What is it, what are the benefits and how to optimize it?

[ishanijerin1]

MRP is a calculation system that helps you understand what materials and how much quantity is needed to determine production demands.

It is essential to improve management and planning, which translates into greater cost savings and growth. Learn more about how it works, its benefits and how you can implement it.

What is MRP?
The industry universe is full of acronyms related to systems and strategies to optimize the day to day of a company. An example of this is MRP – Material Requirements Planning or, in Spanish, Material Requirements Planning .

MRP is a management system that, through intelligent calculations, allows you to determine the amount of materials needed for manufacturing , which optimizes management.

Calculations cover the process from production volume to raw materials and manufacturing time, using a complex numerical system that links resource demands and objectives.

As a result, you can evaluate current needs, improve production and ensure that the company operates in all its operations, without running the risk of shortages or excess materials.

Learn more about what is demand prediction .

Origin of MRP
This concept emerged in the 1960s. After the Second World War, industries experienced an increase in demand, especially in the United States, which led to drastic changes in production methods.

Many industries adopted the batch production system, which affected inventory levels and resulted in excess or shortage of products.

In 1964, engineer Joseph Orlicky created MRP as phone data a solution for this moment, seeking to answer 3 important questions:

What are the types of materials needed?
How much of each material is needed?
When should they be available?
Also read: How to plan and manage production ?

How does MRP work?
The MRP works based on the concept of backward programming. In other words, from the deadline of delivery, the entire schedule is backwards, where the last thing to be done is the starting point.

Using specialized software, data is collected to help manage resources. In particular, these include:

Quantity of each component of the product
Material Replacement Interval
Total production time
Production batch size
Replacement lot size
Minimum quantity of product and minimum stock material
The maximum quantity of stock must not exceed the demand curve
Important steps
So that the system can work and produce the desired results, there are some important work steps, which will be carried out before and after the MRP. Next, the 5 main aspects are detailed.

Planning and production : you must take into account strategic information such as seasonality, earnings expectations, product life cycle, etc.
MPS ( Master Production Scheduling - Master Production Program) : the master production plan defines the production flow according to each period of time.
MRP ( Material Requirements Planning) : at this stage, MRP itself occurs with material planning.
CRP ( Capacity Requirements Planning) : the best way to carry out work is determined by establishing capacity requirements, taking into account work capacity and its limitations.
Execution : with all structured planning, purchasing and production orders can be initiated on your own.
What is the difference between MRP I and MRP II?
Hay of MRP types. The first to be developed, MRP I, manages materials intelligently to predict the quantities needed for the production line, depending on demand.

The MRP II , on the other hand, evaluates the impacts of production in the finance and engineering departments . In other words, instead of analyzing materials, MRP II evaluates involucrated costs when demand increases and how this affects the business.

This way, you can better plan increases in demand, business expansion and changes in the production model.

What are the benefits of MRP for the industry?
Operating with MRP can bring many benefits to companies. Industries can manage and save more time in planning, with more efficient control of resources.

Fast data processing
An MRP system processes a large amount of data quickly. This allows you to have all the necessary calculations quickly and guarantee the best results.

Inventory management
Data from an MRP system allows us to accurately determine the number of resources required for production, as well as the costs involved. This guarantees that inventory management is optimized and increases time.

Error reduction
When the industry depends on calculations carried out exclusively by people, there is a high probability of making mistakes. The use of a system means that calculations are faster, more dynamic and definitely safer, even in complex scenarios.

Purchasing and production planning
With MRP, it is easier to organize purchasing demands and cross-reference data with production demands, which makes the entire operation more efficient.

Cost reduction
Effective planning allows you to make more economical purchases. You can save more money on materials purchased in batches and avoid wasting certain resources.

Task scheduling
Finally, the system allows you to automate certain tasks, scheduling demands according to previously established rules.

Where does MRP apply?
Now, this methodology is not exclusive to manufacturing; Here are some examples:

MRP in the factory
This system allows managers to:

Establish an efficient production schedule, ensuring that machines and personnel are available when needed.

Check that inputs and components are available at the appropriate time, avoiding delays in the production line.

Adjust your production capacity according to demand, minimizing downtime and maximizing operational efficiency.

MRP in logistics
MRP is used to improve the management of the flow of materials and products.

This way, it provides accurate data on inventory needs, which allows managers to place orders just-in-time and reduce storage costs.

By knowing the deadlines and quantities of required materials, MRP helps to better plan routes and delivery times, improving transport efficiency.

MRP in administration
Finally, it also applies to company administration, impacting key areas such as:

Elaboration of financial assumptions and projections using precise data.

Assign personnel appropriately, avoiding overload and improving team morale.

Monitor and evaluate the performance of different areas of the company, allowing adjustments and continuous improvements.

At this point it could look a lot like an ERP (Enterprise Resource Planning), but that's not the same thing.

What are the differences between MRP and ERP?
While MRP focuses on production planning and inventory management, ERP has a broader reach , integrating different areas of the company, such as finance, human resources, sales, logistics and production.

Another difference is that, while MRP uses specific data related to production and inventory to carry out calculations and forecasts; The ERP is based on data from multiple sources within the company, allowing for more complex analyzes and more effective strategic planning.

How can you implement MRP?
If you are thinking about implementing MRP in your industry, it is essential that you know what indicates what you need:

Problems in planning production efficiently, such as the inability to predict demand or the inefficient use of resources.

Difficulties in maintaining optimal inventory levels.

High delays in product delivery, poor planning or lack of coordination in production.

Lack of effective communication between production, logistics and purchasing which leads to errors and delays.

Little visibility over the state of materials and production, which affects decision making.

With that in mind, here are some keys to implementing it.

Through an ERP with MRP Module
Many ERP solutions include a specific module for MRP. This allows companies to manage their production and resources within an integrated system, facilitating access to data in real time and collaboration between departments.