How Material Requirements Planning Increases Profit

 

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Meeting Market Demands

Customers of all products demand goods to be available when they want them and getting that done can be a complex task that requires the right plan and the right system to track requirements and coordinate and automate tasks. One of the most effective elements, Material Requirements Planning (MRP) is an integrated capability available in manufacturing ERP systems.

MRP focuses on tracking two universal concerns of business — customers’ needs and the resources available to satisfy those needs.  Although MRP is primarily required for manufacturing operations it can be valuable for most business models.

An MRP system is intended to simultaneously meet five objectives:

  • Ensure materials are available for production and products are available for delivery to customers.
  • Maintain the lowest possible material and product levels while being able to meet expected demand.
  • Plan and streamline production activities, delivery schedules and automate purchasing
  • Provide the data required to make informed decisions in the future
  • Reduce workloads and operating costs

In fact, MRP follows customer demands from quote to shipment. Informs the production manager as to when the materials will be available and how long the manufacturing operations take. This allows the production manager to schedule production and the activities that follow in just a couple of clicks.

Blueprint for Profit

The very essence of MRP System is to help all team members save time and work efficiently in one environment.

  • Assigns tasks and routes approvals
  • Lists primary and secondary vendors for each product for faster purchasing
  • Auto-generates Purchase Orders for all purchased inventories that are below the minimum quantity
  • Auto-generates Purchase Orders for a Product, i.e. using the single or multi level Bill of Materials and generate PO’s for all the inventories that are required to assemble a component or finished product
  • Tracks demand of the inventory to stay ahead of the fulfillment requirements
  • Transfer and track inventory from one location to another without issuing an internal Purchase Order or Work Order
  • Manage inventory selling prices in multiple categories such as MSRP, Wholesale Price, Currency
  • Track inventory and price fluctuations
  • Automate document exporting: quotations, invoices, waybills, picking lists, shipments, purchase orders, etc
  • Track heat numbers as required for material trackability of critical components
  • Manage different units of measure for the same inventory item (valuable tool when stocking / selling unit of measure is different from the purchasing unit of measure)
  • Store and associate images, drawings, specifications, heat numbers with materials and products
  • Track an inventory item’s monthly or annual usage, for demand trending
  • Automate reports (PO History, SO History, enables the user with a key stroke to have a detailed report for analysis to fine tune future decisions
  • Compares estimated cost to actual cost at each quantity level
  • Provides instant access to inventory
  • Access to information and reports  without double entering the pertinent data.

Financial  Impact 

Every company is different but considering the cost of staff and all the areas where MRP provides efficiency, the investment is worth hundreds of thousands to the average company over 5 million in sales.

  • Reduces excess inventory (typically inventory reduced by 14% - 20%)
  • Facilitates optimal use of manufacturing resources(typical downtime reduced (15% - 19%)
  • Ensures on time availability of the right materials required for production (20-27%)
  • Reduces workload for accounting, purchasing, and warehouse staff (30-60%)
  • Ensures timely delivery of manufactured goods (typical increase 13% - 20%)
  • Provides accurate business data for analysis, reporting, and better planning   (24%-50%)
  • Reduced warehouse footprint
  • more efficient use of managers time
  • increased customer service level
  • increased market share

 As a rule, getting the most out of your MRP is like your accounting system and requires accurate data input. MRP value increases when your product is quite complex, has a long production cycle, and your CAD/CAM software can generate product specifications to your MRP program.

MRP can be implemented as a standalone software product but provides additional value when included in an integrated software suite, (ERP).

For more information on the capabilities of the MRP functionality included in FocusERP Software

Contact Neil MacLean at neil@enfocom.com.

 

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