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Material requirements planning (MRP)
Material requirement planning is a technique used for the effective planning of all resources of a manufacturing company. It is a dependent demand technique that uses bill-of-material, inventory, expected receipts and master production schedules to determine material requirements.
The initial MRP systems of inventory management developed in the 1940s and 1950s. They used mainframe computers to decimate information from a bill of materials for a certain finished product into a production and purchasing plan for components. Over time MRP extended to information feedback loops so that production personnel could change and update the inputs into the system as required.
The next level of MRP, known as manufacturing resources planning or MRP II, also grew to include marketing, finance, accounting, engineering, and human resources aspects into the planning process. Enterprise resources planning (ERP) which is similar to MRP, uses computer technology to connect the various functional areas across the business organization.
MRP splits the inventory requirements into planning periods so as to ensure timely completion of production while keeping inventory levels and costs low. Although MRP helps managers to schedule productions times and do capacity planning. It is a costly as well a time consuming and may not be suitable for small business. Companies must also ensure that current and correct information is supplied to MRP to avail real time benefits.
