Material Requirements Planning (MRP), what is it and how do we perform it optimally?

MRP (material requirements planning) is a technique of assessing dependent demand by using a BOM (bill of material), inventory, expected receipts and a MPS (master production schedule) to determine the material requirements (Heizer & Render, 2009).

When we say “dependent” demand, we are referring to the production of an item that is dependent on certain parts. For example, the production of a motor car is dependent on parts like the engine, wheels, windows, body etc. Heizer and Render (2009) also note that, broadly speaking, “for any item for which a schedule can be established, dependent techniques should be used”.

In a paper by Anderson and Schroeder (1984) points out that MRP can and shouldn’t operate in isolation from the rest of the business (i.e. only in manufacturing). MRP Systems should expand to the other functional areas of a firm and information must flow freely between these areas.

The main functions included by Anderson and Schroeder (1994) include:

1)     Manufacturing
As we have discussed above the main focus behind MRP is on manufacturing. The MRP system is based on the type of product being manufactured, identified by using the Master Production Schedule and Bill of Materials (MPS and BOM). Manufacturing is the core process of developing the products.

2)     Engineering
The engineering function of the firm is where the BOM mentioned above comes from. Anderson and Schroeder use an example of a firm implementing MRP where the BOM from Engineering did not match up with the Manufacturing bills – It is important to make sure all data is correct and this is another reason why all areas of the firm should be involved in the system.

3)     Marketing
Marketing is important to MRP systems because this is where the main demand forecasts are coming from. As mentioned in Anderson and Schroeders (1994) example, marketing “provided the information on firm orders and a forecast for the system”.

4)     Finance
As we know the main point of just about any organisation is to maintain profitability and the MRP system is a tool used to optimise the materials required for production. Finance provides accurate reporting on the performance of the implemented MRP system.

5)     Personnel

At the heart of any organisation is its’ personnel. All personnel should be well educated in and understand the purpose of the MRP system.

Expanding on the last point, the study by Anderson and Schroeder (1994) outlined the implementation of an MRP system across two organisations; one successful and one not. The main reason for the unsuccessful implementation was the “degree of commitment to a system rather than to a concept” (Anderson & Schroeder, 1994).

Educating and training employees to understand the importance and exact steps and procedures involved in the MRP system is very important across the organisation as it affects all functions. 

References

Anderson, J. & Schroeder, R. (1994) ‘Getting Results from your MRP System’, Business Horizons, 27 (3), pp.57-64, ScienceDirect [Online]. DOI 10.1016/0007-6813(84)90028-4 (Accessed: 28 May 2011).

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.