5 Helpful Facts about MRP

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What is MRP

MRP and Operations Management

Manufacturing is returning to North America in a number of important ways and sometimes in new industries. In the new economy that has emerged following the Great Recession, there is a new structure to how manufacturing is being done, including reaching out across oceans and borders to find new suppliers and new supply chains. But what is MRP?

MRP is a critical component to facilitate this and ensure that companies can manage the new requirements they may find themselves in.  I have tried to present some facts here for the SMB (Small and Medium business) that is maybe looking at MRP for the first time.  If you are looking for more information on MRP, I've written a blog Explaining MRP in Dynamics Business Central.

Also, if you're interested in how MRP works in Dynamics NAV, I wrote a blog called MRP in Microsoft Dynamics NAV.

Fact One - How It Works.

Material Resource Planning takes a look at your inventory levels, your sales forecasts, and analyzes and plans so you can deliver as soon as possible while keeping your inventory low.  It does this by looking at sales orders, analyzing your bills of material and routings, and looking at rules you create for replenishing and replacing inventory. Your purchases and production orders are entered into the system allowing it to predict what you will have and when. Ultimately it suggests production and purchase plans. Very simple in reality, but it absolutely needs the power of a computer to make it happen.

Fact Two - MRP vs ERP.

In the 1970s MRP was developed as a stand-alone technology, but within a decade almost all such systems were moving towards a new technology called ERP. Most true ERP systems incorporate at a minimum MRP and Financials into one integrated software platform. Some companies are interested in a simple stand-alone Material Resource Planning system. This is because they feel the implementation of software to replace their finance system will be too much work. This seems true on the face of it, but Fact Three says otherwise.

Fact Three - It’s Best to Run an Integrated MRP and Finance System.

MRP requires that all purchases and sales made by your company are entered completely and accurately in the database for it to do its job. That means the same data that is entered into the finance system needs to be in the MRP. Nobody wants double entry, but it becomes unavoidable. There are still some “stand-alone” systems, and most of them claim to integrate with the finance system. It is very important to be cautious about these claims. How do these systems recover when something goes wrong with the synchronization or connection? What happens if someone in finance enters data that should have also been entered in the MRP? What changes to the way finance works need to be made to accommodate the links? Are these changes really easier than just choosing a single integrated system?

Fact Four - Implementing MRP Takes Skill.

There are many different ERP systems with MRP modules, but all of them should be built around a common core of features. Common wisdom says that it requires 2,000 hours of experience to become “competent” with skill, and 10,000 hours of experience to become a master. Setting up (ie; Implementing) an operations management system is its own skill. Running an already setup system is a different and distinct skill. Be sure to either set aside enough time or hire someone with lots of experience setting up an MRP system before you take the dive into it on your own.

Fact Five - Not all ERP are Built Alike

Some systems claim to be ERP but actually do not have complete MRP capabilities. Some systems have core MRP systems but they are incomplete or lack advanced features. Some ERPs have very strong capabilities but have very poor Financial or other modules. It is all very confusing to a customer. The reputation of an ERP system for your industry is really the key to whether the ERP system can handle your business. For MRP, are there other manufacturing companies with a similar product complexity using the ERP? Do they have similar supply chain requirements? All of this is very important.

Hopefully, these five facts are helpful to companies looking for MRP systems and help them understand some of the decisions they should be considering when selecting an ERP.  Manufacturing companies especially need to be cautious in selecting both their ERP and the vendor who is going to implement it.

Learn more about implementing ERP systems for manufacturing at our youtube channel.

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