The Importance of MRP

The concept of ERP has its original roots in manufacturing. When ERP was described in 1990, it was depicted as the logical extension of MRP to MRPII to ERP. As Director of CIM at Gartner Group (and now Chairman of the Rootstock ERP Executive Council), Lee Wylie created the concept of ERP to describe the evolution of MRP into next generation business systems. Its primary mission was to provide assistance in scheduling all the materials, components and assemblies that were required to fulfill a production schedule. At the core was software to maintain the BOM (Bill of Materials) for each of the products produced by the manufacturer.

Today, ERP is defined as the software that’s used to plan the resources of an organization. Those resources include everything from finances to workforce and materials to processes and information. MRP is a more specialized type of software. It’s used specifically to plan the resources that are used during the manufacturing process and can include quoting, work orders, bills of materials, and purchasing or shop floor management. A manufacturing ERP will include a manufacturing MRP. Yet, because many ERPs have not been developed from a manufacturing perspective, not all MRP modules within cloud ERPs are created for manufacturers.

Today, manufacturers want the higher discipline that manufacturing MRP requires to run well, a discipline that many (especially smaller) manufacturers often don’t practice. Nonetheless, these vendors’ customers have moved forward. Not only do they want consistent product innovation, they are demanding their vendors provide a well-oiled machine within which errors and omissions are almost never made.

Of course, most MRP modules can plan production jobs well in advance so scheduled jobs can be updated and monitored within ERP. However, not as many MRP modules also plan purchasing so that most purchase orders can be linked to scheduled jobs or inventory requirements. As a result, these manufacturers lose the time that could be saved for valuable analyses of unique jobs and purchase orders.

What to Look for in a Manufacturing MRP?

In the current manufacturing climate, a resilient MRP module is needed to adapt to disruptions in supply or changes in demand. We now need to run our discrete manufacturing shops with the discipline required to provide the products that consumers want. We need accurate, on-time production jobs. We need discrete purchase orders to be placed and received when required. When upgrading to an ERP system, it must include a real-time and resilient MRP to help us achieve such goals.

After all, the MRP is the software engine that uses sales order and forecast demands in conjunction with the effective production bill of material and, by reviewing item inventory balances, will generate planned supplies in a time-phased manner to offset the outstanding demands for end items and sub assemblies.

Specifically, a manufacturing MRP generates what are termed planned work orders for manufactured items and planned purchase requisitions for purchase or subcontract items. It uses information from Sales Order Management to drive top-level demands. Such an MRP Engine uses the typical algorithms in the industry and will proceed level by level through the Bill of Material starting with the top level (i.e. end item) of the BOM and review the demands and safety stock requirements.

The MRP module should manage shop floor resources, calendaring and scheduling.  It will use the company’s sales order and forecast demands in conjunction with the effective production bill of material and, by reviewing item inventory balances, generates planned supplies in a time-phased manner to offset the outstanding demands for end items and sub assemblies.

“There are many changes that manufacturers must keep in mind while selecting software,” Wylie emphasizes. “Not only do they have to adapt to a global environment but collaboration through the supply chain, performed with a variety of mobile devices, is now the norm. Successful manufacturing companies know there is no cookie cutter approach to doing business. Regarding a new ERP and the MRP within it, questions like this need to be asked of your prospective manufacturing ERP provider –

  1. How do you reduce costs through increased flexibility in all areas of the supply chain?
  2. How do you improve productivity because of better collaboration with your suppliers and customers?

Making Implementation Easier

Integrating the type of detailed, in-depth MRP within a manufacturing ERP that manufacturers need can be an overwhelming implementation project. However, if that detailed MRP resides in an in-depth manufacturing cloud ERP native to the Salesforce eco-system is used by a manufacturer already using Salesforce, it becomes much more easy. We’ll have more on that in our next post.