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Material requirements planning (MRP) systems play an important role in many modern manufacturing facilities. These systems help company leaders plan production schedules and rates that maximize profits and minimize waste. A well-planned MRP system ensures the company will have adequate resources and supplies to meet production goals, yet also eliminates overstock and excess inventory. Businesses can choose from several types of MRP systems, which are often distinguished by the manner in which they handle existing stock. These systems may also be identified by whether they handle material planning on a continuous or project basis.
One of the easiest MRP systems is the gross requirements model. Using this model, businesses list each material or resource needed to complete a product over a specified period. This may include parts, raw materials or labor. They then determine how many of each of these materials they need to produce the desired number of units. The company will then order this quantity of materials, regardless of resources they may already have in stock or in the warehouse. This gross MRP system is quick and easy, but often results in excess inventory and wasted money.
Net requirement MRP systems are similar to gross requirements models, but take existing stock into account when calculating orders. Under this system, companies list the parts for each product, then determine how many of these parts are needed to meet production goals. They then count parts already in inventory and subject them from the total before placing an order. Companies may also count existing completed inventory and subtract these products as well prior to ordering.
Project based MRP systems are used for single production runs or custom orders. They may also be used on a single product line that may not be repeated for some time. The company calculates total number of units needed to complete the run, then places a material order based on this calculation. This type of MRP system helps to ensure the business is not left with unwanted materials, which can detract from total profits.
When the company has a fixed end date on time-sensitive products or projects, they may use a reverse planning system rather than a traditional MRP system. With a reverse MRP model, the company starts by determining how many units will be required by a specific date. They then work backwards to determine what materials are needed at reach this final stage, then go back a step further to calculate raw materials and inputs. This reverse system is often slightly different than other MRP systems, as it may require expediting or special orders to ensure the completion date can be met.
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