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Materials requirements planning (MRP) is a system, usually software based, that helps a business manage inventory levels while making sure necessary materials are in stock when they are needed for manufacturing. Companies often use this type of system as part of operations designed to deliver orders on time. Generally, an MRP is a computer software program with functions designed to help a business order, manage, and use the materials and resources necessary for production. This type of system can be helpful for a business managing multiple orders that require materials to produce.
Business process plans have set timelines for production designed to help ensure that the finished product is delivered to the customer on time as agreed. Materials requirements planning is most often used when planning the smaller tasks necessary to bring about a final finished product. This step is important when planning a business process because it ensures that the materials needed in each step of the process are available when the time comes to execute the step. If a business does not have enough materials on hand to complete a step, the process is delayed and the timeline is affected, which can cause hangups in order delivery.
Delays due to poor materials planning can cause a product delivery to be late, but it can also cause additional costs like the extra labor needed to finish the job after materials are re-ordered. Ordering rush materials can also have extra processing or shipping costs from the vendor. Using a software MRP can make it easier for a manager to accurately record and track inventory changes. A manager using materials resource planning can also assign available materials to planned tasks and track which materials need to be ordered for planned tasks.
Advantages to using a materials resource planning system include more on-time order deliveries, reduced costs due to materials shortages, and reduced stored inventory of excess materials from the production process. Disadvantages to using MRP include cost, employee training, and operator error. Software programs for materials resource planning are generally more beneficial for large businesses than small ones. For small operations with little inventory, using an MRP can add extra work for employees, who need training to use the system. Setting up these programs costs money, and the cost of the extra electronics needed to run an MRP can also be greater than the benefits for a small company.