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Manufacturing resource planning software, sometimes called material requirements planning, also known as MRP II software, is the core technology that sets manufacturing applications apart from other types of business software. This added functionality also adds complexity, both in implementation and in operation. We wrote this buyer’s guide to help buyers navigate the maze of top MRP solutions.
Here’s what we’ll cover:
“If you fail to plan, then plan to fail” is equally true in sports and manufacturing. Manufacturing MRP software was the first attempt to bring software tools, such as a materials forecast, to formal manufacturing techniques. These systems answer the four basic questions: What do I make? What do I buy? When do I buy? When do I make?
MRP is a subset of enterprise resource planning (ERP). It covers the period of time from when a product is conceived, the raw materials are identified and procured, resources are identified, to when production steps are planned. At that point, manufacturing execution systems (MES) take over.
ERP combines the tools of an MRP system and an MES system, and extends both. MRP and MES focuses on planning for individual jobs, ERP is concerned with a manufacturer's entire chain from buying raw materials to delivery of finished goods to the customer, over the course of time. In other words, MRP ERP software focuses on increasing efficiencies for the course of a job and ERP takes a wider and longer view, over all jobs from end to end.
Basic functions include inventory control and procurement, production forecasting, job costing, procurement scheduling, and process scheduling applications. Job costing is usually the core function. It determines what is made versus what is bought. Job costing works with the inventory system to check quantities on hand and lead times for parts that must be ordered as well as production logs to determine lead times for any sub-assemblies that must be fabricated.
Manufacturing resource planning systems are adaptable to many different philosophies but favor the lean manufacturing and just-in-time (JIT) system. It can support all modes including discrete, process, make to stock (MTS), assemble to stock (ATS), assemble to order (ATO), make to order (MTO), and engineer to order (ETO). However, planning and inventory control functions are generally more important to the “to order” modes due to the time constraints that these modes impose.
MRP ERP systems are generally run on premise. Small shops may have only a single-user system or a small network, while larger organizations may have networks with workstations throughout the facility. Manufacturers have been slower to adopt Cloud-based materials requirements planning programs but there is an emerging group of vendors offering a Cloud program.
The first step in evaluating programs, is determining what type of buyer you are. Over 90% of buyers fall into one of these three groups:
The scale of solutions varies greatly; different buyer types need to “right size” and compare the vendors that can meet their needs.
|This type of buyer...||Should evaluate these systems|
|Enterprise resource planning suite buyer||Microsoft Dynamics, Oracle, SAP, Sage|
|Departmental buyer||Microsoft Dynamics, Epicor, SYSPRO, Casco|
|Small manufacturer||E-Z-MRP, ECi, Exact, Fishbowl|
While you evaluate programs, make sure you consider these market trends:
MRP systems, whether stand-alone or incorporated in an ERP system, offer distinct benefits over less formal production planning systems. These include:
Material requirements planning as a discipline, and the software in general, does have some limitations which can cause problems if not addressed. Planning is based on what should be possible; it ignores current limitations. The inventory and resource planning are based on the assumption that everything is idle. Care must be taken not to over-allocate resources.
Inventory levels are another area of concern. Inventory items tend to two extremes. Either too much is carried in inventory, tying up valuable capital and credit, or too little is carried in inventory, requiring stock to be acquired and delaying production. These systems are supposed to solve this particular problem, but if the model does not adapt to changes in the inventory supply chain, inventory levels on key items will tend to one of the two extremes.
There are also problems that develop over time. The bills of materials, work orders and schedules are based on the assumptions made when the program is first installed. If assumptions are not updated to reflect changes over time as costs fluctuate and and productivity changes, the estimates from the MRP will increasingly diverge from the actual costs.
There is also a scope issue. MRP planning is based around particular jobs. While it can increase the efficiency for those jobs, it is possible that over the course of many jobs, the costs will add up. For example, if three jobs are costed that each use four pounds of salt, the system will miss the discount available if 12 pounds of salt are purchased all at once. Among other things, ERP systems expand the scope to solve this issue.
There are several recent trends in the market that buyers should know about:
To get a sense of the history behind this material requirements planning and related technologies, visit our timeline that details get events, people and milestones in the history of this technology.