Why do manufacturing businesses need an MRP system?

Material Requirements Planning (MRP) systems have been around for a long time, and while they are not a buzzword that many business leaders are used to hearing regularly in comparison to others; it remains a fundamental necessity within the manufacturing industry. With the business cycle moving faster than ever, manufacturers must evolve to keep pace - technology is vital to this process.

Businesses relying on traditional systems can suffer from disjointed and inconsistent processes. Introducing MRP software will help manufacturers to stay competitive in today’s demanding world.

But what is MRP?

MRP purely focuses on the manufacturing cells of a business and is designed with users from these departments in mind. A manufacturing business would use an MRP system to manage its production planning, using it to forecast and order materials in the right volumes to arrive when needed.

With the potential to encompass/cover everything from estimating to scheduling, and purchasing to shipping, it can also feed into customer management and accounting systems to provide an overview of the entire business. This can offer significant benefits for management – with accurate, updated information about every step in the process, it will be possible to make better business decisions.

Without technology to help with inventory management processes, factories run the risk of running out of the items they need and on occasion may find themselves in a position where they are unable to fulfil customer orders.

With a digital MRP system in place, manufacturers can plan their operations and control and organise the logistics of their inventory management.

Managing manufacturing processes

The main goal for MRP is to manage manufacturing processes. The software uses materials information, master production and inventory data to calculate the required materials for any given project.

It also allows users to allocate or reserve the stock needed from the manufacturer’s inventory and raise purchase orders for any extra materials.

With fluctuating demand, it can be hard for businesses to forecast the right amount of raw material required. Underestimating will be detrimental to the business and the client, causing unplanned disruption. Meanwhile overestimating will cost money in waste.

Implementing an MRP enables manufacturers to work backwards from a production plan - compiling a list of requirements for the raw materials and component parts that are needed to produce the final product within schedule.

This helps manufacturers get a grasp of inventory requirements while balancing both supply and demand. By estimating demand, MRP can evaluate where to allocate materials and the next step in the production process.

Efficient inventory management

Many small to medium-sized manufacturers rely on systems that lack the flexibility to integrate planning and scheduling. Yet the ability to manage these processes plays a huge role in the success of a manufacturing company.

Workers can spend hours planning production and, if not done correctly, this process can cause significant challenges. An MRP seamlessly streamlines inventory to make sure the stock level is low but also high enough to meet pipeline demand.

Global events are driving unpredictable fluctuations in demand and the price of raw materials - much more so than in the past. Within the manufacturing industry, bulk production is the nature of the work and learning to stay on top of these fluctuations is critical. Having the most effective systems in place can be make or break.

Managing the business without an MRP leaves room for potential errors, time issues and overspending. Combining technology into the workstream eliminates these issues but also creates a better way of working.

Many manufacturers have benefited from implementing MRP, including through greater assurance that regulatory requirements will be met. This goes hand-in-hand with maintaining standards and it’s all achieved by giving full visibility into manufacturing processes.

Customer service improved

Many businesses are recognising the improvements MRP systems can bring during difficult economic times. However, those who prefer to update and manage inventory manually may be missing out on potential opportunities.

A report from Forbes suggests manufacturers who use the manual method are only achieving 40 per cent of their potential because they’re spending too much valuable time manually updating inventory control and production reporting.

Taking on this responsibility manually doesn’t match the pace of today’s market. Relying entirely on manual updates to reports, schedules and spreadsheets isn’t efficient enough to capture the necessary information needed to make timely and vital commercial decisions.

Manufacturers who have adopted MRP and a modern manufacturing strategy can see the full picture in near real-time. They can give accurate information on prices and delivery times to customers, accelerate purchasing processes and plan supplies, delivering significant customer experience advantages alongside the obvious commercial benefits.

What to expect going forward

With an MRP system in place, you can simplify processes. One of the key improvements businesses will notice is accuracy. Workers will also have more confidence in the integrity of data being used to plan and manage inventory details.

By combining customer trends and supplier data, manufacturers can plan to buy in advance and save money. They will also be able to budget efficiently both in terms of materials, and scheduling the number of workers needed, providing a significant competitive benefit to the company over the long term.

MRP continues to play a major role for manufacturers looking to gain a competitive advantage. It offers the potential to build better resilience - particularly critical when there are supply-side challenges.

MRP systems also merge analysis, self-report inventory and increase data sharing. Combining these features pushes manufacturers to even greater efficiency levels and helps them to make better decisions based on near real-time analytics.

With competitive pressure a constant factor, modern manufacturers are choosing an MRP system that will help them meet the new demands of the industry as well as dynamic customer requirements.

To find out more about ECI’s MRP software M1 and ECI JobBOSS2, click here.