MRP: Why You Need It and What It Can Do for Your Business

Most businesses start in the same way: a few people have an idea, create a business and then build the manufacturing processes required to make it happen. The tracking and reporting on these processes are often a reactive afterthought, usually as a result of problems caused through a lack of production planning. Does your business suffer from the same problems and what can a manufacturing resource planning (MRP) system do about it?

 

Common Problems

As a business grows, fragmented processes often develop with it. For example, those involved in production/manufacturing planning may use an Excel spreadsheet to track orders through the various stages of manufacture, but this will not talk to sales, warehouse or shipping—each of which may have their own system. Companies have even been known to plan schedules using Post-it® notes on a wall! Staff in each department has to continually duplicate data, drastically increasing the possibility of error. Data is not updated between departments, which often results in wrong or no information being available when the staffs need it. Reporting also is an issue, as collating data across departments and then number crunching to get the required figures takes time and may even be impossible if the data simply isn’t there.

The paper trail generated by each order can also be frightening, as each department struggles to maintain data integrity on its own localized system and pass information to the next or previous link in the chain.

One of the biggest areas for potential losses is warehouse. With no accurate way to plan ahead, companies often wildly overstock, tying up significant amounts of cash. Also, the above mentioned issues of duplicate entry of data and paper trails can require constant inventory checks, which take up valuable time and often throw up inaccurate figures. All of this can lead to negative consequences for management, as they are unable to make informed decisions without a clear view of the company’s position.

 

How and Why MRP Should Work

MRP or manufacturing resource planning takes ownership of the data from the quotation stage, through the sale, the raising of the works order, through all stages of production including the warehouse (goods in/out) and subcontracting, through to shipping and invoicing. By holding a single source of data all departments should have visibility of relevant information.

As sales orders are loaded on the system, purchasing can immediately see future requirements plus view an item’s order history in order to make informed purchasing decisions. Additional information, such as alternative suppliers and quantity break price information, also can help to bring further purchasing efficiencies.

With purchasing correctly loading orders onto MRP, your warehouse will have visibility of what is arriving and when. Implementing barcode scanners can speed up goods in/out, assist with providing batch traceability and reduce booking errors across all departments on the shop floor. This will filter down to a reduction of inventory inaccuracies, which in turn will require less frequent inventory checks—saving further time and resources.

As an order works its way through each stage of the production process, each update to the system is immediately accessible across the company. Office staff can report more accurate delivery times to customers, and many companies see a significant reduction on product leadtimes post-MRP implementation as stock shortages are reduced/eliminated and all order-related processes can be enacted quicker.

Once orders have been dispatched and invoiced the MRP system’s job is done and it can pass over data to the accounting system for debt collection/processing.

 

Why It Often Doesn’t Work

If the IT or production manager is trying to implement a system that the CEO/CFO or other department heads do not agree with, then there is little or no hope of getting others on board, or indeed getting budget allocated to acquire a suitable system. Directors need to drive the system through the company and, rather than forcing it on an unwilling team of managers they should concentrate on demonstrating the benefits that will be delivered to each department and across the company. By their nature, people are resistant to change unless it is clearly demonstrated to them that they will benefit. Furthermore, in these economically tough times staff is fearful of anything that can reduce a company’s dependence on them.

Choosing the right system also can be a minefield. Remember, the software should be flexible enough to fit with your business requirements rather than you having to change your business in order to work within the constraints of the software. Having said that, maybe it’s time to reassess the way you currently operate. Is it efficient? Does it comply with some of today’s forward-thinking strategies, such as lean and Six Sigma? Having a clear view of the goals, both for each department and for the business as a whole, is paramount before you sign on the dotted line.

Many companies delay implementation of a system (even after spending time selecting it) because they are simply too busy; however, this is a false economy leading in ever-decreasing circles. They are busy because they don’t have MRP running, so by not implementing it or by doing so half-heartedly they simply make the situation worse.

Summary

In short, businesses that will be successful are those that make the decision, stick with it and implement a MRP system in a swift but structured approach. A well implemented system does not have to cost a fortune and will be able to deliver quantifiable return on investment in a very short amount of time.