What is Material Requirements Planning (MRP)?
Material Requirements Planning (MRP) is a computer-based inventory management system designed to increase productivity for businesses. Companies use material requirements planning systems to plan their material needs for predicting raw material quantities and scheduling deliveries, aiming to produce goods efficiently.
How Does MRP Work?
Material Requirements Planning is designed to answer three fundamental questions: What is needed? How much is needed? When is it needed? MRP works backward from a production plan for finished products, transforming it into a list of requirements for subassemblies, component parts, and raw materials necessary to produce the final product within the defined schedule.
This technology analyzes raw data, breaking down information such as bills of lading and shelf life of stored materials. It provides meaningful insights to managers about labor and material needs, potentially helping companies enhance their production efficiency.
MRP Systems
Material Requirements Planning is one of the oldest integrated information technology (IT) systems designed to improve productivity for businesses. The initial MRP systems used mainframe computers in the 1940s and 1950s to extract information from material lists for a specific finished product. Over time, MRP systems expanded to include feedback loops, enabling production managers to update and modify system inputs.
The next generation of MRP combined with Manufacturing Resource Planning (MRP II), incorporating aspects of marketing, finance, accounting, engineering, and human resources into the planning process. Another concept that extended MRP is Enterprise Resource Planning (ERP), which utilizes computer technology to connect various functional areas of a business. With advancements in data analysis and technology, more comprehensive systems have been developed to integrate MRP with other aspects of the production process.