{"id":45,"date":"2014-12-08T20:06:03","date_gmt":"2014-12-08T20:06:03","guid":{"rendered":"https:\/\/www.mrpeasy.com\/blog\/?p=45"},"modified":"2023-01-24T11:52:17","modified_gmt":"2023-01-24T11:52:17","slug":"material-requirements-planning-important","status":"publish","type":"post","link":"https:\/\/www.mrpeasy.com\/blog\/material-requirements-planning-important\/","title":{"rendered":"Why Is Material Requirements Planning so Important?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">In an age when competition between manufacturing companies has become global, making business operations as efficient as possible is the key to economic advantage.<\/p>\n\n\n\n<!--more-->\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/Why-Material-Requirements-Planning-is-So-Important-mrpeasy-manufacturing-erp-1024x683.jpg\" alt=\"Why-Material-Requirements-Planning-is-So-Important-mrpeasy-manufacturing-erp\" class=\"wp-image-2415\" srcset=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/Why-Material-Requirements-Planning-is-So-Important-mrpeasy-manufacturing-erp-1024x683.jpg 1024w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/Why-Material-Requirements-Planning-is-So-Important-mrpeasy-manufacturing-erp-300x200.jpg 300w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/Why-Material-Requirements-Planning-is-So-Important-mrpeasy-manufacturing-erp-768x512.jpg 768w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/Why-Material-Requirements-Planning-is-So-Important-mrpeasy-manufacturing-erp.jpg 1200w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><p><br><\/p><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>You can also listen to this article:<\/em><\/p>\n\n\n\n<iframe loading=\"lazy\" title=\"Why Material Requirements Planning is So Important?\" height=\"122\" width=\"100%\" style=\"border: none;\" scrolling=\"no\" data-name=\"pb-iframe-player\" src=\"https:\/\/www.podbean.com\/media\/player\/3bpep-d97c8e?from=pb6admin&amp;download=1&amp;version=1&amp;auto=0&amp;share=1&amp;download=1&amp;rtl=0&amp;fonts=Helvetica&amp;skin=1&amp;pfauth=&amp;btn-skin=103\"><\/iframe>\n\n\n\n<p class=\"wp-block-paragraph\">Unlike manufacturing companies 100 years ago, nowadays manufacturers compete not only with other local businesses but also with other operations across the globe, both big and small.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To make manufacturing operations as effective as possible one area to focus on is cost reduction and operations optimization. A big part of optimization processes depends on how manufacturing companies plan their operations, control inventory, and organize logistics. To help companies make better decisions in these areas <a aria-label=\"material requirements planning (MRP I) (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/material-requirements-planning\/\" target=\"_blank\" rel=\"noreferrer noopener\">material requirements planning (MRP I)<\/a> has been introduced in the 1960-s. While today it has evolved to manufacturing resource planning (MRP II), its core benefits are relevant more than ever.<\/p>\n\n\n<div class=\"banner-v2\">\n    <p class=\"banner-v2__desc\">Reap the benefits of material requirements planning with MRPeasy<\/p>\n    <a class=\"banner-v2__link\" href=\"https:\/\/www.mrpeasy.com\/sign-up\/\" target=\"_blank\" data-ga-event=\"blog_signup_banner_blue\">Try for free<\/a>\n<\/div>\t\t<style>.banner-v2 {\n    float: right;\n    display: flex;\n    flex-direction: column;\n    justify-content: center;\n    align-items: center;\n    padding: 40px 32px;\n    gap: 16px;\n    width: 356px;\n    height: 205px;\n    background: linear-gradient(199.68deg, #6084E5 13.17%, #5FA7DD 82.1%);\n    border-radius: 4px;\n    margin-left: 12px;\n    margin-bottom: 12px;\n    margin-top: 15px;\n}\n\n@media (max-width: 767.98px) {\n    .banner-v2 {\n         width: 100%;\n         height: 173px;\n         margin-bottom: 0;\n         margin-left: 0;\n    }\n}\n\n.single__content p.banner-v2__desc {\n    margin: 0 !important;\n}\n\np.banner-v2__desc {\n    width: 292px;\n    font-style: normal;\n    font-weight: 700;\n    font-size: 22px;\n    line-height: 29px !important;\n    text-align: center;\n    color: #FFFFFF;\n    margin: 0 !important;\n    order: 0 !important;\n}\n\n.single__content a.banner-v2__link {\n    color: #FFFFFF !important;\n}\n\n.single__content a.banner-v2__link:hover {\n    color: #003557 !important;\n}\n\na.banner-v2__link {\n    display: flex;\n    justify-content: center;\n    align-items: center;\n    width: 181px;\n    height: 51px;\n    padding: 18px 0;\n    border-radius: 4px;\n    background: #003557;\n    font-weight: 700;\n    font-size: 16px;\n    color: #FFFFFF !important;\n    text-decoration: none !important;\n    order: 1 !important;\n}\n\n.banner-v2__link:hover {\n    background: white;\n    color: #003557 !important;\n}<\/style>\n\t\t\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #343333;color:#343333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #343333;color:#343333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.mrpeasy.com\/blog\/material-requirements-planning-important\/#Benefits_of_material_requirements_planning\" >Benefits of material requirements planning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.mrpeasy.com\/blog\/material-requirements-planning-important\/#How_does_material_requirements_planning_work\" >How does material requirements planning work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.mrpeasy.com\/blog\/material-requirements-planning-important\/#Risks_of_not_having_a_proper_material_requirements_planning_system\" >Risks of not having a proper material requirements planning system<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.mrpeasy.com\/blog\/material-requirements-planning-important\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_material_requirements_planning\"><\/span>Benefits of material requirements planning<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The proper material requirement planning setup helps companies to achieve three main goals. First, it helps manufacturers to plan and schedule their production operations in such a way that it will not require any excessive inventory. Why is this such an important factor?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The main reason is capital preservation and effective use of working capital. Having less excessive inventory on hand means that companies do not tie up their valuable cash in inventory. They can remain liquid and use the funds on other needs, like expanding their operations, investing in new production lines, or organizing additional marketing campaigns. Also by not allocating warehouse space to excessive inventory, businesses can save on rental costs or use the space for a better purpose.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When done correctly, material requirements planning helps to ensure that there are enough materials and components available for production. It also helps to determine how many finished goods are and by what date will be available for shipping to the customer. In material management everything is interconnected, the quantity of finished goods planned for shipping depends heavily on the amount of material being purchased for the future product batch.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Knowing how many finished goods there will be available in the future, manufacturers can better plan their sales. This information also helps companies to better plan their purchasing activities and delivery schedules. This is especially critical for businesses with several operational facilities in different countries. Knowing the exact quantities and time when the products are being shipped helps manufacturers to save both on shipping and storage costs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_does_material_requirements_planning_work\"><\/span>How does material requirements planning work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">One of the simplest yet effective ways to ensure that there is enough material available for production is to use a \u201csaw tooth\u201d inventory management logic. Below is a descriptive image of how this logic works.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"605\" height=\"384\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/inventory_control-mrpeasy-manufacturing-erp-mrp-software.png\" alt=\"inventory_control-mrpeasy-manufacturing-erp-mrp-software\" class=\"wp-image-2411\" srcset=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/inventory_control-mrpeasy-manufacturing-erp-mrp-software.png 605w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2019\/02\/inventory_control-mrpeasy-manufacturing-erp-mrp-software-300x190.png 300w\" sizes=\"auto, (max-width: 605px) 100vw, 605px\" \/><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">First, based on the future demand information, the reorder point and replenishment quantity is determined. When reorder point is reached, a material quantity in stock falls below a certain point, and a purchase order is triggered. At this moment a full stock is ordered from the supplier (Replenishment). When this happens, it is important that the amount of material remaining in the warehouse at the reorder point should be enough to cover demand by the time the new material batch will be available (Demand during Lead Time).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risks_of_not_having_a_proper_material_requirements_planning_system\"><\/span>Risks of not having a proper material requirements planning system<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">What are the biggest risks of not using any system for material requirements planning? The biggest would be of course <strong>not being able to meet contract obligations to supply products to the client at the agreed time<\/strong>. The customer is not interested to know the reason why the product that has been ordered a long time ago has not arrived as promised. Most probably such a client will change to a new supplier entirely or will ask for substantial discounts in future shipments. In both cases, this will have a highly negative impact on the manufacturer\u2019s business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Another big risk, which was mentioned before, is that <strong>money will be wasted by being tied up in unused material stock.<\/strong> These funds are literally <g class=\"gr_ gr_11 gr-alert gr_gramm gr_inline_cards gr_run_anim Punctuation only-del replaceWithoutSep\" id=\"11\" data-gr-id=\"11\">dead<\/g> until the finished products are sold and paid for by the <g class=\"gr_ gr_8 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins doubleReplace replaceWithoutSep\" id=\"8\" data-gr-id=\"8\">client<\/g>. In some cases, this could easily be from half a year to several years. While tying up working capital in inventory does not pose any direct risks to the company, it easily can slow its development progress and makes it more vulnerable to sudden demand changes.<\/p>\n\n\n<div class=\"banner-v1\">\n    <div class=\"banner__text\">\n        <div class=\"banner-v1__title\">Easily calculate material requirements and plan production<\/div>\n        <div class=\"banner-v1__desc\">MRPeasy integrates sales, purchases, production, inventory, and finances to provide you with an accurate real-time overview of your business.<\/div>\n        <div><a class=\"banner-v1__link\" href=\"https:\/\/www.mrpeasy.com\/sign-up\/\" target=\"_blank\" data-ga-event=\"blog_signup_banner_white\">Try for free<\/a><\/div>\n    <\/div>\n    <div class=\"banner__img\">\n        <img decoding=\"async\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/themes\/mrpeasy\/assets\/images\/banner.svg\" alt=\"banner\">\n    <\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The importance and need for Material Requirements Planning in small and medium enterprises as well as bigger companies are obvious. While there are still a considerable amount of companies relying on past data and their experience to determine the quantity of materials to purchase, more and more companies are switching to some sort of material requirement planning solutions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>You may also like these <a href=\"https:\/\/www.mrpeasy.com\/blog\/5-tips-for-making-material-planning-more-effective\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"5 Tips for Making Material Planning More Effective (opens in a new tab)\">5 Tips for Making Material Planning More Effective<\/a><\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">MRPeasy offers one such readymade solution. Our <a aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\" target=\"_blank\" rel=\"noreferrer noopener\">MRP software<\/a> includes not only&nbsp;material requirements planning (MRP I) features, like inventory and supply chain management, but also cost control, <a href=\"https:\/\/www.mrpeasy.com\/blog\/what-is-capacity-planning-in-manufacturing-erp\/\" target=\"_blank\" rel=\"noreferrer noopener\">capacity planning<\/a>, workforce control, payroll accounting, extensive statistics, and more (MRP II). This makes it a single piece of software any small or medium manufacturer would need for their manufacturing resource planning.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Read more about <\/em><a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/manufacturing-scheduling-software\/\" target=\"_blank\"><em>Manufacturing Scheduling Software<\/em><\/a><em>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In an age when competition between manufacturing companies has become global, making business operations as efficient as possible is the key to economic advantage.<\/p>\n","protected":false},"author":1,"featured_media":2415,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[94],"tags":[3,4,30],"class_list":["post-45","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tips","tag-manufacturing","tag-manufacturing-software","tag-material-requirements-planning-software"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Why Is Material Requirements Planning So Important?<\/title>\n<meta name=\"description\" content=\"Learn how material requirements planning helps companies to better organize their logistics and inventory control.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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