What is an MRP System? Manufacturing Resource Planning Software Explained

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An MRP system helps manufacturers plan their company’s production in an efficient, streamlined way by means of information technology and computers. However, there are two different standards of MRP and an array of software providers to choose from. This guide is aimed to clear things up in the intricate world of MRP.

What is MRP I?

MRP I refers to Material Requirements Planning – a resource planning and inventory control method first developed and used in the middle of the 20th century.

The very first MRP systems implemented in manufacturing were used to extract information from customer demand and the bill of materials of a particular final product that would subsequently be used to develop a purchasing plan and an elementary production schedule.

This early iteration of manufacturing software needed to answer only two basic questions: What goods are required and in which quantity? But there is a ton of other questions manufacturers had to get answers to.

In the 60s and 70s, the approach was furthered into an integrated IT system designed to enhance business productivity through the use of computers and software technology.

The developments in the method allowed MRP to account for current inventory levels, the bills of materials, and sales forecasts to produce outputs such as recommended production schedules and recommended purchasing schedules.

At that time, the benefits of using the MRP I method were considered substantial. It helped manufacturers reduce inventory costs and control stock levels, get knowledge about input needs, and organize production and purchasing planning in a much more informed way.

What is MRP II?

Spearheaded in 1983 by Oliver Wight, MRP II or Manufacturing Resource Planning is an evolved version of the original MRP I system that accounts for additional aspects like demand forecasting, master scheduling, capacity planning, etc. MRP II provides manufacturers with the ability to develop detailed schedules for production, with access to real-time data for the purpose of coordinating such resources as labor force availability, the delivery of component materials, and more.

It uses additional inputs to give out better, more accurate and sophisticated information. The inputs include Rough Cut Capacity Planning, Work Progress Feedback, Resource Scheduling, Batching Rules, Sale Orders Processing, Cost Accounting, and so forth.

Apart from answering questions like what resources are required and in which quantity, thanks to more information made available for the system, MRP II also adds the dimension of time, giving information about when resources should be available, and when the products will be produced.

In addition to the functionalities of MRP I, MRP II helps to plan and have an overview of all resources used in manufacturing, simulate manufacturing processes, optimize workstations and production routings, etc.

These heightened capabilities bring a plethora of additional advantages to the table, allowing for business-wide improvements in efficiency, making MRP II a central piece in well-functioning manufacturing companies.

In addition, MRP II is somewhat two-fold in that it can be used entirely by itself, or as a core part of a comprehensive ERP (Enterprise Resource Planning) system. Usually, the addition of an extended CRM and an accounting module turns an MRP system into an ERP system.

What is an MRP system?

An MRP system (or Manufacturing Resource Planning system) is used by manufacturers for the purpose of integrating business data within a single system. This data can be used for activities such as production planning, inventory planning, raw material purchase scheduling, and a range of other useful and important purposes.

All MRP systems have some common goals, such as optimizing inventory (avoiding overstocking and stock-outs) and planning out all activities related to the manufacturing process, including the procurement of materials, production, and delivery of finished goods. The improvements compounded by having a systemic approach to managing a manufacturing business will be passed on to the customers as better product and service quality, more balanced prices, and more accurate deliveries.

The majority of MRP systems are software-based, though there are some instances where this is not the case, for instance, some smaller manufacturers may still use a pen and paper to plan their manufacturing planning.

Modern MRP software are mostly cloud-based, meaning that these software do not require on-premises servers and/or a designated IT department to maintain the infrastructure. This makes implementing and using this kind of manufacturing software affordable even to small manufacturers. If 10 years ago, implementing an MRP system could cost anything up to millions of dollars, then nowadays many software providers sell their systems as a service with a low monthly subscription fee.

Some MRP systems are also accessible by mobile devices, which makes it much easier for shop floor workers to report their activities and for managers to see what is happening in the company in real-time.

How does an MRP system work?

While MRP I used the BOM and a sales forecast to produce an elementary material requirement plan, an MRP system receives inputs from an array of additional sources.

Staff from all over the company contribute information for the effective functioning of the MRP system, including people from sales, procurement, inventory, and production. These inputs encompass BOM, routings, customer orders, inventory records, demand forecasts, shop floor reports, etc. and due to this, the results are much more extensive, sophisticated, and accurate.

After receiving the inputs, the MRP system gives its user the outputs: purchase orders, work orders, the material plan, and reports. Modern MRP systems do a lot of processing automatically, meaning that information fed into the system is instantly reflected in reports and statistics.

MRP works on the premise of optimal control, computing data outputs – the initial preconditions, the dynamics, constraints, and objectives – by using formulas that produce the most optimized results. The variables in the formulas are the inventory levels, order size, in-house demand, and costs.

One of the most important things to consider when using an MRP system is the concept of “garbage in, garbage out” or GIGO. This rule of computer and data science maintains that to get high quality results from a system, you need to feed it accurate, high quality input info. If you feed garbage into the system, the system will give garbage back.

Implementing an MRP system

There are certain aspects that need to be addressed when implementing an MRP system, but as no two manufacturing companies are exactly alike, there needs to be a certain level of customized approach in every implementation.

First, a company has to understand why the process is necessary in the first place – clear and transparent communication across all departments is imperative if you want to ensure a smooth and effective implementation.

Then, before actually starting the implementation process, everything needs to be planned according to the capabilities and priorities of the organization. Goals, KPIs and incentives need to be set while also making sure that the productivity of the company will not suffer so much that it would end up losing clients and revenue.

The key to a successful implementation is the people at the helm of the innovation. That means assembling the right team consisting of people with the necessary skills and attributes to organize and communicate the employment of the software.

This team will be responsible for testing the software, preparing the implementation plan, and overseeing the fulfillment of the plan. The project manager in charge of the implementation should have this task as the number one priority, therefore it should never be the managing director of the company. They should, however, be someone with authority and a solid position in the production hierarchy.

It is true that a lot of ERP/MRP implementations fail. The common reasons for this are rooted in the failure to comply with the above-mentioned requirements. For example, if management fails to communicate and include the whole company in the processes, if there is a lack of understanding what the process will be like and which steps are necessary to complete the implementation, if the organization’s specifics such as capacity and culture are not considered, if training is not thorough, etc.

What is a Manufacturing ERP?

ERP (Enterprise Resource Planning) predominantly refers to software that is used for integrated management of the whole business process, to streamline and standardize business processes so that they would be more effective.

Therefore, it could be said that ERP is mostly a form of software for business management. A manufacturing ERP system contains production management and reporting functions, allows manufacturing firms to keep track of main business processes and make better managerial decisions together with achieving enhanced functioning within the business.

The key aspects of an ERP system include order handling, which factors in how many disparate aspects there are within an individual order and organizes order placement according to the entire manufacturing process, considering order quantity, stock inventory details, varying distribution channels, and accounting matters among other things.

Additionally, ERP systems include integrated financial management resources, enabling manufacturing firms to integrate their sales, overall finances, and more. For example, an ERP accounting module allows a firm to access all its finances within one place, and then subsequently make changes with ease.

Moreover, ERP systems can also improve the effectiveness and efficiency of a manufacturing firm through the standardization of HR particulars, enabling business owners and employees alike to utilize self-service interfaces that help them to manage personal data, track costs, enable time-tracking, and much more.

Finally, the very best Manufacturing ERP systems enable firms to manage various manufacturing types, to control and manage the flow of client information, and to regularly communicate with clients through the use of highly efficient CRM (Customer Relationship Management) systems. In addition, they help companies to achieve standardization within their manufacturing processes, they facilitate analysis and tracking for purchases in an organized and streamlined way, and they provide support to processes through reporting, planning, and scheduling, which allows businesses to save valuable time and increase overall productivity in their day-to-day operations.

MRP System

All-in-One MRP System

MRPeasy MRP system makes material planning, production scheduling and team communication easy.

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One tool to manage sales, production planning, stock, purchasing and shop floor:

  • CRM section: For quick cost estimating, quoting and customer relations.
  • Production planning: For assisted production scheduling, a visual production calendar and Gantt chart and dynamic drag-and-drop rescheduling.
  • Stock module: For inventory control, stock movements, stock lot/batch, serial number tracking, shipments, and much more.
  • Procurement: For managing purchases and increase pre-filled purchase orders with a single click.
  • Dashboard: For a quick overview of the whole manufacturing process – from start to finish.
  • Accounting: For making the life of your accountant maximum easy.
MRP Dashboard

Seamless Manufacturing Planning

  • Have one place to manage your stock, material purchase terms, and purchase orders.
  • Quickly estimate material costs and lead times when quoting or when scheduling new manufacturing orders.
  • When a work order is created, automatically book parts from stock and create prefilled purchase orders for missing parts.
  • See color-coded warnings for parts not arriving on time and take immediate action.
  • Use one integrated MRP system for materials planning helps to avoid stock-outs and decrease inventory levels.

Accurate Production Scheduling and Easy Rescheduling

  • Having each work order associated with a particular BOM and routing gives the system the ability to easily calculate the manufacturing cost and time.
  • All manufacturing orders are managed in one place, enabling MRPeasy to check and book the first available workstation time-slots and schedules the production for you.
  • Follow production schedule on visual calendars, or Gantt charts, and use simple drag-and-drop for dynamic rescheduling.

Efficient Team Communication and Reporting

  • All manufacturing operations and materials planning are done in one system, ensuring that every user has a clear overview of tasks and duties.
  • Shop-floor workers can follow their tasks in the “My production plan” section, and report fulfillment or stops.
  • Additionally, they can use simplified the “Internet-kiosk” mode for shop-floor workers tablets or smartphones for simplified real-time reporting.

Integrated MRP System for Business Growth

  • Production Planning

    Accurate automatic planning and realistic production schedule. Reschedule dynamically by just dragging and dropping manufacturing orders and operations in the calendar or Gantt chart.

  • Stock

    Inventory management, stock movements, batch and serial number tracking. Set and optimize stock levels and avoid stock-outs. Have a clear history of your stock operations.

  • CRM (Sales Management)

    Just a few clicks to calculate the product cost and the best delivery time. Send quotations and invoices, prepare shipments. Send confirmed customer order to production. Track the sales process all the way from quotation right down to delivery using a simple pipeline view.

  • Team

    Simple environment for line workers to follow tasks on desktop or mobile device. Real-time shop floor reporting. Real-time overview of the need and availability of human resources.

  • Purchasing

    Manage purchases and raise pre-filled purchase orders with a single click. Vendors, prices, lead times, it’s all there. Manage your supply chain with the help of accurate statistics. Forecast your procurement needs.

  • Accounting

    Enjoy clear visibility to your business performance. Follow your cash flow, balance sheet and profit/loss in real time. Understand the profitability of the business, and more.

More than 1000 manufacturers and distributors trust MRPeasy

Reviews

Brandon Ames

CEO, Anicell Biotech

MRPeasy gives us the ability to track all of our manufacturing lot costs right down to the individual serial number of our products. MRPeasy provides the software as a remote service and has never been unavailable to us except in very rare maintenance windows.

Tim-Grant-Business-Solution-Providers

Tim Grant

CEO, Business Solution Providers, Inc

“Ahead of its time” Easy of use and simplicity to understand. This is one of the best programmed software out there for this industry. We setup, train and implement manufacturing software for multiple companies, and clients find it easy to understand and operate.

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Benjamin Raffiani

CEO, Sox Trot LLC

Best value in the small manufacturing space by far. With MRPeasy our capacity doubled. It streamlined our production, and procurement so well that I’m now able to spend a lot more time on growth and sales. Extremely comprehensive and works seamlessly with Xero and Shopify.

Some of our customers

  • AniCell Biotech
  • Nielsen
  • Skin Actives Scientific
  • Starship

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MRPeasy is a simple yet powerful MRP system that helps small manufacturers organize production. Just sign up to test MRPeasy, select the features plan that meets your requirements and access additional functionality as you grow your business. It is not only a Material Requirements Planning system but it is a full-blown Manufacturing Resource Planning system.