An ERP Consultant’s Perspective on Why to MRP

It is estimated that about 20% of our client base are distributors and manufacturers that currently utilize MRP (the Material Requirements Planning module).

What is MRP? The Material Requirements Planning module in an ERP uses current and projected demand and supply to assist you in planning and creating realistic production, purchasing and supply transfer actions.

A story about a client that implemented MRP

A client of ours that manufactures high-end paint and coatings was not running MRP. The paint and coatings they manufacturer are “tinted” to a specific clients specifications and are relatively expensive.

The material requirements “tint” are therefore ordered from the supplier as needed on a weekly basis and would typically run in the order of several hundred tints for a week’s worth of requirements. 

The client’s current practice would be to do a type of “trial-kitting” on all the sales orders for that week to determine the shortages that were there and then manually create a purchase order for the supplier that was several hundred lines long.

This process was extremely labour intensive and would take roughly an entire day to complete – ouch

With very little effort, once the client because aware of the benefits of the MRP module, the client implemented MRP.

What made it easy to implement MRP

What made it easy was that they already had an accurate Bills of Materials (BOMs) and accurate inventory levels.  The client set something called the EBQ’s (Economic Batch Quantities) against the tints Stock Codes and set a “flag” in the MRP module to order based on the EBQ’s.

From there it was a simple matter of running the MRP calculation. The calculation looks at all the supply and demand (time-phased), and where there is a shortage suggests a requisition to the supplier (rounded up to the nearest EBQ).

All that was left to do is to confirm (with one push of a button) the requisition in to a multi-line Purchase Order. The new MRP process (run on Monday morning for the weeks requirements) literally takes five minutes (compared to a day of labour without MRP!).

It was obvious to them that the pay-back period for justifying the cost of the MRP module and implementation would be very short.   

MRP – the pro’s and con’s: 

To successfully run MRP requires that you have accurate Bills Of Materials and Inventory levels (close to 100%) otherwise the calculations in MRP will be based on incorrect data. And that makes for funny calculations.

MRP suggestions should still be reviewed. You may have knowledge that MRP does not know about i.e. a supplier might be closed in summer for a two week shut down or you know that a supplier is out of a particular part.

Running the MRP calculation and “looking” at the recommendations will not affect your live data. Only when you act on the suggestion are you updating the ERP (in this case SYSPRO).

How does MRP work?

1. MRP simply looks at “supply” and “demand” (time-phased) and suggests “supply” actions and quantities in that case.
2. Sources of supply that MRP looks at are Current Inventory levels, Purchase Orders, Jobs (supply of the Finished Item) and Warehouse transfers.
3. Sources of “demand” are items such as Sales Orders, Job’s (demand on the Used-On parts) and Supply Chain Transfers.
4. MRP will suggest PO’s for Bought-Out items, Job’s for a Made-In item and will also suggest other actions i.e. “Cancel”, “Delay” where there are no current requirements or the supply could be “pushed-out” to match the demand.

Happy “MRP’ing.