What is Material requirements planning software?
Material requirements planning software (MRP) is a very common term used in manufacturing businesses to describe the process of planning manufacturing inventory – what products to make and what items to buy, when, how much, and from who – all based on supply and demand.
Material requirements planning software came out of the 1960s and 1970s MRP strategies by Ollie Wight, Joseph Orlicky, and other pioneersThe funny part is that MRP software really didn’t take off until the 1980s and it didn’t become prevalent in smaller manufacturers until the 1990s leaving many people asking themselves, “What is MRP software?”
In simple terms, we can answer the question of “what is MRP software?” by considering all of the potential supply and demand that could occur in a manufacturing environment and the inventory and item information that could affect one of two things: quantity and lead time.
Material requirments planning software takes into account all possible inventory supply including on-hand inventory quantities by warehouse or stocking location, manufacturing work orders producing finished goods inventory, inbound warehouse transfers replenishing inventory from another warehouse location, and purchase orders for raw materials. Supply can be either actual supply (real orders) or planned supply (based on forecasts and suggested supply orders from the MRP software).
Material requirements planning software demand includes customer real and forecast sales orders or shipments, outbound transfer orders to replenish another warehouse from a centralized warehouse, and component requires (purchased or intermediate assemblies) for upstream manufacturing work orders. Demand can be actual (real purchase orders, transfer orders, or work orders) or planned demand (based on forecasts).
The question of “What is MRP” must also consider item, inventory, and manufacturing parameters which affect both quantity and lead time. For example, how much does the MRP software suggest that we order? This will depend on what’s in stock (supply), what’s on order (supply), what we’ve sold or plan to sell or to transfer out (demand), and what our stocking levels or safety stock is set to in inventory. We also need to consider if there are minimum order quantities with our vendors, order multiples required by our vendors, and the same for manufacturing work orders (minimum work order quantities and minimum manufacturing multiples).
Lead times are picked up by the Material requirements planning software from inventory and are easily defined for various suppliers by item and by warehouse. There may also be internal lead times for quality assurance testing, inspection, stocking, etc. Manufacturing lead times are generated by routing and bill of material plus the longest lead time for the bill of material components and may also include queue time (time spent waiting for drying, cooling, or to move to the next operation), move time (from one operation to the next), outside processing (time spent at a third party supplier for services such as heat treating, coating, plating, etc.), and other factors.
In today’s world, most manufacturers no longer ask “What is MRP software” but rather, they are Material requirements planning software experts using systems like Anytime Supply Chain to gain a competitive edge – especially when they are manufacturing and distributing products sourced and/or sold overseas with longer lead times.
e2b teknologies is the original developer of Sage 500 MRP software. The Company continues to develop new features for Sage 500 MRP software and now offers Anytime Supply Chain software, the next-generation cloud MRP software and cloud DRP software is available for Sage 500, Sage 300, Sage 100, Intacct Financials, Intuit QuickBooks, and other accounting and ERP business applications.