Before computers appeared in our lives, the control of the quantity of materials in the warehouses of enterprises was carried out manually using accounting cards. However, this method was unreliable, errors often occurred, inaccuracies in calculations, and the company had to stand idle without resources, disrupting deadlines and losing profit. With the start of production automation, this process was greatly simplified by programmers. The MRP system was the optimal solution to the problem of warehouse control. Over time, the new method has spread around the world. We will get acquainted with its features, advantages and main tasks.
For the first time the concept of MRP (Material Requirements Planning) arose in the mid-50s of the last century in the United States. By the definition of one of the main developers, J. Orliski, it is a logical sequence of procedures and requirements that must comply with the production schedule. Simply put, this is a method of managing production through the preparation of plans, schedules for the supply of raw materials or components. Based on the theoretical concept, an MRP planning system was developed.
Its scope was working with components, semi-finished products, materials and specific finished products. In the USSR, this method began to be used only in the 70s. With the advent of computer technology, the MRP system expanded to the military-industrial sphere, and in the 80s to the trading business. The method is necessary in the processes of controlling orders and supplying resources with a large nomenclature. A vivid example is the large industrial enterprises (for example, engineering products).
The specialists considered the only problem in the new method to be the choice and development of information and software-mathematical support, office equipment. It is typical of automated manufacturing and manufacturing processes. In this regard, experts distinguish two types: computing and information systems MRP.
Based on the area of possible application of this method, certain goals were formulated. The MRP system meets the needs of the enterprise in materials, components, and products for delivery to consumers. It eliminates costs by maintaining low inventory levels. In practice, the goal of the concept is to plan production operations and procurement schedules.
Also, the MRP system allows you to determine the number and timing of production of the final product and the acquisition of the resources necessary for it in accordance with the production schedule.
The work cycle is determined by a certain sequence of actions. At the first stage, it is necessary to draw up an optimal production schedule for the planned period. This process is based on the analysis of an individual production program.
At the second stage, an inventory should be made of materials and components that are not involved in the production, but which are necessary for fulfilling a consumer order (for example, packaging, storage of products, etc.).
The next stage is unifying, since it requires calculating the total need for each type of materials, components that will correspond to the composition of the final product.
And finally, you need to schedule resources for resources. In the future, it is possible to make adjustments to orders formed prior to planning. They are necessary in order to prevent late deliveries.
Conditions and approaches
For the operation of any system, certain conditions are necessary. The MRP system is no exception. Implementation of resource planning is possible using effective mathematical methods of forecasting, the availability of computer technology, which allows you to quickly optimize tasks. And also planning and management of production and technological processes are required.
The MRP system itself dictates its choice regarding the type of demand for the company's products. There are two types: independent and dependent. In the first case, demand is formed by independent buyers. It is an external economic factor, and therefore control is carried out according to a simple schedule.
The second view demonstrates the reverse side of economic relations. It is due to the use by the manufacturer of several components for the manufacture of goods. Therefore, the demand for each of them forms a certain relationship with the production plan of the final product. It is with this approach to calculating the volume of all types of raw materials that the implementation of an MRP class system is possible.
This method of planning needs has an extensive structure. Elements of the MRP system are divided into input and output data. They, in turn, include subcomponents that are in close information and mathematical relationships and provide high-quality forecasting and control of the production process.
Input data are presented by the production schedule, specifications and data on available stocks and open (i.e., outstanding) orders. They play a key role in the implementation of the planning system.
The first subcomponent is formed of relatively independent demand. The system does not have automation tools for scheduling. Therefore, it is created manually in accordance with the characteristics of consumption and the financial plan. To simplify the work, you can divide the production schedule into periods. The first does not allow any changes, it requires precise implementation. In the second period, adjustments are possible, but they must be consistent with the plan of core resources. The further the period is considered, the more dynamically the information appears.
A specification is a list or list of key resources or components for a single unit of a product. This helps to identify material shortages and compensate for them. It is also necessary to indicate the number of products and the lead time and delivery of the order. For trouble-free production and to avoid errors, the process of tracking available raw materials and comparing with early indicators should be continuous.
Accounting for specifications helps to correctly calculate total resource requirements. This process is accomplished using the MRP algorithm. The production schedule allows you to accurately calculate the total demand for finished units of production and generate data on stock availability, matching the plan with the number of open orders.
This category consists of primary and secondary reports that perform an auxiliary function in the system.
The first subcomponent, in turn, is represented by:
- Planned orders is a schedule broken down by periods (time and size of an open order).
- The release of materials into production (the balance of stocks is calculated taking into account the amount of expenditure of resources).
- Corrections in planned orders in the form of a change in the date, volume of the order and its possible cancellation.
Secondary reports reflect control over the execution of orders in accordance with the timing and volume. They aim to show deviation from the plan, help to calculate production costs. Planning reports (supply contracts and purchase commitments) fall into the same category. Exception reports indicate inconsistencies and errors in reporting.
When using computer technology, the MRP system acts as a program that displays the entire process in a diagram.
Like any phenomenon of reality, this method has its pros and cons of use. The undoubted advantages of the MRP system are:
- The ability to operate on consumption data not in the context of past experience, but with a guide to the future (planning, forecasting accounting).
- The ability to implement minimum stocks of raw materials. This significantly saves the finances of the enterprise, its costs for renting space and hiring staff.
- Increase in stock turnover rate.
- Streamlining production by controlling the status of each type of resource component. This quality allows you to clearly track the production process.
- Exclusion of production delays due to lack of necessary resources;
- Reducing the risk of poor progress in fulfilling orders, as well as reducing the amount of urgent work.
- Another significant advantage of the MRP system is the ability to use its data for other logistics activities in the enterprise or in the supply chain.
The disadvantages of this planning method include:
- The need for a large amount of accurate data and calculations.
- The MRP system has low flexibility, which significantly interferes with timely response to external changes in the production or supply of resources.
- The complexity of managing the system with a large flow of production and workload. This can entail a considerable number of failures, depending not only on the human factor, but also on the malfunctions of the system itself.
- When planning, MRP cannot take into account restrictions on capacity, volume and other production parameters. Therefore, sometimes logisticians are faced with "unreasonable" calculations presented by the program.
- The MRP system requires an expensive and long-term implementation.
At the end of the last century, American analysts George Plosl and Oliver White proposed a more advanced resource planning system, called MRP II. Its main advantage is that it covers the operational and financial side of production, takes into account technological capacities and involves the prompt introduction of adjustments to plans and schedules. The list of functions extended to demand management, modeling of the production process according to benchmark indicators of the warehouse and the evaluation of performance. At the same time, the results are evaluated by the system as a whole, which makes MRP II more flexible planning in relation to external factors.
Despite the significant overcoming of the problems of production planning, the MRP system is imperfect. It applies only to one type of logistics activity. Therefore, in the 90s, the integration of operations and production, personnel management and financial management was carried out. The new system is called ERP (Enterprise Resource Planning). The concept is based on the idea of creating a single data warehouse (or repository). Thus, the MRP system has become part of a larger system.
The advantage of this approach is the absence of the need for communication between systems and significant savings in time and financial costs for staff. Today ERP planning is relevant for large enterprises. And small and medium-sized businesses adhere to the now-classic MRP system.