Material Requirements Planning vs. JIT Delivery: Are They for You?
Material Requirements Planning (MRP) popularized in the 1960’s is an inventory management approach in lean manufacturing that can reduce costs and issues created by excess inventory. Meta Fab’s last article covered Just in Time (JIT) delivery for its benefits and potential problems. The following will focus on MRP and how it might be implemented.
What is Material Requirements Planning (MRP)?
Unlike JIT delivery, which manages inventory on the production floor level, MRP focuses on controlling inventory through sales forecasting. MRP aims to identify materials to meet production schedules by looking at what is needed, how much, and when.
Benefits of MRP
First, strategizing inventory management is good and can help bridge the disconnect between sales and production departments that at times are not in sync. To effectively implement MRP, a company requires assigned staff to conduct timed analyses to avoid under-ordering materials.
Second, material requirements planning encourages communication with customers. MRP is a good reason to conduct a survey with customers to learn about their needs generally and materials specifically. Customers will appreciate efforts to remain knowledgeable and prepared.
Third, MRP helps companies take a step back at their past, current, and potential orders. Scheduling out a material requirements analysis helps departments organize and plan. Knowing that every four months they must produce data on the materials used, frequency of use, and customers in the pipeline help sales communicate better with existing and potential customers. Sales staff who are part of MRP may be less likely to assure a customer of deadlines knowing the company is low on required materials. Moreover, an MRP that shows, for example, excess 5052 aluminum can also inform sales staff on where they might focus sales.
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Downsides to Material Requirements Planning
MRP is involved, and to work well, it really requires its own staff person to look at big-picture operations. They must be able to forecast sales, understand cost of materials, communicate clearly & consistently with other departments, know the company’s production and purchasing schedules, and be skilled at interpreting & responding to supply chain changes. That’s a high level position that a company must be able to afford as well as support with cooperative/collaborative work teams.
MRP is labor intensive and vulnerable to errors. Other departments must be able to produce data about customers, materials, and orders to forecast needs, and it’s not uncommon for different departments to operate out of sync or struggle to maintain ongoing communication.
Forecasting is also notoriously tricky. Pandemic(s), natural disasters, global unrest, workforce challenges, and the economy, among other events, can render a strategic plan inapplicable. Companies should have established protocols for unexpected changes that impact an MRP forecast and be able to purchase more materials without undue delay.
Conclusion
In short, a company is ready for Material Requirements Planning when it has the following:
- Growth trajectory
- Staff capacity
- Existence of excess inventory & associated issues/costs
- Strong workplace culture of communication and cooperation
- Strong relationship with customers to gain insight needed for forecasting future sales & materials needs.