An MRP definition is Material Requirements Planning, a software system designed to manage product-based inventory and balance supply and demand to improve productivity, reduce waste, and control inventory quantities to minimize the risk of overages or shortages.
How does the MRP system work?
MRP encompasses all the processes that occur from the purchase of raw materials or parts through customer delivery. In between these stages, inventory arrives at the business, is processed, and is often changed through a series of scheduled workflow stages, before being packaged and stored or sent out for fulfillment. Every business’ goal is to create a balance of inventory that will keep up with orders as they come in while avoiding a buildup of inventory. MRP organizes the workflow stages to produce given quantities of product to stay in line with demand.
The goal is to eliminate the guesswork as much as possible, so purchase orders are placed with the confidence that the quantity is ideal for current production needs. When your software has the know-how to perform all the necessary calculations for you, you can determine reorder points from calculated minimum order quantities and then automate purchase orders to reorder those raw materials or parts at the right time and in the right amounts. Planning is thus simplified by coordinating workflow behaviors around predetermined quantities to optimize the production schedule.
The MRP meaning for your business can be quite significant if you have never benefitted from using software before. The MRP system meaning for your team will be more time and greater productivity.
The quantity of materials used to produce a finished product are entered into the MRP system. Using a bill of materials, each workflow stage can create a build with predetermined quantities to complete that stage of production. You might have many tiers of builds using different BOMs.
Unlike consumption-based planning, MRP formulates planning and order quantities around information from customers or sales forecasts, rather than historical data, assuming if a certain number of finished products are ordered, you can calculate the raw materials or parts required to produce those finished products.
Many different variables, from minimum order quantity to lot size to lead time must be considered in the planning process to order a broad set of activities from purchase orders, receiving, production, fulfillment, sales, and delivery.
The accuracy of MRP is highly dependent on your accounting and most MRP systems, by definition, do not integrate with accounting functionality. SOS Inventory, on the other hand, integrates all the MRP functionality your business requires with financial functionality to bidirectionally sync with QuickBooks Online. Our customers are delighted by the precision of tracking and record keeping possible with SOS Inventory.
The more products your business makes, and the higher the volume it produces, the more complex this system becomes. Imagine trying to track every item needed to manufacture, placing orders before you were facing shortages and producing just the right amount to meet demand without creating wasteful excess? Without software, it would be a juggling act, perhaps manageable for the smallest companies selling a single product, but never efficient or scalable for growth. MRP software capabilities help to keep costs down and speed up production so today’s companies can grow at their own pace.
What’s the difference between MRP and MRP II?
While easy to confuse, MRP and MRP II refer to two different concepts in the manufacturing world, the II version being an upgraded version of MRP. MRP refers to materials planning while MRP II refers to manufacturing resource planning, which does include the MRP functions with the addition of accounting, forecasting and equipment maintenance.
Q: What is a MRP system that works best for small businesses.
A: Both MRP and MRP II systems tend to be costly for small businesses. Luckily, with SOS Inventory, using MRP means lower costs, greater functionality, extensive reporting features, and unbeatable accuracy in accounting. Planning around acute supply chain disruption demands intelligent software designed to help your business navigate the obstacles. Find out why businesses turn to SOS Inventory for greater inventory control with a free, no risk trial.
MRP system definition for your business should mean greater profitability, control, and efficiency.
The MRP meaning in business is vital for strategizing production for profitability.