MRP stands for “manufacturing resource planning.” It is the process by which jobs and POs are generated and scheduled to ultimately fulfill customer orders.
All manufacturing companies must use some form of MRP
All manufacturing companies must use some form of MRP to create jobs and POs. MRP can be done using manual planning or using a formal MRP system such as DBA Manufacturing.
Job and PO planning is extremely complicated due to multi-level product structures, interdependent demand among subassemblies and purchased components, and the time-phased nature of supply and demand events.
Without formal MRP, flawed workarounds are used
Without formal MRP generation, flawed workaround measures such as the following are used to cope with the complexity of job and PO planning.
Shortage Reports
Shortage reports are commonly used, but fail to account for the time-phased nature of supply and demand events, which leads to shortages and over-stocking.
Timing issues can cause shortages. For example, a subassembly item’s total demand may be covered by a pending supply job, in which case the item fails to get listed on the shortage report. However, if the item is needed immediately by other jobs and the pending supply job won’t be completed until several days from now, an actual shortage exists which prevents those jobs from being started.
Timing issues can also lead to over-stocking. For example, total demand for an item may exceed incoming supply, in which case the item gets listed on the shortage report, which dictates creating a new job. But if some of that demand has a later requirement date that can be supplied by a future job, making the full quantity now results in an over-supply.
Job Chains
BOM explosions are used to create “job chains” that isolate multi-level demand for one sales order and product structure at a time. Job chains fail to account for interdependent demand and result in an excessive number of fragmented jobs with inefficient run sizes.
Using job chains also results in longer times to shipment due to an over-emphasis on making all inputs to order end-to-end instead of making selected inputs to stock in order to reduce lower level lead times.
Blanket POs
Blanket POs attempt to forecast purchased item demand over time, but fail to account for fluctuations in actual demand. This leads to over-stocking when actual demand is less than forecasted demand.
The tedious nature of manual planning leads to inefficiencies
Manual planning is tedious and time-consuming because it requires many hours to sift through reports and manually enter jobs and POs. Because manual planning is so time-consuming, it tends to be done in mass sessions once or twice a week, which fails to provide sufficient response time to account for daily supply and demand changes Furthermore, the tedious nature of manual planning leads to corner-cutting measures such as over-stocking.
A coordinated master schedule cannot be created manually
Because manual planning is incapable of fully reflecting the time-phased nature of job and sales order demand, it cannot create a master schedule where supply dates are coordinated with demand dates on a “just in time” basis. The lack of a coordinated master schedule makes shop control much more difficult and encourages costly and inefficient expediting to meet sales order required dates.
Formal MRP is easier and far more effective
By contrast with manual planning, formal MRP makes job and PO planning much easier and far more effective for these reasons:
- It takes into account multi-level product structures, interdependent demand among subassemblies and purchase components and the time-phased nature of job and sales order demand.
- It automates job and PO generation without need for manual workarounds such as shortage reports, job chains, and blanket POs.
- Because it is a fully automated process, it can be run daily to provide timely response to changes in supply and demand.
- It generates a coordinated master schedule that facilitates shop control and increases shop throughput.
- It liberates planners and buyers from the tedious burden of manual entry, which frees up valuable time that can be better spent on item sourcing and refining item settings.
Which MRP software package is best?
I can’t speak for other products, but my company’s software package, DBA Manufacturing, is especially well suited for small business because it uses just a handful of common sense item planning settings to generate a coordinated, self-adjusting job and PO schedule that insures material availability when it is needed on a just in time basis. Click the following link to learn more:
DBA Manufacturing – MRP Software for Small Business >>
Mike Hart is the co-founder and President of DBA Software Inc., a leading provider of manufacturing software for small businesses.
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