Home Edge Computing What is MRP? – A mechanism for optimizing material procurement and production planning

What is MRP? – A mechanism for optimizing material procurement and production planning

MRP is often one of the ways to leverage edge computing. MRP is one of the production management methods, and it is a mechanism to optimize production including material procurement, which is a major problem in production management.  How does this MRP optimize production and what are the benefits? We will explain the idea and content of MRP, the effects, and precautions.

What is MRP?

MRP is an acronym for Material Requirements Planning, an idea born in the 1970s. Material is the material, Requirements is the word for requirements and requirements, and Planning is the word for planning. If these are connected as they are, it is a “material requirements plan”, but as a more understandable translation, MRP is expressed by the word “material requirements plan”.

In order to deliver the product by the specified delivery date, the product must be completed and packed in a ready-to-deliver state by the deadline after deducting the shipping period. For that purpose, parts, materials, and materials must be prepared by the deadline after deducting the manufacturing period. MRP is a production control method that is part of the production plan by considering “when” and “how much” these parts, materials, and materials are needed, and making a material procurement plan.

Considering only the condition that “what you need at the time of production”, it is ideal that there are an infinite number of parts, materials, and materials that are prepared. However, the space to store them and the funds that are stagnant due to holding inventory are limited, and it is ideal for management to keep inventory low if possible. In this way, MRP is a method for preparing “what you need,” “when you need it,” and “as much as you need.”

You may have heard the words “what you need,” “when you need it,” and “as much as you need.” This is exactly the same as Toyota Motor’s “just-in-time method” (JIT) concept. So what is the difference between MRP and JIT?

At Toyota Motor Corporation’s JIT, a work instruction sheet called “Kanban” is used to inform the delivery of parts, materials, and materials. This is a method that is required from the downstream side / post-process side to the upstream side / pre-process side in all production processes. In other words, it is a “pull method” in which parts, materials, and materials are sought from the manufacturing site on the demand side.

On the other hand, in MRP, the production control person who makes a production plan directs the supply of parts, materials and materials. The person in charge of production control is the most upstream side in the production process, and parts are sent from the front-end process side. This is a “push method” in which parts, materials, and materials are given from the supply side.

In this way, the Kanban method and MRP are different vector methods, even though they have the same purpose of preparing “what you need,” “when you need it,” and “as much as you need.”

MRP evolves to MRP2

Born in the 1970s, MRP is a method that aims for efficient production control by focusing on parts, materials, and inventory of materials. In the 1980s, in addition to this, it became necessary to comprehensively consider the factors necessary for making a production plan such as personnel, equipment, and funds. Therefore, the idea that was born by developing the conventional MRP is Manufacturing Resource Planning. This is now called MRP2.

MRP2 aims to optimize production by managing people, goods, and money from a comprehensive perspective. It is evolving into a system that leads to optimization of management resources through production control, rather than the conventional management method that focuses only on things.

The basic flow of MRP

Let’s see how MRP optimizes production.

  1. Make a demand forecast from past order information
    In order to formulate a future production plan, further demand forecasting is necessary. Demand forecasts are made from past order information and future sales plans. This process is generally handled by the sales department.
  2. Create a production plan from the demand forecast
    From the demand forecast made by the sales department, create a production plan by adding the product inventory held by the production department.
  3. Calculate the required number of materials from the bill of materials (BOM)
    When the type of product to be manufactured is determined by the production plan, the type of material required for the product is confirmed based on the parts list, and the total required amount is calculated.
  4. Calculate the net required amount from the required amount and inventory information
    Check the material inventory information and subtract the inventory from the total material requirement to calculate the net requirement.
  5. Determine the required date and time of materials
    Consider how long you can produce the materials in stock and when you will need the materials that are in short supply, and decide the date and time when you need the net required amount.
  6. Check the lead time of materials
    Now that the quantity and date and time of the materials you need have been determined and you have the information you need to place an order, check the lead time from ordering the materials to delivery.
  7. Determine the delivery date of materials
    We also check if there is enough space in the warehouse to store the materials, and decide the delivery date so that the products will be delivered immediately before use, with a margin that does not increase the risk of material shortages too much.
  8. Order materials
    Since the required amount and delivery date have been decided, we will send it to the procurement department and place an order for materials.

The optimization of production planning by MRP is carried out in this way. Generally, 1 is performed by the sales department, 2 to 7 is performed by the production control department, and 8 is performed by the procurement department, and it is important for each department to cooperate.

Effects and precautions of MRP

By operating MRP, production optimization can be achieved and efficient production is possible, but there are some points to be aware of. Let’s take a look at the effects and precautions that can be obtained by introducing MRP.

Purpose and effect of MRP

The following can be expected as the effects of MRP.

  • Optimization of inventory and work in process

MRP is a method for preparing “what you need,” “when you need it,” and “as much as you need,” and optimizes material requirements and delivery time for that purpose. This is directly linked to the optimization of inventory and work in process, which leads to the reduction of inventory space and smooth cash flow.

  • Reduction of material costs

At MRP, we purchase materials systematically. This eliminates unreasonable orders with short delivery times and unplanned frequent orders for small quantities, enabling efficient ordering of materials. By reducing material costs in this way, product costs can also be reduced.

  • Improving customer service

Since the state of being prepared “what you need”, “when you need it”, and “as much as you need” is kept, there is no situation where materials are short-circuited and production stops. We can maintain a system that enables us to deliver products on time and improve customer service. In addition, there is no need to create an unreasonable manufacturing process that switches between the front-end process and the back-end process, such as waiting for work-in-process, and the cause of quality fluctuations can be eliminated.

  • Increased productivity

By combining the above effects, the sales department can promise delivery dates, the manufacturing department can maintain quality, and the procurement department can purchase efficiently. In addition, warehouse management and material purchase costs will be reduced, QCD (quality, cost, delivery) in general will be improved, and productivity as a company will be improved.

In this way, MRP has a great effect on the basis of production control. It can be said that production control itself does not function normally without MRP.

Precautions for MRP

As you can see, MRP has a great effect that can be said to be indispensable for production control, but there are some things to be aware of.

  • Maintenance of bill of materials (BOM)

In order to calculate the required amount of materials, you need a bill of materials that describes the exact amount and lead time of the parts, materials, and materials that make up the product. If there are many types of products, it will take a lot of time and effort to maintain the parts list. One point is how high value can be found in organizing such information.

  • Time lag for information sharing between departments

The production plan by MRP must be updated daily depending on the production situation. At this time, if there is a time lag in the information held by each department, it will lead to shortage of materials and over-ordering. There is no point in introducing MRP. It is a prerequisite for the introduction of MRP that all departments involved in production can share information without a time lag.

Optimize production with MRP

We explained MRP, a production control method for preparing materials in just proportion and improving productivity.

Material procurement that relies solely on human know-how cannot keep up with diversifying needs. There is a need for a production control system that automates operations and allows downstream processes to proceed smoothly. MRP can be expected to have a great effect on material procurement and production planning in response to these issues. However, on the other hand, cooperation between departments is also essential, and careful coordination between departments and real-time information are required for introduction. In MRP 2, people and equipment are also subject to management, and their importance at the manufacturing site is becoming even greater, and how to build a system that does not tolerate data loss or delay at the edge is also an issue to be examined. Anxiety and opposition to the introduction of the new system are expected, but it is important to thoroughly explain and share the benefits for all departments before introducing it.


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