Material Requirements Planning: 9 Lives And Counting

April 11, 2006
In its latest version, MRP is one of several tools used for capacity and materials planning.

Around for decades, the trusty material requirements planning (MRP) system continues to be used in one form or another by many manufacturers. Sure, at most medium-size and larger companies, MRP has been overshadowed by its fancier, multi-application big brother, enterprise resource planning (ERP), a client-server-based system. But it still plays an important role.

Statistics from IW's Best Plants finalists demonstrate MRP's continued relevance to manufacturing. Among Best Plants finalists in 2004 and 2005, 80% had implemented MRP, and another 8% had plans to implement it.

In the days when manufacturers generally did large-volume production runs because equipment changeovers were time consuming and expensive, MRP was hard to beat. Using a sales forecast, it could be used to handle the bill of materials and routing, the purchase orders needed, and the shop orders to build products -- all with an emphasis on inventory accuracy. A later version, manufacturing resource planning, called MRP II, added accounting and other business processes.

One big drawback of MRP, though, was that its planning "brain" was predicated on a "push" system rather than the more popular "pull" system of manufacturing.

"Pull manufacturing short-circuited much of the MRP process," observes Bill Swanton, vice president of research at AMR Research in Boston. "As a result, people tended to shut off some of the detailed material planning capabilities."

Even so, Swanton points out, manufacturers still find a need to use parts of the MRP logic to give their suppliers a daily forecast.

"With a pull system, the orders come in, and companies respond to them, but they need some forecasting capability to be sure they have adequate capacity on hand," he says.

Case in point: "We don't use all the features of MRP," says Mark Aumann, controller at Nohl Corp., a maker of fiberglass insulation products for electrical switches. The Milwaukee firm uses MRP Plus, a package from Horizon Software in Naperville, Ill., for BOM and routings, costing, purchasing, receiving, inventory updates and accounting.

Even so, Nohl does not fully depend on MRP for production planning. "We do our production scheduling by working off the backlog report run from MRP, which shows us what jobs are due and when they are due," explains Jay Wnuk, project manager. "From a manufacturing point of view, MRP is very user friendly."

MRP systems, too, are evolving. "The style of MRP we are evolving is more of a replenishment style," says Mike Hart, president of DBA Software in Atascadero, Calif., which also targets small manufacturers with its just-released DBA Manufacturing Next Generation package. "There's generally a high degree of frustration with the scheduling capability in an MRP program, but we're blending scheduling and MRP together in a way that reflects the latest ideas in replenishment.

"You used to need to plan MRP requirements a long time in advance, but now a steel company will drop off what you need when you need it," Hart adds. "There's much more interest in pull planning, so companies are setting their order levels a lot lower than they used to."

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