Johannesburg – May 24, 2016 – Material Resource Planning or MRP is the true heartbeat of any ERP system in a manufacturing environment. It’s what’s required to take any such business to a stage of maturity. Once a company starts using MRP, it quickly realises its incredible value and positive impact. It is the ultimate goal of implementing ERP and reaching a stage of a fully automated and optimised system.
MRP was first developed in 1964 by engineer Joseph Orlicky as a response to the Toyota Production System, the famous model for lean production. The first computerised version was tested successfully by Black & Decker later that same year. Today thousands of businesses around the globe attribute MRP for their ongoing success.
However, this extremely powerful system requires some groundwork beforehand to ensure the accuracy of the information inputted. But the benefits of a well implemented MRP far outweigh any pre-requisites.
“MRP is extremely powerful, but can also be very dangerous, in the sense that it suggests how to run your business. So if the information you are inputting is inaccurate, you could bring your business to its knees! It’s incredibly important to first embark on a maturity phase in terms of your ERP system before implementing MRP,” says Tom Grindley-Ferris – SYSPRO Professional Services Manager.
Some of the requirements are, for example, 98% of your stock has to be 100% accurate. Cycle counts and regular stock takes need to be in place and work in progress processes need to be clearly defined.
Grindley-Ferris advises: “Anyone wanting to embark on an MRP project should first focus on internal business processes and get their house in order. The great thing about MRP is that it highlights inaccuracies in business processes. So it shows you where specific items and procedures are incorrect. It helps you become more productive.”
These requirements are probably why many companies running ERP systems, avoid MRP. They instead bypass MRP with lesser functionalities like purchasing worksheets, or replenishing reports. But if set up correctly, MRP can run your business. Management’s role becomes more proactive than reactive, remaining one step ahead on what is required regarding purchasing, manufacturing and capacity.
“Controlling hundreds of SKUs is tiresome. Work that can normally take five hours is achieved in half an hour by MRP. It’s not a question of ‘do you need it?’ it’s a question of whether or not you want to be optimised. It’s not going to change your business by giving you answers you don’t already have – it’s just going to give you those answers much faster,” says Grindley-Ferris.
Another result of MRP is procurement suggestion. It transforms your procurement department to perform a lot more than just a simple purchasing function. Effective procuring is about purchasing at the most optimised price, time, quantity and quality. Most procurement departments don’t manage this because of time constraints. But MRP automates and optimises the entire procurement process.
The end goal is ultimately saving money and becoming more productive. The most important part of MRP is reducing potential over-supply, which reduces working capital. As a result, your business runs leaner and more efficiently. So you get to the ultimate inventory optimisation point where the system is continuously driving inventory levels to their best economic value
Some Key Benefits of MRP:
- Meet demand with effective planning of required material and production capacity
- Suggest purchasing, production and transfer schedules to satisfy demand
- Control inventory levels by identifying potential over-supply
- Quickly identify overloaded work centres
In South Africa, there has been an increasing uptake and maturity of MRP in recent years, fast catching up to our European, Asian and US counterparts. But successful MRP implementation requires a highly specific skill set. Someone who understands the product and its principles. It requires an understanding of every aspect of the manufacturing and distribution chain within the organisation, from master production scheduling through to production control and distribution.
“Over the past three years, the majority of our clients have opted for full MRP implementation. This shows a definite upswing. There are so many factors that go into the MRP calculation, that almost every business unit is involved. If the business processes aren’t clearly defined or are inaccurate, you can’t even start to consider MRP. The key is to get to that level of maturity first before implementation.”
Looking ahead, things like sensors, internet of intelligent things and big data are becoming increasingly prolific in business software. This is good news for ERP and MRP. With the aid of these, the system will essentially start to track your habits, and understand the usage patterns in how you consume certain items and how you order them. Your ERP will then be able to make suggestions based on your habits and patterns, opposed to a specific set of rules, effectively becoming a fully-fledged self-learning artificial intelligence.