The MRP (materials requirement planning) process is a system meant to streamline inventory control and material dependent service delivery. MRP systems are most commonly found in large manufacturing environments but are relevant to any concern which relies on a supply of raw materials and other related items. This process is designed to address three critical objectives: inventory availability, reduced risk inventory levels, and forward planning. Depending on the extent and complexity of the industry involved, MRP functions may be software based or manually implemented.
Most manufacturing and service delivery industries are heavily dependent on an uninterrupted supply of raw materials, spare parts, or finished products to operate efficiently. An unforeseen delay in the delivery of the smallest item can stop the production or service delivery of the biggest, or smallest, enterprise. Businesses which rely on a large inventory of materials from diverse origins are the most susceptible to these issues and require strict, farsighted inventory control to prevent them. The MRP process is one of the most efficient ways of exercising this level of control and is typically structured to address the three most critically relevant objectives in any supply chain.
Maintaining a constant supply of critical materials, the first objective, is often difficult for large inventory holders. Far flung supply sources have their own operational realities and can often not be relied on to maintain unbroken supply trends. The MRP process allows for this by using historical usage and supply figures to calculate purchasing regimens to ensure optimal stock levels. In this way, the system builds in stock buffers to safely accommodate unexpected supply delays while incurring the minimum inventory level penalties.
The second vital function fulfilled by a MRP process is inventory risk reduction, a point which is closely associated with inventory availability. Excessive inventory levels are a great risk to companies in terms of loss and damage risks, increased insurance burdens, and unnecessary expenditures. It is often all too easy to purchase excessive amounts of materials to cover supply reliability issues which, while solving short-term supply problems, simultaneously creates unacceptable stock level risks. An effective MRP process can minimize these risks by maintaining realistic yet safe inventory levels.
The third benefit of MRP process implementation are the forward planning and diagnostic functions typically possible with these systems. The process allows operators to build up a clear historical record of supply and usage trends which can aid in planning in the long term. Some systems can even flag operators of impending situations requiring remedial action. The average MRP process is software driven and most commonly based on referential databases. Manual systems are practical, however, for smaller enterprises with less extensive inventory requirements.