Which Of The Following Statements About Service Resource Planning Is True?

Material requirements planning (MRP) is a system for calculating the materials and components needed to manufacture a product. It consists of iii primary steps: taking inventory of the materials and components on paw, identifying which additional ones are needed then scheduling their production or purchase.

Why is MRP important?

MRP, which is done primarily through specialized software, helps ensure that the right inventory is available for the production procedure exactly when it is needed and at the everyman possible toll. Equally such, MRP improves the efficiency, flexibility and profitability of manufacturing operations. It can make manufactory workers more productive, improve product quality and minimize cloth and labor costs. MRP also helps manufacturers respond more quickly to increased need for their products and avert production delays and inventory stockouts that can outcome in lost customers, which in turn contributes to revenue growth and stability.

MRP is widely used by manufacturers and has undeniably been one of the cardinal enablers in the growth and broad availability of affordable consumer appurtenances and, consequently, has raised the standard of living in most countries. Without a way to automate the complex calculations and data management of MRP processes, it is unlikely that private manufacturers could accept scaled up operations as rapidly as they take in the one-half century since MRP software arrived.

How does MRP piece of work?

MRP uses data from the neb of materials (BOM), inventory data and the master production schedule to summate the required materials and when they volition be needed during the manufacturing process.

The BOM is a hierarchical list of all the materials, subassemblies and other components needed to make a product, along with their quantities, each usually shown in a parent-child relationship. The finished good is the parent at the top of the hierarchy.

The inventory items in the BOM are classified equally eitherindependent demand ordependent demand. An independent demand item is the finished skillful at the top of the hierarchy. Manufacturers make up one's mind its amount past considering confirmed orders and examining market conditions, past sales and other indicators to create a forecast, then decide how many to make to meet the expected need.

Dependent need items, in contrast, are the raw materials and components needed to make the finished product. For each of these items, demand depends on how many are needed to make the next-highest component in the BOM hierarchy.

MRP is the system most companies use to track and manage all of these dependencies and to calculate the number of items needed by the dates specified in the main production schedule. To put it another fashion, MRP is an inventory management and command system for ordering and tracking the items needed to make a product.

Atomic number 82 fourth dimension -- the menstruum from when an order is placed and the item delivered -- is another cardinal concept in MRP. There are many types of pb times. Ii of the virtually mutual are material pb fourth dimension (the fourth dimension it takes to social club materials and receive them) and manufacturing plant or production lead time (how long it takes to make and send the production subsequently all materials are in). Client lead time denotes the time between the customer guild and final delivery. The MRP organization calculates many of these lead times, but some are called by the operations managers and entered manually.

Diagram of a multilevel bill of materials (BOM) — The bill of materials specifies the items needed to make a product and is a key data source in MRP.

MRP in manufacturing

MRP is essential to the efficiency, effectiveness and ultimately the profitability of a manufacturing operation. Without the correct raw materials and components on hand, manufacturers can't hope to go on up with the demand for products at the optimal cost and quality. They will also exist less able to respond to fluctuations in demand by adjusting production.

MRP can besides brand the later stages of production, such as assembly and packaging, proceed more smoothly and predictably by removing most of the uncertainty over inventory and minimizing the time needed to manage it.

MRP is useful in both discrete manufacturing, in which the final products are distinct items that can be counted -- such as bolts, subassemblies or automobiles -- and process manufacturing, which results in majority products, including chemicals, soft drinks and detergent, that can't be separately counted or broken down into their elective parts.

Benefits of MRP

The primary objective of MRP is to make sure that materials and components are available when needed in the product process and that manufacturing takes place on schedule. Boosted benefits of MRP are:

reduced client lead times to improve client satisfaction;
reduced inventory costs;
effective inventory direction and optimization -- by acquiring or manufacturing the optimal corporeality and type of inventory, companies can minimize the chance of stock-outs, and their negative impact on customer satisfaction, sales and revenue, without spending more than than necessary on inventory;
improved manufacturing efficiency by using authentic production planning and scheduling to optimize the utilize of labor and equipment;
improved labor productivity; and
more than competitive product pricing.

Disadvantages of MRP

MRP has drawbacks, including:

Increased inventory costs: While MRP is designed to ensure acceptable inventory levels at the required times, companies can be tempted to hold more inventory than is necessary, thereby driving upwardly inventory costs. An MRP system anticipates shortages sooner, which tin lead to overestimating inventory lot sizes and pb times, especially in the early days of deployment before users gain the experience to know the actual amounts needed.
Lack of flexibility: MRP is also somewhat rigid and simplistic in how information technology accounts for atomic number 82 times or details that impact the master production schedule, such as the efficiency of factory workers or issues that can delay delivery of materials.
Data integrity requirements: MRP is highly dependent on having accurate data near cardinal inputs, specially demand, inventory and production. If ane or two inputs are inaccurate, errors can be magnified at later stages. Information integrity and data management are thus essential to constructive use of MRP systems.

To accost these shortcomings of MRP, many manufacturers use advanced planning and scheduling (APS) software, which uses sophisticated math and logic to provide more accurate and realistic estimates of lead times. Different near MRP systems, APS software accounts for production capacity, which tin have a significant affect on availability of materials.

History of MRP

The seeds of MRP were planted early in the 20th century with the development of new models for optimizing manufacturing. In 1913, American product engineer Ford Whitman Harris developed the calculation known as economic order quantity, the amount that minimizes the toll of ordering and storing a good. Concurrently, the mass-production organisation implemented by Henry Ford showed the value of having strict controls over the flow of materials through an assembly line. Another fundamental driver of industrial efficiency came from the scientific management theories of Frederick Taylor, which included techniques for product planning and control and for improving the efficiency of material handling.

With the advent of computers, systems for optimizing the manufacturing process entered a new era. When mainframe computers became commercially bachelor in the 1950s, programmers at manufacturing companies began developing custom software to manage BOMs, inventory, product and scheduling.

It wasn't until the 1960s, however, that the field got its modern name. That's when a pocket-size group of influential engineers championed an integrated system of computerized planning they dubbed fabric requirements planning. In 1964, IBM engineer Joseph Orlicky developed and formalized MRP after he studied the Toyota Product System, which was the model for the lean production methodology. Then, in 1967, Orlicky's IBM colleague, Oliver Wight, co-wrote a book on product and inventory control with George Plossl, a mechanical engineer and management consultant. The 3 continued to interact and today are usually cited as the pioneers of MRP.

It's important to note that MRP and lean product are not the aforementioned, despite their connection in Orlicky's pioneering work. In fact, they are considered by many practitioners to be antithetical, though some say MRP tin help with lean production. MRP is considered a "push button" production planning system -- inventory needs are determined in advance, and goods produced to run across the forecasted demand -- while lean is a "pull" organisation in which nothing is fabricated or purchased without evidence of actual -- not forecasted -- demand.

Orlicky'due south ideas spread rapidly throughout the manufacturing sector after the 1975 publication of his book,Material Requirements Planning: The New Way of Life in Production and Inventory Management. By the early 1980s, in that location were hundreds of commercial and homegrown MRP software programs.

MRP also received a major boost in the 1970s from the educational efforts of the American Production and Inventory Command Society (APICS), after Orlicky, Plossl and Wight pushed the association to deliver for MRP. APICS became the main source of MRP education and certification and continues in that office today, having expanded over the decades into operations direction and supply chain management.

Orlicky died in 1986. A 2nd edition of his book, updated by Plossl, was released in 1994. The electric current version,Orlicky'due south Textile Requirements Planning, Third Edition is a 2011 update by consultants Ballad Ptak and Republic of chad Smith. It adds communication on how to use MRP to run a "demand-driven" planning procedure that uses actual sales orders, rather than the typical MRP method of a sales forecast, to calculate material requirements. Chosen demand-driven cloth requirements planning (DDMRP), this newer "pull" approach is controversial and viewed by some as a violation of important principles established past Orlicky.

MRP vs. ERP

An extension of MRP, developed by Wight in 1983 and called manufacturing resources planning (MRP 2), broadened the planning process to include other resources in the company, such every bit financials, and added processes for product design, capacity planning, cost management, shop floor control and sales and operations planning, amongst many others.

How MRP differs from MRP II and ERP — MRP II expanded MRP to other business organisation functions and was renamed ERP.

In 1990, the analyst house Gartner coined the term enterprise resource planning (ERP) to denote a however more expanded and generalized type of MRP Ii that took into account other major functions of a business, such equally accounting, human resources and supply chain direction, all of it managed in a centralized database. Both MRP and MRP II are considered directly predecessors of ERP.

ERP quickly expanded to other industries, including services, banking and retail, that did not need an MRP component. However, MRP is still an of import part of the ERP software used by manufacturers.

This was last updated in Dec 2020