MRP integrates data from a variety of sources including inventory, production scheduling and bills of materials to calculate the most efficient and effective purchasing and shipping schedules for parts, components and subassemblies required to manufacture a product.
To ensure that an MRP system runs smoothly, it is important to avoid five major material requirements planning pitfalls:
- Inadequate Bill Of Materials
All production planning starts with a bill of materials – if that is wrong, virtually everything else affecting production will be wrong as well. The BOM drives operations, purchasing, manufacturing, and logistics – the data from a manufacturing BOM is used to inform ERP, MRP, and the manufacturing execution system (MES). The more complete and accurate a BOM, the better the decisions made regarding inventory levels, operational efficiency, and the most cost-effective and profitable way to get products to customers.
2. Lack of understanding of planning fundamentals
Proper material requirements planning is a complex process that requires good analytical skills and strategic thinking. What is important to understand is that planning is a strategy and purchasing is a task. The individual in the planning role may not be familiar with the principles of supply and demand or know how to interpret the information coming out of the MRP system. This can be a major stumbling block for effective material requirements planning.
- Absence of Forecasting
An MRP planner must anticipate what the company will need to successfully manufacture and deliver products. The only way to do that is to have a forecasting mechanism and model. Without proper forecasting there is no planning. Material requirements planning becomes reactive instead of proactive – that’s not an MRP strategy, that’s simply purchasing.
- Treating suppliers as vendors, not partners
Our main suppliers are the initial key to effective material requirements planning. Without their cooperation, we will have no materials to make your products. It’s critical to involve our key suppliers in your MRP beyond simply sending them purchase orders. By developing a close relationship with them, we can have a better view of the supply chain and create supplier agreements that work well for both parties to ensure a ready supply of raw materials for production.
All these material requirements planning pitfalls highlight the need to establish good metrics and business analytics. Metrics enable you to measure planning accuracy and facilitate the continuous improvement critical to optimizing ERP and streamlining manufacturing operations.