Like the chicken and the egg, it’s hard to say which system came first - Material Requirements Planning (MRP) or inventory management. What’s indisputable is that modern Good Manufacturing Practice (GMP) calls for the two processes to work symbiotically to assess and ensure that materials are available to create quality products at a pace that satisfies customer demand.
Manufacturers understand that successful operations rely on detailed planning and resource allocation, and inventory management is a key component of these processes. It works in conjunction with materials planning to inventory and track the location of materials, ensuring there are enough on hand for production, then facilitating getting that inventory where it needs to be at the right time.
This article explores the relationship between material requirements planning and inventory management, the benefits of using inventory management software for MRP, and the essential features to consider when selecting software to support your MRP operations.
Contents
What is material requirements planning (MRP)?
What is material requirements planning software?
Inventory management and material requirements planning
Key features of material requirements planning software
Benefits of material requirements planning software
QT9 MRP for material requirements planning
Material requirements planning is the process of determining the appropriate types and amounts of materials needed to produce a good, and ensuring those materials are available when they are needed for production. The process consists of three primary steps: inventorying materials on hand, identifying what additional materials are needed, and then scheduling their production or purchase so that they arrive on time and in the right place so operations can proceed smoothly.
MRP software calculates the materials needed to meet production plans and customer demand using data from lead times, sales forecasts and production plans to determine optimal stock levels.
With MRP software, companies can easily view production requirements, stock on hand and purchasing or production needs, as well as historical purchasing and production data.
Many MRP software solutions include additional related processes, such as initiating purchase orders, managing warehousing and manufacturing, and managing suppliers. These types of MRP software are considered enterprise resource planning (ERP) solutions.
The accuracy of an MRP system relies on the real-time data provided by inventory management systems. Without this input, inefficiencies such as overstocking, stockouts and production delays can occur.
Inventory management software is used to track and control inventory - finished/manufactured goods or raw materials - so a business knows what inventory it has, where it is located, where it needs to go and when more needs to be ordered or manufactured. The primary goal of inventory management software is to centralize and streamline those processes.
Most inventory management software combines inventory control with related office or operations functions, including purchasing, manufacturing, supplier management and sales. More advanced systems include additional capabilities, such as compliance tracking, demand forecasting and multi-location management.
Choosing the right inventory management software is crucial for supporting MRP. Below are the essential features to look for in MRP/inventory management software:
Inventory management software tracks inventory in real time, using barcodes, QR codes or radio frequency identification (RFID) tags to scan and record materials as they’re received, moved, used in production or shipped to customers. This data helps managers see exactly what’s available, where it’s located and if more needs to be ordered, reducing production delays and providing the insight necessary to maintain balance between supply and demand.
The most efficient inventory management software enables manufacturers to set up reorder points, which automatically generate purchase orders when stock levels drop below a certain threshold. This ensures that materials are available without holding excess inventory, saving space and reducing carrying costs.
MRP software incorporates the BOM into its material acquisition or production processes, using data from the BOM to ensure the right materials are available at the right quantities and in the correct order. The digital environment allows manufacturers to easily make changes to the BOM if needed and improves accuracy for complex products.
Inventory software can serve as a repository for supplier data, including lead times, item specifics and order histories. This makes it easier to build relationships with reliable suppliers, negotiate prices and ensure timely material deliveries.
By analyzing historical sales and production data, MRP inventory software helps forecast demand, estimating how much of each material or product will be needed. This forecasting guides purchasing decisions and reduces overstocking or understocking.
Inventory management software can track and manage inventory across multiple warehouses or production facilities, ensuring material availability at the right location when needed.
Tracking inventory with real-time information, enables accurate updates on stock levels, locations and movements. Often tracking involves using digital techniques such as barcoding, scanning or radio-frequency identification (RFID). This provides accurate data for MRP systems to avoid delays and shortages.
Cloud MRP software is an MRP solution that is delivered over the internet via a third-party provider. The benefits of cloud MRP software are numerous for businesses, since they are not responsible for maintaining the software on their own servers.
This not only eliminates the need for staff and space to maintain the software, it also makes installing system updates simple. What’s more, cloud-based software enables businesses to easily access their MRP data and production information from anywhere, at any time as long as they have an internet connection.
Like so much in the realm of business planning, there is a lot to consider for effective material requirements planning, especially at higher production volumes or for products that are more complex.
MRP software seamlessly and systematically evaluates material requirements, production schedules, sales forecasts, customer orders and inventory to calculate the optimal supply of product inputs. This leads to:
Improved production efficiency – Using a centralized database and integrations between production functions, such as purchasing and shop floor management, MRP software is able to simplify the process of ensuring that materials are where they need to be at the optimal time, so that production can proceed on time, in the correct sequence, with minimal interruptions.
Reduced costs – MRP software reduces the cost of purchases by determining the most cost-effective materials and components. It can also reduce inventory carrying costs and waste through better alignment of production and demand, and helps manufacturers avoid employee overtime through more efficient scheduling and fewer bottlenecks.
Optimized inventory - MRP software help a company reach optimal inventory levels by using real-time and historical data to accurately forecast material needs. The software gives immediate insight into inventory locations and quantities, so you always know what’s on hand and what needs to be ordered or reordered. Inventory capabilities enable the software to automatically update inventory data when shipments arrive or leave the warehouse.
Reduced lead times – With the more accurate forecasting capabilities of MRP software, it becomes easier for manufacturers to schedule production for optimal efficiency, which keeps order-to-delivery times low and makes customers happy.
Traceability and compliance – Many manufacturers must keep detailed records of product materials. Some MRP systems enable easy traceability using barcoding for lot or serial number traceability, satisfying regulatory mandates and making it easier to track products in the event of a recall.
Improved customer satisfaction – Greater production efficiency means manufacturers are able to get their products to market more quickly, improving customer satisfaction and market position.
QT9 MRP incorporates a comprehensive material requirements planning system that simplifies and centralizes pertinent manufacturing and enterprise-wide functions. QT9 MRP improves efficiency and accuracy through integrated data and automated operations, all without breaking the bank.
QT9 MRP provides more than 14 modules as part of its standard offering, as well as easy access to data and analytics to help manufacturers make the best decisions for moving forward.
With QT9 MRP you get:
14+ modules, including multi-level BOM
Quick implementation
Tailored customer support
Customer, compliance, supplier and physical inventory web portals
Lot and serial number inventory control
Access to digital business intelligence and analytics
Integration with QuickBooks, Xero and Sage 50
For highly regulated businesses, QT9 MRP seamlessly integrates with QT9’s highly rated quality management system (QMS) software. What’s more, you’ll get unlimited training, unlimited customer support, free software updates and tailored implementation support, all at an affordable price point.