how material requirements planning mrp works
mrp helps businesses and manufacturers define what is needed how much is needed and when materials are needed and works backward from a production plan for finished goods mrp converts a plan into a list of requirements for the subassemblies parts and raw materials needed to produce a final product within the established schedule mrp helps manufacturers get a grasp of inventory requirements while balancing both supply and demand using mrp managers can determine their need for labor and supplies and improve their production efficiency by inputting data into the mrp scheme such as mrp and manufacturingmanufacturers manage the types and quantities of materials they purchase strategically and cost effectively to ensure that they can meet current and future customer demand mrp helps companies maintain appropriate levels of inventory so that manufacturers can better align their production with rising and falling demand a bill of materials bom is an extensive list of raw materials components and assemblies required to construct manufacture or repair a product or service the mrp process estimates demand and required materials after determining customer demand and utilizing the bill of materials mrp breaks down demand into specific raw materials and components allocates inventory of materials mrp allocates inventory into the exact areas as needed schedules production time and labor requirements are calculated to complete manufacturing and a timeline is created monitors the process mrp automatically alerts managers of any delays and even suggests contingency plans to meet build deadlines history of mrpmaterial requirements planning was the earliest of the integrated information technology it systems that aimed to improve productivity for businesses by using computers and software technology the first mrp systems of inventory management evolved in the 1940s and 1950s using mainframe computers to extrapolate information from a bill of materials for a specific finished product into a production and purchasing plan mrp systems expanded to include information feedback loops so that production managers could change and update the system inputs as needed the next generation of mrp manufacturing resources planning mrp ii also incorporated marketing finance accounting engineering and human resources aspects into the planning process a concept that expands on mrp is enterprise resources planning erp developed in the 1990s which uses computer technology to link various functional areas across an entire business enterprise advantages and disadvantages of mrpmaterials and components are available when neededminimized inventory levels and associated costsreduced customer lead times