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What is Material Requirements Planning Software?

For manufacturing businesses, life is a sea of acronyms and abbreviations. Whether you’re trying to find a CRM, EAM, or ERP solution, things can get confusing pretty quickly. It’s even trickier to pinpoint the right tools and programs when you’re looking for software that overlaps with, mirrors or complements other systems.

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This is the situation that faces companies when searching for quality MRP solutions. Material requirements planning software is undoubtedly valuable, but it has become increasingly integrated with other systems. For instance, the newest enterprise resource planning software (ERP) now covers a lot of the same responsibilities.

It leads to the question of whether standalone MRP systems are still worth the investment. Is it practical to stick with an isolated solution if you can just roll these processes into a broader ERP installation? Well, the truth is that it depends on a variety of factors. Personal preference surely plays a role, as does the size of your operation and its main objectives.

The Purpose of MRP Software

At the heart of every MRP application, you’ll find simple mathematics. While this software may look complicated from the outside, it has a basic function. As the name suggests, material requirements planning solutions tell businesses exactly what they need to complete manufacturing runs or batches.

It ensures that there is always enough of everything to get the job done. MRP software calculates how much raw material is needed to meet production demands. The most obvious benefit is a guarantee that the right amount of products will make it to your customers. However, it’s also a great way to avoid spoilage by cutting back on surplus resources.

Oftentimes this is a much bigger concern for companies than they initially realize. Every year, hundreds of thousands of dollars are lost to wasted stock. With a reliable MRP system, you can reduce the costs associated with spoilage, warehousing, and lead time slowdowns and make substantial savings. Ultimately, MRP can help you run a tighter, leaner operation.

Why ERP Solutions Present a Challenge

Traditionally, manufacturing businesses have relied upon MRP software to manage key resources and make sure suitable amounts are being bought and used. The problem is that more modern solutions have emerged, and it’s getting harder to determine the true value of standalone MRP systems. Are they still beneficial, or can you get the perks elsewhere?

Firstly, enterprise resource planning and materials requirements planning are very closely connected. This is not really a question of whether either one is useful, but whether one can be trusted to cover the other. Or, in simple terms, do you need an MRP system if you already have a robust ERP solution?

While MRP focuses on the manufacturing, ordering, and inventory departments of business, ERP manages the entire suite of business management software programs. As well as covering inventory and stock, it extends to things like payroll management, staff acquisition, shipping, project costing, and more. It is a broader, more “complete” option.

The Benefits of Standalone MRP

We know that high-quality MRP software is very effective. Studies have shown that it isn’t uncommon for enterprises to go from completing less than 70% of orders on time to hitting targets on almost 100% of occasions. So it’s not a question of worth. When applied skillfully, MRP improves customer service, increases direct labor productivity and reduces expenses.

Even sophisticated MRP solutions tend to need a substantial amount of manual input from users. However, this doesn’t lessen their impact on purchasing and manufacturing processes. The software collects and captures data for more efficient logistics planning, product replenishment, and inventory control.

All of these things contribute to faster, more punctual orders and happier customers who come back again and again. If you haven’t yet acquired an ERP system, it might be worth considering a stand-alone MRP solution such as DTAILS or Access Manufacturing Management. However, if you expect to invest in “best of breed” ERP at some point soon, you could potentially skip the standalone MRP.

The Benefits of a Broad ERP System

The argument against standalone MRP is that the best ERP solutions cover most of the core functions anyway. ERP automates many of the daily responsibilities that come with running a company. They include shipping, recruitment, project costing, and more. MRP deals only with material requirements planning, but ERP spans a variety of disciplines and departments.

It means you don’t have to switch between multiple programs to manage more than one task. Quality ERP solutions integrate these processes and unite with other software solutions to create a comprehensive set of tools. The downside is that if you want to link your ERP system with other software, you usually have to pay for integration.

This could include things like staff training so that every department is on board with the new programs. However, more often than not, successful integration leads to a significant return on investment post-deployment. According to research, SMBs commonly increase their on-time deliveries by 24% after setting up a solid ERP system.

Making the Best Choice for Your Business

There are plenty of excellent MRP vendors out there. However, the truth is that you’ll save more money in the long run with a full ERP system. Enterprise resource planning integrates multiple modules and applications, in order to generate a diverse range of data points from a centralized source. It provides more control, along with the ability to make big decisions faster.

There are also endless opportunities for personalization. Currently, around 93% of ERP users are operating custom packages. This has a substantial impact on productivity. It means you have the chance to shape key functions so that they match the needs of the business. In terms of value, ERP software is the better choice if you can afford a high-level integration.

This leaves the question of what role material requirements planning software is likely to play in the future. Will it become obsolete if ERP solutions are covering all the bases? Well, it depends on whom you ask. There are plenty of experts who believe standalone MRP software could have a place in modern enterprises, but that a structural evolution needs to take place first.

Finding a Role for Standalone MRP

It can and is argued by some that the simplicity of standalone MRP is a valuable and underestimated asset. After all, even though ERP covers most of the same functions, it’s a part of a much larger and more sophisticated toolset. For some, retaining this simplicity is the fastest, most accurate way to answer a number of essential questions.

These questions include what resources the business has right now, what it needs to fulfill its production schedule, and how these needs can be met. They are simple questions in many ways, but they can make the difference between failure and triumph for manufacturing companies. Therefore, it’s wrong to assume that MRP has completely lost its place in this environment.

However, there is an urgent need for better forecasting accuracy. Traditionally, MRP solutions have functioned best in a steady state environment. The problem with this is that customer demand changes extremely fast these days. There is a much greater emphasis on lead time efficiency as opposed to customer service, and it can create major logistical challenges.

The Rise of Demand Driven MRP

The lack of agility is driving interest in superior, demand-led approaches to MRP. This so-called “demand driven MRP” is becoming very popular across Europe and the US, because it is helping businesses reduce their dependence on forecasting. It is also compatible with mainstream ERP solutions, so it offers a way for both systems to coexist.

Demand Driven MRP handles the problem of inaccurate forecasting by using Actual Demand processes. It combines AD data with strategically positioned and managed points of stock (buffer stock) across the supply chain. The result is a reduction in demand and supply variability which solves what is known as the “bullwhip” phenomenon.

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It occurs when MRP planning policies lead to substantial and unpredictable shifts to inventory, even when customer demand has only changed by a small amount. It can lead to wild jumps between overstocking and understocking, as businesses try to balance customer demand with cost savings.

DDMRP is a good way to eliminate this effect because it helps companies build more closely to actual market requirements. It is great for encouraging faster, more valuable decision-making processes and it makes it easier to monitor, predict, and respond to high levels of market volatility. For all of these reasons, Demand Driven MRP could be the saving grace of this tricky little tool.

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