MRP II
MRP (Materials Resource Planning) II is a method for the effective planning of all resources of a manufacturing company. MRP II is a the next stage in the natural evolution of regular MRP. Regular MRP started as a method for determining and planning material requirements in the 1960's. The dictionary of the American Production and Inventory Control Society defines MRP as a set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the Master Production Schedule and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventories on hand or on order, and offsetting the net requirements by the appropriate lead times.
Evolving in the 1970's, MRP II takes things a bit further - beyond the mere factory to the other complementary functions necessary for running the manufacturing firm. So, in addition to the traditional manufacturing sub-systems such as production planning and scheduling, shop floor control, capacity planning, time and attendance, etc., MRP II extends the sub-system integration into job costing, financial management, forecasting, order processing, performance measurement, and the like. New technology (4GL, GUI) have today made interfacing between the various functional areas of the complex business increasingly easier. Now, starting in the late 1990's, MRP II is evolving beyond production industries as TOTAL enterprise solution. These expanded "super" MRP II systems are now called ERP (Enterprise Resource Planning).
ERP/MRP II has many purported advantages. Among the most prominent of them are:
- reduce inventory
- improve customer service
- improve labor productivity
- reduce purchasing costs
- reduce traffic costs
- reduce obsolescence
- reduce overtime
- provide real time performance measurement
- develop organizational accountability
- improve "quality of life"
One important thing that ERP/MRP forces management to look at is their company's business processes. If ERP/MRP is going to work, the business processes must be efficient and must fit together. So, a company considering an ERP/MRP installation needs to analyze "as is" and "to be" processes. This "business process reengineering" endeavor entails mapping in detail the processes of the firm, first -as they are now, and second - as they are to be in the future. For example, should engage in walking, mapping, and flowing routers, analyzing value-added versus non-value-added processes, and eliminating non-value-added steps.
For most companies, implementing a successful ERP/MRP program is not an easy thing to do. The implementation process itself crosses over several distinct and important phases, and things can take a long time to be brought together. For instance, there will be a myriad of management decisions to be made as to just how the processes of the firm need to be structured and integrated. Education and training will have to be addressed throughout the entire implementation process. Getting and maintaining an accurate data base that feeds the system will be a huge issue. Aside from the data itself, part and parcel of the data base is the hardware and software upon which the data base resides and is run. Bringing all these issues together in a coordinated and timely fashion can be a herculean task.
Actually, MRP can be thought of as a subset within an even larger framework. As MRP II manufacturing companies realized that they were just one part of a chain from raw material to the customer - including distribution, transportation, etc. So, MRP II has evolved into a larger system integration model depending upon which context of the "value chain" that a particular company resides. For vertically integrated companies, MRP II evolved into Distribution Resource Planning (DRP) - for customer/wholesaler/retailer chains into Supply Chain Management - and for other industries into ERP.
There are some risks to implementation that should be noted. First, there is the potential problem of lack of understanding that MRP/ERP depends upon a high level of information processing discipline. Second, companies must avoid thinking the ERP is a computer system rather than a people system. A third mind-frame to avoid is applying MRP logic to everything. And fourth, companies need to be ever vigilant of not falling into the trap of underestimating the needed effort during conversion.
Lastly, what are the critical success factors for a successful MRP/ERP implementation? The following is a short-list that is probably apropos to most all implementation situations:
- management and user commitment
- trained personnel
- accurate records
- data integrity
- capacity consideration
- realistic planning
- processing accuracy
- ongoing improvement efforts
Some interesting web-sites related to MRP II are:
Advanced Integrated Manufacturing Center
American Society of Mechanical Engineers
Wharton (Univ. of Penn) Forecasting Site
American Production and Inventory Control Society (APICS)