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Material requirements planning (MRP) software offers businesses in assessing the materials or components needed to produce a product. The software helps users in production planning, inventory control, and material scheduling. Software can also project the inventory level of materials, components, and products that should be kept in stock in order to fulfill customer demand.
Material requirements planning (MRP) is a computer-based inventory management system designated to improve productivity for companies. Businesses utilize material requirements planning software to approximate and estimate quantities of raw materials and organize the deliveries.
MRP is designed to help in answerring the following questions: What is required? How much is required? When is it required? MRP works backward from a production plan for finished goods, that is converted into a list of requirements for the sub-assemblies, component parts, and raw materials that are required to produce the final product within the established schedule.
By parsing raw data—like bills of lading and shelf life of stored materials—this technology offers meaningful information to managers about their need for labor and supplies. It can help companies improve the production efficiency.
Material requirements planning was the one of earliest integrated information technology (IT) software that targeted to improve productivity for companies by utilizing computers and software technology. The very initial MRP systems of inventory management evolved in the 1940s and 1950s. They used mainframe computers to extrapolate information from a bill of materials for a specific finished product into a production and purchasing plan. Soon after that, MRP systems expanded to include information feedback loops in order to 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. MRP is enterprise resources planning, using computer technology to link the varied functional areas across an entire business enterprise. As data analysis and technology became more sophisticated, more comprehensive systems were developed to integrate MRP with other aspects of the manufacturing process.
Companies are required to manage the types and quantities of materials they purchase strategically. It plans which products to manufacture and in what quantities; and ensure that they are able to meet current and future customer demand—all at the lowest possible cost. MRP helps companies maintain low inventory levels. Making a bad decision in any sphere of the production cycle will result in lose of money to the company.Manufacturers can better align their production with rising and falling demand by maintaining appropriate levels of inventory.
The data to be considered in an MRP scheme include:
Tracks material requirement: The software helps in monitoring material and ordering quantity as well as the production schedule. It helps production managers in determining the exact level and cost of inventory needed to meet demand. It also helps in computing quantities required as backup stock, distributing production time among various products, and planning for capacity needs.
Resource and asset management: MRP systems offers information about the raw material availability and the expected yield. This information is very helpful for the manufacturer in figuring out what equipment is needed at what time and when extra labor is required.
Economically optimizes purchase decisions: The system helps in calculating the most economical and viable purchase by taking into consideration multiple crucial factors like material quantity, shipping, and storage cost. MRP systems help in making the most of an economical lot size with high precision. It also helps in saving the manufacturer from unnecessary buying expenses.
Bill of materials (BOM): Managing a list of raw materials, components, and assemblies as well as the quantities of each needed to manufacture parts, products, and models.
Inventory management: Helps in tracking and managing the quantity of material in stock to maintain proper supply in order to meet customer demand.
Order management: Helps in organizing, tracking, monitoring, and executing customer orders for goods, investments, or any other purchases.
Production scheduling: Utilizing market forecasting trends for ensuring all needed supplies are available to meet demand.
Reporting/analytics: Assessing reports for picking of materials for job orders and tracking pertinent metrics.
Quality management: Focusing on improving production processes by collection of relevant data and spotting bottlenecks or other challenges.
Quote management: Creating and managing quotes for the manufacturing of products within the system.
Supply chain management: Supporting the planning and executing supply through chain transactions from raw material procurement to production and delivery.
Most products in the market are priced on a “per user, per month” basis and can be divided into three pricing tiers based on their starting price. A premium product is priced higher and include additional features like the bar code system, return merchandise authorization, and backward production scheduling.
Full suite versus best of breed solution: If you are looking for a software which helps in creating estimating, converting estimates into budgets, match invoices to project statuses, and allocating costs, then it’s good to go for a full software. It helps in ensuring that the data and processes are integrated with other systems like that of accounting and project management. However, if you are a specialist in one function and value one feature over others, i.e. if job costing is more important to you than production scheduling then it’s better to look at specific best of breed software. These software are made to meet the needs of specific group of actions.
Configure price quote (CPQ) functionality: If your sales team is consistently creating custom quotes for build-to-order operations, then it is worth looking for a solution with CPQ functionality. It helps in ensuring sales teams that are able to generate quick and accurate custom quotes.
Predictive analytics to optimize planning: Predictive analytics offers to allow production planners in creating revenue projections and performance forecasts by using data like material required and order quantities. Forecasted data can also be compared with actual performance in identifying the bottlenecks and putting measures in place to improve.
Use of bar codes or radio frequency identification (RFID) for intelligent inventory tagging: MRP systems help utilizing barcodes and RFID for equipment and inventory tagging which can remotely offer checking for inventory level and product availability. Many systems also use two-dimensional barcodes that contain descriptive information in addition to an identifier like a part number.