What is MRP
Since before the Industrial Revolution there had been a need for a better inventory control system. In times before, people would use a system of either ordering their materials beforehand or by ordering their materials as needed. The problem with this was either there would be too much inventory or too little inventory to meet the demand needed. Large quantities of inventory can be very costly for purposes of warehousing and deterioration of the material (e.g. food spoilage, animal infestation, etc...). Secondly, the cost of waiting for inventory as in a pull system can be costly as well. The loss of customers for the wait of the final product can be very detrimental to the business as well as the supplier of raw material. Thirdly there is the matter of taxes. The cost of keeping inventory over the next fiscal year is considered an asset and therefore taxable. Furthermore, there was no way of linking the various structures within the organization. To purchase something, the purchaser would have to negotiate with the supplier. Than the purchaser would have to go to the accounting department (assuming that the authority was given to the purchaser to buy the material) to procure the money for the transaction.
Step 6- Capacity requirements planning; at this stage, the capacity requirement planning determine whether the firm has enough capacity (e.g. worker, space, money) to meet the schedules. Again, if schedules could not be met, some adjustment in the master production schedule would be required else requirements would be scheduled. Than the accountant would send an order to the receiving warehouse. The receiving warehouse would make sure there was room, and then go to the mail department. The process goes on and on and therefore would create a huge amount of paperwork to accompany each transaction within an organization. So until the 1950's and 1960's, the technology did not exist to be able to eliminate such problems with inventory like this. ERP, or enterprise resource planning, is the process that began in the 90's and on into the 2000's. What the ERP's primary function was to incorporate the basis of MRP-2 systems to the entire network of the organization. This meant that an organization might have to restructure themselves internally and externally. - Inventory reduction of one-fourth to one-third (cost reduced) Step 5- Material requirements planning (MRP); MRP is the heart of the entire process (MRP-2). When MRP comes into play, material and schedule requirements would be generated. MRP-2 includes the entire set of activities involved in the planning and control of production operations. It consists of a variety of functions of modules and includes production planning, resource requirement planning, master production scheduling, materials requirements planning (MRP), shop floor control, and purchasing. - Reduction in purchasing cost due to fewer expedited shipments
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Approximate Word count = 1896
Approximate Pages = 8 (250 words per page double spaced)
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