Expansions of Material Requirements Planning

Expansions of Material Requirements Planning

Material Requirement Planning (MRP) is a materials planning method developed in the 1970's making use of computer technology. The main features of MRP are the creation of material requirements through the use of bills of material, inventory expected receipts, and a master production schedule. Due to the overwhelming success of Materials Resource Planning (MRP), its breakthrough ideas have over time evolved this concept into similar other planning programs. Three major extensions of MRP are: Closed loop MRP, Materials Resource Planning (MRP II), and Enterprise Resource Planning ERP.

Closed loop MRP is consistent with the basic structure of MRP but in addition, it employs the use of feedback to improve the accuracy of the plan. When MRP was originally used, materials plans were launched for a specific time period and then at then of that period, a completely new plan would be developed and launched. This process was continually repeated but there was no feedback loop to say whether a plan was achievable and whether it had actually been achieved. Developing a Closed loop system involves checking production plans against available resources. Therefore capacity is checked throughout the process allowing for proposed plans to be revised if need be.

The next logical extension of these concepts included incorporating other areas of production into the MRP system. Thus, MRP II (Materials Resource Planning) was developed as a method for the effective planning of all resources of a manufacturing company. It allows for the inventory data to be defined not as just units or quantities, but through the consideration of the additional resources incorporated in the units such as: labor hours, machine hours and accounts payable. With the improved output from this system operation managers are able to compare the resource requirements determined necessary with the capacity required and prepare an appropriate schedule. MRP II provides operations managers with additional information that can then be integrated into purchasing, scheduling, capacity planning, and warehouse management to improve overall efficiency.

Further advancements in the MRP II system resulted in the development of Enterprise Resource Planning (ERP). ERP is "software that allows companies to 1) automate and integrate many of their business processes, 2) share