MRPstands for Material Requirements Planningwhich is related to inventory management in manufacturing companies. It is a collection of processes that allows the planning of material supply activities according to basic data such as order status, production schedule, and all additional inventory information. MRP is supported by IT systems such as the ERP system.
Inventory Management in manufacturing companies
Those processes are used to determine resource demand including raw materials, materials, and components in order to respond to changing demand on the market by selecting the appropriate amount of materials and by creating an optimal delivery schedule.
The principal objective of inventory management in manufacturing companies is to lower current financial expenses so as to result in effective results while controlling the budget. That is why the system requires information on planned production and the scale of accepted orders. On the basis of this information and taking into consideration, among others, delivery time, particular elements are produced.
MRP – material requirements planning – requires information from three various sources: production, BOM, and inventory. It is necessary to pinpoint that planning can be distinguished into forward and backward and the system can anticipate, for instance, production and delivery time.
Material Requirements Planning
Material requirements planning allows, for example, to optimise costs and improve internal processes that at present may seem to be insufficient.
The objectives of MRP are to:
- reduce inventory;
- determine the delivery time of essential raw materials;
- fix production costs;
- use infrastructure in an as effective way as possible;
- monitor various production phases.
How BOM Material can streamline the production process?
BOM stands for Bill of Materials and it is a complex document defining necessary elements for a manufacturing process. This list of materials is useful for designing and producing but also for assembling products. Thus, how does BOM Material streamline production planning? Firstly, it helps to improve the coordination of all supply chain elements. Next, its prime goal is to synchronise the production process with logistics while fulfilling the needs of other working areas. The following position can be found in BOM Production report: a name of a finished product, a list of components (and their structure), and a specification of particular operations which are essential for manufacturing a proper product.
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