Material Requirements Planning - Assignment Example

It is very necessary for an organization in today’s world to have a proper inventory planning, management and control system, in order to prevent any glitches in the production systems and to avoid any inconvenience caused that may lead to dissatisfaction of the customers. (Axsater, 2006).

Especially in the case of the manufacturing industry, proper and efficient inventory management is one of the most important tasks. (Miller, et al, 2010). One of the popular inventory management systems is Material Requirements Planning.

MRP or Material Requirements Planning basically focuses on managing the manufacturing process in terms of consumption of inventory and effective and efficient production of final goods. It is a computer-based system; however, it can also be handled manually, if needed. (Heisig, 2002). It is a system that helps make sure that the right amount of raw materials and other required resources are available for the production of the final goods, at all times in order to avoid any delays. (Axsater, 2006). It also helps minimize the level of excessive inventory and helps chart the near-to-exact amount of inventory needed for the manufacturing process. Moreover, it helps in planning the entire process of production and making future projections accordingly. It also helps calculate potential risks and delays to avoid last-minute inconvenience to the delays and issues.

The history of MRP portrays dynamic evolution. Before computers took over, various methods were used, such as ROP/ROQ (re-order point/re-order quantity). Around the mid-20th century, the simple MRP came out. It used inventory and production bills to generate a simple purchase and production plan. (Heisig, 2002). It kept on evolving and by the 1980s, it took the face of Manufacturing Resource Planning or MRP II. Now, MRPs are usually combined with ERPs or Enterprise Resource Planning Systems in order to integrate various functions of the organization for a better end result.

MRP is often compared to another very popular inventory control system, Just-in-Time or JIT. While MRP projects the raw materials needed and maintains a regular level of inventory (Miller, et al, 2010), JIT uses a system in which the raw materials are purchased as the order comes and as they are needed. (Korgaonkar, 2000). In other words, an organization using MRP keeps a predefined stock of inputs (Miller, et al, 2010) while the organization using JIT purchases the raw materials just in time of production. (Hirano, 2009). Hence MRP portrays a proactive approach while JIT is more of a reactive method. MRP is mainly used in organizations where the line of production is continuous and demand is less likely to stop. (Heisig, 2002). On the other hand, JIT is mainly used where the products are manufactured as the order arrives. Moreover, MRP follows highly centralized operations while JIT exhibits decentralization. (Korgaonkar, 2000).

Consider the example of car production. Earlier, car manufacturers used to follow MRP or similar systems. (Heisig, 2002). The turn-out, then, was not as good as it turned out to be when henry ford first used the JIT system of production for his line of cars. (Korgaonkar, 2000). Ever since then, most car manufacturers have been using the JIT systems for manufacturing their line of cars and there is a noticeable difference in cash-flows. (Hirano, 2009). This is because car production is not a continuous process and it is beneficial for the organization to purchase raw materials and other required resources as the need arises, instead of buying the inventory and leaving it lying there for future use.