Material Resource Planning (MRP) is a computer based inventory management system. MRP generates time-based manufacturing and purchasing plans for optimal inventory availability which is tied to historical data of customer demands. MRP is a subset of ERP for managing manufacturing requirements using integrated production planning and inventory controls. The main theme of MRP software is –
“Getting the right materials to the right place at the right time “
In any inventory management, regardless of the level of sophisticated technology used, the Saw Tooth pattern is followed. In this pattern there is a certain amount of inventory that you start with, then you consume it, stock levels drop, you reorder the stock, you receive this stock and the process continues.
There are four distinct steps –
- Demand / Consumption – You have an amount which you are consuming or you are expecting to consume.
- Re-order point – Once your stock drops down to a certain level then you will need to re order (This level should be set in your inventory).
- Demand during Lead time – After reordering you continue to consume while the re-order is on its way
- Replenishment – New stock arrives before your inventory has run out of stock completely.
MRP software balances supply and demand. It also monitors what you are consuming and informs you when it is time to re-order.
MRP takes into account 3 key points –
- What you need – The total amount of material required to be on hand to support the gross demands of the business
- What you have – The supply you actually have in your stockrooms, retail shelves, warehouse, other locations, and what is already on order but has not yet been received.
- What you require to reorder and when – The net planned quantities and dates required to support the demands of your business, based on the Supply you already have, and have on order.
A simple example of SapphireOne MRP Software Functionality
SapphireOne MRP function forecasts can be calculated or entered manually. These forecasts can be dependent and controlled by sales orders, purchase orders. In SapphireOne there is also provision for it to be independent as the user may adjust estimations manually if required. Let’s consider, SapphireOne MRP Forecasting for May, Jun, July 2022
- Based on the previous 2 years’ sale (Usage History Graph), SapphireOne MRP has calculated the requirement 1251 stock for the month May 2022. SapphireOne also has the capability to calculate this requirement based on up to 4 years’ historical sales.
- Since there are already 1699 inventory items on hand (from the month April) plus an additional 500 inventory items required for orders in May 2022. That’s why at the end of May the system has indicated that approximately 948 inventory items will remain on hand.
- Forecasting for June 2022 inventory stock levels are 745. As there are 948 stock on hand from the previous month, therefore, the system has estimated stock on hand in June is 203 items.
- Projected stock requirements for July 2022 is 1050. In this case, previous month’s stock on hand, 203, is unable to fulfil the requirements. Since the system knows there is 21 days’ lead time, the artificial intelligence (AI) that is part of the SapphireOne MRP system, will indicate 21 days before that month that an additional 847 stock items be ordered.
- The system is set up in a way that inventory should never run out of stock and there will always be the minimum inventory items as entered, on hand. Thus, to fulfill July requirements which is 1050 stock, the calculation is as follows-
Stock on hand After filled: 203 [ From month Jun 2022]
Stocks Required for July 2022: 1050
Net required: 1050 – 203 = 847
But minimum stock on hand set for every month is 6.
Hence, the Planned Order Release / Planned order arrival is: 847+6 = 853
SapphireOne MRP system is a powerful resource planning tool that ensures you satisfy your clients requirements while maintaining an inventory level that will enable you to fulfil any normal orders based on historical records.
SapphireOne MRP system’s material planning, purchasing and inventory reports, allow you to establish just-in-time relationship with your clients and vendors. This enables you to take advantage of any quantity price breaks but paying for materials only as you need, to fulfil future orders.
Discover how SapphireOne ERP, CRM and Business Accounting software suite can satisfy your customer requirements while maintaining optimal inventory levels. To know more request a live demo today.