Manufacturing Resource Planning (MRP II): Definition & Overview

KEY TAKEAWAYS

• Manufacturing Resource Planning (MRP II) is an integrated information system. 
• It is used by businesses in order to facilitate faster and more efficient production processes. 
• MRP II is an extension of the original materials requirement planning (MRP I).
• Both MRP I and MRP II are commonly thought of as the predecessors to Enterprise Resource Planning (ERP).

What Is Manufacturing Resource Planning?

Manufacturing Resource Planning (MRP II) is an integrated information system that is used by businesses. MRP II was developed from the early Materials Requirement Planning (MRP) systems. It changed by adding additional data and integrating it into the system. This would be data such as financial and employee needs. 

The system is designed to integrate, centralize, and process information for an effective decision-making process. These are decisions to do with design engineering, scheduling, cost control, and inventory management in manufacturing.

What Is an MRP System?

An MRP system allows for the complete control and effective management of purchasing, manufacturing, inventory and work in progress products management. It purely focuses on the manufacturing process of a business and is designed to help facilitate users who participate in the manufacturing processes.

MRP I vs. MRP II

In almost all ways, MRP II has replaced the original MRP I software. Most MRP II systems will deliver all of the original functionality of an MRP I system. The MRP II will be able to offer master production scheduling, inventory tracking, and bill of materials (BOM) that the MRP I has. But on top of that, it will also provide functionality within marketing, general finance, and logistics. 

For example, MRP II is able to account for variables that MRP I cannot. Including machine and personnel capacity. This provides a more holistic and realistic representation of a company’s operating capabilities. 

MRP I would include the following three main major functionalities:

• Bill of materials
• Master production scheduling
• Inventory stacking

An MRP II would include the previous three, along with the following four functionalities:

• Machine capacity scheduling
• Quality assurance
• General accounting systems
• Demand forecasting

What Are the Steps Involved in MRP?

There are four major steps involved in the MRP process. They are as follows:

1. Identifying the Requirement to Meet Demands

The first step of the MRP process is identifying the requirements and the customer demand. This starts with inputting customer orders and sales forecasts. 

Using the bill of materials that are required for production, MRP can then disassemble the demand into individual components and raw materials that are needed to complete the production. This is all while accounting for any required subassemblies.

2. Allocating Resources and Checking Inventory

You can utilize the MRP to check the demand against your available inventory. You can then allocate the needed resources accordingly. The MRP allows you to see what items you currently have in stock, and where they are. This is a vital tool if you have inventory that spans across multiple locations. 

3. Scheduling Production

The system can determine how much labor and time are required to complete each step of each part of a build. It can also figure out when they need to happen so that there are no delays in production.

4. Highlighting Issues and Making Recommendations

The final step of an MRP is its ability to link raw materials to customer orders and work orders. This means it can automatically alert the user when any items are delayed and make recommendations for existing orders. 

Why Is Manufacturing Resource Planning Important?

An MRP gives businesses better control over and visibility into inventory requirements. Without these insights, a company would have limited responsiveness. This can lead to issues such as:

• Ordering too much inventory
• An inability to meet demand 
• Disruptions to the production cycle

What Are the Benefits of Manufacturing Resource Planning?

MRP systems give you the ability to plan and make a detailed schedule for the production of your products efficiently. It helps to make sure that the flow of materials is moving through the work order at a respectable pace as well as helping businesses fulfill orders on time. 

One of the biggest benefits of having an MRP system that is integrated across an entire organization is that it can help eliminate lengthy and time-consuming manual processes. This means workers can spend less time on basic functions, freeing up time to do more important tasks.

Summary

MRPs are a very useful tool for any manufacturing business. It helps with business processes, production planning, and inventory planning. As well as giving you access to real-time data, as well as effective planning and asset management.

Some additional functionalities of a good MRP software solution are that it can help cut down production times and help with average cost savings. As well as ensure your inventory level stays within the correct limits. Also, by eliminating time-consuming manual tasks and automating processes, you can save yourself time, money, and manpower.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.