Manufacturing resource planning

What is manufacturing resource planning (MRP 2)?

Manufacturing resource planning (MRP 2) is a strategy by which a manufacturer optimizes the acquisition, storage and deployment of all resources needed in its production runs. These may include raw materials, components from suppliers, production equipment and personnel, spare parts – any resource needed to complete the production of a finished good. Manufacturing resource planning is abbreviated “MRP 2” (or “MRP II”) to distinguish it from material requirements planning (MRP 1). MRP 2 encompasses all the capabilities of MRP 1, which focuses on a manufacturer’s inventory of raw materials and supplied components. MRP 1 uses inventory data along with production order and bill of materials (BOM) data to calculate the quantity and timing of purchases of additional incoming goods.

Manufacturing resource planning is handled in modern manufacturing operations management (MOM) systems by advanced planning and scheduling (APS) software. APS software eliminates much of the manual data entry that has accompanied older approaches to manufacturing resource planning. It also enables the MRP 2 system to manage highly diverse product portfolios under stringent customer delivery requirements, as well as complex resource allocation scenarios and last-minute change orders.

Manufacturing resource planning software calculates and updates material needs based on actual orders and order forecasts. The complexity of manufacturing operations and scheduling has increased dramatically in recent years due to growing product and supply-chain complexity, globalization, mass customization and other factors. As a result, the large numbers of variables and data points to consider in MRP software have caused many manufacturers – even small and mid-size businesses – to migrate from paper-based, spreadsheet and homegrown MRP tools to integrated digital tools such as APS.

Manufacturing resource planning relies on the concept of “dependent demand,” which refers to the fact that the need for a raw material or intermediate component is dependent upon the demand for the finished product. A manufacturer will forecast demand for a particular finished product – considered an “independent demand” because it arises from an external source, typically the customer or a make-to-stock order – and MRP software calculates the demand for materials based on this forecast.

The purpose of manufacturing resource planning today is often tied to just-in-time (JIT) scheduling and just-in-sequence (JIS) methodologies, which seek to minimize both inventory levels and the amount of time a material remains in storage or stationed near the processing equipment that will employ it. Such strategies must also ensure sufficient inventory is present to avoid any shortfalls or production stoppage.

The output of manufacturing resource planning software answers the questions pertaining to acquisition, storage and deployment, including:

  • When to order each material
  • How much to order
  • With which supplier to place each order
  • Where to store inventory
  • When to move material (and how much) from storage to the production line

Manufacturing resource planning also can be used to accommodate changes in supply or demand. Information about the impact of a natural disaster on a supplier, for example, can be accounted for in the MRP system so that an adequate supply is available when it is needed.

Woman working on a laptop using Manufacturing Resource Planning software to plan and schedule resources.

MRP software functionality

Manufacturing resource planning software uses information from bills of materials (BOMs), bills of process (BOPs), product demand forecasts, customer orders, the master production schedule (MPS) and supplier lead time and capacity. It also takes into account:

  • Production line capacity
  • Production rate
  • Availability and training/certification of manufacturing personnel
  • Production equipment availability
  • Production equipment maintenance requirements

Based on these inputs, MRP software calculates needs and prompts the creation of purchase orders for incoming goods.

Manufacturing resource planning conducted on a modern APS system enables the planning team to generate plans and schedules in both make-to-order and make-to-stock environments.

To enable visualization of the full production schedule and resource allotment, MRP 2 software provides interactive schedule visualization, displaying data as stock profile graphs and capacity usage graphs. Changes made on these graphs are automatically reflected on the master production schedule (MPS).

MRP 2 software tracks inventory levels and resource deployments. As materials are consumed or incorporated into finished products, and as demand and orders change, manufacturing resource planning recalculates need and adjusts material orders as needed.

Rather than reacting to supply or demand changes when they occur, modern manufacturing resource planning systems also allow manufacturers to examine “what if” scenarios that enable them to create plans for adjustments and contingencies.

Benefits of manufacturing resource planning

Manufacturing resource planning, especially as performed by integrated APS systems, optimizes the timing of material purchases, minimizes stagnant inventory as well as idle personnel or production equipment, and reduces costs associated with over- and undersupply of needed resources.

Additional benefits

  • Minimizes inventory footprint
  • Reduces inventory management costs
  • Reduces spoilage and material waste
  • Minimizes production line idle time
  • Lowers production costs
  • Improves on-time delivery