MRP is the function or software module that calculates material acquisition plans – purchase and manufacturing orders – needed to meet production plans and customer demand. When combined with supporting applications like engineering, inventory, purchasing, and production control, the software suite is called manufacturing resource planning or MRP II. In the mid-1990s, MRP II was renamed enterprise resource planning (ERP) to reflect its broadened scope and distinguish newer, more capable versions from more limited predecessors. The ERP term is still the dominant name for these systems, although some authorities are using the more general term “enterprise systems.”
The original MRP function or module is the calculation of material requirements. When combined with supporting applications, such as customer orders, inventory, engineering, purchasing, production control, finance, and accounting, the suite is called manufacturing resource planning, or MRP II. MRP has been and remains the core planning approach in nearly all modern manufacturing information systems.
MRP is the function or software module that calculates the need for materials and recommends production and purchasing activity (orders) to satisfy those demands. MRP planning is the process of exercising those calculations to develop a plan. MRP is a core part of nearly all integrated information management systems for manufacturers, called enterprise resource planning or ERP.
The master schedule, or more properly the master production schedule (MPS), is a build plan for sellable products, consisting of planned production quantity, start date, and due date. The master schedule represents the manufacturing activity needed to meet net demand. Net demand is customer orders, forecasts, or a combination of these minus available inventory.
Demand-driven MRP (DDMRP) is a variation of material requirements planning. It incorporates many elements of Theory of Constraints (ToC), Kanban (from JIT and the Toyota Production System), and other modern manufacturing management ideas to improve distribution planning. DDMRP focuses on triggered replenishment of materials through the network using buffer inventory levels and replenishing them when they fall below defined target.
Predictive MRP (pMRP) is an enhancement to the DDMRP solution that helps predict capacity load issues. This allows the planner to evaluate possible scenarios early in the planning stage. This insight into capacity issues helps in the final decision to make the product or buy the product or materials.
Supply chain planning is a general term that includes all the planning activity needed to make the right quantities of the right products at the right time to satisfy demand. Supply planning includes master scheduling, MRP, resource planning, capacity planning, and advanced planning systems as appropriate.
Demand is the quantity and timing of customer orders and forecasts. All planning and execution (activity) within a manufacturing organization is aimed at meeting demand. Demand planning and demand management are the processes and applications that accept, recognize, and handle demand information. The demand planning function develops forecasts for future demand while working with manufacturing and material planning to position the organization for meeting that future demand. Demand management can also work with marketing, sales, and distribution to understand the sources and influences on demand and administer programs to shape demand to improve sales and better use available resources.
APS is one of the terms used to identify modern planning engines that incorporate advanced logic, like optimization, to create a feasible plan for materials and capacity simultaneously. APS, being a somewhat nebulous term, can also include supply chain planning functions and applications like demand planning and management, distribution planning, and finite scheduling, among others. The common characteristic is the employment of heuristics, optimization, modelling, and other sophisticated calculation engines.
A bill of materials (BOM) is a structured definition of the relationships between items, such as products, assemblies, parts, and units, and the materials, parts, and components they contain. BOMs are customarily described in terms of direct parent-component relationships that can be chained into multi-level bills. BOMs are also referred to as “product structures.”
Basic MRP systems are limited to planning material requirements based on fixed assumptions – like standard lead times. When a work order is planned, the recommendation is to start the work order a specified number of days (the standard lead time) before the due date. It is assumed that more than enough capacity is always available – which is known as the infinite capacity assumption.
Basic MRP plan generation is followed by a separate capacity planning process that will detect and report any scheduling conflicts, such as planning multiple jobs to run on the same machine at the same time. Users must resolve these resource conflicts manually, outside of the planning system. However modern planning engines, like advanced planning systems or APS, plan material and capacity simultaneously, thereby recognizing the finite nature of capacity.
The Theory of Constraints (ToC) is an idea from the world of physics that was brought into manufacturing management by Eli Goldratt in his book The Goal (1984). The ToC posits that production can never proceed any faster than the slowest resource (machine or work center) in the plant, therefore effective management must focus solely on exploiting and elevating that bottleneck. An entire production management approach built on this basic assumption with many visual tools involved in the execution has been incorporated into some ERP/MRP systems to improve scheduling and workflow.
Just-in-time (JIT) is a simplified name for the Toyota Production System – a production management approach developed by Japanese automakers in the 1980s that relies heavily on standard work (rigid processes with little room for variation), high quality, and manual, visual controls (Kanban). The approach was popularized in the West by the book The Machine That Changed the World by Womack, Jones, and Roos (1990). Once thought to be incompatible with MRP, many MRP systems today incorporate electronic (and physical) Kanban for in-plant inventory replenishment. Note that the term JIT can be applied to any system or strategy aimed at bringing in materials just before they are needed, thereby reducing inventory. In essence, MRP, MRP II, ERP, APS, DDMRP, and virtually all manufacturing planning and control systems are JIT.