Inventory Control – What is MRP and Why Do We Use It?

~written by Nick Bukaczyk, Dataram Memory Blog Team Member

Often, employees throughout a company hear such words as purchase order, sales order, shortages, expediting, due dates, forecast, demand, kits, material, inventory, data and bill of material.  They all come together through MRP.

MRP (Material Requirements Planning) is the computerized ordering and scheduling system used by manufacturing and fabrication industries.  It uses bills of material, sales orders and forecasts to generate raw material requirements (components/parts).  It also gathers new order requirements as they come in, presents shortages if they exist and suggests ordering/building when necessary based on data gathered.

Many people throughout an organization contribute to the MRP process:

  1. Sales – enters orders which creates a finished goods requirement
  2. Production Control – reviews inventory levels and sales requirements, then provides manufacturing with work orders to satisfy demand
  3. Purchasing – reviews component stocking levels, forecast and sales orders, then generate purchase orders for raw material to satisfy demand
  4. Receiving personnel –  as raw goods arrive, items are received into inventory to show component availability for  manufacturing orders
  5. Stockroom personnel –  kit work orders, perform transfers and cycle count to maintain inventory accuracy so purchasing and production control see up-to-date availability
  6. Shipping personnel – relieve finished goods inventory and satisfy the sales order demand when shipping/closing orders

An MRP system is used to simultaneously meet three main goals:

  1. Ensure material is available for production and finished goods are                           available for delivery to customers while minimizing inventory levels
  2. Maintain certain stocking levels as dictated by company philosophy
  3. Plan manufacturing and purchasing activities with delivery schedules, lead-times and sales

MRP is used to guide the company in its daily inventory activity. It helps us maintain our standards to consistently provide customers with on time deliveries and high quality product.


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