Benefits of MRP II: Manufacturing Resource Planning

Manufacturing Resource Planning
Manufacturing resource planning, also known as MRP II, is a method for the effective planning of a
manufacturer's resources. MRP II is composed of several linked functions, such as business planning, sales
and operations planning, capacity requirements planning, and all related support systems. The output from
these MRP II functions can be integrated into financial reports, such as the business plan, purchase
commitment report, shipping budget, and inventory projections. It has the capability of specifically
addressing operational planning and financial planning, and has simulation capability that allows its users
to conduct sensitivity analyses (answering "what if" questions).
The earliest form of manufacturing resource planning was known as material requirements planning (MRP).
This system was vastly improved upon until it no longer resembled the original version. The newer version
was so fundamentally different from MRP, that a new term seemed appropriate. Oliver Wight coined the
acronym MRP II for manufacturing resource planning.
In order to best understand MRP II, one must have a basic understanding of MRP, so we will begin with a
look at MRP and then expand into MRP II.
Benefits of MRP II
 MRP II helps to standardize business processes by offering automated methods for many areas of the business.
Standardization leads to easily repeated processes and a platform for improving those processes.
 An increase direct labor productivity in all areas of the company.
 The efficiency will increase in the interaction between the various functions because of the common data bases and
improved version of the information flow in the organization.
 The implementation of the different engineering changes at different level will swift and effective than before.
 With manufacturing resource planning the company can shift their focus from the crisis management to process control
due to the ease of process provided by the system
 More accurate inventory records in the systems.
 A company that implements MRP II for the first time is due to facing problem in controlling the increase in selling
transactions, manufacturing and purchasing associated with growth. The improvement in the way work gets done allows
the company to be more competitive.
 From the manufacturing point of view: there is better control of inventories and improved scheduling in MRPII system
then in MRP.
 From the financial and costing functions: There will be reducing amount of working capital for inventory
Limitations of MRP II
Problem in Implementation
In case of MRP II, there is a problem of Implementation as system requires information to be accurate. In case low quantity
information is applied either in the bill of material module or the inventory segment, this will result in automated planning
processes errors.
The planning modules use the concept of lead times or order lot sizes.
So, in case there is differentiation regarding the actual lot sizes produced or bought and the lead times then the planning
software won’t generate plans that go with what is actually happening which may cause costly reimplementation and
implementation failure.
Operational Drawbacks
MRPII systems are difficult, time consuming, and costly to implement. Many businesses encounter resistance from
employees when they try to implement MRPII. A huge training and education is needed to employees to operate the
systems and these tasks leads to increase costs to the company.
Some Modules of MRP II
MRP: Material Requirement Plan or MRP is a set of different techniques involving bill of material, the master production
schedule and inventory data to calculate the required amount of inventory for the further process. MRP is time-phased so it
can make recommendations to reschedule open orders even when the due dates are not yet fixed.
Capacity Planning: The process of determining the amount of capacity needed to produce in future. This process may be
performed at an aggregate or product line level, at a master scheduling level and at material requirements planning level.
Master production schedule: It is a schedule which includes the plan for different or individual commodities required for
production in a given time period. It is basically linked with the manufacturing process where the schedule explains how
much an item is required and when it is required with respect to the demand by the customer.

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