Capterra Logistics Technology Blog

Inventory, warehouse, and distribution technology for logistics professionals

What Is MRP Software—and Do You Need It?

Share This Article

Welcome to Manufacturing History 201: MRPs and You.

[Insert flickering 16 mm film and click-clack noise. Dim lights. Open juice boxes.]

In 1975, Joseph Orlicky published the first edition of “Orlicky’s Material Requirements Planning,” setting down the foundation for a library of industry expertise and study.

MRP (material requirements planning) was actually coined as a term back in the ’60s and promoted in the early ’70s by APICS, but Orlicky brought new prominence to the practice with his book.

MRP is a manufacturing system designed to do three main things:

  1. Minimize lead times for production
  2. Optimize inventory levels, so a business isn’t holding component parts unnecessarily
  3. Maximize service levels, keeping operations ticking at their peak production efficiency

Many of the concepts MRP embraces are also found in just-in-time/lean manufacturing. Those processes, in turn, were born out of the Toyota Production System developed just after World War II.

History lesson complete. Hit the lights.

what is mrp

What is MRP software?

MRP software automates the manufacturing planning process, determining how much raw material a business requires based on its projected demand for finished goods. It makes ordering timelines more efficient and helps keep inventory levels as lean as possible.

A good MRP software solution can turn a good business into a great business, identifying wasted time and costs and helping you turn work into cash more quickly than ever before. Businesses can also make better use of employees and other resources, creating tighter shifts and scheduling less downtime for equipment.

Of course, no software is a cure-all, and MRP is no exception. Before you can get anything out of any type of planning software, you must have a solid business to plan around.

In short, MRP software is a tool, not a magic wand.

MRP versus ERP: Which is best for your business?

While MRP and ERP are related, there are important differences. Take a look at how Gartner explains the two systems (full content available to Gartner clients):

“ERP evolved from a more specific set of capabilities known as ‘material requirements planning’ (MRP) and ‘manufacturing resource planning’ (MRP II). MRP became a popular discipline in the 1980s through the efforts of organizations like the American Production & Inventory Control Society (APICS). MRP is at the heart of ERP solutions used today by most corporations around the world.”

ERP takes MRP to new heights, integrating with other financial, HR, and manufacturing processes and systems in a central location. This can make a huge impact on businesses with varied versions of “the truth” floating around.

As an example, your sales team may count a sale when the contract is signed, your manufacturing team might count a sale when the product is shipped, and the finance department may only count that sale when the money hits the books. All three could have different ideas of how many “sales” were made last month.

For businesses that just need to increase manufacturing or production efficiency, an ERP may be overkill. MRP software can help you accomplish these goals without rearranging the parts of your business already operating at peak performance.

Maybe, for instance, you don’t need new accounting and CRM tools. These are often major components of an ERP, and putting them in place can shift the whole tone of your business. By opting for an MRP, you can get many of the benefits an ERP offers with less disruption to the daily routine.

Who uses MRP software?

MRP software is used by companies that create finished products out of raw materials. This includes:

  • Electronic components manufacturers
  • Furniture makers
  • Consumer good manufacturers
  • Drug companies

Service businesses or companies that modify existing goods aren’t going to get much benefit out of MRP solutions. More subtly, companies that create finished goods out of raw materials, but do so on odd schedules or an ad hoc basis probably don’t need MRP tools.

These sorts of businesses can employ a more basic product buffer, which ramps up based on busy periods. You can forecast those busy periods based on previous sales spikes or on external demand factors – the launch of a new iPhone or a regulatory change, for instance.

MRP software is designed to forecast demand and then to minimize the costs and time required to fulfill that demand. If you can’t forecast demand with any granularity, an MRP isn’t going to help much.

Finding the right MRP software for your business

To find the right MRP solution for your business, check user reviews, interview vendors, and participate in some demos or trial runs. Getting a feel for how the product actual works is key to finding a good system.

User reviews are also a great resource for learning how well a software provider responds to help and feature requests. They can also help you get a good feel for the types of businesses each brand caters to.

Capterra—the provider of this very blog—has an entire directory of MRP software options with reviews and feature comparisons. Check it out to find the perfect solution for your business, and start increasing efficiency now.

Looking for Logistics software? Check out Capterra's list of the best Logistics software solutions.

Share This Article

About the Author

Andrew Marder

Andrew Marder is a writer for Capterra. His background is in retail management, banking, and financial writing. When he’s not working, Andrew enjoys spending time with his son and playing board games of all stripes.

Comments

No comments yet. Be the first!

Comment on this article:


Your privacy is important to us. Check out our Privacy Policy.