Following are a few scenarios related to a manufacturing company which I am sure any person associated with the manufacturing industry would be able to relate to.

1. The right raw materials are procured for the right output, but in wrong quantities (The quantities are either more than what are necessary or less than what are required).

2. The right materials are procured for the right output in right quantities but, at the wrong time (Either there is a delay in the arrival of the materials required for the manufacturing to progress uninterrupted or the materials arrive so early that a lot of space is required to store them as inventory for future use).

3. The material procured towards manufacturing the finished product, is in the right quantity and arrives at the right time but, the material is found to be a mismatch to the one required for the manufacturing the finished product (mismatch is evident in the quality and specifications required).

4. Sometimes, in spite of everything being right, including the quality of the material, quantity of the material and the timing, the production activity does not go uninterrupted, owing to some unforeseen circumstances such as breakdown of the vehicle transporting the materials and goods or some other disturbances.

From the above scenarios, it is pretty obvious that there is lack of proper material resource planning on the part of the company.

Material Resource Planning… What is that?

The primary purpose of existence of a manufacturing company is production. The company deals with procuring the raw material, undertaking activities required to manufacture the product and delivering the finished product to the customers. All these activities are not as simple as they sound to be. It involves good amount of planning. This is where material resource planning comes into picture.

Material Resource Planning is not just a fancy name but, a well planned approach towards making the optimal use of the resources and inventory of the company. It has ample scope in the manufacturing sector. Both effectiveness and efficiency matter in material resource planning as it is a matter of procuring the right items in the right quantities for the right kind of job to get the right output with time playing a crucial role in all the aspects. This meticulous planning of each and every aspect pertaining to the production of goods is what Material Resource Planning is all about.

In a manufacturing company, bringing out the perfect output is as important as bringing it out at the right time with optimal utilization of the resources. Production can probably be summed as the coming together of procurement, manufacturing activities and delivery of the finished product. But these so called simple processes involve cumbersome activities which need meticulous planning as in ‘what material to purchase’, ‘when to purchase’, ‘how much to purchase’, ‘how best the manufacturing process could be designed’, ‘what could the ideal inventory be’ etc., and there is no one solution for all companies. The needs, processes, requirements and the business as a whole varies from SME to SME and the implementation of material resource planning in the company varies accordingly to suit the business.

Material resource planning, talks of holding the least inventory possible which can cut down the costs incurred by the company. In the days prior to the advent of the concept of material resource planning, great importance was attached to stacking and storing a good amount of raw material (otherwise known as inventory) required for undertaking the production activities. This was a strategy on the part of the company to avoid uncertainty. But, one cannot deny the fact that exorbitant amount has to be shelled out on inventory. Apart from this, there is always a risk of the material going waste as a particular material may not be needed to manufacture the finished product, or because the material is spoilt owing to the shelf life it has or because the storage conditions prevalent in the organization are not conducive to the material. This further escalates the cost of bringing out a product.

This is what Material Resource Planning is all about at a superficial level. But, if we delve deep into this concept we realize that there are some objectives which form the basis for Material Resources Planning.

MRP is about…

Encouraging thorough study and understanding of the output required which encourages us to assess and understand the quality and quantity of the raw material suitable for bringing out the finished product.

Assessing the time required to give the finished product the shape it needs to be in. Material resource planning also emphasizes on understanding the lag time between placing the order and getting the material delivered so that the production activity goes uninterrupted and smoothly.

Making a thorough study of the logistics to use it to the advantage of the organization and ensuring that the uncertainty in the arrival of raw materials as well as the delivery of the finished products to the customers is minimized.

Possible consequences in the absence of material resource planning in SME

Material resource planning is a ‘must use tool’ which when adopted by the organizations benefits them immensely. But, if for any reason an organization fails to adopt this tool, there is a high possibility of the production activity getting disrupted and when the production activities do not go as planned, the purpose of the organization itself will be lost.

Also, huge financial losses and marred reputation in the market come as accompaniments to the disrupted production activity. When the organization fails to keep its’ promise of delivering the goods to the customers, the chances of the organization losing out business to its competitors are very high and this can prove to be too costly for a company to afford.

Material Resource Planning delves into designing the purchase activities, manufacturing activities and delivery schedules in such a way that the entire process exhibits a smooth flow without any hitches and glitches.

Sometimes, it requires an entire lifetime for reputation to be built but just a fraction of second for it to be destroyed. So armed with the tool of material resource planning (MRP), all the companies involved in production can march towards achieving their business purpose with confidence.

Ostendo MRP is ideally suited for small to medium sized manufacturers who are currently being restricted by the manufacturing functionality in their Accounting and Inventory software. Neither is capable of tracking Work in Progress (WIP) which is one of the primary reasons neither system is adequate by itself to properly manage a manufacturing based organization

To Schedule A Non Obligation MRP Software Demo, Please Call Anson at 6347 7778 Now

Would you like to improve the productivity of your business operation? Wish to receive funding from the Government to support and defray your project costs? Call 6347 7778 now to find out more about the different Government schemes available and how the grants can be utilized to improve the productivity for your company.