Role Of Mrp Mrpii And Erp System Information Technology Essay

Manufacturing Organizations used re-order point system till 1960 to control their stocks. Whenever the stock fells to a specific quantity they were reordered resulting large number of inventory.

During sixties customers become more demanding, competition between the organization and the rate of interest increases. The increase in interest rate creates serious financial problem for organization because large amount of money tied up in inventory. This made organizations understand to improve their system to satisfy the demands of customer and to control inventory level.

The two main difficulties faced by supply chain management in past were scheduling of product and distinction between dependent and independent demand (a demand which is not based on the demand of other is independent demand while a demand which is based on the demand of other item is dependent demand) resulting the higher level of inventories which was increasing the total cost of organization.

MATERIAL REQUIREMENT PROGRAM (MRP)

In order to differentiate these two types of demand and timely supply of goods MRP (MATERIAL REQUIREMENT PROGRAM) was formed.

MRP is used to control timely delivery of the components and the raw material required in the production of the final good.

The main function of MRP system is

1. Inventory control

2. Bill materials processing

3. Elementary scheduling

MRP will answer what, when and how much will be needed for manufacturing the final product.

Many small companies are using Microsoft excel to control their manufacturing process instead of MRP software which are designed to perform such tasks.

Manufacturing, purchasing, delivering are also maintained by MRP application.

ADVANTAGES:

COST:

Raw material inventory and component inventory are reduced by using MRP system. Lower level of inventory reduces the inventory carrying cost.

EFFECTIVE PURCHASING:

Purchasing becomes more effective by using MRP. It determines the actual raw material or component material needed to purchase for final product.

IMPROVEMENT IN PRODUCTION PLANNING:

Production planning will improve by using MRP system. It identifies the shortage in inventory so the manufacturer changes the production assets to the production of other items which are on hand.

PRODUCT PRICES:

It reduces the cost of production so the organization competitively prices their products.

PROBLEMS IN MRP:

MRP system is highly costly and there are many technical complexities in implementing it.

It is very time consuming.

Considerable inputs are required for data entry and file maintenance.

Forecasted values can be misleading.

Late deliveries from supplier as a result late deliveries to customers resulting large number of complains.

MANUFACTURING RESOURCE PLANNING (MRPII)

In material requirement program it is not possible to get feedback from buyers or production personnel only plans are sent to them as a result it was not possible to adjust the plan to keep the schedule valid, it was assumed that infinite capacity was available and suppliers always delivered raw material on time and correct for example

Time for good may be differ because of problem in machine or late delivery from supplier, goods are damage etc

Manufacturing resource planning is an extended version of MRP that includes strategic manufacturing and business processes such as

1. Material requirement planning.

2. Accounting and distribution.

3. Ordering

4. Tracking of inventory.

5. Ensuring the capacity.

6. Forecasting the demand.

7. Tracking the quality.

8. Employees attendance recording.

9. Contribution and productivity of labor.

10. Balancing demand and supply.

MRP II has greater impact then MRP on business processes and peoples. Manufacturing resource planning goes several steps further then material requirement program. Through the manufacturing process to the shipping of good are incorporated in MRP II.

ADVANTAGES:

Inventory is control to greater extent than earlier.

It increases the productivity.

Performance of supplier increases.

Reduce purchase cost, stress and expediting.

Timely delivery of good improves the satisfaction of customer and reputation of organization.

DISADVANTAGES

MRP II is complicated and requires correct data implementation.

Lot of time and effort is required to set a successful MRP II.

If any unpredicted variation occurs planning procedure may also be started again from beginning.

Its require commitment at all level of organization.

ENTERPRISE RESOURCE PLANNING

Enterprise resource planning (ERP) systems mix external and internal management facts and figures across complete organization including accounting, manufacturing, finance, sales and service, customer relationship management, etc.

The object of ERP is to enable the movement or flow of information internally and externally in all business functions.

In today’s global market rising demand of customer has dramatically reduced margins of manufacturer. In order to meet the demands of customer manufacturer should have all necessary information on everything from shop floor scheduling, supply chain inventories, planning of production, data on customer demographics and interest. It is now become a requirement for global supply chain management to collect, analyze and share this information for a manufacturer.

In order to provide visibility to customers and to achieve efficient and effective use of manufacturing assets an integrated enterprise resource planning is very helpful. Managing internal business processes through ERP gives competitive advantage to manufacturers. To compete in global market, it is an operating platform for every manufacturer. It is a fast path for manufacturer to reduced cost, increase the speed of work and improve transparency that increases profitability and customer satisfaction.

ADVANTAGES:

DEVELOP BETTER CUSTOMER UNDERSTANDING:

In today’s global world to make strong and a long term relationship with customer you will need to understand your customer, you should have complete knowledge of customer, you should know all the problems and should know the demand of customers for long term relationships with customers. This means that you maintain full view of your customers.

ERP system enable manufactures to look strategic order fulfillment and have a better understanding of customer wishes for modified products and services. It will help the company to increase their profits and its offering.

It will identify:

What are the purchasing patterns?

Are orders being driven larger to customers?

Are our demand is increasing or decreasing that we must react to?

Attain global view in a demand energetic supply chain:

To provide excellent customer service and optimize in inventory investment in an age of tough cost management for manufacturers, is very critical. It is also important to provide customer with visibility into inventory and availability of product. To improve plan for re-supply and production in critical condition it is very important to know when and where inventory is needed. To do so, they should have complete information of inventory and ERP system can provide them complete information of supply chain.

Lean manufacturing, universal sourcing, and supplier integration:

Now a days it is very important for a manufacturer to manage the lowest possible cost to gain competitive advantage, by using ERP system manufacturer can efficiently manage their manufacturing cost.

Locating the best supplier is also very important for business practice it requires a complete database of supplier that makes a manufacturer to find out that any opportunities exist for lower costs. The current generation of ERP makes it possible; it includes all real time production data exchange with suppliers and processes that ensure lean operation.

Managing for advanced performance:

Today integrated ERP systems include business analytics that allow management to standardize metrics across the organization and supervise production and profitability. At all level of organization it will provide actionable information to all employees and it will bring speed to their work and help them to make quality decision.

DISADVANTAGES:

Cost:

ERP applications are very expensive and not affordable by small companies; only big companies afford ERP system. It may also require modifying the internal infrastructure of an organization, so it will increase the implementation cost.

TRAINING:

It will be mandatory for an organization to train their employees which means increase in expenditure to have an effective ERP system.

Time:

It is not particularly time consuming task, but in order to use ERP system effectively it is important that all the employees are perfectly trained it may requires a time otherwise the whole ERP system will be inefficient and the use of money and time will be in vain.

Efficiency:

When ERP system will use correctly it will increase the efficiency of an organization but during the training period the efficiency of organization might suffer.

Customization:

ERP systems involves a lot of time in customization or either they are not customizable. They require other software’s for customization which may make the processes complicated.

Conclusion:

MRP, MRP II and ERP have same objective of managing inventory, cost, production, tracking all internal process within a company and satisfy customer needs. They provide several benefits for a company however it requires a complete training of employee to get all benefits of these technologies.