Why Mrp Is Needed For A Organisation Information Technology Essay

MRP is the acronym for Material Requirements Planning .It means planning or estimating the materials that are required to produce or devlope the end product based on the demand.It involves in production planning and inventory control system.

MRP II is defined as Manufacturing Resouces Planning. Man Machinary Material are the three main resources which diminishes with the time and that are to be planned very effectively and efficently for productive outputs by any organisation or enterprise. This MRP II is the extension for MRP.

To study in detail what is MRP and MRP II in Manufacturing industries and protrait its scope, advantages and its process in the industries.

To identify the differences between MRP and MRP II and advantages of each modules.

To identify companies that have implemeted MRP and MRP II sucessfully.

How these businesses application had helped them in automating their business what are the issues that occur while implementing the MRP and MRP II

To identify what type of companies and how many companies are sucessfully using these business appilcations.

To identify the critical factors in the successful implementation of MRP, MRPII and ERP systems in manufacturing industries.


The objectives of the project are:

To carry out a critical review of MRP, MRPII and ERP literature with a particular emphasis on the implementation of these systems.

To know what are the ideal methodologies that should be followed to implement these MRP and MRP II at different enterprises.

To gain the knowledge of different modules in MRP and MRP II.

To study and understand how these submodules interact with each other during the business process.

To gain knowledge about the other business appilications which are more in use and advantageous when compared to MRP and MRP II.

Choose a suitable methodology for consulting businesses on their implementation of MRP, MRPII or ERP

Obtain the views of business / company leaders on the factors influencing the successful implementation of MRP, MRPII or ERP.

Consolidate practice based experience with literature based advice to create a lessons learnt list or top tips for the implementation of MRP, MRPII or ERP and the differences between these three systems.

Write up dissertation.

Research questions :

Selecting and sucessfully Implementing a new manufacturing planning system is very important a management task in an enterprise for productive outputs and for for reaching objectives and targets of the entrprise.Some of the check list questionire that needed to be dicussed while going for implementing MRP and MRP II.

What kind of Enterprise is it what are its products and Business Process.

What are the reasons for selecting MRP and MRP II as a solution for their business.

What are its requirements?

What they are expecting form MRP and MRP II ?

What level of automating they need through MRP and MRP II?

What are the problems at their facility?

What level of integration they are looking at ?

They need lisenced Application or Free ware Application(Based on this the cost and time are estimated.)

Had they ever implmented an Business Appliaction before ?

What are the problems they are facing with the existing business application?

How is the data and orders,information regarding different things to be maintained in the appliaction?

What kind of reports and how many reports that are needed to be generated ?

List Of Companies Using MRP and MRP II :

Software Arts Inc.







St.Jude Medical


Fujji filim

Wesco distribution


Global Helicopter Technology Inc.





ALTA Manufacturing



Material Requirements Planning -(MRP):

MRP is the acronym for Material Requirements Planning .It means planning or estimating the materials that are required to produce or devlope the end product based on the demand.It involves in production planning and inventory control system. The main Idea or focus of the MRP system is to integrate all the business information systems of a ogrganization so that it would help in increase in productivity. This plays a very important role in managing manufaturing process.Joseph Orlicky made a detail study about the TOYOTA Manufacturing Program and designed Material Requirements Planning (MRP).It was sucessfully implemented intially in 150 companies, Later this number had raised to about 8,000 by 1988[2].Even very small manufacturing companies can implement this MRP Very sucessfully.

MRP can be veiwed as a planning tool designed specifically to assembly operations. The main aim of MRP is to allow each manufacturing unit to forecast its supplier what parts it requires and when it requires them. The material supplier may be within the Organisation or an outside supplier. When combined with MRP II it is probably the most popularly used planning and scheduling tool.MRP was created to handle effeciently the issue ‘dependent demand'[2]; Undersatnding or calculating how many of a particular component is required to produce the products or end goods.Advances in Information Technology and computer hardware made the calculation possible.An MRP system is designed or expected to meet three objectives:

To Esitimate correctly the materials needed to produce the finished products and are delivered to the customer at right time.

Maintain the lowest possible level of inventory.

Plan manufacturing activities according to the demand or orders raised, delivery issues and schedules, procurement activities.

The primary function of MRP system is inventory control, bill of material-B.O.M processing and elementary scheduling. MRP is mainly used to maintain low inventory level in an organisation. It is used to schedule and organize manufacturing, procurement and delivering activities.The MRP System is used beacause to maintain order entry in to a organization.Once a Order Entry is made then all other departments which are related to that order and manufacturing departments are activated and are put in to action like Inventory control,Bill of Materials(BOM),purchasing department,Manufacturing department,invoicing and shipping department etc.

Functionalities of MRP Include:

Demand Forecasting[4]

Order Planning ,Controlling[4]

BOM-Bill of Materials[4]

Inventory Controlling[4]

Priority Planning and Control[4]

Planning Capacity Requirement and Development of Broad Business Plans[4]

Fig1: Various Functions that MRP deals [4]

Why MRP is needed for a Organisation:

Companies need to utilize their resources and plan their resources very well in very efficnetly sothat they always meet the demand of the customers with out fail because loosing a customer for a company is permanent loss so they have to be well organized to avoid failures in planning the manufacturing of the products according to the demand.and also the organisations have a very big issue in order to produce the finished goods like procuring the suitable raw materilas from correct and reliable vendors.Organisations or Entereprises have to plan which products are to be produced and in what quantities and they should be in a position to forecast that they are able to meet current and future demand of the customerand that too it should manufacture the goods at lowestr possible cost. If any organisation is making any bad decision at any level then they would lose moneyreulting a failure in strategic business planning. Some of the examples are quoted below:

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If a company procures wrong materials and quantities from a wrong vendor then they would fail to meet the client requirements and eventually fail to deliver the products or goods at the agreed date.

If a company fails to predict or plan correctly like quantities required to be purchased like purchasing more or execessive quanties where a less qunatity is required for production then its a waste and remains as stock in warehouses and may never even be used at alland its a waste of money as a unecassary procurement is done. However, some purchased items will be of minimum quantity than the required quantity therefore, procurement of excess quantity is necessary.

Starting the production of an order with out proper planning and intergation and coordiantion with other departments in a organisations could end up in not meeting the customers deadlines or demand.

So for this reason a organisation or a enterprise requires a well tightly intergated tool that could interact with all departments to carry out the business in a profit making way.

MRP is a tool which primarily focuses to provide answers for several questions and also to deal with problems like:[1]

What items are required?[1]

How many are required?[1]

When are they required?[1]

Issues with MRP systems :

Data Integrity:

Data integrity is the major Issue faced by the MRP Systems and MRP Customers. If any mistake or errors done while configuring the master data like inventory data or BOM(Bill of materials) data then the expected output data will also be incorrect.Most number of customers who are implemeting these system are expecting data interigty for more better results.

Time Prediction:

This Time Prediction is also a major issue faced by the MRP System or the Mrp customers because here the user have to specify the time needed to manufacture a end product or finished good from the procured induvidual parts .But Unfortunatley the sytem everytime assumes this “Lead time” is same for every product or good that are manufatured in that orgaisation or manufacturing unit irespective of the Quantiy of finished good that is to be manufactured and avilabiltiy of machines and manpower etc. available.

InterCommunication Issue:

This is also an another issue faced by the faced by the MRP System or the Mrp customers.If the customers organizations or factories or warehouses are located at located at different geographical locations and intercommunication is not posible between them .An Ideal ERP or MRP application should overcome this issue by able to communicate between differnet warehouses factories for distributing goods,products based on the demand of the customer for the goods.

Manufacturing Resources Planning (MRP II) :

MRP can be expanded as Manufactuing Resource planning which means planning the resources of a manufacturing company in a effective way and efficient way in persepective of time for getting maxium profits.This can overcome the or it can be veiwed as a extension of MRP. This is software application which is developed by many skilled people and integrated with a dedicated data base accuracy. This is an application which is used by the prganisations for productive and well utilization of human resources.MRP II is not a free software system or a open source software system.Thus this MRP II application appears in different formats or structures depending on the clients business requirements .Genrally these MRP II applications are purchased form other MRP devloping companies in the form of licenses or it can be a in-house software devlopment.

Every MRP II system is devloped with different modules because as it is known differnet business ‘s have different kinds of requirement and solutions, so the modules in MRP II system will be different. MRP II system have the following basic modules:

Master Production Schedule (MPS)[3]

Item Master Data (Technical Data) [3]

Bill Of Materials (BOM) (Technical Data)[3]

Production Resources Data (Manufacturing Technical Data) [3]

Inventories and Orders (Inventory Control) [3]

Purchasing Management[3]

Material Requirements Planning (MRP)[3]

Shop Floor Control (SFC) [3]

Capacity Requirements Planning (CRP)[3]

Standard Costing (Cost Control) [3]

Cost Reporting / Management (Cost Control)[3]

All the above listed modules and with few other auxilary modules are tightly integarted together so that they can intercommunicate very well and work on same data and exchange information,and that would be a ideal model for any MRP II application and this kind of ideal ,good MRP II application enables the manufacturing enterprise to operate in a objective way. This MRP II application is completely different from Point-of solution approach which is operated through induvidual systems and this MRP II application is fully integrated and fully interfaced application. Which enables the user to interact with application more friendly.Many manufacturing industries have implemented MRP II systems sucessfully. Different Industries have different requirements like few of them need specific functions like lot traceability,Man Power Management etc.

Fig: Different modules in MRP II System[4].

Advantages of using MRP II systems :

Inventory Control. [3]

Scheduling [3]

Productive relationships with suppliers[3]

Improved design control[3]

Quality control [3]

Reduced capital for inventory [3]

Improved cash flow through quicker deliveries [3]

MRP II Issues

Ideally MRP II should have overcome the MRP problems or drawbacks. Unfortunately in MRP II most of software implementers or consultants failed to understand master scheduling.So they failed in implementing modules like master scheduling and capacity planning correctly making the new MRP II application also look like old MRP application.

Inaccurate data:

To Control the business or to run the business in a successful profitable way the data that is entered or the records that are present in the inventory module or BOM-Bill of materilas etc.,should be very accurate. But these MRP II software packages failed to understand the needs and business requirements which became a challenge to MRP II implementors to properly map the packages to the business.so this made the data or records entering in to the modules inaccurate.

Time Facctor:

MRP II implemetation takes long time to implment on a average a MRP II implementation takes 18-24 months of time for implmentation.

Requiremnet for technical man power and machinary:

This MRP II needed huge number of technical consultants and business people and machinary for its implementation[4].

Helped only manufactring companies:

It confiend its benifts or results only to manufacturing process organisations and failed to extend its benefits to other modules or other sectors.[4]

It Could not effect other modules like quality management and other management issues[4]

Comparission between MRP and MRPII Systems:

Both MRP and MRPII systems are business applications which is used to integrate the different functionalites in a business process and provide business information when required from a central and dedicatd database.

MRP is deals with manufacturing materials while MRPII deals with the coordination of the entire manufacturing production and it also includes materials, finance, and human relations[3]. The goal of MRPII is to provide accurate data [3].

MRP takes the input from sales and marketing and then it forecast and determine the raw materials demand and required for manufactuirng. Both MRP and MRPII systems depends on a Master Production Schedule.

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MRP deals with the coordination of raw materials procurement while MRPII involoves in the development of a detailed production schedule taking in to account machine and labor capacity, scheduling the production or manufacturing according to the arrival of materials in the inventory. An MRPII provide Data about the cost of production, including machine time, labor time and materials used, as well as final production numbers[3].

Allocating resources is the major advantage or devlopement of MRP II system from MRP system.

Enterprise Resources Planning :(ERP)

Enterprise Resource Planning can be defined as or it can be understood as well planning of all the tangible resources or preishable assests of a company in a effective and efficient way with respect to time .Here the the resources are mainly





These are well planned and well utilized in a enterprise .An ERP’s true ambition is to integrate all the modules across the compnay on to a single unit that can serve all the those deparment needs. It is a business appliction which should facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders[5]. This ERP application has a centralized database with a platfrom independence or sometimes platfrom dependent and some programming language. ERP systems consolidate all business operations into a uniform and enterprise wide system environment[5].These ERP systems used to come on sigle server environment which used to be a limitation but now a days all ERP sytems are opting for client-server architechture.There are 2-tier architechtures, 3-tier architechtures among these 3 tier architechture is the best suitable for ERP Systems.

Every Compnay or organisation look for ERP because it increases profits,reduces human work and provides secured and accurate data helps in expanding their business in different countires as these ERP applications deals with multi currency also and helps so work becomes simple and easy and business will improve and can make profits if they are sucessful in implementing ERP application to their business process. Every company grows in to big organisation or enterprise and departments, functionalities also increses or grows depending on their requirment so ultimatley data and paper work in each department increases considerably.So the organisations started looking for a software application that could automate all the business process and tightly integrate all the functionalites in that particular organisationand have a smooth flow of data, so thus came the need of ERP. Ideally an ERP application should have the charecteristics like :

1.All the data and application should reside on a single database.

2.Entire application when accesed by different users at at different geographical locations should same look and feel.

3.It should work like a real time application.

4.A user should be capable of accessing anyh information or data at any time from any location.

5.It should be accurate and capable of generating reports for a business application.

Enterprise resource planning came as a extension of MRP and MRP II .The MRP II drawbacks were completely fullfilled by ERP applications .ERP was dominently sucessful in capacity planning The term “Enterprise resource planning” originally derived from manufacturing resource planning and breeching its effect in to other modules like quality control,inventory control , warehouse management ,logistics,finance and control,sales,distribution,human resource and payroll management.Thus ERP is very sucessful in processing or automating a business applicatoins.ERP sytems became more demanding when they became capable of dealing with customers directly through a functionality called CRM (Customer Relationship Management) and by entering in to

e-business.now a days these ERP applicatins are both desktop application and web based application.Every ERP application is cutomized based on the cutomer requirements so that the ERP application look as though it is the software devloped only for that business requiremnet.

fig:Different funtionalites of a MRP application [5]

the above shown are the different funtionalites and module that are ideally coverd in a ERP application.

Generally when organisations think of implemeting the ERP application for their business application they can either go for a in house production or buy from other vendors who implement ERP application for their business process or they even can opt for third party vendors who study their businees process and implement the customized ERP application for their organization.There are many ERP vendors in the market and to name a few these are the dominant ERP Implementing players













Among the above listed ERP companies SAP AG’s ERP called” SAP “is the well known ERP. Many third party vendors are there in the market who are implemeting SAP to the enterprise’s or organisations who need a ERP applicaton.SAP is so famous because it is easy to implement and all the modules are tightly integrated and their success rate is also considerably good when compared to other ERP’s.Recent studies show that markert share of each ERP application ,SAP at 51%, People soft 12%, J.D. Edwards 8% and BAAN 5%. So by these statistics we can confirm that SAPERP is well used and opted ERP in the current business world.SAP ERP is so famous when compared to ther Companies ERP because all other ERP applications provide only single functionality but SAP Provides all functionalites like sales and distibution ,Customer relationship management,Supply chain mangment,Business inteligence,Fianace and control ,Material management,human Capital management etc.ERP application main intention is to increase profits ,improve business ,expand business, to easily access the information of one department by other department ,help to reduce operating cost,make day to day managmet more easy,easy decision making,increase in productivity . So every organisation should have its own ERP application implemented in its organisation to compete in the current business world.it make them to easily with other MNC’s present at different geographical locations.

fig:Market shares of each ERP application[8]

Advantages of ERP application:

Integrate all the functional areas together[5]

The capability to streamline different organizational processes and workflows[5]

The ease of communication of information across various departments[5]

Improved efficiency, performance and productivity levels[5]

Enhanced tracking and forecasting [5]

Improved customer service and satisfaction[5]

some ERP’s are open source so reduce cost.

Disadvantage of ERP Application:

Level of customization is limited.

Highly expensive systems to implement

Limited technical support

long time taking process to implment.

Effective Methods Of Implmetation Learnt through case studies:

These ERP applications should be implemented by following some ideal methodologies for implementation other wise the implementation could fail there are many cases for ERP Implentation failure.All the companies who are implemnting the ERP applicatin to automate their business process were sucessful there are many failures.As implementing a ERP application for a company is a very complex process and it involved huge budget and long time as the specifications and requirements used to change.

ERP implementation gets failed due to the follwing reasons:

Failing to analyze the business process correctly.

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Improper collection of clients or customer requiremnts.

Lack of technical consultants.

Failure in the data migration

Wrong configuration of master data.

Lack of knowledge of the newly implemented system in the organisation among employees.

Failure in gerating required reports.

Failure in analyzing time and money required.

Successful If a ERP implementation is sucessfully implmented in a company mot only helps theorganisation by reducing waste costs but also it helps its customer’s as they can purchase the products of the company at a low price eventually rising sales and making good profits.They also because they share the data of the production line in real time[10].

So for a sucessful implementation the following methodologies should be followed.These are ideal methodologies one should follow when they are implmenting ERP orMRP or MPR II application for any kind of compnay.

An Effective Implementation have the follwing modules:

Project preparation[11]

Solution definition[11]


Business Process Analysis


Testing & QA


Final preparation[11]

Project preparation:

Project goals and objectives[11]:

Undestanding goals and objectives of the project and getting a clear picture about the project.

Roles and key focus[11] :

Identifying the roles and reponsibilites for the project and assainging the tasks according to

the roles.Identifying core team members,repoerting authority and documentation team

it also includes identifying Steering Committee, Project Management team, Consultants team, Technical and Security management teams.

Determining the implementation strategy[11] :

Plannig the implemneting strategy like how to implement the project and how to run the project according to the dead lines and defining the deliverables for each team,preparing road maps for the project and preparing blue print for the implemetation.Determinig how many locations are present for the compnay and what level of the automation required for which departments and what software and hardware required.

Developing a project budget[11]:

This is the main and very important stage for any ERP or MRP or MRPII implmentation because any mistake or worng assement could utterly result in failure of implmentation.so planning for the project and determing the correct budget required to implement the application sucessfully budgeting involves like cost required to procure resources that are useful for the accomplihmnet of the project and cost of the human resources getting involved in the project. Planning the budget required for implementation includes the cost of Labor

, Training, Facilities ,Project support costs

Determining the technical requirements[11]:

Making a study on technical requirements required for implmeting the application sucessfully.Performaning the GAP Analysis and matching it with the application to checek how far the customization required and how well the application suits the business process.Identify and prepare infrastructure facilites selecting a pool of technically dominant consultant’s as a team and making them to study the pro’s and con’s of the project.

4.3 Solution development and realization[11]

Project team training[11]:

This involves the training for all employess and for getting good knowledge about the on going implmetation and it helps the team members and any new members in the project which helps to implement the project at right time with out any dealy. This is very important because it helps to implement the application as according to the blue print defined.

Conversion and interfaces[11] :

Conversion and interfaces are very important for every project. But generally these Conversion and interfaces are not given importance and attention from the project management, because of lack of necessary IT knowledge.conversion and interface of a project is necessary and it should it be in line with the main project and it should be controlled by the project manager[11].

Final configuration[11]:

This is very important phase the final configuration represent a repetetive process that coordinates the configuration with your business processes and business requirements[11].

Testing & QA

Unit Test[11] :

This testing is done by the programmer or devloper itself to evaluate the programs or transaction for errors. This test is done intially at configuration level it is mainly tested for program and module functionality.Whether the business requirements are fulfilled or not whether they are working in the expected way.

Final integration test[11]

This test is done when all the modules are integarted and tests are done whether these are working in the expected manner fullfilling the business requirments.This test is done by the expert testing team while integration and even after integration like verifying workflows , business logics and other functinlities.

Prototyping and Production[11]:

In this phase a test system with fully intergated and devloped appliaction is made ready for working .Ideally at this stage all the funtionlaites and modules should work correctly as per the business requirments and it should be demonstrated to the users with data flows across each module.Once the protype of the business application is sucessful and if the customer is satisfied then the final phase of the implmentation takes place in which cutover plans take place and go-live date is planned and fixed.

Final preparation[11]

User manual and support[11]

Preparing user mannuals powerpoint presentations about each modules and funtionalites for the customers or users to get good knowledge of the implmented ERP or MRP or MRPII application.

End user training[11]

Providing training for the user in the organisation or company for effective using of the application because if the end user fail to gain knowledge about how to use and how to work with the application it results in failure of the implmnetataion.

System management and system test[11]

In this the application is tested for smmoth running of the appliaction with extra loading of data and extra stress on the database and application like simultainous logging of many user at a time etc. it also includes failure scenarios test,application admistration tests,backup and restore procedure test

[11] etc.

Cut-over plan[11]

In this the all final approval and validations should be comleted and all the manual work and transcations of the company have to stopped as after the apporval of cutover plan they start configuring the appliation to automate the business process.

Going live check[11]

In this the manual data entries should be completed before cutover.

and going live date is decided based on the following factors :

proper end user traning is done and completed.

R/3 system administration is ready[11].

Stress test on application and database and desaster recovery tests are sucessfully completed


Conversions and business processed in the production system have been checked


quality check

and testing is completed.

Data transfer[11]

Data transfer is a very important phase in the total implmetation because man times there arise a issue of wrong configration that is configuring one module data to the other module. This is a time consuming process so a due consideration is given and a good amount of time is to be alloted for data tranfer.It The transferred data must be fully tested in every detail by the line organization














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