Manufacturing resource planning (MRP) has long been the go-to software solution for manufacturers. Usually called ERP today (enterprise resource planning), this suite offers modular applications tailored to the major functions of the enterprise—production, sourcing, customer service, inventory and warehouse management, master data (design and engineering), planning and scheduling, finance and accounting, field service, and more. To avoid confusion with the separate application known as material requirements planning, we will use the full name here instead of its acronym, MRP.
With manufacturing resource planning systems, companies can pick and choose the application sets they need, within limitations. When installed, these modules seamlessly integrate atop a common database, tying all parts of the enterprise together.
At heart a communications system, manufacturing resource planning breaks down information silos to manage, apply, and store data from and for all parts of the business. Its infusion of information helps streamline operations, focusing all departments and processes on shared business strategies and objectives, like delivering the right products to the right customers, at the right time, as efficiently as possible.
The Art of Planning
Manufacturing resource planning matters most for, well, planning. Planning applications form the backbone of this integrated comprehensive system, supporting step-by-step, top-down business planning, beginning with setting and prioritizing the company’s objectives.
With these determined, next comes sales and operations planning (S&OP), which calculates supply and demand for groups of products (product families) and administers a dose of realism…is this plan even feasible?
At the S&OP stage, the top decision-makers for each area of the enterprise determine how their unit can support the business plan. They’ll ask things like: What’s the budget for raw materials and components? Is there enough warehouse space? Can production handle the expected workload? And this process spans across all areas—sales and marketing, design and engineering, production, distribution, warehousing, field service, finance, and more. The goal is to create a unified supply-demand plan at the product family level that meets the projected demand while making the best use of available resources. And this plan is all backed up by rough-cut capacity planning to make sure everything aligns.
The next step is to break down the product family plan to individual items, to create a master production schedule (MPS). Then, the resource requirements planning app confirms, again, that the plan can be executed effectively. After that, the material requirements planning tool kicks in, mapping out all the production and purchasing needs. At the same time, a detailed load vs. capacity analysis (capacity requirements planning) helps balance the workload across the shop floor to ensure everything runs smoothly and that manufacturing schedules are completed on time.
While all manufacturing resource planning software generally follows this process, the way it’s named and the features it offers can vary a lot depending on the vendor and product. Some systems take things a step further with advanced programming to speed up the steps, use more sophisticated algorithms to plan materials and resources at the same time (this is known as finite scheduling or advanced planning), or even use simulation and machine learning to continually refine their capabilities and outcomes. Others might apply alternative methodologies such as theory of constraints (ToC) (Goldratt, 2021) or demand-driven MRP (DDMRP) (Demand-Driven Institute, 2024).
Supporting Functions and Data
As mentioned, the central database is key to manufacturing resource planning and ERP systems. For planning and production, the product data management (PDM) application guides the entry, control, and maintenance of what’s called master data or basic records, digital descriptions of products and how they are made. These entries capture relatively static information on:
- Items—definitions with various controls that define management and use.
- Product structure, or bills of materials—defines the relationships between manufactured items and their components, components’ components, raw materials, etc.
- Facilities—the work centers and production lines where manufacturing activities take place, as well as capacity/scheduling control information. In some systems you can also define skills, tooling, and other resources for planning and scheduling.
- Routings—the sequence of manufacturing steps, where each takes place (facility, line, or work center), and the resources needed.
The remainder of the central database is populated by the operational applications in manufacturing resource planning as they perform their functions, capturing data about orders (purchase orders, customer orders, work orders, etc.), activities, suppliers, customers, warehouses, inventory balances, and more.
Of course, the old “garbage in/garbage out” adage applies. Schedules, plans, inventory balances, on-time shipments, and even the products themselves pushed out by the enterprise system are only as reliable and up-to-date as the data behind them. An incorrect inventory balance, for example, can shut down a critical production line, delay product completion, and push back a customer ship date. Planning applications that rely on incorrect, outdated information will not deliver the well-coordinated, precisely-targeted, highly efficient operations (or the results) that everyone is counting on.
Manufacturing resource planning and ERP are comprehensive application suites that support the information management needs of the entire enterprise. Other applications not mentioned above handle production tracking and reporting, inventory management, customer relationship management and order processing, purchasing and supplier relationship management, finance and accounting, as well as optional modules for manufacturing execution systems (MES), warehouse management, transportation management, field service support, distribution, and more.
Implementing Manufacturing Resource Planning
With so many manufacturing resource planning systems to choose from, it is critically important to pick a system that fits your needs. Easier said than done, of course. Software vendors make big claims about integration and fit. While nearly all of these systems are highly configurable and tailorable (without custom programming), there will always be some room for interpretation. Here are some facts to guide you as you begin your search:
- Know thyself. Packaged manufacturing resource planning/ERP systems are more alike than different, but the devil is in the details. Analyze your specific needs before shopping, possibly with the help of an experienced, objective consultant. Focus your assessment on identifying tasks and processes that are specific to your company or otherwise vary from the “standard” way of doing things. How those particular needs are addressed will be the most important selection criteria for your new software.
- Just as important as the hardware and software is the implementation process itself. Workers at all levels will depend on the system’s information and processes over its lifespan, typically for 8 to 10 years or more.
- Evaluate the vendor. They will be your partner in implementing the system, training the users, and supporting the system throughout its life. Speaking of which, be sure to look at life-cycle costs; you will want to contract with the supplier to support the system with ongoing updates, improvements, advice and assistance.
- It's always much better to adapt your procedures to fit the software than to modify the software (custom coding) to match your current procedures. Custom coding is expensive, delays the implementation and its benefits, and carries a continuing maintenance requirement. Modern ERP software is highly adaptable through built-in tailoring capabilities that allow the users to customize the user experience without changing the underlying functionality—and no custom coding.
- Most importantly, train users to properly use the system as a key part of their everyday activities. Whenever there’s a mismatch or missing function, change your process to take advantage of what the system can do better than you.
Implementing a new manufacturing resource planning system, as a project (i.e., a limited-duration task with documented objectives), should be managed with standard project management techniques. Assign a strong cross-functional team to direct the effort and garner visible senior management support.
Get Guidance from a Pro
If your current manufacturing resource planning system is not delivering the functionality and results you expect and deserve, call in a trusted advisor. A professional can help you decide whether the blame falls on a) poorly-fitting or out-of-date software, or b) improper use. Form a project team to fix the problem. Re-train users, modify procedures, or re-implement the software, if necessary, to do it right this time, giving you a a fresh start.
If you decide that the software is the problem, use your analysis as background as you search the market for a new system that better serves your needs. Then put your project team together to make it happen.
