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Materials Resource Planning (MRP) System Concepts, Benefits And Examples

MRP System

Would appreciate an overview, as I have no experience with it.


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

MRP or MRP II is a must have for any company that handles large amounts of inventory (either in SKUs, $ or quantities) and is a distributor or manufacturer.

It allows you to manage your on-hand quatities and ordering levels based on sale assumption and orders in-house.

MRP/DRP (distribution) v MRPII/DRPII simply put is that MRPII also involves labor in the equation.

Chuck Boecking
Title: Open Source ERP and Business Intelligenc..
Company: Chuck Boecking
(Open Source ERP and Business Intelligence, Chuck Boecking) |

You would want MRP if you want the following:
1) You want the right materials landing on the right dock with the right quantities at the right time.
2) You want your receiving, storing, assembling and shipping of product to accurately flow to the GL. (this may be crossing into the bounds of ERP)
3) You want to efficiently handle the movement of materials between multiple warehouses and destinations.
4) You want to be able manage high-volume vs low-volume materials differently.
5) You want to accurately fulfill orders in increased volume.

Here is an example Company that would benefit from MRP:
* Company is in the industrial goods wholesale distribution business.
* Company has larger warehouses in China and in the US.
* Company has 10 commercial outlets in the US and in Canada.
* Each Outlet stocks high-volume products
* Each warehouse aggregates product from around the world.
* Company takes customer orders over the web, via customer service and walk-in outlet traffic.
* Each warehouse fulfills orders from all sources.

The MRP would help operations and accounting manage material coordination around the world to ensure (1) efficiency and (2) profitability. It accomplishes these goals by providing insight into predictive purchasing, insight into material availability, and accountability of order execution.

Another important concept is material costing. MRP helps provide insight into accurate material costing (product costs, freight, duties, taxes, handling, etc...). Accurate material costing provides insight into product and customer profitability. Again, this concept may be crossing into the ERP world.

MRP is to distribution as MRPII is to manufacturing. MRPII extends the MRP material policies into the production process. In some cases, MRPII is used in the destruction or reverse logistics of product as well.

I think I touched on all three: concepts, benefits and examples. I hope this helps!! Let me know if you have more questions.

Chuck Boecking


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