When a company first implements ERP, it can be pretty overwhelming. It’s a complex system and there are so many different tools to use that benefit different departments. So, when a company first gets on and the shiny new software isn’t working the way they expected, the first thing to investigate is whether they are using the materials requirement planning (MRP software) functionality correctly.
MRP is the process of planning manufacturing inventory based on supply and demand. ERP has MRP software built into it to put this planning process on auto-pilot, which is one of the most important areas of ERP for manufacturers. If a company isn’t taking advantage of the ability to automate material ordering, demand planning and inventory management to organize stock levels and schedules, then they won’t end up seeing the ERP ROI they expected. There are three major benefits that can be attributed to using MRP software.
- Raw Materials
Whether you’re dealing with materials that will expire while sitting on the shelf or simply aren’t selling the surplus, having an excess of raw materials is what will truly effect costs for a manufacturer. Using MRP software to plan out the ordering process to ensure you are only purchasing what you will use will help to cut down on costs immensely. MRP software can process the bill of materials against the materials you have in stock before communicating what is needed to suppliers.
- Demand Planning
Avoiding surplus can also be achieved by predicting the demand of your product. This can be a tricky task. If you overestimate, you will be left with a surplus of product wasting away in the stock room, costing you real estate. If you underestimate, customers will be turned away and they may go with a different provider. MRP software can automate the demand planning process for you by using historical data in your ERP, so there is no over or under estimating.
- Data Purity
The only way you can ensure that inventory and demand planning are up to par through MRP software automation is by ensuring your data is clear of any errors and is as up to date as possible. Once it has been determined that all the data is clean in your MRP software, then you will start seeing a ROI for your ERP system.
Taking advantage of MRP software is where manufacturers will see the largest ROI on their ERP software. Planning out inventory and demand each month allows for leaner manufacturing and producing less waste, which is one of the quickest ways to reduce costs. To get the most out of your ERP software, look towards using your MRP software correctly.