Maximize ERP ROI With Material Requirements Planning
Are you utilizing your software’s material requirements planning functionality to its fullest potential? It’s a question we ask many ERP users who express disappointment in their system and are finding that the software is just not living up to the promises the slick software sales team made them. Too often, this disappointment arises not from the software itself, but the processes that companies are supporting with their ERP. Enterprise software can often be complex and seemingly bulky with modules that may seem superfluous to your business. However, look close into your production module and ensure you are using your material requirements planning (MRP) system to the fullest of its ability. Many modern ERP systems have robust MRP capabilities, that can combine the complex functions of material ordering, demand planning and inventory management to organize your production schedules and stock levels in line with lean manufacturing best practices.
Click here for more on the relationship between ERP software and lean manufacturing!
With production and inventory management so obviously crucial to your businesses success, and a sharp MRP strategy will go miles towards finding you the ROI you expect from your enterprise software. Proper material requirements planning is crucial for business success, whether you are manufacturing pharmaceuticals, machine parts or beer. Although different industries may have their own specific requirements and varying best practices, the importance of the inventory management and planning capability that an MRP system cannot be overstated for any business. Read on for more on material requirements planning and how to make it work hard for your business.
Raw Materials
Excess raw material can be a serious hindrance to a manufacturer; particularly if you are working with perishable items, or you simply don’t have the space to store the surplus. Lean principles ask manufacturers to cut down on waste, and your raw materials are one of the most important sources of time and cost wastage to target. Whether materials before they ever go into production, or they waste away as finished products in your stock rooms, excess will cost a manufacturer dearly. Use your production planning module to become a master of material ordering and start mastering the ordering process; only paying for what you know what will be manufactured and then bought.
Your material requirement planning center will be responsible for processing the BOMS required throughout the assembly process. Simply enter the bill of materials for a needed end product, and your ERP system will be able to make sure that everything you need is in place before a production line begins—be it the right machinery or the exact amount of material input. The ERP will communicate the exact materials needed in line with your BOMs and communicate this to your suppliers for you, ordering only the products you need when you ask for them. Seeing a demand increase? Just input that new demand, and the new raw materials can be sourced.
Demand Planning
Speaking of demand, planning for predicted demand requirements can often be a finicky business and have a huge effect on your production planning process. One fundamental best practice that can help manufacturers avoid the waste of surplus production lies in demand planning. After all, if you overestimate how much product you will need, you either end up with too many raw materials, overloaded production lines or inventory taking space and management time in a warehouse somewhere. This headache can be alleviated with the help of stringent material requirements planning practices. After all, your ERP isn’t just good for real-time manufacturing management, it’s also a pro at collecting historical data. Your system will track varying demand for your products over time and through quarters, so that you armed with data-driven predictions for the future. Forecasted demand, backed by historical sales data, means that you have more power and knowledge than ever to accurately forecast your schedules. If one product normally sees a jump in sales during a quarter, you will know to increase your raw materials order and free up production lines to meet that new demand. Of course, your demand planning cannot always account for sudden increases or dives and random acts of change, but it’s far better than reaching in the dark and suddenly finding you have to pay for a bigger warehouse just to keep all that extra stock on hand.
Total demand planning becomes even easier when you integrate your CRM software into your ERP databases. With a total history of all your sales combined with demographic information about your clients such as their work position, industry and buying habits, you can understand your customer base better than ever before. You can innovate new products and target them at the audiences that will be most responsive to them, and ramp up production for the times when the target audience is most active. Just imagine the ROI-generating power that can come with a totally integrated and customer-focused enterprise system focused on lean principles.
Maintain Data Purity
One crucial factor to successful inventory management and demand planning? Clean data. Because material requirements planning encompasses such a significant part of your ERP production module, and is directly responsible for so many crucial processes that directly affect your customers and your bottom line, it is the last place that your company can allow data errors. One wrong number or mixed up date can mean a huge order of raw materials or a late shipping date to an important client. Put double checks in place within your MRP to enforce the clarity of your data and company policy on data entry.
Consider putting one of your organization’s ERP super users up to the task—and ensure that best practices are widely disseminated and strictly Border, time zones and languages can be particular weak spots when it comes to data integration, so shore up your data strength at these links if you do have global or statewide operations. Once you combine the power of pristine data with a powerful material requirements planning system, the sky is the limit for you manufacturing business.
Wrap Up
The Material Requirement Planning process will become a key piece of your production planning module, which balances the often complex relationship between order of raw materials, scheduling and planning of production, product delivery and inventory management. All of the processes mentioned in this post must work smoothly and concurrently, and properly implemented enterprise software will facilitate the reciprocity necessary in production planning. ERP software exists to simplify and automate your business processes—but you must fully commit all of your organization and its (clean, exact) data to the system before it can even begin to generate truly impressive ROI.
If you’re looking to implement an ERP system with a robust material requirements planning capability or need to strengthen your current system, contact an expert at Datix today! We have over 18 years of experience with refining business systems and technological processes to truly help businesses transform through the power of software.
