What is a Materials Requirement Planning (MRP) System?

//What is a Materials Requirement Planning (MRP) System?
What is a Materials Requirement Planning (MRP) System? 2017-10-06T00:07:34+00:00

Definition: Materials requirement planning (MRP) system is a software information system with the purpose of increasing overall productivity and functionality in business.

What Does MRP Mean?

What is the definition of materials requirement planning? MRP software is an integrated information system that improves logistical productivity. The software works by taking data from the production schedules, inventory, and bill of materials to manifest different productivity metrics such as purchase options and necessary materials for future production.

Businesses typically use MRP software to aggregate data to help improve operations across the board. The most common usage for this software is in logistics, but businesses also use it to formulate future plans for pricing possibilities, hiring decisions, and marginal productivity. To do this the software typically aggregates data from employees and accounting books as well as other areas of particular interest for business evaluation.

Let’s look at an example.

Example

Frederick is currently running an agricultural service business that grown quite a bit within its first year. He wants to gather some information about the operations of the company, so he can increase efficiencies, so Frederick decides to purchase a MRP software package that he can use to carefully analyze his factors of production and decide the best course of action.

The software takes the information and uses its programmed algorithm to synthesize metrics such as employment costs, supply loss, weekly revenue among other factors. In addition to these metrics, the software will make recommendations to Frederick such as the amount of agricultural product he should purchase based on estimates from previous sales and identify sources of waste in his business management. Frederick takes the software’s suggestions into consideration and analyzes the metrics synthesized by the machine to get a more definitive idea of what future actions he could take with the business.

Summary Definition

Define Materials Requirement Planning: MRP system means a software package that improves logistics efficiencies.