Manufacturing resource planning (MRP) is the effective method of operational or financial planning of a manufacturing firm’s resources. In a practical manufacturing environment, the production line must deliver the right quantities of components while maintaining a timely delivery. A modern manufacturing company utilizes the latest technology and materials management system to monitor and control the processes, and schedule for placing orders in production of materials.
MRP is an integrated system that employs some decision rules to govern the optimal performance of a production facility. The manufacturing process factors in other functional areas of production decisions in the planning process. It integrates high level planning of a company (Production plan, financial plan, marketing plan) with the lower level needed to implement these plans (Inventory, Purchasing, Shop floor control). This ensures a seamless flow of activities to deliver products that meet consumer standards and requirements. As a computer-based system, MRP is capable of creating detailed production schedules from real-time data and information to control the flow of incoming materials by integrating machines and human labor. Other functions to consider in the production process include purchasing, engineering and business development.
How MRP differs from a WMS
Today, technology is widely used in almost every aspect of business. The manufacturing environment is very competitive and it is important for a firm to use technology to its advantage. Employing the right manufacturing resourcing planning system or software could gain a firm competitive advantage over its competitors. However, MRP is often confused with Warehouse Management System (WMS). While MRP describes the most effective manufacturing and production planning decisions to utilize the manufacturing company’s resources in an efficient manner, WMS is a key component in the supply chain and targets to control the storage and movement of materials in the warehouse. WMS helps in effective tracking of inventory levels and stock locations. It provides management with the information needed for effective control of movement of materials within the warehouse.
While MRP is used in planning of the entire manufacturing process, WMS majorly deals with management of finished products within the warehouse. MRP takes into account such factors as scheduling and capacity planning when determining the amount of raw materials required in the manufacturing process. On the other hand, WMS deals with shipping, put-away, receiving and picking. It closely monitors warehouse infrastructure, tracks materials, and identifies product stations. The basic function of WMS revolves around three things: receipt, storage and material movement especially of finished products. A firm can improve efficiency by employing an effective WMS in inventory control, receiving, storing and shipping of materials. Raw materials will be received and tracked through the Warehouse Management System, sales will create demand for the finished good, the Manufacturing Resource Planning system will consume the raw materials to create the finished good, the inventory values and costs will be updated in the Enterprise Resource Planning system (ERP, or financial system) while the finished good is brought into the WMS ready for sale.
Benefits of a Warehouse Management System
Employing WMS can help streamline the operations of your company. For instance, knowing your inventory levels means you can accurately setup your purchasing and manufacturing to accommodate your sales traffic. Barcoded inventory and bin locations means that each transaction is accurate and efficient. Lot codes and serial numbers allow a business to track specific items from when and where they were purchased, how they were moved through production and warehouse, to who they were sold to.
The Warehouse Management System reduces errors in the picking process by providing workers with the right information on when to do the picking, at what quantities, and from which locations. By doing so, it ensures accuracy of each order by establishing the right quantity to pack for shipping. Lastly, the WMS ensures that orders are shipped at the right quantities, the right date, and to the right destination by requiring each transaction to be scanned.
In a typical manufacturing environment, both systems are required for smooth operation of the production system. MRP is first used to carry out operational and financial planning on manufacturing resources required in production, and then WMS takes over the finished product by receiving, storage, tracking and shipping of the merchandise. In the supply chain, WMS is mainly used in managing movement and storage of inventory by tracking and providing details on the whereabouts of the materials.
Who Needs a WMS?
Every modern warehouse needs a WMS to optimize business operations. It manages complex processes involved in the supply chain especially at the warehouse. Without an effective WMS, it is nearly impossible to track materials. Any business that deals with receipt, storage, and shipping or dispatch of inventory needs WMS in place. In today’s competitive business environment, a good warehouse management system comes in hand to automate complex business processes, reduce costs, and increase efficiency.
How the finished good is brought into inventory via ERP or WMS
In a manufacturing process, plant and machinery consume raw materials, labor, and other resources as input. It then uses these inputs in complex processes to produce output in form of finished products. However, the finished goods need to find a place for storage before they reach the intended consumer. In some cases, manufacturing firms outsource warehousing facility (Third Party Logistics, or 3PL). In other cases, they normally have storage facility in place. Regardless, a WMS is needed to manage inventory before it is taken to the required destination. It also helps in tracking raw materials through finished products.
Once the manufacturing process is complete, the finished product is then considered for storage before it is dispatched to the required location. It is received by the WMS, which, records the relevant information such as product size, quantity, location in the warehouse etc. It then proceeds to the warehouse for physical storage before it is ready for dispatch. The transactions are done in real-time and no batch updates are required. This lowers the cost of inventory storage and improves inventory management process. The WMS manages the information of all inventories from the moment they are received to the time they are delivered to the required location. Any serious manufacturing firm needs to invest in both MRP and WMS systems to optimize production processes by reducing costs and ensuring smooth business operations.