Why have an MRP system?
Manufacturing resource planning is a system that is used to effectively plan the use of a manufacturer’s resources. It enables manufacturers to develop a precise production schedule for the future that minimizes costs and maximizes the use of the resources available at their disposal.
What does MRP include?
Sales forecasting helps a manufacturer estimate the expected demand for a product so that they can source the proper amount of raw materials and schedule deliveries and quantities on time. It also provides a target production level to determine the number of machine units and labour required during a given production cycle.
Manufacturing resource planning arrives at the optimal order quantity and frequency for raw materials by adding the average use for a planned replenishment lead time with the safety stock that is required to protect against stock-outs.
Thus, “When to Order” = Average Use Time + Buffer Stock
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