Advantages & Disadvantages of MRP II

by Bob Turek; Updated September 26, 2017
MRP II software can position a company to cut costs and increase revenues.

MRP II is manufacturing resource planning. MRP II includes software for many areas of manufacturing companies including purchasing, inventory, material requirements planning, shop floor scheduling, capacity plannning, customer order entry and accounting. Advantages are standardization and automation of business processes leading to improvements in cost control and revenue. Disadvantages are associated with not understanding the impact and limitations of MRP II.

Advantages

MRP II helps to standardize business processes by offering automated methods for many areas of the business. Standardization leads to easily repeated processes and a platform for improving those processes. A company that implements MRP II for the first time is usually having trouble controlling the increase in transactions in selling, manufacturing and purchasing associated with growth. MRP II enables employees in those business areas to do more and have increased visibility of information for their jobs. The improvement in the way work gets done allows the company to be more competitive.

Disadvantages

MRP II implementation requires information to be accurate. If poor quantity information is used in either the inventory area or the bill of material module, errors in automated planning processes will result. The planning modules use averages for length of time to purchase or manufacture (lead times) and for quantities usually purchased on a purchase order or manufactured on a work order (lot sizes). If there is variability in the actual lot sizes purchased or produced and the lead times then planning software will not produce plans that match what actually happens. Poor information and lack of understanding of the impact of average lot sizes and lead times can cause implementation failure and costly reimplementation.

Implementation

The sequence of implementation of the software modules of MRP II and the tolerance of the organization for adopting changes in business processes must be considered. Typically MRP II is implemented in phases allowing for a period of proving the system will work before going further. A first phase can include inventory, purchasing and accounting. Another phase can include material requirements planning, customer order entry and shop floor control. Each module requires data and information that may be created in a system for the first time so care must be taken with how information is defined and kept up to date.

Auditing

Auditing of the system comes in two forms: auditing information and auditing the use of the software. A frequency level for audits depends on the company, it's employee turnover rate and the amount of information in the system. Information that requires auditing are lead times, lot sizes, standard hours for labor and machinery, customer files and vendor files. All business processes should be audited for how well employees are using the system. System use erodes because some employees find other ways to get their jobs done without the system and employee turnover. A training program becomes an on-going process with a regular auditing approach.

About the Author

Bob Turek started writing in 1994 for "The Performance Advantage" magazine. His book "Value Selling Business Solutions" draws on technology industry experiences gained from his position as director of business development for Infogain's cloud CRM for customer support operations practice. He holds a bachelor's degree in economics and psychology from Claremont McKenna College and a Master of Business Administration from the University of Southern California.

Photo Credits

  • Kim Steele/Photodisc/Getty Images