MRP, ERP and
Supply Chain Management
An Explanation
Over the last
25-30 years there has been a steady evolution of manufacturing
system concepts. In the seventies, MRP (Material Requirements
Planning introduced a new mechanism to more efficiently
calculate what materials were needed, when they were needed and
in what optimal quantities. Many companies, still to this day,
do not have effective MRP systems in place or, due to poor
procedural controls, do not use MRP effectively.
Many new
business applications were developed using MRP concepts as a
foundation . While this was effective, MRP failed to consider
other important factors, such as capacity, space, capital,
engineering changes, and cost.
MRP eventually
evolved into MRP II (Manufacturing Resource Planning)
which encompassed additional factors such as long range
planning, high level resource planning, master scheduling, rough
cut capacity planning, detailed capacity planning and shop floor
control. One of the fundamental concepts of the MRP-II model was
that of "closing the loop" and feedback. By continuous
monitoring of what actually happened versus what was planned,
companies could continually improve their processes to achieve
more and more efficiency.
Although MRP
II was the next logical step in efficient production and
materials planning, companies quickly realized that
profitability and customer satisfaction needed to be
incorporated into the picture. These generated the need for
integrated capabilities such as finance, forecasting, sales
order processing, sales analysis and local and global
distribution, quality control, and powerful reporting and
monitoring tools. The new concept of this totally integrated
enterprise is called ERP (Enterprise Resource Planning).
ERP is further
extending to include the management of every operation of its
value chain in order to minimize the cost and time of getting
products to customers. This is usually referred to in the
industry as Supply Chain Management or more recently Global
supply Chain Management. An important element in this
evolution is the "Web-enablement" of Supply Chain
Management Software. As globalization, out-sourcing and Internet
transactions become more the norm, this will play a vital role.
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