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Advantages and Disadvantages of an MRP system

MRP is a comprehensive system used for planning and scheduling materials requirement. It assists in improving the materials handling capability of an organization. But it has certain disadvantages. Some of the advantages and disadvantages of MRP have been discussed below

Advantages

Some of the key benefits that can be derived from using an MRP system are:

  • Reduced per unit cost of production thus enabling an organization to price its products competitively

  • Low inventory levels, especially for in-process materials

  • Better response to market demand

  • Better customer service

  • Reduced set-up and tear-down costs

  • Comprehensive material tracking and optimized production scheduling

  • Improvement in capacity allocation and planning

Disadvantages

Following are the disadvantages of an MRP system:

  • High costs and technical complexities in implementation. In addition, organizations, which use an MRP system need to spend considerable effort on installing necessary equipment (computers), training personnel, modifying the software to serve their specific needs, validating, testing, and eliminating possible errors, and maintaining the software.

  • The time required for planning and implementing an MRP system is generally very long.

  • Data entry and file maintenance requires considerable inputs in the form of training and education of the personnel.

  • Dependence on forecast values and estimated lead-time can sometimes be misleading.

The implementation of an MRP system can be effective only when there is a high degree of accuracy in the organization's operations. It requires high commitment from the top management of an organization. The management should educate its executives on the importance of MRP as a strategic planning tool. The success of an MRP system, like that of any other system depends on proper implementation and right application. Managers can derive more benefits if they use the MRP system as a management-planning tool. MRP needs enormous human efforts and care in continuously collecting the required information for the system. However, many organizations prefer to adopt MRP systems, as the advantages of the system outweigh its disadvantages.                   

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