The materials requirement planning system, like any other management information system, can be expanded to support other functions like engineering, production, finance, marketing and purchasing. Integrating these functional areas redefines the nature of an MRP system into a full-scale management information system. Exhibit lists the benefits that can be derived from an MRP II system.
Exhibit
Benefits of a Manufacturing Resource Planning System
Through MRP II, organizations can improve their competitive position with regard to pricing, product quality and delivery schedules. The benefits of MRP II system are:
1. Effective inventory management and control
a. Balanced inventories
b. Reduction in work in process inventories
c. Reduction in finished goods inventory
2. Improved capacity planning
a. Improvement in equipment utilization
b. Easy identification of problem areas in work centers
c. Improvement in maintenance
3. Better priority
a. Reduction in production lead time
b. Rescheduling capabilities
4. Enhanced customer service
a. Improved costs
b. Timely delivery
c. Improvement in quality of products
d. Reduction in lost sales
5. Improved management
a. Improved control and management through performance measures
b. Gives a detailed overview of the manufacturing process
6. Enhanced employee morale
a. Confidence in system
b. Enhanced interdepartmental coordination
7. Effective long range planning tool for
a. Marketing
b. Production
c. Personnel
d. Finance
f. Purchasing
g. Top management
Operations managers refer to this type of integrated system as the Manufacturing Resources Planning (MRP II) system. The MRP II system can be used to analyze complete product cycles, from corporate production plans to finished goods distribution. The functions of the system can be broadly divided into three parts: product planning functions, operations planning functions and operations control functions.
Managers at the upper-management level generally carry out product planning functions. They translate the strategic considerations into corporate business objectives. The output of this function is a production plan. This production plan becomes a point of reference for the production department to manufacture the specified quantities; for the sales department to sell the quantities produced; and for the finance department to manage the necessary financial resources so that manufacturing and sales department can carry out their operations smoothly.
Middle-level managers perform operations planning functions. Many activities in this function are similar to that of MRP, but with additional attention to both short and long-term physical constraints. Manufacturing line workers and staff supervisors carry out operations control functions. The activities of this function include purchasing parts and components, executing work orders, monitoring material movements, checking worker performance, reviewing the distribution activities, and so on. All the three functions mentioned above interact with the help of feedback provided by the checkpoints between them. The feedback can include information regarding the adequacy of resources, details regarding resource allocation, and competence in executing the plans. MRP II system offers many advantages such as improved customer service, reduced inventory levels, and improved operating efficiency of an organization. Exhibit illustrates the use of MRP II in semiconductor industry.
Exhibit
MRP II in Semiconductor Industry
The semiconductor equipment and materials industry started as made-to-order business i.e. customers placed the orders and based on them, suppliers provided the raw materials such as wafers, chemicals, etc. This process was effective in the past when the numbers of customers were less, orders were smaller and firms had to deal with less inventory. Now the requirements for semiconductor materials and equipment have increased manifold. Thus the industry has to deal with more customers, larger order sizes, etc. To deal with such large scale purchasing and delivering requirements, organizations need to improve their supply chain activities. This can be achieved by the implementation of MRP II system. MRP II facilitates the integration of different business functions and improves the supply process, leading to greater customer satisfaction. In MRP II, communication between different functional entities is critical. MRP II encompasses the complete supply chain from demand forecasts to planning and production and the delivery of final product. Adoption of MRP II improves the on-time shipment of goods and the accuracy of the inventory records, which is critical in materials supply industry. Semiconductor materials and equipment industry operates in an ever changing and unpredictable environment. MRP II allows the supply chain activities of semiconductor equipment and materials' suppliers to operate efficiently in such volatile business environment.
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