ERP and MRP-II
MRP-II (Manufacturing Resource Planning) is a method that has been developed for the coordinated use of the resources of a manufacturing business, such as equipment, tooling, finances and human resources. As the preferred method used for manufacturing and inventory planning, MRP-II is also an important component of an ERP system.
When a manufacturing business makes use of an ERP system, MRP-II is the methodology used for planning such activities as inventories, orders, manufacturing and purchasing.
MRP-II is itself an integrated system that very much resembles an ERP system. As MRP-II is a methodology that is predominantly used in manufacturing industries, there is a widely held misconception that there are two separate methodologies in existence. The order of execution used in manufacturing organizations are shown below. Through these processes, applications such as SCM, CRM, MES, and FCP, are introduced as required.
MRP > MRP-II > ERP > E-BUSINESS >
MRP-II systems have been applied in businesses since the late 1970's. MRP-II systems aim to collect all resources in an organization into a common database and have all personnel share a common language.
The technological advances in recent years have made it more difficult for businesses to be successful, and as traditional remedies have proven inadequate, businesses have been forced to re-examine their manufacturing technologies and management methodologies. At the same time, with the advent of global competition due to the removal of tariffs, the concept of supply chain management has assumed a forefront role, which includes suppliers, manufacturing processes and customers. With substantial changes in the marketplace and accompanying technological advances, as well as a movement towards formal management, the concept of ERP (Enterprise Resources Planning) was born.
Current MRP-II systems are used for such activities as sales management, manufacturing planning and control, and purchasing. Where MRP-II systems fall short, additional modules or integrated software packages have come into the picture; however, these products are only effective within an organization, and do not answer the needs of cross-organizational data exchange. As a result of globalization, management of business activities in multiple geographical locations using distributed database and global integration has gained momentum, and ERP systems have entered their age of maturity. ERP software systems enable global integration of information across organizations.
The primary tools used in applying strategic planning systems are budgets. During budget preparation, each department of the organization prepares its own budget; during this process, expense budgets are based on the sales budget. Within the year, budgets are revised on a 3 month and 6 month periodical basis, depending on extraordinary events that take place. Afterwards, activities are checked against budgets and deviation analysis is performed.
It is a well known fact that customer demands and requirements change both in quantity and quality, and forecasting these changes is highly challenging. ERP provides an approach where activities can be modified to keep pace with such changes. Paying detailed attention to the goals and objectives determined through strategic planning activities, as well as to the capacity and properties of our manufacturing and distribution resources, and thereby transforming our activities into those that are sensitive to change, is only possible through an ERP systems approach.
Another feature of ERP is its ability to perform coordinated planning for the organization's facilities in geographically distributed locations (both in-country and outside), as well as for the resources of the suppliers for these locations and warehouses. This makes it possible to specify such decisions as determining the plant that will manufacture a specific customer order, the warehouse that will be used for that same order, the determination of the suppliers for the materials and services needs of all manufacturing plants, and the determination of coordinated and shared use of the production and distribution resources of manufacturing plants such as machinery, materials, labor, energy, and information. In other words, the capacity and features of all departments, manufacturing and supply resources are taken into account at once in order to fulfill a customer order in the shortest time period, at the quality requested and for the cost specified.
ERP implements integration across manufacturing plants on the basis of the flexibility provided by those plants. The goal is to take advantage of the self-administration present in the manufacturing plants while enforcing the organization's fundamental strategies in the process of implementing coordination and integration across multiple plants. Decentralization can be treated at several levels. For example, long term purchasing by the plants can be either implemented in a centralized manner or can be assigned to each plant. Similarly, credit checks can be implemented in a centralized or de-centralized fashion. However, certain activities such as forwarding demands to plants, inter-plant transportation, performance analysis, and financial consolidation must be performed in a centralized manner.
In conclusion, ERP is a software system that aims to implement in the most effective and productive manner the planning, coordination and control functions of the organization relating to its geographically distributed supply, manufacturing, distribution and financial resources, based on the organization's strategic objectives and goals, to best meet customer requirements and demands.
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