Question

“Why is it important for manufacturing firms to focus on MRP?”

Answer 1

Any manufacturing firm, tries to reduce its cost and unsold inventory in the warehouses of the firm. It tries its maximum to avoid situations in which the demand for products is high, whereas the firm is unable to produce goods enough to sell in the market place respectively.

It is important for firms to realize the concept and importance of MRP which stands for Manufacturing Resource Planning and is an important micro economic practice which most manufacturing firms have started to follow over the years respectively.

Any firm that operates has data points to collect regarding demand cycles, fluctuations, peak seasons and others so that it can widely plan the level of operations required to ensure that the products get sold in the right quantity and quality at the right time.

In case, of seasonal demand of products this method is to be realized even more, since the overall requirement is to manage the production lines in a better manner respectively.

The importance of a Manufacturing Resource Planning System is that it allows for flow of inventory to be in a better manner and ensures that products are produced at the right time and productivity of the staff can be increased. This helps to reduce costs and avoids delay in production of goods and services.

Further, smooth implementation has the following benefits respectively

• Reduced Cost Of Procurement

For Manufacturing Companies the cost of procurement is the biggest and has an extremely big impact, on the profits for the firm respectively.

A manufacturing resource planning system means that a company can assess the requirements well ahead of time, and can opt to procure the raw materials at the best time possible such that the quality of the product is maintained and the prices are reflective respectively.

• No Inventory Shortage

Most Manufacturing companies fail, not because they have bad strategies, but because of the fact that they fall short of the inventories require at critical time periods.

A Manufacturing Resource Planning system ensures that a company does not have shortages of inventory when required most respectively

• Increased Labor Productivity

When, manufacturing happens seamlessly instead of the need for immediate action in times of increased demand, the productivity of the labor force increases significantly.

Most companies find themselves producing better volumes with increased production if they follow proper resource planning and this reflects in the production quality and employee welfare also.

These are some of the critical advantages which are possible by following Manufacturing Resource Planning. The importance arises because these companies primarily have huge capital investments and failure to act would mean the company finding itself in thick soup during high demand times if it had no inventory or if its inventory would still be in work in progress stage respectively.

Please feel free to ask your doubts in the comments section.