MRP: How It Works and Its Challenges

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How MRP Works

An MRP system defines a materials requirement planning tool used in operations management. Comprehensively, an MRP system is a computer-based tool used in inventory management where operation managers assign and reassign stocks or materials in the inventory department (Enotes 1). In defining the way MRP works in an organization, we will analyze Qatar Airways which is based in the United Arab Emirates (UAE). The company basically uses the MRP system in scheduling and placing orders for its materials, component parts, and sub-assemblies of aircraft parts (Rizvi 412).

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At Qatar Airways, MRP works in a backward manner through a service plan blueprint where the creation of specific services is done according to the requirements of the company’s customers (Rizvi). This system works perfectly for the company considering Enotes explains that “MRP begins with a schedule for finished services that is converted into a schedule of requirements for the subassemblies, component parts, and raw materials needed to produce the finished items in the specified time frame” (2). Qatar Airways, therefore, uses the MRP model by first defining what is needed, where it’s needed, and how much is needed (regarding inventory purchases and utilization).

The basic inputs which the company uses in utilizing the system include three main sources: a bill of materials (includes a listing of all raw materials, component parts, subassemblies, and assemblies), a master schedule, and an inventory records file. Each department has its own separate bill of materials because their functions differ in a number of ways. The bill of materials is however arranged in the sequence where the maintenance managers ensure that the most important tasks are completed first, using the first bill of materials before another (Bell 6). The bill of materials are utilized by the MRP model to establish the number of inputs used to carry out a given maintenance function and from the quantity established, the MRP system subtracts it from the existing inventory, to enable the managers to establish the order requirements for the maintenance function (Bell 7).

The master schedule as another input mechanism ensures that the service functions of the various functional departments are correctly anticipated through the use of internal forecasts and external orders. Basically, the master schedule ensures that the company correctly estimates the time frames for the completion of specific service duties. It is however important to note that the master schedule is more inclined to the demand for aircraft services as opposed to the company’s capacity in accommodating this demand. The MRP ensures that the total service time taken by each engineer is equal to the total lead time taken in completing all assembly points of the maintenance operations. However, the MRP fails to deliver when prior tests to establish the feasibility of various schedules need to be undertaken. In this regard, therefore, the company’s service engineers need to establish that each schedule is feasible before MRP is used.

The inventory recording file is also another source of input for MRP, considering it contains detailed information on the available inventory orders and those which are still to be delivered. The delayed inventory is therefore deducted from the materials to be ordered. The inventory file is useful to the company in providing detailed information about each inventory item at specific periods of time. Notes (7) elaborates that “This includes gross requirements, scheduled receipts, and expected amount on hand. It also includes other details for each item, such as supplier, lead time, and lot size.”

After utilizing the information obtained from the master schedule, inventory files and the bill of materials, the MRP works by determining the net requirements for raw materials and all other items required for aircraft repairs and maintenance (by first determining gross material requirements, then subtracting the current inventory at hand and adding back the safety inventory to determine the net inventory for the company). The final output for the MRP model is presented in terms of planned order schedules (which stipulate the quantity of inventory to be purchased and at the specific time frame), order reports which outline the issuance of the go-ahead to purchase more inventory, and lastly, modifications to planned orders, which may entail changes in already issued orders or even the termination of specific purchase orders.

The MRP model helps the company break down the planning periods into specific time frames where the company’s inventory department maintains inventory costs at a bare minimum. When undertaken in an effective way, the MRP model helps the company estimate the capacity requirements for its operations while correctly allocating production or service time to specific functional areas of the company’s operations. Despite the fact that MRP implementation is time-consuming and expensive for small-scale operators, Qatar Airways finds minimal resistance (in implementation) because of the large-scale operation it undertakes when using the model. However, the company finds it important to maintain a good input of information into the system because of the validity concerns of the information output expected from the system as well. Enotes affirms that “the information that comes out of an MRP system is only as good as the information that goes into it. Companies must maintain current and accurate bills of materials, part numbers, and inventory records if they are to realize the potential benefits of MRP” (9).

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Challenges of Implementing MRP

In as much as most managers and companies derive endless benefits from MRP in streamlining their work processes and instructions for processing and purchasing, the MRP model has many potential drawbacks in its implementation. First of all, it is important to note that MRP’s accuracy basically depends on the quality of its input. For instance, if Qatar Airways fails to maintain a good inventory system, or has a redundant bill of material, then it is likely to experience challenges in obtaining the correct information when utilizing the output from the MRP model. Enotes notes that in such situations, a company is likely to suffer problems relating to “missing parts and excessive order quantities to schedule delays and missed delivery dates” (12). Because of these risks, Enotes further affirms that “At a minimum, an MRP system must have an accurate master production schedule, good lead time estimates, and current inventory records in order to function effectively and produce useful information” (13).

With regards to Qatar Airways, the company has in the past had a problem implementing the MRP model because it is time-consuming and quite expensive to implement. Moreover, implementing the system requires technical expertise and at times, such manpower may be hard to obtain. In the initial months, Qatar airways had problems orienting existing employees with the new system since they were already used to a more moribund system. For instance, existing employees who were rather sloppy in record-keeping posed the biggest barrier to the implementation of the system since a change of the system warranted a change in the way activities were done in the workplace. In fact, departments that used to hoard a part of the inventory also used to pose a significant barrier to the implementation of the model because departmental heads had a much difficult time trusting the system and letting go of their bad habits. To reverse this situation the company had to organize extensive training in terms of seminars and workshops to make the employees accept the new system. This resulted in wasted manpower hours and resources for the company since the time allocated for such activities could have been used for other activities in the company. However, with a change of employee attitude, the system was ultimately implemented in the company.

Enotes (17) notes that the trick to having a smooth transition in implementing MRP in the organization is to provide adequate training and education to existing employees on the use of the system. Enotes further affirms that “It is vital to identify whose power base will be affected by a new system” (17). These sentiments have also been reiterated by William J. Sawaya (cited in Enotes 18) who notes that “These persons must be converted or the system will fail. Key personnel must be convinced that they personally will be better served by the new system than by any other alternative.” Another good system of improving the general acceptance of employees to the new MRP system is improving the reward system, especially with regards to tasks dealing with inventory management since people normally first act in their own interests before the interests of any other person or body (Enotes 15). These factors withstanding, Enotes affirms that “If the performance measures that are used in determining compensation and promotion do not adequately address materials management, then no system in the world can significantly improve the situation” (16)

Qatar Airways has also experienced problems in the past regarding the improvement of its performance delivery systems, even after implementing the MRP model because it failed to consider performance delivery factors such as production capacity, production control, productivity, procurement, process robustness, and product delivery responsibilities in MRP implementation. Moreover, the company experienced challenges in the initial stages of MRP implementation because it failed to keep up with the demands of the MRP output since delivery delinquencies used to occur when the company fell behind in keeping up with the system.

What is therefore needed in project management is a keen observance of capacity constraints on-time delivery performance, in addition to understanding the nature of capacity lead time relationships (Berk 9). Research however notes that lead time relationships should only have deviated when there is strong support of a rescheduling plan (Berk 9). Alternatively, companies can capitalize on the robustness of their activities from the utilization of the system’s failure analysis process which identifies a problematic area and recommends viable solutions to solve them. In this regard, therefore, companies (and more specifically, the managers) ought to understand the project requirements of their operations and act on areas that meet specified standards. In other words, the process managers should be able to comprehend the procurement process and their associated lead times, while keeping an eye on associated lead times which complement the MRP requirements. Finally, research studies affirm that it is important for companies to ensure they are more focused on the end result of specific operations as opposed to the processes (Berk 10). This will improve the performance of the purchasing processes.

References

Bell, Steve. Lean Enterprise Systems: Using IT For Continuous Improvement. London: John Wiley and Sons, 2006. Print.

Berk, Joseph H. Delivery Performance Improvement. 2010. Web.

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Enotes. Materials Requirements Planning. 2011. Web.

Rizvi, Ashraf. Effective Technical Communication. London: Tata McGraw-Hill, 2005. Print.

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BusinessEssay. (2022) 'MRP: How It Works and Its Challenges'. 22 February.

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BusinessEssay. "MRP: How It Works and Its Challenges." February 22, 2022. https://business-essay.com/mrp-how-it-works-and-its-challenges/.