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Topic: MRP II (Manufacturing Resource Planning)
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19th October
Contents
Executive summary 2
Introduction and background of MRP II 3
Implement in Manufacturing Industry 6
SWOT Analysis of MRP II System 8
Conclusion 9
Recommendations (Next generation of MRP II system) 11
Reference: 13

Executive summary
The purpose of this report is to illustrate what MRP II is, what features it provides, and what benefit the manufacturers could get from it as well as the existent issues in MRP II system. The research also demonstrates how MRP II was implemented in manufacturing industry by studying a case of successful implementation of MRP II software.
Introduction and background of MRP II
MRP II is Manufacturing Resources Planning for short. It is defined as a man machine application system for the effective planning of all resources of all manufacturing company. From the global optimal point of view, using scientific method to plan, organize, control and coordinate all the manufacturing resources and all the links of operation of enterprises effectively and reasonably is what the MRP II concerned about. The purpose of using the MRP II system is to achieve continuous and balanced production and minimize the various items in the inventory. Eventually it can improve the economic efficiency of enterprises. It is an important tool for aligning manufacturing with a company’s overall strategy and goals.
There is a diagram can demonstrate the structure of MRP II：[3]
Since the 18th century industrial revolution, many handcraft industry workshop developed into industrial plants, then manufacturing emerged. With the emerging of manufacturing almost all the enterprises in the pursuit of basic objective are to minimum capital investment and obtain the biggest profit. The pursuit of this goal led to the manufacturing industry produced a lot of problems. In order to solve these problems, people in 19th century 60s realized “Material Requirement Plan” on computer, which is mainly used for inventory control. To protocol detailed report of parts demand within a few weeks, it was used to supply the ordering and adjust the original order to meet the changing needs. By the age of 70s, for the sake of adjusting the demand and plan timely, Closed-loop MRP (close MRP) with the feedback function emerged. Closed-loop MRP integrated the financial system and production system applying the management logic of plan –implementation-feedback. So it led to an effectively plan and control of production of each resource. At the end of 80s, people integrated the main parts of production such as sales, financial, costs and engineering technology as well as MRPII and Closed-loop MRP into a system. Then this system became a comprehensive planning tool which can be used to manage the enterprises. Oliver Wight from the USA called this integrated management technique manufacturing resource planning MRPII. It can utilize manufacturing resources, control capital occupation, shorten the production cycle, reduce cost, and implement the optimization of whole enterprises effectively under a careful plan. At the same time, it served the best products and services to capture the market. Additionally, MRP II can release the executives from complicated affairs and make them focus on improving the level of management. Thus they will have more energy to solve the substantive issues in management.
In modern manufacturing industry, MRP II system is generally divided into three subsystems: Production Control (planning and manufacturing), Logistics Management (distribution, procurement and inventory management) and Financial Management (accounting, costing and capital).
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Implement in Manufacturing Industry
Manufacturing resource planning (MRP II) is concerned with the coordination of the entire manufacturing production, including materials, finance, and human relations. This technique was applied initially to mobile and airplane industry. MRP II is widely used in current manufacturing firm, and the original vision of integrated information systems as we know them today began with the development of MRPII in manufacturing.
ABAS is one of the most famous MRP II system, which provides cost-effective MRP II solutions to over 2700 customers at 3200 sites. It’s mainly service customers are small to mid-sized businesses in the Manufacturing, Distribution and Service marketplace. ABAS offers the integrated functions focusing on Engineer-to-Order, Make-to-Order, Assemble-to-Order and Made-to-Stock customers.
Customers usually face many challenges in their manufacturing process before using MRP II system. They generally used variously different software systems for purchasing, production, transportation and customer service. With information in all different places, it was difficult to find the needed information in an efficient way. Meanwhile, customers encountered excessive prices and complicated processes for ordering what they wanted. Moreover, Their software was a pretty much outdated which cannot satisfy diverse requirements of their customers.
Casa Fiora is a company providing a line of related hardware and soft home furnishings to coordinate with their custom draperies. Items in each of the collections are available in a variety of different fabrics and are delivered within four weeks or less. Because Casa Fiora is 99% custom made, the flexibility of MRP II system is crucial. ASAB gives their employees and customers quicker information and increases their quality of customer service by accessing information within a given time frame, without going between different systems, They could use ASAB to customize their production line to make it more efficient.
Some companies such as Bergmann & Hillebrand uses ABAS Business Software to accomplish production planning, utilization of capacity and warehouse management. By using the system all employees have the same access authorization to check details of each order at all times, i.e. which agreements have been entered into and which deadlines have to be kept. When the order is issued, ABAS Business Software checks whether the capacities are sufficient to meet delivery dates and the necessary material is in stock. The system supplies information on whether enough raw materials and purchased parts are available and in which warehouse they can be found. After the order date has been finished, the work orders are printed and the work order documentation are generated. Completed orders are reported back and another check for correctness is carried out before the order is closed. If bottleneck situations occur, such as lack of material or a due date is brought forward, then managers’ ability to improvise is required. Bottleneck situations with regard to the machines are dealt with by the master craftsperson who decides which order runs on which machine.
Customers could get lots of benefits through using ABAS. The clear structure of ABAS Business Software and sophisticated implementation strategies facilitate short implementation times, as well as the quick and smooth integration into the company structure and existing software environments. ABAS provides users with an extensive range of functions, which can be made easily, flexibly and cost efficiently. It provides a multifaceted optimization and use potential, such as an increase in productivity, improvement of transparency and service, increase in competitive strength, cost savings, and much more. These bring cost benefits in the user operation. Besides, It is easy to customize in according to users’ requirements. It also has a continuous upgrade strategy to ensure that the business software will also be reliable in the future. New functions and technologies are always integrated into the software standard so that users are always up-to-date.
SWOT Analysis of MRP II System STRENGTHS * Improved utilization of facilities and labor * Improved on-time completion * Increased customer service and satisfaction * Better inventory planning and scheduling * Better manufacturing planning and control * Faster response to market changes and shifts * Reduced purchase costs * Reduced inventory levels without reduced customer service | WEAKNESSES * MRP II system is complex * Expensive to procure * Requires significant employee training * Compatibility issues with other systems * Setting up a successful system takes a lot of time, effort and commitment at all levels of the organization * Security concerns | OPPORTUNITIES * Huge potential in the emerging global markets * Not only the huge companies but also more and more small and medium companies of developing countries such as China, India etc. pay attention to the MRP II system * High efficiencies becoming critical in the manufacturing industry due to the cut-throat competition and paper-thin margins | THREATS * Dividing opinion over Return-on-Investment (ROI) of such systems * No good ends—continued investment and training are essential * Increasing complexities of such systems * Security concerns regarding sharing of data over the network such as the Cloud technology * Inaccurate data leads to poor performance |

As we see the SWOP analysis of MRP II, though there are some disadvantages and threats during implementing the system, the benefits, however, should very quickly make the exertion worthwhile.
Conclusion
Manufacturing resource planning (MRPII) refers to software that enables business processes related to manufacturing and distribution companies. MRPII includes virtually all business processes.
MRPII can apply to all business processes in a company, including manufacturing, planning, finance, order management, inventory, and distribution and purchasing. MRPII can also apply to business process within, and between, multiple entities within a larger company, including plants and distribution centers.
Benefits of MRP II:
In the narrow sense, the main benefit of MRP II is its ability to generate valid schedules and keep them valid. But valid schedules have broader benefits for the whole organization. These include, more or less in order of importance:
1. Improved on-time completion
A typical manufacturing organization using MRP II should be able to achieve on-time completion rates of 95 percent or more, because completion of a parent item is less likely to be delayed for lack of a component. On-time completion helps improve customer service.
2. Reduced inventories
Inventory falls typically by 20-35 percent because parts are not ordered until needed.
3. Capacity requirements planning data
Work centre capacity requirements can be planned for many periods into the future.
4. Improved direct labor productivity
Fewer shortages mean significantly less lost time and overtime, and less disruption to accommodate shortage-list jobs.
5. Improved productivity of support staff
MRP II cuts expediting and allows more time for planning. For example, purchasing can start looking for alternative or better suppliers; materials management can plan inventory needs better.
6. Total business planning
Drawbacks of MRPII
Though Manufacturing Resource Planning has a number of benefits, it has a few limitations too. They are:
MRP II system is complex.
MRP II implementation programmer takes a lot of time, effort and commitment at all levels of the organization to set up a successful MRP II system.
But actually MRP and MRP II are set of heuristics. Better production plans could be obtained by optimization over more powerful mathematical programming models, usually integer programming models. While they acknowledge that the use of heuristics, like those prescribed by MRP and MRP II, were necessary in the past due to lack of computational power to solve to solve complex optimization models, this is no longer true.

Recommendations (Next generation of MRP II system)
In 2011, a new concept was introduced into MRP II system which called Demand driven MRP system. This is also known as DDMRP. Demand Driven MRP is a multi-echelon formal planning and execution technique with five distinct components. [5] * Strategic Inventory Positioning. This is most concerned about “given our system and environment, where should we place inventory to have the best protection?” * Buffer Profiles and Level. The parts and materials that behave similarly on some important factors such as lead time, variability, whether to be made or bought or distributed are grouped into "buffer profile". The replenishment will be taken based on the buffer profile when the actual buffer level is initially set after strategic replenish position is determined. * Dynamic Adjustments. Maintaining dynamic buffer level is to adapt to fluctuated market and company's strategy change. * Demand Driven Planning. Customer demand is one of the important inputs of the system as development of Master Production Schedule (MPS) tightly relies on it. Accurate demand or most possible demand forecast will result in the execution of the remainder of the business process with little or no change. * Highly Visible and Collaborative Execution. All the integrated systems such as Purchase Order, Manufacturing Order, and Transfer Order with MRP should be connected seemingly which means they should synchronize with the changes occur within the execution of the production.
Where does the software go from here? To gain the big potential of the MRP system, the software should be enhanced with the following characteristics:
High Integration
Highly and smoothly integrate within sub-systems (Purchase Orders, Transfer Order, etc.) and all related systems, such as Customer Relationship Management, Supplier Chain Management will make information up-to-date and accurate and synchronized.
Simplicity
Simplicity will make people easy understand the system and easy to contribute to the success of implementation of system. Sophistication and complication of system are easy to get wrong data entry and produce a useless production plan.
Flexibility
The software should always support the change needs of a company. For example, a company likes to move their work order production to rate-based kanban shop floor plan; the software should allow this happen without a radical change of the software. The system is also highly committed to top level of management in order to incorporate the decision from business management. The optimum tradeoffs are not suitable for world class manufacturers as they are just best guess. For example, EOQ(economic order quantity) is tradeoff between inventory carry cost and set up cost, however, management may have different input about batch size.
Accessibility
The system should be easy accessed by people who are involved to do some customization. For example, writing custom report based on the information contained in system.
More Intelligence
Business Intelligence programs should be embedded into MRP II system to analyze the uncertainty and the interactions of uncertainties during the execution of production plan.

Reference:
[1] Garvin, David A, Note on Manufacturing Resource Planning (MRP II). Harvard Business School Background Note 687-097, June 1987.
[2] Introduction to MRP II: http://baike.baidu.com/view/395875.htm
[3] Manufacturing Resource Planning (MRP II): http://www.apicsforum.com/category/topics_dictionary/mrp_ii [4] Jianwei Yan, Research about Implement of MRP II System in discrete manufacturing, 2002.
[5] Manufacturing resource planning: http://en.wikipedia.org/wiki/MRPII
[6] Top ten ERP Software Systems for Manufacturing: http://www.top10erp.org/abas-erp-products-45
[7] Franjo Cecelja, Manufacturing Information and Data Systems, Elsevier Ltd. (2002), ISBN: 978-1-85718-031-2, P79-100.
[8] Xiande Zhao, Fujun Lai & Scott Young, A study of Manufacturing Resources Planning (MRPII) implementation in China, International Journal of Production Research (2010), London, 40:14, P3461-3478
[9] MANUFACTURING RESOURCE PLANNING (MRP II): http://cde.annauniv.edu/CourseMat/mba/sem2/dba1651/mrpii.html
[10]Shum, Paul (2003). Knowledge and Innovation Culture as Determinants of Financial Performance in New Product Development, Australia, The International Journal of Knowledge, Culture and Changes Management.
[11] URL: http://en.wikipedia.org/wiki/Material_requirements_planning
[12]What is MRP (I, II, III), http://www1.ximb.ac.in/users/fac/Surya/surya.nsf
[13] Brian H. Maskell, President, Why MRP II Has not Created World Class Manufacturing And Where Do we Go from Here, BMA Inc.
[14] J. Oleskow, P. Pawlewski, M. Fertsch, LIMITATIONS AND PERFORMANCE OF MRPII/ERP SYSTEMS –SIGNIFICANT CONTRIBUTION OF AI TECHNIQUES, Institute of Management Engineering, Poznan University of Technology, Strzelecka 11 Str., 60-965 Pozna?