Why MRP II Is Important for Small Manufacturers and Craft Businesses?

 MRP for small manufacturers

Despite of being a sluggish sounding term associated with huge factories, the concept MRP II represents is important to small manufacturers and crafters alike. It is paramount to have a clear overview and tight control over your inventory levels, production speed and capacity to to run an healthy business.

Small and medium manufacturers practice an hybrid of made-to-order and made-to-stock production models, provision its multichannel sales with just enough products, just in time to keep their Etsy sales soaring without excessive inventory. To be efficient one needs a good overview and tools to analyze the situation, predict the demand right. How does one find a solution to a manufacturing problem without knowing the right terms?

 

 

Let's assemble a quick cheat-sheet for connecting the dots from good old MRP II to craft business challenges.

MRP II Features

Craft / Small Manufacturing Fit

Master production schedule (MPS) – a plan for individual commodities to be produced in each time period such as production, staffing, inventory, etc.

Having up-to-date information on how much and when needs to be produced, also keeping an eye on progress still makes sense. Look for a simple Backlog, Queue or Grid one page planning solutions, if it looks like full-time job then it's too big and bloated.

Item master data

A central unit of management your manufacturing process is built around. You will need Items from day one, it is the carpet that ties the room together.

Bill of materials (BOM) - a list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, parts and the quantities of each needed to manufacture an end product.

Management of production recipes in conjunction with Inventory Management forms the backbone of manufacturing business.

Production resources data (workstations)

At small scale this capability is not essential, knowing the production steps and time it takes to complete them is more important in the beginning. However, it will become relevant later, at larger scale.

Inventories and orders (inventory control, also known as stock control)

This is where the overview and control of your business kicks in.

Purchasing management

While turning materials into profitable products, one must order more materials. It is even better to do it at the right time, before your run out of them and have to stop the production.

Material requirements planning (MRP)

Knowing how much of this and that can be built sounds important. Knowing how changing production queue impacts customer order fulfillment - take that as well.

Shop floor control (SFC)

This is not essential for a craft business startup. It may change when 3-d printers become dominant shop floor inhabitants (also applies to larger scale with more workstations involved).

Capacity planning or capacity requirements planning (CRP)

In the beginning it is pretty straight forward: you know the number of people and machinery involved, and when. Bring it in when simple production throughput forecasting requires more precise capacity data.

Standard costing (cost control) and frequently also Actual or FIFO costing, and Weighted Average costing.

While the labour cost has lost its importance over time, material cost is still very relevant part of the equation. A must have.

Cost reporting / management (cost control)

It is more convenient to do this outside of MRP II system, through an appropriate tool

Sales order management

You sell your products yourself via online marketplace, that’s how its done nowadays.

All the checks done, it is time to emphasize once again that Katana MRP was built taking a good old MRP II concept, "thinning" the features down for small manufacturers and crafters, connect multichannel sales and integrate it with the rest of the a la carte ERP world.

Good luck, Jim.

Priit KaasikComment