Material planning is also known as material requirements planning (MRP) is a production planning and inventory control system. Material planning integrates data from production order or work order to arrive the raw material requirements (bill of material (BOM)) to meet the production of planned quantity.
MRP optimizes the material consumption and maintain the stock levels. It will help to avoid excess stocking of material, reduces waste by maintaining only the lowest possible materials and product levels in stock, helps to plan manufacturing functions, delivery schedules and purchase of raw materials. When an MRP system is doing its job, it reduces material waste while also avoiding product shortages
There are four primary functions of an MRP system.
BOM (bill of material): Identifying the of raw material/component's usage in the production of a final product. The final product will be either the end user product or the semi finished goods that may be produced between the production line and will the component or ingredient of the final product.
Production Planning : As per the marketing scenario/planning or the orders available with the company a job order or production indent will be issued to the production department.
Material Planning : On the basis of job order or production indent material planning will take place to get the raw material quantity required for executing the production. While doing the material planning available stock, material already assigned to previously planned production, existing, pending purchase order that already issued to vendors etc. will be taken into consideration. At the end of the material planning a purchase Indent will be issued to purchase or procurement department for further action.
RM Procurement : Have analyzed the various factors of procurement such as vendor credibility, cost of material, lead time etc. purchase department will initiate the order processing.