How MRP in SAP works effectively towards inventory optimization
Inventory management is much needed in today’s industries. Poor inventory management can lead to many problems such as too much inventory, low product turnover, and disorganization of inventory. You can avoid these issues using MRP in SAP and can save your business time and money. MRP in SAP works effectively towards inventory optimization.
Before getting ahead how MRP in SAP works effectively towards inventory optimization, let’s discuss briefly on MRP
MRP stands for Material requirements planning; it is a planning and control system for inventory, production, and scheduling. MRP helps companies to forecast the product and plan the supplies for the complete product flow covering all the levels. It also helps companies to plan the procurement and consumption of regular raw materials and also finished products to meet the un expected customer demand with the help of features like safety stock, safety days of supply, Min stock, Max stock, Lot size planning etc. MRP supports both Pull and Push strategy and using appropriate planning strategy, MRP creates supply elements by making sure that there is no excess of inventory at any point of time.
The Prerequisites in SAP for the using MRP is Master data – MRP views in Material master, Bill of materials, Work center, Routing, Demand Management (Where forecast is maintained) and Sales order (Customer order)
MRP and inventory optimization:
MRP is a computerized inventory management system, which helps production managers to plan and schedule the purchase of raw materials. MRP systems are driven by foretasted orders or outstanding orders or a combination of the two. Following are the few benefits companies can get by configuring MRP in SAP PP Module.
- Level of Inventory:
MRP allows inventory managers to reduce the level of parts and raw materials inventory. The MRP system works backward from the production schedule to determine the exact amount of inventory required to meet production demand. Maintaining lower inventory levels reduces the amount of capital tied up in inventory and reduces inventory-carrying costs.
- Economical Ordering:
MRP also reveals the ideal lot sizes that should be purchased for each component item or raw material. By considering the production demand for the item, quantity price breaks, carrying costs, and transportation costs. In short, the most cost-effective order amount can be determined with great accuracy with MRP.
- Planning for Purchase:
With the help of MRP, managers can determine what inventory would be needed to meet increased demand. With the increase in inventory requirements comes an increase in warehousing requirements. The prior Information about inventory requirements helps managers to plan for future facility expansions.
- Manage Work Schedule of Staff:
MRP provides a clear picture of the inventory available for the production process. Managers can use this information to schedule work crews without over staffing the production line.
- Best Customer Service:
How MRP in SAP works effectively towards inventory optimizationInformation provided by an MRP can help customer service representatives to provide customers with accurate order delivery dates.