While (Materials Requirement Planning) MRP that has grown out of traditional production and inventory management does an excellent job of planning for the materials, such a technique cannot be fully effective in achieving the business objectives unless it takes into account the other resources of a manufacturing organization. Without such integration, the planning for materials may not be able to mesh properly with the production schedules, to production plans in the longer term. The planned production capacities and more importantly, the other resources required for the manufacturing function such as the human resources, the machines and the finance. Therefore, planning for the requirements of materials has to take into consideration the business plans, the financial plans, the available human resources at any point in time, the available capacities, the machines, and also the aspects of logistics such as shipping status. Because of these need and considerations there evolved an integrated manufacturing management system called manufacturing resources planning (MRP II). MRP II has been defined by APICS (American Production and Inventory Control Society) as:
‘A method for effective planning of all the resources for a manufacturing company’. Ideally it addresses operational planning in units, financial planning in dollars and has a simulation capability to answer what-if questions. It is made up of a variety of functions each linked together: Business Planning, Production Planning, Master Production Scheduling, Material Requirements Planning, Capacity Requirements Planning and the execution system for capacity and priority. Outputs from these systems would be integrated with financial reports such as the business plan, the purchase commitment report, shipping budget, inventory production etc.
Thus MRP II is a logical extension that goes beyond the computations or materials requirements. It aims at addressing the entire manufacturing function rather than just a single task within that function. This is very significant improvement in terms of integration that has been achieved by the use of information technology (IT). The developments in IT have made these improvements more and more possible.
However, MRP II suffers from a few drawbacks. For instance, it assumes a static nature of an enterprise and fits the systems to it. The various terms to setup, move and processing are taken to be deterministic. The batch sizing concept is another drawback. Over the years, other tools had evolved to automate the manufacturing management process like Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), computer integrated manufacturing, customer oriented manufacturing management system etc. These developments indicated the scope available or introducing these product design and customer requirements variables into the system for better integration.
From the basic concept of MRP which brought in integration in the materials management function, there has been an ongoing search for further integration of other areas of the firm. The intention behind these measures to integrate has bent to help an organization make holistic decisions rather than based upon compartmentalized information, fragmented understandings of the situation and, therefore probably an insufficient and incorrect analysis. Organizations have always been looking for a total solution and MRP II has been a step in that direction.
The last decade has been the global competition becoming intense. Manufacturing and operations in general had to become not only flexible but agile. Just-in-Time systems which came into existence in the 1980s tried to fulfill the needs of the customers in a very short time, almost instantly, the focus was still about needs that did not change drastically. However, this situation rapidly changed to that where the product life cycles became short. More and more services and other values were necessary to be added to the products and services offered to the customers. Business process reengineering came into being in order provide a process orientation to the company. This meant integration of all activities done in a business firm in order to meet the customers’ needs. The focus of improvements was with respect to the ultimate goal of satisfying the customers’ needs.