There’s no such thing as a million dollar idea, declares American entrepreneur Aaron Patzer on the topic of the start-up he sold for $170 million, 3 years after launch. He goes on to explain that your greatest business concept, however hungry the market, is useless if you’re unable to execute your idea.
Are you dreaming of introducing a breakthrough food or beverage line to the UK market? Patzer’s advice to focus on execution is especially pertinent, as you’ll be dealing with quick expiring raw materials (fresh produce), retailers' high shelf life expectations, an increase in customers' service level expectations, and a greater number of regulatory bodies imposing a greater volume of requirements.
Material Requirements Planning (MRP) is the solution to nailing execution where profitability and customer satisfaction are subject to the whims and fancies of quick expiring produce.
How MRP helps food and beverage manufacturers to nail fresh product lines
MRP has transformed production and inventory management in many manufacturing industries. “What's in the MRP secret sauce?”, you may ask. Simply put, MRP is a tool that designs a time-phased production schedule that ensures benefits like quality manufacturing, timely distribution, and maximum profitability.
How does MRP accomplish these benefits? Read on.
Fresher results, optimal pricing
Here’s how MRP functions in manufacturing fresh produce lines to optimise freshness and reduce costs:
- The MRP creates the Master Production Schedule (MPS) by identifying the specific ingredients required to produce the finished products on order.
- The system determines the exact quantity of each ingredient that will be required to manufacture the end product.
- Based on the required delivery date and the manufacturing order (recipe instructions) the system determines the optimal date at which orders for each ingredient should be released.
By following this process, the timing of ordering each ingredient is optimised to reduce the cost of raw materials (e.g. considering seasonal variations in price) and increase the freshness of ingredients, leading to a fresher, more cost-efficient end-product.
Improved customer service
If properly designed and controlled, an MRP enhances customer service by ensuring consistent order fulfilment even when the demand is variable, seasonal, or when suppliers plan to miss their commitments to you.
Reduced costs
Having quick access to changes in demand and supply allows you to act proactively to reduce late orders, and it also makes it much simpler to formulate a good production schedule. This results in significant saving on organisation’s labour time, stocking and reorder costs.
Increased productivity
The main benefit of using MRP is that it is a very efficient tool for planning, facilitating proactive decision-making, rather than reactive ‘fire fighting’.
This is because it is designed specifically to provide solutions regarding the quantity of raw materials required, including when they are needed. When implemented properly, MRP also forms the basis upon which production managers can effectively plan capacity requirements as well as allocating production time.
This translates into improved direct labour productivity, reduced traffic costs, reduced obsolescence and reduced overtime.
The parts that make up a successful MRP run
Eager to know a bit more about MRP? Here are three parts that make up a successful MRP run:
1. Master Productions Schedule (MPS)
The requirement of ingredients is predetermined the moment an order is made, triggering the master production schedule to fulfil the order. MRP takes into account two main variables when creating the MPS: the known requirement and the known period of requirement (time). By ensuring a lead time that is shorter than the time schedule right off the bat, orders are fulfilled on time, every time.
2. Bill of Materials (BOM)
The BOM is a detailed, itemised requirement document (ingredient list) that makes up the second input needed to for a successful MPR run. In complex recipes, it may contain intermediate ingredients that may require several stages of processing before they can be used in the making of the final or finished product.
3. Inventory record file (IRF)
Inventory record filing is the third input for MRP. It contains the status of an inventory item. It indicates the current stock position, the past timing and sizes of all orders, including the open orders for the item and the lead time for each item. IRF is essentially a record of past experience and serves as a good reference point for planning for the future MRP.
How an MRP can provide true business benefits
Used effectively, MRP can benefit a fresh food and beverage business in many ways. In summary, it helps ensure that the right quantity of stock is in the right place at the right time to satisfy your customers.
