Customers usually require products to be delivered to them in shorter time durations than the manufacturing process requires. It is thus difficult for customers to make orders and wait for the manufacturing process to be complete before they can get access to their orders. This means that manufacturers should plan their material requirements and inventory in order to meet the market demand. When manufacturers efficiently plan their material requirements, problems such as late delivery.
Other problems such as purchase of the wrong materials are also reduced, and this too helps in ensuring effective delivery of the orders. This will create customer loyalty which not only increases the market share, but it also increases sales and profits. Material and product wastage. Material requirement planning as earlier discussed, helps in ensuring that products and materials which are required for production are available (Hunter, 2007). This prevents either a situation where there is a shortage or presence of excess materials for production.
Material requirement planning enables a manufacturer to establish the optimal materials required for production, which prevents a situation where excess materials are held, yet they are not being utilized for the production process. This is disadvantageous to firm for many reasons. The first is that holding materials which are not being used ties down cash, which would have been used elsewhere for investment. It also increases storage costs, which would have been eliminated if optimal materials were held.
Ultimately, material requirement planning helps reduce costs related to storage and waste, as well as helps reduce tying up cash, which is an opportunity cost. Conclusion. Material requirements’ planning is very important to manufacturing firms since it enables them to hold optimal levels of materials. This prevents instances of wastage or inability to meet customer demands. It also lowers costs attributed to storage of materials. It is very important to implement all processes of material requirements planning, in order to achieve the desired goals.
Hunter, K. 2007.Benefits of material requirements planning. Retrieved on January 30, 2009. Available at <http://ezinearticles. com/? Benefits-Of-Material-Requirements- Planning&id=873964>. Kusiak, A. 2000. Computational Intelligence in Design and Manufacturing. New York: Wiley-IEEE, pp 179-184. Orlicky, J. , Plossl, G. W. 2000. Orlicky’s Material Requirements Planning. New York: McGraw-Hill Professional, pp 37-39. Rushton, A. , Oxley, J. , Croucher, P. , Institute of Logistics and Transport. 2000. The Handbook of Logistics and Distribution Management. UK: Kogan Page Publishers, pp 170-174.