Operations Management / Supply Chain Management

Module 12.03 Key Concepts: MRP in Services and Link to Enterprise Resource Planning

Material Requirements Planning can be used in service businesses. Some services or service items are directly linked to demand for other services.  These can be treated as dependent demand services or items.  Some common examples can be found in Restaurants, Hospitals and Hotels.  You can probably think of many others.

The MRP approach is also relevant the the planning of Distribution inventory between distribution centers / warehouses.  It is referred to as Distribution Requirements Planning (DRP).  In Distribution Requirements Planning, expected demand or sales forecasts become gross requirements. All other levels are computed.  DRP pulls inventory through the system and generally promotes small and frequent replenishments.

Enterprise Resource Planning represents an extension of the MRP system to tie in customers and suppliers.  ERP systems allows automation and integration of many business processes and shares common data bases and business practices.  ERP systems produces information in real time and can be used to coordinate the total  business from supplier evaluation to customer invoicing.
Typical ERP Modules include:
  • Basic MRP
  • Finance
  • Human resources
  • Supply chain management (SCM)
  • Customer relationship management (CRM)
  • Sustainability

In general, ERP systems have the potential to reduce transaction costs, increase the speed and accuracy of information and facilitate a strategic emphasis on JIT systems and supply chain integration.  However, these systems can be expensive and time-consuming to install.

As with MRP, ERP systems also have application in Services.  ERP systems have been developed for health care, government, retail stores, hotels, and financial services.  They are also referred to as efficient consumer response (ECR) systems.  The overall objective is to tie sales to buying, inventory, logistics, and production.