Manufacturing Resource Planning and its Financial Applications

Date of Submission

1983

Document Type

Thesis

Degree Name

Master of Science in Accounting

Department

Accounting

Advisor

John Listio

LCSH

Manufacturing processes--Data processing

Call No. at the Univ. of New Haven Library

AS 36 .N29 Acc. 1983 no.12

Abstract

This project was undertaken to impart the importance of the involvement of the management accountant in the implementation of Material Requirements Planning (MRP) systems. Traditionally the job of implementing the system has been left up to the materials and inventory control personnel. The management accountant can no longer stand by and let operations have total responsibility for installing MRP. The materials requirements system can provide the information to drive inventory accounting, product costing, and various other financial reports. The input of the finance department is necessary for a totally integrated result.

MRP, as a system, is an inventory planning and control system, incorporating the master production schedule, bills of material, and engineering routings to determine when to order materials, in which quantities, and when they should be released to the production floor. When the closed loop is added to the system, capacity requirements planning can be used. In this way it is determined what capacity is required to produce the product. From this evolved MRP II, or Manufacturing Resource Planning. This system integrates the entire organization so that every department is working together toward a total operations plan, including manufacturing, marketing, engineering, and finance. There is no tug of war between departments, all are working for the same ends, the same goals.

The benefits that can be derived from an integrated Manufacturing Resource Planning system are numerous. Some of the benefits that can be derived from the system include improved customer service, inventory reductions, and manufacturing efficiency. In addition, other benefits have been obtained as by-products: increased morale of personnel, cohesiveness of management, and increased productivity, to name a few.

The costs associated with Manufacturing Resource Planning are significant, as are the failure rates. However, as long as management is committed to implementing the system and is involved in its implementation, the costs and failure rates will be minimized. The benefits that can be generated from such a system can far outweigh the costs. MRP II, is an effective tool for managing Inventories, production, and shipments; and it integrates all areas of a firm to a total operations plan.

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