MRP and JIT (materials resource planning and just in time processing) are two methods of controlling production and inventory levels for manufacturers. MRP focuses on production of finished goods based on forecast requirements, while JIT focuses on production as a response to actual orders. Both MRP and JIT rely heavily on computerized information processing.
Materials resource planning is a comprehensive system of raw materials ordering and production scheduling of equipment and manpower based on forecast orders. It incorporates changes to orders into its scheduling process to produce a dynamic production schedule. MRP embraces the concept of dependent demand: for example, if production of finished product A requires three units of product B, and production of product B in turn requires four units of product C and six of product D, then a production level of a specific number of units of product A requires all the corresponding units of products B, C, and D to reach completion. For a complicated manufacturing process that includes many components, an advantage of MRP is its ability to successfully organize the production of each component so parts are ready when needed and the production process doesn't stall for lack of finished components.
In contrast, JIT is a manufacturing process that responds to actual orders. It relies on the timely delivery of exactly the right raw materials in the right place to allow for production as orders are received. An advantage of JIT is its reduction of the amount of raw material and finished goods on hand, which can reduce carrying costs and the likelihood of spoiled or damaged inventory. It focuses on accurate production and leaves little room for production errors. A disadvantage of JIT is that if suppliers fail to deliver raw material as scheduled, a halt in production can occur because of the limited inventory in stock.
Different goals of MRP and JIT mean that each system works better under certain conditions. MRP is well-suited to a production line that operates on a batch or special order basis. The system's ability to constantly adjust for changing requirements makes it react well to variable orders. The JIT system works well in an environment of repetitive orders of similar products. Suppliers can more easily respond to prompt delivery schedules for routine orders of similar materials.
The emphasis in both MRP and JIT is on the reduction of waste in the production process. Both systems achieve improvements in inventory levels. It is the intent of MRP and JIT systems to prevent lost production time, although MRP is more responsive to fluctuations in production as it is a change-based system. Production under the JIT system may be hampered by lack of capacity if unexpected orders are received.