How to Best Understand the Problems with MRP Software

Executive Summary

  • Wikipedia has an interesting listing of the problems with MRP software.
  • We provide an analysis of the commonly listed problems with MRP software.

mrp-question

Wikipedia’s Listing of Problems with MRP Software

Many companies complain that the MRP software functionality within their ERP system is challenging to implement. There are articles written on why MRP is a problem for many businesses, and Wikipedia has a section on its MRP software entry, a synopsis of which is provided below.

While they are not listed this way in Wikipedia — I have added a “name” in parentheses for each problem:

Problem 1: Data Integration

“First problem with MRP software – the integrity of the data. If there are any errors in the inventory data, the bill of materials (commonly referred to as ‘BOM’) data, or the master production schedule, then the output data will also be incorrect (“GIGO”: Garbage In, Garbage Out).”

Problem 2: Lead Time Estimation

“Systems is the requirement that the user specify how long it will take for a factory to make a product from its component parts (assuming they are all available). Additionally, the system design also assumes that this “lead time” in manufacturing will be the same each time the item is made, without regard to quantity being made, or other items being made simultaneously in the factory.”

Problem 3: Multi-Plant Planning

“A manufacturer may have factories in different cities or even countries. It is not good for an MRP system to say that we do not need to order some material, because we have plenty thousands of miles away. The overall ERP system needs to be able to organize inventory and needs by individual factory, and inter-communicate the needs in order to enable each factory to redistribute components, so as to serve the overall enterprise.”

Problem 4: Other Systems

“This means that other systems in the enterprise need to work properly, both before implementing an MRP system and in the future. For example, systems like variety reduction and engineering, which makes sure that product comes out right first time (without defects), must be in place.”

Problem 5: Alternate BOMs

“Production may be in progress for some part, whose design gets changed, with customer orders in the system for both the old design, and the new one, concurrently. The overall ERP system needs to have a system of coding parts such that the MRP will correctly calculate needs and tracking for both versions. Parts must be booked into and out of stores more regularly than the MRP calculations take place. Note, these other systems can well be manual systems, but must interface to the MRP. For example, a ‘walk around’ stock intake done just prior to the MRP calculations can be a practical solution for a small inventory (especially if it is an “open store”).”

Problem 6: Lack of Constraints

“The other major drawback of MRP is that takes no account of capacity in its calculations.”

An Analysis of the Commonly Listed Problems with MRP Software

Below I provide an explanation as to the nature of each problem, and how it applies to other supply/production planning methods.

Analysis: (Data Integrity)

This is listed by Wikipedia as an issue for MRP, but in fact, it’s an issue for any method of planning — either computerized or even if planning is performed manually. Most companies reduce their ability to plan as accurately as they could because they are unaware that software exists to help them manage the BOM, and think that a combination of Excel & ERP is BOM (or recipe if in the process industry) solution. I have yet to see a consulting company understand this. They are hired to bring knowledge; that is simply too often not evident.

Analysis: (Lead Time Estimation)

Inaccuracy exists both for suppliers and for production lead times. Production lead times can auto adjust in constraint-based methods such as cost optimization, however, unless the supplier is modeled as an internal plant, lead times will not change for volume from vendors.

The synopsis on this is the most sophisticated supply planning systems have very similar issues to MRP on lead time inaccuracy. In fact, few companies are meticulous about reviewing their lead times and adjusting them to the current reality.

Analysis: (Multi-Plant Planning)

This is a true limitation of MRP. However, to be able to do this, it is necessary to use a method that “can see the entire supply network.” MRP cannot see outside of a single location — that is its design. Multi-plant planning is rated by SCM Focus as one of the two most sophisticated functionalities in supply planning. The only known application which performs multi-plant planning is PlanetTogether, and this is one of the three Superplant functionalities. Turning on multi-plant planning is a desirable goal, but it is a more involved activity than simply using MRP functionality.

Analysis: (Other Systems)

Yes, MRP relies upon other systems, as do all other supply planning methods.

Analysis: (Alternate BOMs)

This is performed by having alternate BOMs or recipes in the application with different effectivity dates — something most vendors that offer MRP has mastered — although there are considerable differences in the usability and maintainability of this functionality, and therefore which changes the real-life capability that companies have with this functionality. Furthermore, a true BOM or recipe management solution should feed the new BOM or recipe information, as was discussed in the first bullet point. This takes the recursive complexity of BOM/recipe management both away from the ERP system and the external planning system. Both of these systems are simply designed to represent BOMs and recipes, not to actively manage this master data.

New BOMs/receipts are brought over in an interface when released from the BOM/recipe management system when they are production ready. They should be coded with their priorities at this time. The highest rated BOM solution by SCM Focus is Arena Solutions. For process industries where recipes are used, our recommended solution is Hamilton Grant. This overall topic will be discussed in the next section.

Analysis: (Lack of Constraints)

Yes, MRP is unconstrained. This means that planners must capacity level the plan either manually (by moving orders around by hand) or by using a capacity leveling method. Many vendors provide a procedure for capacity leveling which can be configured. This brings up the related issue of the accuracy of resource capacity information, but while this issue is often directed at methods that perform capacity constraining, it affects all of the supply/production planning methods. Here again, not all applications are created equal — because the existence of constraining functionality says nothing about how easy or difficult it is to maintain resources. SAP APO has an extraordinarily ineffective and time-consuming resource management functionality, which results in data not being updated as frequently, and a heavy maintenance load. Overall the techniques for constrained planning have had a high failure rate on projects, something that promoters of things like cost optimization frequently leave out of their presentations to customers and at conferences.

Executive decision makers generally cannot see the distinctions between applications in this area, and will often end up with a heavy maintenance application that is not able to effectively keep capacity information updated, even though the application can perform capacity constraining within the procedure. This has given capacity constraining a black eye generally when in reality it is just as much a function of the application selected.

Conclusion

One of the dimensions which are not well explored in this list from Wikipedia is the actual MRP software itself. MRP software can be well designed or poorly designed — which can directly relate to the “problems with MRP.”  This seems to be left out of many discussions of what can make it difficult to get MRP software to work. This is covered in detail in this article which describes the many benefits of Demand Works Smoothie which has very strong MRPs software.

Learn about the history of MRP at this link.

Remote Supply Planning Consulting

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork MRP & S&OP Explorer

Improving Your Supply Planning, MRP & S&OP Software

Brightwork Research & Analysis offers the following supply planning tuning software, which is free to use in the beginning. See by clicking the image below:

References

https://en.wikipedia.org/wiki/Material_requirements_planning

Repairing the MRP System Book

MRP System

Repairing your MRP System

What is the State of MRP?

MRP is in a sorry state in many companies. The author routinely goes into companies where many of the important master data parameters are simply not populated. This was not supposed to be the way it is over 40 years into the introduction of MRP systems.

Getting Serious About MRP Improvement

Improving MRP means both looking to systematic ways to manage the values that MRP needs, regardless of the MRP system used. It can also suggest evaluating what system is being used for MRP and how much it is or is not enabling MRP to be efficiently used. Most consulting companies are interested in implementing MRP systems but have shown little interest in tuning MRP systems to work to meet their potential.

The Most Common Procedure for Supply and Production Planning?

While there are many alternatives to MRP, MRP, along with its outbound sister method DRP, is still the most popular method of performing supply, production planning, and deployment planning. In the experience of the author, almost every company can benefit from an MRP “tune up.” Many of the techniques that the author uses on real projects are explained in this book.

Chapters

  • Chapter 1: Introduction
  • Chapter 2: The Opportunities to Improve MRP
  • Chapter 3: Where Supply Planning Fits Within the Supply Chain
  • Chapter 4: MRP Versus MRP II
  • Chapter 5: MRP Explained
  • Chapter 6: Net Requirements and Pegging in MRP
  • Chapter 7: Where MRP is Applicable
  • Chapter 8: Specific Steps for Improving MRP
  • Chapter 9: Conclusion
  • Appendix A: Calculating MRP

Supply Planning Book

SUPPLY

Supply Planning with MRP, DRP and APS Software

Showing the Pathway for Improvement

Supply planning software, and by extension supply planning itself, could be used much more efficiently than it currently is. Why aren’t things better?

Providing an Overall Understanding of Supply Planning in Software

Unlike most books about software, this book showcases more than one vendor. Focusing an entire book on a single software application is beneficial for those that want to use the application in question solely. However, this book is designed for people that want to understand supply planning in systems.

  • What methods fall into APS?
  • How do the different methods work and how do they differ in how they generate output?
  • What is the sequence of supply planning runs?

These types of questions are answered for readers in this book.

This book explains the primary methods that are used for supply planning, the supply planning parameters that control the planning output as well as how they relate to one another.

Who is This Book For?

This book as a practical primer for anyone looking to perform a supply planning software selection, any person beginning a supply planning project, or anyone who just wants to understand supply planning software simply better.

Chapters

  • Chapter 1: Introduction
  • Chapter 2: Where Supply Planning Fits Within the Supply Chain Planning Footprint
  • Chapter 3: MRP Explained
  • Chapter 4: DRP Explained
  • Chapter 5: APS Supply Planning Methods
  • Chapter 6: APS for Deployment
  • Chapter 7: Constraint-based Planning
  • Chapter 8: Reorder Point Planning
  • Chapter 9: Planning Parameters
  • Chapter 10: How MRP, DRP, and APS Relate to One Another
  • Chapter 11: Supply Planning Visibility and Master Data Management
  • Chapter 12: Understanding the Difference Between Production Versus Simulation

 

How to Best Understand The Limitations of MRP ERP Systems

Executive Summary

  • MRP in ERP systems is used far differently from how MRP is explained by vendors or how it is explained in textbooks.
  • MRP is one of the major methods of supply and production planning.
  • MRP in ERP has many weaknesses that tend to not be covered by ERP vendors or consulting companies that seek to whitewash the performance of ERP systems.
  • How MRP treats each location as an island.
  • Cost optimization was presented as a method of replacing MRP but largely failed.

Introduction to MRP in ERP Systems

When MRP systems were first implemented they were stand alone. But in the 1980s most of the MRP vendors were purchased by and incorporated into ERP systems. This is normally presented as a positive development due to the benefits of integration. However, a review of MRP based ERP implementations calls this conclusion into question. In this article you will learn the real story of how MRP works within ERP.

How Does MRP Work?

MRP ERP systems can perform the basic functions of material requirements planning.

  • They can explode the bill of material
  • Connect demand elements to supply elements
  • Perform inventory netting and so on.

Commoin Problems Encourntered in ERP Based MRP Systems

Most companies that use an MRP ERP system, or MRP from within ERP systems, run into common problems that can be easily found by visiting most any company that use this software.

Some examples of this are the following:

  • Have problems with maintaining the master data for these systems.
  • Run into issues with inventory visibility due to the limited user interface of most ERP systems for planning.
  • Do not remove invalid product location combinations from the system leaving large numbers of unarchived combinations.
  • Lack the ability to effective group product location combinations.
  • If one looks at specific systems that perform supply planning, they outperform ERP MRP in how the user interface is designed for performing supply planning by a wide margin. ERP vendors essentially live off the integration argument, not feeling the necessity to improve, particularly the supply chain/operational aspects of their software versus the financial aspects of their software.
    This is why it is far easier to get a better plan from a specialized external planning system over ERP MRP.

This article will compare ERP MRP systems versus specialized ERP MRP systems as well as to APS systems. The majority of manufacturing companies perform production planning and scheduling in their ERP systems. The primary reason for this is that most ERP systems have this capability, or ostensibly have this capability as part of their manufacturing ERP software functionality.

How MRP ERP System Are Used in Reality

When MRP is implemented within ERP, so-called ERP MRP, it is more difficult to use and gain value from than when MRP is implemented from within a specialized MRP application. ERP was greatly lauded as an integrated system (but which in reality made integration to other systems more complicated), but it had the unfortunate consequence of getting companies to accept standard functionality to have an integrated system.

As result companies with ERP MRP often end up with a complicated to use and difficult to troubleshoot the system. That is IT benefits, but the business loses out.

Many companies, on balance, think this is perfectly fine. When reviewing articles in CIO magazine, it is interesting how frequently costs savings are listed. But how infrequently the actual capabilities of applications are discussed.

ERP MRP and Production Planning

ERP MRP will do a poor job of creating the initial production plan. Is this surprising? It shouldn’t be.

ERP vendors do not make MRP a focus of development. After the planning run, the production plan will have to be manually adjusted on a continual basis. This is the role of the production and or supply planner.

The Problem with ERP and Production Scheduling

Supply and production planning is often at one level of weakness within an ERP system. The story takes a turn for the worse when one moves to production scheduling. ERP MRP can only create an initial production plan (i.e., the starting place for further work), never the final production plan. Just a few of the reasons for this are listed below:

  1. Mathematical Limitations: The mathematics of Material Requirements Planning is quite simple, and cannot account for the detailed work required to manage a production schedule unless the environment is extremely stable.
    1. Algorithms don’t take production realities into account at the same level as in APS systems, often ignoring things like simultaneous resource usages, material production and consumption rates, resource preferences, and alternate routing trade-offs to name just a few.
    2. Schedule changes made by users require massive, rapid recalculation to determine the impact on other orders. ERP databases were designed for transactional work like order entry and therefore are architecturally incapable of doing the job.
  2. Dimension Limitation: Material Requirements Planning has no other objectives aside from meeting dates. This means it cannot prioritize – however when two production orders vie for the same capacity, who receives this capacity? Material Requirements Planning cannot answer this question with any nuance because it will merely allocate the capacity to the first production order it processes.
  3. Unconstrained Output: MRP cannot constrain, so it assumes that the plant is an infinite bucket where for example five production orders can be scheduled on the same line at the same time. Optimization with constraints will only allow the load to be placed where there is capacity. This is incredibly detailed work, and because Material Requirements Planning requires the manual movement of the production orders to create the production schedule and to schedule to the hour with as few open gaps as possible. This means that companies that exclusively use MRP end up nearsighted – that is they only create a production schedule for as far out as they need to for the needs of the factory floor.

How to Improve the Use of MRP

A company can begin with just one or a few licenses of a specialized MRP system to run MRP and see the results before taking the plunge and implementing the system. This approach has little risk. We estimate that a typical company can get a fast payback on this investment both regarding better planning output as well as better planner productivity.

External application specialized MRP/DRP provides the following advantages over ERP MRP/DRP:

MRP Weakness 1: A Better User Interface

It is essential to find an MRP environment that is easy to use, providing a high degree of transparency and find-ability to the results.

MRP Weakness 2: Master Data Parameter Management

Companies often declare an interest in master data, but they do not include how easy or difficult it is to maintain the master data in the applications which they purchase. Large consulting companies attempted to tell companies they could only look to a single system — the master data management system (MDM), to maintain their master data — and that has been one of the more significant misallocations of resources in recent memory in the enterprise software space.

MRP Improvement 3: Implementation Time

It’s essential that the system can be brought up and run “offline” quickly.

MRP Weakness 4: Simulation

As soon as the second MRP system is up, one can begin performing a simulation to see what occurs when changes are made to critical inputs like lead times, stock levels, etc..

All of this can be done without impacting the production system.

MRP Weakness 5: Aggregation and Grouping

Rather than looking at product location combinations one by one, one needs an MRP system that allows for heightened understanding and a more efficient analysis of the results. The following quotation from a colleague on MRP output is the following:

“One other issue that MRP has is that when BOMs are complex, and inventory is stored in various phases of manufacturing the reporting of components availability is awful and has to be custom developed. This should be standard in MRP applications, but it is not.”

MRP ERP System Versus APS for Scheduling

As poor a job as ERP MRP does for the production plan, any MRP system, either from within ERP or a specialized system, has no functionality for production scheduling. Production scheduling deals with the minute level scheduling of production orders and must take into account production constraints. After production scheduling applications being available for years, the dominant tool for production scheduling as of the time of this writing is the spreadsheet.

Many APS systems have the functionality to account for many of the limitations of MRP systems. The mathematics of APS systems can account things like

  • Simultaneous resource usages
  • Material production and consumption rates, etc..

Accounting for Multiple Dimensions in Production Scheduling

Regarding being able to account for multiple control dimensions, second-generation APS based optimizers allow for multiple aspects to be accounted for. Secondly, some dimensions can be emphasized over other dimensions during the planning run. (see footnote)

  • If a company is more focused on keeping costs down, an optimization scenario can be created for this.
  • A company may like to test the effect on the production schedule from emphasizing machine utilization, or setup times. All these things are possible with the right application.
  • There is even an application that can optimize the plan based upon financial key performance indicators.

Regarding constraining capacity, when a company uses an APS solution that automatically moves production orders to where they can be produced. The length of the scheduling horizon becomes a simple matter of computer processing capacity.

At one production planning and scheduling vendor, their clients often create a production schedule for three months, which is called the schedule horizon.

The production planning horizon is often created for a year. Will the schedule change? Of course, however, it is quite beneficial to have at least a first cut production schedule for a three-month horizon. This is because the production schedule serves more than the needs of the factory floor.

Constrained production planning and scheduling provide the foundation for implementing one of the most desirable functionalities. This is capable to promise. The white unicorn of supply chain planning.

Advanced planning & scheduling (or APS for short) systems not only provide superior methods of planning. They also have many other attributes that improve planning. One example of this is user interfaces that, unlike ERP MRP systems, are designed for planning and master data maintenance designed (which vary depending upon the specific software) to provide the flexibility manufacturing environment require.

The Black Box Effect of ERP Based MRP

One reason for this is that the way an MRP ERP system is implemented tends to be a black box. It is a rare ERP system where much thought has gone into making the MRP ERP system screens usable. By usable we mean where the system’s output can be reviewed efficiently by planners.

With respect, the MRP parameters the following should be controllable from the “overall” perspective.

  • They should be alterable for a group of plant and material combinations simply by filtering the plant and material database.
  • The changes applied then only apply to that subgroup.
  • We have never seen any ERP system with this functionality. We have exposure to most of the larger ERP systems on the market, and even many of the smaller ones.

MRP ERP System + Excel

MRP from within ERP systems is not flexible enough to provide planners with what they need.

  • Companies that lack a specialized production planning applications tend to use a combination of MRP and Excel.
  • This means shuttling data between the MRP ERP system to Excel for analysis. Then they either upload the data to ERP or making the changes in ERP manually. This means that companies that run an MRP ERP system take a productivity hit as their planners are consumed with data manipulation.
  • For complex forms of planning such as rough-cut capacity planning, it is quite common for companies to have complex spreadsheets. These are spreadsheets that no MRP system can come close to modeling. This is another time-consuming activity. At several clients, we have seen custom adapters that then pull in the spreadsheet into the ERP system.

Intelligently Improving an ERP MRP System

We have analyzed this issue for decades. The problem is that the traditional approach, which is to implement a complex external supply planning system does not have a very high success rate. Both cost optimization and inventory optimization arrived as major trends and then faded from prominence.

Cost Optimization and Inventory Optimization to the Rescue?

We have written in detail about how cost optimization never made any sense for supply planning. Inventory optimization, while at least consistent with the goals of supply planning, has been the subject of high failure rates.

Allocation Based Supply Planning to the Rescue?

Other packaged solutions such as allocation can work well but only apply to narrow segments of companies that perform supply planning that want to plan based upon customer, and prioritize some customers over others (predominantly high tech).

And all of this also left companies that could not tolerate the complexity and expense of these systems with no way to improve their MRP systems.

Conclusion

An MRP ERP system tends to do very little regarding helping a company master MRP.

  • Only a small percentage of companies attempt to implement, and then even fewer successfully implement non-ERP based planning systems.
  • An MRP ERP systems need to tuned by external systems to even develop a reasonable supply and production plan. This tuning should be performed before a company thinks about migrating to a complex external supply and/or production planning systems to help ameliorate the limitations of an MRP ERP system.
  • After reviewing the limitations of both an MRP ERP system and problematic external/advanced planning systems Brightwork has developed a system that allows companies to get more out of their MRP ERP system and quickly and at low cost.

There are all types of inefficiencies caused by an MRP ERP system. ERP systems were always designed to provide just the basic capabilities concerning MRP. This became the dominant approach, but it was never actually effective.

Even at this point, most companies primarily use MRP ERP system for their supply and production planning.

Learn about the history of MRP at this link.

References

Brightwork MRP & S&OP Explorer

Improving Your Supply Planning, MRP & S&OP Software

Brightwork Research & Analysis offers the following supply planning tuning software, which is free to use in the beginning. See by clicking the image below:

This topic is covered in depth in the following book.

Repairing the MRP System Book

MRP System

Repairing your MRP System

What is the State of MRP?

MRP is in a sorry state in many companies. The author routinely goes into companies where many of the important master data parameters are simply not populated. This was not supposed to be the way it is over 40 years into the introduction of MRP systems.

Getting Serious About MRP Improvement

Improving MRP means both looking to systematic ways to manage the values that MRP needs, regardless of the MRP system used. It can also suggest evaluating what system is being used for MRP and how much it is or is not enabling MRP to be efficiently used. Most consulting companies are interested in implementing MRP systems but have shown little interest in tuning MRP systems to work to meet their potential.

The Most Common Procedure for Supply and Production Planning?

While there are many alternatives to MRP, MRP, along with its outbound sister method DRP, is still the most popular method of performing supply, production planning, and deployment planning. In the experience of the author, almost every company can benefit from an MRP “tune up.” Many of the techniques that the author uses on real projects are explained in this book.

Chapters

  • Chapter 1: Introduction
  • Chapter 2: The Opportunities to Improve MRP
  • Chapter 3: Where Supply Planning Fits Within the Supply Chain
  • Chapter 4: MRP Versus MRP II
  • Chapter 5: MRP Explained
  • Chapter 6: Net Requirements and Pegging in MRP
  • Chapter 7: Where MRP is Applicable
  • Chapter 8: Specific Steps for Improving MRP
  • Chapter 9: Conclusion
  • Appendix A: Calculating MRP

Software Ratings: Supply Planning

Software Ratings

Brightwork Research & Analysis offers the following free supply planning software analysis and ratings. See by clicking the image below:

software_ratings

How to Understand The History of MRP II, ERP and Oliver Wight

Executive Summary

  • Oliver Wight was the creator of MRP 2, which was the foundation for MRP.
  • We cover the relationship between RMP and MRP II.

Introduction

MRP 2 was popularized by Oliver Wight in the mid-1980’s. Oliver Wight was already well established in MRP decades before developing MRP 2. He was a co-author, often with another MRP, as well as overall production planning and inventory management guru, George Plossl. While Plossl will be first tethered to MRP, Oliver Wight will forever be associated with MRP 2. Interestingly, Oliver Wight died a year after publishing his book on MRP 2. Therefore while Oliver Wight was the definitive developer of the concept, he did not live long enough to shape it as it rose in popularity, although the consulting company that Oliver Wight founded is still in operation today.

MRP 2 described a category of software. At first, there was stand-alone MRP software. Then software vendors began adding extra functionality that while connected to MRP was not part of MRP.

MRP was an intermediate stage between MRP and ERP. The takeover of ERP systems by the late 1980s is a primary reason why no one speaks of MRP 2 systems, although the concept of MRP 2 is still sometimes discussed.

As with most ideas that become popular in supply chain management, what something is, is a combination of the following:

  • It’s actual features.
  • How the item is expressed, which often has a lot to do with marketing

But first should distinguish between MRP II systems and MRP II the concept.

The Difference Between ERP and MRP

MRP 2 being the basic footprint of what would become ERP shows the difference between ERP and MRP.

The difference between ERP and MRP is quite straightforward.

  • MRP is focused on production and supply planning.
  • ERP is much broader. It contains MRP within it, but then adds sales and distribution, finance and accounting, non MRP materials management (things like stock transfer that MRP does not do). ERP systems often have a warehousing module as well.

ERP is almost never enough for all of a company’s needs. I have a book why entities like Gartner, SAP, Oracle, the large consulting companies and many others proposed this back in the 1980’s. This was proven incorrect as companies continued to use their legacy systems along with ERP after ERP was implemented, and then purchases more applications and connected them to the ERP system.

Oliver Wight and MRP II

In his 1983 book, the following are examples of the checklist criteria used by Oliver Wight Consulting to certify a company. This certification provided the company a “Class A for Business Excellence.”

  1. Understanding and Analyzing the Internal and External Environment: A process exists to collect relevant information internally and externally to understand the company, its products and services, its marketplace and the competition.
  2. Company Capability: The company has a business process to understand the ability of all its business processes to identify the strengths and weaknesses of its offer to the marketplace.
  3. Analytical Tools: A comprehensive use of analytical tools is made to identify business trends and opportunities and to understand how the company responds to current and future needs.
  4. Vision Statement: The vision statement is inspiring and memorable and summarizes what the company wants to become in the marketplace and community.
  5. Supplier Quality: Supplier quality processes and improvement programs are monitored and reported, to ensure integration with the company’s quality systems.

As should be apparent, none of these criteria have anything to do with setting up MRP systems.

Other reading of this book shows the overall process, rather than calculation orientation of Manufacturing Resource Planning.

How Useful Were these Certifications

It ‘s hard to say exactly how useful these types of certifications were. But it is amusing to find this quote from George Plossl, who was a friend and co-author of Oliver Wight regarding the certification program at the time:

“Implementation (of MRP) was viewed as “getting software running on the computer” not as using the programs to run the business, so users were poorly prepared, incomplete systems were installed, and proper foundations were not put into place. Under qualified consultants aggravated this by offering to help install MRP II systems and reach in very short time “Class A status,” a set of superficial and systems related criteria more than operations-related requirements.”

Interestingly, there must have been some consulting companies offering this Class A status at the time — however, Oliver Wight’s checklist does not focus on systems related criteria and are more focused on higher level types of criteria.

Why Oliver Wight Introduced MRP 2

It is clear that MRP 2 was introduced based on the marketing platform that MRP had not achieved its objectives.

The argument of MRP 2 was that the reason was that MRP was insufficiently integrated to other systems. And therefore to the rest of the business. And that it lacked some specific functionalities.

The quotation below explains this idea.

“By far, the  greatest single factor in ruining a perfectly good manufacturing plan is the tendency for the Demand Forecast to change on a regular basis, typically inside planning lead time. Or, the Demand Forecast may be completely useless for manufacturing  purposes, forcing the person responsible for the master schedule to literally generate  his own forecast in an attempt to predict what the demand actually will be. Often times, a combination of both of these conditions exists, where the marketing forecast is so inaccurate as to make it useless, forcing the master scheduler to perform this task of generating a forecast. And, without some kind of forecast, there is no master schedule. And, without a master schedule, there is no ‘M.R.P.’. Any ‘M.R.P.’ system without a demand forecast analysis capability is thus severely limited in its ability to  help reduce overall inventory and simultaneously meet the requirements of the production plan. After all, “Garbage In, Garbage Out.””What is MRP (I,II)

A More than 30-Year Problem

I don’t use this quote from Oliver Wight because I agree with it, but because it illustrates the arguments presented for MRP 2 by Oliver Wight at the time. Indeed, Oliver Wight has consulted at quite a few companies and had lived through the migration of companies to MRP systems.

Interestingly, 30 years after the introduction of MRP 2, this problem persists.

Connecting a low accuracy forecast to an MRP system through an integrated system does nothing to improve this prediction.

How Interchangeable are the Terms MRP and MRP II?

Most people that work in supply chain management are familiar with MRP or material requirements planning. MRP II, which stands for Manufacturing Resource Planning, is a term that was at one time popular but is now rarely used. The issue is that sometimes someone will use the term MRP when they mean Manufacturing Resource Planning.

While MRP is contained within MRP II, they are not at all the same thing, and in fact, this is an easy area of confusion. In this article, we will unravel the history and differences between MRP and MRP II. Let us begin by covering MRP II.

The Focus of MRP II Versus MRP

MRP II or Manufacturing Resource Planning, while sounding almost exactly like MRP is in fact not focused on the same things as MRP. In fact, Manufacturing Resource Planning more or less accepts MRP as a supporting capability — which is then extended with MRP II.

Manufacturing Resource Planning was introduced by Oliver Wight who after spending many years consulting with companies on their transition to MRP systems, observed the limitations in MRP system implementation.

MRP II is focused on the integration of MRP and the new functionalities of capacity planning and detailed scheduling.

MRP II the concept, rather than the MRP II system, is also more qualitative than MRP and more focused on process. For instance, Oliver Wight began a consulting company that certified companies in Manufacturing Resource Planning.

Conclusion

All of this is why it is more misleading than clarifying to speak of MRP II in the same sense as MRP. For instance, ERP contains MRP. However, one could never use the terms ERP and MRP interchangeably, but this is often done with MRP and Manufacturing Resource Planning. While this is not understood, this observation was made by George Plossl all the way back in 1984:

“Practically all suppliers of MRP programs provide a comprehensive core-system package for manufacturing planning and control, including MRP, rough-cut capacity planning and capacity and shop floor control, plus many support programs for procurement design and process engineering, quality management, cost accounting and plant maintenance. Unfortunately, these are usually called “MRP II systems,” leading to confusion between MRP technique and the MRP system they represent. Sophistication of programming of these systems is also overdone.

The acronym (MRP II) was an unfortunate choice, causing confusion and generating more heat than light on he subject of improving operations.”

Plossl points out the difficult aspects of calling all these functions “MRP II” (shortly after this same set of functionalities would be called ERP, a term coined by Gartner).

Plossl on Programming Undone

Plossl also makes the point about the sophistication of the programming being overdone. This is easily found if you read other quotations by him.

I cover this topic in a separate article. This is that over-sophistication negatively impacts the implement ability of these applications. Today MRP II applications are referred to as “ERP.” This is not a quote from 5 or 10 years ago but from 30 years ago.

To learn about the history of MRP see this article.

Remote Supply Planning Consulting

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Improving Your Constraint Planning

Brightwork Research & Analysis offers the following supply planning tuning software with a new approach to managing capacity constraints, which is free to use in the beginning. See by clicking the image below:

References

Wight, Oliver. The Oliver Wight Class A Checklist for Business Excellence. Sixth Edition. Oliver Wight International. 2005

Plossel, George. Orlicky’s Material Requirement’s Planning. Second Edition. McGraw Hill. 1984. (first edition 1975)

What is MRP (I,II) Full citation lacking, but available at this link
https://www.share-pdf.com/73ec30f31e4e41e29f089357308d2349/What%20is%20MRP.pdf

As MRP II is essentially ERP, I provide my book on ERP below:

The Real Story Behind ERP Book

 

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

Software Ratings: ERP

Software Ratings

Brightwork Research & Analysis offers the following free ERP software analysis and ratings. See by clicking the image below:

software_ratings