- Wikipedia has an interesting listing of the problems with MRP software.
- We provide an analysis of the commonly listed problems with MRP software.
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.
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.
Brightwork MRP & S&OP Explorer
Repairing the MRP System Book
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.
- 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
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?
- 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