Theory of Constraints Handbook - James Cox Iii [221]
In truth, Supply Chain Management (SCM) solutions do not deal with the manufacturing implications and coordination (materials and capacity) of the items that they are demanding and supplying. While there is a wide array of different (and effective) methodologies and technologies to schedule manufacturing capacity, there is one universal materials system and approach throughout the world to manage materials known as MRP. To be consistent with current global understanding we will use the following definition from the APICS Dictionary (Blackstone, 2008, 81):
Material requirements planning (MRP)—A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times. (© APICS 2008, used by permission, all rights reserved.)
Let us be very clear—MRP is not going away (and it shouldn’t). Since the detailed description of its specifications by Orlicky (1975) in his classic book, Material Requirements Planning, MRP has provided the foundation for the design and material planning within most manufacturing environments. An Aberdeen Group Study (2006, 17, Table 3) showed that 79 percent of companies that bought Enterprise Resources Planning (ERP) systems also bought and implemented the MRP module.
Even after over 50 years of using MRP and other technologies to plan and coordinate material, how is it that companies and supply chains can struggle so mightily with materials synchronization and the business effects identified at the start of this chapter? After careful examination of many companies and the supply chains in which they participate, there appear to be two main reasons why those effects happen in today’s manufacturing enterprises:
1. MRP was not designed to deal with today’s challenges. The sheer size of ERP systems today hides the reality that for most mid-range and large manufacturers, MRP remains a critical module in their ERP system, and the changing global manufacturing environment has exposed critical shortcomings in most MRP implementations and tools. Variability and volatility are on a dramatic rise and the implementations of pull-based philosophies like Lean and TOC are proliferating. These conditions and approaches are putting extreme pressure on MRP systems and even creating conflicting modes of operation (push versus pull). We need to be reminded that MRP was designed in the 1950s, commercially coded in the 1970s, and really has not changed since. The reality is that it was never designed with today’s factors and pull-based concepts in mind.
2. Users are forced to make incomplete and unsatisfactory compromises. Most companies are not blind to the shortcomings. Materials and Production Control personnel often find themselves in a dilemma regarding their MRP system. There are powerful aspects of MRP that are still relevant and necessary. MRP is possibly even more relevant than ever as we have more complex planning scenarios than ever. At the same time, there are disastrous consequences to ignoring MRP’s shortcomings in today’s environment. Given this conflict, Materials and Production Control personnel are forced to find various, often unsatisfactory and