We have a less than perfect understanding of how our planning systems plan. Which leads to a less than perfect understanding of where our problems come from. Which leads to a less than perfect understanding of what to do about it.
Traditional Material Requirements Planning (MRP) approaches the situation in a seemingly logical way. But it has too many flawed assumptions. Maybe more accurately, since there are things that MRP doesn’t know, it sort of just ignores them.
MRP uses the “known” input of Customer Request Date. For clarity, let’s define this as the date we need to ship to the customer.
From there, MRP advises a Planned Order date for purchased parts (when we need to order our raw materials). It also advises a Planned Manufacturing Order date (the Production Start Date for manufacturing).
Sounds good so far. But these are separately determined based on the end goal. And essentially what we might call “one-way” planning.
What are the flaws?
- There is no consideration for capability. 1 pc or 1 million pieces, same timeline.
- No consideration for the sequential nature of the beast. The raw material due date should be tied to the production start date. One could argue that it is, loosely, at the beginning. But if the raw materials are late or the ops team decides to start on a different date, there is no interconnecting revision upstream.
- With longer lead times and more frequent disrupting events, the chances that execution will match the plan is nearly zero. Still, MRP demands perfect alignment.
- Changes to the customer due date (or quantity) causes changes to the planned order dates (both Purchasing and Manufacturing). Depending on the change, it results in expediting and firefighting. But always results in distraction and noise.
MRP is tied to precision over periods of time where we know precision can’t work, resulting in the changes and chaotic nature of supply chains. But really, MRP is focused on the customer due date. Everything starts there. It does not care that you have not the time or the resources. Because, by design, the execution is left up to individual participants. And, by design, those changes are not connected to the other players or back up to the customer due date.
Imagine you plan for Thanksgiving dinner on Thursday (the holiday day), which requires you to start preparations on Wednesday. You calculate when you need to start cooking. But changing the dinner time is not an option. So, no matter what happens to your plan, the end goal is still the same. You can either revise the menu or cook faster. Sound ridiculous? Then stop managing your business as if this is a normal process.
The chaos of supply chain is driven by these assumptions that don’t align with the reality we face. We scramble to find alternatives. We scramble to recover from the disruption. We scramble to reschedule. And all the scrambling happens outside our planning tool (MRP).
Especially in manufacturing, where everything is dependent on no deviation from the plan.
Who lives in a world where plans always execute perfectly? No one.
Once we realize the flawed nature of our tools and thinking, it becomes obvious that a solution must be found. Don’t throw out the systems; create an appropriate enhancement. It also becomes obvious that it’s not the fault of your people. We need to fix our tools.
Enter Demand Driven Material Requirements Planning. It’s not a magic pill, but it does help you to do what you’re so desperately trying to accomplish. Let me show you.
