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I recently attended the APICS 2012 International Conference and Expo in Denver, Colorado. There were many educational sessions to choose from. So many that I found it difficult to decide which session would give me the best information to help me better serve my clients. The best session I attended was Carol Ptak’s Material Requirements Planning in a Demand Driven World. In Ms. Ptak’s presentation she spoke of the faults within MRP systems in today’s hyper-competitive market. She talked about why most demand and supply planning systems deliver poor results, evaluated the core problems causing those inadequacies and presented an alternative method of replenishment.
Re-writing MRP? How would you do that? What would you do? That really got me thinking. As an APICS CPIM instructor and MSS consultant, I reiterate to both my clients and students that the entire goal of MRP is to have the right stuff at the right time in the right amount. But how do we determine how much to have of what, when? We forecast! However, I also tell my clients/students that inventory management or demand planning is in no way an exact science. Forecasting is always wrong. It’s just a matter of how WRONG that forecast is. In my opinion, individuals in supply chain have a thankless job. You can never have enough, but at the same time you always seem to have too much, and then you never have exactly what you need when you need it.
Ptak’s description of the optimal range of on-hand inventory is accurate, ‘more than too little but less than too much’. The fluctuations between the two ends of the spectrum have the effects of the three things that we are supposed to be avoiding: unacceptable inventory performance, service challenges and high expedite expenses. Then, the added pressures of volatility in supply chain with global markets are causing more workarounds and compromises than ever before. I think she might be on to something.
She went on to explain that MRP was conceived in the ‘50s, codified in the ‘60s and commercialized in the ‘70s and is still used 79% of buyers and planners today. But those same buyers and planners are still using excel spreadsheets and data dumps to plan their material. If you attend one of my detailed planning and scheduling classes, you’ll hear my students talking about how to make ‘adjustments’ to what the “standard calculations” tell them to plan.
Ptak explains that today’s planning and supply scenarios are more complex than ever. Ptak pointed out that the past is NOT a predictor for the future and therefore we need to look for a new ways to plan material.
I am not going to explain Ptak’s methodology, as I feel it warrants a deeper understand than I could obtain in a 30 minute powerpoint presentation. However, I will say that she talks of re-classifying material into group traits. Attributes like calculating daily usage, discrete lead times, developing order policies and looking at locations of suppliers. Taking that a step further and making dynamic adjustments to demand planning that I found fascinating. The examples she gave, using her new inventory planning methodology, were all right on target with demand.
I have to say I am still somewhat a skeptic… That might be because I see myself having to modify the way I teach inventory and supply chain planning. But, I’ve always believed that the one constant you can count on is change. So maybe she’s right, maybe it’s time for change.
This blog was contributed by Marti Ouellette, MSS Consultant.
For questions about MRP, Supply Chain Optimization or Value Chain Creation contact us at firstname.lastname@example.org
Cite this blog post:
MLA: Oullette, Marti. “Faults of MRP systems in Today’s Hyper-Competitive Market.” MSS. MSS. Blog. 08 April 2015.
APA: M Oullette. (2012, Nov 13). Faults of MRP systems in Today’s Hyper-Competitive Market.