Season Three, Episode Three
Three realities of Traditional MRP that you don’t need to endure anymore.
Few, if any, follow recommendations of their traditional MRP system unquestioned. That gives a clue.
One: Because safety stock is intended to make sure we don’t run out, let’s see what has actually happened. Consider the Expedite report. How much time is spent each day sorting through the items on that report that are not the emergency that MRP leads you to believe?
Sanity check. When MRP inventory balance reaches zero and when MRP inventory balance reaches the safety stock level, there is no difference in the MRP reaction. If the balance hits zero, MRP sends crazy expedite messages “encouraging” you to react as if there is an emergency – which there is. But, when the balance hits the safety stock level, MRP reacts exactly the same even though this time there is no emergency.
End result: You have to sort through your MRP Expedite report to find the items that are real emergencies and separate them from the items that are not emergencies. And there is no definition of the degree of emergency either.
Side note: When you compensate by increasing the safety stock level, it doesn’t make this problem go away. It makes it worse.
Two: Because we don’t trust our MRP action report, we pull the data from MRP and load it into a spreadsheet. There we massage the numbers, run algorithms, adjust, and generally outsmart ourselves.
Your Traditional MRP action report tells you to order 25 parts. You pull that info into your spreadsheet. Possibly you look at order history. Maybe you cross-reference the upcoming requirements. Perhaps you even search for price break levels to try and cut the cost a little.
Sanity check: The problem is actually two-fold. One is our dependence on experienced guesswork as the only valid decision-making process. Two is that every day, every situation is a new mystery to solve.
End result: It is an (educated) guessing game as to how much you will order. There are no guidelines, except don’t stock out and don’t over stock – or else.
Side note: Traditional MRP orders are reactionary (for lack of a better term). The idea isn’t to maintain a level of inventory, it’s to only order precisely what you need. And if your need changes or notice is short, then expedite is the name of the game.
Three: Because with Traditional MRP our priorities are based on due dates, we must manually adjust our priorities and again, try to guess at the best sequence.
Due dates are set at a point in time. But lots of things are happening every day. Can you be sure that the due date set two weeks ago is still the same after all that’s happened in those two weeks? Case in point, you have an order due yesterday and an order due tomorrow. Which one is more important?
Sanity check: You may not have the information to answer the question which one is more important. You might say the oldest due date. You might say the highest profit item. But the truth is, asking your customers is the best way to know which is truly more important.
Side note: Things aren’t just changing for your business, they’re also changing for your customers.
End result: You may not be working on the order that is currently most important. A due date set two weeks ago may already be covered in dust. So, while working hard on the wrong order, you’re also frustrating a customer.
If these are your realities, then explore Demand Driven MRP. The solution is closer than you think.