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tight discipline in shop-floor operations. You know what it can do in terms of:
increasing financial control of operations; banishing paperwork from the sup-
ply chain; drastically reducing lead times; reducing waste and scrap; providing
continuous improvement of supplier performance. All of this, as you tell your
clients, leads to enhanced profits and competitiveness. You understand the phi-
losophy of the technology and try to get this over to your clients. ERP is essen-
tially based on the ‘push philosophy’ of the original MRP2 system that matches
the purchasing and scheduling of raw materials and parts to centralized produc-
tion plans based on sales forecasts so that materials are available when they are
needed for production without holding unnecessarily high levels of inventory.
ERP though also considers how planning, scheduling and control can be aligned
to broader business (enterprise) objectives in particular markets.
Operationally, the planning systems and software needed to achieve ERP
break activities into a front end, an engine and a back end. The front end pro-
duces the master production schedule (MPS). The MPS plans the production
of the goods offered to customers over a given planning horizon based on sales
forecasts. The back end handles factory scheduling and manages materials from
suppliers. Material requirements planning (MRP) is the core of the engine. It
takes a period-by-period set of MPS requirements and generates a related set
of component parts and raw materials requirements. These MRP data make it
possible to generate a time-phased requirement record for any part number. This
can also drive the detailed capacity planning modules – a massive computational
task. MRP is therefore the natural starting point for many companies to begin
to computerize their overall production control where they are starting more or
less from scratch. Then the systems can be developed into a more sophisticated
version that provides continual updates of the various components and materials
requirements to match changing circumstances.
This enables better priority-setting and fine-tuning of shop-floor operations.
As well as managing material flows, these enhanced systems can allocate resources
(such as machinery and personnel) more efficiently. They can also include finan-
cial modules. Simulation techniques allow the examination of various ‘what if’
scenarios. Such enhanced systems are clearly more company-wide, being less
narrowly focused on production control. Indeed, their scope is so much wider
than the original concepts of MRP, that the guru Oliver Wight coined the new
term – MRP2 – ‘Manufacturing Resource Planning’. Later versions are known
even more grandly as ERP.
ERP is much more exciting because it allows you to work with clients, align-
ing their production planning with financial accounting and much broader stra-
tegic objectives. It also usually means a much longer-term (and more costly!)
relationship with clients. You read a recent study some years ago reporting a
large survey of 2000 ERP users that described the benefits and costs of ERP
systems. This showed substantial benefits. For example, performance on deliv-
ery promises increased from 61 per cent to 88 per cent and lead times reduced
from 71 to 44 days (almost 50 per cent). Typically paybacks begin within some
six to nine months of ‘going live’ with the software. It also found that average

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