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CHAPTER 2 MRP in the Modern World 15

But do these approaches meet the required need for effective planning? In most
manufacturing environments, they are grossly inadequate. This is why the conflict is so
severe and the impact so significant. The things we do for planning hurt our ability to be
flexible, whereas the things we do to be flexible disregard certain critical planning
requirements. In many lean implementations, a stated project objective is to eliminate or
disable the material requirements planning (MRP) system. There will be more on this
specific conflict around the use of MRP later in Chapter 3.
In order to effectively resolve this conflict, a solution must be deployed that allows
companies to plan effectively while maintaining or increasing flexibility. Most global
manufacturers, enterprise resource planning (ERP) software companies and manufactur-
ing consultants seem to ignore the obvious path to the above-stated solution require-
ments. Instead, the most common approach is to chase symptoms and propose incom-
plete and even disastrous solutions that either overcomplicate or oversimplify planning,
execution, and control systems with less than desirable results.

KEY QUESTIONS FOR PLANNING
AND FLEXIBILITY
The key questions to be answered with regard to planning and flexibility are

1. How do we minimize or eliminate shortages? Shortages cause problems in manu-
facturing. Any person who spends even one single day in operations knows
this fact. When those shortages are chronic and frequent, they can cripple a
company’s service and financial performance. Frequently, shortages result in
additional spending for overtime and expedited freight, cause scheduling devi-
ation and general chaos, and jeopardize service levels. In a time when customer
tolerance times are shrinking, controlling shortages becomes even more crucial
to a company’s sustainable success.
2. How do we keep production lead times as short as possible? As mentioned earlier,
customer tolerance times are shrinking. In order to stay lead-time-competitive
and minimize the amount of inventory required to do so, companies are under
constant pressure to compress manufacturing and purchasing lead times.
3. How do we keep working capital (materials and manufacturing assets) synchronized
with demand? Companies are striving to minimize inventory positions while at
the same time provide a high level of service. Defining this kind of strategy is a
smart business move no matter what the climate. In the best of times, it means
a significant return on average capital employed (RACE), and in the worst of
times, it minimizes the company’s exposure to downturns and recessions.

DEALING WITH VARIABILITY

The answer to these three key questions resides in understanding and protecting against
variation and volatility within both the manufacturing enterprise itself and its supply