Page 44 - Orlicky's Material Requirements Planning

C HAP TE R 3

The Four Critical

Questions Answered

QUESTION 1: RELEVANCE OF MRP

Is manufacturing requirements planning (MRP) still relevant in an industrial world
obsessed with supply-chain management and enterprise resource planning (ERP)?
At the core of every MRP application is the calculation designed to tell companies
what they have, what they need to make and buy, and when they need to make and buy
it. If this were the only definition for MRP, then the answer to this question would be
obvious. MRP may not be perceived as leading edge at this time, but accurate answers to
the simple questions of what a company has, what it needs to make and buy, and when
it needs to make and buy it can spell the difference between success and failure for any
company. When taking into account the increased complexities in the twenty-first centu-
ry, the failure to answer these questions accurately will cause a company to fail more
quickly. In this case, “failure” is not necessarily bankruptcy. It is often a difficult middle
ground where some companies perpetually teeter on the brink without actually failing,
whereas others are also-rans that never can break their way into sustained growth.
In reality, MRP is critical and more relevant than ever. Unfortunately, the truth is
that the core MRP concepts and rules around them have been neglected and left to stag-
nate for a long time. In addition, there is a complete lack of understanding that this stag-
nation is even a problem. Many newer operations approaches even advocate abandoning
MRP completely. Some lean and theory of constraints (TOC) implementations measure
their success by unplugging the formal MRP system.
In the last 50 years, there has been a revolution in logistics costs and management.
Consider that the first container ship was introduced in 1955. The cost to load one ton of
1
cargo in 1955 was $5.86. Today, the cost to load one ton of cargo in a shipping container
is 16 cents. At the same time, communication technology has evolved dramatically. In
1915, Bell’s first transcontinental call from New York to San Francisco took 23 minutes to

1 Intermodal Steel Building Units, American Association of Port Authorities.
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