Page 49 - Orlicky's Material Requirements Planning

30 PART 1 Perspective

manner (rules and tools) in which conventional MRP plans and manages these stock
positions creates the problematic undesirable effects detailed in Figure 3-2.
Most MRP systems are driven by a master schedule driven by a forecast. This plan
can be developed through an interactive sales and operations process (see Chapter 19),
but it is still a best guess at end-item requirements. Using the forecast to drive require-
ments creates, by definition, a push-based system. This is frequently in error and conflicts
with the proliferation of demand-driven or pull-based approaches, methods, and tools.
Companies that use forecasting to drive MRP while at the same time using demand-dri-
ven/pull-based techniques to execute often have a push-versus-pull dilemma. This
4
“results in a constant tension between the supply side and demand side.” This tension
creates misalignments, and the misalignments generate massive amounts of waste.
MRP is fundamentally only a planning tool. Problems tend to be identified only
after they have risen to the surface. There is little or no visibility of potential problems or
what constitutes the actual execution priority. This lack of visibility creates a critical gap
in today’s more complex supply-chain scenarios. Companies are now beginning to real-
ize just how important this type of visibility is. A survey of 209 companies in 2009 by the
Aberdeen Group concluded that:

. . . 57 percent of respondents indicated that Supply Chain Visibility (SVC)
was currently a high priority for improvement with an additional 28 percent
indicating it was a medium priority. Increasing visibility is a critical strategy
for enterprises aimed at reducing costs and improving operational perfor-
mance in the context of their complex and multi-tiered global supply-
demand networks. 5

Most experienced planning personnel are not blind to the shortcomings of MRP.
These have been discussed for years at APICS meetings. However, these shortcomings
have been further exacerbated by the variability and volatility of today’s hypercompetitive
and hypersensitive environment. Materials and production control personnel often find
themselves in a dilemma regarding their MRP system. There are powerful aspects of MRP
that are still relevant and necessary. The need to be able to plan complex product structures
across a complex supply chain well in advance of customer demand means that some
aspects of MRP are even more relevant today than when they were conceived 40 years ago.
Companies desperately need visibility within today’s more complex planning scenarios.
At the same time, using MRP does not provide the flexibility to be responsive to
actual market requirements and consumption. Ignoring these shortcomings has disas-
trous consequences in today’s environment. Every person faced with materials planning
under these circumstances is forced to find various, often unsatisfactory and incomplete

4 Aberdeen Group, “Order-to-Delivery Excellence: Linking the Demand Chain with the Supply Chain,” Boston,
2009, p. 1.
5 Bob Heaney and Viktoriya Sadlovska, Supply Chain Visibility Excellence; Reduce Pipeline Inventory and Landed Cost
(Boston: Aberdeen Group, 2009), p 4.