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CHAPTER 3 The Four Critical Questions Answered 37

understand those dependencies and control them. By overflattening the BOM, companies
can actually lose visibility at both the planning and execution levels. Some companies
have had to reinsert a level in their BOMs in order to gain back critical leverage and
decoupling points. This will be discussed at length in Chapter 23.

Move to a Make-to-Order (MTO) Model

Some companies will attempt to address the forecasting issue by eliminating it totally
and any finished end-item positions entirely. This is possible only with a pure MTO strat-
egy. Referring back to the Wheelwright and Hayes product/process matrix in Figure 1-2,
this strategy is effective only in a job-shop environment that supports high-variety, low-
volume production. Attempting to use this strategy for low-variety, high-volume pro-
duction will spell disaster for the company as costs spiral out of control. Companies that
can employ this strategy will need carefully placed and controlled raw material and com-
ponent stock positions in order to stay competitive in terms of lead time and cost. Part 4
of this book will provide more detail.

“Dumbing Down” MRP
Finally, companies will “dumb down” the MRP system by eliminating some of the inte-
grated nature of its planning. The power of this technology is the rapid calculation of
requirements across complex interrelated BOMs. MRP at its core minimizes inventory by
planning only items that are needed when they are needed. By dumbing down the sys-
tem, those interrelationships and that precise timing are lost. The balance of this book will
discuss the necessary conditions for an effective material planning system in a demand-
driven environment.

QUESTION 3: THE MRP CONFLICT WITH LEAN OR PULL
Why do lean and other pull methodologies often come into conflict with MRP?
In addition to the rise in volatility and complexity referred to earlier, the prolifera-
tion of lean philosophies has put additional pressure on planning personnel and MRP
systems. The fundamentally different view of what is important in relation to inventory
puts lean advocates and planning personnel at odds. Many lean implementations
attempt to abandon MRP. This causes tremendous friction between planning personnel
and those pushing for that abandonment. Lean facilitators often see MRP as an overly
complex and wasteful dinosaur that simply doesn’t work in the demand-driven world.
Planning personnel, however, see it a completely different way. They understand that
without the ability to see the total requirements picture, critical blind spots then exist in
the planning process that lead to shortages and/or even excessive inventory positions.
They see the lean approach as a gross oversimplification of the complex scenarios that are
the “new normal.” There are three conflicts that tend to occur between lean and MRP.