Why MRP Isn’t Fully Utilized
As we pay attention to trends across our clients and prospective clients, we are noticing a lack of understanding of why MRP (material requirements planning) isn’t being fully utilized as depicted in our article “Case Study in Fueling Productivity, Profitability, & Performance with ERP Optimization“. It seems as though it should be easy to “turn on” the ERP functionality, automate the bulk of the planning process to ensure the “right” products are in the “right” place at the “right” time at the “right” cost while also lessening the workload and speeding up the process. Planners want to ensure customers (both internal and external) get what they need and struggle to get the system to achieve the specific requirements while the ERP experts insist they should follow their “best practice” functionality (regardless of whether it is SAP, Oracle, Microsoft Dynamics or the like). The truth is somewhere in the middle.
Leaders are frustrated and want their planners to utilize their ERP system, automate with MRP and accelerate results. They worry about their employees being resistant to change and don’t want to see their planners managing multiple spreadsheets, running in circles to expedite to ensure shipments are completed, and not fully utilize (or even better utilize) their ERP functionality that cost millions. And, they want their planners to have a better work life balance without the constant rat race.
Planners are concerned about specific customer requirements as they know their key customer expects shipments on a certain day or a specific label or other requirement and don’t know how to get MRP to perform these tasks. They also know Operations expects to receive work order packets organized in a certain format that is surprisingly difficult to achieve in many companies or items sequenced in a specific order that won’t sort on their ERP screen or truckload quantities that won’t combine on their workbench. Planners also know that Finance expects them to utilize the optimal routing times as it could impact costs and minimize slow moving and obsolete inventory, yet they cannot see inventory implications on their screens. Thus, they develop processes that meet the requirements and go off-line and work extra hours if needed as Sales, Operations, Customer Service, Project Management, and Finance will be on the phone if anything goes awry. If they express concern, they might be seen as a problem We wouldn’t be surprised if every client saw their company in these examples.
What the Best Clients Do Differently to Achieve MRP Success
Our most successful clients realize that there is a gap between the planning team, the ERP experts, and what’s essential to satisfy customers and internal customers. It isn’t as easy as it seems. When it comes to planning, you are automatically at the center of competing priorities – customers, operations, finance, R&D, etc. To add fuel to the fire, you are also at the mercy of the ERP system’s functionality, its setup, quality of the data, and your ERP / IT team. On the other hand, if you do the job effectively, it looks “easy”. It is only when balls start falling in the planning juggling act that the issues are exposed. Typically, the planners don’t know how to communicate the issues. In the best companies, someone (planner, leader, sponsor) sees the situation, knows how to explain the problem, and will design the process upgrades and roll out the appropriate ERP and related technologies and/or automation tools to consistently deliver success. Or, they will find resources to help.
Although we’ve seen wide ranging situations requiring simple fixes, reallocation of work, upskilling, process upgrades, extensive ERP utilization, and the creation of automation tools, the most successful clients do several things differently than the masses. They will focus on the following priorities:
- Providing supporting resources: In addition to hiring supply chain consultants to provide support and accelerate progress, they will also temporarily reallocate resources, hire temporary employees, jump in to perform detailed tasks to support and fully understand the needs, invest in training and education, etc.
- Not making assumptions: We have found that some of the best planners are seen as the largest complainers because they want to ensure success and are worried it won’t occur. Thus, instead of overreacting to what might appear like a problem employee, the best leaders dig into what’s really happening and help bridge the gap. On the other side, they do not overreact to what the ERP supplier might say. Whatever the ERP supplier is recommending might be accurate or it could be true if the client happens to follow the exact step-by-step process that the system requires, or it could be completely incorrect in the situation. ERP experts understand functionality but are not typically process experts.
- Focus on aligning the process & system: This is the 80/20 of the technical details. In 99% of our client situations, the daily requirements of the job don’t equal the step-by-step training received on MRP. Thus, the trick is to align the daily requirements (which might require push back) with the process, the use of ERP functionality, and the data. For example, refer to the case study in our article, Planning & MRP Upgrades to Support Revenue Plans and Proactively Plan Capacity.
- Accompany with education: Education is different than training. Training provides step-by-step information on how to perform a task. Education explains the why, the impact, etc.
- Perfection is not the goal: No client achieves perfection in terms of utilizing MRP, cleaning up data, etc. Instead, the focus should be on getting directionally correct results as quickly as feasible.
- Automate what makes sense only: A bit of uncommon common sense will go a long way. However, almost every client gets into a rut at some point in thinking they must fully utilize ERP functionality and not use accompanying tools including Excel. Each tool has a purpose and time. For example, of course, you could automate everything. However, why would you if it costs $1 million to save $100? With that said, technologies change frequently and be careful not to get married to your current process because it is “easier” currently. Do what makes sense and re-review frequently.
When clients utilize these simple yet hard-to-implement approaches, they have dramatically improved service levels from 40 and 50% to the high 90%’s, reduced 40-50% of inventory without an impact on service levels, and improved profitability, efficiencies, productivity, etc. Additionally, equally important and sometimes more importantly, they accelerate results and speed up the order fulfillment process and grow the business. MRP will also feed a SIOP (Sales Inventory Operations Planning) process to proactively address the strategic decisions such as make vs buy, reallocation of production, and lead time, pricing and product rationalization strategies.
Give these ideas a try, utilize uncommon common sense even when it is not popular, invest and educate in success when others panic, and tailor your MRP system to work for you and your customers. Bottom line business results will follow.
If you are interested in reading more on this topic:
Material Planning Best Practices to Proactively Manage Cost & Service