What is The Difference Between MRP and MRP II?

Executive Summary

• MRP and MRP II are very different from one another.
• We cover the difference between MRP II and what MRP II is today.

Introduction

These two terms are highly connected terms with MRP proceeding MRP II. Oliver Wight popularized MRP II in the mid-1980s. Oliver Wight was already well-established in MRP decades before developing MRP II. He was a co-author, often with another MRP and overall production planning and inventory management guru, George Plossl. While Plossl will be first tethered to MRP, Oliver Wight will forever be associated with MRP II. Interestingly, Oliver Wight died a year after publishing his book on MRP II. Therefore, while Oliver Wight was the definitive developer of the concept, he did not live long enough to shape it as it rose in popularity. However, the consulting company that Oliver Wight founded is still in operation today.

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About MRP II

MRP II described a category of software. At first, there was stand-alone MRP software. Then, software vendors began adding extra functionality that, while connected to MRP, was not part of MRP.

MRP was an intermediate stage between MRP and ERP. The takeover of ERP systems by the late 1980s is a primary reason why no one speaks of MRP II systems, although the concept of MRP II is still sometimes discussed.

As with most ideas that become popular in supply chain management, what something is is a combination of the following:

• It’s actual features.
• How the item is expressed, which often has a lot to do with marketing

But first, we should distinguish between MRP II systems and MRP II concepts.

The Difference Between ERP and MRP

MRP II, being the basic footprint of what would become ERP, shows the difference between ERP and MRP.

The difference between ERP and MRP is quite straightforward.

• MRP is focused on production and supply planning.
• ERP is much broader. It contains MRP within it and adds sales and distribution, finance and accounting, and non-MRP materials management (things like stock transfer that MRP does not do). ERP systems often have a warehousing module as well.

ERP is rarely enough for all of a company’s needs. I have a book about why entities like Gartner, SAP, Oracle, large consulting companies, and many others proposed this back in the 1980s. This was proven incorrect as companies continued to use their legacy systems and ERP after ERP was implemented, then purchased more applications and connected them to the ERP system.

Oliver Wight and MRP II

In his 1983 book, the following are examples of the checklist criteria used by Oliver Wight Consulting to certify a company. This certification provided the company a “Class A for Business Excellence.”

1. Understanding and Analyzing the Internal and External Environment: A process exists to collect relevant information internally and externally to understand its products and services, marketplace, and the competition.
2. Company Capability: The company has a business process to understand all its business processes’ ability to identify the strengths and weaknesses of its offer to the marketplace.
3. Analytical Tools: An extensive use of analytical tools is made to identify business trends and opportunities and understand how the company responds to current and future needs.
4. Vision Statement: The vision statement is inspiring and memorable and summarizes what the company wants to become in the marketplace and community.
5. Supplier Quality: Supplier quality processes and improvement programs are monitored and reported to ensure integration with its quality systems.

As should be apparent, none of these criteria have anything to do with setting up MRP systems.

Other readings of this book show the overall process rather than the calculation orientation of manufacturing resource planning.

How Useful Were These Certifications

It’s hard to say precisely how useful these types of certifications were. But it is amusing to find this quote from George Plossl, who was a friend and co-author of Oliver Wight regarding the certification program at the time:

“Implementation (of MRP) was viewed as “getting software running on the computer” not as using the programs to run the business, so users were poorly prepared, incomplete systems were installed, and proper foundations were not put into place. Under qualified consultants aggravated this by offering to help install MRP II systems and reach in very short time “Class A status,” a set of superficial and systems related criteria more than operations-related requirements.”

Interestingly, some consulting companies must have been offering this Class A status at the time. However, Oliver Wight’s checklist does not focus on systems-related criteria and is more focused on higher-level types of criteria.

Why Did Oliver Wight Introduce MRP II?

MRP II was introduced based on the marketing platform that MRP had not achieved its objectives.

MRP II argued that the reason was that MRP was insufficiently integrated into other systems. And, therefore, to the rest of the business. And that it lacked some specific functionalities.

The quotation below explains this idea.

“By far, the  greatest single factor in ruining a perfectly good manufacturing plan is the tendency for the Demand Forecast to change on a regular basis, typically inside planning lead time. Or, the Demand Forecast may be completely useless for manufacturing  purposes, forcing the person responsible for the master schedule to literally generate  his own forecast in an attempt to predict what the demand actually will be. Often times, a combination of both of these conditions exists, where the marketing forecast is so inaccurate as to make it useless, forcing the master scheduler to perform this task of generating a forecast. And, without some kind of forecast, there is no master schedule. And, without a master schedule, there is no ‘M.R.P.’. Any ‘M.R.P.’ system without a demand forecast analysis capability is thus severely limited in its ability to  help reduce overall inventory and simultaneously meet the requirements of the production plan. After all, “Garbage In, Garbage Out.”” – What is MRP (I,II)

A More than 30-Year Problem

I don’t use this quote from Oliver Wight because I agree with it, but because it illustrates the arguments presented for MRP II by Oliver Wight at the time. Indeed, Oliver Wight has consulted at quite a few companies and had lived through the migration of companies to MRP systems.

Interestingly, 30 years after the introduction of MRP II, this problem persists.

Connecting a low-accuracy forecast to an MRP system through an integrated system does nothing to improve this prediction.

How Interchangeable are the Terms MRP and MRP II?

Most people that work in supply chain management are familiar with MRP or material requirements planning. MRP II, which stands for Manufacturing Resource Planning, is a term that was popular but is now rarely used. The issue is that sometimes someone will use the name MRP when they mean Manufacturing Resource Planning.

While MRP is contained within MRP II, they are not at all the same thing, and in fact, this is an easy area of confusion. In this article, we will unravel the history and differences between MRP and MRP II. Let us begin by covering MRP II.

The Focus of MRP II Versus MRP

While sounding almost precisely like MRP, MRP II or Manufacturing Resource Planning is not focused on the same things as MRP. Manufacturing Resource Planning more or less accepts MRP as a supporting capability — which is then extended with MRP II.

After spending many years consulting with companies on their transition to MRP systems, Oliver Wight introduced Manufacturing Resource Planning, who observed MRP system implementation limitations.

MRP II focuses on integrating MRP and the new functionalities of capacity planning and detailed scheduling.

MRP II, the concept, rather than the MRP II system, is more qualitative and focused on the process than MRP. For instance, Oliver Wight began a consulting company that certified companies in Manufacturing Resource Planning.

For instance, Oliver Wight began a consulting company that certified companies in MRP II. In his 1983 book, the following are examples of the checklist criteria used by Oliver Wight Consulting to confirm a company in Class A for Business Excellence.

1. Understanding and Analyzing the Internal and External Environment: A process exists to collect relevant information internally and externally to understand its products and services, its marketplace, and the competition.
2. Company Capability: The company has a business process to understand all its business processes’ capabilities to identify the strengths and weaknesses of its offer to the marketplace.
3. Analytical Tools: An extensive use of analytical tools is made to identify business trends and opportunities and understand how the company responds to current and future needs.
4. Vision Statement: The vision statement is inspiring and memorable and summarizes what the company wants to become in the marketplace and community.
5. Supplier Quality: Supplier quality processes and improvement programs are monitored and reported to ensure integration with its quality systems.

As should be apparent, none of these criteria have anything to do with setting up MRP systems. Other readings of this book show the overall process rather than the calculation orientation of MRP II. It is difficult to say exactly how effective these types of certifications were. But it is amusing to find this quote from George Plossl, who was a friend and co-author of Oliver Wight, regarding what was the certification program at the time:

“Implementation (of MRP) was viewed as “getting software running on the computer” not as using the programs to run the business, so users were poorly prepared, incomplete systems were installed, and proper foundations were not put into place. Under qualified consultants aggravated this by offering to help install MRP II systems and reach in very short time “Class A status,” a set of superficial and systems related criteria more than operations related requirements. Interestingly, there must have been a number of consulting companies offering this Class A status at the time – however, Oliver Wight’s checklist do not focus on systems related criteria and are more focused on higher level types of criteria.”

This issue persists today in supply chain software implementations and is what I refer to as an IT-centric implementation. All of this is why it’s more misleading than clarifying to speak of MRP II in the same sense as MRP. For instance, ERP contains MRP; however, one could never use the terms ERP and MRP interchangeably – but this is often done with MRP and MRP II. While this is not generally understood, this observation was made by George Plossl back in 1984:

“Practically all suppliers of MRP programs provide a comprehensive core-system package for manufacturing planning and control, including MRP, rough-cut capacity planning and capacity and shop floor control, plus many support programs for procurement design and process engineering, quality management, cost accounting and plant maintenance. Unfortunately, these are usually called “MRP II systems,” leading to confusion between MRP technique and the MRP system they represent. Sophistication of programming of these systems is also overdone. “The acronym (MRP II) was an unfortunate choice, causing confusion and generating more heat than light on he subject of improving operations.”

Plossl points out the confusing aspects of calling all these functions “MRP II” (shortly after, this same set of functionalities would be called ERP, a term coined by Gartner). But Plossl also makes the point about the sophistication of the programming being overdone –which, if you read other quotations by him, and which I cover in a separate article, is that this over-sophistication negatively impacts the implement ability of these (what are now referred to as ERP) applications. This is not a quote from 5 or 10 years ago but from 30 years ago.

Conclusion

There are still some companies where the terms and vocabulary and the much broader scope of MRP II are confused with the range of MRP. MRP II was introduced with a great deal of fanfare, and there are more books on MRP II than MRP. However, its actual impact is far smaller than MRP unless one translates MRP II into ERP systems, but in that case, we are talking about a great deal more than supply and production planning. In most cases, MRP II is far more confusing than helpful, and the point of this article was to have the reader put aside MRP II concepts when discussing MRP.

All of this is why it is more misleading than clarifying to speak of MRP II in the same sense as MRP. For instance, ERP contains MRP. However, one could never use the terms ERP and MRP interchangeably, but this is often done with MRP and Manufacturing Resource Planning.

While this is not understood, this observation was made by George Plossl back in 1984:

“Practically all suppliers of MRP programs provide a comprehensive core-system package for manufacturing planning and control, including MRP, rough-cut capacity planning and capacity and shop floor control, plus many support programs for procurement design and process engineering, quality management, cost accounting and plant maintenance. Unfortunately, these are usually called “MRP II systems,” leading to confusion between MRP technique and the MRP system they represent. Sophistication of programming of these systems is also overdone.

The acronym (MRP II) was an unfortunate choice, causing confusion and generating more heat than light on he subject of improving operations.”

Plossl points out the problematic aspects of calling all these functions “MRP II” (shortly after this same set of functionalities would be called ERP, a term coined by Gartner).

The problem with MRPII is that it put forward an illusory magic solution for supply planning. MRPII requires many adjustments from companies implementing MRPII, extensive new training, etc..

One of the best ways to understand MRP is by understanding its parameters. We have developed a Brightwork Explorer system designed to improve parameters and how MRP runs and can be used to better understand MRP. This allows for a higher degree of control and the average inventory to be coestimated to provide an observable total system inventory, holding cost, service level, and a picture of what is happening to the overall system. Calculating individual parameters like inventory without an appreciation for the systemwide does not make sense.