The Weak General Knowledge of MRP Systems

Executive Summary

• MRP is far less understood than is generally known.
• We cover the common reasons for this knowledge gap.

Introduction

When MRP systems, which stands for Material Requirements Planning, were first implemented, they were stand-alone systems. But in the 1980s, most of the MRP vendors were purchased by and incorporated into ERP systems. What has evolved far less since MRP was first introduced in companies in the 1970s and primarily the 1980s has been the common understanding of MRP.

Our References for This Article

If you want to see our references for this article and related Brightwork articles, visit this link.

The Understanding of MRP

It is remarkable to me that, at this late date, MRP is often so poorly understood by the people that both work in it but also manage MRP systems. MRP, and by extension DRP (DRP is based upon MRP), is very simple. And the fact they are still not adequately understood is quite a stinging critique of companies’ ability to train their employees and organizations like APICS to provide elementary education in supply chain management.

However, this criticism extends to universities that both offer too few supply chain programs and do not cover major procedures like MRP. It isn’t easy to see why every student of the supply chain should not have had exposure to an MRP system or to have the opportunity to create and adjust a plan by the time they graduate. However, even if this were to occur, the vast majority of people working in supply chain planning have no formal education in the topics in which they work. Many lack the math confidence to excel as planners.

The Under-education of MRP

The question over what degree to teach vocational versus higher-minded topics is a long-running debate. However, there is little doubt that supply chain management is a greatly under-taught topic compared to other business topics. When one looks at the number of available marketing positions versus the number of open supply chain positions, many more people study marketing that ends up in marketing than those that study supply chain and end up in supply chain management. Of course, marketing is more glamorous and also tends to pay better.

Generally, the more technically advanced people working in the supply chain tend to be engineers and are often not trained in supply chain concepts. The closest engineering area to the supply chain is industrial engineering, although I have frequently worked with electrical or mechanical engineers in my consulting career. A vast area of employment, which has hugely few people who have any educational background in the topic, is about as good evidence that I can provide a poorly designed educational policy.

Who Manages the Policies of the Supply Chain Systems?

I am sorry to say that many Directors and Vice Presidents have only a cursory knowledge of the MRP systems they are managing. However, this is not the only problem. Suppose someone were to come to me and ask if person XYZ were the right person to control a planning group. And they were to tell me that this person had a good knowledge of the technical aspects of demand planning, supply planning, and production planning and further that they were savvy in supply chain software and able to manage people, I would still have another question, and that question would be…

“Do they have the confidence and a demonstrated history of pushing back on bad ideas?”

This is because they will be repeatedly asked to make decisions to improve short-term metrics, which will ultimately undermine the planning process. At many companies across the US, Vice Presidents and Directors in the supply chain are interfering with planning decisions and having their planners meet antiquated planning targets or reactively flush inventory to meet short-term objectives.

Suppose the individual who controls policy in supply planning systems cannot push back on the constant churn of what are often silly ideas of corporate directives (often promoted by consultants). To do this or that to service levels and inventory levels based upon meeting quarterly results, or the flavor of the month of philosophies, they will not be able to maintain a sustainable system even if they have excellent supply chain system domain expertise. The fact that a rather simple procedure (MRP), which was first developed back in the early 1960s, is still not managed very well is perplexing. Perhaps this is not much discussed, that as a society, we don’t like observing things we don’t do very well. We have many supply chain Directors and vice presidents who still say something like “let’s forecast every day to improve working capital” is unfortunate, but we can feel better if we don’t focus on it.

The fact is, no organization can move to more advanced methods until they have mastered the techniques below them. Of course, the first step to improving something you are not very good at is admitting that it is a problem.

The Black Box Effect of ERP Based MRP

One reason for this is that the way an MRP ERP system is implemented tends to be a black box.

It is a rare ERP system where much thought has made the MRP ERP system screens usable. By usable, we mean where the system’s output can be reviewed efficiently by planners.

Conclusion

MRP is not anywhere near as well understood as it should because, in our view, there is little investment on the part of companies to teach MRP to the people that work with MRP. Secondly, they often rely on consulting firms with little interest in performing knowledge transfer to their workers.

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 understand MRP better.