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A Time-Tested Technique

By Dave Turbide, CFPIM, CIRM, CSCP, CMfgE | July/August 2012 | 22 | 4

A Time-Tested TechniqueStudying the successes and shortcomings of material requirements planning

Material requirements planning (MRP) is the calculation of potential shortages and replenishment activity from the master schedule using the bill of material and inventory availability data. Developed in the early 1950s, the basic approach still is at the center of every enterprise resources planning (ERP) system more than half a century later. 

Of course, MRP has in fact changed over the years, benefiting from ever-increasing computer capabilities and the advent of new computational and programming techniques. But the world also has changed. In the 1950s and 60s, demand outstripped capacity—a company could release a new product, put it on the market in great quantities, and likely sell it. Today, it is more often the case that capacity is greater than demand, and competition is global and relentless. Customers tell manufacturers what they want, when they want it, and how much they are willing to pay for it. More variety, smaller individual product volumes, short lead times and product cycles, and intense pricing pressure are the characteristics of business. 

For many people, MRP doesn’t provide what they need. Alternatives and additions continually emerge to try to resolve this issue. Most notable among these is lean manufacturing—also known as the Toyota Production System—which relies on flow production and physical signals (kanban) rather than forecasts and software calculations. Lean manufacturing is an efficient and effective production management system where it fits the environment; but, it does not fit everywhere nor always provide the planning capabilities that are needed in fast-moving production situations. 

Recognizing that neither approach provides all the answers to effective production planning and control, some companies create a hybrid system combining the best aspects of MRP and lean. There have even been a few success stories in this regard, with a full MRP and ERP implementation supplemented by the use of lean and kanban for production control and material management. Many MRP software providers now even include flow production management and electronic kanban capabilities in their product suites.

Another strategy is to develop ideas and techniques to overcome MRP’s limitations and make it more responsive to today’s manufacturing realities. Demand-driven MRP, documented in the latest edition of Orlicky’s Material Requirements Planning, is one such approach. It incorporates traditional MRP, lean, and the theory of constraints, replacing MRP’s push-oriented approach with a “position and pull” execution strategy. 

Looking toward the future
After more than half a century of extensive use around the world, MRP still is the definitive solution for manufacturing companies—new approaches supplement the methodology, but they do not replace it. On the other hand, such initiatives emphasize that MRP is not perfect. 
The world continues to change, providing challenges and opportunities for manufacturers, management theorists, and software developers alike. Today’s enhanced solutions aim to address these challenges. As for tomorrow, we’ll just have to see what challenges emerge and how MRP enhancements evolve to meet them.

Dave Turbide, CFPIM, CIRM, CSCP, CMfgE, is a New Hampshire-based independent consultant and freelance writer and president of the APICS Granite State chapter. He may be contacted at dave@daveturbide.com

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