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Material Requirements Planning

Materials Requirements Planning 

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If you didn’t notice, for the first time our number 
of subscribers has dropped. This occurrence was 
anticipated as I have been forced to drop my “pay-4-
clicks” advertising due to a negative return on 
investment. Consequently, my Web site traffic has been 
temporarily reduced and that results in less signups 
for the Business Basics & Best Practices Bulletin. 

I am currently working on restructuring my Web sites 
to be more Search Engine friendly and that should 
increase the number of visitors. Like any Internet 
business, my e-Tutorial business has had its ups and 
downs and profitability is always a “front-burner” 

That said, I could use your help. If you have gained 
competitive knowledge from any of my writings, please 
encourage your business customers, suppliers, and 
association members to subscribe to our BB&BP Bulletin: 

Signup-link: http://bbasicsllc.com/subscribe 

Your help will be appreciated. 

If your company is having problems with the integrity 
of their MRP or ERP systems, don’t miss reading this 
week’s article. “A MRP/ERP Wake Up Call!” It comes 
from my Web site’s archives file. 

Have a nice day, keep the faith, and stay connected.

Bill Gaw
Business Basics, LLC


First, let me assure you that I do not recommend that 
companies abandon their MRP/ERP systems altogether. I 
accept that MRP/ERP are good systems for calculating 
time phased requirements and providing long range 
inputs for purchasing parts and capacity planning. 

However, when it comes to detail scheduling, marginal 
data input integrity causes MRP/ERP systems to create 
far too many rescheduling actions that can cause a shop 
floor to lose control of day-to-day activities. This 
schedule instability is human driven and not a system 
design problem. 

The MRP evolution took us down the road of computer 
sophistication. It was to be the panacea for solving 
all manufacturing problems. Little did we know that 
when we finally arrived at the final phase---ERP---
we would still be facing daily parts shortages, shop 
floor chaos and end-of-the-month scrambling. What 
happened to all those “salesmen” promises?

MRP/ERP at first look, are not complicated systems. 
We input a master schedule that uses bills of material 
and parts procurement lead times to calculate gross 
requirements. These requirements are then balanced 
against the aggregate of on-hand inventory, work-in-
process and open purchase orders to determine the net, 
time phased requirements. The resultant is subjected to 
lot size algorithms and planned orders are created. 
(The final output is notification to planners in the 
form of action messages to either reschedule, reorder, 
or cancel shop and/or purchase orders.) 

If we go deeper into what is happening in the gross to 
net requirement process, we find that many calculations 
are made based on the data and systems parameters 
supplied and maintained by planners. While a computer 
is flawless in its ability to calculate the answers, the 
data supplied by the planner is not. Consequently, the 
answers are subject to human error.

In our "ShowTime!" ( http://bbasicsllc.com/showtime.htm )
presentations we do an exercise in statistical 
probability. Each participant writes down what he/she 
knows (or guesses) to be the percentage accuracy of 
their company's master schedule input data. To arrive 
at the aggregate input accuracy of the master schedule, 
they convert the percentages to decimal equivalents 
and multiply each to the other. (Statistic probability 
is not the averaging of the decimals, as many people 

Using the same statistical probability approach, the 
resultant decimal is used as the master schedule 
accuracy input into the requirements planning step to 
calculate a shop order launch accuracy. An accuracy 
level of 0.70 or 70 percent (70%) is quite common and 
indicates that their order launching and rescheduling 
efforts are based on a system error of 30 percent. Is 
there any wonder why MRP and ERP are not the panacea 
we once thought them to be!

An effective method for evaluating how well a company 
is doing in managing their MRP input data is to ask 
questions as to how accurate are their bills of 
materials, how accurate is their purchase order status, 
how accurate are their inventory records, etc. If the 
answers you get are vague, like---good, OK, not too 
bad---then you know that this is a company that needs 
help in stepping up to the problems of poor information 

If a company is not measuring their system's data 
integrity, ( http://bbasicsllc.com/BB-II.htm )nor in 
constant pursuit of continuous improvement, then their 
results will always be poor and their production 
environment will surely produce shop floor chaos and 
late deliveries to internal schedules and to customers 
delivery commitments.

For a measure of MRP/ERP shortcomings, one needs only 
to spend some time in a manufacturing facility ---
especially during the last weeks of the final financial 
quarter. In a typical company, you'll find that 
converting the quarterly financial forecast into 
reality still requires overtime, internal/external 
expediting, last minute on-the-run product changes and 
even a little smoke and mirrors. Results are scrap, 
rework and warranty costs that negatively impact a 
company's bottom line performance. 

In addition, marginal quality and late shipments 
deliver less than acceptable customer satisfaction. 
Companies that have spent thousands of dollars in 
pursuing MRP/ERP are devastated when they experience 
a business decline due noncompetitive pricing caused 
by uncontrolled operating costs. Is there a solution? 
Certainly, I call it Kaizen Based Lean Manufacturing™.

Kaizen (pronounced Ky'zen) is the Japanese word that 
means gradual, continuous improvement. In my experience, 
managing a continuous improvement project is difficult 
but a kaizen program presents a unique challenge. The 
kaizen program has no end. It is sustainable and 
successful only when management has made a commitment 
to keep the faith and stay the course --- discipline 
and tenacity are basic requisites for kaizen success. 

Kaizen Based Lean Manufacturing™ (KBLM) is a proven 
methodology that employs practical tools and techniques 
that optimize manufacturing performance and helps 
companies to consistently exceed performance 

KBLM involves arranging and defining manufacturing 
resources so that products flow most efficiently through 
the manufacturing process. Today, most manufacturing 
companies are still organized for functional 
manufacturing---mechanical assemblies, electronic boards, 
cables, machined components and purchased parts are 
produced or purchased in lot sizes and received, 
inspected and moved to stockrooms. 

This process includes the "picking-of-parts" to fill 
shop orders and the movement of shop orders to the 
production machining and assembly build areas. When 
the parts are completed, they are returned to the 
stockroom to be "picked" for the next higher assembly 
shop order. 

Finally the end product is "picked", assembled, tested 
and accepted. KBLM eliminates all the non-value-added 
tasks in this "order launch and expedite" system ---
the result: A significant increase in quality, speed 
and profits.

No matter how much computer sophistication is added to 
shop floor control systems, if we fail to master the 
8-Basics of KBLM, we will never eliminate the chaos that 
grips our shop floor day-to-day activities!

If your company is having similar problems with their 
MRP/ERP systems. please explore in detail my e-Tutorial, 
“Kaizen Based Lean Manufacturing™”

My e-tutorial transfers unique, “how to move from MRP 
to lean manufacturing” knowledge. It provides a 
foundation for optimizing manufacturing performance 
and enables companies like yours to exceed their growth 
and profit expectations. 


* Learn how to become a lean manufacturing champion 
* Transform your work environment from drudgery to 
* Minimize your day-to-day stress level 
* Become a master of the 8-Basics of KBLM
* Gain recognition, promotions and salary increases. 


* KBLM will optimize MRP/ERP and lean manufacturing 
* KBLM will eliminate the high cost of shop floor 
* KBLM will put an end to costly end-of-the-month 
* KBLM will increase speed, improve quality and lower 
operating costs 
* KBLM will contribute to "bottom-line" performance. 

For a detailed review of this e-Tutorial and our 
special Internet offer, go to: 



To preview twenty 1-2 hours PowerPoint® Training Presentations on CDs with expert commentary by Bill Gaw, click below:

World Class Manufacturing Training


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6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596