February 04, 2008

Hi MBBP Subscriber,

If you’re still scheduling your factory and suppliers with outputs from a Material Requirement Planning System (MRP), you most likely are experiencing the costly and stress generating "End-of-the-Month Crunch."  

It wasn't until late in my manufacturing career that I became aware of the need to get MRP off the shop floor and out of scheduling short-term procurement requirements. Lean manufacturing techniques i.e. sequential production,  point-of-use logistics. and team empowerment became my new paradigm for exceeding company performance expectations. 

Today's MBBP article is entitled, "A MRP/ERP Wake Up Call." If you’re having problems coping with forecast errors, inside of lead time order placements, engineering changes and nervous material requirement scheduling, be sure to read this week's article..

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

Bill Gaw
bg@bbasicsllc.com 
760-945-5596

A MRP/ERP WAKE UP CALL! 

First, let me assure you that I do not recommend that companies abandon their Materials Requirement Planning/Enterprise Resource Planning (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 Evolution

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. 

MRP/ERP Shortcomings

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, it's called lean manufacturing. 

A Proven Methodology

Lean manufacturing is a proven methodology that employs practical tools and techniques that optimize manufacturing performance and helps companies to consistently exceed performance expectations. 

Lean manufacturing 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... Olie Wight was first to call this methodology "Order Launch and Expedite."  

Order Launch and Expedite Mindset

Lean manufacturing eliminates all the non-value-added tasks in this "Order Launch and Expedite" system... the result: A significant increase in quality, speed and profits. So why is it that so many companies are still band aiding their MRP/ERP systems and living with marginal success.  

The answer: Its root cause is an existing "order launch and expedite" mindset and a MRP/ERP management paradigm that prevents a company wide commitment to lean manufacturing implementation.   

If your company needs help in implementing and/or optimizing its MRP/ERP and lean manufacturing efforts, have your manufacturing leader checkout our Lean Manufacturing, Back-to-Basics, PowerPoint Plus, e-Training Package. It can be reviewed at: 

http://bbasicsllc.com/kblm.htm

NEED HELP IN CHANGING YOUR TEAM'S PARADIGM? 

To address this need, I developed "ShowTime!" A set of manufacturing simulation exercises that demonstrate the pros and cons of MRP/ERP vs. lean manufacturing.  

ShowTime exercises are helping manufacturing teams:

• Identify the shortcomings of MRP/ERP

• Understand the power of flow technology

• Effect a paradigm shift from MRP/ERP to lean manufacturing

• Gain company-wide commitment to lean manufacturing

• Step up improvements in quality, speed and cost reductions

• Eliminate shop floor chaos and "end-of-the-month" scrambling

• Earn relevant recognition and rewards.

ShowTime is an intensive, participative, action learning experience providing a lean manufacturing wake up call for MRP driven manufacturing teams.  

Companies that understand and implement the concepts demonstrated in SHOWTIME consistently outperform their competitor. SHOWTIME provides an effective methodology for identifying and achieving a company's full growth and profit potential.  

For full details of "ShowTime!" simply click on the below link: 

http://bbasicsllc.com/manufacturing-simulations.MBBP.htm

Sharing the Knowledge

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