Mark Edmondson from Lean Affiliates and Mark Graban have been hammering away at the latest whiz bang variation of MRP, calling it another "siren song" for manufacturing. For those a little light on their Greek literature, the sirens were a devious bunch of women with beautiful singing voices, and they would lure passing sailors to venture closer to hear the music, only to find that they had been suckered into steering the ship right into the rocks, where it would crash and sink. To see the boys over at Lean Manufacturing Blog’s sarcastic, cynical comments (imagine someone writing in such a tone in a serious manufacturing blog!), drop down the page to "First the V-Pill; Now Its the V-Chain".
They are right, of course. Joe Orlicky and Ollie Wight lured American manufacturing onto the rocks with MRP in 1961, and we have been foundering on them ever since. Originally, MRP stood for ‘Material Requirements Planning’. A few years after Orlicky put the first system into a JI Case plant in Moline, Illinois, the system was tweaked to add capacity planning, and it has remained unchanged since. Later on, the whole system was tied into cost accounting, and renamed MRPII, and the initials now stand for Manufacturing Resource Planning. Finally, the tentacles grew deeper into the company and the whole mess was renamed ERP – Enterprise Resource Planning. Through it all, though, the heart of the system has remained unchanged since Joe and Ollie laid it all out during the early days of the Kennedy administration.
In order to understand MRP, conjure up all of the core principles of lean manufacturing in your mind – then picture the opposite. You will have a good grasp of MRP logic. Taichi Ohno used the analogy of manufacturing being like a river full of rocks. The water level in the river represents inventory and the rocks represent manufacturing waste. The aim of the Toyota Production System, says Ohno, is to continually drop the water level and expose the rocks, so they can be eliminated. The rocks of poor quality, long set up times, poor factory layout and so forth all must be eliminated to turn the factory into a smooth, rapidly flowing stream of production.
MRP, on the other hand, is designed to make it easy for factories to plug in the size and location of each rock, then turn it over to the system to assure that there is always enough water to keep every rock covered. It is built around lot sizes that assure set up times and costs are spread out over so many units they become insignificant cost elements; the user inputs yield percentages to generate enough extra production to assure that lousy quality doesn’t get in the way of shipping; it helps to assure that there is enough inventory everywhere in the process to keep all of the manufacturing waste hidden from view.
While the sophisticated systems peddled today as ‘necessary’ for every serious manufacturer have whistles and bells Orlicky and Wight could not have imagined, they still drive manufacturing exactly to their 1961 vision. The enhancements to MRP have been in hardware, not software. Joe and Ollie would be flabbergasted to see desktop machines running MRP. The original was run on a computer the size of a comfortable home called an IBM RAMAC 305. (Check out this cat running an IBM RAMAC machine and you will have a good idea just how state of the art MRP is) For that matter, RAMAC stood for Random Access Method of Accounting and Control. The factory people had to know nothing good could come from introducing more ‘accounting and control’ into the factories. At any rate, once the MRP crusaders got over their amazement at hardware, however, they would feel right at home with the logic.
MRP was useful – even necessary – under the manufacturing philosophy of the day. Trying to become lean using a 45 year old manufacturing tool won’t work, however. It is a lot like a world class, Olympic sprinter who breaks her leg. Sure, she is going to need crutches until her leg heals. But she better get rid of the crutches eventually if she thinks she is going to get to the Olympics. MRP was a great crutch for factories bloated with inventory, cranking out dismal quality products in the 1960’s. Nobody is going to keep up with Toyota using MRP, however.
As info, Toyota uses MRP for planning – it still does a great job there, especially for capacity planning. But there is no sign of MRP in their factories. You have to go to an American plant to see the relics of Orlicky’s thinking in serious action.
Computer systems are great tools – not panaceas. The siren singing of a system that does it all sounds almost as sweet to American manufacturers as the siren singing Chinese love songs. The manufacturers that follow all end up on the rocks, however. I read somewhere that American manufacturers can be expected to compound the waste in their factories with over a billion dollars of additional waste in the next year for MRP systems. I wish them all good luck as they head off to battle with the truly lean manufacturers armed with their half century old arsenal.
Blogger’s Note: It pains the author to have to admit that I am an APICS certified MRP wizard and have led a number of companies down the road to ruin with MRP, and induced many more to self-destruct as a result of my lectures and articles in various APICS forums. I have fully recovered from my addiction to MRP and I can only beg forgiveness for all the harm I did early in my career.
An Even Better Note: Mark Edmondson has submitted a couple of links to two great articles on this topic in the Lean Executive Newsletter. As a former peddler of this stuff, he is an even worse sinner than I am. His observations are worth checking out.
Ken Craig says
Great article! My experience in implementing Lean manufacturing into organisations is that ERP/MRP belong either side of the shop floor – not ON it. It is a big task to get it, and the ingrained cost accounting thinking out of the way.
Mark Graban says
Thanks for the mention, here is the direct link to the article:
http://kanban.blogspot.com/2005/12/first-v-pill-now-its-v-chain.html
Karen Wilhelm says
One of the results of MRP is a bonanza for Microsoft Excel. People on the plant floor are running around with do-it-yourself spreadsheets to circumvent the plant scheduling inadequacies of MRP.
Bill Waddell says
That ought to be a pretty clear sign that MRP has some serious flaws – the ‘How To Become Lean With MRP’ literture is increasingly full of work-around tips, mostly using Excel and Access, as Karen points out.
Mark Edmondson says
Bill, You may also be interested in two articles, “Confessions of a Recovering Software Sales Executive” and “The Sirens’ Song of Enterprise Software” found in this issue of “The Lean Executive”:
http://www.leanexecutive.com/LeanExecutiveVol1Issue2.html
Jim says
An interesting post, it is understandable why serious lean people want to throw the computer out of the shop floor. ERP/MRP II systems do have a place (care to do cost rollup calculations or process WIP issue and receipt transactions by hand?) and can still accomplish lean initiatives by using tools like Kanbans.
How often do you hear Just In Time, or zero inventory (which does not really mean _zero_ inventory) anymore? Methodologies, like lean, that are proven to work but can be improperly interpreted or not fully understood.
I think the main concept companies don’t realise that (something Oliver Wight preaches) can result in a failed or stalled ERP system; the factory is comprised of people processes that are made possible with or augmented by the computer system.
-Jim
http://www.mrp-two.com
Bill Waddell says
Jim???
Cost roll ups? inventory transactions? That is accounting stuff – not manufacturing. You are suggesting we need all of that shop floor paperwork, APICS certified MRP, massive file maintenance chores and a blizzard of work orders to open and close , clogging up and slowing down the factory floor for no benefit to manufacturing. It is all just to do the accountants work.
We are using a 45 year old, obsolete, expensive manufacturing system to do accounting on the factory floor…and wondering why it is so hard to become lean.
You’re making my point, buddy
Mark Hanna says
In many companies MRP is the way things get done and for such companies throwing out MRP from one day to the next is not an alternative. I wish I could live in a lean ivory tower and spend all day rubbishing MRP but I don’t have time.
The way forward for many manufacturing people who have to work with MRP is to justify lean modules within MRP and get things changed at a pace the organisation can handle.
Lean is under pressure from other areas as well as MRP. The extra control and segregation of duty required by Sarbanes-Oxley is reducing empowerment and lean capability as we speak.
Bill Waddell says
Yep – in most companies MRP is how things get done, which is a big obstacle to those companies becoming lean. I only clambered up here into the ivory tower after spending ten years putting MRP systems in, then another ten taking them out.
Sounds like you have a lot of your career invested in MRP, Mark. You’d be surprised how easy it is to get rid of it. I’ll be glad to come out of the tower for a couple days and show you how.
The Sarbanes-Oxley issues are real, of course, but have no bearing on the fundamental obstacle MRP presents to lean manufacturing.
Ralph Woodhead says
Having experienced the evolution of MRP1/MRP2/ERP first-hand, I recommend that the 2 in MRP2 be considered as ‘shop floor control’ rather than cost accounting and can be replaced by the visual control systems in Lean. If Bills of Materials can be flattened, and supply lead times reduced, then MRP1 is also replaced by Lean.
It’s interesting to think that an MRP1 system driven by actual sales, without the safety buffers and no batching, becomes a pull system not a push system!
Ralph
Len Dube says
This Blog and the accompanying supporting comments do a good job of illuminating one of the true reasons why Toyota leads the way and will likely enjoy their advantage for a long time: lack of imagination, or the application thereof, from their Western counterparts. MRPII and lean are not inconsistent or even contradictory. Imaginative sorts learn how to meld the software antics of one with the desired results of the other.
One respondant mentioned flattened BOMs; that’s one example of how to work within the confines of the software’s ‘logic’ to your advantage. Accompany that with a backflush of inventory using a simultaneous ‘autoissue-and-consume’ transaction when the unit is done, all in turn facilitated by point-of-use stock to eliminate the wasteful stocking-and-kitting exercise. In fact, many modern M/ERP packages support this sort of functionality built-in right out of the box. And don’t forget that if set-up times are zero, and proper planning flags are set, MRP will drive lot sizes of 1, not many. But you first have to recognize the importance of eliminating set-up time, as have our Japanese counterparts, as a driver of lean flow.
Don’t get me wrong here, many MRP ‘solutions’ are not ideal for a truly lean enterprise and I too have become, of necessity, an Excel-Master. But it also doesn’t have to be the show-stopping obstacle suggested. When it is, it’s a clear indicator of upper management’s misunderstanding of what lean truly is: a total overhaul of the corporate culture; one where results and bottom-line profits follow an ideology that puts customer and the supporting processes first. Anything less reflects their substitute belief that lean is yet another ‘management-silver-bullet-initiative’, proven through their reluctance to lead change through changes in their own behavior. Uncomfortable with having to learn new reports, or ‘manage’ any differently than before, they are strangling the willing through their own ‘business -as-usual’ inertia. THAT, and not MRP software, is the true reason why Toyota willingly schools anyone from the US who wants to learn about their TPS. They are decades ahead of us in terms of internalizing lean culture as their core corporate value system and know that our cultural inertia will forever keep us behind.
Ray Karaffa, CPIM says
I’d just like to say that your article is the biggest bunch of hogwash I have ever heard regarding MRP, MRPII or ERP. I’ve been involved with MRP (Material Requirments Planning) and MRPII (Manufacturing Resource Planning) for over thirty-five (35) years now. By the way, you should remember from your APICS certification studies that MRP has not now or ever been renamed. MRPII or Manufacturing Resource Planning is the evolution of the manufacturing system and still utilizes the MRP (Material Requirements Planning) engine as it did way back in 1961.
Ollie Wight should be rolling over in his grave based on what poeple like you have done to this essential manufacturing technique.
I have worked for quite a few manufacturing companies and am now working for one who is in the process of implementing an SAP ERP system throughout all of Aerospace. I must say that during my thirty-five years of working with MRP systems, I haven’t found one yet that is a Class A, B or C implementation. I was lucky to find some D’s but mostly E’s.
Any why is that? Ollie Wight layed out the requirements for success with MRP, but did you ever listen to that list of requirements? He discussed things such as Top Management Commitment. I don’t think I ever ran into any top management that ever knew how to spell MRP rather than schedule a shop floor with it. They could care less. Leave it to the high school dropouts on the shop floor to do that.
Ollie used to talk about the formal system versus the informal system. He stated that we have to get away from the informal system of hot lists and shortage lists and build integrity into the formal MRP system and actually use the output on the shop floor on a day-to-day basis. I’ve never run into a company that does that.
Integrity is the main thing that I’ve found that has been lacking in all of the so called MRP systems I have worked with.
I think that it is possible to have the most sophisticated MRP software and also never come near the workable MRP concepts that Ollie and Joe used to talk about.
The informal system has always prevailed just about everywhere I have been in my career. The reason for that is that people just don’t want to work to a formal system. Hell, expediting is the way to go! The people on the shop floor and the buyers love it! That’s the way they make their money, through overtime. They know more ways to kill productivity improvements than Carter has little liver pills. Top management doesn’t know how to properly run MRP so they just have to come up with different reasons for raising prices.
There is one true way you can determine whether of not a company is actually following MRP concepts and building integrity into it’s system. The biggest thing that kills MRP is the lack of use of True Manufacturing Lead Times that are accurate and comes directly from the operations of the manufacturing routings.
MRP system software packages didn’t used to have a field called Manufacturing Lead Time Override. It took a while for software developers to discover but they found out that they could sell more MRP software to companies that wanted to look like they are on MRP, simply because they purchased the software package but still want to run via the informal shortage hot lists.
What Manufacturing Lead Time Override does is that it schedules all manufacturing orders for the same part with the exact same lead time. In other words, it will give the same lead time offset for a one (1) piece order or a thousand (1,000) piece order for the same part. Using this field saves a lot of time and work. You don’t have to study and calculate Move, Queue, Setup and Run Times for all of the manufacturing routings so why not be lazy and just put in one lead time for all manufacturing orders?
I can’t think of anything that has blown the integrity out of manufacturing schedules than that one field.
Heck, the SAP software developers want to sell the new ERP software to companies that still want to Order Launch and Expedite by including their own Manufacturing Lead Time Override field. They call it In House Production Time. However, they add a different twist to this concept. You can still have Variable Process Lead Times from the manufacturing routings to schedule your shop floor with but you can schedule your purchased material to the Fixed Manufacturing Lead Times of the In House Production Times. Consequently, the shop floor is actually scheduling the production accurately but Purchasing is bringing in the material to a totally different schedule.
You meantioned that Toyota actually uses MRP to do their planning. They must be doing a great job of it. I heard that they get anywhere from 80 to 100 turns on their inventory. They reall must have a ton of intergrity built into their MRP systems. When are we ever going to get over this hogwash about Kan Bans? Has it ever occurred to you that the Japenese probably don’t want you to know how to do MRP correctly and feed you all the education about Kan Bans you can digest.
MRP is not on the rocks, the rocks are in your head.
Ollie Wight was a great man and I’m sure he is rolling over in his grave.