A few months back I was asked to visit one of the big – really big – manufacturing software providers to talk to them about lean. They were particularly interested in lean accounting, and thought there might be a market out there they were missing. I might as well have made my presentation in Portuguese for all the good it did. Turned out to be a colossal waste of my time and their's. The notion that manufacturing management is experiencing a paradigm shift from the heady days in 1961 when Ollie Wight and IBM's Joe Orlicky were racing each other to install the first MRP systems is a notion too daunting for their conservative minds to grasp.
The big software companies are still convinced that all good manufacturing begins with driving a forecast to a master schedule, exploding and time phasing bills of material, then balancing lot sizes with set-up times to optimize inventory, and tracking the whole thing with standard costs. That is the baseline, according to their thinking, and every manufacturer should start with this approach to management. Pull systems and lean accounting are viewed as add-ons – something to hang on the side of the ERP system – but certainly not the core of a completely different approach to management.
So they all go to market with their MRP centered systems, Then look to their third party application developers to cobble together the lean things to hang on the side of their ERP systems. I told these folks they were sending their third party developers out with at least one hand tied behind their backs – that forcing the market to begin with MRP was severely limiting. I told them that MRP logic has a place in some lean enterprises, but not all and it is certainly not the core of manufacturing management in the 21st century. I told them there was a great deal of arrogance underlying their view that they knew more about manufacturing management than the manufacturing community, and that continuing to shove MRP down manufacturing's throat was a formula for eventual failure. I pointed out to them that, in most manufacturing companies, the most adept and prolific Excel users were the folks in supply chain and accounting – the two core users of MRP – which ought to tell them something about how well their logic was working. It is rare to see a want ad for a cost accountant that does not require advanced Excel skills – because cost accounting cannot get the information it needs from MRP. I might just as well have had the conversation with the cocker spaniel next door.
Now comes IBM with their "Smarter Planet" strategy – so blown up that the Prince of Wales is hosting a global summitto discuss the breathtaking implications of the concept. What is the 'Smarter Planet'? "The aim is to use software to analyse and predict trends in consumption, allowing organisations to save money and natural resources by adjusting supply to meet demand in real time." In plain English – the smarter planet is forecasting demand so it can drive through a master schedule … the same 'smartness' Joe Orlicky conjured up in Rock Island, Illinois 49 years ago. After years of pushing the old MRP monkey by dressing him in a silk suit, they are now trying to pawn off the 49 year old monkey by seating him on the royal throne.
Drill down into IBM's Smarter Planet and you will find that on the smart planet companies will be able to "drive economies of scale" and "implement volume price agreements". That sure sounds like the same old not-too-smart planet on which manufacturing foundered for years to me.
MRP logic certainly has a place in manufacturing. It is another tool in the tool kit, but it has been roundly disproven as the core of an integrated management system
Some day one of the big manufacturing solutions providers – SAP, Oracle, Microsoft, IBM – is going to have the courage to take the big step of building a new manufacturing platform from a clean sheet of paper … or maybe it will take a more aggressive start-up to redefine the industry. But the fact is that, for all the big talk about innovation and the marvels of our high tech culture, the software companies are lagging far behind manufacturing in advancing the state of the art, lacking vision and completely incabale of doing what they are supposed to do best – innovate.