Fulfilling customer demand successfully is not as easy as it was prior to this volatile, uncertain, complex, and ambiguous (VUCA) environment. As supply chain disruptions continue to rage, planners jump through hoops, expedite, and are a bit frazzled trying to support customer requirements while meeting operational objectives, pushing back when needed on sales commitments, and addressing cost concerns. It is not uncommon for planners to be buried in spreadsheets and miss the forest for the trees. The most successful clients are pursuing planning process upgrades and leveraging MRP (materials requirements planning), MPS (master planning systems), DRP (distribution requirements planning), CRP (capacity requirements planning) and APS (advanced planning systems) to automate, digitize, and upgrade plans. These upgrades support revenue growth plans and provide executives the visibility into capacity and supply plans to maximize profitability.

Planning Process Upgrades & Leveraging MRP

Planning process upgrades will optimize three key objectives: #1) the fulfillment of revenue plans with high service levels, #2) maximizing operational and supply chain effectiveness, #3) accelerating cash flow with reduced inventory levels. There are several potential planning process upgrades depending on the circumstances. For example, collating data to get better visibility into quotes, orders, customer forecasts and point-of-use data so that you can plan effectively for what’s coming down the pike can achieve significant results. In another client, digging into the capacity information so that the schedule is realistic could be what’s most important. No matter the client details, we have yet to find a situation that cannot be substantially improved, no matter how volatile and unpredictable the situation appears.

Thinking high-level, upgrading the planning process spans several core areas. Upgrade the materials planning process by evaluating your supplier base, taking account of lead times, order multiples, and other requirements, and utilizing the appropriate strategy to ensure materials arrive in a timely manner to support production yet at the best total landed cost with mitigated risk. Plan production effectively by optimizing the schedule by sequencing by changeover group (such as size, flavor, material type etc.) and/or instilling a rotating production wheel of items. Determining the optimal quantities to optimize customer, cost, and cash is another element of the process. In some environments, you can build the product to a certain point in the process to remain flexible to changing customer needs while driving operational performance.

Scheduling must be done in concert with capacity planning. Developing a schedule without the knowledge of what Operations can achieve is pointless. Of course, it is never that simple with varying work centers, cells, skill requirements, overtime, flexible crews, and other considerations. In fact, these planning strategies should be combined with a keen eye to operational performance. For example, you want to minimize staffing requirements as there are often times to run a set of items jointly, requiring 2 people instead of 3. You also might want to plan downtime on one line for maintenance and/or sanitation while running a complex item on another line requiring supplemental staffing.

Labor scheduling might come into play where you have the opportunity to maximize output through your shift configurations (shift composition, timing, duration, # of crews, etc.). In fact, there are countless ways to optimize plans and schedules. To read more on this topic, refer to our article, “Production and Labor Scheduling Case Study to Maximize Productivity“. Although you track all of these types of factors and considerations manually and incorporate into your schedule even if using a robust ERP system such as SAP or Oracle, taking the time to incorporate these critical factors into MRP and advanced planning systems will certainly simplify the process, enhance visibility, and speed up and maximize results.

MRP automates providing recommendations for purchase orders (size, quantity, dates) and for work orders (size, quantity, dates) and includes exception reporting to address changing conditions. In some systems, the planning side is called MPS, but most systems refer to it as MRP. CRP takes account of the capacity and staffing considerations and provides a rough cut of capacity. And, depending on the ERP system, scheduling will be a separate screen or module, or it might be incorporated into APS. MPS can also refer to high-level plans derived from APS. DRP will be the same as MRP but for interbranch and intercompany orders. Planning can seem quite simple when performed expertly and supported by systems or a huge mess with inexperienced planners in a complex environment developing schedules manually (potentially using or even not using MRP suggestions as a base).

Why Don’t More Companies Better Leverage MRP & Related Systems?

The bottom line is that there is vast opportunity in leveraging MRP and related systems; however, it is not as simple as it appears. As we discussed in one of our oldest yet evergreen articles, the $1 Million Dollar Planner, it requires a rare aptitude to thrive as a planner. You must be comfortable being in the middle of several competing priorities (customer, cost, cash), push back as appropriate yet align players on the optimal plan, and be focused on continuous improvement and leveraging ERP and advanced systems as it makes sense. It is quite common for us to find high-skilled planners who are comfortable with their process as it achieves the competing objectives, and they do not want to rock the boat by leveraging additional functionality in the systems. The best planners realize that planning can be like a house of cards as they try to keep many balls in the air at once. However, what they often don’t realize is that the process is not scalable and sustainable if they don’t take the leap to better utilizing MRP, DRP, APS etc.

What Is Required to Take the Leap into MRP?

It requires leadership to push for the uncomfortable while appreciating the unique skills required to keep multiple balls in the air without proving it by making it apparent by firefighting and riding to the rescue. It also requires appropriate support of consultants, ERP expertise, process tweaks and upgrades, and bringing the appropriate resources together to visualize the big picture and competing priorities. The results are worth it. Your company will be at risk relying on any one person (not matter how experienced the person) instead of a process. A person is not scalable or sustainable over decades; a process will be.

The tricky part is that executives do not “see” the risk because the process appears easy if the balls remain in the air and there isn’t significant planning expertise in senior leadership. And the process upgrades and related ERP upgrades will require investment of time and resources and can be uncomfortable as the balls (risks, optimizing factors) have to be incorporated in the process, data, and functionality. ERP suppliers are likely to say, “our ERP is best practice; just use it”. Planners are likely to say, “I can guarantee results using my process”. And related departments are likely to think, “This is too much work. Just make it happen and give me what I need.” With that said, to give you hope, most of these high-skilled planners that might be stuck in this manual cycle will move forward with good leadership and consulting support. And, we have worked with clients with resources that rise above and build sustainability and success into the process….shout out to JaNel among others).

What is the bottom line? You must take the leap! Your experts are retiring. If they retire suddenly for any reason, you will not even know what the balls are, let alone how to address them to keep them in the air. There will be a point at which your business grows that you have to hire an army of people to ensure success if you don’t automate, digitize and upgrade. Regardless, your visibility will be worse than you’d like as you’ll be dependent on information solely from your planner instead of “click of the button” visibility to Sales, Project Management, Operations, Purchasing, etc. And, no matter how effective your planner(s), you will not maximize customer, cost and cash as fully as you could with upgraded process, MRP and related systems, in combination with your key planning expertise . Read more about where the talent has gone and strategies for success in our article.

Case Study: Planning & MRP Upgrades to Fulfill the Revenue Plan & Proactively Plan Capacity

An industrial equipment manufacturer supporting the power industry had to go live on a new system quickly while supporting aggressive sales growth. Because there wasn’t enough time to account for the optimal planning processes and ensure data clarity, the planning team was running on all system go to simply survive. Customers were unhappy with lead times and the lack of visibility. Operations leaders were unhappy with the lack of information about upcoming demand so that they could plan to fulfill orders efficiently. Engineering was overloaded, and Purchasing was at the end of the line waiting to expedite due to lack of MRP reliability.

Thus, leadership agreed to embark on a project to upgrade the planning processes and rollout MRP and capacity planning processes. After assessing the situation, it was clear that there most of their inputs to MRP were suspect or missing, MRP wasn’t setup to provide directionally-correct answers, and the system was “light” vs the ideal ERP system for a custom/ engineer-to-order manufacturer. Thus, we devised a plan to create quick wins while educating the team and moving forward with the appropriate steps to utilize the system for a longer-term solution.

A cross-functional team was put together including Purchasing, Planning, Operations, Engineering, the ERP partner and LMA as MRP experts and the link between the process and the system. After unscrambling the order backlog and status management, the team started digging into the MRP input priorities. They reviewed multi-site ERP solutions for setting item characteristics, evaluated different bill of material configuration options to handle differences between sites and better address a massive transaction workload associated with added BOM layers, reviewed ERP functionality for transferring products between sites and cross-border, and dug into capacity information. This enabled a successful design to be developed while a few quick wins were implemented (to extend visibility, manage statuses, etc.). The team learned along the way, tested ideas, and successfully rolled out a simplified approach, upgraded the planning processes and leveraged MRP for success,

While working to upgrade the use of MRP, the team also dug into capacity. Because it was in manual spreadsheets, and the process had not been standardized, subassemblies were scheduled via tribal knowledge, and there were countless exceptions and nuances that had to be accounted for in order to get a directionally-correct result, it was quite the challenge. On the other hand, Operations leaders had to know which cells/ work centers required additional support, where orders were stuck without walking to the floor to find out, and they wanted a capacity forecast to support not-yet-engineered orders, quotes and forecasts. In essence, they wanted to proactively plan. Although no simple feat, the team put together a model that successfully predicted capacity so that they could incorporate projections and recommendations to address shortages/ overages during the SIOP (Sales Inventory Operations Planning) process, and through this tool, the team could evaluate the optimal approach to meeting customer needs efficiently and effectively.

The Bottom Line

The bottom line is that the team successfully rolled out MRP, simplified the bills of materials to better plan what’s meaningful while reducing a mountain of unnecessary transactions and put a plan in place to utilize advanced planning capabilities (APS). Visibility was established with a capacity planning process that incorporated estimates for not-yet-engineered demand. Thus, they created revenue predictability and supported sales growth plans with improved visibility, enhanced capacity availability, increased efficiency/ automation, shortened lead times, and highlighted opportunities for margin/ performance improvement.

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Master Planning & Production Planning Case Study: Gaining Visibility for Results