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The Power of MRP

Understanding and Managing by Exception
By
David Carroll

Understanding, and using the power of MRP has many benefits and can help your organizations supply chain greatly. Setting off on the path from imbalance and inefficiency to balanced integration requires recognizing that data and material requirements planning (MRP) are the glue that holds everything together. As Material Requirements Planning (MRP) runs, it touches everything — materials, BOM, production, and other data with one sole purpose: to supply demand. When you step into a live MRP environment that reacts every time you take an action, you need to ask yourself: are you ready for it? Is every function and every department in your supply chain connected and communicating through one source of truth?

MRP is designed to help ensure that inventory needs are determined in advance and materials are produced to meet the needs you forecast. Once you use the power of MRP to do the hard work and make sure the data is correct, it becomes crucial to use exception monitoring. It is crucial to ensure that integration on the shop floor is being managed through evidence of actual — not forecasted — demand and that every step of the process hums along without glitches.

First, let’s be clear what managing by exception means. Exception monitoring is the tool used by master production schedulers, material planners, and buyers to ensure business processes are in check and that there is a balance between demand and supply.

What Happens When You Ignore Exceptions?

Quite simply, exception monitoring is the secret to success when striving to create integration across the supply chain. Through exceptions-created alerts, you quickly receive a heads-up that the strategies and rules you put in place are not correct, or not being adhered to, or not being integrated with other functions.  Without a clear understanding of managing by exception, the following can and often does occur:

  • Master data is inaccurate and does not support the full potential of MRP
  • Process data becomes overdue and cluttered, breaking down the reliability of MRP
  • Functions and departments set their own objectives, which rarely support improved productivity
  • Communication across the company is difficult, inaccurate, and expensive

When processes and behavior are not aligned, inefficiencies are everywhere.  These inefficiencies endanger your organization’s ability to secure a position and leads to unnecessary expense and missed business opportunities. The moment the process gets out of alignment, discrepancies between supply and demand become evident and cost is bound to be impacted. Even if you’re getting your product out the door to the customer on time, if you are consistently recovering at the last minute from your red-light situation, the quantity and time aspects of your supply chain are in jeopardy. Understanding the power of exception monitoring is key to a well-run supply chain and will help avoid future issues down the road.

To read more on this topic please read our white paper: “Managing by Exception: Cut 50% of Hidden Cost from Your Supply Chain.”

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