Planning is a part of manufacturing. It’s necessary for meeting contract terms, ensuring parts and materials are available, avoiding production delays, and keeping a lid on labor costs.
Although manufacturers generally agree that planning is essential, your business may take a 180-degree approach to planning compared to some of your partners or competitors. Numerous companies invest in enterprise resource planning (ERP) systems in an attempt to create the proverbial well-oiled machine. Others rely on tribal knowledge, instinct, and frankly, guessing to determine what needs to be done next, communicating that information with spreadsheets and email. Still, others, usually established companies manufacturing the same items for years, don’t focus much on planning – because the plan never changes. As soon as they use up one bin of parts, they move onto the next one and order more.
Those planning styles may work for a while. As long as everything stays the same – customer demands, regulations, supply chain operations, part and material cost, and availability – production goes as planned. However, when unexpected circumstances arise, manufacturers who have gone all-in on ERP may find themselves reverting to manual methods and communications to get production back on track. Worse, operations that have always used manual methods or minimal planning may simply face downtime. That part shortage, new regulation, or change order can take their teams completely off guard and interrupt production.
Manufacturers’ planning methods are often a function of how founders established and scaled the business. At first, the goal of planning was just to make sure a team could do what it needed to get the job done. Then, as the business scales, it may consider an ERP or other system, but the growing organization may not agree on a common way forward, and embarking on a costly and lengthy implementation may seem like making things worse, not better.
Material resource planning (MRP) fills the gap.
As manufacturers know, it takes the right tool for the job. MRP software is designed specifically for manufacturing planning. It tracks all relevant interactions, including available people, materials and machines, lead times, bills of materials (BOMs), issues, supplier data, and more. In addition to information from the planning team, MRP collects data from other systems and applications, such as clocking, machine uptime, overall equipment effectiveness (OEE), and issue and nonconformance management. The MRP system analyzes it, automatically generating work orders and purchase orders. Also, when a machine goes down or skilled labor isn’t available, entering that information and running MRP will provide decision makers with the real-time information they need to make smart adjustments.
No single person or even a planning team can track all of the data that an MRP system can, especially as a business scales and has multiple projects in process at any given time. MRP quickly provides the framework for a plan for what needs to happen next to keep all projects advancing and communicate that intel to the people who need it.
Material resource planning usually takes place in two phases:
Manufacturers that aren’t using MRP often experience some significant issues. The biggest is operating without a single source of truth. This can create chaos from an operational standpoint, making a scramble to finish a project on time the rule, not the exception. But it can also erode work culture and team unity. Without a plan and consensus about the way forward, team members may question each other and their authority when they make decisions.
Furthermore, without a system that makes assignments and provides a central system that people can access for information, they will continually ask for information and explanations, which can create delays and a burden on your planning team.
Businesses that don’t use MRP software may also have losses due to downtime. Those costs vary based on your industry, the number of employees, partners, and customers it impacts. A recent survey from ITIC found that an hour of downtime costs most enterprises more than $100,000, with some organizations reporting the loss at $1 million per hour. It’s not hyperbole. An aeronautics company whose project is delayed because they’re short 30 $1 fasteners could experience a loss due to expedited shipping and an underutilized workforce – but the delay may also cost them a $30 million contract.
MRP systems have leveraged technological advancements to enhance their capabilities, and that trend continues. The availability of more computing power and parallel processing could slash the time required from questions to an answer from an MRP system from hours to minutes. Also, Internet of Things (IoT) sensors used in the supply chain could trigger the MRP to provide instantaneous updates to planning based on new data.
Furthermore, expect to see automated planning across supply chains. The event that triggered a planning adjustment at the manufacturing facility could also be shared with vendors and customers down the BOM so they can adjust their plans based on the change without delay.
It’s unlikely that MRP will totally automate the planning process – humans are still the best decision makers. But MRP can more quickly provide the relevant information that people need for the smartest decisions.
The future-forward developers in the material resource planning space aren’t just seizing an opportunity – they’re fulfilling a need. In a dynamic manufacturing space with ever-more-demanding consumers, MRP that quickly lays the groundwork for effective planning will enhance agility and competitiveness, giving planning teams the ability to plan quickly and effectively