Featured Improvement Technique

This article, describes how you should measure your MRP system to ensure that you have implemented it properly such that it is likely to deliver the bottom line benefits promised by your software vendor.

The first stage of MRP success is that you should always meet your own plans (even if this does not fully satisfy customer's aspirations). One virtue of MRP systems (heavily over-promoted by software vendors) is that you can "re-plan at will". Unfortunately very few manufacturing plants of my experience have the ability to "produce at will". But by constantly changing plans the water is muddied and there is never a point to measure success or delinquency.

An MRP system produces an output which in various systems goes under the names of "order / re-schedule report"; "exception message report"; etc. This report shows the impact of the latest MRP calculation on your existing plans. It has two parts:

New planned orders or schedules
Changes to existing firm orders / schedules (or exception messages)

Very simply, if your MRP system is operating in a volatile, unstable environment:

The volume of exception messages will be extremely high. (The world record we have encountered is 8500 per week!)
New orders / schedules will be generated for start dates within real lead-time (causing expediting) (a common complaint in purchasing)

There are three fundamental reasons for this:

Invalid or inaccurate data
Genuine changes within lead-time
You are firming orders at assumed lead-time, which is earlier than real lead-time. (too early) (Here is an example of this type of analysis from one of the very delinquent MRP implementation which we recently rescued.) As you can see this analysis reveals that there were very few items for which the lead-time was sufficiently accurate to produce stable plans!

Comparison of planned vs. actual lead time

All of these are planning failures! (Even genuine changes should have been anticipated and provisions / contingencies should have been made.)

Exception messages are produced when something has changed within your assumed fixed plan. (The system is basically telling you at this stage that you existing plan is invalid.) Failure to respond to these messages can result in a repeating cycle of expediting; late deliveries etc!

Therefore it follows:

That the smaller number of messages that are produced, the more stable the plan is, and the more you are following your plans (simply adding on the next period at the end).
By placing orders within real lead-time you are planning to fail! (The plan is invalid.)

There are a number of methods of measuring MRP systems in terms of its overall results, (See achievable benchmarks), but a key measure is to what extent you actually follow your existing plan without modification. I.e. Compliance to the MRP planned orders. A compliant order is unmodified by the release (firming) process, starts on its planned start date and is completed on its due date, on-time in full (See Previous Best Practice B045: Measuring on time delivery or schedule adherence).

Compliance % = Number of compliant orders divided by the total number of orders

To feed into this calculation you can measure, whichever is simpler, either:

Compliant orders
Or the number of incompliant orders

For MRP2 systems you can use compliance to the work-to-list.

The ratio of compliant to total orders gives you a measure of the competence of your planning process. The difference being genuine variables in the process such as exceptional scrap; unanticipated process breakdown, etc. (Remember you should have provisioned for typical levels of scrap or process breakdown.)

Our best result is 98% over a 3 month period (made more difficult because scrap was occurring). But, as usual, benchmark comparisons are difficult since your variables are likely to be different to others. But it also follows that these variables should also be measured in further detail and these measurements used as a spur to improve not only planning performance, but also overall business performance.

________________________________________________________

Speed of Beneficial Impact

Short term

Type of benefits

Better planning accuracy
Genuine problems are revealed early
Only genuine reasons for expediting remain
You can now focus on the real constraints and improve them!

Ease of Implementation

Easy

Prerequisites

None

______________________________________________________

For more articles try our archives at: "Previous Best Practices ","Previous Techniques ", "Previous Questions: ", "Previous Malpractices ".

Bookmarks for this topic above:

Our full range of training

Relevant Training / Workshops

Relevant Further Reading

Top

To discuss your consulting or training needs with one of our independent consultants or trainers please Contact Us

Whilst great care has been taken to provide relevant, accurate, practical, advice based on our considerable process design and development experience, this will almost certainly require interpretation into the context of your unique business. Please be careful in doing so and if in doubt seek expert advice. We would welcome your feedback!

SM Thacker & Associates

Independent Best Practice Training & Consultancy

Highlights of our full range of training courses / Workshops:

Bookmarks for this topic below:

Relevant Training Course / In-house Workshop Highlights:

Relevant Further Reading: The following further articles were mentioned in this paper: