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Manufacturing Resource Planning (MRPII)

In classes and seminars on this subject I sometimes tell the hypothetical story of the pioneers of MRPII - Oliver Wight, Joe Orlicky, George Plossl and perhaps Hal Mather - sitting in a bar glumly pondering their future now that MRP had gone wrong. Sylvester Stallone walked in and asked what they thought had made him rich. They all, of course, thought the answer was Rocky. 'Oh no,' he replied, 'that just made my name. The money started rolling in with Rocky 2.' The pioneers thought this through and recognised that, of course, they had the same opportunity.

Computer power was increasing all the time and allowed them to address the problems that had beset MRP. Some means of validating the master schedule had to be found if MRP were to give customer service and keep control of inventory. Master scheduling software, which incorporated different sources of demand, introduced some level of control over what changes could be introduced in what timescales and then checked the resultant plan against some broad statement of resource availability (in Rough Cut Capacity Planning) would address the first two concerns.

The management of recommended planning actions could be assisted by system facilities to report the number of messages outstanding, but they recognised that the real issue here was to educate people in the essentials of the approach. Where the systems could really provide further assistance was in tracking all aspects of the manufacturing and procurement process. Production and Purchase Orders could be monitored in the system and exceptions highlighted to trigger re-planning as necessary. Finally, the computing facilities by now available could look at all the production orders against all resources and produce a detailed analysis of capacity against load for each piece of plant or each element of direct labour using an approach to be termed Capacity Requirements Planning.

This, then, would be MRPII.
Material Requirements Planning had moved on to be the planning engine within the much broader approach of Manufacturing Resource Planning. Conceptually, the originators taught us that we needed to think in terms of a 'Closed Loop. ' That is, we must no longer think in terms of setting a plan, running MRP to generate lots of instructions to make or buy and then at some time in the future throwing all this away and starting from scratch.
The packages which conformed to this new vision all came complete with literature which showed lots of modules in little boxes, and do so to this day. The figure below is different in that it tries to present, in summary form, this idea of the closed loop. Working clockwise from the Master Production Schedule we see that at each stage we can react to change by re-aligning the MPS with what is now feasible.


Supply Chain Management - MRP Closed Loop System

This in fact is incomplete as the MRP gurus soon broadened the master planning approach. They decided that master production scheduling was in fact detailed, looking at specific products or product types. To be effective, they argued, master planning must first start at a more overview level. If we could set the high level plan, in product family terms, at an achievable level (hopefully one which allowed us to capitalise on the market available to us - but there is no point aiming for a plan which we cannot meet!) then we could refine this top level plan to generate our MPS.

At first this high level process was known as Production Planning which unsurprisingly caused considerable confusion. Over the years a much more appropriate term was coined: Sales and Operations Planning. This name for the discipline says it all. The S&OP forum is where the management team put together the plan saying 'this is what we are going to make and sell.' Within the broader framework of MRPII a technique for validation of the higher level plan, Resource Planning, evolved. The principle of master planning is that we set the sales and operations plan and refine this into our master production schedule. The MPS is reviewed fairly frequently, perhaps monthly, and the S&OP less so, perhaps quarterly.

MRPII in itself is still viewed by many companies as an essential element of proper management of the planning of manufacturing and the execution of those plans. There are many lessons within the application of MRPII that are essential to all planning and control activities, no matter what we choose to call this aspect of running our business.

~ Ian Henderson ~

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