ERP DRP and Lean Manufacturing are not compatible.
Below is a MRR and PLR article in category Business -> subcategory Marketing.
The Incompatibility of ERP/DRP and Lean Manufacturing: A New Planning Approach Needed
Introduction
Over the past decade, many businesses, from small enterprises to large corporations, have been investing heavily in updating or implementing Enterprise Resource Planning (ERP), Distribution Requirements Planning (DRP), and Advanced Supply Chain Planning (APS) solutions. Reasons for this surge include consolidating IT systems after acquisitions and enhancing IT capabilities to support specific supply chain strategies.
Despite these significant investments, businesses often find themselves with rigid IT solutions based on outdated planning principles from the late '60s. These systems struggle to support the agile and flexible supply chain processes necessary for competitiveness today.
This article explores the essential elements for creating a successful, cost-effective supply chain, why current IT solutions often fall short, and how a new planning approach can unlock the benefits of Lean Manufacturing without discarding existing IT investments.
The Problem with Forecasts
ERP and DRP systems provide solid operational platforms supporting various business processes, from finance to HR. However, they lack effective planning tools. Typically, these systems include a basic Material Requirements Planning (MRP) engine, and more advanced versions may have predictive safety stock planning or reorder point logic under the guise of an Advanced Planning Systems (APS) module. Essentially, it's like having a multi-million dollar IT solution powered by outdated technology.
The core issue with these MRP systems is their reliance on forecasts as the basis for all calculations. Experienced planners know that accurate forecasts are challenging, with even the best achieving only about 70% accuracy. While APS systems might offer slight improvements, they often fail to deliver significant benefits relative to the investment cost. MRP systems exacerbate the issue by using these unreliable forecasts to determine planned orders and safety stock levels, leading to unpredictable and inflated inventory levels, efforts, and costs throughout the supply chain.
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