Every company moving goods in a supply chain needs to balance delivery service, resource utilization and inventory levels. The most common planning methods used today for this purpose are Material Requirements Planning (MRP) and Distribution Requirements Planning (DRP), the reason being is that every ERP system relies on MRP and DRP to create distribution, production and purchase proposals.
However, the unfortunate truth is that MRP/DRP do very little to help you balance the above stated objectives.
Firstly, MRP/DRP are one dimensional and the only constraint respected is lead time.
Secondly, MRP/DRP work sequentially and break expected customer demand all the way back to purchase requirements. The consequence is that you are left with a plan where no consideration has been given to how supply constraints like finite production capacity, finite storage capacity, finite transportation capacity and finite supplier capacity impact the supply chain upstream and downstream.
In real life, supply chains are neither one dimensional nor sequential, so we will spend a little time outlining the options available to make life easier for planners:
1, Manually work through action messages generated by MRP/DRP and try re schedule orders manually. While this is an option in theory, it soon becomes an over whelming task as soon as you have too many orders.
2, Use Advanced Planning & Scheduling (APS) software that will re schedule orders created by MRP/DRP. With this you can get a production plan that respects finite capacity and material availability. The problem however, is that you are still stuck with the wrong order quantities created by MRP/DRP and as long as that is the case, the result will never be optimal.
3, Use optimization as a complement to MRP/DRP. The advantage with this option is that it will not just continue with the output from MRP/DRP but it will create optimal and synchronized distribution, production and purchase quantities. The optimized quantities for finished goods are then sent back to ERP as firmed planned orders (Master Production Schedule) and MRP/DRP can then continue from here to break down to lower levels.
MRP/DRP have served manufacturing and distribution companies well over the last 40 years and we believe it’s about time to start considering smarter and more modern methods, which can truly assist in optimizing your supply chain planning.