Implementing MRP Software

Many manufacturers have taken the big leap to Material Requirements Planning (MRP) software systems or are
considering such a purchase. These systems tell the manufacturer what, how much, and when to order or produce a part
or final product, on a “just-in-time” basis, enabling the manufacturer to maintain low inventories while retaining the
ability to produce the product on time.
The system contains a bill-of-materials structure that relates all the components of the manufacturing process to each
other and can schedule each phase of the manufacturing process on an hour-by-hour basis if necessary.

MRP II
An MRP II (Manufacturing Resource Planning) system is a complete system that can handle back office financial needs
in addition to managing the production floor. It also provides management with feedback on the financial impact of
production, thereby improving decision making. These systems generally incorporate a “little MRP” (Material
Requirements Planning) software application.
With hundreds of systems available and no two businesses alike, choosing the right system to suit a company’s needs is
a dizzying process. Once a selection is made, a manufacturer will want to sit back and breathe a sigh of relief. But it’s
not time to relax yet. Many companies encounter problems in implementing an MRP II system because they fail to use
the “little MRP” concept properly.

The Implementation Process

Implementation can make the difference between success and failure in using an MRP system. If the implementation
process is not handled properly, employees will lose faith in the system and may never adjust to it.

Because each manufacturer is different, the implementation process must be tailored to the company’s unique needs and
qualities. The one common denominator is education and training. Employees should be trained before implementation
tasks begin. The project team that selected the system, as well as top management personnel, must understand what
MRP is and what it can do for their business. If such a team does not exist, the company should organize one that
includes representatives from each area of the business.

Management’s commitment is critical to implementation. Management must maintain business as usual while
implementation takes resources and personnel away from their regular duties. Implementation may never be their first
priority, but it has to be a close second. If the process takes too long, people lose their focus, and the system never gets
fully implemented. Six to twelve months should be enough time for most companies, depending on their size and
sophistication.

Conference Room Test Pilot

Before implementation, it’s a good idea to test the system in a nonproduction mode-sometimes called a “conference
room test pilot.” One product line is selected, a subset of data is entered, parameters are identified, and the system is set
in motion. If the company is a job shop, can the system send an estimate through and convert it to a customer order? A
job order? A work station schedule? Are other production and financial transactions being handled as expected?

The project team can determine if the system is handling these processes appropriately using a subset of the data that
ultimately will be used when the system is converted to live operation. After this test, a company can choose to
implement the new system through either a phased-in or “big bang” approach.

Phased-In Approach
Under this approach, the company phases parts of the system into production over a selected period of time. The
business is broken down into functions, which often correspond to application modules within the system, and each one
is tested separately. For example, financial modules or accounts payable might be selected to use first. This approach is
less risky than the
© 2009 big bang approach.
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goes wrong, only a portion of the company’s operations is affected.
 Implementing MRP Software (Cont’d)
Big Bang Approach
With the big bang approach, the entire system is cut in at one time, perhaps over a weekend. The advantages of this approach are that
the company avoids running two systems at once, and a clean cut start-up avoids confusion.

The disadvantage of the big bang approach is its riskiness. If it doesn’t work properly, it will impact the entire business. The system
must be set up properly. When the “switch” is turned on, the system has to work. Companies that already have functioning
manufacturing software are the best candidates for this implementation process. If personnel have no experience with an MRP system,
a phased-in approach is preferable.

Accuracy and Discipline Critical

Once implemented, an MRP system must be adequately updated. A well-functioning system requires accuracy, and discipline is
necessary to maintain that accuracy. For example, if the system is not updated as inventory is used up, the system may show quantities
of parts or products that do not exist.

If inventory accuracy and lead times are good, the system can be very efficient. Parts will arrive at the manufacturing plant on a just-
in-time basis and won’t be sitting around collecting dust in the warehouse. The manufacturer can build what it has to, when it has to.
The minimum standard for data accuracy is 95 percent for inventory and 98 percent for the bill of materials.

These accuracy rates may seem excessive, but they are not. An MRP system makes calculations and sends out messages each day to
buyers and planners based on system information (e.g., orders, inventory counts, lead times, bill of material structures, etc). But even
with an accuracy rate of 90 percent for inventory and 90 percent for the bill of material, an MRP system message will generate
accurate messages only 81 percent (90% X 90%) of the time. Users will lose faith in the system, and the system will never benefit the
business as much as it could.

Conclusion
MRP software requires a serious commitment to keep the system running accurately. Properly implemented, however, such a system
can do wonders to streamline a manufacturer’s business and contribute to the bottom line.

MRP Checklist
•Personnel must be educated and trained on the MRP concept, and must know the objectives and capabilities of the system.
•Inventory data accuracy should be maintained at 95 percent or more. Cycle counting of inventory should be done on a regular basis
and compared with the system’s figures.
•Routing data (the description of steps needed to complete a part or product) should be maintained at a 98 percent accuracy rate. If
labor or machinery figures change, system data must be updated accordingly.
•Bill of materials data should be maintained at a 98 percent accuracy rate.
•Maintain lead times. If a vendor who usually takes four weeks to supply a part suddenly needs five weeks, this must be reflected in
the system; otherwise, the part may be ordered too late and the entire production schedule may be thrown off.
•Delivery performance promises must be entered to maintain a high level of customer service. A typical system maintenance goal for
delivery performance accuracy is 95 percent.
•Reflect product design changes in the bill of material as they occur.
•Update product cost figures when there is an increase or decrease.
•The master schedule must be realistic. The build schedule should consider capacity.
•Master production schedules can be given to key vendors to enhance just-in-time purchases and deliveries.
•Objectives and goals should be quantified, displayed, and tracked (even after implementation) in an atmosphere of continuous
improvement.

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