Both demand and supply planning and materials requirement planning (MRP) have been around for a long time. It’s hard to imagine a modern manufacturing company without either one. With a robust MRP system, manufacturers can better control inventory, plan production accurately, manage data and documentation related to production, and optimize their workflow.
Likewise, good demand and supply planning can help companies adapt to demand volatility and manage resource allocations strategically. They can also help improve overall operational efficiency for areas of the company outside of production. Yet, many companies never fully connect their demand and supply planning to their MRP. And many manage them as separate entities, erecting yet another silo that acts as a barrier to improvement.
Where MRP Falls Short
MRP systems revolutionized production planning. By focusing on materials required to produce finished goods, companies could plan better inventory purchases. MRP systems utilized a master production schedule to allow for order completion, forecasting and capacity. They did so using bills of materials (BOM) that listed every component and its required volume for a single unit, as well as its cost and vendor information. It then tied these elements together to produce an inventory requirement for the gross material needs for the schedule.
This coordination helped companies improve purchasing, which in turn improved inventory accuracy. It also allowed for enhanced WIP, creating a positive impact on cash flow. MRP optimized workflow in production by ensuring that the suitable materials were in the right place at the right time.
But something was missing from the equation. While MRP was excellent at pointing to what was to be made and how much material was required to make it, it lacked the analytical capability to contextualize the information. MRP systems alone could not account for demand shifts, nor could they create multiple scenarios for contingency.
Because of this, demand and supply planning and MRP were often maintained separately with little interoperability between the two. This created gaps that acted as limitations to improvement. For one, while MRP knew what was needed, it could not calculate optimal re-order points. And any changes to supply chain disruptions were usually manual adjustments, increasing the margin for error.
Using Data to Unlock MRP’s Value
Today, there is a way to unlock the value of an MRP system using near-real-time data to reach beyond the “middle ground” occupied by MRP in production. By utilizing best-in-class demand and supply planning software, the total value of the supply chain can be leveraged from sourcing and ideal purchase points through distribution and execution of finished goods.
MRP alone does not possess the analytical capability to contextualize demand data and create an optimal forecast. But this phenomenon is made possible when demand and supply software factors are part of the production plan and feed MRP these insights using advanced analytics. The result is sharper and more realistic forecasting based on accurate data.
Demand and supply planning software also provides MRP systems with the data needed to be the central engine for inventory management and production and operational excellence at the manufacturing level. This means more manageable inventory, lower costs, and achievable production plans.
By linking a company’s MRP system with demand and supply planning software platforms, companies can move forward from a “what can we make” mentality to one of “we are making what is demanded by the customer.” This shift generates more business through happy consumers.
Plex DemandCaster has been developing its best-in-class demand and supply planning software platform for many years. The system offers end-to-end visibility not feasible with standalone MRP software alone. It also provides trend analysis and optimized inventory strategies to leverage integrated MRP capabilities that are part of DemandCaster’s software. And because it allows “what-if” strategies not available in standalone MRP software, companies can manage disruption with actionable contingency plans that keep production running in the worst of times.
To see how Plex DemandCaster can unlock the value of demand and supply planning with advanced MRP for strategic decision-making that goes beyond simple BOM and inventory management, contact us today.