Preparing for MRP
Material Resource Planning (MRP) is a fundamental ERP function that many growing businesses struggle with. While companies are small, it’s easy to manage replenishment through spreadsheets and manual checks; however, there comes a point where it is no longer sustainable and suddenly the business is struggling to keep inventory under control, maintain fill rates, and hold their vendors accountable.
Replenishment is as simple as matching your supply with your demand, and there are only so many variables involved in calculating it. If you store those variables in your ERP system, you are most of the way to having a sustainable supply chain planning process. In fact, we find many businesses have all the necessary data, but have essentially replicated MRP functionality in Excel. The issue is because the business is not mature enough in its processes, there’s always a few crucial assumptions that the buyers and planners make, which create major obstacles when migrating to a true MRP process.
Oftentimes, inventory management causes the biggest issue. This can be either a lack of actual transaction adherence on the floor, or oftentimes can be improper item creation strategies. Businesses, especially small ones, often cut corners in data maintenance and item creation because its perceived to be too burdensome. But as the organization grows, those habits become engrained in the culture. This leads to situations such as:
Duplicate items, each with their own inventory
Distinctly different products that share the same item number
Poor inventory accuracy
Incorrect or lack of bills of materials
Oftentimes sales order and purchase order management are forced to be correct because other businesses require those documents to be setup properly to function correctly. But when it comes to internal transactions and documents, growing organizations often struggle. It’s important to adopt proper ERP practices early on in a company, such that every function in the business can scale and succeed. There’s already too much variability in how vendors and customers operate to have the same variability inside your own organization.