MRP is a gold mine for consultants. But not for business

The final text of this article was formed in my head when I saw another razor on TV. She has five blades and she is the best that ever was in the razor industry. So says advertising. I have a razor with three blades, although before that I had two and shaved beautifully, but I was presented with three. Why can I need with five, I generally will not attach my mind. But marketing wins over common sense, and people will undoubtedly buy this thing, although they will not always be able to answer the question “why it is for you”. One replacement cassette for this new razor of five blades will probably cost as much as my entire razor along with two interchangeable cassettes. Below you will understand why I gave this example.

In business, too, marketing often wins over common sense.

In the middle of the last century, some US auto industrial enterprises faced a problem related to the management of factories. The delivery times and the quality of the cars began to suffer.
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And the devil knows how it happened, but for some reason the auto business did not turn to the experience of its predecessor, the great and brilliant Henry Ford. Why they did not turn to the ideas of Taichi Ono, I, too, even though you burst, I do not understand.

But they turned to consultants. Or who this Orlisk was there who invented the MRP. Some even call him a researcher. But Ford and Ono were practices, the best practices in the world. That one had to learn.

Once in the journal Furtune, the article “In Search of Prossers” noted: “In complete silence, without thunder of fanfare, the consulting business was captured. The new gurus, armed exclusively with pens, cabinets and boundless shamelessness, joined the normal, useful business: providing sensible advice to business representatives. ” Let me explain: simpletons are businessmen.

So the consultants came up with MRP. Then marketers joined the issue and, after them, it seems, PR people to “push” this idea to business. For decent money, of course. This “holy trinity” has done its job - a general clouding of the brain has begun in the business, which, like an enchanted one, began to pay space money to consultants for the introduction of a new management system called MRP. Although, of course, manufacturers can be understood. When your business rolls down, you’ll even pay the hell out of bald to get it out. The consultants took advantage of this.

And then, with enviable constancy, more and more new “razors” began to appear. MRPII, MES, APS. Each following, of course, more expensive than the previous one. But there were problems as they were, only now car factories added another item of expenditure - endless consulting and gigantic costs of supporting expensive software. Well, and smut, of course, increased. GM in the 80s lost 15% (!!!) of the American market. Oldsmobile disappeared altogether from the face of the earth. Did not help the guys MRP.

Do you know which car brand is the most popular in the USA? No, not GM, not Chrysler, and not even Ford. You will laugh, but this is Toyota. A company that has never used MRP technology in its management. But this company never forgot what Taichi Ono was saying and used the experience of Henry Ford.

If we talk about a specific applied problem that the MRP theory is intended to solve, here it is: there is a conveyor belt, a car goes on it (thank God, the consultants did not come up with an alternative to the Ford conveyor belt). When he comes to the place where the bumper should be screwed to it, it turns out that there is simply no bumper. And the conveyor stops. We are waiting for the bumper. Timing break down. Simply put, this is the problem that the MRP had to solve.

What did the consultants suggest? They offered to plan everything in advance. First, marketers plan sales in advance, then production is planned on the basis of these plans, a procurement plan is drawn up on the basis of production plans, and a budget is drawn up based on the procurement plan. Well, this is already MRPII, but not the essence. In short, like this. And here you get such a monster called “the plan of all that is possible”, based on the marketing experts' assumptions. A friend of mine works as a logistics director for a large trading company. The word “marketers” acts on it like a red rag on a bull.

I do not know who said this, but, most likely, some ancient philosopher. And he said this: the main feature of the plans is that they never come true. Brilliant, eternal phrase.

So at the heart of the MRP are just the plans. They are known to never come true. This means that the monster (crazy plan) is a card lock on the sand. This plan is incredibly complex. And complex systems (ask mathematicians and physicists) are extremely unpredictable. It is enough that in any one place of the monster something goes wrong so that the card lock is formed.

All of these crazy plans are built entirely on the speculations of your marketers. They are based on those factors that your company can influence, that is, on the internal factors of the company. But the problem is that your plans are most affected not by internal factors, but by external factors that do not depend on you at all, and which you cannot influence.

Let me remind everyone of 2008. Plans built by marketers, a lot of people. I suppose that most of these plans already in 2009, were stuck in a well ... at the mountain marketers. Some particularly zealous perhaps even flat.

I think that the essence of the current plans of BP is to save its salary ... zu. And before the “Mexican story,” I think they were promising. In the 81st year, Roger Smith headed GM and promised that he would soon bring his company's share in the “big three” to 70%. Plans came true was not destined. The share of GM in the big three is already below 30%, although at the time of Smith’s arrival she was 66%. In short, more than enough examples.

So, your sales will not be as you plan in MRP. I think I proved it. They may be more than your plans, they may be less, it does not matter. But they will definitely be different. If someone thinks that this is not the case, then let them try to plan in detail at least one week of their own and do everything as planned.

Bill Long, one of the most successful US retailers, answered the question about his strategic plans: “How can I know, damn it! First, tell me what will happen to my customers, competitors, suppliers and capital! ”

If your sales are not as you planned, then the production will not be like that. And the procurement, then, too, will not be so. Well, and the budget, respectively. And if your consultant advises you not to change production plans when sales change, you can buy white slippers for your enterprise. Soon the consultant will bring your business to the grave.

If you’ve got involved in the MRP, get ready in your tight schedule to devote, on a regular basis, time to an event called “meetings on adjusting plans”. This will not have to be done once. With these adjustments you will now live.

I do not know how your production should work and what it should produce until you have adjusted the plan. Maybe MRP consultants will tell you?

But endless adjustments to plans are, of course, not the worst problem that awaits your company if you want to implement MRP management.

MRP reduces the company's flexibility and competitiveness. And now I will prove it to you with a simple example.

You have planned sales, production, purchases. And placed orders with suppliers. At least six months in advance, because you are far in the MRP. And here your main dealer comes to you and says that your main competitor has a new chip and the dealer will go to him if you do not do the same. Your main competitor has perfected what you used to have with him equally. And now your competitor is better. "This is a business, old man - your best dealer tells you - I will go to him, otherwise I will lose customers." But you can not do anything, because your components are already ordered for six months ahead and you can not change it. If you try to cancel orders, then your suppliers will impose such fines on you that will not seem like a little. Your company is getting too slow.

MRP takes your money and I'll prove it to you too.

As soon as you begin to implement MRP management, you may not pay attention first, but it will happen for sure, you can be sure. Stocks in your warehouses will start to grow. The reason is simple - you will not produce what your customers need, but what your MRP system needs. And customers will never buy what they do not need. The only way to sell what you don't need is a sale. But this is a loss of money, and does not always work. So the enterprises that implement the MRP on the advice of the heroes Prostokvashin work - in order to sell something unnecessary, you must first buy something unnecessary. First, do unnecessary, and then arrange sales.

Your marketers have planned something there. But they, of course, did not take into account factors that could not be affected. For example, such as the release of Apple's iPhone. Or, for example, such factors as the economic crisis and the subsequent sharp decline in demand. Even now, when I am writing this article, I am sure that the manufacturers of traditional hard drives are divided into two categories. Those who already think about how and when it will start producing SSD drives, and those who do not think about it, because they think that this is nonsense. And now these second ones will sooner or later produce disks, as planned, a year in advance, and these disks will remain dead in warehouses, because sooner or later the fate of diskettes awaits them. This was the case with film and film cameras at Kodak. It happened with the company Palaroid. These companies simply could not react to market trends due to their slowness. And, apparently, because they listened to their marketers too much, not the market.

The introduction of MRP technology, one way or another, but will lead to an increase in stocks of finished products and work in progress. I think people from real production do not need to explain what this can mean for a business. This circumstance can become a grave for the company. Because the more stocks you have, the less you have working capital.

And then you will go to the bank for a loan to replenish working capital. Although all of your working capital is lying perfectly in your own warehouse. They can be taken there, and not in the bank.

As a result of the gestures of the "holy trinity", the business received not just a problem in the form of a monster plan, but also the need to control this monster. The volume of data has become so huge and complex that it took incredibly complex software products to process it. Their manufacturers even call their products “heavy” and are very proud of this fact. To implement and operate these software monsters, a whole staff is needed, the content of which also, of course, falls on the client. By the way, have you ever wondered, but for whom are these software products heavy?

So how to solve all these production problems?

A very simple. Just as they were solved a hundred years ago in the factories of Henry Ford, as well as it was proposed to do almost a hundred years ago by Taichi Ono.

Consider the problem with the bumpers. The rest are similarly solved. I will deliberately offer a solution to this problem literally on the fingers, without any serious automation. Although, of course, the 21st century is in the yard and many things can and should be automated.

So, Vasya is responsible for the bumpers on your conveyor (I still hope that Vaska will ever produce decent cars on the conveyor in our country). Next to it should be two boxes, each of which should be the very bumpers. The boxes should have the same number of bumpers. Vasya should strictly take the bumpers first from one box and only when they run out, take from the other. How many bumpers should be in each box is not the point. Below I will explain how to find the optimal number of bumpers in each box. Each box should have a simple tag with a number on it, which means the part number of this bumper. Tags must be in two different colors. Blue is the product you buy from suppliers, red is the product you make yourself. Once a day, your pipeline bypasses the crawler and collects tags from empty kanban cells. It is better that he do it on the square, taking empty boxes along with tags. Vasin box is a kanban cell. The can with bolts, in which the bolts lie, with which they screw something on another place of the conveyor is also a kanban cell. The clerk carries the blue tags to the purchasing department, and he takes the red tags to the place where you are doing these things. And those responsible for making them start making them as soon as they get the red tag. Not earlier and not later.

When the lineman from Vasya took the box, Vasya takes the bumpers from the second box, and at this time your logistics order bumpers from the supplier, because they received a blue tag. Or rather, at the first stage, until you have restructured your production, the lineman will take this tag to the warehouse where the insane stocks of these bumpers are stored, and from there they will be shipped to Vasya. But this is a bad scheme and it needs to be redone.

You are calling a bumper supplier. This is Petrovich, one of your best suppliers. You used to buy bumpers from him once every three months. That is, at first these bumpers were accumulated in his warehouse, and then at yours. And now I suggest that you talk with Petrovich about deliveries under the “once a week” scheme. And let Petrovich not worry, because you will choose from him the same volume, just more often. I think that Petrovich will kiss you with happiness, if you explain to him the advantages of such a scheme. After all, before sending you a batch of bumpers once every three months, they accumulate in his warehouse, he “freezes” his working capital in these bumpers and receives real money from you only once in three months. Surely he has problems with working capital. And such a scheme will save him from this problem. So, the size of the Vasin box should be equal to this very weekly delivery. And do not save bumpers in stock. The supplier brought the bumpers, immediately to Vasya in a box. As soon as you and Petrovich set up the scheme “once a week”, immediately proceed to setting up the scheme “once every three days” with a simultaneous reduction in the size of the supply two times. As a result, the number of Vasya’s bumpers in the box will decrease by half, which means that the size of your work in progress will decrease. So, you will need significantly less working capital and you will free up real money for the company.

If you add a bit of automation to all this (for example, rfid tags, decent automated warehouse accounting, work with suppliers, customers, a normal analytical system, etc.), then you will get production that works like a clock.

Q.E.D.

MRP is a very difficult decision. And already therefore it is inoperative.

Ask your advisor to explain to you on your fingers how the MRP works. Just like that, just on the fingers. Nine out of ten consultants will not be able to do this. This question will confuse them. By implementing any solution in a multi-user environment, you should understand that only the simplest solution will work. The more complex the decision, the less chance it will work. Because a lot of people are involved in it. Confusion is inevitable. And only the simplest solutions work always and reliably.

Conclusion

At the entrance to the company, in the back should be another kanban cell. It will be a bucket. It will have a broom. With this broom you will drive the next consultants, who will offer you another super production management system.

PS

How the implementation of MRP looks like in some very well-known software products can be read here , there is an insert in the middle of the post.

You ask: "And what is the alternative?". And I will answer: "Theory of Constraints."

Critics of my point of view answer here .