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Since the 1960s, companies have been relying on MRP for inventory management. Its forecasting abilities have found tremendous applications in the manufacturing industry but there should be no qualms in accepting that its advantages have been far blown out of proportion in contemporary times. This article talks about why traditional planning is falling out of use and why manufacturing ERP needs a complete reformation.
Reasons why traditional manufacturing planning is falling out of use:
- It relies heavily on forecasting.
- Forecasting helps estimate sales, production costs, and inventory planning.
- But forecasting can only provide a rough estimate and in most cases, the figures are too ideal to achieve.
- Forecasting takes into account past sales data, material batch sizes, and wasted resources.
- If there is even a small error in the data, it can lead to the generation of erroneous reports that ultimately defeat the purpose of the forecast.
- Also, as material lead times continue to get shorter, it is getting even more difficult to forecast.
Also Read: Benefits of Material Management in ERP
How traditional planning is transforming?
- MRP (Material Requirements Planning) is slowly and steadily changing to DDMRP (Demand Driven Material Requirements Planning).
- DDMRP brings a new element in production planning – variability.
- This is why planners need not be too precise and give suitable weightage to uncertainty in the planning process.
- Instead of a due date system, DDMRP uses a buffer status system to determine priority.
- For example, if a manufacturing company has a buffer stock of 20% aluminium and the due date is 5 weeks away, then a DDMRP will assign a higher priority to it than if the same manufacturing company has a buffer stock of 50% iron and the due date is 3 weeks away. This results in better production planning, material handling, and inventory management.
Taking a demand-driven approach instead of a due date approach is the need of the hour. Meeting modern market needs requires important adjustments such as close monitoring of buffer levels and strategic decoupling. At Sage, we are home to world-class Manufacturing ERP software that automates scheduling, enables material handling, provides you greater control over inventory management and increases your manufacturing efficiency exponentially. To know more about it, SMS SAGE to 56767. You can also write to us at firstname.lastname@example.org.
Disclaimer: All the information, views and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.
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