Moving from MRP to APS: The Drawbacks of MRP

Everything has its season, and as technology evolves, some tried and true processes are becoming obsolete.  That is true of Materials Requirement Planning (MRP), a 30-year-old software-aided inventory and production planning methodology. Although some project managers still swear by it, MRP is slowly stepping aside and giving stage to Advanced Planning and Scheduling (APS). Why? Good question, and one we will delve into in this next blog series.

MRP’s fundamental philosophy is back-planning from the demand due date, utilizing an item lead time to provide signals of what to produce or purchase. Unfortunately, this process gives limited information on whether the schedule of events is realistic and achievable, and often provides a “start date” to order material or start a job well into the past with its back scheduling. And the worst thing your business can do is overpromise and underdeliver. First let’s discuss the top three drawbacks of MRP that could limit your overall business success.

#1: MRP Struggles with Real-Time Data:

• Traditional MRP systems run on batch processing, meaning they update data periodically rather than continuously. This delay can cause outdated information on inventory, demand, or production schedules. In addition, if your business struggles to react instantly to sudden shifts in demand, supply chain disruptions, or machine breakdowns, your MRP software often requires running a new and time-consuming calculation which can often be a setback to your operations and meeting customer expectations. Without real-time visibility, MRP may base decisions on outdated forecasts rather than actual market conditions.
• Moreover, if Inventory levels, order statuses, and production progress aren’t updated in real time, your workers can easily make incorrect planning decisions, such as ordering materials that are actually already in stock. No matter what updates you make to your current system, such as IoT devices and real-time sensors that provide live updates on issues such as machine performance and stock levels, MRP isn’t designed to play nicely with them. And synchronization issues don’t stop there; manufacturing operations, supply chain logistics, and sales teams often operate on different systems that don’t talk with each other. Without real-time synchronization, MRP may work with outdated demand forecasts or incomplete supplier updates. Real-time processing requires high computational capability, so if you’re attempting to run MRP with real-time data on a legacy system, it rarely has the computing power to handle this demand.

#2: MRP Struggles with Capacity Constraints:

• Generally, capacity constraints in manufacturing, service or logistics companies often result in a 5% to 20% profit loss (up to 50% in extreme cases). Whether they be physical, operational, or financial, MRP software, unlike APS, often overlooks capacity constraints and therefore is unable to optimize efficiency, scale operations and, thus, unable to improve profitability. First, standard MRP assumes that machines, labor, and work centers have unlimited capacity. As a consequence, it generates production schedules based on material availability, without considering whether resources can handle the workload.
• Second, even though MRP ensures materials are available when needed, it doesn’t check if there are enough machines and labor available at the same time. This mismatch can lead to materials sitting idle, resulting in increased storage costs and lead times. In addition, MRP might schedule more work orders than a production line or machine can handle, causing bottlenecks and delays. Since MRP doesn’t account for real-world constraints like machine downtime or failures, maintenance, shift limitations, or labor shortages, it does not automatically adjust the schedule to account for these changes, thus leading to minor or major disruptions.
• Finally, MRP systems don’t always provide a clear view of how workload is distributed across different production units. This lack of visibility can result in some machines being overburdened while others remain underutilized.

#3: MRP Struggles with Flexibility (Especially with Changes in Demand or Production Schedules)

• Struggles with real-time data and capacity constraints ultimately feed into this final challenge faced by those working with MRP software.  Traditional MRP systems run calculations periodically (e.g., daily or weekly) rather than continuously. If demand suddenly changes after an MRP run, the system won’t adjust until the next scheduled update. This lag time can result in producing excess inventory or facing stockouts. Making matters worse, entering these new adjustments often requires manual intervention, which can be time-consuming and prone to errors.
• Additionally, MRP assumes fixed lead times for materials and production processes. However, in reality, suppliers may deliver late, machines may break down, or production may speed up. And because MRP doesn’t dynamically adjust lead times based on real-time conditions, it can create inaccurate schedules.
• Finally, small demand fluctuations at the customer level can lead to large variations in material orders, causing instability in supply chains. MRP does not inherently smooth out these fluctuations, causing your business to over-order or under-order materials.

Overall, while MRP offers businesses a structured approach to inventory management and production scheduling, it is not without its drawbacks. The system’s reliance on accurate data, high implementation costs, and complexity can pose significant challenges, especially for businesses with limited resources. Ultimately, APS is the new “it” software and is likely to carry business into a successful future for many seasons to come.