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What to look for in an MRP System

Key things you should know about an MRP System

An MRP System (Materials Requirements Planning) helps a manufacturing company utilize built-in scheduling logic to manage the flow of materials in the manufacturing operation. Companies are looking at ways to reduce inventory costs, drive down lead times while improving customer service, improve the manufacturing process and improve product quality. Using an MRP system, a manufacturer can become much more efficient and better plan the needs for resources, both in terms of materials as well as capacity within the factory and better serve the customer.

There are two types of MRP Systems that can be discussed. First is Material Requirements Planning and the second is Manufacturing Resource Planning or MRPII. A traditional MRP System is one where the software uses the Bills of Materials, Inventory levels, and the Master Production Schedule to calculate and plan the need for replenishment orders. An MRPII system is a system that plans many more functions of the entire manufacturing process, including Capacity Requirements planning, Master Production scheduling, Plan Simulations and all the aspects of the classic MRP system.
MRP System
Most systems today are MRPII based systems, so from this point forward, if we are referring to an MRP System, we are really discussing MRPII systems as that is what is presently offered in the market and includes the earlier aspects of MRP.

Researching an MRP System often brings about a lot of questions and uncertainty. Not so much about the MRP System and how it calculates the requirements, that is usually just a calculation that you can get from a good Material Requirements Planning book. Really, the question usually comes about as to where the differences are between the systems.

Essentially, the key differentiators of MRP systems would be the ease of their ability for them to allow you to see the multiple layers of planning. But even more, the ease in which you can keep the data clean. With thousands of parts and possibly thousands of Bills of Materials (along with the many variations), you will need to be able to easily update or even mass update parts, BOMs, routings and all of the detail surrounding them.

MRP System as part of an ERP solution

As most MRP system software is a subcomponent of ERP (Enterprise Resource Planning), it is worth looking at how the materials planning aspect of the ERP interacts with the rest of the system. For example, how well does the MRP system communicate order requirements to the shop floor control system? How well does the Product Data Management aspect of the ERP interact with the Bills of Material module? How well does the inventory control system work with the Quality Management system? For example, if you receive inventory into the system, is there a way to isolate it from the MRP System while it undergoes quality inspections?

When looking at MRP Systems the real concern is how the users will use it. It needs to be as simple as possible to interact with from a user perspective. However, it needs to be able to drive all of the capacity and material plans that you need to run the business. An important thing to try is to let your material planning or purchasing people try out the system during the demo phase. They won’t be able to run the system without help, but at least they can get a feel for the screens and the depth of information provided.

Another important tip is to make sure that all of your people who are interacting with the system, such as buyers, planners, and inventory managers all have training on the concepts of MRP. This will help them get up to speed quickly once a new MRP system is in place.

Your Future MRP System

When you get down to a short list of vendors, it would be a great idea to start looking at the quality of the information from your existing MRP System. Clean up the Bills of Materials. Obsolete any that are out of date. Ensure that your inventory counts are accurate. Make sure that your customer orders are clean and old back-orders that will never ship are closed. You should begin the cleanup of the data in the source system long before you even think about transferring it to the new system. If you do it a little at a time over a period of months, by the time you are ready to migrate the data to the new system, you will be ready to utilize the new system immediately. At some point the data needs to be clean, it might as well be now.

Lastly, find out early from the software provider of the new system what additional data elements you will need to support their system. You may not be capturing that data currently, so start building the list now. Moving to a new MRP system does not need to be difficult, but it will take some cleanup and planning.

If you are looking for an MRP System or an ERP system: Gain immediate access to the key features that you must be evaluating with our Manufacturing Software Feature Checklist, available for immediate download.MRP System Feature Checklist

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Manufacturing ERP Fundamentals

What is Manufacturing ERP?

Manufacturing ERP (Enterprise Resource Planning) software is a much more complicated system than standard ERP systems. Before we talk about software though we need to understand that Manufacturing ERP also consists of the business processes that it takes to run a manufacturing operation. Unlike distribution or service businesses, there is a complete set of processes that enable the create of value from raw materials. These materials are supported by a supply chain which also needs to be managed.

Setting the software aside, there are inventory processes, shop floor processes, design processes, procurement processes, quality control measures and processes, and order management processes that need to be properly managed in the manufacturing ERP system. Many people have tried to solve the issues related to all of these processes by applying a new software solution to manage the process and have failed.

A blend of people, technology and process factors needs to be evaluated and optimized. If any of these three areas are missing or weak then the overall manufacturing process will not succeed. What will make you successful is improving the processes before you apply a manufacturing erp software solution.
Manufacturing ERP

When evaluating Manufacturing ERP software, it is important that the functional requirements for each of the three factors needs to be evaluated. How will the people be managed and evaluated in the Manufacturing ERP system? How will controls on the machinery and other technology be managed in the manufacturing ERP system? How will the technology enable efficient operations?

A trend in manufacturing over the last decade has been to apply Lean Manufacturing principles. Essentially, you want to remove waste from a process before automating it. If you do not, you will make the inefficiencies operate faster, creating more in-balances in supply and demand. It really doesn’t matter what you produce in terms of products, or what you utilize as your input raw materials. Lean principles balance out your supply and demand and in doing so, create better throughput. With the advent of Lean Manufacturing principles, many ERP software systems have incorporated a lean thinking into their systems.

Using a combination of Lean principles and common sense, you can work at creating operational efficiencies that will help when you apply any manufacturing erp software system to help manage the business processes. Bottom line: don’t automate a mess.

Manufacturing ERP Software

Looking at Manufacturing ERP Software, you need to evaluate how well it manages the manufacturing business functions (such as creating purchase orders, the business processes (such as managing the demand planning process), and how well it manages the data (as in providing efficient access and ease of reporting). That being said, all systems typically have a set of financial modules, a collection of inventory modules, manufacturing modules, and sales and order modules. These various modules each have certain functionalities that help you run the core business.

The differentiation between these various systems is in how well they accommodate the niche business that you are in. If you are a process manufacturer making blends then there is a certain set of Manufacturing ERP systems that work best for you. If you are a machine shop, then another class of Manufacturing ERP solutions work for you. If you are a complex or project based manufacturer, then you will look for different software than others. The good news is that there are ERP vendors that specialize in these different niche areas and others.

Understanding the class of software you want to evaluate is key to creating a short list of vendors. Keep in mind that there is a class of ERP software that fits in as a generalist niche solution. In other words, these software do all aspects of manufacturing fairly well, but do not have a specialty in any certain industry. Often these manufacturing ERP solutions will rely on their value added reseller chain to create add-on modules to fit certain industries. For example, there may be a generalist solution that has a set of 3rd party modules (written in the native toolset) that provides the process manufacturing functionality.

Things to look for in Manufacturing ERP solutions

When you evaluate Manufacturing ERP software, it can seem overwhelming. There are hundreds of manufacturing ERP software vendors all looking to be the next system at your company. If you step back and look at the industry that you belong to and evaluate the systems based on those that are successful in your industry, you will have taken the first step.

Second, you need to look at those systems that support all areas of your business. If you have unusual requirements make the vendor demonstrate how they will handle these unique functions. Many vendors claim to support various business processes, but when you make them show them in detail, there will be a clear distinction between those that can and those that only think they can handle your requirements.

Thirdly, you should evaluate the standard functions, but do not spend too much time on those things. Being able to cut a check or create a debit memo are pretty standard these days. Rather, have the vendor spend time showing you how they will handle your unique Return Merchandise process or your specialized Quality Management requirements. There is a consulting joke about the fact that “you as a customer are unique just like everyone else.” This is both true and false at the same time. Every business thinks it is unique on the whole. But the reality is that you probably do a majority of the things that most other businesses do. However, there is probably 20 percent of the things you do that make you special and make you successful. You want to make sure that these are the things that you drill down on with the vendors to ensure that you can continue to be special in those areas.

Taken step-by-step or with an area-by-area focus, Manufacturing ERP systems can be selected and implemented with great success.

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How to Have a Successful Selection Project

What to do right in a Business Software Selection Project

An ERP selection project (or any business software selection project) is a difficult endeavor. There are many things that need to be managed. There have been projects that seem to go well and then suddenly things end up on the wrong track. The critical thing about an ERP Selection project or any business software selection is that it lays the ground work for the implementation project. So if it is done correctly, you will have a higher chance of success in your implementation. If you have a weak selection project, then you are likely to have an equally weak implementation.

Things to ensure success on your Selection Project

There are several things you can do to ensure success on your selection project. Firstly is to gain top management’s support for this project. If the project is not a high priority at the top, then it will never succeed. This is one of the most important things that needs to be in place for a project to be successful. Good project management dictates that you have support for the selection project before undertaking the project. If the staff see that management doesn’t really care, then they will not care. However if people realize that management has made this a priority, they will shift their work to accommodate this new project.

The next thing that will help to ensure success is to have well defined expectations. This means that you need to map out the goals that you want to achieve with the new system. Often people will define their requirements for the system, but they have no higher goal. What is driving this need for a change? What is the expected successful outcome. Any successful project begins with the end in mind, but an ERP selection project is driven by the overriding goal of a successful out come resulting in significant positive changes. This goal will get you through the difficult times. Without it, the project is destined to achieve mediocre results and will likely take longer and be more difficult.

A focused timeline will also aid to the success. If you can define and manage to a set timeline and stick to it, the selection project will move at a reasonable pace. If you do not set a timeline and manage to it, the project will move at the pace of the vendors and will likely flounder. Again, this goes back to the management support. It needs to be a driven project. A selection project that is treated like just additional work will not be successful.
Selection Project Success
Focused and available resources are also key to the successful ERP selection project. Typically there are two teams, which may overlap. First is an executive steering committee that will decide on key things such as issues that arise where departments are competing with one another, or issues where time and budget are involved. This team is usually composed of senior management and at least has people empowered to make strategic decisions. Second is a functional team that represents the various areas of the business. Accounting, Quality Control, Manufacturing operations, Purchasing, Order Management, Inventory Control, etc. are all key areas that should be represented in the functional team.

This team needs to have the time to dedicate to the project. Companies that are truly committed to the success of the selection project often will move key people out of their jobs and give them full time responsibilities to the project. This is often very difficult and creates a short term gap in the various departments. But usually the remaining staff rise to the challenge and the leader from the department will provide invaluable insight into how the software system should function. The best people to assign to the project are the people you can least afford to remove from their jobs. They are the movers and shakers of the company and they make things happen in their departments. But this personality is exactly what you need on your selection project. They will give insight and a sense of drive to the project that will ultimately make it and the company a success.

Another key area to keep in your area of focus is the acceptance of change. Change management is one of the critical things you can do to ensure that the implementation is a success. But why talk about this in the selection project? Because the selection is where the change management process begins. If you can communicate your goals and visions for the project and get people enrolled into the idea of a change to their working environment, and make them excited about the change, then you are on your way to being successful. Change management boils down to effective communication. If you can over communicate the needs, the reasons for the projects and the successful vision, then you will gain the trust and support of those who will likely be doing more work in the short term to make the selection project a success. This includes those who are not directly involved, but will ultimately be users of the system. You need to make sure that everyone is involved.

This ties in with the last success factor and that is the communications plan. A plan needs to be drawn up to help communicate the goals of the project, the status of the project, they impact the project will have on users and even communicating bad news. Be sure to build into the project the communication plan. For example, at initiation, communicate the goals and desires of the project to the employee community. Along the way, communicate the status of the project. Make people feel involved or at the very least they are not being kept in the dark about the project.

What a Successful Selection Project looks like

If you have done the above mentioned items well, then a selection project will look like and will be a success. There are many aspects to a selection project, including people, processes, and the technology. Managing all of these factors well will result in your success. But communication and support are critical. You can not over communicate too much. Be sure that you have support and that everyone understands why you are undertaking the project. If you do this, you are on your way to choosing the right software and ensuring a successful outcome to your implementation, all thanks to the good work you put in on the ERP selection project.

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10 Steps to selecting ERP Software

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