The happy marriage of push and pull.

EXECUTIVE SUMMARY

The current management emphasis on lean manufacturing recognizes that pull production is the way to achieve value creation with Less waste. But what to do, then, with the MRP system? Since material requirements planning relies on a push concept of building Products to meet anticipated needs, it would seem to be the antithesis of lean. Not so. Because most facilities have mixed-mode Manufacturing, push and pull processes can co-exist in harmony, each meeting the needs of particular lines.

Push or pull: That is the question. In today's complex manufacturing sector, we are not only challenged to do more with less, but we are also bombarded with new philosophies and concepts that often push (or pull) us in different directions.

A case in point is the ongoing battle between MRP and lean. MRP systems are frequently condemned as one of the main reasons so many manufacturing companies are locked into push systems, whereas lean concepts imply that pull systems are the ideal. Truth be told, one shouldn't simply throw out one for the other--the two can co-exist harmoniously and beneficially if they are given a better definition of roles.

Jargon junction

First introduced as a philosophy in the 1970s, material requirements planning is a process used to calculate the amount of raw materials necessary to manufacture a specified number of products. Over the past 20 years, MRP has evolved into a critical tool in enterprise resource planning systems, which are used to plan and control all the resources a company requires to fill customer orders.

Today's MRP systems are typically highly technical, computerized methods for planning the use of a company's resources, including scheduling raw materials, vendors, production equipment, and processes.

In contrast, lean manufacturing--a production method that calls for building products with as few steps and as little work-in-process inventory as possible--relies on work centers or manufacturing cells that are capable of building multiple products, giving the company the flexibility to produce the exact mix and quantity of products required.

According to the Lean Institute, the fundamental objective of lean thinking is to provide perfect value to the customer through a perfect value creation process that has zero waste. To accomplish this, lean thinking changes the focus of management from optimizing separate technologies and assets to optimizing the flow of the product or family of products through the entire value stream.

Eliminating waste along the entire value stream instead of at isolated points creates processes that need less human effort, space, capital, and time to make products and services at far lower costs and with fewer defects compared to traditional business systems. Companies are able to respond to changing customer desires with great variety, high quality, low cost, and with very fast throughput times. Also, with the application of visual methods to control material flow and work-in-process, information management on the shop floor becomes much simpler and more accurate.

As manufacturers implement lean principles, many see the benefits of eliminating the waste and excess inventory associated with transaction-intensive MRP systems. Lean production processes are designed to ensure that the right materials are available for use in the right quantities at the right time.

But the material pull concepts of lean are not easily applied in all situations.

Lean tends to work best in repetitive manufacturing environments, where families of products are produced in cells or production lines. In a lean environment, a pull system is used to authorize and control production. Actual customer orders trigger production, which means items are purchased or produced only when there is demand in the form of an actual order. Planning typically occurs in a short timeframe, such as a daily production schedule, and goods can be produced in any sequence in quantities as small as a single piece. The variety of products that may be produced is based on a limited number of purchased materials and manufactured components.

Further, the rate of finished goods production determines the rate at which vendors supply materials or the rate at which related manufacturing lines supply subassemblies. Lot sizes and work-in-process may be controlled by the use of standard-size racks or containers, and deliveries of materials occur daily or sometimes even more often to match production requirements.

MRP systems operate on a push principle as goods are produced to meet a forecasted demand--a combination of actual orders and forecasted sales.

Material planners develop a plan for purchased items and manufactured components and then monitor and control the plan to ensure requirements are met. This plan relies on accurate planning information. Inputs include the master production schedule, bills of materials, and on-hand inventory. To remain valid, the plan also requires timely information on transactions, such as material receipts and issues, completion of manufactured items, and information from vendors and the shop floor, to identify variances in quantities or completion dates that can disrupt the plan.

With accurate data inputs, MRP planning and inventory tools work well to ensure that items are available when they are needed. However, the MRP plan often results in purchasing or producing items in large batches in order to gain efficiencies based on economies of scale--which can build inventories of items that are not needed immediately in the manufacturing process or to fill customer orders.

The argument can be made that MRP is better applied in job shop environments and that lean is more applicable to the repetitive manufacturing environment.

In the job shop environment, a wide range of products are made on general purpose equipment, which is grouped together in fixed locations. Products are made in batches, and work orders are used to authorize and track production. In a repetitive environment, families of similar products are made using assembly lines or cells. Production scheduling and control are based on production rates. Work orders are not necessary

Mixing it up

Many companies find that all of their products do not fit into one neat production environment. Most manufacturing facilities at some time have a mixed-mode manufacturing environment (including repetitive, job shop, or engineer-to-order), where the same raw materials may be used to make multiple products.

A company's mature products may be produced in high-volume production lines using repetitive manufacturing and a pull system. However, newly-introduced products or products that are near the end of their life cycle may be made in batches using a job shop routing.

A job shop approach may also be required when the manufacturing process contains operations such as heat treating or chemical treatment, where the time required to complete an operation is lengthy and where safety or environmental concerns affect where and how the equipment is used.

These different manufacturing environments within the same facility can use a blend of push and pull material planning and control methods to ensure that products are produced when they are needed. By applying the right mix of MRP and lean concepts, manufacturers can gain the benefits of reducing waste in their processes while also benefiting from the planning and inventory tools of MRP.

Blending push and pull

In a mixed-mode environment, MRP can be used to set priorities for the production of finished goods and to develop a plan for common raw materials consumed in the job shop and repetitive environments. For products produced in the repetitive environment, the material plan provides a basis for discussions with vendors on reducing lot sizes and supplying only what is needed, when it is needed. For unique items consumed in production lines, uniform containers can be used to standardize lot sizes to signal the need to replenish materials and to simplify transport between the vendor and customer. Materials can then be pulled into production lines as needed to support the required production rate of finished goods. Sharing material plans can lead to partnerships with vendors that not only reduce lot sizes and lead times but also result in reduced costs and less work-in-process at both vendor and customer locations.

For the job shop environment, the planning and inventory tools of MRP can also be applied to set priorities for raw materials and manufactured products in addition to developing plans for when and how much will be required. In this environment, MRP can be used to plan for materials that are purchased on a regular basis as well as unique one-time use materials, items with long lead-times, or subcontract services from vendors. To ensure valid material plans for both the repetitive and job shop environments, MRP can be used to track the progress of actual production versus plan, and to identify the need for corrective action when deviations from the plan occur. MRP also provides the means for analyzing and responding to changes in demand, such as new orders, cancellations, or changes to quantities or delivery dates on existing orders.

Getting started

MRP and lean are not only capable of co-existing, but they can support one another, provided that the following concepts are understood and conditions exist:

* Commitment to planning: First and foremost, there must be a commitment to planning. The "P" in MRP stands for planning, yet its role is often over-shadowed by the zeal to reduce waste. The importance of planning simply cannot be overlooked. Beyond better inventory control, planning enables you to have the right quality and quantity at the right location and time. Good material planning can help reduce the waste of downtime as well as decrease the amount of overtime. It also helps with overall product quality

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