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THE BEST APPROACH FOR INVENTORY CONTROL:

What’s The Best System for Inventory Control: Excel? MRP? Kanban?

Thu, May 05, 2016 @ 11:36 AM / 0 Comments / in Microsoft Dynamics AX, Manufacturing ERP Software, ERP Software by Nancy Phillippi

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About a decade ago, The Aberdeen Group studied the percentage of manufacturers using spreadsheets for demand planning vs. material requirement planning (MRP) or other automated tools. The overwhelming majority of manufacturer’s (71%) used spreadsheets because they found it easier than using the tools in their enterprise resource planning (ERP) or inventory control system.

"Unfortunately, not much has changed since then," says Mark Skinner, Director of Services at Clients First. "When we talk with new clients, we almost always hear something about how frustrations with their current ERP systems have driven them back to the spreadsheets they were using before the system was implemented. This is typically due to poor initial training and setups, lack of management ownership in the system and lax operational processes."

Overcoming Common ERP Complaints

Despite common ERP type 1 complaints, operations managers know these objections must be overcome as using spreadsheets for demand management, or resource planning is far from perfect. "As powerful as spreadsheets are, they just aren't up to the task of handling the complex supply chain scenarios most of our clients face, and things change too quickly to allow the planner to go back and update the spreadsheet," adds Skinner. At Clients First, we like the added benefit of Microsoft Dynamics in that the ERP system usability features are familiar, the programs are formatted like Excel and Word, so there is no need to learn something new in order to use Dynamics AX.  Work processes become easier with AX through workflows.

In addition, resource planning is a collaborative effort, or at the very least, one which requires data aggregation from a number of sources. When everyone involved is working from their own version of the master plan, the data is often inaccurate or out of date. "Spreadsheets can facilitate decision making, and that includes poor decision-making," adds Skinner.  This is why some type of material resource planning software is important for manufacturing.

Automating Resource Management

Automating resource and demand management processes can go a long way toward helping the manufacturer become lean and nimble. In addition, because the automation makes processes more efficient, planners have the ability to use more sophisticated techniques.

Two of the most popular inventory management techniques today are MRP (Material Requirements Planning, based on historical data) and Kanban:

MRP - A production planning and inventory control system that uses bills of material, inventory data, and the master production schedule to calculate requirements for materials.

Kanban - A visual replenishment system that uses manual inventory signals to trigger replenishment.

As Excel’s user dependent silos has been ruled out, which is better for manufacturing: MRP or Kanban? As in most areas, the answer is "it depends on the businesses functionality." Sometimes it can seem like the ultimate goal of lean practitioners and purists is to get rid of "outdated" notions such as MRP. However, other manufacturing experts don't see MRP as the problem so much as the way it is implemented within the organization.

 "In reality, MRP is critical and more relevant than ever. Unfortunately, the truth is that the core MRP concepts and rules around them have been neglected and left to stagnate for a long time."

~ Orlicky's Material Requirements Planning, Third Edition, Carol Ptak and Chad Smith, 2011

Many of Clients First's customers manage their operations using a combination of MRP and lean principles like Kanban. According to Catherine Dean, CPA, Managing Director at Clients First, Minneapolis office "While Kanban and other lean techniques can help keep inventory levels low, MRP allows for flexibility and is helpful when demand is unpredictable. Manufacturers should not be forced into one or the other by their ERP system."

The best approach to resource management

Advanced applications like Microsoft Dynamics AX have sophisticated functionality that allow for both options as well as flexibility in the way the concepts are applied. "Dynamics AX has supported make-to-order production planning and MRP for decades. In addition, Dynamics AX has the electronic Kanban functionality required to make visual replenishment feasible in a number of different scenarios. With Dynamic AX, we can help our clients implement the right techniques for their business," says Dean.

Clients First, a Gold Certified Microsoft Partner, can help your business improve inventory management in implementing Dynamics AX, the most selected ERP software solution.  Dynamics AX is utlized world wide by manufacturers and professional service companies including the maintenance, repair and overhaul (MRO) industry. It is built on Microsoft easy to use technology making employees happier and more efficient that positions your company for growth. Please contact us our Texas location at 800-331-8382 or [email protected].  Our Dynamics AX Minnesota office can be contacted at  877-428-7205 or email [email protected]

Tags: Microsoft Dynamics AX, Manufacturing ERP Software, ERP Software