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Best Practices for manufacturing planning and MRP in 2023

Manufacturing planning and Material Requirements Planning (MRP) can present some challenges and risks, particularly in a dynamic and competitive business landscape where demand, supply, and costs can fluctuate rapidly.

We unveiled the main challenges of these processes at the webinar “Best Practices for manufacturing planning and MRP in 2023”, held by Mauricio Dezen, SVP Operations, Supply Chain Professional along with Natalie Lopadchak-Eksi, Ph.D. (C), CSCP and VP of Partnerships at Streamline.

The main challenges to consider are as follows:

  • Bullwhip Effect
  • Long Lead Times
  • Capacity constraints
  • Outdated Technology
  • Return on Investment
  • Each challenge will be covered in more detail.

    Bullwhip Effect

    The bullwhip effect refers to a unique occurrence within the supply chain where minor shifts in customer demand at the retail level can result in amplified fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels.

    “Bullwhip effect is extremely risky, something that we manage daily. If you don’t have a sophisticated supply chain control, it’s a shaping form of a tsunami and actually at the end, the tsunami is going to hit MRP,” – said Mauricio Dezen, SVP Operations and Supply Chain Expert. “If you have manufacturing, any unexpected event will create the bullwhip effect, a bigger wave on retail and then go to your distribution channels, warehouse, transportation. So the webinar is about – how do you have to accommodate urgencies, shortages, and lack of inventory. What is the solution for that? You need a single source of information where all the players can see the same things. Adopting new technologies, adopting AI can be the answer.”

    Long Lead Times

    Longer lead times create large complexity when trying to predict inventory levels which then multiplies exponentially complexity when predicting MRP levels again – the longer your lead time the more precise you have to be, and as you grow, your supply chain will simply be too complex to not use AI. Large inventory building for unused materials or large stockouts and lost sales.

    The sooner you capture a future disruption in a long lead time supply chain, the better your chances of correcting course, and changing the orders before they ship. What can help? Nimble and adaptive supply chain and potential negotiation with suppliers where the company provides a plan for the future, with updates biweekly.

    Capacity Constraints

    Production capacity is often maxed out or heavy rubber banding due to slow changes required (machine installation, labor training). Very often there is not enough accurate foresight of demand and inventory needs to produce a capacity plan that is accurate in the long term – and therefore can be planned with enough time to be actionable and impactful.

    Companies need to have an accurate, precise, up-to-date, and repeatable demand and inventory plan with enough time in advance to make meaningful adjustments to capacity planning. Just under full capacity as close to 100% of the time as possible. Furthermore, future models have to be built up to 100 months in advance, analyzed, and adapted based on online/real-time sales. Predict fast, and adjust in the long term.

    Outdated Technology

    Businesses are increasingly acknowledging the limitations of using Excel as their primary planning tool and are seeking alternative solutions that offer enhanced capabilities. The adoption of dedicated demand planning solutions is gaining traction as they provide more sophisticated features, seamless integration, and supply chain-specific functionalities for consistent and reliable results. By embracing these integrated planning tools, businesses can build robust and accurate plans for the future, improving overall operational efficiency.

    “The traditional tools of pen and pencil are no longer effective for managing Material Requirements Planning (MRP). Similarly, relying solely on Excel is also proving to be ineffective in the context of MRP,” – said Natalie Lopadchak-Eksi, PhD(C), CSCP and VP of Partnerships at Streamline. “As businesses recognize the limitations of these outdated methods, they are actively seeking more efficient and sophisticated solutions to streamline their MRP processes.”

    Return on investment

    AI can create a lot of returns, powerful returns. The companies that are not adapting AI don’t communicate. No communication means you are going to lose sales, write off inventory and you are going to stick with a massive amount of cash flow in the wrong places. By implementing modern strategies, businesses can enhance their financial performance, reduce inventory-related costs, and create a more responsive and adaptable supply chain ecosystem.

    Summing up

    “AI is not software, it is a new way of doing business,” – said Mauricio Dezen, SVP Operations and Supply Chain Expert. “Streamline AI platform offers a range of customization options in different areas, empowering businesses to adapt it to their specific business models and industry conditions. It is essential to evaluate what works best for your organization, how you can enhance your manufacturing planning and Material Requirements Planning (MRP) processes, and how Streamline can add value to your operations.”

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    • Achieve optimal 95-99% inventory availability, ensuring you can meet customer demand consistently.
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    • Cut excess inventory by up to 50%, freeing up valuable capital and storage space.
    • Increase margins by 1-5 percentage points, boosting overall profitability.
    • Enjoy up to 56 times ROI within one year, with a 100% ROI achievable in the first three months.
    • Reduce the time spent on forecasting, planning, and ordering by up to 90%, allowing your team to focus on strategic activities.