How to Understand The History of MRP II, ERP and Oliver Wight

Executive Summary

  • Oliver Wight was the creator of MRP 2, which was the foundation for MRP.
  • We cover the relationship between RMP and MRP II.

Introduction

MRP 2 was popularized by Oliver Wight in the mid-1980’s. Oliver Wight was already well established in MRP decades before developing MRP 2. He was a co-author, often with another MRP, as well as overall production planning and inventory management guru, George Plossl. While Plossl will be first tethered to MRP, Oliver Wight will forever be associated with MRP 2. Interestingly, Oliver Wight died a year after publishing his book on MRP 2. Therefore while Oliver Wight was the definitive developer of the concept, he did not live long enough to shape it as it rose in popularity, although the consulting company that Oliver Wight founded is still in operation today.

MRP 2 described a category of software. At first, there was stand-alone MRP software. Then software vendors began adding extra functionality that while connected to MRP was not part of MRP.

MRP was an intermediate stage between MRP and ERP. The takeover of ERP systems by the late 1980s is a primary reason why no one speaks of MRP 2 systems, although the concept of MRP 2 is still sometimes discussed.

As with most ideas that become popular in supply chain management, what something is, is a combination of the following:

  • It’s actual features.
  • How the item is expressed, which often has a lot to do with marketing

But first should distinguish between MRP II systems and MRP II the concept.

The Difference Between ERP and MRP

MRP 2 being the basic footprint of what would become ERP shows the difference between ERP and MRP.

The difference between ERP and MRP is quite straightforward.

  • MRP is focused on production and supply planning.
  • ERP is much broader. It contains MRP within it, but then adds sales and distribution, finance and accounting, non MRP materials management (things like stock transfer that MRP does not do). ERP systems often have a warehousing module as well.

ERP is almost never enough for all of a company’s needs. I have a book why entities like Gartner, SAP, Oracle, the large consulting companies and many others proposed this back in the 1980’s. This was proven incorrect as companies continued to use their legacy systems along with ERP after ERP was implemented, and then purchases more applications and connected them to the ERP system.

Oliver Wight and MRP II

In his 1983 book, the following are examples of the checklist criteria used by Oliver Wight Consulting to certify a company. This certification provided the company a “Class A for Business Excellence.”

  1. Understanding and Analyzing the Internal and External Environment: A process exists to collect relevant information internally and externally to understand the company, its products and services, its marketplace and the competition.
  2. Company Capability: The company has a business process to understand the ability of all its business processes to identify the strengths and weaknesses of its offer to the marketplace.
  3. Analytical Tools: A comprehensive use of analytical tools is made to identify business trends and opportunities and to understand how the company responds to current and future needs.
  4. Vision Statement: The vision statement is inspiring and memorable and summarizes what the company wants to become in the marketplace and community.
  5. Supplier Quality: Supplier quality processes and improvement programs are monitored and reported, to ensure integration with the company’s quality systems.

As should be apparent, none of these criteria have anything to do with setting up MRP systems.

Other reading of this book shows the overall process, rather than calculation orientation of Manufacturing Resource Planning.

How Useful Were these Certifications

It ‘s hard to say exactly how useful these types of certifications were. But it is amusing to find this quote from George Plossl, who was a friend and co-author of Oliver Wight regarding the certification program at the time:

“Implementation (of MRP) was viewed as “getting software running on the computer” not as using the programs to run the business, so users were poorly prepared, incomplete systems were installed, and proper foundations were not put into place. Under qualified consultants aggravated this by offering to help install MRP II systems and reach in very short time “Class A status,” a set of superficial and systems related criteria more than operations-related requirements.”

Interestingly, there must have been some consulting companies offering this Class A status at the time — however, Oliver Wight’s checklist does not focus on systems related criteria and are more focused on higher level types of criteria.

Why Oliver Wight Introduced MRP 2

It is clear that MRP 2 was introduced based on the marketing platform that MRP had not achieved its objectives.

The argument of MRP 2 was that the reason was that MRP was insufficiently integrated to other systems. And therefore to the rest of the business. And that it lacked some specific functionalities.

The quotation below explains this idea.

“By far, the  greatest single factor in ruining a perfectly good manufacturing plan is the tendency for the Demand Forecast to change on a regular basis, typically inside planning lead time. Or, the Demand Forecast may be completely useless for manufacturing  purposes, forcing the person responsible for the master schedule to literally generate  his own forecast in an attempt to predict what the demand actually will be. Often times, a combination of both of these conditions exists, where the marketing forecast is so inaccurate as to make it useless, forcing the master scheduler to perform this task of generating a forecast. And, without some kind of forecast, there is no master schedule. And, without a master schedule, there is no ‘M.R.P.’. Any ‘M.R.P.’ system without a demand forecast analysis capability is thus severely limited in its ability to  help reduce overall inventory and simultaneously meet the requirements of the production plan. After all, “Garbage In, Garbage Out.””What is MRP (I,II)

A More than 30-Year Problem

I don’t use this quote from Oliver Wight because I agree with it, but because it illustrates the arguments presented for MRP 2 by Oliver Wight at the time. Indeed, Oliver Wight has consulted at quite a few companies and had lived through the migration of companies to MRP systems.

Interestingly, 30 years after the introduction of MRP 2, this problem persists.

Connecting a low accuracy forecast to an MRP system through an integrated system does nothing to improve this prediction.

How Interchangeable are the Terms MRP and MRP II?

Most people that work in supply chain management are familiar with MRP or material requirements planning. MRP II, which stands for Manufacturing Resource Planning, is a term that was at one time popular but is now rarely used. The issue is that sometimes someone will use the term MRP when they mean Manufacturing Resource Planning.

While MRP is contained within MRP II, they are not at all the same thing, and in fact, this is an easy area of confusion. In this article, we will unravel the history and differences between MRP and MRP II. Let us begin by covering MRP II.

The Focus of MRP II Versus MRP

MRP II or Manufacturing Resource Planning, while sounding almost exactly like MRP is in fact not focused on the same things as MRP. In fact, Manufacturing Resource Planning more or less accepts MRP as a supporting capability — which is then extended with MRP II.

Manufacturing Resource Planning was introduced by Oliver Wight who after spending many years consulting with companies on their transition to MRP systems, observed the limitations in MRP system implementation.

MRP II is focused on the integration of MRP and the new functionalities of capacity planning and detailed scheduling.

MRP II the concept, rather than the MRP II system, is also more qualitative than MRP and more focused on process. For instance, Oliver Wight began a consulting company that certified companies in Manufacturing Resource Planning.

Conclusion

All of this is why it is more misleading than clarifying to speak of MRP II in the same sense as MRP. For instance, ERP contains MRP. However, one could never use the terms ERP and MRP interchangeably, but this is often done with MRP and Manufacturing Resource Planning. While this is not understood, this observation was made by George Plossl all the way back in 1984:

“Practically all suppliers of MRP programs provide a comprehensive core-system package for manufacturing planning and control, including MRP, rough-cut capacity planning and capacity and shop floor control, plus many support programs for procurement design and process engineering, quality management, cost accounting and plant maintenance. Unfortunately, these are usually called “MRP II systems,” leading to confusion between MRP technique and the MRP system they represent. Sophistication of programming of these systems is also overdone.

The acronym (MRP II) was an unfortunate choice, causing confusion and generating more heat than light on he subject of improving operations.”

Plossl points out the difficult aspects of calling all these functions “MRP II” (shortly after this same set of functionalities would be called ERP, a term coined by Gartner).

Plossl on Programming Undone

Plossl also makes the point about the sophistication of the programming being overdone. This is easily found if you read other quotations by him.

I cover this topic in a separate article. This is that over-sophistication negatively impacts the implement ability of these applications. Today MRP II applications are referred to as “ERP.” This is not a quote from 5 or 10 years ago but from 30 years ago.

To learn about the history of MRP see this article.

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References

Wight, Oliver. The Oliver Wight Class A Checklist for Business Excellence. Sixth Edition. Oliver Wight International. 2005

Plossel, George. Orlicky’s Material Requirement’s Planning. Second Edition. McGraw Hill. 1984. (first edition 1975)

What is MRP (I,II) Full citation lacking, but available at this link
http://www.share-pdf.com/73ec30f31e4e41e29f089357308d2349/What%20is%20MRP.pdf

As MRP II is essentially ERP, I provide my book on ERP below:

The Real Story Behind ERP Book

 

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

Software Ratings: ERP

Software Ratings

Brightwork Research & Analysis offers the following free ERP software analysis and ratings. See by clicking the image below:

software_ratings

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