Materials Requirements Planning was the first application for computers in business.
Back in 1956, the IBM 305 RAMAC (Random Access Method of Accounting and Control) had 5MB of storage, cost $3,200 per month (over $27,000 in today’s money) and filled a room.
Since then hundreds of companies have developed software systems for manufacturing. Hundred thousands of manufacturing companies have used them. Computing power has grown exponentially as costs have similarly fallen.
With that kind of history, it is no surprise that fifty-seven years later, effective MRP software is cheap, effective and widely as a commodity.
Um… Actually, no. Getting software to effectively plan and control a manufacturing business is still a struggle. Despite billions in capital expenditure and billions more in operating expenses, businesses still depend on manual processes to plan and schedule their operations.
Flexibility versus Control
It is understandable that managers look to software as a magic bullet. There are 2 types of people in a business:
- Those who look for the similarities with other organisations
- Those who look for the differences
If you believe that off-the-shelf packaged software has everything you need to run your business, you are more likely to be Type 1.
There’s nothing necessarily wrong with this approach: After all, every business has things they buy, hold in stock and sell. Every company has transactions to control these processes. And the basic information behind these transactions is the same: An item code, a quantity and some dates.
You could make a case to say that all businesses have transactions in common. This is where a standard system approach should work. Yes, on the whole MRP and accounting software does a good job of managing these transactions.
However, the similarities fall away when you look at the processes that connect those transactions. How transactions are made can be standardised. What transactions get made, when they get made and why is a different matter.
Good business processes are aligned to customer value. You can take a standardized approach to define, measure, improve and control your process. This is the principle behind Operational Excellence. However, the process itself is going to be unique to the value proposition of the business.
There are few entrepreneurs who believe a software company will know better how to deliver value to their customers. The planning and execution processes that run at the core of a business are unlikely to emerge from shrink-wrapped software.
The result is that businesses start with the process. If the process doesn’t fit the software then they get performed outside the system.
The Excel Elephant in the Room
When discussions are made about business process automation, the use of Excel spreadsheets is the problem that everyone would rather ignore. Modern business processes are increasingly involve data. If the process is not performed in the MRP system, then data are extracted and manipulated in Excel.
People like Excel because it is flexible and can represent information visually. Most people are visual thinkers and want to see information that supports daily decisions. Excel is the number one software for planning in business.
The horrors of using spreadsheets badly are widely known. They have resulted in billion-dollar trading losses and perhaps trillion-dollar economic losses from over-zealous austerity policies.
So, you have two choices. You can wait until the software industry develops applications that are so good they make spreadsheets irrelevant.
(you can stop laughing now…)
Or you can accept the use of Excel spreadsheets in business, adopt best practices and avoid the seven deadly spreadsheet sins.
The Best of Both Worlds
This website is our way of sharing some best practice in using Excel for planning and scheduling. We earn our living as consultants who develop custom planning and scheduling systems for manufacturing companies.
Since 1990, we have helped hundreds of companies (SME and yes, many multinationals) improve their planning of materials, inventory and production.
Up until recently, the typical approach looked like this:
The input data are always unique to a company. The logic used in the planning or scheduling application is a combination of standard best practices in planning and customized logic that fits the business. The reports are what the client wishes to see. Again, they combine common features and custom requirements
Over years’ of experience, we have gained a pretty good feel for the best practices in the Process logic. And we believe we know the areas that make a business unique and are the needs for a unique approach.
This makes it possible to use a slightly different approach:
The input data, as ever, represents the actual state of the business and is unique. The process logic and output data are standardized around proven best practice, but now the customization works with parameters. The output reports can be freely customized to suit the business. The only difference is that they are generated from standard structure of output data.
As the process logic and calculations are standard, we can now offer them to clients as a module. Rather than developing a system from scratch, we can configure a system using input data, parameters and reporting. Choose the modules that deliver the right function, set up the input data and
The result is a system that can be integrated quickly with dependable results, yet highly customized to the business processes.
A foundation of Excel is has the benefit of being accessible, familiar to users and available at no further cost. The Fast Excel Development Method bring a proven technique to apply best practices of supply-chain planning and management. We have been offering the Fast Excel Development Template for some time, at no cost and all modules are built on this platform.
We have a suite of 20 modules that together can form an integrated supply-chain management system. To see some detail on each of the modules, click here. Most manufacturers won’t need anywhere near all 20, and a powerful planning system for production, materials and/or inventory could be assembled with just 3-4 modules combined together.