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Integrated Management Systems: ERP – MRP Evolution…

ERP philosophy has evolved from MRPII philosophy. MRPII philosophy evolved from MRP philosophy. It is important to understand the difference between each term.

Effective ERP requires that integrated management processes extend horizontally across the company, including product development, sales, marketing, manufacturing, and finance. It must extend vertically throughout the company's supply chain to include the acquisition of raw materials, suppliers, customers, and consumers. The fundamental purpose of ERP is to establish a process that links projected demand plans to supply plans, so that the resources of manufacturers, their suppliers, and especially their customers are utilized in the most efficient and cost effective way.

To do so requires a process for anticipating demand and planning and scheduling resources in a manner that supports a company's strategic and financial goals. There are five major elements in this:

  1. An integrated business operating process that links strategic plans and business plans to sales plans and operations plans.
  2. A people-driven process that is supported by a computer system.
  3. A formal resource planning process that involves all functions within a company.
  4. Defined responsibilities and performance measurements for all functions in a company.
  5. Communications among all functions in a company as well as communications among all divisions and sister companies.

Strategies must be tied to tactics, supply is resolved with demand, the financial system is tied to the operating system, aggregate planning is translated into detailed planning, and planning and execution are linked together via a two-way flow of information and a spirit of cooperation among all functions.

ERP is a people process supported by the computer, rather than the other way around. People -- and their behavior and discipline in utilizing the ERP process -- is vital. When people understand how to utilize the ERP process, tools, and techniques, the data and information will be highly accurate, and they will make sound decisions.

ERP philosophy has evolved from MRPII philosophy. MRPII philosophy evolved from MRP philosophy. It is important to understand the difference between each term:


MRP: Material Requirements Planning

MRP: (From the 60's& 70’s) includes only Material Planning Projections
Based on Bill of Material Explosions

Typical Functions:

1 Bills of Material
1 Inventory Management
1 Work Order Management
1 Shop Floor Scheduling
1 Production Activity Control
1 Material Shortage Management

Fundamental Process Questions:

1. What do you want to make?
2. What materials does it take?
3. What materials do you have?
4. What materials do you need to get?

MRPII: Manufacturing Resource Planning

MRPII (From the 80's& 90’s) includes ALL Manufacturing Resources
for "What If" Pro-Active Process Simulations

Typical Functions:

1 Financial Modules
1 Business Plan
1 Resource Planning
1 Production Plan
1 Sales and Operations Plan
1 EDI and Customer Orders
1 Master Production Schedule
1 Rough-Cut Capacity Planning
1 Detailed Capacity Planning
1 Product Costing Modules
1 Engineering Change Management
1 MRP: Material Requirements Planning

Fundamental Process Questions:

1. What do you want to make?

2. What materials does it take?

3. What materials do you have?

4. What materials do you need to get?

5. What constraints must be met now or in the future?

ERP: Enterprise Resource Planning

ERP (From the 80's& 90’s) includes ALL Business Management Systems, Philosophies and Performance Evaluation at All Levels

Typical Functions:

1 Financial Planning Simulations
1 Business Planning Simulations
1 Sales/Marketing Planning Simulations
1 Distribution Requirements Planning
1 Resource Management Simulations
1 Production Management Simulations
1 Supply Chain Management Simulations
1 Continual Improvement Strategies
1 R&D Management Simulations
1 MRPII: Manufacturing Resource Planning




Fundamental Process Questions:

1. What do you want to make?

2. What materials does it take?

3. What materials do you have?

4. What materials do you need to get?

5. What constraints must be met now or in the future?

6.How will performance be planned, simulated, measured, and improved?

Where Accountability & Performance are Assigned & Measured as Follows:

ERP: Executive Planning
Financial Planning, Business Planning, Sales/Marketing Planning, Resource Management Simulations

ERP: Intermediate Planning
Distribution Requirements Planning, Master Production Schedule, Rough-Cut Capacity Planning,
Detailed Capacity Planning, Engineering Change Management, Material Requirements Planning

ERP: Operations Planning
Procurement, Inventory Management, Bills of Material Management, Work Order Management,
Production Activity Control, Shop Floor Scheduling, Product Costing

ERP creates organizational synergy that drives the development of highly effective processes that are properly managed for continual success. The dramatic results are derived from a deep organizational understanding of ERP philosophy. Proactive strategies become the mainstay of the company-wide operating system. Without this organizational understanding, well-intended efforts will deliver wrong results. Organizational profitability is derived from the organization’s overall willingness and ability to improve. Therefore people at every level must see beyond their local functions and interactively understand how their individual actions increase or decrease profitability.

Back to ERP...


ERP & Hoshin Kanri…
Profit-Ability Improvement... (¬Click here to see definitions)
Profit-Ability Management Principles... (¬Click here to see definitions)

People, Empowerment & Profit-Ability… (¬Click here to access articles)
Hoshin Kanri & Deming's Plan-Do-Check-Act... (PDCA) Cycle…



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