The issues with using spreadsheets and ERP or MRP systems for inventory planning
Why today’s inventory planning and clear-to-build reporting is broken
When procurement and supply-chain teams are inventory planning and building clear-to-build reports, they essentially have two options. Option one is using a spreadsheet and doing everything manually, which most companies with less than 300 people use. Option two is using ERP-based materials requirements planning (MRP) or advanced demand/supply planning systems, which larger enterprise companies use. Unfortunately, there are issues with both.
The problems with inventory planning in spreadsheets
To help plan weekly build calendars and run a clear-to-build analysis, procurement and supply-chain teams have historically used spreadsheets. However, using spreadsheets comes with many limitations when managing a complex supply chain. They require loads of manual labor from exporting and combining data sets, which is very time-consuming. They’re prone to human error, and the result is out-of-date and inaccurate data to forecast and build on. Plus, spreadsheets are not scalable, they are brittle, and they are difficult to share or collaborate on.
1. Updating and reporting is manual and time-consuming
Using spreadsheets for inventory planning is really time-consuming for complex manufacturing industries like robotics, aerospace, industrial equipment, medical devices, and other industries where there are thousands of components needed to build a product. If a couple of thousand items are in the bill of materials and then those are multiplied by the quantity you’re trying to build, very quickly you’re managing millions of individual items. Tracking all of those items and gleaning insights out of historical data so you can improve your plan becomes very hard when it’s all living in a spreadsheet.
Because spreadsheets are so time-consuming and manual, teams become focused on the day-to-day. The bigger-picture goals and projects they want to work on, such as finding building commodity strategies, sourcing new vendors, or sustainability initiatives, get put on the back burner. It’s also hard to look back and learn from mistakes, successes, and improve over time.
2. Data entry is error-prone
Spreadsheets are also easily prone to human errors when people enter incorrect values. The downstream effect is massive—if you mess something up and thought you’d have certain materials but then it turns out you don’t have them, you will not be clear to build. It could take weeks or months to get the necessary materials and if you don’t ship products, you don’t make money, which could cause the whole operation to be shut down.
3. Collaboration is challenging
Spreadsheets are not scalable—they break often and they are difficult to share or collaborate on both internally and externally. Communication and collaboration with stakeholders and suppliers are critical for successful inventory management and clear-to-build reporting.
The problems with using ERP-based materials planning systems for inventory planning
On the other hand, companies that have invested in traditional ERP-based material requirements planning (MRP) systems to help manage their supply chains still struggle with getting accurate, real-time data. The inaccurate data underlying the MRP is the data that lives in the enterprise resource planning (ERP) system, which is cumbersome and difficult to manually keep up to date.
1. Updating and reporting is time-consuming and cumbersome
Unfortunately, it takes a huge amount of time to go in and update data in the ERP or MRP, which causes another big problem with ERP-based planning systems: they are built for the most complex use cases, making them difficult to learn and cumbersome to navigate. This makes it really hard to make quick updates to the inventory plan in real-time, quickly evaluate alternative scenarios, and develop a reliable plan.
Additionally, if something is not clear to build, these systems will give an error code but it's not clear why it’s not clear to build. You’re left trying to figure out what the issue is, and finding the issue takes a lot of digging and knowledge about how the system works to get to the root cause. Most of these systems were built 30+ years ago, so the infrastructure is old and clunky. The learning curve can be years long for individuals to learn the system, leading to error-prone and slow decision-making.
2. Systems are costly to maintain
The ERP-based MRPs are extremely costly with a seven to eight-figure price tag when customization, implementation, and support is included. Buyers and suppliers also often have different MRPs that don’t communicate with one another, and creating a custom integration can be very expensive to set up and maintain.
3. Data is inaccurate or outdated
For these ERP-based planning systems to really work well, every last data point in the ERP has to be accurate and updated. Vendor lead times, logistics transit times, yields, resource availability, etc., all need to be correct—there’s very little flexibility. The way this data is updated today is by manually entering, updating, and editing the information. When the data is incorrect or outdated, it has a cascading impact on the forecasts and build plans, costing companies time, resources, and money.
4. Collaboration is difficult
Traditional ERP-based MRP systems make it challenging to collaborate and communicate because buyers and suppliers often have different MRPs that don’t talk with one another. Even if a company has a system with a supplier portal in place, many of these portals only see a 30-40% adoption by suppliers, leaving manufacturers in the dark on most of them.
Effective inventory planning and CTB solutions
An effective CTB and inventory planning solution should provide complete visibility into your supply chain and build schedule. Automation and collaboration are critical. It is important that they integrate with your ERP or MRP system and provide real-time data for your planning process, reducing the amount of manual labor needed and the risk of human error. By leveraging a purpose-built, clear-to-build software solution you will be able to:
- Provide clear, accurate visibility into what parts are being delivered and when
- Overcome manual process constraints and achieve greater accuracy and efficiency
- Improve lead times and allocation of appropriate resources
- Write data directly into the ERP, so orders and line changes are updated in real-time
- Streamline communication both internally and externally with suppliers and customers
- Make confident, data-driven inventory decisions and forecasts
- Scale more efficiently as your business grows in size or complexity
- Mitigate supply-chain risk and get rid of excess inventory, saving you money
A solution like Factor can help manufacturing teams by feeding real-time data into the build plan, such as real supplier lead times, ultimately streamlining the production process and mitigating supply-chain risk. Click here to learn more or request a demo today to see how Factor can transform your operations and help you get better data from your suppliers to save money and time. Our supply chain experts are ready to provide a tailored walkthrough focused on your specific challenges and goals.