A couple of weeks ago, I wrote an article about kill-floor data collection systems in the meat industry. I started off with the famous story of how Henry Ford had been inspired by the design of the plants in the stockyards of Chicago for the assembly lines of the Model-T, which was at that time the very first mass manufactured car. The meat industry taught the car industry how things are done.
Lately I hear that companies are attempting to do it the other way around, attempting to implement manufacturing and system paradigms from the car industry in the food industry. I have my doubts that this will succeed in a lot of instances. One of the most discussed topics is the MRP model as a mechanism for planning production, determining what raw materials and ingredients need to be purchased to optimize inventory levels and bound capital.
MRP (Material/Manufacturing Requirements/Resource Planning) is a model that presumes that you can plan based on either forecasts or committed sales what items companies need to produce in the upcoming period. It is critical for the success of the MRP model that you have a good understanding of future sales as far into the future as you supply chain needs to deliver the raw materials and ingredients needed in the process. If companies have a good understanding of the sales you are going to have for the next 2 weeks at any given moment you can use an MRP model to plan purchases of your main ingredients. Meats can in most instances be sourced and arrive within 7 days, even if you purchase some of your trimmings on the other side of the country. In this instance, an MRP model makes a lot of sense, provided that this model addresses not only the standard manufacturing bill of materials but also provides tools, such as a least costing approach to optimize the raw materials you need. Recipes and Bill-of-Materials in a meat processing facility are much more variable than in the car industry.
Even if a company thinks it can use MRP planning and purchasing, we need to keep in mind that this approach is not all encompassing. A large portion of items such as your plant supplies (gloves, knives, and saw blades), your maintenance supplies and others are nowhere to be found in Bill-of-Materials. This means that MRP, if it can be used, does only apply to a range of products and ingredients. It is complementing some other approaches that you take to replenish your inventory.
In quite a few instances, an MRP approach cannot be used at all. Some examples are:
- If you are working in a meat packing operation, work in a push planning scenario, in which you change often up to the last minute what products you want to produce. An MRP approach fails, the animals coming in can hardly be changed and the other components such as boxes, labels and bags will change up to the last minute.
- If your planning horizon and sourcing requirements do not match, MRP will bring trouble. Companies that try will pay for the promised and perhaps executed inventory savings with inability to fill customer orders and lose business.
- If you do not have the full discipline to live and maintain the basic data required to execute MRP, you will fail as well. A lot of organizational discipline is required for the success
- If the MRP model does not support the production variations a meat company has, whether these are different cut patterns in a deboning facility or the different recipe-formulations in a sausage plant that optimize raw material consumption based on current market conditions, the MRP model is next to useless or in other words will suggest to an organization not always the best way to profitability.
MRP is just another tool. Depending on what is broken in your meat plant, you need to check in your available tool box which tool can help you to fix your problems. MRP is a tool that is a lot of times very deep buried in the tool box for a good reason. Since it is not a tool that is very usable for companies in meat packing and some meat manufacturing, a large number of companies has not been implemented, and the failure rate on attempted implementations is quite high. I am not saying that it is not applicable to the meat industry at all! During my past 20 years in which I have seen hundreds of different companies in the meat business, I have seen that an MRP model is applicable in about 20% of all cases, at least to some degree, and some of them have attempted and have succeed in implementing. For the largest portion of the meat industry it is not the case though, and they can take better approaches to increase their profitability such as Product Availability Systems, automated yield management systems, even document management systems. They all may provide a bigger bang for the buck and are much easier to execute. They are in most instances the low hanging fruits that are unfortunately not harvested.