Abstract
In the 1960s and 1970s, two major thinkers were actively changing the face of manufacturing for decades to come – In the West it was Joe Orlicky with the creation of his MRP concept, whilst to the East it was Taiichi Ohno and the development of Kanban. However, since the two approaches were independently developed for managing production and inventory control, both are often mistaken as mutually exclusive. This chapter addresses the developments in both fields, and through considering the shortcomings of each of the approaches, suggests how MRP logic and Kanban can be combined and integrated to enable a more effective, “hybrid” production and inventory management system that exploits the advantages of each of the techniques. A framework is presented for the integration of MRP and Kanban, which gives details of the purpose of the master production schedule, documents the two primary roles of inventory management considerations, and explains how Kanban operates in such a system in order to eliminate non-value-adding activities and to simplify the production management task. An illustrative case study is also presented in order to give insight to the reader as to how such a “hybrid” system operates in practice, offering practical examples regarding how techniques such as production leveling (Heijunka), net-requirements planning, backflushing, and cost-accounting operate in an integrated MRP-Kanban system.
TopIntroduction
The debate as to whether lean production and information technology (IT) are contradictory or complementary approaches to production management has become a hot-topic in recent years. When we look back in time, it is clear that much of this issue has arisen from the focus on the pull nature of just-in-time production vis-à-vis the push characteristics of Material Requirements Planning (MRP) systems. Though there has been a wealth of literature on this topic throughout the 1980s and 1990s, there still remains confusion as to how these two very different methods can be successfully integrated to create a hybrid production planning and control (PPC) system that exploits the advantages of both systems whilst simultaneously eliminating the respective weaknesses. Therefore, the aim of this chapter is threefold. Firstly, MRP and Kanban will be defined as alternative approaches to production and inventory management; secondly, the limitations of both approaches will be addressed; and finally, the possibility of creating a hybrid system that exploits the advantages of both approaches will be demonstrated. The objectives of this chapter are:
- 1.
To understand the essential differences between MRP and Kanban, and to appreciate their requirements and fundamental assumptions;
- 2.
To recognize the difficulties and limitations of both approaches;
- 3.
To identify the advantages of each of the approaches and understand how the two methods can be integrated as a “hybrid” production planning and control system.
TopBackground
There’s more than distance separating Japan and America. In the field of production planning and inventory management, the two countries are going in different directions. To the East, it’s Kanban; to the West, it’s MRP. (Goddard, 1982)
MRP, or net-requirements planning as it is also known, was developed by Joe Orlicky in the 1960s, who at that time was working as a consultant for IBM. It was subsequently popularized in his book “Material Requirements Planning” (Orlicky, 1975). One of his major customers was John Deere, the leading manufacture of agricultural machinery. As such, the MRP concept was to be a revolutionary concept for planning material requirements for dependent demand items. At around the same time, Taiichi Ohno and his colleagues at Toyota Motor Company were developing their answer to the problem of high levels of work-in-process (WIP) inventory on the shopfloor. They were busy introducing Kanban to the workshops of Toyota. The basic definitions of MRP and Kanban are given in Table 1.
Table 1. Definition of terms (APICS, 2011)
| MRP | “Abbreviation for material requirements planning. A set of techniques that uses bill-of-material data, inventory status data, and the master production schedule to calculate requirements for materials...Time-phased MRP begins with the items listed in the MPS and determines (1) the quantity of all components required to fabricate those items and (2) the date that the components and material are required…” |
| Kanban | “A method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers…” |
Key Terms in this Chapter
Independent Demand Items: Demand that is not related to any other product.
Bill-of-Materials: A formalized description of the product structure, including levels of sub-assemblies and individual components required to make the product.
Dependent Demand Items: Demand that is derived from the demand of another item (e.g. through the bill-of-material).
Kanban: A card-based techniques for authorizing the replenishment of materials.
Supermarket: An area of the shopfloor used for strategically placed inventory, whereby the inventory levels are controlled by an authorization mechanism such as Kanban (I.e. an area assigned for explicitly limited levels of WIP).
Master Production Schedule: The plan for production of individual end items.
Lean Production: A production management paradigm that involves the systematic identification and elimination of non-value adding activities.