Why ERP/MRP fails ?

There is always an easy solution to every human problem — neat, plausible, and wrong

Henry Louis Mencken

In my previous post, I claimed that ERP does not work due to its intrinsic flaw. Thoughout many decades, experts just said that the problem why ERP does not work is due to human, computer and management but nobody questioned the model itself.

The problem of ERP/MRP is because it assumes the cycle time is constant. ERP model says that the cycle time is a fixed number no matter how the system or factory is full or empty. This is a serious flaw that collapses the whole hierachy of ERP system.

The lead time is dependent on how crowded (or utilization in the technical lingo) of the factory. When the factory utilization is low, the lead time is near the number quoted in ERP system. However, when the factory utilization is so high, more than 80%, then cycletime would skyrock.

We can mathematically prove this properties. The derivation is based on Stochastic Modelling. The derivation is pretty tedious. Here I just give the intuition as well as the simplified version of the equation. This is call Kingman’s equation:

CTq is the waiting time. u is utilization and te is the processing time.V is the variabity of the system. To be more visually, let’s look at the following graph:

As you can see, as the utilization become higher ,i.e: the factory become busier. The cycle time (or flow time) skyrocks in a rapid manner. This is the reason why ERP fail. Cycle time does increases regard to how busy the factory is.

Let’s take an example. Imagine you wanna to travel from home to school. If it is a good time when not much traffic then you would arrive at school in 10 minutes. However, when you encounter a terrible traffic jam (high utilization of the street), it might take more than one hour.

So in the end, the problem of ERP is that its own fundamental building block is FLAW. The cycle time is not a constant as everyone hope. It is a random variable.

So if your company already implement ERP, what should you do?

And why are there still a few companies thrive in their operation by using ERP?

Stay tune for my next post. See you next time.