Although Kanban is an excellent execution tool, it is not intended as a planning tool. However, planning is where MRP-type systems excel. MRP systems work by taking a production forecast and turning it into a series of component forecasts. They do this by using bills-of-materials and routers, which break down each finished good into its basic components. MRP systems also use data on lead times and safety stocks to develop production schedules and raw material requirements. MRP systems excel at planning; however, they are data-intensive systems fraught with problems:

• Forecast error

• Labor intensive

• Systems intensive

• Resistant to change

Every forecast is a prediction of future demand based on present information. And, like weather forecasts, the farther out the forecast goes, the less accurate it is. Thus, when you plan your production and material schedules based on these forecasts, you will frequently have the wrong amount of material. If the forecast is high, you will schedule too much production, resulting in excess inventory and unnecessary work. If the forecast is low, you will miss customer shipments resulting in excessive expediting and overtime costs. Since the consequences of stock outs are higher (and more visible) than the consequence of excess inventory, most materials professionals choose to increase inventory levels to protect themselves ("just-in-case" inventory management).

MRP systems are also very labor intensive. Bill-of-materials and routers must be kept up-to date on every part in the system. Since there are always going to be errors (either in the bills and routers or in...