New Way Of Thinking And Working Fixes Broken Planning Systems And Dramatically Improves The Performance Of Manufacturers And Even Supply Chains.
Whenever a Supply Chain involves a manufacturing business as a link in the chain - which means "always," of course - then there's the probability of a particular type of problem emerging that has repercussions for the entire Supply Chain.
If that manufacturing enterprise is using ERP software, there's a very good chance they are also using a specific module of the software known as MRP, or Material Requirements Planning.
And that's the source of the problem; this MRP module, which was conceived in the 1950's and turned into detailed logic in the 60's has remained mostly intact in the past 50 years. Unfortunately, the world has. And the MRP logic that was so promising that it triggered a revolution in the 1970's and 1980's as computers became affordable to even small manufacturers, isn't a good fit any more for today's business environment.
Product life cycles have been compressed dramatically. After many years of efforts aimed at reducing the lead times of purchased parts and materials, the trend to outsourcing has generated lead times that are longer than they have ever been. Regardless of this reality, customers now routinely order with shorter lead times than ever before. And, customers feel entirely free to change their minds. With the variability, volatility and short lead times, forecasts are the least accurate they've even been and they've NEVER. And after decades of attempting to reduce variability in processes, the increased lead times, greatly reduced product life cycles and increased volatility in demand has created more variability than at any time in history.
Which presents us with a Catch 22 when we examine MRP.
On the one hand, the MRP logic - which takes a forecast or actual demand and uses the Bill of Material and demand and supply and on-hand information to calculate what they need, how many are needed, and when they are needed - has never been more important. The ability to recalculate is crucial when so many things are changing.
On the other side of the dilemma, the high level of volatility combined with MRP's re-running the numbers means our MRP systems are flooding planners with exception messages, and planners can't keep pace; and priorities are shifting so often that no-one can respond effectively.
One result of this is, manufacturing businesses in many environments (for example, manufacturers with any degree of complexity in their Bills of Material) are forced to live with permanent, chronic shortages of materials, purchased parts and manufactured parts, and finished goods that is having a devastating effect on inventory levels, customer service levels and plant productivity.
And since the manufacturing business is part of a Supply Chain, and is trying to manage demand signals and generate their own ..., the impact of this broken engine at the heart of a manufacturing business has implications for the whole Supply Chain.
The solution? A new approach , a fusion of the best of MRP with concepts drawn from DRP (Distribution Requirements Planning), Lean manufacturing, Theory of Constraints (TOC) and some pure innovative thinking. It's labeled Demand Driven MRP, shortened to DDMRP, and the scale and nature of results so far in users of all kinds has been spectacular.
The Demand Driven MRP technology has been fully documented in the new, 3rd Edition of Orlicky's Material Requirements Planning an updated version of the book, Orlicky's MRP, that first documented the classic MRP approach in the early 1970's.
Common results include greatly reduced inventories (as much as 60% for some users), in combination with substantial improvements in Customer Service, often to the 98% order-fill-rate and better. When combined with reduced expenses associated with expediting (freight in, freight out, and overtime) the combination is without equal in terms of the potential for performance improvement.
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