Powerful New Way Of Thinking And Working Fixes Broken Planning Systems And Boosts The Performance Of Manufacturers And Even Supply Chains.
Every Supply Chain has several links; and if one or more of those links is a manufacturer, then there's a high likelihood of a particular problem developing that has ramifications for every other link in the Supply Chain.
If that manufacturing enterprise is using an ERP package, there's an excellent chance they are also using a central but little regarded module of the software known as MRP, or Material Requirements Planning.
And herein lies the problem; the MRP software, which was conceived in the 1950's and first programmed in the 1960 decade has remained mostly intact in the past 50 years. Unfortunately, the world has changed. And the material requirements planning logic that was so promising that it initiated a revolution in the 1970's and 1980's as computers became common, no longer matches current realities.
Product life cycles have shrunk dramatically. After several decades of efforts aimed at reducing the lead times of purchased parts and materials, the trend to outsourcing has generated purchased parts and materials lead times that are longer than they were even in the days when MRP was conceived. Nevertheless, customers now habitually order with less lead time than ever before. And, customers have no hesitation in changing their minds or their orders. With the variability, volatility and short lead times, forecasts are the least accurate they've even been and of course they've never been accurate. And further after decades of seeking to reduce process variability, the worsened lead times, shorter product cycles and increased demand volatility has created more variability than at any time in history.
Which presents us with a Catch 22 when we examine MRP.
On one hand, the MRP logic - which takes either a forecast or actual demand and uses the Bill of Material and a database of inventory and order data to work out what they need, how many, and when they are needed - has never been more important. The ability to re-run the calculations is crucial when so much is changing so quickly.
On the other side of the dilemma, the volatility combined with MRP's recalculations means our MRP systems are flooding planners with reschedule messages, and planners can't keep up with the tsunami; and priorities are shifting so often that no-one can respond effectively.
One outcome of this is, manufacturing businesses in many environments (for example, those with any complexity in their Bills of Material) are compelled to live with permanent, chronic shortages of materials, purchased parts and manufactured parts, and finished goods that is causing havoc with inventory levels, customer service levels and plant productivity.
Given the reality that the manufacturing business is one link in a Supply Chain, and is attempting to deal with demand signals and generate their own ..., the impact of this broken engine at the heart of a manufacturing enterprise has consequences for the whole Supply Chain.
What's the solution? A new approach , in many ways a fusion of the best of MRP with key concepts taken from DRP (Distribution Requirements Planning), Lean manufacturing, Theory of Constraints and some pure innovative thinking. It's called Demand Driven MRP, shortened to DDMRP, and its success rate with users so far has been stunning.
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 almost 40 years ago.
Expected outcomes include substantial reductions in inventory (as much as 60% for some users), along with substantial improvements in Customer Service, commonly to the 98% order-fill-rate and better. When combined with reduced expenses from expediting (freight in, freight out, and overtime) the combination is without equal in terms of the potential for improved performance.
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