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This New Way Of Thinking And Working Fixes Scheduling And Materials Planning Systems And Transforms Manufacturing And Supply Chain Performance.
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 business is using an ERP system, there's a probability they are also using a module of the software known as MRP, or Material Requirements Planning.
And herein lies the problem; the MRP software, which was originally formulated in the 1950's and codified in the 60's has hardly been changed since then - that's 50 years!. Unfortunately, the business world has changed enormously in that time. And the MRP logic that was so promising that it triggered a revolution in the 1970's and 1980's as computers became common, no longer matches current realities.
The life cycles of many products have shrunk dramatically. After many years of attempting to reduce purchasing lead times, the strong and continuing trend to outsource from offshore has created lead times that are longer than they have ever been. Nevertheless, customers now habitually order products with less lead time than ever before. And, customers feel entirely free to change their minds. Forecasts are the least accurate they've ever been and of course they've never been accurate. And in addition after decades of attempting to reduce variability in processes, the increased lead times, shorter product cycles and expanded demand volatility has created more variability than at any time in history.
Which poses a real dilemma with regard to MRP.
On one hand, the MRP logic - which starts with a forecast or actual demand and uses the Bill of Material and a database of inventory and order data to work out what's needed, how many, and when they are needed - has never been more necessary. The ability to re-run the calculations is essential when so many things are changing.
On the other side of the dilemma, the volatility combined with MRP's recalculations means our MRP systems are swamping planners with reschedule messages, and planners can't keep pace; and priorities are changing so frequently that it's impossible to respond effectively.
One result of this is, manufacturing businesses in many environments (for example, those with any complexity in their BOMs) are living with permanent, chronic shortages of materials and purchased and manufactured parts, and finished goods that is causing havoc with inventory levels, customer service levels and whole-business productivity.
And since the manufacturing business is part of a Supply Chain, and is attempting to deal with demand signals and generate their own ..., the impact of this badly broken engine at the heart of a manufacturing enterprise has implications for the entire Supply Chain.
Is there a solution? A new and innovative approach , a fusion of the best of MRP with concepts drawn from DRP (Distribution Requirements Planning), Lean manufacturing, Theory of Constraints and some pure innovative thinking. It's called Demand Driven MRP, abbreviated to DDMRP, and its impact on the users to date has been spectacular.
The DDMRP technology has been extensively documented in the new, 3rd Edition of Orlicky's Material Requirements Planning an update of the book, Orlicky's MRP, that first documented the classic MRP approach in the early 1970's.
Common results include substantial reductions in inventory (as much as 60% for some users), along with major improvements in Customer Service, typically to the 98% order-fill-rate and better. When combined with reductions in the expenses from expediting (freight in, freight out, and overtime) the combination is unparalleled in terms of the potential for performance improvement.
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