This Innovative Way Of Thinking And Working Fixes Scheduling And Materials Planning Systems And Transforms Manufacturing And Supply Chain Performance.
When a manufacturer is involved in a Supply Chain - and of course, that's "always" if you extend a Supply Chain all the way from origin to consumer - there's an immediate potential for a problem.
If that manufacturing business is using an ERP package, there's a probability they are also using a specific module of the software known as MRP, or Material Requirements Planning.
And this is where all the problems begin; this MRP software, which was originally formulated in the 1950's and turned into detailed logic in the 1960's has hardly been changed in the past 50 years. Unfortunately, the business world has changed enormously in that time. And the MRP logic that was so promising that it initiated 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.
The life cycles of many products have been compressed dramatically. After decades of attempting to reduce purchasing lead times, the trend to outsourcing has created lead times that are longer than they were even in the days when MRP was conceived. Regardless of this reality, customers now routinely order products with shorter lead times than ever before. And, they feel 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 worsened lead times, compressed product life cycles and expanded volatility in demand has created more variability than ever before.
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 demand and supply and on-hand information to calculate what's needed, how many are needed, and when - 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 high level of volatility combined with MRP's re-running the numbers means our MRP systems are swamping planners with exception messages, and planners can't keep up; and priorities are changing so often that it's impossible to respond effectively.
One result of this is, manufacturing businesses in many environments (for example, manufacturers with any degree of complexity in their BOMs) are compelled to live with constant, 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 one link in a Supply Chain, and is trying to manage demand signals and generate their own ..., the impact of this badly broken engine at the heart of a manufacturing business has repercussions for the entire Supply Chain.
What's the solution? A new and innovative approach , a fusion of the best of MRP with key concepts taken from DRP (Distribution Requirements Planning), Lean manufacturing, Theory of Constraints (TOC) and some pure innovative thinking. It's labeled Demand Driven MRP, abbreviated to DDMRP, and its success rate with users so far has been nothing short of spectacular.
The DDMRP technology has been fully 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.
Expected outcomes include greatly reduced inventories (as much as 60% for some users), in combination with major improvements in Customer Service, commonly to the 98% order-fill-rate and better. When this is 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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