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New Way Of Thinking And Working Fixes Scheduling And Materials Planning Systems And Transforms 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 plant is using an ERP system, there's a good probability they are also using a module of the software called MRP, or Material Requirements Planning.
And that's the source of the problem; this MRP software, which was conceived in the 1950's and codified in the 60's has remained almost unchanged 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 led a revolution in the 1970's and 1980's as more manufacturers could afford computers, isn't a good fit any more for today's business environment.
Product life cycles have shrunk dramatically. After many years of efforts aimed at reducing the lead times of purchased parts and materials, the strong and continuing trend to outsource from offshore has created lead times that are longer than ever before. Regardless, customers now routinely order with less lead time 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 and of course forecasts of this kind have never been accurate. And to add salt to the wounds after decades of attempting to reduce variability in processes, the longer lead times, greatly reduced product life 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 side of the dilemma, the MRP logic - which starts with a forecast or real demand and uses the Bill of Material and the inventory and demand order and supply orders to calculate what they need, how many, and when they are needed - has never been more important. The ability to re-work the numbers is essential when so many things are changing.
On the other hand, this volatility combined with MRP's re-running the numbers means our MRP systems are flooding planners with reschedule messages, and planners can't keep pace; and priorities shift so frequently that it's impossible to respond effectively.
One result of this is, manufacturers in many environments (for example, manufacturers with any degree of complexity in their Bills of Material) are living with permanent, chronic shortages of materials, purchased parts and manufactured parts, and finished goods that is leading to entirely unsatisfactory performance in terms of inventory levels, customer service levels and whole-business productivity.
And since the manufacturing business is in 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 enterprise has implications for the whole Supply Chain.
Is there a solution? A new and innovative approach , a fusion of the best of MRP with concepts 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 its impact on the users to date has been spectacular.
The Demand Driven MRP 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.
Typical results include major inventory reductions (as much as 60% for some users), in combination with substantial improvements in Customer Service, typically to the 98% order-fill-rate and better. When combined with reduced expenses from expediting activities (freight in, freight out, and overtime) the combination is unparalleled in terms of the potential for performance improvement.
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