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Innovative Technology Fixes Broken Planning Systems And Boosts The Performance Of Manufacturers And Even Supply Chains.
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 plant is using the popular ERP software, there's a good probability they are also using a specific module of the software called MRP, or Material Requirements Planning.
And herein lies the problem; the MRP software, which was conceived in the 1950's and turned into detailed logic in the 1960's has remained almost unchanged since then - that's 50 years!. Unfortunately, our industrial environment has changed. And the MRP logic that was so promising that it led a revolution in the 1970's and 1980's as computers became common, no longer matches current realities.
Product life cycles have been compressed dramatically. After decades of trying to reduce lead times, the strong and continuing trend to outsource from offshore has created lead times that are longer than ever before. Nevertheless, customers now habitually order with shorter lead times than ever before. And, they feel 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, shorter product cycles and increased volatility in demand has created more variability than ever before.
Which gives us a real dilemma when it comes to 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 a database of inventory and order data to work out what they need, how many are needed, and when - has never been more important. The ability to re-work the numbers is essential when so many things are changing.
On the other hand, the volatility combined with MRP's recalculations means our MRP systems are flooding planners with exception messages, and planners can't keep up; and priorities shift so frequently that it's impossible to respond effectively.
One result of this is, manufacturers in many environments (for example, those with any complexity in their Bills of Material) are forced to live with constant, chronic shortages of purchased materials and 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 attempting to deal with demand signals and generate their own ..., the impact of this broken engine at the heart of a manufacturing business has repercussions for the whole Supply Chain.
Is there a way out? A new and innovative approach , a fusion of the best of MRP with concepts 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 the scale and nature of results so far in users of all kinds has been nothing short of 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 substantial reductions in inventory (as much as 60% for some users), along with substantial improvements in Customer Service, often to the 98% order-fill-rate and better. When this is 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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