This New Way Of Thinking And Working Fixes Ineffective Planning Systems And Boosts 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.

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If that manufacturing business is using ERP software, there's a good likelihood they are also using a module of the software known as MRP, or Material Requirements Planning.

And herein lies the problem; 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, our world has. And the MRP logic that was so promising that it initiated a revolution in the 1970's and 1980's as computers became common, no longer is a good fit for today's operating realities.

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The life cycles of many products have been compressed dramatically. After decades of attempting to reduce purchasing lead times, the trend to outsourcing has led to lead times that are longer than they were even in the days when MRP was conceived. Nevertheless, 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 they've NEVER. And further after decades of attempting to reduce variability in processes, the worsened lead times, shorter 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 the one hand, the MRP logic - which takes a forecast or actual demand and uses the Bill of Material and a database of inventory and order data to calculate what's needed, how many are needed, and when - has never been more necessary. The ability to recalculate is vital when so many things are changing.

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On the other side of the dilemma, the volatility combined with MRP's reworking means our MRP systems are swamping planners with exception messages, and planners can't keep up; and priorities are changing so often that no-one can respond effectively.

One result of this is, manufacturing businesses in many environments (for example, those 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 having a devastating effect on inventory levels, customer service levels and whole plant productivity.

And since the manufacturing business is one link in a Supply Chain, and is attempting to cope with 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.

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The solution? An innovative new approach , 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 known as Demand Driven MRP, abbreviated to DDMRP, and its success rate with users so far has been nothing short of spectacular.

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The DDMRP 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 in the early 1970's.

Expected outcomes include substantial reductions in inventory (as much as 60% for some users), together with major improvements in Customer Service, commonly to the 98% order-fill-rate and better. When this is combined with reductions in the expenses associated with expediting (freight in, freight out, and overtime) the combination is matchless in terms of the potential for performance improvement.

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