Innovative Technology Fixes Ineffective 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 manufacturer is using an ERP system, there's a probability they are also using a module of the software called MRP, or Material Requirements Planning.

And herein lies the problem; this MRP software, which was conceived in the 1950's and codified in the 1960 decade has barely changed since then - that's 50 years!. Unfortunately, our world has changed substantially 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, isn't a good fit any more for today's business environment.

Product life cycles have shrunk dramatically. After several decades of attempting to reduce purchasing lead times, the strong and continuing trend to outsource from offshore has led to lead times that are longer than they have ever been. Nevertheless, customers now routinely order with less lead time than ever before. And, customers have no hesitation in changing their minds or their orders. Forecasts are the least accurate they've ever been and and of course forecasts of this kind have never been accurate. And in addition after decades of attempting to reduce variability in processes, the increased lead times, shorter product life cycles and increased demand volatility has created more variability than at any time in history.

Which poses a real dilemma with regard 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 calculate what they need, how many, and when they are needed - has never been more necessary. The ability to re-work the numbers is vital when so many things are changing.

On the other hand, the volatility combined with MRP's re-running the numbers means our MRP systems are flooding planners with reschedule messages, and planners can't keep up with the tsunami; and priorities change so frequently that it's impossible to respond effectively.

One result of this is, manufacturers in many environments (for example, those with any degree of complexity in their Bills of Material) are living with permanent, chronic shortages of materials and purchased and manufactured parts, and finished goods that is leading to entirely unsatisfactory performance in terms of inventory levels, customer service levels and whole plant productivity.

And since the manufacturing business is part of a Supply Chain, and is attempting to manage demand signals and generate their own ..., the impact of this broken engine at the heart of a manufacturing enterprise has consequences for the entire Supply Chain.

Is there a solution? An innovative new 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 labeled Demand Driven MRP, shortened to DDMRP, and its impact on the users to date has been stunning.

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), in combination with substantial improvements in Customer Service, typically to the 98% order-fill-rate and better. When combined with reductions in the expenses from expediting activities (freight in, freight out, and overtime) the combination is matchless in terms of the potential for performance improvement.

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