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This Innovative Technology Fixes Scheduling And Materials Planning Systems And Transforms The Performance Of Manufacturers And Even Supply Chains.
Every Supply Chain has several links; and if one or more of those links is a manufacturer, then there's a high likelihood of a particular problem developing that has ramifications for every other link in the Supply Chain.
If that manufacturing plant is using ERP software, there's an excellent chance they are also using a module of the software called MRP, or Material Requirements Planning.
And that's where the problem lies; the MRP software, which was conceived in the 1950's and turned into detailed logic in the 1960 decade has remained almost unchanged in the past 50 years. Unfortunately, the world has changed. 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, no longer matches current realities.
Product life cycles have been compressed dramatically. After several decades of efforts aimed at reducing the lead times of purchased parts and materials, the trend to outsourcing has generated lead times that are longer than ever before. Regardless, customers now habitually order with shorter lead times than ever before. And, customers have no hesitation in changing their minds or their orders. With the variability, volatility and short lead times, forecasts are the least accurate they've even been and they've NEVER. And further after decades of attempting to reduce variability in processes, the longer lead times, reduced product cycles and increased volatility in demand has created more variability than at any time in history.
Which presents us with a Catch 22 when we examine MRP.
On the one hand, the MRP logic - which takes a forecast or real demand and uses the Bill of Material and the inventory and demand order and supply orders to work out what they need, how many are needed, and when they are needed - has never been more important. The ability to recalculate is crucial when so many things are changing.
On the other hand, this volatility combined with MRP's recalculations means our MRP systems are flooding planners with exception messages, and planners can't keep up with the tsunami; and priorities shift so often that no-one can respond effectively.
One result of this is, manufacturers in many environments (for example, those with any complexity in their Bills of Material) are compelled to live with permanent, chronic shortages of materials, purchased parts and manufactured parts, and finished goods that is having a devastating effect on inventory levels, customer service levels and plant 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 consequences for the whole Supply Chain.
The solution? A new 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 its success rate with users so far has been stunning.
The Demand Driven MRP 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.
Typical results include major inventory reductions (as much as 60% for some users), along with substantial improvements in Customer Service, commonly to the 98% order-fill-rate and better. When combined with reduced expenses associated with expediting (freight in, freight out, and overtime) the combination is without equal in terms of the potential for performance improvement.
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