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New Technology Fixes Materials Planning Systems And Dramatically Improves 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 ERP software, there's a good probability they are also using a key 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 in the past 50 years. Unfortunately, our industrial environment has changed. And the material requirements planning logic that was so promising that it triggered 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 efforts aimed at reducing the lead times of purchased parts and materials, the trend to outsourcing has created purchased parts and materials lead times that are longer than they have ever been. 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 they've NEVER. And to add salt to the wounds after decades of formal efforts aimed at reducing the variability in processes of all kinds, the increased lead times, shorter product cycles and increased volatility in demand has created more variability than ever before.
Which presents us with a Catch 22 when we examine MRP.
On the one hand, the MRP logic - which starts with either 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 recalculate is essential when so much is changing so fast.
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 often that it's impossible to respond effectively.
One consequence of this is, manufacturers in many environments (for example, those with any complexity in their Bills of Material) are compelled to live with constant, 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 whole-business productivity.
Now, because the manufacturing business is part of 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.
The solution? A new and innovative approach , in many ways 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 called Demand Driven MRP, shortened to DDMRP, and its success rate with users so far has been nothing short of spectacular.
The Demand Driven MRP technology has been fully 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 almost 40 years ago.
Common results include substantial reductions in inventory (as much as 60% for some users), along with substantial improvements in Customer Service, commonly to the 98% order-fill-rate and better. When this is combined with reduced expenses associated with expediting (freight in, freight out, and overtime) the combination is unparalleled in terms of the potential for improved performance.
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