New Way Of Thinking And Working Fixes Materials Planning Systems And Transforms The Performance Of Manufacturers And Even Supply Chains.

Every Supply Chain has to have at least one manufacturer somewhere along it's length, and that almost always means there's the potential for a problem.

If that manufacturing business is using an ERP system, there's an excellent chance they are also using a central but little regarded module of the software called MRP, or Material Requirements Planning.

And that's where the problem lies; this MRP software, which was first conceived in the 1950 era and turned into detailed logic in the 60's has hardly been changed since then - that's 50 years!. Unfortunately, the world has changed. And the material requirements planning logic that was so promising that it led a revolution in the 1970's and 1980's as computers became common, no longer is a good fit for today's operating realities.

The life cycles of many products have been compressed dramatically. After many years of trying to reduce lead times, the strong and continuing trend to outsource from offshore has generated purchased parts and materials lead times that are longer than ever before. Nevertheless, customers now routinely place orders for products with shorter lead times than ever before. And, customers feel entirely free to change their minds. Forecasts are the least accurate they've ever been and and of course forecasts of this kind have never been accurate. And after decades of seeking to reduce process variability, the longer lead times, reduced product life cycles and exploding 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 takes either a forecast or real 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 re-work the numbers is crucial when so much is changing so quickly.

On the other hand, the volatility combined with MRP's reworking means our MRP systems are overwhelming planners with exception messages, and planners can't keep pace; and priorities are changing so frequently that no-one can respond effectively.

One outcome of this is, manufacturers in many environments (for example, those with any degree of complexity in their BOMs) 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 plant productivity.

Given the reality that the manufacturing business is in a Supply Chain, and is attempting to cope with demand signals and generate their own ..., the impact of this damaged engine at the heart of a manufacturing business has implications for the entire Supply Chain.

Is there a solution? A new approach , in many ways 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 known as Demand Driven MRP, abbreviated to DDMRP, and the scale and nature of results so far in users of all kinds has been spectacular.

The DDMRP technology has been extensively 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 almost 40 years ago.

Typical results include substantial reductions in inventory (as much as 60% for some users), together with serious improvements in Customer Service, often to the 98% order-fill-rate and better. When this is combined with reductions in the expenses from expediting activities (freight in, freight out, and overtime) the combination is without equal in terms of the potential for improved performance.

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