DEMAND DRIVEN MATERIAL REQUIREMENTS PLANNING
Material Requirements Planning (MRP) was developed in the 1950’s and 1960’s by Joe Orlicky. When MRP was brought to market in the 1970’s and he wrote the first edition of Material Requirements Planning there were only 700 companies in the world actually using MRP. In his book, Joe highlighted a need to overhaul how a business plans and manages both inventory and resources. By the year 1990, over 1 million companies were using MRP with little change from its original concept.
Industry is now presented a new dilemma as the circumstances that drove Orlicky’s original design have dramatically changed. Since 1970 when Orlicky’s model was launched, Forecasts have gotten worse, Supply Chain complexity has increased, customer tolerance has decreased and inventory has become a priority. These new age challenges have led to the inventory oscillation witnessed in MRP systems today. The levels of demand and supply variability that exist in the 21st Century are further compounded by the inabilities of MRP to provide reliable and appropriate information for today’s supply chain planners.
The answer to this common problem is demand driven material requirements planning (DDMRP), defined as a multi-echelon inventory and planning system that senses the shape of customer demand, then adapting planning and production systems all while pulling from suppliers in real time. [adapted from the Demand Driven Institute 2009]
DDMRP breaks down the myth that you need more inventory to maintain high customer service levels. It provides the planning and execution tools for the 21st Century, enabling companies to become demand driven and responsive to their market while significantly reducing lead time, eliminating variability and volatility across the entire supply chain and achieving Return on Capital Employed.