Is MRP Killing Your Business
With High Levels of Inventory, Stockouts & Poor Customer Service Levels
Does your company suffer from any one, or all, of the following:
– Poor inventory performance; stock outs while carrying excess levels of inventory
– Unacceptable customer service levels
– High expedite expenses, such as air freighting expedited parts
– Constant changes to supplier and production schedules; changes to order requirements based on constant changes in MRP
– Reliance on Excel spreadsheets to establish, confirm and monitor supply chain requirements
– Stressed planners and buyers
Demand Driven MRP (DDMRP) is the solution you have been searching for. DDMRP is a Demand Driven operating model that provides companies with the operational planning and execution tools to revolutionize their supply chains, right sizing inventory at strategic locations throughout the entire supply network while dampening supply chain volatilities at the same time. These strategic inventories decouple the entire supply network and absorb inherent variabilities and volatilities enabling visibility, control, responsiveness and agility.
DDMRP will enable improvements of up to:
– 65% reduction in average on-hand inventory
– 80% reduction in lead times
– 100% on-time delivery performance
– 90% reduction in inventory obsolescence
– 400% improvement in inventory turns
– 25% improvement planner availability
Since the inception of MRP back in the 60’s and initial acceptance in the mid 70’s, supply chains have evolved from being linear based to more complex multi-node global supply networks. As network complexity has increased so too have volatility levels in demand and supply throughout these supply networks. In addition, customer tolerance has decreased, the number of parts with long lead times has increased, product life cycles are shorter and product variety has increased. This is the New Normal of today’s business environment.
It’s bad enough that we expect MRP to work in this New Normal, but then we add in the fact that we knowingly drive MRP with an inaccurate forecast. It’s no wonder that MRP is unable to achieve the levels of inventory performance we expect and need today.
Forecast accuracy in the “best of class companies”, is in the region of 75%, but we insist on planning and executing production environments and our global supply chains based on this level of inaccuracy. MRP planning logic further amplifies the volatility and system nervousness as demand and supply flow through the entire supply network driving higher levels of inventory, stock outs and lower levels of customer service. MRP is a great application for transactional activity, but it is the main cause of the Bullwhip Effect and it no longer has the capability to provide the right information to make the right decisions within today’s supply chain networks.
DDMRP is the world standard for demand driven methodologies in planning, scheduling and execution of the entire supply network from end users and distribution to manufacturing and multi-tiered suppliers. It is a Multi-Echelon Material and Inventory Planning and Execution system that enables a company to become demand driven, dynamically sizing and adapting supply networks and production systems through sensing changes in actual demand patterns and supply responsiveness. DDMRP right sizes inventory, while reducing overall inventory holding, improves customer service levels, establishes lead time compression, and generates an overall return on investment.
DDMRP provides a channel for the flow of information enabling the correct decisions to be made at the right time reducing variability, subsequently improving the level of visibility and control across the supply network. Control and visibility are established through the positioning of inventory at strategic locations that decouple the supply network creating not only independence from a BOM structure point of view but also independence between demand and supply.
The decoupled strategic locations have the capability to absorb the volatilities in the supply chain fully dampening the Bullwhip Effect. Demand signals between consuming and producing nodes of the supply network are then stabilized with inventory availability through the supply network being significantly improved; even if a supplier is late or there is a spike in demand.
DDMRP is a Complex Adaptive System that by definition is a system that changes its behavior in response to its environment. Strategic inventory levels are dynamically adjusted through the supply network on a daily basis taking account of the needs of the market, and changes in demand and supply variability. As a result, DDMRP strategic inventories are fully synchronized to the exact needs of the market.
Supply order generation is controlled by DDMRP when the total availability of inventory across the consuming and producing locations drops beneath dynamically calculated thresholds. Further control of the supply network is achieved the highly visible execution where priority is defined by the levels of inventory depletion rather than by a due date essentially defined by a forecast error.
High Impact Coaching & Strategies has a long and respected heritage working with clients around the world to implement demand driven transformations within factories and global supply networks. Over the years we have been forced to define specific attributes, parameters and processes within our supply network designs to “trick” MRP into becoming demand driven. Now after years of constantly fighting MRP, we have filled the missing link with an application that by-passes the MRP planning process while retaining it’s excellent transactional capabilities.
TheONE, our DDMRP compliant software replaces MRP planning logic with a series of demand driven planning and execution tools that promote increased visibility, responsiveness and agility through the entire supply network. Average inventory levels will be reduced while increasing levels of customer service, compressing lead times and absorbing variability. The problems characteristic of MRP within today’s supply networks will immediately become a thing of the past.
Global organizations such as Unilever (Gartner’s #1 demand driven supply chain for 2016), Michelin, Coca-Cola and others small to large have already adopted DDMRP enabling improved market responsiveness, reduction in lead times, elimination of variability and volatility throughout their supply networks.
Contact us today
so that your company can start to benefit from DDMRP
before your competitor does!
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