An Executive Overview of Actively Synchronized Replenishment

This Executive Overview is intended to provide to-the-point answers to the questions:

What is Demand Driven MRP (DDMRP) ?
Who can use DDMRP?
What are the benefits from using DDMRP?
What are the costs of using DDMRP?
What is the shape of a typical implementation?
Where is the best place to start?

1. What is Demand Driven MRP (DDMRP) ?

There are 2 ways of looking at Demand Driven MRP.

One … it fixes broken Planning systems to reduce or eliminate chronic shortages, correct inventory imbalances, reduce inventory substantially, avoid the nonsense of trying to get more accurate forecasts, and reduce expediting costs. In some Lean environments it can be the “key” to making the Pull system work when shortages are crippling the implementation; and it can be the solution to the conflict between, “turn MRP off” and “If we do, we die.”

Two … it offers the opportunity to gain a serious competitive edge through massively improved customer seervice levels with greatly reduced inventory levels and compressed lead times, and an approach that is far more tolerant of variability and volatility.

Now I’m going to expand on those.

DDMRP is a solution to a major and common problem, and an opportunity for a distinct competitive advantage, aimed at manufacturing businesses that use ERP software in challenging and complex environments … including those attempting to implement “Pull” systems such as Lean Manufacturing or Theory of Constraints.

The nature of the problem solving and the opportunity for competitive advantage are:

a) To solve some serious problems that afflict many ERP users; the most common problem being chronic shortages of materials, parts and components that interfere with the execution of production schedules, whether traditional schedules or Lean or TOC “Pull” based schedules.

b) To offer the opportunity to gain a competitive advantage through either a reduction of lead times in a market sensitive to lead times, or an increase in service levels (fill rate, or on time delivery).

2. Who can use (best use) DDMRP?

Even “straightforward” ERP users faced with managing Finished Goods (in plant or in downstream supply chains) and Purchased parts and materials inventories are likely to gain an advantage from DDMRP and are candidates for the technology.

However, companies that will MOST benefit from DDMRP — where there is really no other solution, and the problems are major — are those with a complex or challenging manufacturing environment that leads to many needed materials, parts and components being unavailable when needed; and that leads to a common complaint of “too much of the inventory we don’t want, too little of what we do want.”

Such a company might be a “simple” ERP system user; or, it might actively be attempting to implement a “demand-pull” system such as Lean Manufacturing or Theory of Constraints, and experiencing a high degree of frustration through chronic shortages of needed materials, parts, components and finished goods. Especially with Lean implementation attempts, a common symptom can be heated conflict between the ERP and Lean protagonists, even leading to demands to turn-off the MRP element of the ERP system (which could be disastrous).

An example of a complex or challenging environment is where a company has a very deep Bill of Materials (our most extreme example is a 28-level deep BOM), or where many materials and components have multiple used-on situations, or where many parts are sourced from Asia with long lead times and significant variability in the reliability delivery, or where complex Routings in the plant contribute to weeks-long production lead times.

However, companies with service level problems with made-to-stock goods can also take advantage even if their environment isn’t “challenging” according to the above guidelines; similarly, companies wanting to shrink their lead times in order to respond to marketplace demands may be candidates for DDMRP.

3. What are the benefits of DDMRP?

Order fill rates boosted to the 98% level and above
High material, purchased parts and manufactured component availability even where there is variability in demand and supply.
Weeks stripped out of lead times in some long-lead-time environments.
Inventories reduced … often greatly reduced.
Whole-plant productivity boosted.
Expenses reduced in terms of less overtime, less premium freight (incoming and outgoing), and fewer incidences of premium pricing when expediting materials in.
Elimination or at least a major reduction of the number of “personal workarounds” that people feel compelled to develop because they don’t believe they can perform their job effectively within the ERP system.
ERP systems start to generate the type of results that were always hoped for but had never materialized.
Stalled Lean implementations find a basis for genuine demand-pull flow through the resources.

4. What are the costs associated with Demand Driven MRP (DDMRP)?

If a company chooses to use DDMRP-compliant software in support of an implementation, the financial opportunity can be almost financially risk free.

For example, the opportunity exists to have a “snapshot” taken of a company’s inventory and orders to identify the potential scale of inventory reduction in purchased materials and parts; then agree on a target; then have an implementation with hardware, software and training provided, for a 180-day trial … ALL AT NO COST UNTIL 30% OF THE TARGET INVENTORY IMPROVEMENT IS REACHED.

At that point, the monthly payments are a small percentage of the replenished inventory value; and as the inventory reduces towards the target, the payments therefore also shrink.

At that stage, with no risk and 100% demonstration of the power of the technique, a company can elect to extend the implementation into manufacturing and Finished Goods inventory management.

Again, the total investment is a fraction of the banked benefits to be gained.

5. What is the “shape” of a typical implementation?

The description in (4) above sets out a high-level path for an implementation – prove the potential in purchasing, agree on a target improvement, implement and educate and train, extend to manufacturing and finished goods/distribution as the performance improvement validates the approach. .

Prior to a commitment to this path, a company is likely to explore the technology through webinars and workshops and plant visits.

The specifics of the” implementation, education and training” stage includes these elements of the Demand Driven MRP solution:

a) Strategic inventory locations are selected.

b) The profiles of the Dynamic Stock Buffers are defined, and buffer levels determined.

c) Demand Driven Planning is “turned on,” following appropriate training and education.

d) The focus turns to effective execution, using the DDMRP tools.

Demand Driven MRP implementations can be surprisingly short in duration in some companies – days and weeks rather than months and years – but this cannot be generalized for all environments.

6. Where is the best place to start?

If you want to know more, I suggest:

Browse this site, then
Watch these short videos of customers talking about their experiences, then
Take a look at the 2 short presentations under “Watch” on this page, and if you have more time, listen to the podcasts under “Listen.”

The presentations provide a solid, no-words-wasted explanation of the problem being solved, the cause of the problem, and how Demand Driven MRP provides a solution that has been proven in some extremely challenging environments.

If you want to short-cut all the above and talk directly to someone who can answer questions … call me (Steve Jackson) at 604-668-3253 or email me using this contact form. If I can’t answer a question, I’ll connect you quickly to someone who can, or get back to you promptly.