Traditional forecast push MRP models that companies operate around the world to manage their factories and supply chains are totally ineffective for business today and drive significant cost into the organization. All the time we hear of companies having high levels of inventory, yet the organization has poor customer service levels. Why is this?
Does our company suffer from any of the following issues?
❯ Poor inventory performance; stock-outs while carrying excess levels of inventory
❯ Unacceptable customer service levels
❯ High expedite expenses, such as and premium charges from suppliers and air freighting
❯ Constant changes to supplier and production schedules
❯ Reliance on Excel spreadsheets to establish, confirm and monitor supply chain requirements
❯ Stressed planners and buyers
Most manufacturing companies today use some form of MRP (Material Requirements Planning) to determine what to build, or purchase, in what quantities and when it is required. MRP was envisioned in the 50’s, codified in the 60’s and commercialized in the 70’s, however, after over four decades the fundamental algorithms utilized by MRP have remained unchanged. New functionality and other planning tools have been developed as add-ons to enhance MRP, but the basic principle of how MRP works has remained unchanged. In its day, MRP was the solution, it would time-phase all procurement, manufacturing and distribution demand requirements. As forecast error and demand volatility increased, safety stock functionality was added in an attempt to minimize issues of excess and insufficent inventory availability.
Demand Driven MRP (DDMRP) is the solution for supply chain planning in the 21st century. DDMRP provides companies with the operational planning and execution tools to revolutionize their supply chains, right-sizing inventory at each strategic location across the supply network. These strategic inventories decouple the entire supply network, absorbing 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
Global organizations such as Unilever, Michelin, Coca-Cola, BT (British Telecom) 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.
Read the next installment in this series, MRP – Solution or Problem: Part 2
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TheONE DDMRP software is fully compliant that enhances existing MRP systems by replacing traditional 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 customer service levels are increased, lead times will compress and supply chain variabilities will be absorbed. The age-old problems characteristic of MRP across today’s global supply networks will become a thing of the past.
Contact us today so that your company can start to benefit from DDMRP before your competitor does!
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