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Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
Material requirements planning in a demand driven world 2
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Material requirements planning in a demand driven world 2

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Knowing modern MRP as a demand driven logic

Knowing modern MRP as a demand driven logic

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  • 1. Material Requirements Planningin a Demand-Driven WorldCarol A. Ptak, CFPIM, CIRMChad Smith
  • 2. Carol Ptak Carol Ptak is the co-author of the third edition of Orlicky’s Material Requirements Planning and a partner at the Demand Driven Institute. Previously, Carol was at Pacific Lutheran University as Visiting Professor and Distinguished Executive in Residence after years of executive management experience at PeopleSoft and IBM Corporation. Ptak served as the vice president and global industry executive for manufacturing and distribution industries at PeopleSoft. Additionally, Carol is a past President and CEO of the American Production and Inventory Control Society (APICS).
  • 3. Chad Smith Chad Smith is the co-author of the third edition of Orlicky’s Material Requirements Planning and a partner at the Demand Driven Institute. Chad is also the co- founder and Managing Partner of Constraints Management Group, a services and technology company specializing in demand driven manufacturing, materials, and project management systems for mid- range and large manufacturers.
  • 4. 1975: The First Significant Explanation of MRP Joe Orlicky “As this book goes into print, there are some 700 manufacturing companies or plants that have implemented, or are committed to implementing, MRP systems. Material requirements planning has become a new way of life in production and inventory management, displacing older methods in general and statistical inventory control in particular. I, for one, have no doubt whatever that it will be the way of life in the future.” 4
  • 5. The Evolution of Inventory Planning1920’s: Inventory Mgmt 1961: BOMP 1965: MRP 2011 – Demand Driven MRP1972: Closed-Loop MRP 1980: MRPII (DDMRP) 1990: ERP 1996: APS 5
  • 6. What is Demand Driven MRP? A multi-echelon materials and inventory planning and execution solution. Demand Driven MRP (DDMRP)Material Requirements Distribution Requirements Planning Planning Theory of Lean Innovation (MRP) (DRP) Constraints 6
  • 7. What is the Problem we are Solving?Today’s formal planningsystems arefundamentally broken! 7
  • 8. Modern Planning Systems Broken?! Companies Using Spreadsheets for Demand Management Best-in-Class 63 Industry Average 71 Laggards 84 0 20 40 60 80 100 Aberdeen Group (Demand Management, November, 2009) “ “ 86% of respondents indicate that their management team has asked them to find opportunities to improve their companies supply chain planning processes and 71% of respondents have indicated the same for supply chain technology improvement. Aberdeen Group (Inventory Optimization Technology Strategies for the Chief Supply Chain Officer, December 2010) 8
  • 9. Old Rules, Old Tools, New Pressures• Forecast error is on the rise• Volatility in supply and demand is increasing• Legacy planning tactics and tools are breaking down 9
  • 10. The Planning Legacy► Material Requirements Planning (MRP)► Inside most modern ERP systems is MRP► 79% of ERP Buyers implement MRP► Conceived in the 1950’s► Codified in the 1960’s► Commercialized in the 1970’s and…► …it hasn’t changed► What has changed? 10
  • 11. The “New Normal” ►Global sourcing and demand ► Shortened product life cycles ► Shortened customer tolerance time Worldwide there is morecustomization ► More product complexity and/or complex ► Pressure forand supply scenarios planning leaner inventories than ever – the ► Inaccurate forecasts past is NOT an ► More product variety predictor for the future ► Long lead time parts/components 11DDMRP Sneak Peek
  • 12. The “New Normal” is Here to Stay “ “ Forty-eight (48%) percent of companies indicate that increased supply chain complexity is a top pressure. Aberdeen Group (Enabling Supply Chain Visibility in the Cloud, November, 2010) 12DDMRP Sneak Peek
  • 13. The Typical Effects in the New NormalFrequent Shortages Leading to:• Unacceptable Inventory Performance• Unacceptable Service Level Performance• High Expedite Related Wastes Survey Results www.beyondmrp.com 90 80 70 60 50 40 30 20 10 0 Poor Inventory Poor Service High Expedite At Least One Performance Level Expense Effect 13
  • 14. Is Improvement even possible in the New Normal? 14
  • 15. Inventory – Asset or Waste? Asset Amount of inventory Too Little = Too much = stock-outs, Waste cash, capacity back orders, and space tied expedites & up in inventory missed sales 15
  • 16. Unacceptable Inventory PerformanceUnacceptable Service Level Performance High Expedite Related Wastes Oscillation Asset Too Little = Too much = stock-outs, Waste cash, capacityback orders, and space tiedexpedites & up in inventorymissed sales 16
  • 17. The Shift to Demand Driven• The problem is not going away• The world of “push and promote” is done• Companies and supply chains need to align their working capital with actual consumption• From “Push” to “Demand Driven” 17
  • 18. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments PlanningPositioning Execution 1 2 3 4 5 Modeling/Re-modeling the Environment Plan Execute 18
  • 19. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments Planning Positioning Execution 1 2 3 4 5Modeling/Re-modelingthe Environment Modeling/Re-modeling the Environment Plan Execute 19
  • 20. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments Planning Positioning Execution 1 2 3 4 5Modeling/Re-modelingthe Environment Modeling/Re-modeling the Environment Plan Execute 20
  • 21. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments Planning Positioning Execution 1 2 3 4 5Modeling/Re-modelingthe Environment Modeling/Re-modeling the Environment Plan Execute 21
  • 22. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments Planning Positioning Execution 1 2 3 4 5Modeling/Re-modelingthe Environment Modeling/Re-modeling the Environment Plan Execute 22
  • 23. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments PlanningPositioning Execution 1 2 3 4 5 Modeling/Re-modeling the Environment Plan Plan Execute 23
  • 24. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments PlanningPositioning Execution 1 2 3 4 5 Modeling/Re-modeling the Environment Plan Execute Execute 24
  • 25. Strategic Inventory Positioning Where? (Position) BEFORE How Much? When? (Quantity) (Timing) Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 25
  • 26. Answering “Where?” 6 Factors1. Customer Tolerance Time2. Market Potential Lead Time3. Supply and Demand Variability4. Inventory Flexibility and Matrix BOM5. Supply and Distribution Net Structure6. Critical Resource Considerations Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 26
  • 27. Dampen variability Compress lead times Better leverage working capital Flow with Pull-Signals and Buffer Positions Identified Shaft Stock Outside 12” Rough & Finish 13” Rough & Finish Endo Balance Assemble Finish Test Shaft Press 14” Rough & Finish Housing 15” Rough 15” Finish H S Castings Castings MTO Customer Time Buffer Replenishment Buffer Pull Signals Paint Pack Ship Distributor Distributor Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 27
  • 28. ASR LT + Matrix BOM ASR Lead Time = The longest unprotected sequence in the BOMMatrix Bill of Material depicts relationships between ALL child and parent items 101 1H01 20H1 20Z1 201 203 205 203 204 304 301 303 301 305 307P 304P 305 304P 309P 401P 305 408P 305 403P 417P 408P 409 403P 501P 403P 501P 403P 501P 403P 501P 501P Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 28
  • 29. DDMRP Part Types All parts Non- Stocked Stocked Replenished Lead TimeReplenished Min-max Non-buffered Over-ride ManagedTypically ≈ 20% of Purchased Parts are strategicTypically ≈ 10% of Manufactured Parts are strategicTypically most Distributed Stock is strategic = strategically positioned and managed part = non-strategic part Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 29
  • 30. Failure to properly positioninventory is a huge source ofwaste for most manufacturingand supply chain companies. Position and Pull Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 30
  • 31. Buffer Profiles and Levels Stock Out ALERT! Rebuild OK Too Much Group Trait Inputs + Individual Part/SKU InputsLead Time Category Average Daily UsageMake, Buy or Distributed Appropriate Discrete Lead TimeVariability Category Ordering Policy (min, max, multiple)Significant Order Multiples Location (distributed parts) Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 31
  • 32. Buffer Profiles and LevelsPart: 403P Buffer Profile: 233 590 890Lead Time: 21 days B11MOQ ▼ ▼ ▼Green Zone 300 403P R Y GYellow Zone 357Red Zone Base 179Red Zone Safety 54 0% 20% 40% 60% 80% 10 0 % Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 32
  • 33. Dynamic Adjustments Dynamic Buffer Adjustment 1000 100Available Stock Position Average Daily Usage 900 90 800 80 700 70 600 60 500 50 400 40 300 30 200 20 100 10 Recalculated Adjustments Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 33
  • 34. Dynamic Adjustments Seasonality Ramp Up Ramp Down 1000 100 1000 100 1000 100 900 90 Average Daily Usage Average Daily Usage 900 90 Average Daily Usage 900 90 800 80 800 80Zone Levels 800 80 Zone Levels Zone Levels 700 70 700 70 700 70 600 60 600 60 600 60 500 50 500 50 500 50 400 40 400 40 400 40 300 30 300 30 300 30 200 20 200 20 200 20 100 10 100 10 100 10 ▲ ▲ Effectivity Date Effectivity Date Planned Adjustments Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 34
  • 35. Demand Driven Planning Supply generation is based what zone the available stock equation places the part Available stock = on-hand + on-order – demand (past due, due today and qualified spikes) Part Open On-hand Demand Available Recommended Action Supply Stock Supply Qty r457 5453 4012 1200 8265 0 No Action10,000 f576 3358 4054 540 6872 3128 Place New Order h654 530 3721 213 4038 2162 Place New Order r672 2743 1732 623 3852 0 Expedite Open Supply (Execution) 5,000 Order Spike Horizon
  • 36. De-Coupled Explosion 101 201 203 204 301 302 303P 304P 401P 402 403P 404P 501P Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 36
  • 37. Highly Visible & Collaborative Execution Priority by Buffer Status Problem: Priority by DUE DATEOrder # Order Type Due Date CustomerMO 12367 Stock 5/12/2011 InternalMO 12379 MTO 5/12/2011 Super TechMO 12465 Stock 5/12/2011 Internal Priority 1:MO 12401 Stock 5/14/2011 InternalMO 12411 Stock 5/16/2011 Internal Priority 2: Priority 3:Order # Order Type Due Date CustomerMO 12367 Stock Due NOW Internal Priority 4:MO 12379 MTO 5/12/2011 Super TechMO 12465 Stock Due NOW Internal Priority 5:MO 12401 Stock Due NOW InternalMO 12411 Stock Due NOW Internal Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 37
  • 38. Highly Visible & Collaborative Execution Priority by Buffer Status Solution: Priority by BUFFER STATUS!Order # OH Buffer Status Order Type Due Date CustomerMO 12379 MTO 5/12/2011 Super TechMO 12401 12% (RED) Stock 5/14/2011 InternalMO 12465 27% (RED) Stock 5/12/2011 Internal Priority 1:MO 12367 33% (YELLOW) Stock 5/12/2011 InternalMO 12411 41% (YELLOW) Stock 5/16/2011 Internal Priority 2: Priority 3:Order # OH Buffer Status Order Type Due Date Customer Priority 4:MO 12379 MTO 5/12/2011 Super TechMO 12401 12% (RED) Stock Due NOW Internal Priority 5:MO 12465 27% (RED) Stock Due NOW InternalMO 12367 33% (YELLOW) Stock Due NOW InternalMO 12411 41% (YELLOW) Stock Due NOW Internal Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 38
  • 39. Highly Visible & Collaborative Execution Material Synchronization AlertMaterial Synchronization Alert Todays Date: 5/20/2011Demand Release Supply PromiseOrder # Part # Date QTY Order Type Shortage Order # Part # Order Type QTY DateMO 532-32 SAG 5/24/2011 40 Replenished 5 PO 625-71 PPZ Replenished 30 5/25/2011MO 531-47 FPS 5/28/2011 60 NB 60 PO 611-54 PPY NB 60 6/2/2011 Order Promise Date ▼ Parent Order Release Date MO #9432 Parent Order Promise Date ▼ MO# 8763 PO #87632 ▲ Order Promise Date Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 39
  • 40. Highly Visible & Collaborative Execution Material Synchronization AlertMaterial Synchronization Alert Todays Date: 5/20/2011Demand Release Supply PromiseOrder # Part # Date QTY Order Type Shortage Order # Part # Order Type QTY DateMO 532-32 SAG 5/24/2011 40 Replenished 5 PO 625-71 PPZ Replenished 30 5/25/2011MO 531-47 FPS 5/28/2011 60 NB 60 PO 611-54 PPY NB 60 6/2/2011 Order Promise Date ▼ Parent Order Release Date MO #9432 Parent Order Promise Date ▼ MO# 8763 PO #87632 ▲ Order Promise Date Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 40
  • 41. Highly Visible & Collaborative Execution Material Synchronization AlertMaterial Synchronization Alert Todays Date: 5/20/2011Demand Release Supply PromiseOrder # Part # Date QTY Order Type Shortage Order # Part # Order Type QTY DateMO 532-32 SAG 5/24/2011 40 Replenished 5 PO 625-71 PPZ Replenished 30 5/25/2011MO 531-47 FPS 5/28/2011 60 NB 60 PO 611-54 PPY NB 60 6/2/2011 Order Promise Date ▼ Parent Order Release Date MO #9432 Parent Order Promise Date ▼ MO# 8763 PO #87632 ▲ Order Promise Date Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 41
  • 42. Highly Visible & Collaborative Execution Lead Time Alerts 63 day lead timeOrder Release Order Due Date Date ▼ ▼ 21 Day LTM Alert Zone G Y R LATE ▲ ▲ ▲ ▲ Notification Notification Notification Notification Lead Time Alerts Todays Date: 5/20/2011 Status Order # Days Left Part Type Part # ASRLT Request Date Promise Date ! PO 4532 LATE Purchased PPD 105 5/15/2011 5/19/2011 ! PO 5120 6 Purchased PPI 63 5/26/2011 5/26/2011 PO 5214 10 Purchased PPJ 45 5/24/2011 5/30/2011 PO 5290 12 Purchased PPF 36 6/1/2011 6/1/2011 Strategic Demand Visible and Buffer Profiles Dynamic Inventory Driven Collaborative and Levels Adjustments Positioning Planning Execution 1 2 3 4 5 42
  • 43. What Execution Looks LikePurchased Items Manufactured Items Distributed Items Order # Due Date Buffer Status Item # Location Buffer Status Order # Due Date Item # Buffer Status PO 820-89 05/12/09 Critical 13% FPA Region 1 Critical 11% WO 819-87 05/24/09 FPA Critical 13% PO 891-84 05/12/09 Med 39% FPA Region 2 Med 41% WO 832-41 05/22/09 SAD Critical 17% PO 276-54 05/12/09 Med 41% FPA Region 3 Med 36% WO 211-72 05/22/09 ICB Med 34% Supplier 1 Purchased Region 1 Parts List Bill of Materials PPA PPE PPJ PPG FPA SAC ICB Supplier 2 PPB PPI ICA PPD PPH SAF FPA Region 2 SAA PPD PPA SAD PPG PPI PPF SAB ICC FPA PPC PPE PPC ICD SAE Supplier 3 PPJ PPB Region 3 PPF PPHLead Time Managed Parts ▼follow up ▼ notification FPA 8 months 43
  • 44. The Five Components of DDMRPDemand Driven Material Requirements Planning Strategic Visible and Buffer Profiles Dynamic Demand Driven Inventory Collaborative and Levels Adjustments PlanningPositioning Execution 1 2 3 4 5 Modeling/Re-modeling the Environment Plan Execute 44
  • 45. The Power of DDMRP Asset Amount of inventory Stock Out ALERT! Rebuild OK Too MuchStock-outs, Too much, cash,back orders, capacity andmissed sales space tied up in Waste inventory 45
  • 46. An Example of the Realignment Asset Asset Too much, Too much, Stock-outs, cash, Stock-outs, cash, back orders, capacity and back orders, capacity and Waste space tied up Waste space tied up missed sales missed sales in inventory in inventoryProjected Inventory Reductions Over 1 Year Mo 1 Mo 2 Mo 3 Mo 4 Mo 5 Mo 6 Mo 7-12 TotalsInventory Beginning of Period $ 9,564,443 7,738,294 7,869,529 7,569,990 7,392,764 7,278,870 7,194,836 $ 9,564,443Projected Inventory Reductions (consumption) (2,415,391) (796,305) $ (313,565) $ (187,875) $ (113,894) $ (84,033) $ (794,430) $ (4,705,494)Projected Inventory Increases - (purchases) $ 589,242 $ 927,540 $ 14,025 $ 10,649 $ - $ - $ - $ 1,541,456 Net Inventory Reduction by Period $ (1,826,149) $ 131,235 $ (299,540) $ (177,226) $ (113,894) $ (84,033) $ (794,430) $ (3,164,038)Inventory End of Month $ 7,738,294 $ 7,869,529 $ 7,569,990 $ 7,392,764 $ 7,278,870 $ 7,194,836 $ 6,400,406 $ 6,400,406 % Cumlative Inventory Reduction 19.1% 17.7% 20.9% 22.7% 23.9% 24.8% 33.1% 33.1% Total Dollars to Build Positions by Period Total Dollars Drained by Period Net Inventory Reduction by Period 1,000,000 $3,000,000 500,000 900,000 $2,500,000 800,000 - 700,000 $2,000,000 600,000 1 2 3 4 5 6 7 (500,000) 500,000 $1,500,000 400,000 (1,000,000) $1,000,000 300,000 200,000 $500,000 (1,500,000) 100,000 - $0 1 2 3 4 5 6 7 1 2 3 4 5 6 7 (2,000,000) 46
  • 47. Is DDMRP really different? DDMRP ERP/MRP Kanban/Super Spreadsheets 5 Zone Buffers YES RARELY NO RARELY Dynamically Adjusted Buffers YES SOME SOME SOME Planned Adjustments to Buffers YES YES, but1 NO RARELY Relative Priority Based on Buffer Status YES NO NO RARELY Globally Managed Buffer Profiles YES NO NO NO Decoupled BoM Explosion YES YES, but3 YES, but2 NO ASR Lead Time Calculation YES NO NO NO Qualified Order Spike Horizon and Threshold YES RARELY NO RARELY Material Synchronization Alert YES YES, but4 NO NO Multi-Location Buffer Status Visibility YES SOME SOME RARELY Lead Time Managed Parts YES NO NO NO Matrix BoM + ASR Lead Time Analytics YES NO NO NO Simple and Visible YES RARELY YES YES, but5YES, but1 (Planned positions are often forecast driven and, thus, not integrated into a demand driven framework)YES, but2 (Kanbans have no recognition of the BoM, they simply treat every connection as independent and factor only on-hand and on-order stock positions)YES, but3 (While almost every MRP system has the ability to do what is called “two level master scheduling,” it requires someone with extensive MRP background and is a very advanced technique. We have never seen it successfully implemented)YES, but4 (Shortage lists are typically limited to current and past shortages not future potential misalignments)YES, but5 (Most homegrown systems are simple and visible ONLY to the person who uses the tool) 47
  • 48. Early Adopter ResultsMountain House Division: Industrial Ingredient Division:• Sales increased 20% • 60% reduction in make to order• Customer Fill Rate improved from lead time 79% to 99.6% • 100% On-Time-Delivery• 60% reduction in inventory • 20% reduction in inventory Raw Material No out of stock Reduced inventory $2.5M+ All material and © copyright Demand Driven Institute 2011, all rights reserved
  • 49. Early Adopter Results DDMRP MRP All material and © copyright Demand Driven Institute 2011, all rights reserved
  • 50. Early Adopter Results 700 700 Low InventoriesStock-outs reduced by over 66%! 600 500 High Service High Inventories 600 500 Fewer Expedites Shortages $Millions 400 $Millions 400 Massive Expedites 300 300 200 200 100 100 0 0 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Sep Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Sep 09A Longview Inv Longview TR Houston Inv Houston TR All material and © copyright Demand Driven Institute 2011, all rights reserved
  • 51. What Would “Papa Joe” Say about DDMRP? “Traditional inventory management approaches, in pre-computer days, could obviously not go beyondthe limits imposed by the information processing tools available at the time. Because of this almost all of those approaches and techniques suffered from imperfection. They simply represented the best that could be done under the circumstances. They acted as a crutch and incorporated summary, shortcut and approximation methods, often based on tenuous or quite unrealistic assumptions, sometimes force-fitting concepts to reality so as to permit the use of a technique.The breakthrough, in this area, lies in the simple fact that once a computer becomes available, the useof such methods and systems is no longer obligatory. It becomes feasible to sort out, revise, or discard previously used techniques and to institute new ones that heretofore it would have been impractical or impossible to implement. It is now a matter of record that among manufacturing companies that pioneered inventory management computer applications in the 1960s, the most significant resultswere achieved not by those who chose to improve, refine, and speed up existing procedures, but by those who undertook a fundamental overhaul of their systems.” 35 Years Later Industry Finds Itself in Another Time of Transition and Re-Examination
  • 52. cptak@demanddriveninstitute.comcsmith@demanddriveninstitute.com

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