Is there a compatible future for Lean and MRP?


Published on

There seems to be an element of distaste from Lean Supply Chain people about MRP. Not being a Supply Chain expert it is really not for me to comment. But I did ask Carol Ptak and Chad Smith to address a few of those issues in the Business901 podcast, and in the podcast, Is Orlicky’s MRP relevant today? Think DDMRP.

Published in: Business, Technology
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Is there a compatible future for Lean and MRP?

  1. 1. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Is Orlicky’s MRP relevant today? Think DDMRP Guests were Carol Ptak and Chad Smith Related Podcast: Is Orlicky’s MRP relevant today? Think DDMRP Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  2. 2. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsCarol Ptak and Chad Smith are the co-author of the new Orlicky’s Material Requirements Planning 3/E. A fully revised and updated edition of the landmark work on material requirements planning (MRP), Orlickys Material Requirements Planning, Third Edition focuses on the new rules required to effectively support a manufacturingoperation using MRP systems in the twenty-first century. Thisauthoritative resource offers proven solutions that help you gainthe competitive edge through strategic lead time reductions,substantial reductions in total inventory investment, andsignificant increases in service levels. This is an indispensable toolfor manufacturing practitioners and anyone preparing for CPIMcertification.Carol has written several books on MRP,ERP, Lean and Theory of Constraints. She isthe Past President of APICS International andformer Vice President and global industryexecutive for manufacturing and distributionindustries at PeopleSoft. Chad co-foundedConstraints Management Group in 1997 afterworking under the tutelage of Dr. Eli Goldrattfor several years. Constraints ManagementGroup specializes in demand driven supply chain andmanufacturing solutions for a variety of industries. Clients haveincluded Boeing, Unilever, IBM, LeTourneau Technologies andRoseburg Forest Products. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  3. 3. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe Dager: Welcome, everyone. This is Joe Dager, the host ofthe Business901 podcast. With me today is Carol Ptak and ChadSmith. They have founded the Demand Driven Institute, anorganization devoted to the proliferation and further developmentof demand-driven strategies and tactics in industry. They are alsothe co-authors of "Orlickys Material Requirements Planning"book, the third edition. Carol and Chad, could you tell me how thebook is going so far?Chad Smith: So far, its been great. Weve gotten somefantastic reviews from some of the folks that were in MRP rightfrom the very beginning, so the formal planning crowd. We gotsome really great feedback from the Lean and Six Sigma crowd,and even the Theory of Constraints crowd. When you get allthose people agreeing on something, its usually pretty special.So were excited about getting it out there, letting more peopleknow that its available. In fact, Amazon just made it a Kindleversion here, I think, in the last week or two.Now its just a matter of getting the word out and mobilizingsome of the people that have already read it and to get them togive us reviews on Amazon. But so far, very promising.Joe: Orlicky wrote the book. Its been a long time ago -- I thinkyou said like 36 years. Is it still relevant? I mean, that seems likeancient history.Carol Ptak: Thats the thing thats the most interesting is today,in the hyper-competitive times that we have, "Orlickys MRP" ismore relevant than ever. Think about it: back in the day when hewrote it, the big worry was, "How do I get what I need, howmuch do I need, and when do I need it?" Before that we couldafford to keep some of everything around all the time. Then wereally got into this whole area of we were capacity-constrained.And now we find ourselves in this whole new world that wevenever seen before, where manufacturing companies around the Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  4. 4. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsworld have excess capacity, and now the shift comes back tomaterial again: "How do I have what I need where I need it?"Because the problem that we face is that the customers nolonger willing to wait, and so this whole idea of "How do I get theright material in the right place at the right time?" is even morecritical than it ever was before, but now that first question haschanged. Its now not just how much and when, but its where:"Where do I position that inventory so that I get the bestresponse to the marketplace?"Joe: Are we still basing everything on some type of forecast? Ifthats always uncertain, arent we always going to be wrong, nomatter what we do?Chad: Absolutely. Youre correct, Joe. As long as we continue totry to outguess what is a more variable and volatile set ofcircumstances, we are going to be in trouble. And I think thatsone of the things that weve identified as something thatdramatically needs to change in the formal planning communityin moving forward. Companies have to find a way to align theirworking capital and their assets and their resources as close toactual demand as possible. I think a lot of people think that byforecasting better they are getting ahead of things, that they arepriming the pump, so to speak, that theyre taking care of theirlong-lead-time items, when in fact theyre really just pushingtheir resources and their activities farther away from the market.Weve been trained and weve been conditioned, by big software,by academia, to try to attack a symptom, and that is get better atforecasting, rather than attack the real issue, which is, how do weactually position materials and inventory closer to the market andthen take signals based upon the real-time replenishment ofthose key positions?How do we take signals and drive activity and synchronization,not only through our organization but through the supply chain? Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  5. 5. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: Would it be fair, then, to say that youre kind of building aflatter supply chain?Carol: Its not really a flatter supply chain, because when I thinkof a flatter supply chain, I think about whats happened in theLean community, where they believe that the way to get moreaccuracy in their forecasts and to be responsive is they flatten thebills of materials, which meant that now I go and I haveeverything on the same level of the build going into the final endproduct. Which is OK, and it works really well if youve got acompany that is very, very reliable, with demand thats reallyreliable, that the next one looks like that last one and thats allgreat. And to me, when I think about a flatter supply chain thatwould work the same way, if I had a supply chain that alwayslooked the same way that always demanded the same thing.But the fact that its not flatter, its actually more responsive.Because when I think of how most people describe a supplychain, they do describe a supply chain as linear. And in all theyears Ive been out there, Ive never seen a linear supply chain,where Ive got a company that has a customer and a suppler anda suppliers supplier and a customers customer, until you finallyget to the customers customers customer and the supplierssuppliers supplier. Thats a linear supply chain, and I haventever seen one of those.To me, supply chains are almost web-like. Thats why we put thatgraphic on the cover of this book. Somebody said, "Where didyou get this graphic from?" And I said, "Well, thats whats in myhead, is what a supply chain looks like."They said, "Ooh, thats a real scary place." Its web-like. Its gotnodes. It looks like a fishing net, but in three dimensions, with allthese little things going on. I dont buy from a single supplier. Idont sell to a single customer. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  6. 6. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsSo its not about flattening the supply chain as it is being able tothink of it like a spiders web, being able to sense that vibration inthe web, so that that spider can get out there and grab its preyand eat. Thats really what a supply chain is all about.The book and the work that Chad and I have been doing isgetting that supply chain to be higher ability to sense and adapt.I hesitate to use the word "reactive" because I dont want to bereactive. I want to be able to sense and adapt to whats going onin the marketplace rather than just reacting to whats going on,because when I just react, I can make some very poor decisions.As Chad said, Im looking at inventory in a whole new light.Inventorys on our balance sheet as an asset. Why it hasnt beenlooked at before, saying, "Hey, that asset should yield a certainreturn on that investment," before, it needs to be now, becausewere all being crunched for this investment thats tied up inthose dollars of inventory. So its how, in that position of thesupply chain, I can sense and adapt to the market so that myinventory investments giving me my best return.Chad: I think youre hitting on one of the critical differences, orcritical changes, that were proposing for the new formal planninglogic for the 21st century, that the point of diminishing returnshas been reached. The idea that were going to spend tons ofmoney, tons of time, tons of energy on trying to be able to guessbetter. What we know today is that forecast accuracy is actuallydeclining, and thats happening despite the proliferation of allthese advanced forecasting algorithms.Well, why? Its very easy to draw the connection, that the worldis a totally different place. The supply chain is more complex, theproduct structures are more complex, and the customers aremuch more intolerant than theyve ever been before.Instead of trying to optimize an old approach that really isntreturning anything for us, weve got to completely change the Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  7. 7. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsway that we define what demand really is. MRP is a calculator,right? It doesnt care what you call demand.If you give it demand thats a problem, then it will createproblems for you. Weve got to give it a different type of demandsignal, and that demand signal has to be all about what isactually being consumed at strategic points in the supply chain.Joe: When you talk about strategic points, can you define orelaborate on that a for me?Chad: Sure, thats the key here is what weve come up with,with what we call demand-driven MRP, or DDMRP, its wellblueprinted out in the book, through about 150 pages and wellover 100 graphics. Its based upon five concepts. The very firstconcept, or the very first component of what DDMRP is, issomething called strategic inventory positioning. Just think abouttoday. If youre a planner in the supply chain, or a buyer even,you come to work and youre trying to answer two questions, allthe time: how much and when?Youre trying to answer a quantity and timing. We think theres afundamental mistake in approaching it just right then and there.What companies are going to have to do is theyre going to haveto back up a minute and answer what I think is the primaryquestion of inventory, and that is, where should we place theinventory? Where, in our supply chain or in our manufacturingprocess, should we place inventory positions so that we candampen variability, compress lead times, and better leverage ourworking capital?Its not a simple answer. It takes kind of a cross-functional teamto answer those questions. The questions that you have to reallyask in order to properly answer where are things like you have toknow what the customer tolerance times are. You have to knowwhat the market potential lead time is. Thats just simply whats Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  8. 8. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthe lead time, if you could offer it, that the market would rewardyou with more business.You have to take into account the variable rate of demand andsupply. You have to also take into account the product structure,the shared child components across parent items. Finally, youalso have to consider if theres any key operational areas thatneed to be protected in order to dampen variability or prop uplead times.Theres a lot of analysis and thinking and intuition, and there is aprocess to figure out where in the bill of material, where in themanufacturing operation, where in the supply chain you shouldhold inventory. The best thing is, when you find those places, itsa win-win for both sides of the fence, so to speak -- so, in otherwords, the people that take from that inventory position and thepeople that deliver to that inventory position. If those positionsare placed properly and managed properly, both sides win.Joe: When youre talking about the strategic position of this, arewe doing something different from the operational level, or arewe just positioning material differently?Chad: I think its a little bit of both. I think, if you look at theway that were taught to place stock positions, typically stockpositions are really only held at the finished-item level and theraw-material-item level. In fact, its kind of a no-no, or its atleast accepted doctrine, that you dont stock at theintermediate-component level.Carol: Think about it, because you think about the generalperception is, what has been taught in the past, is that Ive gottotal control of that because its inside my four walls, so it wouldbe not only not advisable but youd be crazy to stock somethingthats halfway in between. We always said, "Well, safety stocks toguard against variability of supply or demand." We never thoughtabout stocking inventory somewhere in that central point. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  9. 9. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsChad: The idea is, when you do that, you are decoupling points,points where we can stop the cascading effect of variability. Wecan create much better visibility, and we can actually even createmuch better schedule stability when it comes to resourceschedules. If you go back to the 80s, youre going to hear allkinds of things around something called nervousness in MRP.Everybody was so concerned with the impact of variability on thedemand and supply signals as the bill of material was exploded,thus created order-release signals, supply-order signals.Then came along the idea of APS, where we tried to account forevery minute of our resources manufacturing time. We hadanother level of nervousness, and these two things just kind ofcompound each other.What were really trying to do here with DDMRP is allow theproduct structure to really work for us, rather than against us.Its a blend of independence and dependence that people, I think,really need to explore a little bit, grasp, and theyll see howelegant it really is, and how really effective it is, too. It justrequires some changes to the traditional way that MRP has lookedat generating supply-order signals in a bill of material.Joe: Are you opposing the other methodologies, I mean, or areyou embracing Lean and the different types of methodologies outthere that have been real prevalent in supply chain recently?Chad: First of all, we owe Lean a huge debt of gratitude togetting some critical elements in front of industry. One thing thatI think is very important is the Lean crowd, I think, unfairly getsbranded as anti-technology. I think that thats unfair because, upuntil now, technology hasnt worked for Lean very well. If youlook at the basic rules of MRP and how it works, it doesnt workwell for Lean. If you look at the Toyota Production System, eventhe critical points in the Toyota Production System abouttechnology, I think, Likers book, I think its point eight. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  10. 10. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsIt says, "Use only thoroughly tested and proven technologicalmethods for your people and processes." Well, up until now,there havent been thoroughly tested or proven technologicalprocesses.So its forced the Lean community, its forced the TOC communityback into manual systems. And those manual systems arebreaking down. Theyre too intensive. And for larger corporations,you really lose a lot of visibility across an enterprise. In fact, forlarger companies, Joe, the idea of enterprise Lean really doesntexist. And why? Its because we have limitations with technology.Now, what Carol and I are doing here is were saying, look. Letsnot throw the baby out with the bath water. Lets not just throwout the promise of technology and jump all the way back tomanual re-order point systems. Lets figure out how we have tochange the formal planning logic to create new rules that thenfoster new tools that both the formal planning crowd and theLean crowd can embrace.And so far, weve heard really good feedback from both sides ofthe fence here that says, "Yeah, this seems to solve the thingsthat we need to see" and from the Lean side, it also seems to beright in line and actually even facilitate their objectives.Joe: Can you give me a couple of the ideas that the Lean peoplehave liked about it, or liked about the book?Carol: Well, I have heard from a couple of Lean guys, becauseits -- the reality is, like Chad said, Lean and the Leanimplementation and the Kaizen books worked really well in eitherreally small companies or as a pilot in a very large company.Now, the issue has always been how do you get it across thecorporation? How do get it so that you can get a multi-billiondollar company to be able to integrate and do Lean across theenterprise. Because what a lot of companies will do with Lean istheyll say, "Well, youve got to flatten the bills and materials. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  11. 11. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsYoure going to have kanbans all over the shop floor, and thatworks great provided the next one in line is exactly what the lastone in line was.Now, if you happen to be producing red widgets and all of asudden, about every 11th one, you have somebody that wantsblue widgets, youve got to let that supplier know that paint fromred to blue, lead time away that they need the blue ones.So what the DDMRP approach has said is that it enables, it reallyenables the capability for both the Lean and the other pulltechniques like Drum-Buffer-Rope to have the material available.As you look at all these kaizen events, the big issue that theyalways run into is, "Well, if only we always had our materialavailable, then we could do all this."What ends up happening is one of the big non-value-addedactivities that the Lean people find themselves fighting all thetime is not that theres too much inventory. Its just that therestoo little inventory, but its having the right amount of inventoryin the right place at the right time.Thats where the DDMRP approach has been such a godsend forthem is that at very complex, complicated, integrated functionsacross very large companies, is having the right material in theright place at the right time -- not too soon, not too late.Thats really where were really seeing the big difference with theLean crowd is that where some of the other techniques that havecome out work really great in a pilot or they work really great insmall companies, what I really have been overwhelmed by is thenumber of very large companies that have jumped on the boatfor DDMRP.Chad: You want to be very, very careful, here, and say, we dontto convey the message that Lean is not working, because Leanwill work effectively in certain environments. Its these larger Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  12. 12. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsproduct structure environments and larger, maybe more verticallyintegrated entities where theres a problem, where theres a needfor a wider net to be cast in terms of visibility. We know this. Theanswer is not to have inventory everywhere, and the answer isnot to have inventory anywhere. Its got to be somewhere inbetween, in a very complex product structure environment, if youmake Kanbans everywhere, you have too much inventoryeverywhere. At some point, the people say, weve got just waytoo much working capital built up.Now, if you remove that entire inventory, you get killed on leadtime performance. So the really unique thing about DDMRP is itallows you to find the right places in complex product structuresand networks to stock and to manage around those areas, and itdoes it in a very Lean friendly way, with high visibility and realtime priority status.Joe: One of my complaints is always about -- lets say a Leansupply chain -- is the first thing I hear about from someone. Theyalways say, "Well, you bring the control point inside." Does DDPallow you to get that control point of the system closer to thecustomer?Chad: Absolutely. I mean, the whole design is place positions orplace de-coupled positions in the spots that really matter. One ofthe things and one of the places that they really matters is whereit touches the customer. The problem in maybe todays supplychain is if you just place a stock position at the finished skid leveland you dont back it up in operations with good stockingpractices, the amount of working capital that you have to have tohave that position maintained is ridiculous. So it kind of works onitself.Imagine these tiers of inventory positions in the right places atthe right time. Not everywhere, but in strategic areas that reallyde-couple and compress the lead times. So, if it takes a lot less Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  13. 13. Business901 Podcast TranscriptionImplementing Lean Marketing Systemstime to replenish a position, then that position needs to have a lotless inventory to cover demand over -- and spikes -- over thatperiod of time.Joe: What are the strategic positions? Is it because it influencesso many other strategic positions? Is that how you rate it?Chad: Absolutely. A common component, a shared childcomponent is very important in DDMRP, but not all of them. Youcant just go right where a user ports and stick picking all theshared child components, because in reality, there are typicallyjust a few shared child components that really matter. Theyrethe components that fall on the longest unprotected sequences inthe bills and material. So those people that just go out and say,"Well, lets just stock all shared child components," well, youprobably, maybe running a little bit too rich in terms of theinventory. Youre not getting money back for some of youre notgetting lead time back for some of that inventory investment onsome of those shared children.Carol: It really is about finding your leverage point in yoursupply chain. As Archimedes said, if I can find a lever and theleverage point, I can move the world. In this way, its if I can findthat shared component and I understand my holistic supplychain, I can move a whole supply chain. So it minimizes theinventory, but yet, at the same time, moves that entire supplychain.Joe: Is this all based on technology? I mean, is this just all newtechnology out there and I plug a software package in and itworks?Carol: Sorry, Joe, for laughing. Coming out of the softwareindustry, I watched so many software companies and their ads Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  14. 14. Business901 Podcast TranscriptionImplementing Lean Marketing Systemssay all you have to do is just buy our software and all will be rightwith the world, and thats just so ludicrous.Chad: Remember, any software is just a tool. And what issoftware? Software is the ability to just reinforce routine, right?So, we got to back up and say, "Where does software really comefrom?" Well, software is a way to enact certain rules. "Well,where do those rules come from?" Policies and vision and thingslike that. So what Carol and I did is we went right back to squareone and said, "Wait a minute. Lets go back to Joe Orlicky andlets first answer the question, Is Joe Orlickys vision still relevanttoday?"As Carol said before, absolutely, it is. In fact, its probably morerelevant than it ever has been." You know, supply chains are stillislands of MRP connected to each other. If we want more agilesupply chains, well, wed better get more agile forms of MRP, andnot just at the individual level, but at the collective level, as well.Then we said, "OK, well, if the vision is still relevant, if the visionis still good -- maybe even more relevant -- what are the rulesthen that need to change, given the changing circumstances inthe 21st century?" OK, well, so we were able to define the rulesthat get us in trouble, the currently, the conventional forms ofMRP and the rules associated with them.Then we were able to also come up with the new rules oramended rules to adapt to this new set of global circumstancesand only then should people be talking about technology. If youget the rules right, then the tools are going to be OK.Its when industry really gets into trouble when they startdeveloping tools and then try to backfill the rules and the visionafter that. In, unfortunately, I think many companies havelearned that lesson the hard way when theyve selected an ERPpackage. Theyve let the ERP application dealer construct theirbusiness rules and vision more than they themselves. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  15. 15. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsCarol: Well, and in fact, Joe Orlickys first book, the first editionof this book came out before the age of commercially availablesoftware. Back in Joes day, you had to specify your rules first. Allthe software was written in-house, and then you implemented it.Thats why I always get sort of a chuckle now out of people todaythat complain about implementing it. I sort of feel old when I say,"Oh, back in the old days, we had to specify the rules first, thenwe wrote the software, then we implemented it. So yourealready at step three.What Chad and I believe is that the DDMRP book is in the sameposition that Joes original book was, is that the body ofknowledge is there. The whole last half of the book actually putsinto the public domain the specifications on how to build a DDMRPsystem. And thats how we specifically wrote it that way. It isvery, very specific. Its got basically a whole specification in thatsecond half of the book.Joe: So the new book is really a how-to book.Carol: Oh, yeah. A smart software company picking that up,looking at that, could say, "Hmm. Heres our future in our lap."Chad: Carol and I think that thats going to happen.Immediately, no, because I think that in many cases, the big ERPcompanies have really -- are blind to the problem. Why? Theydont have to use it on a daily basis. The people that know theproblem are the people -- they are on the front lines -- of theplanners, the buyers, the materials managers. They get theproblem. You know how we know they get the problem? Isbecause most of them are using some form of work around tool,like a spreadsheet or an Access to enact rules or enact, getvisibility that they cant get out of their modern ERP product withtheir kind of old MRP module embedded in it.Joe: I was surprised to see that you talked about visibility andcollaboration as a very important ingredient of all this. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  16. 16. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsChad: Of course, I think one of the big holes -- go back to whenJoe and his cadre were specking out MRP and building MRPsystems from the ground up. This idea of collaboration, real timevisibility, the Internet -- it just didnt exist. I mean, from theirperception, they had this giant calculator that could calculatefaster than anybody could ever dream of. So what did they do?They focused on the planning side. Thats why we got "materialrequirements planning." We never really built in any execution.DDMRP we try to carefully separate what planning is versusexecution. And very simply, planning is the process of generatingneeded supply orders. All right? And in execution, in DDMRPexecution, thats the process of managing open supply orders.And priorities change all the time, especially in this more volatileworld.So there has to be a carefully detailed blueprint for how toexecute today, and youve got to have rules. Youve got to havedifferent types of alerts. Youve got to have routines andprocesses to account for changes that will happen, inevitably andhow that comes back around to effect planning as well.Joe: In a typical MRP system that someone has right now, is iteasy to make a change?Carol: To get that MRP system to do Demand Driven MRP?Joe: Yes.Carol: That would be like asking a leopard to change its spots.Just functionally, the whole underlayment of how that systemworks is all based on inventory. If you peel the tree back, asChad talked a little bit about earlier, advanced planning andscheduling systems -- we could do those, because we had ERPsystems. We could do ERP, because we had MRP, too,manufacturing resource planning. But you do MRP2 because ithad closed loop MRP. We could do that because we had MRP. Wecould do that because we closed-loop MRP. We could do that Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  17. 17. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsbecause we had MRP. We could do that because we had BOMPprocessors and DBOMP processors.When you peel it all the way back to the middle of the entireinfrastructure, its all about inventory. The reality of what wehave to shift to is that the center of it has to be about demand.Technological side of it, if you will, has to be focused on thedemand side.Now, does that mean that everybody has to rip out their MRPsystems? Absolutely not. The data comes over and the planningthat happens in the DDMRP system, because whats at the core ofthis new tree, if you will, if you think of the old systems, weretrees that continued to grow and evolve, because we were able tomove from a BOMP processor to a DBOMP processor becausecomputers got faster.We could go from DBOMP to a full MRP system because we nowhad 8K of memory. I mean, think of that: 8K with the first MRPsystems. We could go from MRP to closed-loop because we hadmore computer power.That tree has continued to grow by adding rings. The reality ofwhere were at today is that that tree is rotten to the core,because at the core its all about inventory. DDMRP is whats atthe core is all about demand, and its how do I start to grow thisnew tree based on the center of demand and being able to senseand adapt to whats going on in the marketplace.Now, it doesnt I have to pull out of the old system. Theres agreat amount of information that is hidden in that system thatpulls over, that the analysis is done to say, first, where do I putthat inventory, because I want my whole system to be able tosense and adapt to those changes in the marketplace.Chad: There are some subtle nuances between the different ERPproducts out there and their respective MRP modules. Some will Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  18. 18. Business901 Podcast TranscriptionImplementing Lean Marketing Systemshave some elements of DDMRP that can be accomplished. Theproblem is in being able to put the whole package together.DDMRP is not just something that you go, "Well, I like a little bitof this and a little bit of that, and Ill do some of that." Really,youve got to put the rules together to make the kind of hugeimpact that DDMRP has made in the early adopters.The early adopters, the performance that theyre reporting isstaggering, relative to using the traditional tactics. They get thoseresults because theyre doing all of the components of DDMRP.I think that theres going to be a lot of smart people out therethat read the book, that go through the blueprint, and theyregoing to be able to get some wins immediately by doing some ofthese tactics, even if its kind of offline.What we really need to do is they need to get wins, and then theyneed to demand better. OK? Quite frankly, theyre the customer.They need to demand change. They need to demand bettersystems. And they also need to demand of their software providerto make fundamental overhauls of code that really, in somecases, hasnt been touched in 35 years. OK?The customer should be able to demand that. And the problemtoday is its very difficult for the planner or for the buyer todemand that kind of change, to even articulate the magnitude ofthe problem, and then the subsequent direction.Thats how weve tried to lay that all out. In the book, we presentthe past of MRP, what MRP is today, why its breaking down, whatthe effects are of it today, and then what the blueprint is for thefuture.Joe: How did it evolve into this? Can you just give me, really, abrief history? Because Im sitting here saying, "OK, this makessense. This is good." But the idea just didnt pop up. It evolvedfrom somewhere, didnt it? Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  19. 19. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsCarol: Well, its sort of a funny story, how the whole thing cameabout. Chad and I have known each other for years. Actually, Imthe old one on the team, so Ive sort of watched Chad grow up.He and his former company developed this really cool product. Iwas teaching at the university at the time, and he brought it tome and he said, "This is what we got. We think its really cool."I looked at it and I said, "Do you realize what you have there?"He says, "Yes, we think its this." Then I go, "Well, it could bethat, but what youve also done is that you have solved aproblem that weve been facing in the MRP, material-planningarea for about the last 50 years." Chad looked at me and went,"Whys that a problem?"Chad doesnt come out of the material-planning side. Chad grewup in the Theory of Constraints side. I grew up in thematerial-planning side. But I was so trapped in "this is how wealways did things" that I understood the problem real well, but Iwould have never devised a solution.Chad came up with this incredibly innovative solution, but didntrealize that what hed solved was an entirely different problemthan what he thought hed solved. So its sort of like at 3M, whenthey invented Post-It notes? They were going for something else,but what they invented was this incredible adhesive that wouldcome off and on as you needed it.What Chad and his team came up with was the direction of asolution and the nuances of a solution that solved problems thatweve been facing for 50 years.Chad: Our biggest challenge, when Carol and I sat in that roomand kind of noodled it over for a couple hours, was it becameapparent that in moving this thing further, what we were going tohave to do is go back to square one and really, really researchand understand and articulate the magnitude of the problem. AndI think that thats one of the reasons why Carol, in an earlier talk Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  20. 20. Business901 Podcast TranscriptionImplementing Lean Marketing Systemswith you, Joe, alluded to a time when she was at the APICSInternational Conference in, I believe, Kansas City, and there wasa standing-room-only crowd to speak on a particular topic, and itwas like the precursor to this.We knew that we were on to something because people kepttelling us, "Youre hitting the problem. This is my life. Youvenailed the problem." That got us very excited, becauseintroducing the world or people to something new, to a newsolution, the key starts with getting them to agree with you onthe problem. Once you get all sides to agree on what the problemreally is, the effects that it has on you and them, then the dooropens for them to agree on what the solution is.So thats where were at now. We believe weve articulated theproblem well enough, for most people that live in the planningworld, the continuous-improvement world, the operational world,to say, "Yeah, this makes a lot of sense."Now its time for us to bring that solution to the world and say,"OK, if this is the problem, then now heres the road to thesolution." And its not an insurmountable task. It is going torequire some rules to change. And I guess that shouldnt be asurprise to anybody. If something is fundamentally broken, thenits going to require a little bit of effort to change some of therules.Carol: In answer to your question, it was a classic example ofhow one plus one equals three. Its something that neither of uswould have been able to do separately, but together, it was reallyvery complementary. As Chad said, I understood the problem. Hehad a direction of the solution. Its taken time, as weve reallynoodled through and spent many, many hours on this andsupported by research, because so many times we stepped backand said, "Are we missing something? Is this really right?" Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  21. 21. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsAs Chad said, we have been absolutely overwhelmed by theacceptance in the marketplace, from the first APICS magazinethat published one of the earliest white papers that they ranunder the title called "Brilliant Vision" as the title story of themagazine. We sat back and we went, "Whoa, maybe we gotsomething here"--to the conference, to the initial reviews onAmazon on this book.We think were on to something here. Its really been a greatcollaboration. You never develop anything by yourself. It alwaystakes a team. This is a good case here.Chad: When McGraw-Hill approached us, came to us and offeredus the opportunity to revise the Orlicky text... The Orlicky text,when Joe wrote that book, he says, in the book, there were 700companies that were doing MRP or had committed to doing MRPat the time. Thats 1975. If you think about the magnitude, theeffect of what that book had on the industrialized world, itsstaggering. And to be able to come back and rewrite that bookand really go back to the vision that Joe had and say, "OK, now,the vision, how does that translate in todays circumstances?" andget the opportunity to lay that blueprint out, its just been anabsolutely phenomenal experience.Joe: The regular supply-chain people, of course, should read thebook. Who else should maybe read this book?Chad: In my opinion, I think anybody thats interested inplanning, working-capital reduction. The book is 536 pages, soits not light reading by any stretch of the imagination.Carol: At least with the Kindle version now, its a little lighter.Chad: I think the controllers, I think the CFOs of the world aregoing to want to take a look at this, too, or at least certainsections of it, because it has huge implications on working capitaland how to use working capital properly, and how you can Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  22. 22. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsactually hurt yourself through all the well-intentioned efforts ofworking-capital reduction unless you do it in the right way. I thinkthat the Lean professional, I think that the Six Sigmaprofessional, I think that the Theory of Constraints professional isgoing to be acutely interested in this. I think the S&OP crowdshould take a look at this. I think it represents a very good bridgebetween the S&OP process and the on-the-floor tactics inscheduling that needs to occur on a daily basis.But once again, it is 29 chapters. Its 536 pages. Its one of thosethings that youll have to digest there a little bit. But theresgoing to be parts of that book that appeal to many, manydifferent parts of the organization, maybe even sales. Becauseone of the things that we talk about is its very critical to know, toget the markets pulse on what lead time or acceptable lead timesare. Thats really a really key input into the DDMRP equation.Carol: Yeah. Id just summarize it as, anybody that is anywhereinvolved with a manufacturing company that wants to becompetitive now and into the future.Joe: I read the sales and marketing part, the other belief I have,and read certain other chapters of it. I cant say I read it cover tocover. It is very well-written. It was very easy to understand thedifferent points you were trying to get across, so I complimentyou on that.Chad: Thank you.Joe: But the one thing that I believe is marketings role ischanging so much within industry right now, and one of theirrequirements is bringing that pulse of that customer more directlyinto them four walls. I mean, thats one of their primary missionsright now.Carol: Thats why we were so thrilled to highlight the sales andoperations planning chapter thats in there. If you noticed, that Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  23. 23. Business901 Podcast TranscriptionImplementing Lean Marketing Systemschapter was written very different than the rest of the book,because it was written by Dick Ling himself. Dick is the father ofsales and operations planning. I mean, it would be like having JoeOrlicky still around talking about MRP. Dick is the guy that coinedthe term "sales and operations planning." He and Andy Coldrickhave done some incredible new stuff in S&OP, and theyd neverpublished it.Dick is a friend of mine from the APICS days, and I called him upand we felt that it was very, very important to include sales andoperations planning and that whole idea of marketing back to thecustomer and that customers voice. I reached out to Dick toinclude some of the S&OP stuff, and he said, "Carol, Andy and Ihave had this huge breakthrough." He sent me a couple whitepapers that they had written, and then I asked him, I said,"Would you write a chapter for this book?"Chad and I were so honored to include that chapter in this book,because we just think its such a necessary condition. But ratherthan trying to re-voice the man, the giant, that we were standingon his shoulders, it was the man himself wrote it. So that chapterdoes have an entirely different voice, because it was written byRichard Ling.Joe: You mentioned APICS here. Youre going to be speakingthere. Could you tell me when that conference is?Carol: In late October, the APICS International Conference iscoming to Pittsburgh, Pennsylvania, on October 23rd through the25th. And Chad and I are going to be speaking on DDMRP on the23rd, on Sunday, and doing a book signing after that. So werevery excited to be bringing the APICS material back to APICS.We think this is a great opportunity for APICS to stand up andtake a leadership position, once again, like they did in the 70swith their MRP crusade that made APICS the largest professionalsociety in the United States. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  24. 24. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: Chad and Carol, Id like to thank you very much. Thispodcast will be available on the Business901 blog site and alsothe Business901 iTunes store. So, thanks again.Chad: Thanks, Joe.Carol: Thank you very much. Bye now. Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901
  25. 25. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Joseph T. Dager Lean Six Sigma Black Belt Ph: 260-438-0411 Fax: 260-818-2022 Email: Web/Blog: Twitter: @business901 What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joes ability to combine his expertise with "out of the box" thinking is unsurpassed. He has alwaysdelivered quickly, cost effectively and with ingenuity. A brilliant mind that isalways a pleasure to work with." James R.Joe Dager is President of Business901, a progressive company providingdirection in areas such as Lean Marketing, Product Marketing, ProductLaunches and Re-Launches. As a Lean Six Sigma Black Belt,Business901 provides and implements marketing, project and performanceplanning methodologies in small businesses. The simplicity of a singleflexible model will create clarity for your staff and as a result betterexecution. My goal is to allow you spend your time on the need versus theplan.An example of how we may work: Business901 could start with aconsulting style utilizing an individual from your organization or a virtualassistance that is well versed in our principles. We have capabilities toplug virtually any marketing function into your process immediately. Asproficiencies develop, Business901 moves into a coach’s role supporting theprocess as needed. The goal of implementing a system is that the processeswill become a habit and not an event. Business901 Podcast Opportunity Expert Status Is Orlicky’s MRP relevant today? Think DDMRP Copyright Business901