This document summarizes and compares three inventory management systems: Material Requirements Planning (MRP), Theory of Constraints (TOC), and Demand Driven MRP (DD-MRP). MRP uses time-phased planning to schedule supply to meet demand. TOC focuses on identifying and exploiting constraints through methods like Drum-Buffer-Rope. DD-MRP builds on concepts from both MRP and TOC by using conventional MRP explosion to derive dependent demand and extending TOC buffering concepts with color-coded zones that are calculation-driven. The document examines strengths and limitations of each approach and argues that DD-MRP attempts to find a balance by combining aspects of MRP and TOC to

1. VALUE REALISATION

2. MRP, TOC and DD-MRP:
Material Requirements Planning, Theory of Constraints, Demand Driven MRP
It is not getting easier, you need to get better
JOHAN DU TOIT

3. iPlan

4. The Inherent Supply Chain Problem
A wager is an act of faith of gamblers.
Prophecy is an act of faith of the saints.
Inventory is an act of faith by business.

5. Human nature is irrational
• Bias towards existing reference
• We selective seek information
• We overestimate our ability to predict the future,
• We believe that based on a series of previous events, an
outcome is more likely than the calculated odds.
• It is easier to be “wrong with everyone”
than “right and alone”
• We overreact

6. Bi-modal inventory oscillation
Warning Optimum Warning Too muchToo little

7. What you need is a system
Material Requirements Planning (MRP-1956)
Theory Of Constraints (The Goal - 1981)
Demand Driven MRP (DD-MRP - July 2016)
What we need is a system…..

8. Material Requirements Planning

9. Time Phased
1 Establish the demand;
2 Schedule the supply to meet the demand;
Time Phased Planning
Dependant vs
Independent demand.
If you can’t describe what you are doing as a process, you
don’t know what you’re doing.
W. EDWARDS DEMING

10. So what is the problem?
Demand Supply

11. Theory of Constraints
“Look on a complex reality and
find the simplicity”
DR. ELIYAHU GOLDRATT

12. TOC – The Management Philosophy
• Strength of the chain is 35kg (Constraint)
• Use chain judiciously (Exploit)
• Increasing the strength of the other links does not increase
the strength of the chain (Subordinate)
• Harden the link to 40kg (Elevate)
• Work on the next link (No inertia)
TOC in practise

13. TOC in the Supply Chain
Drum Buffer Rope
DBR
Feed Forward:
Drum Schedule
Shipping Schedule
Initial Buffer Size
Material release schedule
Feed back:
Buffer “holes” (Expedite)
Update buffer size
Emerging CCR
POOGI focus
Buffer
Management

14. Success?
Prevents system from being overloaded
Fairly constant WIP
Single focus
High visibility (Graphical)
Minimum of data required
Simple calculations

15. DBR & Buffer Management

16. 1) DDMRP builds on TOC concepts of inventory buffers
with colour coding but extends specific concepts to
address some shortcomings.
From where ----- DD-MRP ?
Combines aspects from MRP and TOC to
attempt finding a sweet spot for addressing
most critical shortcomings in each.
2) DDMRP use conventional MRP explosion to derive
dependant demand.

17. Green Zone (Supply Order Generation frequency and size)
biggest of:
- Order Interval (AverageDailyUse x OrderIntervalDays)
- Min Order Qty (Quantity in Number of Units)
- Calculated (LeadTimeFactor x Decoupled Lead-time)
Yellow Zone (Lead Time Coverage)
- (AverageDailyUse x Decoupled Lead-time)
Red Zone (Safety in Buffer)
- Red Zone Base (AverageDailyUse x Decoupled Lead-time x Lead Time Factor)
- Red Zone Safety (Red Zone Base x Variability Factor)
Buffer zone sophistication
All Buffer Zones Calculation Driven

18. DD MRP

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