Do you believe your Supply Chain performance can be improved?
Companies persisting with conventional MRP are missing out on huge opportunities to transform the performance of their supply chains.
Yet supply and production planners can get control of complex modern-day supply chains with a straightforward, rules-based system coupling supply flow to actual demand.
This ‘Demand-Driven’ approach has been implemented in demanding organizations and has shown proven
benefits in stable production, high service levels and improved ROCE performance. Making the change is
low-risk, with proven, straightforward software. The gains can be achieved in months not years.
So, where is the problem now?
There are fundamental, systemic flaws in the long-established MRP approach, flaws commonly embedded in ERP systems. MRP organizes to a specific ‘point forecast’ of demand volume and timing. Point forecasts soon hit the real world of customer and competitor-led demand variability. Supply and Production become unsynchronised, forcing the build of the wrong stock, the wrong volume and having in the wrong places. Constant timeconsuming action to re-schedule, expedite, and re-allocate follows. Because the MRP system is tightly coupled to an exact forecast, when it goes wrong the natural response is to chase greater forecast accuracy. This in turn leads to frequent and costly ERP and Planning System upgrades. This path has low returns for two clear reasons; variability is not managed across the supply chain and flow is not linked to actual demand.
Time for a re-set – accept variability into plans and get control
Market variability is always present and, counter-intuitively, predictable. Control can be gained with integrated operational processes that are configured to absorb variability. This is the foundation of the ‘DemandDriven’ method.
The Demand Driven approach – how it works
Demand Driven is a flow operating model that eliminates the unstable, bullwhip effect. It works with three control cycles. First, the optimum location in the supply chain to place inventory buffers is determined to best maintain flow. Next, on a monthly basis, the buffer volumes are re-configured. The forecast is needed, now to determine the demand runrate. Recent market variability finalises the buffer volume. Thirdly, based on planner-determined daily and weekly cycles, replenishment orders are coupled to real demand, so decoupling orders from point forecasts. This method has been proven on global and national scales with oil, telecoms, stationery and drinks companies. Thousands of skus, multiple sites, multiple customers.