Key Issue
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DRP Process
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O8 DDMRPII™ Process
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Selection of appropriate replenishment control technique
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- 2 basic techniques set manually (Call-off or Make to order (MTO), & MRP.)
- Reliance on forecast results in a focus on selecting the correct forecast algorithm – the algorithms can be highly complex & are often augmented by a specialist forecasting system.
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7 separate control techniques:
- (MTO, RoP, Poisson distribution planning, Re-order cycle, Multiple level Re-order Point (kanban), rate based, promotions & event management).
- Use of VVA (Volume & variability analysis ) to determine appropriate control technique by SKU.
- Inventory control techniques re-assessed formally every month.
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Correct safety stock in system
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- Inventory safety stock is manually set using specific volumes or number of days cover. Parameters often not maintained.
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- Safety stock built into calculation via customer service parameter. Stock is appropriate to each SKU and is recalculated monthly.
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Calculation of inventory targets accounting for demand variability & forecast volume
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- Forecast algorithms attempt to predict time based fluctuations from history and build result into the plan.
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- Stock levels set for overall expected volumes and additional inventory added to cater for demand variability.
- Selective use of volume forecasts based on historic accuracy.
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Account for batch & delivery constraints when planning inventory targets
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- Inventory requirement accurate on day MRP is executed.
- Exception messages created to encourage rules to be broken to restore plan
- No formal ability to cater for delivery schedules or planning schedules in inventory target setting.
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- Targets are amended during calculation to account for lead-time & batch constraints.
- Additional tools support multiple planning and execution business cycles. eg Fixed planning & ordering schedules.
- Ability to link planning process and SKU level inventory targets to ABC analysis.
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Support for financial and business planning
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- Inventory plan changes each time MRP is run.
- Main driver of plan is the forecast – operational constraints hidden.
- Individual planners alter plan with ‘gut-feel’ or off-system calculations that take into account recent business drivers, eg reduce stock levels. No ability to link these day to day decisions with an overall plan.
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- Separation of planning from daily ordering process results in inventory targets which are approved by business at S&OP meeting.
- Inventory is attributed to operational constraints and the effect of altering those constraints can be seen in real time simulation tools.
- Key decision parameters are service and inventory positions – supports clear link between policy setting & business mgt.
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Rigorous & robust process
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- Substantial part of planners’ role undertaken ‘off-system’ on spreadsheets.
- No in-built mechanism for reviewing appropriateness of safety stock numbers or current plan.
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Monthly S&OP review cycle ensures robustness of targets & execution:
- Metrics & KPI’s produced
- Continuous improvement activity is focused on inventory drivers & improving business performance
- Every SKU is reviewed & correct control technique & inventory target is re-assigned
- Improvement activities are measured & incorporated as they happen
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Minimisation of time delay and cost in running the planning process
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- MRP usually run on a fixed schedule. Output is a revised plan driving re-work and alterations to the plan on a regular basis.
- Management of plan outputs is a manual and time consuming process.
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- Inventory plan fixed through operating period.
- Replenishment signals produced automatically.
- Plan & execution success constantly monitored & alerts produced ahead of issues occurring.
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