TO MRP OR NOT TO MRP?
Better fire prevention with faster firetrucks?
When fighting fires, it is always tempting to look at faster fire engines, longer ladders, louder alarms, and bigger hoses. But as business becomes more proactive and outcome-driven the same old approach won’t cut it. Choosing to continue to fight fires (instead of fire prevention) echoes the common refrain: “that’s the way we’ve always done it.”
It’s the same with supply planning forecasts.
Everyone agrees reaching a high-level of forecast accuracy is nearly impossible.
Time-phased requirements planning is designed to consume a forecast – which is usually wrong. When an inaccurate forecast and due dates collide, it is difficult to transition to fire prevention when so much time, budget, and effort is spent designing faster firetrucks.
If you are relying on inaccurate forecasts, how much time, resources and budget do you want to invest in non-value adding forecasting information?
In what area of business would it be acceptable to be only sixty percent accurate the majority of the time?
Accurate forecasts are impossible at an item level and take no account of supply-side planning techniques. Forecasts using MRP often result in a sub-optimized supply chain setup.
Orchestr8’s DDMRPII(TM) delivers a 100% accurate volume forecast and a demand-driven, lean-supply planning environment that will deliver a 20% working capital benefit over the MRP approach.
MRP forecasts fall short because the timing of a forecast will ALWAYS be wrong, which is to be expected. However, MRP requires the “WHEN something happens” to be as accurate as “HOW MUCH is required” in order to work effectively.
For this reason, MRP’s execution process will always be suboptimal and expensive. Orchestr8 removes the dependency on “WHEN something happens,” allowing us to leverage the volume forecast data and remove the need for an unreachable level of forecast accuracy.
If you have tens of thousands of SKUs and or a complex network and you’re not fully convinced that our argument makes sense, we challenge you to a simple wager. Let us run a simulation on your current data. Let us show you how we can provide the appropriate supply planning method and technology to deliver a 20% improvement regardless of your current level of accuracy. If we can’t deliver, we’ll send you a gift certificate for a $200 dinner.
Curious? Or hungry? Request a copy of “Why a Forecast is Not a Plan And What MIT Research Reveals” and we’ll follow-up to schedule your simulation.