Friday, December 12, 2014

MRP Conflict

I've had quite a few requests to post more information on Demand Driven Material Requirements Planning (DDMRP), so in today's post I will begin a series of posts on this subject.  I will be quoting much of what I write from the wonderful book,  Orlicky's Material Requirements Planning 3rd Edition by Carol Ptak and Chad Smith.  Don't forget that in March of next year there will be a conference in Houston on DDMRP and that you can get a discount if you sign up using the promo code BOBSBLOG.  Here's the link for this conference:

I want to start this posting by discussing a seemingly universal conflict that exists within traditional MRP and I'll do so by way of one of TOC's Thinking Process Tools named the Conflict Diagram as depicted in the following visual. 

Many companies today are attempting to become agile, but what does being agile really mean?  According to the 12th edition of the APIC's Dictionary, agility is defined as "The ability to successfully manufacture and market a wide range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization.  Agility merges the four distinctive competencies of cost, quality, dependability and flexibility."

Carol and Chad tell us that the problem with this definition is not whether it is a desirable state to achieve, the problem is that it is too difficult to achieve given no shortage of challenging circumstances relative to the manufacturing environment. 

For those of you not familiar with the conflict diagram it uses necessity based logic and is read from left to right as follows:  In or to be agile, we must produce to actual market pull.  In order to produce to actual market pull, we must ignore MRP.  The other side of the conflict is the reverse and states that in order to be agile, we must have visibility to total requirements, especially long lead time parts.  In order to have visibility to total requirements, especially long lead time parts, we must utilize MRP.  So what are we to do since both modes of operation are opposite in content and can not exist at the same time?

Carol and Chad tell us that MRP has some very valuable core attributes in today's more complex planning and supply scenarios with these being the  Bill of Material (BOM) visibility, Netting Capability, and Maintenance of Sales Order/Work Order Connection between demand allocations and open supply.  In other words, critical aspects of it are still relevant - perhaps even more relevant than in the past four decades.  The key is to keep those attributes while eliminating MRP's critical shortcomings.  At the same time we should be integrating the pull-based replenishment tactics and visibility behind today's demand-driven concepts into one system  in a dynamic and highly visible format.  The solution is called demand-driven MRP DDMRP).

In my next posting we will dive more into the Demand Driven Material Requirements Planning (DDMRP).
Bob Sproull

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