DDMRP - Demand Driven Material Requirements Planning

Description

In the 1950s, a planning method was conceived called “Material Requirements Planning (or MRP).” MRP changed the world of manufacturing forever. But times have changed—customer tolerance times are much shorter, product variety and complexity has increased, and supply chains have spread around the world. MRP is dramatically failing in this “New Normal.” Demand Driven Material Requirements Planning (DDMRP) is a practical, proven, and emerging method for supply chain planning and execution that effectively brings the 1950s concept into the modern era. The foundation of DDMRP is based upon the connection between the creation, protection, and acceleration of the flow of relevant materials and information to drive returns on asset performance. Using an innovative multi-echelon “Position, Protect, and Pull” methodology, DDMRP helps plan and manage inventories and materials in today’s more complex supply scenarios, with attention being paid to ownership, the market, engineering, sales, and the supply base. This method enables a company to decouple forecast error from supply order generation and build in line to actual market requirements, and promotes better and quicker decisions and actions at the planning and execution level. DDMRP is already in use by MAJOR Global 1000 companies. Demand Driven Material Requirements Planning is THE definitive work on DDMRP, and is a recommended reading for all those taking the ISCEA Certified Demand Driven Planner (CDDP) Program. Foreword Definitions in This Book Introduction About the Authors Acknowledgments PART 1 PERSPECTIVE CHAPTER 1 Planning in the New Normal The Material Requirements Planning Revolution Evidence of a Problem Return on Asset Performance Degradation Work-Around Proliferation The Inventory Bimodal Distribution The New Normal Summary CHAPTER 2 The Importance of Flow Plossl’s First Law Establishing Flow as the Foundation Relevant Information and Materials The Bullwhip Effect Summary CHAPTER 3 Material Requirements Planning in the New Normal What Is MRP? Distortions to Relevant Information Demand Signal Input Nervousness The Weekly Bucket Flattening the Bill of Material Distortions to Relevant Materials Common Cause Variation Delay Accumulation Amplifying the Distortions to Relevant Information and Materials— Batching Policies Summary CHAPTER 4 Unlocking a Solution—The Power of Decoupling Decoupling Decoupling Point Buffers Summary PART 2 BECOMING DEMAND DRIVEN CHAPTER 5 Supply Order Generation and Execution for the New Normal MRP Versus Lean—What Can We Learn? Dependence Versus Independence Supply Order Generation (Planning Versus Execution) Lean and Technology Demand Driven Material Requirements Planning The History of “Demand Driven” Position, Protect, and Pull Summary CHAPTER 6 Strategic Inventory Positioning Positioning Factors Customer Tolerance Time Market Potential Lead Time Sales Order Visibility Horizon External Variability Inventory Leverage and Flexibility Critical Operation Protection Applying the Positioning Criteria A New Form of Lead Time Advanced Inventory Positioning Considerations Distribution Positioning Considerations Summary CHAPTER 7 Strategic Buffers Inventory: Asset or Liability? Introducing Decoupling Point Buffers The Green Zone The Yellow Zone The Red Zone Buffer Profiles Factor 1: Item Type Factor 2: Lead Time Factor 3: Variability Individual Part Attributes Part Average Daily Usage Part Lead Time Part Minimum Order Quantity Part Location Calculating Replenished Part Buffer Levels and Zones The Green Zone The Yellow Zone The Red Zone Continuing with Company ABC Iterations Calculating Replenished Override Buffers Calculating Min-Max Buffers Summary CHAPTER 8 Buffer Adjustments Recalculated Adjustments Planned Adjustment Factors Demand Adjustment Factor Zone Adjustment Factor Lead Time Adjustment Factor Summary CHAPTER 9 Demand Driven Planning The Shift to Actual Demand The Net Flow Equation Qualifying Order Spikes Supply Order Generation Based on Net Flow Position Simulating DDMRP Supply Order Generation Calculating Average On-Hand Inventory Average On-Hand Range Average On-Hand Target Average Open Supply Orders Decoupled Explosion Hybrid Model Supply Order Generation Prioritized Share Supply Order Consideration Discount Optimization Freight Optimization Coverage Optimization Min-Max Supply Order Generation Completing the Company ABC Example Summary CHAPTER 10 Demand Driven Execution Buffer Status Alerts Challenging Priority by Due Date Planning Versus Execution Display Current On-Hand Alert Projected On-Hand Alert Synchronization Alerts Material Synchronization Alerts Lead Time Alert Summary CHAPTER 11 DDMRP Impacts on the Operational Environment DDMRP Strategic Buffer Criteria The Decoupling Test The Bidirectional Benefit Test The Order Independence Test The Primary Planning Mechanism Test The Relative Priority Test The Dynamic Adjustment Test DDMRP Versus Safety Stock and Order Point Safety Stock and the Buffer Criteria Order Point and the Buffer Criteria DDMRP Impacts on Scheduling DDMRP and Master Production Scheduling Assumptions DDMRP Shop Floor Scheduling Implications Finite Scheduling with DDMRP? Additional Scheduling Sequence Impacts DDMRP and WIP Priority Management Summary CHAPTER 12 DDMRP Metrics and Analytics Measuring Relevant Information (Signal Integrity) Measuring Decoupling Point Integrity Outlying Event Reports Measuring Velocity Driving Improvement in DDMRP Summary CHAPTER 13 The Demand Driven Organization The Demand Driven Adaptive System Demand Driven Sales and Operations Planning Conventional Sales and Operations Planning The Five Steps of Demand Driven Sales and Operations Planning 1. Strategic Business Management Direction and Review 2. Integrated Reconciliation 3. Managing the Portfolio and New Activities 4. Managing Demand 5. Managing Supply Demand Driven Sales and Operations Planning Projections Working Capital Space Capacity Projected Order Frequency Summary Contribution of Dick Ling CHAPTER 14 Implications for Technology Operations and Information Technology—Two Ships Diverging in the Night? DDMRP Software Compliance Criteria PART 3 APPENDICES APPENDIX A An MRP Example The Scenario Simulating the Scenario APPENDIX B Simulating DDMRP Buffers About the Simulation Widget Simulation Results Gazoonk Simulation Results Simulating the Impact of Minimum Order Quantities Summary About the Author APPENDIX C Applying DDMRP to the Apparel Retail Environment The Need for a Retail Application of DDMRP A Retail Apparel DDMRP Example Special Characteristics and Challenges of the Apparel Retail Environment The Proposed Model Retail DDMRP Buffer Zone Considerations Realized Results About the Author APPENDIX D Demand Driven MRP Dictionary APPENDIX E DDS&OP Checklist Endnotes References Index