On the first day of June, 2012, the International Supply Chain Education Alliance (ISCEA) announce its strategic partnership with the Demand Driven Institute (DDI) to provide education and certification in Demand Driven Material Requirements Planning (DDMRP). IISB (ISCEA International Standards Board) dubbed this program of education and certification the CDDP (Certified Demand Driven Planner).
What is Demand Driven MRP?
Demand Driven MRP (DDMRP) is a new and improved formal planning method that has been designed and developed to specifically correct the recognized inadequacies and inappropriate rules still dominating traditional and conventional MRP (material requirements planning).
Traditional or conventional MRP was first articulated in the 1950s, methodized and systemized in the 1960s, and then promoted commercially in software and systems beginning in the 1970s. Unfortunately, it has not really changed significantly since—even though the whole world of manufacturing and supply chains is almost unrecognizably difference from what it looked like in 40 or 50 years ago.
Simply put, the traditional approach to MRP was designed and implemented for a world where yesterday was a reasonably good predictor of tomorrow in most major industries. That, however, is not the supply chain world that we live in today.
In 2011, Carol Ptak and Chad Smith published a rewritten and expanded version of Orlicky’s Material Requirements Planning, Joe Orlicky’s original tome on the workings of MRP. The new version, Orlicky’s Material Requirements Planning, Third Edition, defines a new approach to MRP that meets the challenges of what Ptak and Smith call “the New Normal.”
The New Normal
The New Normal looks like this:
- Global sourcing and global demand
- Dramatically shorter product life-cycles
- Significantly reduced customer tolerance times
- Increased product complexity and mass customization
- Huge pressure for reduced inventories
- Forecasts accuracy failing to improve because improved methods are constantly offset by increased supply chain and demand volatility
- More product variety than ever before
- Many long lead time components, despite the shrinking customer tolerance times
Does Demand Driven Planning mean Make-to-Order (MTO)?
No. Becoming demand-driven does not necessarily mean that you must produce to order.
What it does mean, however, is that all production and replenishment orders are triggered by what occurs relative to actual demand in the supply chain. While planning may include forecasts that will lead to adjustments in the size of supply chain buffers—stock, time or capacity—the actual order to produce or replenish will be triggered by actual demand in the system.
This whole approach improves FLOW. FLOW, in turn, drives inventories down while driving profits and ROI (return on investment) higher.
Why apply Demand Driven methods?
Traditional MRP, ERP (enterprise resource planning), DRP (distribution requirements planning) planning and execution systems rely on detailed forecasts to drive orders for production and replenishment. While such “push and promote” systems worked well in a world where market demand outstripped production capacities (as in the 1950s, 60s and into the early 70s), it has proven to be far less effective in today’s world where manufacturing capacities exceed market demand (except, of course, in some emerging markets).
Chances are, if you have anything to do with a supply chain—internal or external to your company—you have experienced how these legacy rules and systems create enormous friction and drive constant compromises and firefighting when planned orders fail to synchronize with actual demand.
The new Demand Driven methods can help achieve alignment across the entire organization—or, even, the entire supply chain. Resources, inventories and replenishment activities can be given clear signals and easy to understand priorities for action based on what is happening with actual demand. There can, at last, be a clear understanding of inventory investment strategies and tactics, and full cooperative harmony between sales, planning, scheduling and execution.
A Certified Demand Driven Planner (CDDP) can help you achieve these ends.
Benefits of Demand Driven planning and execution
Companies that have implemented Demand Driven methods have discovered significantly improved financial success—typically far outpacing their industry rivals. Supply chain risks are minimized; lead times are compressed; customer service is improved; and inventories are reduced.
Demand Driven methods have proven their worth.
What’s keeping your company from becoming truly Demand Driven?