Recently, one of the founders of the Demand Driven Institute (DDI), Chad Smith, allowed me to ask him a few questions. I was interested to know more about the path that led Chad to the founding of DDI.
What he told me is fascinating:
I got my start in Supply Chain in 1995, working for Dr. Eli Goldratt author of The Goal. I was on my way to law school but got sidetracked, distracted and enamored by what he was doing with organizations.
In 1997, when he retired from the Goldratt Institute, I founded a consulting company called Constraints Management Group with some like-minded and very talented people. We each had very complementary but different skill-sets and we immediately picked up significant consulting opportunities with larger mid-range manufacturers ($250M - $1B). We sold them on implementing methods primarily focused on the Theory of Constraints, but when they said, “yes” we were like, “OK, now what?”
We had to figure it out. These methods had never really been fully implemented at the scale at which we were dealing. One of the things we constantly fought against was the planning system.
If you plan to the wrong demand signal, no matter how fast you make the floor move, you simply run the risk of making the wrong things faster. Additionally, in large complex manufacturing, we had to find a way to compress lead times without holding massive amounts of inventory.
Through the early 2000s we were able to articulate the methods through four key accounts and diverse environments. Those accounts were:
We were actually able to create a piece of software that embodied these methods. You think you know something? Write software for it and you will find out how much you do not know.
I had a friend that was in Strategic Account sales for Infor. I showed him a presentation called “Beyond MRP” and then showed him the software. He actually said (I’ll never forget it), “I don’t know if you were just lucky, or if you meant to do this, but I sell six different ERP products and none of them can do anything like this.”
That got me thinking that maybe the potential application of the method was much broader than I thought. I reached out to the most knowledgeable person I knew on MRP, Carol Ptak. I had known Carol since the late 1990s, and she happened to live close to me. I showed her the method and how it would work in software. She got excited, and then I got excited. We decided to write about it and see if we could better articulate it for the planning community. We wrote our first article and, on a whim, sent it off to APICS Magazine. Ninety minutes later we had a response, “Can please condense this a bit, it will appear in the July-August 2008 edition.”
We condensed and they published. What we did not know is that it would be the cover article under the title, “Brilliant Vision.” APICS told us the response to article was great. Could we do a webinar? Sure! We did and 250 companies showed up! This is when we knew that we had something. Then McGraw-Hill came to us and asked us if we would like to write the third edition of Orlicky’s Materials Requirements Planning.
Are you kidding? Of course! Most of the rewrite is about conventional MRP, but about quarter of the 562-page book introduces the method that we came to call Demand Driven MRP (DDMRP), and why it is necessary in today’s more complex and volatile environments.
As we were preparing the manuscript, we knew that people, after reading the book, would want to know more about this method. Furthermore, we felt that some might try to bastardize or try to shoehorn it into something it wasn’t. Finally, we knew we had to continue researching and articulating.
We wanted to establish an entity that could plant a flag in the ground, advance the DDMRP method, keep it rooted it practical application and create a global consistent standard. Thus, we founded the Demand Driven Institute in March of 2011 just before the release of the third edition of Orlicky’s Material Requirements Planning.
So, while DDMRP and DDI have deep roots in Theory of Constraints, they are also firmly grounded in the essential elements of traditional MRP. Joe Orlicky’s original tome on MRP—the first edition of Orlicky’s Material Requirements Planning—laid the groundwork for all of the theoretical and practical elements for traditional and conventional MRP. Now, in today’s much different global economy and global supply chains, Demand Driven Institute has taken upon itself the challenges of setting and maintaining the standards that will carry DDMRP (demand driven MRP) well into the future.
Tell us about your experiences with traditional MRP—the good, the bad, and the ugly. Also, let us know if you have tried to implement any of the methods associated with DDMRP. We look forward to hearing from you.