As a supply chain manager or executive, do you find yourself preparing for your next cross-functional or S&OP meeting by finding all the ways you can point out that many of the challenges you and your team are facing are due to the errors in the latest forecasts with which you were supplied?

Forecast error versus flow

If you’re a supply chain manager, forecasting isn’t really your responsibility.

 

So, why do you find yourself spending so much time thinking about it?

 

Probably you’re thinking about it because, even though forecasting isn’t in your realm of responsibility, it remains at the core of so many of the problems you and your team face day-in and day-out.

 

Your traditional materials requirements planning (MRP) system has dutifully taken the forecast data, blown through your bills of materials (BOMs) to figure out what you need to make and buy—and when you need to make it or buy it. Your DRP (distribution requirements planning) system has done its job, telling you when you should supply what specific quantities across your distribution network.

 

The problem—as always—is that almost nothing is going according to plan.

 

Worse! It is very difficult to figure out what your firefighting priorities should be.

 

And, when you finally set your action priorities, there’s almost always someone from some other department—like finance, sales management, production planning—telling you why they disagree with your priorities, and what they think you should be doing—right now!

 

The good news!

First of all, we all know that forecasts are always wrong.

 

So, let’s agree that whatever system you’re using shouldn’t be putting you into a position 1) second-guess the action plans it has given to you, or 2) the forecasts upon which the action plans are based—since you can do absolutely nothing about them.

 

To the rescue comes DDMRP (Demand Driven Material Requirements Planning) as articulated by the Demand Driven Institute.

 

By applying DDMRP, along with the DDOM (Demand Driven Operating Model) you can spend your time doing what you were hired to do as a supply chain manager or executive.

What were you hired to do?

 

Regardless of the (perhaps) ill-conceived metrics by which you may be “officially” measured, you were hired to promote and protect FLOW so that your customers’ actual demand can be satisfied.

 

DDMRP simplifies your job by telling you at a glance which buffers (i.e., stock buffers, time buffers and/or capacity buffers) are in the greatest danger of failing at your goal of promoting and protecting flow. (You won’t get rid of forecasts—or the errors in your forecasts. But, you will learn to use them in an entirely new and more effective way.)

 

How does DDMRP make this so simple?

 

By giving you the information you need in a very simple format: a color and a number.

 

The color will be RED, YELLOW or GREEN. If the color is RED, you know that buffer need immediate attention. It is in jeopardy of failing to protect FLOW effectively. If it is YELLOW, you might need to check on things, but not until everything in RED has been addressed. If the color is GREEN, you’re good.

 

The number will be stated as a percent and represents the percent of buffer remaining. The lower the number, the higher the relative urgency of action to protect FLOW.

 

What is even better is that everyone involved in sales, operations and (even) finance—when properly trained—will fully agree on these priorities for action. No more in-fighting, fire-fighting, or finger-pointing.

 

So, start focusing on the really important thing! Focus on PROMOTING and PROTECTING FLOW.

 

It’s time to get on-board with DDMRP and DDOM.

 

Don’t wait! Your competition is already looking into this new, highly-effective approach.

 

If you have questions, leave your comments below, or contact us directly, if you prefer.

 

 

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