• John Melbye

Season Three, Episode Two

4 Changes of Perspective with Demand Driven Material Requirements Planning

If I had to describe the impact of DDMRP by identifying one overall change required, I would sum it up as a change in our expectations of how precision fits into our very imprecise world.

Material Requirements Planning (MRP) offered a huge improvement from its predecessor. Through MRP, we gained the ability to know precisely how much of all our component parts we would need. And, when we would need them. If we had our lead times right, our bills of materials right, our demand right, our inventory counts right, and we had a method to locate the materials we needed, when we needed them, then we were saved. Because now we would know the exact quantity and timing of bicycle components we would need just by knowing how many bicycles we needed to produce.

But like all things that require a lot of moving parts to line up perfectly, there are problems. When customers aren’t willing to wait, when supplier deliveries are delayed, when one part gets damaged, when equipment breaks, and when there is no room for error; well it doesn’t always turn out perfectly.

So, as we slowly spin into chaos, we have to finally admit that trying to use a tool based on precision and exactness creates a challenge as our world becomes more and more imprecise.

But I like to highlight three other changes.

First, a change to the way we try to improve visibility. Many think visibility means a better forecast. But visibility into seeing our priorities clearly, a visibility that alerts us to problems before they occur, and a visibility to understand whether our actions have the desired effects would also be useful.

We need to accept that even with a perfect forecast, we cannot properly synchronize until we address all of the gaps created by our focus on precision.

Second, a change to the way we make decisions. Traditional MRP expects you to react once a customer order is received and then you react based on the resulting precise situation. But with Traditional MRP, you are either fine or you are really not okay at all. With traditional MRP, you ignore until it’s most likely an emergency. DDMRP has strategic buffers that are part of a process used to determine when purchase orders are triggered. We plug new information into our process and then still react using the same logic. And that logic includes a warning system that gives an indication of how close you are to placing an order and how close you are to having to expedite. It reduces the chaos dramatically.

Third, a change in the way we react to trouble. In traditional MRP, often we don’t know what went wrong. We have a reactionary mentality. The problem has already occurred. With DDMRP, we put the work in at the planning stage. We can be triggered to react when trouble is brewing and there are 6 areas to check. With a warning before a problem occurs, we have a chance to prevent it.

Once you see this real solution, you cannot pretend that you did not see it.

John Melbye

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