By Jakes Mantle, Solutions Director at SYSPRO Australasia
The famous Benjamin Franklin quote ‘by failing to prepare, you are preparing to fail’ has been used many times over. As the ripples from 2020’s global events are still being felt throughout the manufacturing industry, this quote seems to add more weight to the current economic environment.
Many manufacturers have adapted well but now more than ever, it is essential for manufacturers to manage their supply chain, plan to reduce waste and enhance resources.
It is during challenging periods such as these that Demand Driven Material Requirements Planning (DDMRP) can really help a manufacturing business be prepared and take control of its inventory.
DDMRP is an operational supply planning and scheduling methodology. It takes much of the manual work out of planning and execution by using advanced supply chain management software to compress lead times and enhance visibility.
It combines Lean’s focus on reducing waste, pull vs. push processes, and the Theory of Constraints to become a new set of demand-driven planning tactics which enable smarter decision-making across a business and the supply chain.
A key feature of DDMRP is the strategic positioning and sizing of decoupling buffer stocks to manage customer lead times while reducing the impact of normal variability and improving overall flow.
Decoupling stocks is like having a safe but not excess stock level so that the inventory associated with one stage of production does not slow down other parts of the manufacturing process.
Taking control to the next level
Whether you manufacture consumer products, food and beverage or even aerospace parts, DDMRP can help any manufacturing industry that creates made-to-order items. It is important to note that DDMRP is not the same as MRP, MRP II or Enterprise Resource Planning (ERP). DDMRP is a more advanced way of undertaking material planning.
Think of it as being another level up. By avoiding production errors, delivery delays and cost overruns in labour and transportation, it helps reduce the risk of reputational damage and impacting your bottom line.
But how do other materials planning options differ? ERP is a process used by companies to manage and integrate their businesses’ critical parts. Many ERP software applications are essential to companies because they help them implement resource planning by combining all processes needed to run their companies with a single system.
An ERP system can also integrate planning, purchasing inventory, sales, operations, finance, human resources, and more.
Unlike the demand-driven aspect of DDMRP, MRP is a production planning, scheduling, and inventory control system used to manage manufacturing processes and tends to include master production planning, bill of materials and inventory tracking.
While MRP II is a computer-based system that can create detailed production schedules, using real-time data to coordinate the arrival of component materials with a machine and labour availability.
Like MRP, it includes master production scheduling, bill of materials and inventory tracking but it also involves machine capacity scheduling, demand forecasting, quality assurance and general accounting.
Having demand-driven visibility helps manufacturers to meet customer demand through business efficiencies. It helps manufacturers be informed about their strategic inventory position as DDMRP is a more advanced way of undertaking material planning.
It allows you to take your stock control by enabling manufacturers to move inventory where needed and enable them to have sufficient stock to cater for inefficient processes.
Five elements of DDMRP
There are five components of DDMRP that can address supply chain process challenges and enhance the supply chain strategy:
- It helps ensure your inventory is in ‘the right place at the right time’ by providing visibility of where in your supply chain you should hold your stock for maximum performance. For example, what turnaround time do you need to consider giving your customers.
- Allowing you to look at buffer profiles and stock levels by assessing the stock you need to have, volume you need and their variability.
- It provides the ability to adjust stock levels dynamically by looking at trends from a business perspective, sales, market trends and seasonality.
- Using demand-driven planning to create resupply signals to ensure the correct stock supply is prioritised based on the actual need.
- Using DDMRP to gain benefits such as real-time access to your inventory position, improvements in customer service, reduction in lead times and, most important, reduce costs, as supply chain bottlenecks are removed.
As manufacturing industries continue to navigate complex and challenging environments, having a visual understanding of stock at a niche level helps avoid bottlenecks and manage supply chain problems.
DDMRP has the potential to be a game-changer in supply chain planning as the software can perform well in planning at finite capacity under uncertainty and will offer a competitive advantage.
As manufacturers seek to remain profitable while finding new ways to compete successfully on global and local scale, many have found that a demand-driven model is an answer.
However, the execution of a demand-driven model requires a software system that supports and facilitates such a model.
There are several ERP software options that provide the necessary attributes required, but the move to a “lean” and demand-driven manufacturing environment requires a re-think of business processes and use of all available assets.
It is necessary to ensure that greater efficiency and control are applied over methods to streamline.