DDMRP - Demand Driven Material Requirements Planning

417 Pages·2016·14.02 MB·English

by  Carol Ptak

Demand Driven Material Requirements Planning
(DDMRP)
Demand Driven Material Requirements
Planning (DDMRP)
Carol Ptak and Chad Smith
INDUSTRIAL PRESS, INC.
Industrial Press, Inc.
32 Haviland Street, Suite 3
South Norwalk, Connecticut 06854
Tel: [phone], Toll-Free: 888-528-7852
E-mail: [email protected]
Library of Congress Cataloging-in-Publication Data
Names: Ptak, Carol A., author. | Smith, Chad, 1971 – author.
Title: Demand driven material requirements planning (DDMRP) / Carol Ptak and Chad Smith.
Description: South Norwalk, Connecticut: Industrial Press, Inc., 2016. | Includes
bibliographical references and index.
Identifiers: LCCN 2016023395 (print) | LCCN 2016026863 (ebook) | ISBN 9780831135980
(hardcover: alk. paper) | ISBN 9780831193843 (eBook) | ISBN 9780831193850 (Epub) |
ISBN 9780831193867 (EMobi)
Subjects: LCSH: Material requirements planning. | Manufacturing resource planning. |
Production control—Data processing. | Inventory control—Data processing.
Classification: LCC TS161 .P789 2016 (print) | LCC TS161 (ebook) | DDC 658.5/03—dc23
LC record available at https://lccn.loc.gov/2016023395
ISBN print: 978-0-8311-3598-0
ISBN ePUB: 978-0-8311-9385-0
ISBN eMOBI: 978-0-8311-9386-7
ISBN ePDF: 978-0-8311-9384-3
Copyright © 2016 by Industrial Press, Inc.
All rights reserved.
This book, or any parts thereof, with the exception of those figures in the public domain, may
not be reproduced, stored in a retrieval system, or transmitted in any form without the
permission of the copyright holders.
Sponsoring Editor: Judy Bass
Copy Editor: Judy Duguid
Compositor: Patricia Wallenburg, TypeWriting
Cover Designer: Janet Romano Murray
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The Demand Driven Institute logo is a trademark of the Demand Driven Institute. All rights
reserved. The Certified Demand Driven Planner logo is a trademark of the International Supply
Chain Education Alliance (ISCEA). All rights reserved.
Contents
Foreword
Definitions in This Book
Introduction
About the Authors
Acknowledgments
PART 1 PERSPECTIVE
CHAPTER 1
Planning in the New Normal
The Material Requirements Planning Revolution
Evidence of a Problem
Return on Asset Performance Degradation
Work-Around Proliferation
The Inventory Bimodal Distribution
The New Normal
Summary
CHAPTER 2
The Importance of Flow
Plossl’s First Law
Establishing Flow as the Foundation
Relevant Information and Materials
The Bullwhip Effect
Summary
CHAPTER 3
Material Requirements Planning in the New Normal
What Is MRP?
Distortions to Relevant Information
Demand Signal Input
Nervousness
The Weekly Bucket
Flattening the Bill of Material
Distortions to Relevant Materials
Common Cause Variation
Delay Accumulation
Amplifying the Distortions to Relevant Information and Materials—
Batching Policies
Summary
CHAPTER 4
Unlocking a Solution—The Power of Decoupling
Decoupling
Decoupling Point Buffers
Summary
PART 2 BECOMING DEMAND DRIVEN
CHAPTER 5
Supply Order Generation and Execution for the New Normal
MRP Versus Lean—What Can We Learn?
Dependence Versus Independence
Supply Order Generation (Planning Versus Execution)
Lean and Technology
Demand Driven Material Requirements Planning
The History of “Demand Driven”
Position, Protect, and Pull
Summary
CHAPTER 6
Strategic Inventory Positioning
Positioning Factors
Customer Tolerance Time
Market Potential Lead Time
Sales Order Visibility Horizon
External Variability
Inventory Leverage and Flexibility
Critical Operation Protection
Applying the Positioning Criteria
A New Form of Lead Time
Advanced Inventory Positioning Considerations
Distribution Positioning Considerations
Summary
CHAPTER 7
Strategic Buffers
Inventory: Asset or Liability?
Introducing Decoupling Point Buffers
The Green Zone
The Yellow Zone
The Red Zone
Buffer Profiles
Factor 1: Item Type
Factor 2: Lead Time
Factor 3: Variability
Individual Part Attributes
Part Average Daily Usage
Part Lead Time
Part Minimum Order Quantity
Part Location
Calculating Replenished Part Buffer Levels and Zones
The Green Zone
The Yellow Zone
The Red Zone
Continuing with Company ABC
Iterations
Calculating Replenished Override Buffers
Calculating Min-Max Buffers
Summary
CHAPTER 8
Buffer Adjustments
Recalculated Adjustments
Planned Adjustment Factors
Demand Adjustment Factor
Zone Adjustment Factor
Lead Time Adjustment Factor
Summary
CHAPTER 9
Demand Driven Planning
The Shift to Actual Demand
The Net Flow Equation
Qualifying Order Spikes
Supply Order Generation Based on Net Flow Position
Simulating DDMRP Supply Order Generation
Calculating Average On-Hand Inventory
Average On-Hand Range
Average On-Hand Target
Average Open Supply Orders
Decoupled Explosion
Hybrid Model Supply Order Generation
Prioritized Share Supply Order Consideration
Discount Optimization
Freight Optimization
Coverage Optimization
Min-Max Supply Order Generation
Completing the Company ABC Example
Summary
CHAPTER 10
Demand Driven Execution
Buffer Status Alerts
Challenging Priority by Due Date
Planning Versus Execution Display
Current On-Hand Alert
Projected On-Hand Alert
Synchronization Alerts
Material Synchronization Alerts
Lead Time Alert
Summary
CHAPTER 11
DDMRP Impacts on the Operational Environment
DDMRP Strategic Buffer Criteria
The Decoupling Test
The Bidirectional Benefit Test
The Order Independence Test
The Primary Planning Mechanism Test
The Relative Priority Test
The Dynamic Adjustment Test
DDMRP Versus Safety Stock and Order Point
Safety Stock and the Buffer Criteria
Order Point and the Buffer Criteria
DDMRP Impacts on Scheduling
DDMRP and Master Production Scheduling Assumptions
DDMRP Shop Floor Scheduling Implications
Finite Scheduling with DDMRP?
Additional Scheduling Sequence Impacts
DDMRP and WIP Priority Management
Summary
CHAPTER 12
DDMRP Metrics and Analytics
Measuring Relevant Information (Signal Integrity)
Measuring Decoupling Point Integrity
Outlying Event Reports
Measuring Velocity
Driving Improvement in DDMRP
Summary
CHAPTER 13
The Demand Driven Organization
The Demand Driven Adaptive System
Demand Driven Sales and Operations Planning
Conventional Sales and Operations Planning
The Five Steps of Demand Driven Sales and Operations Planning
1. Strategic Business Management Direction and Review
2. Integrated Reconciliation
3. Managing the Portfolio and New Activities
4. Managing Demand
5. Managing Supply
Demand Driven Sales and Operations Planning Projections
Working Capital
Space
Capacity
Projected Order Frequency
Summary
Contribution of Dick Ling
CHAPTER 14
Implications for Technology
Operations and Information Technology—Two Ships Diverging in the
Night?
DDMRP Software Compliance Criteria
PART 3 APPENDICES
APPENDIX A
An MRP Example