Demand Driven MRP: Abundantly Lean Demand Driven MRP

32 Pages·2013·1.44 MB·English

by  Michael P. Lilly

DDeemmaanndd DDrriivveenn MMRRPP:: AAbbuunnddaannttllyy LLeeaann
Mike Lilly, CDDP
Delivery Performance Specialist
All materials and content © copyright 2012 Demand Driven
Technologies, Constraints Management Group, LLC and
the Demand Driven Institute, LLC
The Big Squeeze
(cid:1)
On one hand, we are pressured to NOT run out of stocked
items. Running out leads to:
(cid:1)
Expediting costs
(cid:1)
Overtime
(cid:1)
Missed shipments
(cid:1)(cid:1)
LLoosstt ssaalleess
(cid:1)
On the other hand, we are pressured to NOT have too
much inventory. Having too much inventory leads to:
(cid:1)
Running out of cash
(cid:1)
Delaying or preventing investment in other assets that will help the
company grow
2 Copyright © 2012 Synergy Resources. All rights reserved.
Stuck in the Middle with You
We need more
inventory. We
We have too
missed sales
much inventory.
because of stock
We need to free
outs!
up working
capital!
Is this a solvable problem?
(cid:1)
Is there a way to resolve this conflict?
(cid:1)
WITHOUT inducing the pendulum effect
(cid:1)
Is this just the way things are?
(cid:1)
It’s always been this way
4 Copyright © 2012 Synergy Resources. All rights reserved.
Why are things the way they are?
(cid:1)
An unanswerable question?
(cid:1)
Like “Why is the sky blue, Daddy?”
(cid:1)
This conflict is a result of the systems that have been in
use since the 1960’s
(cid:1)(cid:1)
TThhaatt’’ss wwhhyy iitt sseeeemmss ttoo hhaavvee bbeeeenn tthhiiss wwaayy ffoorreevveerr
(cid:1)
MRP and, by extension, ERP
5 Copyright © 2012 Synergy Resources. All rights reserved.
Key assumptions of MRP
(cid:1)
Forecasting
(cid:1)
Assumes that you can predict what items customers will buy and
when they will buy them
(cid:1)
And that we should buy and produce based on these predictions
(cid:1)
Standard lead times
(cid:1)
Assumes that the time to acquire purchased items is a constant and
that the time to manufacture an item from its components is a
constant
(cid:1)
Safety stock
(cid:1)
Assumes that you can compensate for the inadequacies of MRP with
a “fudge factor” that is constant
6 Copyright © 2012 Synergy Resources. All rights reserved.
Reality
(cid:1)
Forecasting
(cid:1)
Customers always buy more of some items than was forecast and
less of others
(cid:1)
Customers always buy at different times than was forecast
(cid:1)
except when the forecast period is quite large (a year?) and too big for
ddrriivviinngg pprroodduuccttiioonn aaccttiioonnss
(cid:1)
Standard lead times
(cid:1)
Time needed to purchase and receive items is variable
(cid:1)
Time needed to make items is variable
(cid:1)
Safety stock
(cid:1)
If it worked, we’d never run out nor ever have too much
7 Copyright © 2012 Synergy Resources. All rights reserved.
The net effect of three false assumptions
(cid:1)
Driving production and purchasing based on forecast leads
to these effects:
(cid:1)
Running out, which leads to:
(cid:1)
Expediting costs
(cid:1)(cid:1)
OOvveerrttiimmee
(cid:1)
Missed shipments
(cid:1)
Lost sales
(cid:1)
Having too much inventory which, leads to:
(cid:1)
Running out of cash
(cid:1)
Delaying or preventing investment in other assets that will help the
company grow
(cid:1)
We never have JUST ENOUGH
8 Copyright © 2012 Synergy Resources. All rights reserved.
MRP is a fear-based approach
(cid:1)
Designed to prevent the state of not having enough
(cid:1)
Using time-phased netting techniques
(cid:1)
begins with quantity we have on hand of an item
(cid:1)
adds in existing supply orders
(cid:1)(cid:1)
ssuubbttrraaccttss oouutt eexxiissttiinngg aanndd pprreeddiicctteedd ddeemmaanndd
(cid:1)
predicts when the future on hand balance will dip below zero
(cid:1)
recommends orders to increase supply
(cid:1)
to prevent the future on hand balance from going
negative.
(cid:1)
We fear that if we do not predict future needs and act to
meet them NOW, that we will run out
9 Copyright © 2012 Synergy Resources. All rights reserved.
In the 1960’s
(cid:1)
The biggest fear of material planners was kitting a complex
assembly and finding out they were short even a single
part.
(cid:1)
If you don’t have ALL the parts, you can’t make it!
(cid:1)(cid:1)
TThhiiss ffeeaarr wwaass ssoo ddeeeepp bbeeccaauussee ssuucchh sshhoorrttaaggeess wweerree nnoott
an uncommon occurrence.
(cid:1)
Material planners routinely stashed expensive parts in their desk
drawers “just in case”.
10 Copyright © 2012 Synergy Resources. All rights reserved.