By Mike Hart
Demand Driven MRP (DDMRP) is a revolutionary planning methodology that solves the inherent flaws of traditional forecast-driven MRP. DDMRP is a major focus of this blog because it is a game changer for small business and should be given serious consideration when selecting an ERP software package.
The Demand Driven Institute is leading the revolution
The DDMRP methodology evolved in the early 2000’s and was formally introduced in 2011 by Carol Ptak and Chad Smith, who have written numerous books and white papers on the subject. Their Demand Driven Institute is an organization dedicated to promoting demand driven methods throughout the world with workshops and certification programs for consultants and compliant software packages. The institute’s website includes numerous case studies of dramatic results achieved with DDMRP.
Planning is the name of the game in manufacturing. Your ability to ship orders quickly and reliably with efficient utilization of inventory is totally dependent on your planning methodology. Traditional MRP is severely flawed, which is why so many companies fail to get good results with ERP software.
What is Demand Driven MRP (DDMRP)?
DDMRP is based on the principle that future demand cannot be accurately predicted and that acting on forecast demand creates an unstable, error-prone, and inefficient master schedule that is in a state of constant adjustment. Accordingly, DDMRP acts only on current demand and replaces forecasts with strategic stocking.
Actual demand can safely be actioned on
Actual demand originating from customer orders can safely be action on with jobs and purchase orders that are short-term and firmly set with minimal need for the quantity changes, date changes, cancellations, and specifications changes that are the norm with forecast-driven systems.
Forecasts are replaced with strategic stocking
Instead of trying to predict demand with forecasts, DDMRP uses strategic stocking whereby key sell items, subassemblies, and materials are planned for stocking to eliminate lead time contribution and reduce time to shipment. Buffer stock is maintained with demand-driven trigger points that replenish stock at demand-driven intervals with minimal shortages and over-stocking.
Overall inventory is almost always reduced
Even when strategic stocking is applied to a great many items, overall inventory is almost always reduced because it is utilized far more efficiently than with traditional planning methods.
DDMRP is much easier and far more effective
With DDMRP, almost all planning activities are devoted to item settings. With traditional MRP, planning not only involves item settings, it also includes forecast maintenance and constant rescheduling of jobs and purchase orders. By contrast, DDMRP is much easier to use and far more effective at boosting the efficiency of your manufacturing system.
My company has been a pioneer in demand driven planning
My company has been a pioneer in demand-driven planning methods for over a decade. Our DBA Manufacturing software package includes what we call Time to Shipment MRP, which is based on the same planning principles as DDMRP, including demand-driven jobs and purchase orders and strategic stocking.
Our focus is on reducing time to shipment
As its name suggests, Time to Shipment MRP is focused on reducing time to shipment, which is essential for staying competitive in the Amazon age. Our software reduces time to shipment using a combination of item lead time allocations and strategic stocking order policies. Time to Shipment MRP is optimized for smaller companies and brings the Demand Driven MRP revolution to small business.
Overview Video:
Related Post:
The MRP Catch-22 for Small Business
Mike Hart is the co-founder of DBA Software Inc., a leading provider of manufacturing software for small business.
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