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Does DDMRP Apply to SMEs?

By Bernard Milian

Agility is in the genes of SMEs 

Small and medium-sized enterprises, or SMEs, are an essential component of the industrial and commercial dynamism of the global economy. The first characteristic of successful SMEs is agility: they rely on tight teams, interactions between industrial, technical, and commercial functions are permanent, and the silos are less compartmentalized than in many large groups. 

It is not surprising, therefore, that from the early days of the DDMRP’s dissemination, some small and medium enterprises have been pioneers.  

One example is the company Peugeot Saveurs, a French manufacturer of spice mills sold worldwide. It is a company with about 150 employees. Following the training of 3 members of the management committee in May 2015, the decision was immediately taken to implement DDMRP with Replenishment+, for a go-live within 3 months. This is the speed at which an SME is able to go, whereas embarking a large group or even a single entity of a large group can sometimes take several years.

Go straight to the point

However, for an SME to make the leap, the interest must be clear to key decision-makers. DDMRP, DDOM, DDS&OP, DDAE, complex adaptive systems, cash velocity or adaptive S&OP are jargon that does not hit the nail on the head. Regardless of their curiosity for new concepts, the management team of an SME is focused on its customers and suppliers, its product and service offering, its current operational concerns. It is looking for concrete, pragmatic, efficient, and, if possible, quick-to-implement solutions. 

The capacity for investment and attention is constrained, the right priorities must be chosen. Many of these companies have a strong culture of customer service, but a limited culture regarding Supply Chain management practices. They have often been overwhelmed by the implementation of their ERP, which has monopolized many resources without necessarily providing the expected service. Trusting in a new miracle formula with a nice SD-labeled software is not self-evident. 

On the other hand, pilot the activity by the real demand—no problem, we understand, that’s what we try to do from day to day! 

Fragile planning and execution

What are the problems that the Demand Driven approach can solve in a SME context? 

For many SMEs, especially industrial ones, it is not uncommon to find that planning intelligence—order management, manufacturing, procurement—is actually in the heads of a few key people. They know what is possible and what is not. Over the years, they have developed an in-house logic for planning, backed up by Access databases and Excel files, with information extracted from the ERP and reworked. It works, sometimes hard, but it’s fragile.  

Often a culture of everyday heroes has also developed. The teams are focused on serving the customer at all costs, with friendly pressure from a very present sales team (we have known sales managers who go into the workshop to manage priorities, right? …), and after a while we are in continuous crisis and emergency management in firefighter mode. 

When the environment is increasingly uncertain, as is the case for many companies, especially with crises exacerbated by Covid-19 or Brexit, there is a strong risk that the company will find itself in complicated situations and not have the right stocks at the right time.  

A favourable breeding ground 

Lean has gradually made its nest in most small and medium-sized industrial companies, particularly in terms of quality, organization, structuring and simplification of processes. 5S, short interval animation, problem solving, facilitation of continuous improvement have become anchored in daily practice. 

However, the pull flow, in the form of kanban variants, is still in the minority for a variety of reasons, whether it’s lack of knowledge or confidence to implement these practices or the inability of the company’s ERP system to easily support them. Most SMEs try to plan in a conventional way, based on forecasts, more or less smooth and fixed PDPs, material requirements calculations and safety stocks.   

As for the practices of the theory of constraints, they are very much in the minority because very little is known in this segment of the industry. 

However, because of their dynamism and their permanent need to adapt, SMEs are eager for new practices and there is less resistance to change than in large structures. The success of a DDMRP implementation is therefore within reach for those who are committed to it. 

What are the prerequisites? 

“DDMRP sounds good, but we probably don’t have the necessary maturity, we first need to master our MRP and improve the reliability of our forecasts!” 

We have heard this questioning very often. However, there are many examples that demonstrate that:

  • Multiple SMBs have successfully implemented DDMRP without going through the MRP box—moving directly from an Excel supported in-house logic to a DDMRP process. 
  • Mastering an adapted MRP 2 process (ICP / MPS / Needs Calculation) and improving the reliability of forecasts is for many a never-ending quest in which a lot of resources are spent for frustrating results. 
  • Implementing DDMRP, adapting and mastering the model for your business, and starting to reap the benefits takes just a few months, and is much simpler than mastering MRP. What’s more, the visibility provided to the teams allows them to immediately start the continuous improvement process. 

Let’s be clear: no, you don’t need a mature MRP to embark on the road to the DDMRP. On the contrary! 

If you have already set up kanbans or order points to manage your stocks, you will be able to facilitate their management thanks to the DDMRP dynamic buffers mechanism, which will be very natural to adopt.  

Why and how SMEs should set up DDMRP? 

The management of a Demand Driven project is now well established, and can be done remotely without any problem within the current health constraints: 

  • Evaluation of the existing situation, preparation of the model through simulations, evaluation of the potential 
  • Training of teams, with practical and playful supports, to start quickly and with full knowledge of the facts. There are training courses adapted for all audiences – planners, production supervisors, suppliers, management teams – to get up and running quickly and support change
  • Interfacing software solutions with the ERP (often in just a few days) 
  • Participatory model design workshop 
  • Experimentation in “sandbox” mode to gain confidence without risk 
  • Go live 
  • Post-go live improvement phase 

In just 3 to 6 months you will be able to benefit from a simple and efficient process in which:  

  • Supply or manufacturing requirements are based on the order book and no longer driven by forecasts
  • Stocks are constantly adapted to the evolution of demand
  • Stock health is visible and the same priorities are shared across the company
  • Teams are less about emergency management and more about substantive improvement

The many SMEs that have committed themselves to the approach testify. Do not hesitate to meet them to make your opinion: 

  • The performance indicators show a clear improvement within 3 to 4 months after implementation: fewer outages, improved customer product availability and better stock distribution.  
  • Our web-based software solutions, although functionally very rich and complete, are simple and intuitive to use: planners and suppliers give us very positive feedback. 
  • The implementation project is relatively short – on average 3 to 7 months with the upstream and downstream phases depending on the defined perimeter or sector of activity. 
  • Planning and procurement teams save time by managing by exception. Teams can focus on model improvement, customer relations, supplier follow-up, overstock management… 
  • The cost of a project is very affordable, and pays for itself within a few months. 

DD Tech teams are at your service for any information request! 

If you are a SMB looking for a DDMRP compliant ERP cloud solution do not hesitate to explore our Replenishment+ solution for NetSuite. 

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