As supply chain professionals, we’re trained to anticipate our company’s needs. That’s a good thing. Unfortunately, our training can also lead to some unfortunate habits.
We place manufacturing orders too early; We place supply orders too far in advance. This causes us to close ourselves off to market realities, such as unexpected changes in demand.
MRP systems exacerbate this problem as they require us to firm up orders early and don’t provide the visibility we need to adapt.
For example, let’s say I’m a buyer/planner in charge of purchased items several BOM levels deep. I base my procurement decisions on time-phased net requirements – without knowing whether the items are for firm sales orders, forecasts, or safety stocks.
Because these requirements are calculated very precisely by the ERP system, they are official system figures. They inspire confidence.
Yet, I’m in the hot seat every time there’s a shortage.
Sure, there are things I can do. For instance, I can ask my supplier for a shorter lead time to fill an unforeseen need. But that can get complicated. And, it’s always time consuming. Clearly, it’s in my best interest to place orders in advance and to maximize my quantities.
As buyer/planners, we need to understand our operating model and the actual lead times for the items we manage. Then we need a control model and tools to tighten and monitor the replenishment loop, so we’re ordering just what we need, when we need it. In short, we need “controlled procrastination.”
Demand Driven Technologies’ Demand Driven Material Requirements (DDMRP) solution is designed to prevent us from making decisions too early. This is accomplished through the strategic placement of decoupling buffers that are linked to true market demand signals. Easy to understand dashboards gives us visibility into our inventory position and tell us what we need to order. Because we’re using true market demand signals, these buffers dynamically adjust as demand goes up and down. If the change is more sudden, we have the visibility we need to adapt.