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| 1 (888) 259-6666 | [email protected] www.syspro.com/ca DEMAND DRIVEN MRP (DDMRP): THE SECRET TO REDUCING HIDDEN COSTS IN YOUR PROCUREMENT PROCESSES
| 1 (888) 259-6666 | [email protected] www.syspro.com/ca
DEMAND DRIVEN MRP (DDMRP): THE SECRET TO REDUCING HIDDEN COSTS IN YOUR PROCUREMENT PROCESSES
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In today’s competitive market landscape, with a driving emphasis on meeting increased customer demand and improving satisfaction levels, manufacturers must find ways to outperform their competition—while keeping margins intact.
Today’s procurement leaders must keep up-to-date with changing industry standards—while maintaining efficient daily operations and meeting regulatory standards. Minimizing any and all unnecessary expenditures and reducing revenue leakage becomes crucial in the face of higher operational costs, and complex supply chains.
This solution sheet outlines some key areas of procurement processes where hidden costs may exist, and how Demand Driven Material Requirements Planning (DDMRP) can provide procurement teams with a strong foundation for addressing these undetected costs.
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There are several hidden or undetected costs manufacturers face in today’s procurement environment. Some key areas of inefficiencies include:
THE HIDDEN COSTS IN PROCUREMENT
ROGUE PURCHASING: Purchasing processes that are not streamlined. This results in reactive and manual processes, whereby manufacturers spend a lot of time expediting purchases and paying for premiums, as a result of last-minute ordering. Often, manufacturers also end up paying higher prices to suppliers who have to accommodate last-minute orders.
INVENTORY: Manufacturers often struggle with visibility across the supply chain. This lack of visibility renders them unable to understand which operational events will affect supply and demand which, in conjunction with poor purchasing processes, can impact the purchasing department’s ability to bring in the right inventory—at the right time. As a result, manufacturers are vulnerable to carrying too much inventory, along with all of the associated costs. On the other end of the spectrum, manufacturers are sometimes left with too little inventory.
ORDER FULFILLMENT: By having the wrong inventory on hand, together with manual processes, customer demands are not met correctly, or in a timely manner. Often times, the end result is that customers are shorted on their orders. Poor order fulfillment processes results in reduced revenue and higher customer dissatisfaction for manufacturers.
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AN OVERVIEW OF DEMAND DRIVEN MATERIAL REQUIREMENTS PLANNING (DDMRP)
DDMRP (as defined by the Demand Driven Institute) is a multi-echelon demand and supply planning and execution methodology. It was developed in order to mitigate the effects of variability and volatility on manufacturing operations and supply chains, and to promote visibility and velocity. It focuses on a demand-driven approach to supply, rather than the traditional model of pushing inventory using MRP systems.
DDMRP combines elements of MRP, Distribution Requirements Planning (DRP), Lean, Six Sigma, Innovation, and the Theory of Constraints. As such, DDMRP integrates multiple tiers in the supply chain, in order to provide end-to-end integrated planning and execution visibility—across an enterprise and supply chain. The DDMRP methodology includes planning and execution innovations, lead time compression improvements, and execution visibility.
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Demand Driven Material Requirements Planning provides manufacturers with a strong foundation for building efficient procurement processes, and in turn address these hidden costs. With DDMRP, procurement departments can spend more time on strategic procurement requirements:
REDUCE HIDDEN COSTS IN PROCUREMENT WITH DDMRP
Strategic inventory planning: DDMRP provides end-to-end integrated planning and execution visibility by integrating multiple tiers in the supply chain. Procurement leaders can then decide how to best hold inventory and connect products to customer orders. In doing so, procurement teams have a better understanding of variability in demand and supply, customer tolerance, and other necessary resource considerations. Manufacturing businesses can also reduce inventory levels due to having the appropriate visibility and accurate information prior to submitting purchase orders to suppliers.
Flexibility through buffers and dynamic adjustments Manufacturers can set inventory levels by establishing profiles for buffer stock. These buffer profiles can be dynamically adjusted based on a variety of factors, and can alert procurement teams to an inventory-related issue, in real-time.
Demand-driven planning: DDMRP helps procurement leaders prioritize sequences based on the actual stock needs and clear re-supply signals. In doing so, manufacturers are able to compress lead times because they hold the right stock, in the right place, all along the supply chain and improve customer service, as a result of improved fill-rate performance.
Strengthen supplier relationships: DDMRP helps procurement professionals execute the tactical side of their roles—in a more efficient way—so they can be freed up to source better materials and build stronger relationships with suppliers around the world. This often leads to preferred pricing and delivery times, which in turn, helps meet growing customer demands.
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CONCLUSION
DDMRP is experiencing huge growth in in several key industries such as pharma, retail, oil and gas, and heavy industrial markets and many well-known Global 1000 companies are adopting this new methodology.
For procurement leaders, DDMRP is the new solution for calming the chaos in purchasing, inventory, manufacturing, and order fulfillment including dealing with complex and global supply chains, and most importantly, meeting increasing customer demands.
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ABOUT SYSPRO
SYSPRO software is an award-winning, best-of-breed Enterprise Resource Planning (ERP) software solution for cost-effective on-premise and cloud-based utilization.
Industry analysts rank SYSPRO software among the finest, best-in-class enterprise-resource planning solutions in the world. SYSPRO software’s powerful features, simplicity of use, scalability, information visibility, analytic/reporting capabilities, business process and rapid deployment methodology are unmatched in its sector.
SYSPRO, formed in 1978, has earned the trust of thousands of companies globally. SYSPRO’s ability to grow with its customers and its adherence to developing technology, based on the needs of customers, is why SYSPRO enjoys one of the highest customer retention rates in the industry.
If you want to learn how SYSPRO can help improve managing material requirements to meet your procurement demands, contact us today at [email protected] or +1 (888) 259-6666.
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