Standing on the ShouldersStanding on the Shouldersof Giantsof Giants

Carol A. Ptak

“If I have seen a little further it is by standing on the shoulders of Giants."Sir Isaac Newton, 1676.

Full presentation available at:http://www.tocico.org/?page=upgrade_workshop

Full article and presentation available at:http://www.tocico.org/?page=upgrade_workshop

Standing on the ShouldersStanding on the Shouldersof Giants application toof Giants application tomaterial synchronizationmaterial synchronization

Carol A. Ptak

“If I have seen a little further it is by standing on the shoulders of Giants."Sir Isaac Newton, 1676.

12

1975: First Significant Explanation of MRP1975: First Significant Explanation of MRP

“As this book goes into print, there are some 700manufacturing companies or plants that haveimplemented, or are committed to implementing,MRP systems. Material requirements planning hasbecome a new way of life in production andinventory management, displacing older methods ingeneral and statistical inventory control inparticular. I, for one, have no doubt whatever that itwill be the way of life in the future.”

Joe Orlicky – the Giant

13

Area not addressedArea not addressed

� Forecast error on the rise� Volatility in supply and demand� Legacy planning tactics and tools

14

Historical perspectiveHistorical perspective

1920’s: Inventory Mgmt

1961: BOMP

1965: MRP

1972: Closed-Loop MRP

1980: MRPII

1990: ERP1996: APS

DDMRP Sneak Peek

15

TheThe ““New NormalNew Normal””► Global sourcing and demand► Shortened product life cycles► Shortened customer tolerance time► More product complexity and/or

customization► Pressure for leaner inventories► Inaccurate forecasts► More product variety► Long lead time parts/components

Worldwide there is more complexplanning and supply scenariosthan ever – the past is NOT an

predictor for the future

15

View todayView today

External Ordersfor Components

MasterProductionSchedule

IndependentDemand

Forecasts

InventoryRecord File MRP SYSTEM Product

Structure file

ManufacturingExecutionSystem

MRP at the Heart of ManufacturingMRP

MRP

MRPMRP

MRP

MRP

MRPMRP

MRP

MRP

MRP

Today’s Complex Supply Chains

What needs to change with MRP?What needs to change with MRP?Is MRP still relevant?Is MRP still relevant?

� Unacceptable inventoryperformance

� Unacceptable service levelperformance

� High expedite related waste

Conceptual DifferenceConceptual Difference

� The definition of “demand”� Lead time calculations� Relative priority management� Stock management techniques� Integrated execution tools

MRP not significantly evolved?MRP not significantly evolved?

� Software not necessary or sufficient� Process capability focus� MRP Lost Generation� Software Community Inertia

Pull (Lean/DBR) versus MRP?Pull (Lean/DBR) versus MRP?Protect and

ImproveFLOW

Primary Objective

Align efforts andresources as close

as possible withactual demand

Visibility to the totalrequirements and

status picture acrossthe enterprise

Prerequisite Objective Prerequisite Objective

(Lean Side) (MRP Side)

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Too Little =stock-outs,

back orders,expedites &

missed sales

Too much =cash, capacityand space tiedup in inventory

Asset

Waste

Amount of inventory

InventoryInventory –– Asset or Waste?Asset or Waste?

22

Asset

WasteToo Little =stock-outs,

back orders,expedites &

missed sales

Too much =cash, capacityand space tiedup in inventory

Unacceptable Inventory PerformanceUnacceptable Service Level Performance

High Expedite Related Wastes

Oscillation

23

Demand Driven Material Requirements PlanningStrategicInventory

Positioning

1

Buffer Profilesand Levels

2

DynamicAdjustments

3

DemandDriven

Planning

4

Visible andCollaborative

Execution

5Modeling/Re-modeling the Environment Plan Execute

The Five Components of DDMRPThe Five Components of DDMRP

24

Wrong AssumptionWrong Assumption

Where?(Position)

BEFOREHow Much?

(Quantity)When?

(Timing)

StrategicInventory

Positioning

1

Buffer Profilesand Levels

2

DynamicAdjustments

3

DemandDriven

Planning

4

Visible andCollaborative

Execution

5

StrategicInventory

Positioning

1

StrategicInventory

Positioning

1

Buffer Profilesand Levels

2

Buffer Profilesand Levels

2

DynamicAdjustments

3

DynamicAdjustments

3

DemandDriven

Planning

4

DemandDriven

Planning

4

Visible andCollaborative

Execution

5

Visible andCollaborative

Execution

5

25

AnsweringAnswering ““Where?Where?””1. Customer Tolerance Time2. Market Potential Lead Time3. Supply and Demand Variability4. Inventory Flexibility and Matrix BOM5. Supply and Distribution Net Structure6. Critical Resource Considerations

StrategicInventory

Positioning

1

Buffer Profilesand Levels

2

DynamicAdjustments

3

DemandDriven

Planning

4

Visible andCollaborative

Execution

5

StrategicInventory

Positioning

1

StrategicInventory

Positioning

1

Buffer Profilesand Levels

2

Buffer Profilesand Levels

2

DynamicAdjustments

3

DynamicAdjustments

3

DemandDriven

Planning

4

DemandDriven

Planning

4

Visible andCollaborative

Execution

5

Visible andCollaborative

Execution

5

26

Failure to properly positionFailure to properly positioninventory is a huge source ofinventory is a huge source ofwaste for mostwaste for mostmanufacturing and supplymanufacturing and supplychain companies.chain companies.

From Push and Promoteto

Position and Pull

StrategicInventory

Positioning

1

Buffer Profilesand Levels

2

DynamicAdjustments

3

DemandDriven

Planning

4

Visible andCollaborative

Execution

5

StrategicInventory

Positioning

1

StrategicInventory

Positioning

1

Buffer Profilesand Levels

2

Buffer Profilesand Levels

2

DynamicAdjustments

3

DynamicAdjustments

3

DemandDriven

Planning

4

DemandDriven

Planning

4

Visible andCollaborative

Execution

5

Visible andCollaborative

Execution

5

27

The Power of DDMRPThe Power of DDMRP

Asset

Waste

Amount of inventory

Stock-outs,back orders,missed sales

Too much,cash, capacityand space tiedup in inventory

ALERT! Rebuild OK Too MuchStock Out

Stock-outs reduced by over 66%!

0

100

200

300

400

500

600

700

Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Sep'09A

$Milli

ons

Longview Inv Longview TR

0

100

200

300

400

500

600

700

Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Sep

$Milli

ons

Houston Inv Houston TR

High InventoriesShortagesMassive Expedites

Low InventoriesHigh ServiceFewer Expedites