Page 406 - Orlicky's Material Requirements Planning

C HAP TE R 22

Blueprint for the Future:

Demand-Driven MRP Logic

Demand-driven manufacturing is a manufacturing strategy of dramatic lead-time com-
pression and the alignment of efforts to respond to market demands. This includes care-
ful synchronization of planning, scheduling, and execution with consumption. It was
coined by PeopleSoft in 2002 and embraced later by several research companies. It is
important to point out that demand-driven manufacturing is not synonymous with
make-to-order manufacturing. Demand driven manufacturing requires a fundamental
shift from the centrality of inventory to the centrality of demand. To be successful, a com-
pany must be able to sense and adapt to market changes.
The traditional push approach has proven to be grossly inadequate in a highly
volatile and variable manufacturing landscape dominated by more complex planning
scenarios than ever. Seeing the benefits of being demand-driven, many companies have
attempted to build walls around or disable the push-based aspects of traditional materi-
al requirements planning (MRP) in an attempt to use it in a more demand-driven fash-
ion. At the same time, the limited set of materials planning and inventory control tools in
pull-based philosophies such as lean and drum-buffer-rope (DBR) are also proving to be
grossly inadequate, even counterproductive, to the implementation of demand-driven
manufacturing. A new type of MRP is required to deal effectively with today’s circum-
stances and fully capitalize on and implement pull-based philosophies.
The traditional MRP rules that were conceived codified and commercialized in the
’50s, ’60s and ’70s under the old “Push and Promote” mode of operation are now break-
ing down. This includes the general industry love affair with better forecasting algorithms.
Working to forecast has long been compared to driving a car by looking on the rear view
mirror. Today, however, the road is a twisty mountain road in dense fog and the penalties
for error are significant. Paying large sums of money for more sophisticated forecast algo-
rithms simply means now you have a more expensive rear view mirror. Any appreciable
gains by these “smarter” algorithms are being more than offset by the rise of volatility.

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