When it comes to inventory and material planning, the goal of most manufacturing enterprises revolves around maximizing flow from production to customer, while minimizing the costs of doing so. Easier said than done.
Lean proponents often opt for the “less is more” approach. It sometimes gets accused of being anti-technology in its pursuit of waste reduction and the elimination of useless steps. Lean proponents often view MRP and formal planning tools as inappropriate, transaction-intensive, and non-value added.
MRP proponents, being planning types, see it differently. They believe that without the ability to see the full picture, companies leave themselves open to critical blind spots in planning that can lead to shortages, excesses, or ‘expedite’ situations, none of which are beneficial either to customer satisfaction or to improving a firm’s cash flow.
Is there a middle position that can reconcile the two?
Our friends at APICS (The Association for Operations Management) recently sponsored an evening of information about “Demand Driven Planning,” courtesy of The Demand Driven Institute, chaired by Carol Ptak and Chad Smith, co-authors of Orlicky’s Materials Requirement Planning, 3rd Revised Edition.
With its primary objective to “protect and improve flow” the authors endeavor to bring harmony between Lean, with its emphasis on aligning efforts and resources as closely as possible with actual demand, and MRP, with its emphasis on providing visibility to the total requirements and planning across the enterprise.
Their hybrid approach yields an integration of Lean with MRP that in their view will help best determine:
- Where to place inventory to promote flow but minimize working capital;
- How to size and dynamically adjust strategic stock positions;
- How and when to replenish them;
- How to effectively see priority across the enterprise with respect to inventory and materials demand and supply signals.
Their solution, detailed in their book, migrates MRP (Material Requirements Planning) and DRP (Distribution Requirements Planning) from a style of “push and promote” to that of “position and pull.”
The end result: a way to fuse relevant MRP/DRP tactics combined with the pull approaches of Lean and TOC along with innovations for better lead time compression and execution visibility. As the authors note in a brief white paper (available from this blog free for the asking), “It takes Lean’s waste reduction focus and visibility for execution and combines it with a new set of demand driven planning tactics that provides unprecedented planning visibility across an enterprise and supply chain.”
You can download a free sample of the book at www.demanddrivenmrp.com And you can a preview of the premise from their white paper, simply by commenting to this blog today.