Manufacturers encounter the following problems
High-demanded production is manufactured in insufficient amount. The company suffers sales losses, customer loyalty decreases; the buyer leaves to another manufacturer or chooses another product.
High inventory levels on all assortment to meet the demand maximally. This freezes current assets, reduces turnover, and has a negative influence on cashflow.
Parts, raw products and materials are often not available (insufficient quantity, short supply, low-quality raw materials) that results in lack of products at warehouses.
. Surplus and non-sellers are sold out with big discounts. Expired production is written off in losses. Products shipped, but not sold by distributors increase returns.
Lack of information exchange between supply chain links and manufacturing leads to situations when capacities and inventories do not allow to make the required quantity.
Need for warehouse spaces grows, stock holding and staff costs increase.
Penalties from chains caused by assortment line items dropout at warehouses and reciprocally at clients – stores.
Urgent orders break a production schedule that leads to uneven capacities loading, as a result product availability decreases, capacities are used inefficiently.
How to produce what is demanded in required quantity with optimum inventories?Request a presentation
The main reason of problems in an outdated manufacturing management approach, which is put in many MRP systems, is based on:
- Forecasts of requirements in raw products, materials and finished goods.
- Dependencies of production phases (Bill of Materials).
The manufacturer predicts the amount of products he will sell and the system through BoM explosion calculates how many, which and when the resources have to be located. BUT, forecasts are not accurate, they do not correspond with the actual demand at the market! At the same time, the forecast error increases while moving through supply chains links and manufacturing, deviations accrue as a snowball, “a bullwhip effect” appears.
To solve this problem, it is necessary to avoid forecasts and localize negative dependencies in a supply chain.
DDMRP (Demand Driven Material Requirements Planning) is a manufacturing inventory management system that combined the best world practices of manufacturing and supply chain organization — Theory of Constraints (TOC), Kanban, Lean, 6 Sigma, DRP, MRP, Innovation. DDMRP is designed to achieve a breakthrough performance due to material requirements planning taking into account demand variabilities. It allows to perform manufacturing management in accordance with the actual demand, it also promotes more reasonable decisions and actions at the planning and execution level.
What is DDMRP? from Chad Smith on Vimeo.
DDMRP shows WHERE strategic stock points should be placed how to logically determine and dynamically adjust these line items. Manufacturing process is divided into stages, on each of the stage some problems appear, which are localized and their negative influence is not transmitted further along the chain. At each stage of the process strategic replenishment points are created, which provide flow promotion and protection and are replenished depending on consumption.
Replenishment+® software product is a solution based on DDMRP Operating Model. The system reveals key locations for positioning stock and, dynamically adjusts buffers according to the demand fluctuations, therefore keeping necessary amount of inventories in strategic points.
Implementation of DDMRP methodology and Replenishment+® system provides smooth manufacturing processes running, effective manufacturing inventory management and positive impact on the company’s profitability. When the profit grows, inventories are minimized and unnecessary expenditures are excluded – business ROI grows.
What we offer
Carrying out diagnostics and revealing “bottlenecks” in manufacturing inventory management
Holding a seminar training on Demand Driven Material Requirements Planning methodology
Implementation of DDMRP algorithms: determining strategic replenishment points, localizing problematics, creating stock buffers etc.
Automating manufacturing inventory management in Replenishment+ system
Providing methodological and technical support
Cloud-based Replenishment+® solution is designed to automatically calculate the necessary inventory level for each SKU, on each strategic replenishment point, according to the actual consumption. Manufacturing inventory management is executed according to Demand Driven Operating Model. Read more about Replenishment+® system capabilities here.
Effects for your company
- Inventory level decreases by 40 – 60%. Stock-holding costs, write-offs and returns decrease. Operating assets tied up in stock decrease.
- Stock replenishment level at clients’ warehouses improves. Sales increase by 20%.
- Scheduled delivery reliability increases to 95%. Number of expedited orders is reduced.
- Order delivery time accelerates to 70%. Production planning cycle is reduced to 1-2 days.
- Operating profit increases and ROI grows.