A white paper from the Demand Driven Institute brings to light the importance of “buffers” in helping all companies – particularly manufacturers – to drive their own ROI by improving the flow of their operations. By managing buffers efficiently, it is possible to simultaneously reduce on-hand inventory while improving customer fill rates and satisfaction. That’s the Holy Grail for most production entities, but of course, if it were simple, everyone would have mastered it by now.
That’s the reason behind DDI’s white paper entitled “Demand Driven MRP Buffer Explanation and Simulation” published recently. Demand Driven MRP is “a new formal planning and execution technique first articulated in the third edition of Orlicky’s Material Requirements Planning (Ptak and Smith, McGraw-Hill, 2011). The entire foundation of DDMRP is based upon the connection between the creation, protection and acceleration of the flow of relevant materials and information and return on investment.”
In other words, follow their principles around the use of strategic stock position known as “buffers,” placed at critical “decoupling points” and you will accomplish the necessary functions to improve fill rates, compress lead times and absorb supply shocks. All this helps improve your flow, your sales and operations planning, and your ultimate profitability and thus, return on investment.
It is well beyond the scope of this article to detail DDI’s exact prescription for accomplishing the feat, but their white paper delves extensively into explanations about how the DDMRP buffers work, what tests a stock position needs to pass in order to comply, and how to establish a base from lead times and other factors. It’s not for the faint of heart, but it is clear, concise (well, 14 pages…) and leads to intelligent conclusions about determining MOQs (Minimum Order Quantities) and PAFs (Planned Adjustment Factors).
Through careful examples, they demonstrate how “the buffers of DDMRP are strategic points and tools to protect flow in a given environment. By decoupling at critical points a system gains the ability to quickly compress lead times and isolate or contain variability from being transferred or amplified at those points.”
In other words, they can create a robust and intuitive planning mechanism, especially in environments with a more “volatile” order flow – all while maintaining high service levels, containing working capital growth and minimizing expediting-related waste.
To learn more about the Demand Driven Institute, or request a copy of this white paper (among others), you can go here. DDI provides education and training and, like our friends at APICS (and us!), have a mission that involves helping manufacturers become more efficient and productive. Worth a visit…