Being Demand Driven in an MRP world

MRP (Material Requirements Planning) is not as responsive or efficient as we’d like it to be. A new approach takes the best features of MRP and adds on lean and constraint-based features to make it more demand-driven and more effective for today’s manufacturing challenges.

Reconsidering Inventory Rationale

Dropping inventory below the optimum amount causes shortages, whereas holding more inventory than necessary will result in waste. The main reason for keeping inventory is to save time, so lowering it will adversely affect the condition that the inventory is there to manage. You should go back to why you made those decisions in the first place.

We don’t manage inventory

Despite the focus on inventory (check out Dave’s article “Inventory errors cause revenue losses”), we as operations managers, do not actually manage inventory. We manage production, resources, sales, etc. Inventory is a visible measurement of the success of our efforts.

It’s all about Lead Time

Lead time is arguably the most important factor in manufacturing and distribution. To a great extent, it determines how you set up your business, what inventory you carry and where/why, what you can offer to your customers, and how agile and responsive you can be to changing conditions and changing demand.

Taking control of supply and demand

Anyone on the marketing and sales side of things is likely to be oriented toward satisfying whatever demand they can find . . . but that may not be the best way to run a business.

Regional Sourcing

Does your company do business in a local or regional market or do you focus on importing parts and materials while exporting products? If it’s the former, you may be ahead of your time.

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