Demand Driven Material Requirements Planning (DDMRP), Version 2. Carol Ptak
flow through and to their customers. Chapter 2 highlights the need for and benefits of flow. The better the flow of relevant information and materials, the better the service levels and use of working capital. The better the service levels and working capital, the better the bottom line.
Do MRP advocates disagree with this? Certainly not! Materials and processes that flow reliably are the easiest to plan and manage. Having the right things at the right time is the key to flow. MRP’s entire reason for existence was to attempt to synchronize environments to have the right things at the right time. But does conventional MRP have deficiencies that hurt flow? Undeniably yes!
Do Lean advocates agree with the need for flow? Absolutely. Information and materials that flow reliably generate considerably less waste. But does Lean have a complete tool set for fully protecting and improving flow at the plant, enterprise, and supply chain level in a more complex and volatile world? There seems to be something missing.
So if there is a common objective, why are these camps locked in a chronic conflict? As discussed previously, MRP is a perfect just-in-time system that nets to zero inventory. This sounds incredibly compatible with Lean’s approach. Yet the conflict persists because they represent diametrically opposed approaches with regard to two critical factors. These critical factors are essentially two sides of the same coin but are worth discussing specifically. Any solution must involve addressing this inherent opposition in these two areas.
Dependence Versus Independence
Figure 5-2 illustrates the area of this particular conflict. At the top of the structure is the common objective of protecting and promoting flow. MRP and Lean have different critical needs in order to accomplish this objective, and each method has a specific attribute designed to secure its respective critical need.
FIGURE 5-2 The dependence versus independence conflict between MRP and Lean
We will explore the MRP side first. MRP advocates understand that the protection and promotion of the flow of relevant information cannot occur without the ability to synchronize complex and dynamic environments. In order to accomplish this synchronization, MRP, as discussed in Chapters 3 and 4, is hard coded to obey the dependencies defined by product structure. A change anywhere creates change everywhere. MRP was designed in this way in order to make sure that the operating environment could understand the impact of changes as they occur.
On the Lean side we see that the protection and promotion of flow requires that resources have clear signals to operate by. When signals become confusing or conflicting, a resource’s ability to determine what is correct breaks down. Too many points of data or constantly changing signals create that confusion or conflict. Thus Lean makes everything independent. Resources only need to look to one place (the kanban that they feed) to determine if they should produce or not produce. It is literally that simple.
Making everything dependent versus making everything independent is certainly mutually exclusive. In fact, both sides’ attributes break down the other side’s critical need. By making everything dependent, MRP creates an incredibly confusing set of constantly changing and conflicting signals. By making everything independent, an environment loses the ability to synchronize to changes that can and will occur. This is particularly true in environments characterized by heavy demand fluctuations, long lead time parts, shared resource bases, and product innovation.
Is there an alternative that can have the benefits of dependence (synchronization) and the benefits of independence (clear signals) at the same time without conflict?
Supply Order Generation (Planning Versus Execution)
Figure 5-3 illustrates the area of another conflict. Once again, at the top of the structure is the common objective of protecting and promoting flow. MRP’s need remains unchanged from the previous conflict: synchronize complex and dynamic environments. Lean has a different critical need.
Both sides have a different attribute designed to secure their respective critical need with regard to supply order generation. One could argue that this is simply an extension of the dependence versus independence conflict. That is a valid argument, but there is an additional level of insight that could be brought to bear by discussing them separately.
As described in depth in Chapter 2, MRP is typically loaded with forecasted demand in order to attempt to synchronize the long manufacturing and procurement cycles with anticipated demand. This happens well in advance of consumption. The Lean side, however, seeks to protect and promote flow by pacing to actual demand because the inherent inaccuracy with forecasts directly impedes flow. Resources are squandered on things that are overproduced and overordered in advance, while expedites must accommodate the things that were underproduced or underordered as the picture becomes clearer. The only way to truly know if demand is real is after it has occurred. Consumption is definitive proof of demand.
As with the previous conflict, the attributes seem to be mutually exclusive. When MRP generates supply orders well in advance of anticipated consumption, it loses the capability to pace to actual demand at least by the amount of the forecast error. The longer the planning horizon, the greater the forecast error. When we generate supply orders at the execution level, there is a delay in responding to significant changes, as the supply orders must make their way through the entire connective structure one level at a time; there is rudimentary but extremely slow synchronization at best.
FIGURE 5-3 The supply order generation conflict between MRP and Lean
Is there an alternative that can have the benefits of supply order generation at the planning level (synchronization) and the benefits of supply order generation at the execution level (pace to actual demand)?
It is vital to understand that all the critical needs are required to protect and promote flow. Planning and execution systems must pace to actual demand, provide clear signals for resources, and synchronize complex and dynamic environments.
Focusing on only one critical need and discounting the others almost guarantees challenges to flow. Indeed that seems descriptive of the impasse between the MRP and Lean worlds. When it comes to the protection and promotion of the flow of relevant information and materials, both Lean and MRP have weaknesses in today’s more volatile and complex environments. Lean’s reliance on independent replenishment kanbans with little to no visibility or connectivity at the plant, enterprise, and product structure level is a problem for the protection and promotion of flow. But the antiquated and complex rules of conventional MRP that govern demand and supply order generation create unrealistic, constantly changing, and generally confusing plans and schedules.
To protect and improve flow, a blend of simple visible pull signals and the computational and connective power of technology is necessary. This isn’t a compromise for the two sides to live in peace; it must be a harmonious integration where both sides’ critical needs are incorporated to create a stronger solution for the protection and promotion of flow. And it must be practical, consistent, and scalable!
What if there is a way to define a solution (rules and tools) that is not overly complex or overly simple? What if there is a way to take key and relevant aspects of both points of view and create an elegant blueprint that will work for and enhance both sides’ objectives? This solution must include a level of sophistication that can provide more visibility and synchronization from a planning and execution perspective