Manufacturing the Cloud: DDMRP and the Death of a TLA, Part 1

ERP, MRP, ATP, APS, CTP, SCM, CRM, WMS, TMS…

The software (and business) world is full of Three-Letter Acronyms (TLAs) that we tend to throw around as a way of telling people that we know what we are talking about. Come on, admit it—you’ve done it too, hoping you’re the one who can throw out a TLA that requires explanations such as…

“So in that way the demand plan will then generate your supply plan which is essentially your MPS…” (quicklook around and pause for effect) “…Master Production Schedule.” Classic!

Here at MTC (Manufacturing the Cloud) we ask our prospects or customers to define the details of the requirement when they throw out a TLA as part of a conversation. Just the other day a prospect kept mentioning MRP, so when I asked him for HIS definition I was told: “You know: order entry, purchasing, production, inventory etc.” Glad I asked…

I’d always been somewhat skeptical about MRP and I really wasn’t sure why until we recently attended a Demand Driven MRP (DDMRP) conference in Seattle hosted by the Demand Driven Institute (DDI). Industry analyst Frank Scavo had suggested we check them out and quite honestly it was one of those light-bulb-goes-on / ta-daa! moments in life when pieces of the puzzle start to fit into place.

Let’s back up a bit. MRP was originally designed in the ’50s, codified in the ’60s and commercialized in the ’70s and essentially hasn’t changed a lot since. When Joe Orlicky wrote the original MRP book in 1975, Orlicky’s Material Requirements Planning, it became the bible of material planners and the foundation on which APICS (The Association for Operations Management) was built. But seriously—how many other things from the ’50s do we follow blindly and assume work? Fast forward to 2011 and the launch of the third edition of Orlicky’s MRP book, which was essentially rewritten by Chad Smith and Carol Ptak with the goal of making MRP more nimble than it had been previously.

At the opening session of the conference, Carol Ptak talked a lot about the need for change and dispelled some of the planning myths that are inherent with MRP, but what really grabbed my attention was her statement: “Today’s formal planning systems are fundamentally broken.” OK, now we might be onto something.

And why are they broken? The answer of course is in history and forecasting. When was the last time you saw any kind of forecast that was even remotely accurate? Whether it’s a weather, sales, purchasing or production forecastthey are all fundamentally flawed because they are using HISTORY as a basis for the FUTURE. And seriously, if anyone had figured out how to accurately forecast, we would all be rich from playing the stock market….

That, my dear friends, was the piece I was missing all along. The reason I was skeptical about MRP was entirely because I knew that it was fundamentally flawed. So now we have that out of the way—what is the solution? Stay tuned—Part 2 to follow….

-Gavin Davidson - Vertical Market Expert, Manufacturing

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