Demand Driven MRP
Demand Driven MRP is a software used in the manufacturing sector to monitor, plan and control raw material requirements. Demand Driven MRP was first developed in the fifties by a legendary computer engineer, however it was not until the seventies that this software was formally developed. This software contains the basic tools required to be successful in a global marketplace. This software was designed to manage the global supply chain of raw materials and eventually led to the development of many related processes.
The demand driven supply chain is primarily concerned with the accurate delivery of ordered materials to the customer on time. Many processes within a supply chain are designed around accurate delivery dates. The software provides accurate forecasts for demand. If demand is predicted to be higher than supply, then an automatic corrective mechanism will be triggered. However if demand is lower than the supply, then corrective mechanisms will not be triggered.
The demand driven mrp is also used in Lean Manufacturing, which is a manufacturing strategy that eliminates most of the waste associated with traditional manufacturing methods. Waste is eliminated through processes such as flowcharts and lean manufacturing principles. In a traditional production system, there are often predictions or guesses regarding how much material is going to be required by the supplier. Once production begins, most or all of the guesswork is eliminated because of durations of raw materials and other factors. In the case of the demand driven MRP, accurate demand forecasting allows manufacturers to eliminate waste completely.
Another benefit of the demand driven mrp is its ability to provide increased visibility into material costs. Material costs can fluctuate significantly between seasons, markets, or times of year. With the use of an ERP program, materials can be bought and sold more quickly, which enables the company to sell the material to meet increasing demand. This is the primary reason for the increase in popularity of this type of MRP.
An additional benefit to the MRP strategy is the increase in lead times associated with purchasing activities. By using an MRP strategy, companies are able to provide increased access to necessary supplies when it is most critical. Supply chain planning is often a time consuming process and can lead to increased levels of demand and profitability. By using an ERP system, a company can reduce the amount of lead time associated with purchasing activities and instead focus on improving the quality, efficiency, and accuracy of the supply chain. Increase in lead times and reduction in waste both directly and indirectly lead to increased profitability and reduced waste.
In summary, the demand driven MRP provides a variety of benefits for many companies. Firstly, it increases profits by reducing the amount of lead time associated with purchasing decisions. Secondly, the increased profitability is directly related to the decreased waste associated with such decisions. Thirdly, MRP greatly reduces the variability of supply and eliminate the long lead times associated with demand-based planning. Finally, the elimination of unpredictable and uncontrollable factors such as global events, economic fluctuations, and weather patterns significantly reduces the variability of demand and consequently reduces the occurrence of shortages and other risks associated with supply chain management.
