1

Demand  Driven  MRP  Case  Studies    from  the  

All  material  and  content  ©  copyright  2014  Demand  Driven  Ins;tute.    All  rights  reserved.  Cer;fied  Demand  Driven  Planner  (CDDP)  is  a  trademark  of  the  ISCEA  

2 All  material  and  content  ©  copyright  2012  Demand  Driven  Ins;tute.    All  rights  reserved.  Cer;fied  Demand  Driven  Planner  (CDDP)  is  a  trademark  of  the  ISCEA  

Oregon  Freeze  Dry  Case  Study  

Mountain  House  Division:  •  Sales  increased  20%  •  Customer  Fill  Rate  improved  from  79%  to  99.6%  

•  60%  reduc?on  in    inventory  

Industrial  Ingredient  Division:  •  60%  reduc;on  in  make  to  order  lead  ;me  

•  100%  On-­‐Time-­‐Delivery  •  20%  reduc;on  in  inventory  

Raw Material No out of stock

Reduced inventory $2.5M+

3 All  material  and  content  ©  copyright  2012  Demand  Driven  Ins;tute.    All  rights  reserved.  Cer;fied  Demand  Driven  Planner  (CDDP)  is  a  trademark  of  the  ISCEA  

LeTourneau  Case  Study  

MRP

DDMRP

4

C

Steel Products

Component Supply (H/

L)

Offshore Products

Mining Products

C

C

Suppliers

Drilling Systems

Forestry Products

C

C

Synchroniza;on  and  Flow  Challenge  

C = Customer = Remote Location

Supply Variability

Distortions & amplification in

demand requirements reverberate backward

Demand / Information Variability

End Item Assembly inherits the amplifying upstream variability.

Lead Time before DDMRP

5

SP CS

OP

MP

C

C

Suppliers

C = Customer

DS

FP

C

C

= Remote Location

= Time Buffer = Strategic Replenishment Buffers

C

DDMRP  Design  

6

Stock-­‐outs  reduced  by  over  66%!  

0

100

200

300

400

500

600

700

Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Sep'09A

$Millions

Longview Inv Longview TR

0

100

200

300

400

500

600

700

Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Sep

$Millions

Houston Inv Houston TR

High Inventories Shortages Massive Expedites

Low Inventories High Service Fewer Expedites

DDMRP  (Longview)  vs.  MRP  (Houston)  

7

Before  Demand  Driven  –  FMCG  Example  (soap)  

8

Raw

Pack

Mix Room

Pack 1

Pack 2

Pack 3

DC

DC

DC

DC 50+ Days

Planned Orders (MRP) Purchase Orders

Manufacturing Orders

Expedites/ Schedule Break-ins

Before  Demand  Driven  –  FMCG  Example  (soap)  

9

DDMRP  Design  –  FMCG  Example  (soap)  

All  material  and  content  ©  copyright  2013  Demand  Driven  Ins;tute.    All  rights  reserved.  Cer;fied  Demand  Driven  Planner  (CDDP)  is  a  trademark  of  the  ISCEA  

Raw

Pack

Mix Room

Pack 1

Pack 2

Pack 3

DC

DC

DC

DC 9 Days

HUB

3-8 Days

Manufacturing Orders Stock Transfer Orders

Purchase Orders

10

Immediate  Results  for  Materials  –  FMCG  (soap)  

300  Materials  are  buffered  without  increase  in  RPW  inventory.    This  is  accomplished  with  18%  less  total  

RPW.  

Dampened  the  bull  whip,  now  opera?ng  more  effec?vely,  with  less  

working  capital  

Before

After Replenishment lead time has been reduced 82% to 9 days from 50 days,

becoming Responsive

Finished Goods dropped 45+% with consistent services level at

or above 99.7%

A few cases from Orchestr8

Who are Orchestr8? (www.orchestr8.com)

●  Specialist, best of breed Supply Planning Solution provider; experienced professionals dedicated to Lean

●  Founded in 2002, headquartered in UK with coverage for global implementations

●  Our customers are global

●  Unique provider of a SaaS (Software as a Service) Lean Planning solution which builds on Demand Driven principles to deliver a step change in supply chain performance

O8 Boots Manufacturing Project Case Study

●  Move from MRP based Planning to a Pull based philosophy

●  Inbound –  Doubled inventory turns –  Improved schedule stability from 60% to 95%

●  In-house Bottle Blowing –  Reduced lead time from 6 weeks to 1 week –  33% stock reduction

●  Finished Goods –  30% reduction in stock in 6 months

●  In November 2007 BM switched off MRP –  added remaining factory cells –  20% total FG stock reduction –  Lead time reduced from 12 weeks to 4 weeks –  Internal Service level improvement to 98.9% –  Obsolescence reduced by 50%

●  Now planning all items Internal and External using O8 processes

–  Enabled BM to win additional third party manufacturing business: P&G Manufacturing partner of the Year 2008

●  Re-designed the Planning structure to match new way of working

–  40% head count reduction

0

10

20

30

40

50

60

70

80

90

100

Inbound Stock

FG Stock

Order Stability

Obsole- scence

Service Headcount FG Lead Time

The BCM Management report shows wide ranging value to the business

People Processes System Financial Benefits

Time Saving •  Workload Reduction •  Redistribution of

Tasks

Establish ‘Pull’ Planning Methodology •  Remove effect of

MRP Noise

Volume Variability Analysis •  Categorise

Replenishment Techniques

Lead Time Reduction •  Finished Goods •  Components

Cash Flow Impact

Supports New Structure •  Headcount Reduction •  Provide more intuitive

tools

Daily Processes •  Stabilise Demand •  Swifter Reaction to

change •  Ability to Challenge

Target Stock Calculation •  Setting & Reviewing

Correct Levels •  Simulation / Budget

Preparation

Inventory Reduction •  Finished Goods - VMI •  Components

Cash Flow Impact

Interaction with External Customers •  Web Portal

Functionality •  VMI Opportunities •  Enables Innovation

Discussions

Support development of S&OP Process •  Daily / Weekly

Activities – One Set of Numbers

•  Monthly Analysis – Capacity Planning

Reporting •  KPI Dashboard •  Schedule Adherence •  OTIF

Historical Picture of Supply & Demand •  Supplier & Customer

Order Points / Liability

•  Forecast Comparison

Interaction with Internal Customers •  VMI

Interaction with Suppliers •  VMI of Components •  Supply Discussions •  Greater Stability

Phase Out Process •  Discontinue Dates •  Control Obsolesence

3M Finished Goods Planning

●  Stocking locations in hubs and warehouses across Europe ●  Planning done centrally ●  Stock targets set in each location based on volume and order

patterns at that point –  Local warehouse stock set by market demand, lead time to ship

from Hub & batch size to ship –  Hub stocks set by call off demand pattern, lead time & batch size to

make in the factory –  Supplier stocks set against factory demand and lead time to

resupply

Factory

Suppliers

5 Hubs 20 Warehouses

Product

Replenishment call-offs to demand Market

Supplier VMI Hub

3M Occupational Health Inbound & Distributed finished goods

●  Stock held in 5 EDCs and 20 local warehouses and inbound to the 3M factory

●  30% reduction in on-hand inbound inventory

●  60% reduction in FG Inventory across all sites

●  Service performance better than the 97% target

●  Elimination of process gaps in factory between Lean / Pull methods and planning approach

●  Process delivers better productivity, reduction in Non-value added activity and better communication & relationships across the supply chain

0

20

40

60

80

100

Service Inbound  Inventory

FG  Inventory Planning  effort

Productivity

“Working with O8 has put us back in control of the supply chain”

S Alexander, 3M Supply Chain Manager, OH & ES, Europe

•  Requirement to run a VMI style process from Thailand

•  O8 system installed in Thailand in the summer of 2010

•  The planning parameters changed to VMI in November 2010

•  O8 system influenced stock levels in the UK from January 2011

•  O8 system now deployed significantly further across PZ global network

Inventory Value and Customer Service Levels

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

08/0

5/20

10

22/0

5/20

10

05/0

6/20

10

19/0

6/20

10

03/0

7/20

10

17/0

7/20

10

31/0

7/20

10

14/0

8/20

10

28/0

8/20

10

11/0

9/20

10

25/0

9/20

10

09/1

0/20

10

23/1

0/20

10

06/1

1/20

10

20/1

1/20

10

04/1

2/20

10

18/1

2/20

10

01/0

1/20

11

15/0

1/20

11

29/0

1/20

11

12/0

2/20

11

26/0

2/20

11

12/0

3/20

11

26/0

3/20

11

09/0

4/20

11

23/0

4/20

11

07/0

5/20

11

21/0

5/20

11

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

CSL Tgt CSL ActAct Val Tgt ValValue as at May costs

O8 Implemented in Thailand to support UK Warehouse

1.  Stock reduced to target using standard internal safety stock optimisation led to decreased service levels

2.  Stock levels returned to original level to solve service issues 3.  O8 implemented: Service remains high whilst stock levels

drop

Cases 000s

Pallets Value %

Weeks Stock

Jan 11 337 2,965 100% 5.6

May 11 181 1,797 65% 4.3

Var -155 -1,168 -35% -1.3

1 2

3

GDS planning model with O8 Business Benefits

●  Stock reduction by approx. 500K EUR (c.15%) ●  High availability maintained – over 98% ●  Scalability

–  one person handles all parts with no major challenges –  No additional team required when implemented in new regions

●  Low levels of ‘noise’ when changing the parameters –  each month approx. 1,500 changes compared with 2,500

●  Use of O8 ABC analysis to adjust lot sizes/rounding values with optimum balance between number of inbound order lines and stock level

●  Clean up components and introduce more Kits - Easy to customize various aspect of it (rules, filters etc.) - Strong tool to make various simulations on a “what if” bases and find the optimum set of parameters - Extra potential available

(spare parts 70K sku’s)

GDS planning model with O8

Process benefits achieved with O8

●  Monthly target process down to 2 days using standard rules ●  System provides full simulation capability to trial alternate rule

settings and support new implementations ●  Control provided through the Phase In / Out controls ●  Removal of mistakes through elimination of spread sheets ●  ‘Cloud’ system allows installation across multiple SAP instances

–  Now live in Singapore –  Current roll out in Australia and India

●  Easy to customize various aspect of it (rules, filters etc.)