In search of "Common Sense"

Aug 31, 2016

Innovations & smart thinking by Demand Driven Institute

I had the opportunity to attend Certified Demand Driven Planner workshop conducted by Carol Ptak at Pune (26-27 Aug, 2016). Learning directly from the creator of a whole new body of knowledge is a privilege. I have penned my thoughts on the smart thinking and innovations made by Carol Ptak and Chad Smith at Demand Driven Institute (www.demanddriveninstitute.com). The entire endeavour is to use "Relevant Information" to take decisions and impact actions towards increasing ROI.

  1. Building on the foundation of available knowledge.
  2. The APICs definitions with which the Supply Chain and Operations Professionals are well versed with are not tempered.
  3. Highlighting the fact that Supply Chains are not linear systems which can be optimised. Rather they are Complex Adaptive Systems which can sense, adapt and learn continuously. This puts in context the constant struggle that companies trying to adopt SAP APO are encountering in their struggle to get a handle on the materials requirement planning conundrum based on forecasts.
  4. Using the TOC knowledge of supply chain dilemma to frame the problem succinctly. 
  5. Clearly articulating the conflict arising out of lean efforts which undermine the importance of MRP usage in the organisations who have invested a tidy sum in acquiring the enterprise software. The divergence of thinking is at the level of planning every item on Bill of Materials - independently (Lean) or in a dependent manner (MRP) as well as generating supply order at the planning stage (MRP) or at the execution stage (Lean).
  6. Highlighting the fact that severe cause of variability which gets accumulated and amplified to result in Bull-Whip and System nervousness is in the dependent nature of the structure of Supply Chain and BOM.
  7. Clearly articulating the wrong assumptions that trip the usage of MRP, Re-order point systems, Safety-Stock. The assumptions have become invalid over a period of time and have been the root cause of the problems faced by the companies but the approach followed by most of the people was work-around on excel worksheets creating a veritable "Excel Hell".
  8. Pointing out the fact which stares everyone in the face. Lean, Six-Sigma, TOC and MRP  are trying to solve the problems are doing it to protect and promote FLOW. There is a complete agreement on the objective of protecting and promoting flow but lot of disconnect in the mechanism adopted to meet the necessary conditions to achieve the objective.
  9. Suggesting a ground breaking idea which is elegant in its simplicity. Use decoupling points to store design inventory. This is "one thought" which qualifies Dr. Eli Goldratt's criteria of giving Nobel prize - "Why did I not think this up?", "Oh, isn't it obvious?" and it is easy to communicate in one page.
  10. The result of decoupling is a new term coined by DDI - Decoupled Lead Time (DLT). DLT is shorter than Cumulative Lead Time (CLT) (Inventory no-where) and Manufacturing Lead Time (MLT) (Inventory everywhere). The inventory in the system is stored which provides value - dampen variation on both supply and demand side, shorten lead time, be the point for generating supply orders and increase ROI and is constantly being impacted by the stream of incoming orders.
  11. The innovative use of knowledge of MRP to size the different zones of the buffer with very specific function assigned to each.
  12. Providing for managing special cases of demand variations by dynamically as well adjusting the buffers in a planned manner. This is a serious innovation which gives coarse+fine tuning knobs for managing the buffers,
  13. Innovative "Net Flow" equation to generate Supply Orders. The fact that Demand Driven Operating Model has no use of Forecasts in the tactical time-frame is ingrained in this equation. The regular consumption of buffer and the Sales Order spikes in the immediate horizon of DLT at the buffer closest to customer becomes the first signal into the system which get cascaded through to the vendors in an innovative Decoupled Explosion. The result is PULL based on actual demand and not PUSH because of Sales Forecasts.
  14. Having two distinctive perspective of the buffers - planning and execution - decisions and actions based on "Relevant Information" for each perspective.
  15. A complete new knowledge for integrating the Strategic Business Planning and Tactical Execution through Demand Driven S&OP.

Overall impact of these innovations and smart thinking on the part of Demand Driven Institute should result in getting more and more organisations to start adopting this "Thoughtware" which is created on the foundation of FLOW.