Demand Driven Material Requirements Planning

University essay from Mälardalens högskola/Akademin för innovation, design och teknik

Abstract: Manufacturing industries used to develop their operation strategies focusing on the cost of manufacturing, high volume production, and stabilizing the customer demand. But due to advancements in technology and evolving customer needs, the market demand became highly volatile, dynamic and customers expected customization, low volume products, and faster deliveries. This evolution in customer needs has pushed the companies to improve their operating systems to be more flexible, agile, and adaptable to the market’s dynamic character. In order to effectively evolves themselves and achieve more flexibility, manufacturing companies had to implement effective manufacturing, planning, and control systems.  The first breakthrough in planning systems came in the year 1975 where a systemic approach called material requirements planning was introduced by Orlicky. MRP has become the global for production planning and inventory management in manufacturing industries. Later, over the years, research on the planning systems has brought modifications in MRP and it was evolved into closed-loop MRP. Further into the late 1980’s availability of technology led to an introduction of a newly evolved system called the Manufacturing resource planning which resulted in a holistic approach in material planning involving, financial and accounting functions which improved the planning efficiency. Further advancement in technology resulted in advanced planning systems like Enterprise resource planning and Advanced planning and scheduling.  On the contrary, though there has been a lot of advancement in technology and effective production planning methods, there are still discrepancies in obtained results when compared to theory. This is because the existing systems were based either solely on push production or pull production strategy. There is a lack of a hybrid system that includes the positives of both production strategies and negates the MRP conflict. However, in the year 2011, a new concept called demand-driven material requirements planning was introduced by Ptak & Smith, which was a fusion of the core MRP, theory of constraints, and Lean principles. Since the introduction DDMRP has seen an increase in implementation across industries which claimed a significant improvement in performance, on-time delivery, reduction in inventory, and reduced stock-outs. DDMRP has received very little attention in academia due to a lack of awareness among researchers and industries. A literature review approach was used to collect and analyze the data on DDMRP and its advantages. The objective of this thesis was to shed light on the process of DDMRP, its pros, and cons in implementing the new material planning system.

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