Synchronize Inventory Replenishment
There are three main reasons why many manufacturers’ and distributors have too much inventory, too many stock outs, and too much expediting.
- The reliance on the forecast to determine what to buy, make and/or ship
- The belief that purchase-to-order or make-to-order are good ways to reduce Waste
- The belief that MRP is a good approach to materials management
Fortunately, a lot of great new thinking is emerging about how to effectively synchronize inventory supply with demand.
In order to ensure the right amount of inventory at the right place and time in the supply chain, purchasing and production should follow three simple rules:
- Hold inventory at the point in the production flow or supply chain where it has the most choice about what it will become or where it will go
- Establish inventory targets that cover the most that is expected to be needed before more can reliably arrive or be made
- Buy what you use, make what you ship, ship what you sell.
Demand Driven Replenishment is a solution for Manufacturing AND a solution for Distribution. In manufacturing, DDR is focused on the synchronization of materials (raw materials, purchased parts, manufactured components, and finished goods) at the right place and time in the production flow. In distribution, DDR is focused on the synchronization of products at the right place in the supply chain. DDR links material and product availability directly to actual consumption by establishing strategically located inventory buffers that dynamically adjust based on actual demand.