Two months ago Chad Smith and I (Ultriva founder, Narayan Laksham) discussed the five components of DDMRP (Demand Driven Materials Resource Planning) at a well-attended webinar. Wanted to take this blog as an opportunity to dig a little deeper. Smith is the co-author of Demand Driven Performance – Using Smart Metrics (Smith and Smith, McGraw-Hill, 2013). He is a co-founder and Partner at the Demand Driven Institute, an organization dedicated to proliferating demand driven methods globally. Smith serves as the Program Director of the International Supply Chain Education Alliance’s Certified Demand Driven Planner (CDDP) Program.
One of Smith’s clients, LeTourneau Technologies former CEO, wrote the forward in the book referenced above. Dan Eckermann, a native Texan, spent nearly his entire career working in energy and mining-related manufacturing. He served on the National Petroleum Council, an advisory body to the Secretary of Energy and is still a passionate “student” of energy. Eckermann worked for LaTourneau Technologies Inc. (LTA) for a quarter century, as an operations manager within a business unit, as a business unit head, and then spent his final 13 years as company head (President & CEO) until retirement. During his tenure as President & CEO, LTI grew nearly tenfold.
About a Demand Drive Supply Chain, Eckermann said, “I had previously believed that these types of methodologies would only work in high volume, low mix operations like those in Detroit, or perhaps in other well-defined operations with highly repetitive nature. I had nearly convinced myself that these methodologies could not possible work at LeTourneau Technologies, Inc. where complexity in operations at our Longview plant was severe, highly integrated vertically, from scrap steel to finisher product; 600,000 BOM records, 165,000 Part numbers, 60,000 manufacturing orders annually, 290,00 manufacturing operations annually, and 500,000 drawings. These are WOW numbers by anyone’s measure for managing logistics. The logistics challenge is rarely this complex for most companies.”
Eckerman understands the management mindset and suggested, “This mind-set in management does not expect, nor demand the achievement of real, breakthrough improvements in their respective supply chains,” and goes on to say, “Doing the right thing, the right way” in supply chain management clearly requires breaking from convention and tradition.” He insisted that method improvement should be pursued BEFORE spending more Cap-Ex for many companies.
At the end of the day all this Demand Driven Supply Chain improvement resulted in real metrics and it became possible to sell the company for approximately 25x the net investment after 17 years of owners. Some of the key results that made this possible Smith details in the book including dramatic improvement in on-time delivery with routine meeting of customer expectations, contrasted from previous times or rarely meeting customers’ delivery expectation; multiple volume growth in new large equipment production, from the same facility that previously was believed to be operating at capacity with lesser volumes; multiples of volume growth in the complex after-market part business segment that contributed substantially to company profitability; hard-working employees moved from working in frustration to working with more defined purpose and achieving favorable results; return-on-average capital-employed improved by multiples.
Eckermann’s forward is titled, “You can do this – a CEO’s Perspective.” To learn more here is a link to the August 2014 webinar: