Suppliers and manufacturers present different challenges in their production chain; these challenges can range from the complexity of their supply chain, the reduction of the life cycle of their products or even the poor supply and production of high-demand goods.
For this reason, we present different solutions that can help improve the efficiency of production in your company.
How to improve production efficiency and ensure a profitable business?
Production efficiency can be improved if everything is based on DDMRP (Demand Driven Material Requirements Planning).
Improving production efficiency starts with understanding the causes of production problems and the correct use of tools such as modern production IT systems.
MRP (Materials Requirements Planning) manufacturing systems are based on 2 pillars:
- Interdependence of materials
- Planning and forecasting.
Therefore, having analyzed the logic is simple:
You have an estimate of sales and the system shows how much and when resources are needed. But, it is known that forecasts are not accurate and no matter how advanced your forecasting system is, forecast error will only increase, since the past cannot be an indicator of the future. As you move up the supply chain, the deviations only increase and a “whiplash effect” occurs.
To improve production efficiency, the DDMRP methodology and the Replenishment software product based on DDMRP algorithms have been successfully applied.
The essence of production and the supply chain as a whole consists of the flow of raw materials, materials, components and finished products from suppliers, through factories and distribution channels to buyers, as well as the flow of information between the links about what is planned and required.
5 DDMRP components
- Strategic stock positioning: where to store stock?
- We do not manage individual SKUs, but profiles created according to certain criteria.
- Dynamic buffer management per SKU.
- Automatic orders based on demand.
- Transparent and collaborative execution.
The production process is conventionally divided into stages, in each of which potential problems are clearly defined. It is localized and its negative influence is no longer transmitted along the chain. At each stage of the process, Strategic Replenishment Points (STP) are created. STPs are created to ensure flow stability and are replenished as actual consumption.
To increase the economic efficiency of production:
- 40-60% reduction in inventories.
- Order turnover is several times higher.
- Sales growth of +20%.
- Increase in operating profit.
- An increase in the rate of return for the average amount of capital used.
- Significant decrease in equity capital.
- Positive impact on cash flow.
- Increase the level of stock replenishment in the customer’s warehouse by up to 99.6%.
- Reduced lead times by up to 60%.
- Fewer days of delivery delays.
- Increased deliveries according to schedule by up to 95 +%.
- Virtually excluded urgent deliveries.
- Reduce production planning cycle to 1-2 days.
- Company receives a tool that calculates actual delivery time and provides customers with realistic and reliable production lead times.
- Flow rate increases.
- Better understanding of manufacturing capabilities and what prevents the company from increasing production flow.
- Transparency of the production process facilitates the exchange of relevant information and well-coordinated coordination of the links in the supply chain.
- Access to transparent information, which improves communication and teamwork between departments.
- Opportunities are open for continuous improvement throughout the system.
When profits increase, inventory is minimized and unnecessary waste is eliminated, ROI grows. The goal of any company is to guarantee the profitability of the invested capital, and the surest way to do this is to strengthen and guarantee the flow. Effective inventory management ensures the continuity of the production process and the company’s profitability.
If your company is looking for a warehouse or industrial building to adapt to the new reality, VYNMSA is the best option. We like to work closely with our clients, always adapting to their requirements and exceeding their expectations.
In VYNMSA we would like to help your company to establish itself in Mexico. We have over 30 years of experience and have delivered more than 400 projects to satisfied international clients. We are one of the leading industrial real estate developers in Mexico. We have the know-how to develop tailor-made or Build To Suit projects. We also work actively with industrial brokers as business partners; we have around 20 inventory buildings ready for immediate occupancy, totaling 1.7 million square feet of space in the northeast and the Bajío region.