Caroline Mondon: "The MRP worked very well 20 years ago. Today it's a black box"

The Development Director of the Francophone Association of Supply Chain Management AfrSCM Caroline Mondon reflects on three decades that have seen industrial and distribution companies reshaped by globalization and market variability. This eminent international expert in Supply Chain Management identifies two major developments: at the top of companies, there is finally a start to address the profession as a general management subject, after mistakenly assimilating it, for a long time, with logistics or procurement. We are also witnessing the rise of the Demand Driven methodology, driven by the need to better connect the company to real demand in an ever more uncertain context. Interview.

- In terms of Supply Chain, what has fundamentally changed in the last 30 years?

We have moved from a support function managed like any silo to a transversal function concerning all the company's businesses, intended to create value. This is a major change. The mistranslation of the concept, still too often equated in France, with logistics and procurement activities alone, partly explains why supply chain management is poorly understood, to the extent that few leaders take an interest in it. However, Supply Chain Management involves coordinating the three flows: financial, physical, and information, and increasingly the flow of skills. It is nothing less than the lever for implementing the company's strategy! It is indeed a general management subject.

- You are a staunch advocate of the Demand Driven Adaptive Enterprise DDAE method, a concept imported from the United States that aims to connect the company more to real demand. What is it about, and why retain this new approach as a significant feature of the 21st century in Supply Chain?

A bit of history is required to understand it well. I have been experiencing the evolution of Supply Chain Management for nearly thirty years. I was first a fervent ambassador of the MRPII model (Material Resource Planning), the dominant model for managing supply chains that uses the MRP (Material Requirements Planning) calculation, which I taught for more than twenty years. I even knew the contents of the Apics by page number, which shows how much I adhered to the method! I delivered hundreds of training courses at the time of Basics, which later became CPIM Part 1.

I remember that at that time – when I was then a plant manager in industrial SMEs and later worked as a shared time employee in companies in distress – I was almost seen as a magician by turning around organizations where I implemented the MRPII model. Through the setup of the Master Production Schedule (MPS) and Sales & Operations Planning (S&OP) – concepts difficult to translate into French – within six months, the company would improve its service rates from 75% to 85% or even 90%, while reducing its inventory and smoothing its production rhythms.

I then became an international Supply Chain Director at Valeo, overseeing about ten sites across seven countries. At that time, we started implementing the famous Toyota Pull Flow because we considered customer forecasts had become so inaccurate that it was counterproductive to pollute computer systems with information that led to surplus inventories and simultaneously shortages.

We began to notice that processes that had worked very well ten or twenty years ago were deteriorating. The globalization, market variability for customers, suppliers, and internal changes with much faster turnover of executives and the arrival of new technologies caused a range of disruptions in the processes.

One example: at the beginning of my career as a plant manager, one of my KPIs was the number of rescheduling messages from the MRP calculation. My teams were supposed to have fewer than ten per week. Today there are hundreds! We have an MRP system supposed to help us make scheduling decisions, and we do not have time to process all the rescheduling suggestions. It's become a real black box.

This logically led me to take an interest in the new Demand Driven Adaptive Enterprise (DDAE) method in early 2012.

The beginnings of Demand Driven in France

It was ultimately thanks to my experience with Toyota Pull Flow at Valeo that I discovered and experimented with the idea of pulling flows based on real demand information rather than inaccurate forecasts.

I connected with the Demand Driven Adaptive Enterprise method when I discovered the work of American Carol Ptak based on the famous Theory of Constraints (TOC) by Dr. Eli Goldratt. We then agreed to introduce this methodology in France with AfrSCM (formerly Fapics) and its partners, as pioneers.

The methodology was tested in several SMEs members of AfrSCM in France; we immediately observed spectacular results in terms of service rate improvement, inventory reduction, and Working Capital Requirement (WCR) decreasing – it is worth recalling that the number one cause of SME mortality in France is cash flow issues and difficulties borrowing from banks...

After these successful experiences, made public in 2014, larger member companies, such as Michelin, Figeac Aero, Lectra, or Radiall, among others, gradually embarked on the adventure.

- How can the DDAE methodology be very simply explained?

A company that adopts this philosophy is one where the leaders challenge the teams on flows rather than cost reduction. In this approach, everything is done to ensure that flows are not interrupted by lack of components, capacities, skills, or unforeseeable subcontractor delays.

Everyone is empowered from the ground level, as operators are considered capable of understanding how to protect flows to satisfy customer commitments based on the variability they encounter daily. We are dealing with a philosophy very different from the traditional MRPII, MPS, and S&OP, which are more 'top-down' linear approaches. Here we have a systemic approach with two feedback loops between operational and tactical levels and between tactical and strategic decisions. This allows adjustments to be made whenever it is useful. And to negotiate, for example, additional investments. Ultimately, the essential is to obtain a constant alignment between strategy, tactics, and operations. Achieving this means that operational people feel understood by their leaders, and vice versa. It is very consistent with Total Quality and Lean philosophies, which also promote collective intelligence that breaks down departmental silos.

The DDAE is ultimately a process for conquering new markets thanks to an excellent service rate flirting with 99% relative to true customer demand. At the same time reducing inventories by an average of 30%, as well as the 'throughput time' (the time for traversing the system, from components to finished products), often spectacularly. An SME near me in Blois thus reduced its throughput time from eighty-nine days to ten days in six months! In the end, a substantial reduction in WCR was achieved, which the manager could use to finance company growth and recruitment.

- Where does the DDMRP - Demand Driven Material Requirements Planning - solution fit into the DDAE process?

The start of the method involves conducting a DDMRP pilot: positioning stock buffers that are multiple strategic decoupling points to alleviate upstream and downstream variability. A Sales & Operations Planning (S&OP) process is then undertaken, consisting of a strategic Adaptive S&OP part and a tactical Demand Driven S&OP part – which adds to the traditional S&OP process – that involves configuring the production system composed of various buffers: stock buffers, capacity buffers, time buffers, and even skill buffers, where their absence can also create bottlenecks that could block flows.

Ultimately, DDMRP is the beginning of the story, a bit like Kanban is the beginning of the story in Lean Management. It's important to highlight this because many of my generation can testify that companies that implemented Kanban without having understood the Lean philosophy failed. In the same vein, it seems crucial that a company embarking on a DDMRP project understands the DDAE model to gradually make it their new benchmark.

- The implementation of a DDMRP software is the first step then?

Yes, it's the pilot stage, crucial for the future because it will allow, with a DDMRP software like BEVOLTA – a partner of AfrSCM – to extrapolate the result across the company. However, it is important not to focus only on physical flows and to see the 'big picture': it is not just a subject for planners but a strategic issue under the purview of general management acting as a guide. There is indeed this pitfall, a bit like at the time of Lean with Kanban, of talking a lot about DDMRP and little about DDAE, probably because French literature on the subject is still lacking.

Afterwards, Carol Ptak, along with other experts including Debra Smith and Christoph Lenhartz, and I will publish two reference articles in Techniques de l'Ingénieur in 2024 to explain, in French, the entire DDAE model (it currently exists only in English). The second article will cover the deployment in larger companies, such as Michelin, Figeac Aero, Lectra, or Radiall, and their gradual immersion into the DDAE project.

The idea is to tell companies: to motivate your employees, take an interest in the global DDAE model, which is a model of collective intelligence, so in tune with our times!

Interview by Ghislain Journé.