CHAPTER 8
The DDAE Model Development Path
Stage 1: Operational Efficiency (Cost)
Stage 2: Operational Efficiency (Flow)
Stage 3: DDAE Level I
Stage 4: DDAE Level II
Stage 5: DDAE Level III
Software Implications
Summary
APPENDIX A
Skill Buffers: The Missing Links, by Caroline Mondon
Defining a Skill Buffer
The Demand Driven Skill Model
Using DDS&OP to Link Adaptive S&OP and DDSM
Summary
APPENDIX B
Adaptive Systemic Thinking, by Chad Smith
The Need to Think and Problem Solve Differently
The Adaptive Systemic Thinking Process
Applying the Process—The TreeCo Example
Notes
Index
Where does common sense turn into common nonsense in organizations? The basic fundamental principles we will explore in this book are supported by mathematics, economics, physics, and managerial accounting. These concepts are simply undeniable, and people readily agree on and identify them as common sense and obvious facts. Yet when we look at how organizations are actually operating, we see these principles missing or pushed to the background only to emerge through lip service or crisis. Why?
These principles make common sense, yet the application of and adherence to them are anything but common. If people can understand these ideas and agree that they make sense, what is missing? We believe we have the answer: an effective framework.
Today, organizations lack an effective framework to consistently apply and integrate common sense principles at all levels of the organization (strategic, tactical, and operational). Instead, many people inside organizations must actively fight against and/or work around their current framework just to do what they know is right. Company personnel are stressed as they are constantly forced into a no-win situation of choosing between what makes them look good or what is actually the right thing to do for the company. Worse yet, our conventional systems obscure or distort relevant information that makes knowing what is right for the company that much more difficult to determine.
We have reached a point where we will have to choose. Either your organization will continue to try to compete by doing the same old things better and faster or it will make a fundamental break from convention and try something new. The choice will be forced upon you one way or the other.
If you are ready to explore something new, this book is a good place to start. In this book we will reveal a new framework by which to run an organization in the volatile, uncertain, complex, and ambiguous (VUCA) world we live in today. This new framework is called the Demand Driven Adaptive Enterprise (DDAE) Model. Not only will we describe this model but we will detail the path and stages required to fully implement it.
This framework and book will not be embraced by everyone. It challenges a lot of conventional practices and systems. It has and will threaten those with interests in keeping those practices and systems in place. For those who have embraced this model, the results have been well worth it. So, is your organization ready for something new?
This book will use two sources of definitions. All known and accepted terms that are not new with the advent of Demand Driven Adaptive Enterprise (DDAE) model will be defined using definitions from the fourteenth edition of the APICS Dictionary. The authors thank APICS for its support of this project. Since 1957, APICS has been the premier professional association for supply chain and operations management and the leading provider of research, education, and certification programs that elevate supply chain excellence, innovation, and resilience.
For terms that are new with the advent of the DDAE model, the authors have created a dictionary specific to DDMRP. Translated versions of this dictionary in multiple languages can be found at http://www.demanddriveninstitute.com.
Chad Smith
Chad Smith is the coauthor (with Carol Ptak) of the third edition of Orlicky’s Material Requirements Planning (McGraw-Hill, 2011), Demand Driven Material Requirements Planning (Industrial Press, 2016) and Precisely Wrong—Why Conventional Planning Fails and How to Fix It (Industrial Press, 2017). He is also the coauthor (with Debra Smith) of Demand Driven Performance: Using Smart Metrics (McGraw-Hill, 2014). He is a cofounder of and partner in the Demand Driven Institute, an organization dedicated to proliferating demand driven methods throughout the world.
In 1997 Mr. Smith cofounded Constraints Management Group (CMG), a services and technology company specializing in demand driven manufacturing, materials, and project management systems for midrange and large manufacturers. He served as Managing Partner of CMG from 1998 to 2015. Clients (past and present) include Unilever, LeTourneau Technologies, Boeing, Intel, Erickson Air-Crane, Siemens, IBM, The Charles Machine Works (Ditch Witch), and Oregon Freeze Dry. Mr. Smith is also a certified expert in all disciplines of the Theory of Constraints, studying directly under the tutelage of the late Dr. Eli Goldratt.
Chad Smith makes his home in Wenatchee, Washington, with his wife, Sarah, and two daughters, Sophia and Lily.
Carol Ptak
Carol Ptak is currently a partner with the Demand Driven Institute (www.demanddriveninstitute.com) and was most recently at Pacific Lutheran University as Visiting Professor and Distinguished Executive in Residence. Previously, she was vice president and global industry executive for manufacturing and distribution industries at PeopleSoft, where she developed the concept of demand driven manufacturing (DDM). Ms. Ptak spent four years at IBM Corporation, culminating in the position of global SMB segment executive
A leading authority in the use of ERP and supply chain tools to drive improved bottom line performance, Ms. Ptak’s expertise is well grounded in four decades of practical experience as a successful practitioner, consultant, and educator in manufacturing operations. Her pragmatic approach to complex issues and dynamic presentation style has her in high demand worldwide on the subject of how to leverage these tools and achieve sustainable success.
She holds an MBA from Rochester Institute of Technology and completed the EMPO program at Stanford University. Ms. Ptak is a frequent educator at the university level and presents at many key technical conferences around the world, in places such as South Africa, France, Israel, Australia, Ireland, and the Netherlands, as well as thirteen APICS International conferences. She is the author of numerous articles and the books DDMRP (Industrial Press, 2016), Orlicky’s Material Requirements Planning 3e (McGraw-Hill, 2011) with Chad Smith, in addition to MRP and Beyond and ERP, Tools, Techniques and Applications for Integrating the Supply Chain, Theory H.O.W. with Harold Cavallaro, and