Overview

A historical perspective on the evolution of demand-driven manufacturing begins with an understanding of material requirements planning (MRP). As mainstream manufacturing companies in North America adopted MRP, comparisons to Japanese manufacturing and its superiority to American and European models circulated widely. This productivity and quality gap has narrowed significantly over the last 15 years, due in part to the availability of better tools. However, the primary reason for the improvement in North America is the growing recognition that by meeting customer demand, manufacturing companies can realize increases in productivity and quality over and above what many lean manufacturing techniques strive to achieve.

MRP promised a wide range of benefits, including the ability to control and monitor manufacturing activities, track and record transactions, schedule and plan production, and procure parts. As more companies embraced the MRP methodology, they soon recognized its shortcomings. For example, MRP couldn't accommodate capacity restraints. Manufacturing resource planning (MRP II) then emerged to address the resource planning process, as well as other functional gaps in MRP. MRP and MRP II combined with a variety of quality initiatives sharpened the competitive edge for many companies. The next logical step in the pursuit of efficiency was to seek out low-cost labor. As a result, many corporations moved manufacturing operations to China, Poland, the Baltic States, and other burgeoning economies.

Even many Mexico-based manufacturers established a foothold in China in hopes of achieving lower direct labor costs. However, lower direct labor is not the path to market domination. The ability to...