RE: POs considered harmful for dependent demands

["Rachel Foerster" <rachelf@ix.netcom.com>]

Bob,

I totally and strongly agree with your comments below. My understanding of
dependent demands relates to what my industry (the medical products supply
chain) is trying to accomplish with its Efficient Healthcare Consumer
Response Initiative. In this Initiative our vision is to capture the use of
a medical product at the point of health care delivery (i.e., at the patient
bedside in a hospital or in a doc's office or clinic, etc.) and then to have
the product usage/consumption event ripple back through the entire supply
chain to the distributor and then to the manufacturer for a seamless (and
near realtime) replenishment of the product used. This vision of course,
doesn't need a PO (and in fact a PO would negatively impact the process),
nor does it need an invoice, since the product would be paid for at the time
it's used based on pre-determined contract prices.

Rachel Foerster

> -----Original Message-----
> From: owner-ebxml-core@lists.oasis-open.org
> [mailto:owner-ebxml-core@lists.oasis-open.org]On Behalf Of Bob Haugen
> Sent: Monday, February 14, 2000 10:52 AM
> To: ebxml-bp@lists.oasis-open.org; ebxml-core@lists.oasis-open.org
> Subject: POs considered harmful for dependent demands
>
>
> Maybe everybody already knows this, so this is the short version.
> I have included this point in a different message, but wanted to
> make sure it was as clear as I could make it.
>
> I still see documents going to this list that seem to assume
> that purchase orders are the way all B2B ecommerce is done.
>
> PO's are not a good mechanism for dependent demands,
> and if they are set in stone in ebXML in such a way that
> it is difficult to do business without using them, it will
> need to be redone for Internet-mediated commerce.
>
> Dependent demands are demands that are dependent on some
> other demand, usually called the independent demand.
> This concept comes from MRP, the predecessor (and still
> included in) ERP software.
>
> Dependent demands include the components of manufactured
> products, retail replenishments, shipping for almost any
> purchased item, etc.
>
> Purchase orders are a carryover from paper systems.
> They are usually composed of a collection of line items,
> often aggregating quantities over time periods.  They
> have no knowledge of how the purchases items
> will be used, nor what processes and components
> are required to fulfill the order.
>
> Dependent demands, by contrast, are totally dependent
> on whatever independent demand stimulated them in the
> first place.
>
> All dependent demands should be linked to their
> relative independent demand so if there are changes
> anywhere in the network of activities, they can be
> rippled out to the affected relatives.
>
> For example, if a customer order for a finished good
> changes in quantity or timing or is cancelled - the
> dependent demands should be changed correspondingly.
>
> The PO is too heavy a mechanism for managing
> dependent demands - something more like an
> electronic Kanban or manufacturing schedule
> or point-of-sale event notification would be
> better.
>
> The same goes for invoices, which are unnecessary
> for dependent demands.
>
> Comments? Violent disagreement or agreement?
>
> -Bob Haugen
>
>
>