Demand Driven Material Requirements Planning (DDMRP)
DDMRP (Demand-Driven Material Requirements Planning), which involves planning material requirements based on market demand, is a method of multi-level production planning and execution. This approach ensures and promotes the flow of relevant information for production by creating and managing strategically positioned material inventories at previously identified points within the Supply Chain. DDMRP combines some pertinent aspects of Material Requirement Planning (MRP) and Distribution Requirement Planning (DRP).
DDMRP is the first step in enabling a company to become a Demand Driven Adaptive Enterprise. It combines the best of two elements (MRP and Demand Driven) into a practical and sustainable method to effectively perceive customer demand evolution, adapt planning and production, and collaborate with suppliers in real-time.
Material Requirement Planning (MRP) has been the backbone of production systems for the past 50 years. Thanks to MRP, it is possible to specify which materials and parts to order, how many of each are needed, when they will be required, and when the activity should start to complete the work so that the products are ready by the agreed completion/delivery date with the final customer.
Traditional Material Requirement Planning is inherently forecast-driven. However, precisely because it is based on past activity, it is only sometimes accurate in predicting the future.
La supply chain odierna, caratterizzata da maggiore volatilità, incertezza, complessità e ambiguità, richiede capacità di pianificazione aggiuntive che siano sensibili alle fluttuazioni della domanda in tempo reale. È qui che entra in gioco l’MRP basato sulla domanda (DDMRP).
Today’s supply chain, characterised by greater volatility, uncertainty, complexity, and ambiguity, requires additional planning capabilities sensitive to real-time demand fluctuations. This is where Demand Driven MRP (DDMRP) comes into play.
Since DDMRP is driven by demand analysis, it is, by definition, more sensitive and responsive to changes in demand and supply that can cause shortages, production disruptions, and chaos in production plants.
DDMRP at a glance
DDMRP consists of 3 sequential elements:
- Strategic Decoupling: This involves identifying decoupling points at strategic positions within the supply chain, considering both the internal structure of each product and the entire supply chain. Operating stock decoupling allows subsequent production stages to function independently in case of slowdowns or interruptions. This prevents the proliferation of variability downstream and upstream, compresses lead time, which is the total production time, and makes the planning horizon independent and shorter, generally based on medium to long time intervals. This is not allowed in traditional MRP logic.
- Buffer Profile and Levels: This step involves creating buffers to absorb shocks at the decoupling points, which helps reduce variability. The levels of these buffers, or “the capacities of these decoupling points,” are determined by a unique mix of information that includes forecasts, historical data, and data derived from the DDMRP methodology.
- Dynamic buffer adjustment: After setting the initial levels of the strategic buffers, the DDMRP approach allows for protecting these buffer levels by adapting them to internal and external changes.
Demand driven planning
The ability to generate supply orders through its own simple yet effective algorithm. Thanks to the structure created in the previous steps, the algorithm allows for the placement of supply orders using only the sales orders associated with a short-term time horizon.
Visible and collaborative execution
Execution involves managing open supply orders or those that need to be executed in the short term. Clear and precise signals can identify which priorities need attention. The lower the level of the strategic buffer, the higher the priority assigned. This implies a radical change from MRP logic, shifting from prioritising based on delivery dates (working on the most urgent products first) to priorities dictated by buffer levels (working on products tied to critical buffers first).
Advantages
The implementation of a DDMRP methodology leads to the following advantages:
Improved service level
Reduction in total inventory by eliminating unnecessary stock generated by traditional MRP planning
Lower overall order management costs
Therefore, adopting this methodology ahead of the competition allows for a competitive advantage in terms of operational excellence in planning, production, and supply chain management.
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Value creation across the planning horizon
Optimizing Sales & Operational Planning is, in today’s demand-driven markets, key to enable companies to reach their business goals. If your company aims to achieve “best-in-class” performance and surpass the industry competition, it must be able to implement an efficient business S&OP process, which will only be as effective as the technology it utilizes.