Demand Driven Material Requirements Planning
For some reasons too numerous to mention here, accurate sales forecasting is becoming more difficult, consuming more effort and requiring more mature recesses and complex data sets than ever before. DDMRP could be the most effective option for some companies, as it can provide great value compare to Material Requirements Planning. (MRP).
What is DDMRP?
“DDMRP's goal is to solve the shortcomings of MRP.
This method is used both for planning and execution control, defining:
1) where to stock;
2) how much to stock
3) dynamic review
4) generation of supply orders according to average daily usage plus qualified sales spikes
5) to guide and alert execution in a visual manner.
Further insights are :
- Inventory positioning will determine where the decoupling points are placed.
- Buffer profiles will determine the amount of protection at those decoupling points.
- Dynamic buffer adjustments define how that level of protection flexes up or down based on operating parameters, market changes and/or planned or known future events.
- Demand Driven Planning is the process by which supply orders (purchase orders, manufacturing orders, and stock transfer orders) are generated.
- Highly Visible and collaborative execution is the process by which a DDMRP system manages open supply orders.
Why MRP has to be changed?
DDMRP could be the most effective option for some companies, as it can provide great value compare to MRP, as it combines some of the still relevant aspects of Material Requirements Planning (MRP) and Distribution Requirements Planning (DRP) with the pull and visibility, and the variability reduction. DDMRP is the supply order generation and management engine of a Demand Driven Operating Model (DDOM); all these elements are successfully blended through key points of innovation in the DDMRP method.
We must consider the incremental value and the technology DDMRP brings, when compared to traditional MRP and interactive DRP, in addition to the proven track record of customer service improvements. Of course, reduced inventory and higher service levels are value claims not unique to DDMRP. So, why is it different?
Beyond doubt, these are some of the benefits of DDMRP:
- Above all, Simplicity. It’s surprisingly uncomplicated to understand and simple to use.
- Defining stock positions and socking levels in a dynamic way.
- It hides and alerts execution in a visual way.
- It generates supply events according to the sales order of the day plus qualified sale spikes.
- It provides planning and execution performance improvements in varying environments.
- It gives people a step by step outline.
- It’s transparent, easy to figure out, intuitive, consistent, and sustainable.
- It allows the production to be aligned with the real demand of the market.
- It facilitates a better and rapid decision-making solution.
- It’s fast to implement, bringing better visibility.
- A tangible reduction in obsolete and excess inventory.
- It demonstrates a strong value proposition in customer service levels.
- It removes the importance of accurate sales forecasts to generate supply plans.
- It reduces the quantity of positions where inventory is held, to operate at minimum.
- The buffer levels are dynamically updated as the dependant parameters change.
DDMRP is remarkably easy to plan with. It is five step process simply structured into three phases: Position, Protect, and Pull.
A key benefit of DDMRP is a common enterprise-wide-supply planning process across all facets of distribution, production and procurement. It is true that DDMRP removes the importance of accurate sales forecasts to generate supply plans; in many companies this is a valuable advantage of DDMRP.
To maintain these types of approaches requires a further level of capability, a continuing forecast feed and a dynamic review of the parameters in relation to forecast rather than only history, solutions like SO99+ from ToolsGroup will help with these types of challenges.
CONCLUSION: Some, or most of the existing DDMRP solution can still be integrated with different MRP packages. It is not something that can be done without considering technology, talent, and process. This includes having certified talent on the planning team and experts to operate the Supply Chain modelling and determine the optimal placements of strategic inventory buffers. To relieve against the risks of change and to quantify the business value, customers often choose to perform large pilots of DDMRP prior to deploying the definite program.