MRP – Solution or Problem (Part 3)
DDMRP is the world standard for Demand Driven for planning, scheduling, and execution of the entire supply network; from end users and distribution centers to manufacturing and multi-tiered suppliers. DDMRP is a Multi-Echelon Material and Inventory Planning and Execution system that enables a company to become Demand Driven, dynamically sizing and adapting supply networks and production systems through sensing changes in demand patterns and the responsiveness of supply.
DDMRP and its Demand Driven Operating Model provide the methodology to decouple the entire supply network at strategic inventory locations creating independence between supply and demand. Through structured mathematical design, decoupled strategic inventory buffers have the capability to absorb demand volatilities and supply disruption, fully dampening the Bullwhip Effect and restricting its transference through the supply network. Demand signals between consuming and producing nodes of the supply network are then stabilized with inventory availability being significantly improved. Even if a supplier is late or there is a demand spike, the mathematical design of the buffer will enable the inherent supply chain variabilities to be absorbed without disruption to supply.
In DDMRP the forecast, which is still relevant for business planning and S&OP purposes, is not used for supply order generation where only true demand is utilized. The planning logic utilized by DDMRP still explodes demand through a BOM, however, the demand explosion will end at BOM levels that have been strategically decoupled by a DDMRP buffer. A further explosion of demand will only take place when the associated buffer has been depleted down to the replenishment level. Essentially, the DDMRP model works by balancing on-hand inventories, current open supply (anticipated receipts) and Qualified demand against a dynamically mathematically defined inventory Buffer system. Qualified demand is the demand that is currently due and known demand in the future that will spike above set thresholds during the planning time horizon associated with the supply lead time of the inventory item.
Volatility in demand is absorbed by the buffer as supply order generation only takes place when the buffer inventory (On-Hand Inventory + Open Supply – Qualified Demand) drops below the defined replenishment threshold. DDMRP further restricts transference of the demand volatility by always ensuring that the associated due date for supply is based on the actual lead time of the part and not the point in time when MRP anticipates a need for inventory to maintain safety stock levels. The need to expedite and constant changes in supply schedules will be all but eliminated providing greater order stability to the supplier enabling a direct improvement in overall supply performance.
As a complex adaptive system, the DDMRP model adjusts its behavior in response to its environment on a daily basis with the strategic inventory buffers dynamically resizing as they take account of demand patterns and supply performance. As a result, the strategic inventory buffers are always fully synchronized and balanced to the exact needs of the marketplace and the performance of the supply network.
With strategic buffers in place, DDMRP ensures material availability and provides stability in upstream demand signalling. The flow of relevant information enables correct decisions to be made at the right time reducing variability, improving supply chain visibility and control across the entire network. Lead times will be compressed, inventory right-sized driving an overall inventory reduction, and the improvement of customer service levels. Bottom line, DDMRP provides a return on investment.
Global organizations such as Unilever, Michelin, Coca-Cola, BT (British Telecom) and others small to large have already adopted DDMRP enabling improved market responsiveness, reduction in lead times, elimination of variability and volatility throughout their supply networks.
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TheONE DDMRP software is fully compliant that enhances existing MRP systems by replacing traditional planning logic with a series of Demand Driven planning and execution tools that promote increased visibility, responsiveness and agility through the entire supply network. Average inventory levels will be reduced while customer service levels are increased, lead times will compress and supply chain variabilities will be absorbed. The age-old problems characteristic of MRP across today’s global supply networks will become a thing of the past.
DDMRP will enable improvements of up to:
❯ 65% reduction in average on-hand inventory
❯ 80% reduction in lead times
❯ 100% on-time delivery performance
❯ 90% reduction in inventory obsolescence
❯ 400% improvement in inventory turns
❯ 25% improvement planner availability
Contact us today so that your company can start to benefit from DDMRP before your competitor does!
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