Demand-driven material requirements planning

Demand-driven material requirements planning (DDMRP) is an approach to production planning and production scheduling designed to reduce overstocks and shortages in the manufacturing supply chain.

Demand-driven material requirements planning

DDMRP is designed to reduce overstocks and shortages in the manufacturing supply chain. The overall purpose of demand-driven material requirements planning aims to overcome the difficulties and shortcomings of conventional planning approaches to modern, complex supply chains.

DDMRP diverges from traditional material requirements planning (MRP 1) and make-to-stock (MTS) planning because it relies less on forecasts. It also helps overcome the challenge of long lead times associated with make-to-order (MTO) planning. DDMRP determines where in the supply chain to place strategic inventory buffers and how large these buffers should be.

The inventory buffers used in demand-driven material requirements planning are also referred to as “decoupling points.” This is because each stock buffer helps disconnect sequential lead times that otherwise accumulate and lengthen the delivery time to unacceptable levels. For example, if an inventory buffer is created between an intermediate, complex component and the assembly step that incorporates that component into the finished product, then the delivery time for the finished product is decoupled from the lead time for the complex component.

The reduced lead times offered by demand-driven material requirements planning help mitigate one of the critical drawbacks of make-to-order and other pull-type operations. Because sales orders trigger conventional MTO operations, production operations all occur between the time of the order and the time of delivery. By effectively moving some production operations to the period before the order is received, DDMRP reduces the time to delivery.

Demand-driven material requirements planning draws upon some aspects of MRP 1, combining them with elements from other production practices. Specifically, DDMRP employs a lean manufacturing pull method to limit the queues at each operation, and an emphasis on variability reduction from Six Sigma in manufacturing.

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DDMRP benefits

A wide array of companies across the manufacturing spectrum are adopting demand-driven material requirements planning because it is tailored to new challenges created by greater product variety, smaller lot and batch sizes, and more complex production operations.

Lead time reduction

Streamline operations and enhance overall efficiency by strategically placing inventory buffers along the supply chain, ultimately improving responsiveness and reducing time to delivery.

Improved on-time delivery rate

Strategically position inventory buffers, reduce lead times and enhance supply chain responsiveness to ensure timely fulfillment of customer orders across diverse manufacturing operations.

Reduction of overstocks and shortages

Place inventory buffers, optimize production plans and dynamically adjust buffer levels to ensure a balanced and efficient supply chain that minimizes excess inventory and prevents stockouts in manufacturing operations.

Less expedited shipping and manufacturing

Mitigate the need for urgent actions, reducing the costs and disruptions associated with expedited processes in the manufacturing supply chain.

Reduced supply chain, production and delivery costs

Streamline operations and minimize unnecessary expenses across the manufacturing spectrum.

Greater customer satisfaction

Reduce lead times, improve on-time delivery rates and ensure consistent product availability, ultimately enhancing the overall customer experience through efficient and responsive manufacturing operations.

DDMRP explained in five steps

Demand-driven material requirements planning is typically characterized as a five-step process:

  1. Strategic inventory positioning determines where to place the decoupling points along the supply chain.
  2. Buffer profiles and levels evaluate the size of the inventory buffer that helps optimize the production plan
  3. Dynamic adjustments define the bases for changing buffer levels. These may include future events that become known, changes to operating parameters, market changes, or other events.
  4. Demand-driven planning employs data from the previous DDMRP steps and other planning tools to establish the production plan.
  5. Visible and collaborative execution is used to manage supply orders.

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