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Understanding the Impact of DDMRP on Supply Chain Management
03-26-2018

Demand Driven Material Requirements Planning or DDMRP is the recent methodology that is garnering significant traction in Supply Chain Management. It builds upon the supply chain principles such as Lean Manufacturing, Theory of Constraints, and Postponement Strategy in order to reduce production costs but at the same time meeting customer demands.

Inventory control has always been a challenge for manufacturing organizations and maintaining just the right stock of inventory is what optimizes the balance between production costs and meeting consumer demand. However, determining the right time, quantity and place for replenishing inventory is both a science and an art that requires a lot of effort to perfect. There are several advanced planning applications that can help manufacturers plan and monitor their inventory levels but most require a lot of dedicated resources and effort to train manpower. They also require highly skilled IT staff so that the application runs smoothly, and there is no trust deficit between the applications and their end users. Business users hardly have the time to regularly validate the output produced by such applications and to keep a close watch on the inputs that are fed into them.

DDMRP helps alleviate such challenges by laying more emphasis on the visual and intuitive parameters of inventory management calculations and is therefore designed to have more appeal among end users who want a simple and easy to deploy and use planning tool.

How DDMRP works

DDMRP is a formal multi-echelon planning and execution method that protects and promotes the flow of relevant information through the organization and the management of strategically placed decoupling point stock buffers. It combines some of the key aspects of Material Requirements Planning (MRP) and Distribution Requirements Planning (DRP) with the pull and visibility emphasis related to Lean and the Theory of Constraints, and the variability reduction emphasis that is defined as part of the Six Sigma process.

For an organization to become Demand Driven, it has to shift its focus from the supply and cost-based operational methods (defined as “push and promote”) to actual demand and flow-based methods (defined as “position, protect, and pull”). 

The five components around which the DDMRP theory revolves are Strategic Inventory Positioning; Buffer Profiles and Levels; Dynamic Adjustments; Demand Driven Planning; and Visible and Collaborative Execution. By imbibing practices around these five components into their manufacturing cycles, organizations will be able to improve customer service, reduce lead times, maintain the right-size inventories, enjoy the lowest total supply chain costs; and also work on an easy and intuitive MRP interface.

How DDMRP improves upon the postponement strategy

Traditionally, the postponement strategy has been widely used in industries such as advanced technology or semiconductor manufacturing where further investment into a product is delayed as far as possible to maximize benefits and reduce risks. DDMRP further strengthens postponement strategy by suggesting various product levels where inventory could be stored. Such a move helps in reducing the overall lead time and supports the supply chain to remain alert to any variations in demand.

 

However, here’s a word of caution. Supply chain planning and its execution depends on more complicated parameters in the real world which cannot be solved with just one inventory management method or application. For instance, factors beyond an organization’s control such as supplier side disruptions and environmental factors can readily consume the buffers maintained by DDMRP. So, the estimated benefits of DDMRP must be communicated with caution and the underlying assumptions and exclusions need to be understood. Moreover, as with other planning methods and tools, DDMRP also requires regular monitoring and maintenance. 
To know more, please read our whitepaper on DDMRP.

Meet the Author

Anchal Sood

Director – Supply Chain (Asia Pacific)
Anchal has 14+ years of consulting experience in implementing SCM enterprise applications for different industries in India, SE Asia, US and Europe. An MBA in Supply chain and operations management from NITIE, Mumbai, she also pursued various industry certifications like APICS CSCP, APICS CPIM, SCOR, SAP SM while working on implementation of supply chain planning applications for global companies. She has deep interest in learning, simplification/standardization of processes and automation wherever possible.
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