Why You Should Consider Demand-Driven Material Requirements Planning

Factory men working in room of shelves

The latest new and exciting proposal in the world of supply chain management is DDMRP, or demand-driven material requirements planning. What is DDMRP, and is it something that you should consider for your manufacturing business?

What Is DDMRP?

DDMRP is a way of managing your inventory based on how much you actually need, rather than trying to predict what your inventory requirements will be. Carol Ptak and Chad Smith developed the concept in 2016.

The idea behind DDMRP is that it helps companies avoid ordering too much stock or too much of the wrong kind of stock — and not enough of the right kind. It does this by inserting buffers into various parts of your supply chain. This way, rather than waiting for problems to pop up at the end of the chain and rushing to compensate, you can break up the chain into specific buffer zones, reducing stress on the chain and letting you act fast to make any corrections you need to. Each buffer stalk has a green, yellow and red level. If you’re in the green, that part of the supply chain is doing fine. If it’s yellow, prepare to order more inventory for that zone. If it’s red, get supply to that part of the chain now.

How Do I Implement DDMRP?

The five steps of DDMRP are:

  • Strategic decoupling: Setting the decoupling points in the supply network where the buffers will go.
  • Setting buffer levels: Which is determining how much inventory will go into your buffer.
  • Dynamically adjusting the buffers: Which is adjusting buffer levels based on varying operating parameters or planned future events.
  • Demand-driven planning: Allocating demand once the order is placed to avoid over/understocking or distorting the supply chain.
  • Collaborative execution: Executing of orders by managers using DDMRP software.

How Will DDMRP Help My Manufacturing Business?

If you are not experiencing any inventory hiccups along your supply chain, even when demand increases for your product or you are launching a new product, great. But that is not the norm. Studies show that trying to forecast demand, which is the traditional approach to resource planning, is simply ineffective. It is rare that you can hit the demand right on the nose. You will almost always have too much supply or not enough.

Demand-driven resource planning is a modern approach to supply chain management that will ensure you can make corrections quickly. That way, you don’t find yourself with a lot of excess stock you have no buyers for or hurrying to fill orders from impatient customers because you have run out. Being able to make these micro-adjustments along the way means more satisfied customers and less unnecessary capital outlay.

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