The Demand Driven MRP aims to plan and manage the production process according to customer demand with a decoupled material flow and creating dynamic buffer levels considering the value of the goods issue, production or procurement delivery times, bill of materials usage and demand fluctuation. But whatis Demand Driven Replenishment and what is it for?
Whatis Demand Driven Replenishment?
Demand-Driven Replenishment (DDR) is a feature that allows companies to better plan and manage their supply chains, adapting and making production flexible according to demand.
A big problem with supply chains is that it is usually produced on the basis of forecasts, which are often wrong at the outset as fluctuating customer demand causes missing or excess stock. The problem, linked to the system itself, was amplified by the recent Covid epidemic, which led to the use of security measures and consequent even more accentuated fluctuations in demand. Demand-Driven Replenishment allows the supply chain to adapt to disruptions thanks to the strategic compartmentalization of material reserves, making it less vulnerable to fluctuations.
The availability of the material is guaranteed by the definition of buffers at strategically important points along the supply chain; the right buffer levels (indicated with the use of red, yellow and green colours) are defined respecting the variability of demand, supply and lead time length based on the analysis of real-time data and the history of past consumption.
By designing the compartmentalization of material stocks in this way, DDR can help absorb the impact of the Bullwhip Effect, which occurs with the increase in stock levels along the supply chain in response to fluctuations in demand. These fluctuations have an exponential impact along the supply chain and can cause excessive inventory costs or losses due to product expiration. In essence, the Bullwhip effect represents the uncertainty caused by the lack of communication between the various supply chain links. This distortion of information prevents companies from forecasting demand correctly, resulting in significant costs.
Ideally, the goal is to ensure faster responses to customer requests, while keeping inventory levels as low as possible. With sufficient past consumption data to model customer demands, relevant products or components for demand-driven replenishment can be sufficiently inventoried to meet customer demand, but still stored in optimized quantities to avoid excessive storage costs or losses. This functionality is achieved by classifying products according to criteria that can be used as decoupling points.
What Demand Driven Material Replenishment is for
Demand Driven Material Replenishment allows you to efficiently plan and manage supply chains based on customer demand, rather than through traditional MRP procedures. It also forms the basis for a reliable material flow thanks to the definition of buffers.
With replenishment scheduling, an overview of buffer information sorted by scheduling priority is displayed. In this way, replenishment can be activated in time to avoid missing and delays in the completion of orders and production. With replenishment execution, you can view the current stock situation for each product, check that enough stock is available for production, and speed up replenishment.
Key process steps covered
Replenishment planning:
- Thanks to the buffers effectively identified by three different colours, you can immediately understand whether or not you need to order materials to have them available.
- Material purchase orders are issued according to this alarm system.
Execution of refuelling:
- See if there are any stock-out or low on-hand issues and prioritize orders to get a workable plan.
Benefits
- Avoid the bullwhip effect by providing decoupling points at strategic points.
- Ensures the highest possible service level with the lowest inventory levels, across all bill of materials levels.
- It relieves planners from manually creating material orders.
- It supports the user in identifying issues with inventory levels and prioritizing issues as a starting point to take the right action.
Demand Driven Replenishment and SAP
DDMRP is a methodology of increasing strategic importance, so much so that it can be natively integrated with the main management systems. But that’s not all, SAP has even developed two different solutions for integration.
A first solution is embedded in SAP S/4HANA, while the other allows you to manage the DDMRP directly within SAP IBP. Both solutions allow you to manage the five components of the DDMRP, with the addition of additional features and greater coverage in the case of the latter. In fact, there are features to support buffer placement, simplifying all the analysis work related to DDS&OP. In addition, it also integrates with other tools managed within SAP S/4HANA such as physical warehouse management or finished capacity production.
These integrations allow you to plan and execute logistics and production operations in real time, based on data from sales and the supply chain. They are also very advantageous for those companies where the adoption of DDMRP is gradual, because it allows to continue to manage part of the production in a traditional way and starts with a new methodology.
The software involved in Demand Driven Material Replenishment
Demand Driven Material Replenishment solutions are extremely useful for manufacturing companies who want to remain protagonists in their sector and who want to maintain control of their supply chain. Today you can find out how to adopt such a solution in your reality, benefiting from it in a short time.
Learn how to support your production with DDMRP
In Cybertec you will find the first and only software in Italy to have both the prestigious certifications of the Demand Driven Institute (or DDI):
- “DDMRP Software Compliance” obtained at its first evaluation, something that rarely happens and that testifies to the maturity of the production planning and scheduling software;
- “DDS&OP Software Compliance” achieved very quickly and with great success.
The Demand Driven MRP solution is seamlessly integrated with the rest of the CyberPlan suite and benefits from the same unique features ranging from extreme data processing speed to easy and intuitive user interface.
Find out how to get an effective DDMRP solution available and to support your manufacturing company by contacting a Supply Chain expert at your disposal.