Becoming “Demand Driven” according to Demand Driven Institute requires:
A fundamental shift from the centrality of supply and cost based operational methods (commonly referred to as “push and promote”) to a centrality of actual demand and flow based methods (commonly referred to as “position, protect and pull”). The term “actual demand” is extremely important in distinguishing it from a re-branded and somehow superior forecasting approach.
“Logistics” according to the Council of Logistics Management” refers to:
The process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. Logistics planning serves to link and synchronise the overall supply chain as a continuous process and is essential for effective supply chain connectivity.
Conventional supply chain management practices trace their roots back to the first true MRP systems in the mid 1960s.
Today’s supply chains look nothing like the supply chains of the mid 1960s. They are much more complex and volatile. See the chart to the right for a point by point summary.
Despite this obvious difference in circumstances conventional MRP systems still plan precisely the same way today as they did 50 years ago!
Demand Driven Logistics Planning with DDMRP
Demand Driven Material Requirements Planning is a formal multi-echelon planning and execution method to protect and promote the flow of relevant information through the establishment and management of strategically placed decoupling point stock buffers.
DDMRP combines some of the still relevant aspects of Material Requirements Planning (MRP) and Distribution Requirements Planning (DRP) with the pull and visibility emphases found in Lean and the Theory of Constraints and the variability reduction emphasis of Six Sigma.
These elements are successfully blended through key points of innovation in the DDMRP method.
The 5-Step Process
As Demand Driven Institute explains, DDMRP Demand Driven Material Requirements Planning has five sequential components.
Strategic Inventory Positioning will determine where the decoupling points are placed.
STRATEGIC BUFFER PROFILES
Buffer Profiles and Levels will determine the amount of protection at those decoupling points.
Dynamic Adjustments define how that level of protection flexes up or down based on operating parameters or known future events.
Demand Driven Planning is the process by which supply orders (purchase orders, manufacturing orders and stock transfer orders) are generated.
VISIBLE AND COLLABORATIVE
Visible and Collaborative Execution is the process by which a DDMRP system manages open supply orders.
What is unique about Demand Driven MRP
Supply chain specialists might feel skeptical at first glance. MRP has been around for almost 50 years, and we think we know it well. DDMRP is not MRP with some “demand” element. It’s much more than this.
REALISTIC PLANNING LEADTIME
DDMRP starts with the determination of where to place decoupling points. Decoupling allows for demand signal distortion and supply continuity variability to be combated simultaneously.READ ARTICLE
NEW PLANNING EQUATION
Demand driven planning is the fourth component of DDMRP.Planning is the process of generating supply orders. In order to do that, DDMRP uses a unique equation called the net flow equation.READ ARTICLE
HYBRID MRP BOM EXPLOSION
Combining the use of decoupling with managing for dependencies is done by decoupled explosion. It is the cessation of a dependent requirements explosion at each decoupling point.READ ARTICLE
TRANSPARENT RELATIVE PRIORITIES
Both for planning and execution the buffered positions of DDMRP provide a sense of priority (percentage reference) for position itself as well as how that priority relates to other positions.READ ARTICLE
The companies headquartered predominantly in Europe and the US were surveyed by Camelot ITLab upon successful completion of their implementation projects. They include SMEs as well as large enterprises.
Graphs below present real, confirmed results from single implementations.
These results were achieved parallel – there were no enforced trade-offs !
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