The Benefits of Demand-Driven Material Requirements Planning for Your Manufacturing Business

Don’t you love the way manufacturing produces new acronyms almost daily?

Well, get ready for another one because DDMRP (demand-driven material requirements planning) is here to stay. It is a lean manufacturing method that aids in the systematic removal of waste from the manufacturing value stream.

What is DDMRP?

DDMRP is a five-step process:

1. Strategic inventory positioning—Identify decoupling points, which are specific points of your supply chain where you will put an inventory buffer that will be used to monitor and replenish.
2. Buffer profiles and levels—Determine the inventory buffer sizes (minimum quantity, maximum quantity, reorder point) and reorder quantity for each decoupling point. 
3. Dynamic adjustments—Increase or decrease buffer levels based on operating parameters, planned events, market changes, and other factors that become known.
4. Demand-driven planning (DDP)—Establish the production plan using the data from previous DDMRP steps as well as other planning tools.
5. Visible and collaborative execution—Manage supply orders, reacting in real time to pull from the buffer and signal your suppliers to fill the buffer. The buffer only gets new material when material was pulled.

Step 5 is the biggest change for many companies—pulling in real time rather than preordering and overstocking as they had done in the past.

Because they are similar, understanding the difference between safety stock and buffers can be confusing. A safety stock is a reserve that is set up to prevent a stock out if something goes wrong. Safety stocks are static and typically adjusted and reviewed only a few times per year. Buffers are designed to be more dynamic—they vary as the system smooths out daily pulls and any fluctuations.

Benefits of using DDMRP:

• Improved customer experience—Customers receive the right quantity when they need it.
• More accurate inventory levels—The buffer can help reduce the need for overinflated safety stock.
• Better cost management—Reduces the need to overbuy.
• Improved supplier relations—Your supplier can monitor your buffers, allowing them to better plan.

You can see why more and more companies are taking a closer look at DDMRP.