Demand Driven Material Requirements Planning (DDMRP)
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Demand Driven Material Requirements Planning (DDMRP) is a methodology for inventory and materials management that aims to decouple forecast error from order generation. It was developed as an evolution from MRP to better handle today's complex supply chains. The DDMRP methodology includes strategic inventory positioning, buffer profiles and levels, dynamic adjustments, demand driven planning, and visible collaborative execution. An Odoo application called Eficent.io implements the full DDMRP methodology within Odoo to help companies better manage their inventory and materials.
Demand Driven Material Requirements Planning (DDMRP)
- 1. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com 1 Demand Driven Material Requirements Planning (DDMRP) Jordi Ballester Alomar
- 2. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Structure 2 1. Introduction a. What is DDMRP? b. Why DDMRP? c. What is the Objective? 2. Methodology a. Strategic Inventory Positioning b. Profiles and Levels c. Dynamic Adjustments d. Planning e. Execution 3. DDMRP in Odoo
- 3. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Introduction 3
- 4. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com What is DDMRP? Demand Driven Material Requirements Planning ● Methodology for inventory and materials management. ● Borned as a natural evolution from MRP for the current environment, but it also takes concepts from Lean, Six Sigma, ToC... ● It aims to decouple the forecast error and orders generation. ● Developed by Carol Ptak y Chad Smith. 4
- 5. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Why DDMRP? 40 years later, are we again in a re-examination period? 5 Circumstance 1970 2018 Supply Chain Complexity Low. Mostly linear chains. High. “Supply webs”. Product Life Cycles Long. Years, even decades. Short. Usually months. Customer Tolerance Times Long. Weeks or months. Short. E-commerce, hours. Product Complexity Low. High. And growing... Product Customization and Variety Low. Few options. High. Lots of configurations. Long Lead Time Parts Few. Local vendors. Many. Global market. Forecast Accuracy High. Low variability. Low. Complexity and competition. Pressure for Leaner Inventories Low. Less penalized. High. And keeping up service levels. Transactional Friction High. Hard access to information. Low. With a click.
- 6. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com What is the Objective? 6 Bimodal Distribution Typical MRP distribution ● The goal of any for-profit organization is to maximize ROI. ● From an inventory perspective, we have two important points: ○ Too Little: Affects service levels and generate secondary expenses. ○ Too Much: More than extrictly needed to keep service level. © Copyright 2018 Demand Driven Institute. Used with permission
- 7. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com The Bullwhip Effect ● It is an extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. ● Inventory can quickly move from being backordered to being excess. 7 Foundry Component Assembler Distortions to relevant materials Distortions to relevant information Final Product
- 8. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com What is the Objective? 8 The Primary Objective of Operations Management: “Protect and promote the flow of relevant information and materials.”
- 9. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Decoupling Inventory ● An amount of inventory kept between entities in a manufacturing or distribution network. ● Seeks to create independence between processes or entities. (APICS Dictionary, 14th edition) 9 Foundry Component Assembler Final Product Decoupled Lead Time Decoupled Lead Time
- 10. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Methodology 10
- 11. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com DDMRP Components 11 Demand Driven Material Requirements Planning Strategic Inventory Positioning Buffer Profiles and Levels Dynamic Adjustments Demand Driven Planning Visible and Collaborative Execution 1 2 3 4 5 Model the environment Plan Execute
- 12. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Strategic Inventory Positioning ● Traditional MRP answers: How Much? (quantity) and When? (synchronization). ● There is a previous question… Where? (position). 12 Placement Criteria Customer Tolerance Time Market Potential Lead Time Sales Order Visibility Horizon External Variability (demand and supply) Inventory Leverage and Flexibility Critical Operation Protection © Copyright 2018 Demand Driven Institute. Used with permission
- 13. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Strategic Inventory Positioning 13 Bill of Material Structure Report Bill of Material Matrix
- 14. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com DDMRP Components 14 Demand Driven Material Requirements Planning Strategic Inventory Positioning Buffer Profiles and Levels Dynamic Adjustments Demand Driven Planning Visible and Collaborative Execution 1 2 3 4 5 Model the environment Plan Execute
- 15. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Buffer Profiles and Levels ● Buffers are composed of three zones, each of those with a clear purpose. ● Buffer zones are computed combining group and specific (to product and buffer) properties. 15 Buffer Profile ● Product Type ● LT Category ● Variability Category Examples: ● PSL (Purchased Short Low) ● MLH (Manufactured Long High) Product Specific ● Purchase Lead Time ● Manufacturing Lead Time Buffer Specific ● Minimum Order Qty ● Location ● ADU Calculation Method ● Imposed Order Cycle
- 16. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Buffer Profiles and Levels ● DDMRP Buffer form view: 16
- 17. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com DDMRP Components 17 Demand Driven Material Requirements Planning Strategic Inventory Positioning Buffer Profiles and Levels Dynamic Adjustments Demand Driven Planning Visible and Collaborative Execution 1 2 3 4 5 Model the environment Plan Execute
- 18. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Dynamic Adjustments ● One of the main characteristics of a DDMRP buffer is that they are not static. ○ Automatic Adjustments: Mostly through the daily evolution of the ADU. But also influenced by changes on the buffer profile, MOQ, DLT... ○ Planned Adjustments: There also exist tools to prepare the buffers to anticipated events. Most common one is the Demand Adjustment Factor (DAF). 18
- 19. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com DDMRP Components 19 Demand Driven Material Requirements Planning Strategic Inventory Positioning Buffer Profiles and Levels Dynamic Adjustments Demand Driven Planning Visible and Collaborative Execution 1 2 3 4 5 Model the environment Plan Execute
- 20. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Demand Driven Planning ● One of the greatest innovations in DDMRP is the Net Flow Equation. ● It gives the Net Flow Position (NFP) which governs the supply orders generation. 20 On-Hand Incoming Qualified Demand Order Spike Threshold 1 2 3 4 5 Order Spike Horizon -1-2-3-4 Net Flow Position Reordering Point NFP = On-Hand + Incoming - Qualified Demand
- 21. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Demand Driven Planning ● Planning screen in Odoo 21
- 22. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com DDMRP Components 22 Demand Driven Material Requirements Planning Strategic Inventory Positioning Buffer Profiles and Levels Dynamic Adjustments Demand Driven Planning Visible and Collaborative Execution 1 2 3 4 5 Model the environment Plan Execute
- 23. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Visible and Collaborative Execution ● Execution is about managing open supply orders. ● It offers us a very easy way to prioritize orders. No more prioritization by due date or customer! 23 Buffer Status Alerts Projected On Hand Alert Current On Hand Alert Material Synchronization Alerts Lead Time Alerts Synchronization Alerts Independent Points ( ) Dependent Points © Copyright 2018 Demand Driven Institute. Used with permission
- 24. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Visible and Collaborative Execution ● Current On Hand alert on the Manufacturing App: 24
- 25. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com Visible and Collaborative Execution ● Current On Hand alert on the Purchase App: 25
- 26. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com DDMRP in Odoo 26
- 27. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com ● Our solution is called Eficent.io (https://eficent.io) ○ Open Source (LGPL). ○ Available for versions: 12.0. ○ Certified by the Demand Driven Institute (https://www.demanddriveninstitute.com/compliant-software). ● At Eficent we are also certified instructors and we provide public and private instructions. DDMRP Application for Odoo 27
- 28. Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com 28 Thank you! Jordi Ballester Alomar mail: jordi.ballester@eficent.com twitter: @jbeficent_erp