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Mix between the just-in-time and the MRP, the DDMRP proposes to give back the esteem to the stock.

Introduction

The DDMRP, demand driven MRP, is a production planning tool developed in the years 2000 by Carol PTAK (ex President of APICs) and Chad SMITH (planning specialist). This method has the peculiarity of rehabilitating stocks. Translated as ” demand driven MRP, this method is based on a threefold observation: 

  • MRP as we know it generates a lot of stock and therefore significant costs.
  • The just-in-time has often been put in place in the first sense of the term ” Zero Stock ‘ rather than the ‘ fairest Stock. ” and thus generates ruptures.
  • Customers always want more diversity and always faster with a renewal of the scales always faster.

The DDMRP legitimates the stocks!

The principle

The principle of DDMRP is to identify strategic ” control points” that we will protect by stock and that will allow us to reliable: 

  • For upstream : Demand 
  • For downstream : Delivery 

Because of its design, it is suitable for productions make to Stockassembly to order or make to order.

1-Identify strategic Stocks

We will place strategic stocks within the supply Chain as a whole, from the supplier to the reseller. The goal is to decouple steps to reliable the flow. So we divide the planning horizon so much, which makes it easier to determine.

The criteria for selecting a decoupling point are as follows:

  • The delivery time tolerated by the customer : According to the markets, delivery times are not the same. It is understood between a luxury watch and a pack of pasta, we are not ready to wait so much.
  • Demand variability: It is our ability to reliably predict customer demand.
  • Supply chain Structure: We are not alone in a value chain. Delays may be due to our suppliers.
  •  Protection of critical steps: The notion of Theory of constraints theory is found: protecting the bottlenecks. A stock upstream and downstream of this process will be advantageously placed to ensure that it can produce continuously and that it is not limited to the downstream process.

2-Determine stock levels

The DDMRP proposes to work on 3 levels of inventory prioritization. We find :

Illustration

Description

Formula

This is the normal work area.

There are no necessary actions on these parts.

This is the maximum between the following three formulas:

Lead time of the loop * factor lead time

Minimum quantity of an order

Cycle time * Average daily demand

The protection coverage of our flow and the heart of our system playing the role of damper.

When coins are in this area, they must be rescheduled.

Lead Time of the loop * Average daily demand

It’s the security stock. If any parts are in this area, they must be renewed urgently.

Lead time of the loop * Factor lead time + lead time of the loop * factor of variability * factor lead time

Identification of calculation factors

 

 

Lead Time Factor

Variability

Variability factor

Raw Material

Lead Time Long

0,25

High

0,75

Lead Time Average

0,4

Average

0,5

Lead Time Short

0,7

Low

0,25

Sub Set made

Lead Time Long

0,25

High

0,75

Lead Time Average

0,4

Average

0,5

Lead Time Short

0,7

Low

0,2

Purchased parts

Lead Time Long

0,3

High

0,75

Lead Time Average

0,5

Average

0,5

Lead Time Short

0,7

Low

0,25

 

Sample calculation

We produce pliers for the general public. We are a large-scale industry with high levels of consumption. We want to set up the DDMRP on this value chain.

Our production process is as follows :

 

Since machining is our most reliable and fastest process, we decided not to put a buffer. On the other hand, all the other processes have one.

 

Forging

Treatment

Machining

Assembly

Plastic handles

Hardware

Cycle time

120 MN

360 MN

1mn

7mn

Lead Time with the downstream Position

360 MN

540 MN

30mn

2880

10 080

10 080

Lead Time Factor

0,25

0,7

0,7

0,3

0,3

Variability factor

0,5

0,2

0,2

0,75

0,75

Minimum quantity of a production order

40

250

100

500

10000

10000

Average daily consumption

5 000

 

Calculating different buffers

 

Forging/Processing

Machining/Assembly

Plastic Handles/assembly

Hardware/Assembly

Assembly/Wholesaler

Green Zone

360 * 0.25 = 90

OR:

40

OR:

120 * 5000 = 600 000

(540 + 30) * 0.7 = 399

OR:

250

OR:

(360 + 1) * 5000 = 1 805 000

10 080 * 0.3 = 3 024

OR:

10 000

OR:

N/A

10 080 * 0.3 = 3 024

OR:

10 000

OR:

N/A

2 880 * 0.7 = 2 016

OR:

500

OR:

7 * 5000 = 35 000

Yellow Zone

360 * 5 000 = 1 800 000

540 * 5 000 = 2 700 000

10 080 * 5 000 = 50 400 000

10 080 * 5 000 = 50 400 000

2 880 * 5 000 = 14 400 000

Red Zone

360 * 0.25 + 360 * 0.5 * 025 =  135

(540 + 30) * 0.7 + (540 + 30) * 0.7 * 0.2 = 479

10 080 * 0.3 + 10 080 * 0.3 * 0.75 = 5 292

10 080 * 0.3 + 10 080 * 0.3 * 0.75 = 5 292

2 880 * 0.7 + 2 880 * 0.2 * 0.7 = 2 420

 

Summary of our Buffers

 

Forging/Processing

Machining/Assembly

Plastic Handles/assembly

Hardware/Assembly

Assembly/Wholesaler

Green Zone

600 000

1 805 000

10 000

10 000

35 000

Yellow Zone

1 800 000

2 700 000

50 400 000

50 400 000

14 400 000

Red Zone

135

479

5 292

5 292

2 420

3-Dynamically Adjust

Inventory levels are automatically recalculated in real time. The stock levels are therefore representative of the reality of our consumption and the real needs of our customers.

We can then track stock levels, have a representation of consumption and develop statistical forecasting models.

Some examples of follow -up:

Seasonal consumption

Ramp-Up

Ramp-Down

4-Demand driven Planning

As soon as our available stock reaches the yellow zone, we pass a production order allowing us to return to the Green Zone.

The available stock is:

Actual Stock available + in-progress-qualified customer request

 

Thus, the production launch is no longer due to a delivery date, but to a buffer fill level:

The production order that feeds the buffer with the lowest filling rate becomes a priority.

5-Collaborative execution

Last step of the DDMRP, make the system visual to make the teams autonomous in the management of their priority.

MRP, Lean and DDMRP

MRP

Lean: Just in time

DDMRP

The production orders are launched according to the sales forecast.

The calculation is then done by BOM.

The production orders are launched according to the Kanban loops we have set up and calculated according to the experience and the forecasts of the sales.

Production orders are launched based on the levels of available buffers compared to alert levels. These buffers are dynamically sized according to actual sales.

The launches are in relation to the sales forecast.

The launch takes place according to the consumption of the downstream Position or the Takt Time.

The launches are based on firm orders.

Great dependence on our ability to predict sales.

No global value chain planning.

Global control of the value chain.

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