Operations Planning
Demand Driven MRP - From “Push and Promote” to
“Position and Pull”
Chad Smith Partner
Demand Driven Institute
Today’s formal planning
systems are
fundamentally broken!
What is the Problem we are Solving?
DDMRP Sneak Peek
2 Chad Smith
Companies Using Spreadsheets for Demand Management
84
71
63
0 20 40 60 80 100
Laggards
Industry Average
Best-in-Class
Aberdeen Group (Demand Management, November, 2009)
3
Modern Planning Systems Broken?!
86% of respondents indicate that their management
team has asked them to find opportunities to improve their
companies supply chain planning processes and 71% of
respondents have indicated the same for supply chain
technology improvement. “
“
Aberdeen Group (Inventory Optimization Technology Strategies for the
Chief Supply Chain Officer, December 2010)
40%
28%
23%
9%
High Degree
Moderate Degree
Low Degree
None
Companies using spreadsheets to augment MRP
Chad Smith
Old Rules, Old Tools, New Pressures
• Forecast error is on the rise
• Volatility in supply and demand is increasing
• Legacy planning tactics and tools are breaking down ► Inside most modern ERP systems is MRP
► 79% of ERP Buyers implement MRP
► Conceived in the 1950’s
► Codified in the 1960’s
► Commercialized in the 1970’s and…
► …it hasn’t changed
► What has changed?
Chad Smith
The “New Normal” • Pressure for leaner inventories
• Inaccurate forecasts
• More product variety
• Long lead time parts/components
5
DDMRP Sneak Peek
• Global sourcing and demand
• Shorter product life cycles
• Shorter customer tolerance times
• More product complexity and/or customization
Worldwide there are more
complex planning and supply
scenarios than ever – the past is
NOT an predictor for the future
Chad Smith
The First Law of Manufacturing
All benefits will be directly related to the speed of FLOW of materials and information.
Materials & Information
Information
Corollary: Materials and Information must be RELEVANT!!!
Chad Smith
Two Universal Point of Inventory
Too Much Too Little
A B
0
Optimal Range Warning Warning
Note: “Optimal” is from an on-hand perspective
Chad Smith
The MRP “Bi-Modal” Distribution
Too Much Too Little Optimal Range
# o
f p
art
s o
r S
KU
Warning Warning
0
Chad Smith
The Oscillation and its Effects
Too Much Too Little Optimal Range
# o
f p
art
s o
r S
KU
Warning Warning
Oscillation
0 Three Effects:
1. Persistent Unacceptable Inventory Performance
2. Service Challenges
3. High Expedite and Waste Related Expenses
Chad Smith
Supply Chains = Islands of MRP
External Orders
for Components
Master
Production
Schedule
Independent
Demand
Forecasts
Inventory
Record FileMRP SYSTEM
Product
Structure file
Manufacturing
Execution
System
MRP at the Heart of ManufacturingMRP
MRP
MRPMRP
MRP
MRP
MRPMRP
MRP
MRP
MRP
Today’s Complex Supply Chains
But how can we bring MRP into the highly complex
and volatile demand driven world?
Should we abandon MRP?
Chad Smith
What is Demand Driven MRP?
Material Requirements
Planning
(MRP)
Distribution Requirements
Planning
(DRP) Lean
Theory of
Constraints Innovation
Demand Driven MRP
(DDMRP)
A multi-echelon materials and inventory
planning and execution solution.
Chad Smith
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
1
Buffer Profiles
and Levels
2
Dynamic
Adjustments
3
Demand Driven
Planning
4
Visible and
Collaborative
Execution
5
Modeling/Re-modeling the Environment Plan Execute
The Five Components of DDMRP
Chad Smith
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
Component 1: Positioning
Where? (Position)
BEFORE
How Much? (Quantity)
When? (Timing)
Chad Smith
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
Component 1: Positioning
6 Factors 1. Customer Tolerance Time
2. Market Potential Lead Time
3. Supply and Demand Variability
4. Inventory Flexibility and Matrix BOM
5. Supply and Distribution Net Structure
6. Critical Resource Considerations
Chad Smith
Failure to properly position inventory
is a huge source of waste for most manufacturing and supply chain
companies.
Position and Pull Strategic
Inventory
Positioning
1
Buffer Profiles
and Levels
2
Dynamic
Adjustments
3
Demand
Driven
Planning
4
Visible and
Collaborative
Execution
5
Strategic
Inventory
Positioning
1
Strategic
Inventory
Positioning
1
Buffer Profiles
and Levels
2
Buffer Profiles
and Levels
2
Dynamic
Adjustments
3
Dynamic
Adjustments
3
Demand
Driven
Planning
4
Demand
Driven
Planning
4
Visible and
Collaborative
Execution
5
Visible and
Collaborative
Execution
5
Chad Smith
Stock Out
Component 2: Buffer Profiles and Levels
Group Trait Inputs
Lead Time Category Make, Buy or Distributed Variability Category Significant Order Multiples
Individual Part/SKU Inputs
Average Daily Usage Appropriate Discrete Lead Time Ordering Policy (min, max, multiple) Location (distributed parts)
+
ALERT! Rebuild OK Too Much
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
Chad Smith
Component 2: Buffer Profiles and Levels
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
Part: 403P
Lead Time: 21 days
Buffer Profile: B11MOQ
Green Zone 300
Yellow Zone 357
Red Zone Base 179
Red Zone Safety 54 0 % 2 0 % 4 0 % 6 0 % 8 0 % 10 0 %
403P
▼ 890
▼ 590
▼ 233
G Y R
Chad Smith Chad Smith
Component 3: Dynamic Adjustments
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
Dynamic Buffer Adjustment
Availa
ble
Sto
ck P
ositio
n
Avera
ge D
aily
Usage
100
200
300
400
500
600
700
800
900
1000
10
20
30
40
50
60
70
80
90
100
Dynamic Buffer Adjustment
Availa
ble
Sto
ck P
ositio
n
Avera
ge D
aily
Usage
100
200
300
400
500
600
700
800
900
1000
100
200
300
400
500
600
700
800
900
1000
10
20
30
40
50
60
70
80
90
100
10
20
30
40
50
60
70
80
90
100
100
200
300
400
500
600
700
800
900
1000
100
200
300
400
500
600
700
800
900
1000
10
20
30
40
50
60
70
80
90
100
10
20
30
40
50
60
70
80
90
100
Ave
rag
e D
aily
Usag
e
Zo
ne L
eve
ls
Avera
ge D
aily
Usage
Zone L
evels
100
200
300
400
500
600
700
800
900
1000
100
200
300
400
500
600
700
800
900
1000
10
20
30
40
50
60
70
80
90
100
10
20
30
40
50
60
70
80
90
100
▲Effectivity Date
Zo
ne L
eve
ls
100
200
300
400
500
600
700
800
900
1000
100
200
300
400
500
600
700
800
900
1000
10
20
30
40
50
60
70
80
90
100
10
20
30
40
50
60
70
80
90
100
Ave
rag
e D
aily
Usag
e
▲Effectivity Date
Seasonality Ramp Up Ramp Down
Recalculated Adjustment
Planned Adjustments
Chad Smith
Component 4: Demand Driven Planning
Demand Driven Material Requirements Planning Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
10,000
5,000
r457
f576
h654
r672
10,000
5,000
r457
f576
h654
r672
623
213
540
1200
Demand
0
2162
3128
0
Recommended
Supply Qty
2743
530
3358
5453
Open
Supply
Expedite Open
Supply (Execution)
38521732r672
Place New Order40383721h654
Place New Order68724054f576
No Action82654012r457
ActionAvailable
Stock
On-handPart
623
213
540
1200
Demand
0
2162
3128
0
Recommended
Supply Qty
2743
530
3358
5453
Open
Supply
Expedite Open
Supply (Execution)
38521732r672
Place New Order40383721h654
Place New Order68724054f576
No Action82654012r457
ActionAvailable
Stock
On-handPart
Order Spike HorizonOrder Spike Horizon
Chad Smith
Part/SKU Info
35 units
70 units
52 units
Replenishment Lead Time = 7 days Lead time = 7 days (Medium – 50%)
ADU = 10
Medium Variability (50%)
Order Spike Horizon = 7 days
Order Spike Threshold = 26 (50% Red)
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
Order Spike Threshold (50% of red)
Order Spike
Horizon
▼
1 2 3 4 5 6 7
Sales Order Demand
Supply Orders
-4 -3 -2 -1
As time progresses Sales Orders and Supply Orders advance toward the buffer
Chad Smith
Order Spike
Horizon
▼
Order Spike Threshold
35
Sales Order Demand Supply Orders
1 2 3 4 5 6 7
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
-7 -6 -5 -4 -3 -2 -1
65
72
10
37
127 Today’s Order Recommendation: NONE
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
▪
▪
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 1
On-Hand
Available Stock
10 18 17 6 5
9 10
Chad Smith
Order Spike Threshold
35
Sales Order Demand Supply Orders
2 3 4 5 6 7 -7 -6 -5 -4 -3 -2 -1
37
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
55
72
48
79 Today’s Order Recommendation: 78
SP
IKE
8
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
▪
▪
▪ ▪
◄SPIKE!
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 2
On-Hand
Available Stock
18 17 6 5
9 10 30
Chad Smith
Order Spike Threshold
Sales Order Demand Supply Orders
3 4 5 6 7
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
72
115
47
37
140
▪
8
Today’s Order Recommendation: NONE
▪
▪ ▪
78
9
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 3
On-Hand
Available Stock
SP
IKE
17 6 5
9 10 30 5
Chad Smith
Sales Order Demand Supply Orders
4 5 6 7
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
55
115
36
37
134
8
Today’s Order Recommendation: NONE
78
9
▪
▪
10
Order Spike Threshold
▪
▪
▪ ▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 4
On-Hand
Available Stock
SP
IKE
6 5 9 10 30
5 6
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
49
115
35
37
129 Today’s Order Recommendation: NONE
78
▪
▪
5 6 7 8 9 10
Order Spike Threshold
11
▪
▪
▪
▪
▪ ▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 5
On-Hand
Available Stock
SP
IKE
5 9 10 30
5 6 9
Chad Smith Chad Smith Chad Smith Chad Smith Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
44
115
39
37
120 Today’s Order Recommendation: 37
78
6 7 8 9 10
Order Spike Threshold
11
▪
▪
12
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 6
On-Hand
Available Stock
SP
IKE
9 10 30 5 6
9 10
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
72
115
40
147 Today’s Order Recommendation: NONE
78
7 8 9 10
Order Spike Threshold
11 12 13
37
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 7
On-Hand
Available Stock
SP
IKE
10 30 5 6
9 10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
62
115
30
147 Today’s Order Recommendation: NONE
78
8 9 10
Order Spike Threshold
11 12 13 14
37
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 8
On-Hand
Available Stock
SP
IKE
30 5 6
9 10 20 6
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
32
115
5
142 Today’s Order Recommendation: NONE
78
9 10
Order Spike Threshold
11 12 13 14
37
15
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 9
On-Hand
Available Stock
5 6 9 10 20
6 11
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
105
37
6
136 Today’s Order Recommendation: NONE
10
Order Spike Threshold
11 12 13 14
37
15 16
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 10
On-Hand
Available Stock
6 9 10 20
6 11 10
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
99
37
9
127 Today’s Order Recommendation: NONE
Order Spike Threshold
11 12 13 14
37
15 16 17
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 11
On-Hand
Available Stock
9 10 20 6
11 10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 12 13 14
-7 -6 -5 -4 -3 -2 -1
90
37
10
117 Today’s Order Recommendation: 40
Order Spike Threshold
12 13 14
37
15 16 17
▪
▪
18
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 12
On-Hand
Available Stock
10 20 6
11 10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
-7 -6 -5 -4 -3 -2 -1
80
77
20
137 Today’s Order Recommendation: NONE
Order Spike Threshold
13 14
37
15 16 17 18 19
40
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 13
On-Hand
Available Stock
20 6
11 10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14
-7 -6 -5 -4 -3 -2 -1
97
40
6
121 Today’s Order Recommendation: 36
Order Spike Threshold
14 15 16 17 18 19
40
20
▪ ▪
15 16 17
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 14
On-Hand
Available Stock
6 11 10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14
-7 -6 -5 -4 -3 -2 -1
91
76
11
156 Today’s Order Recommendation: 36
Order Spike Threshold
15 16 17 18 19
40
20 21
36
15 16 17
▪
▪
▪ ▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 15
On-Hand
Available Stock
11 10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14
-7 -6 -5 -4 -3 -2 -1
80
76
10
146 Today’s Order Recommendation: 36
Order Spike Threshold
16 17 18 19
40
20 21
36
15 16 17
▪
▪
22
▪
▪
▪ ▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 16
On-Hand
Available Stock
10 20
Chad Smith
Sales Order Demand Supply Orders
Available Stock Today:
On-Hand
Open Supply
Sales Order Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14
-7 -6 -5 -4 -3 -2 -1
70
76
18
128 Today’s Order Recommendation: NONE
Order Spike Threshold
17 18 19
40
20 21
36
15 16 17
22 23
▪
▪ ▪
▪
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▪
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▪
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▪ ▪
▪
▪
▪
▪
▪
▪
▪
▪
▪ ▪
▪
▪
▪
Order Spike
Horizon
▼
TOG = 157 ►
TOY = 122 ►
TOR = 52 ►
DAY 17
On-Hand
Available Stock
20
Chad Smith
0
20
40
60
80
100
120
140
160
180
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Demand Available Stock On Hand Open Supply
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
10 18 17 6 5 9 10 30 5 6 9 10 20 6 11 10 18
127 79 140 134 129 120 147 147 142 136 127 117 137 121 156 146 128
65 55 72 55 49 44 72 62 32 105 99 90 80 97 91 80 70
72 72 115 115 115 115 115 115 115 37 37 37 77 40 76 76 76
DAY
Demand
Av Stock
On Hand
Supply
Average Daily Usage over 17 day period = 11.8 Average On Hand Inventory = 71.6
Chad Smith
39
All material and content © copyright 2012 Demand Driven Institute. All rights reserved. Certified Demand Driven Planner (CDDP) is a trademark of the ISCEA
Average On-Hand
Inventory = 71.6
On Hand Inventory Distribution
0
1
2
3
4
5
0 20 40 60 80 100
120
140
160
Chad Smith
Component 5: Execution
Demand Driven Material Requirements Planning
Strategic
Inventory
Positioning
Buffer Profiles
and Levels
Dynamic
Adjustments
Demand Driven
Planning
Visible and
Collaborative
Execution
Order # OH Buffer Status Order Type Due Date Customer
MO 12379 MTO 5/12/2011 Super Tech
MO 12401 12% (RED) Stock 5/14/2011 Internal
MO 12465 27% (RED) Stock 5/12/2011 Internal
MO 12367 33% (YELLOW) Stock 5/12/2011 Internal
MO 12411 41% (YELLOW) Stock 5/16/2011 Internal
Solution: Priority by
BUFFER STATUS!
Order # Order Type Due Date Customer
MO 12367 Stock 5/12/2011 Internal
MO 12379 MTO 5/12/2011 Super Tech
MO 12465 Stock 5/12/2011 Internal
MO 12401 Stock 5/14/2011 Internal
MO 12411 Stock 5/16/2011 InternalProblem: Priority by DUE DATE
Chad Smith
All material and content © copyright 2012 Demand Driven Institute. All rights reserved. Certified Demand Driven Planner (CDDP) is a trademark of the ISCEA
What Execution Looks Like
FPA
SAC ICA PPI
PPJ
PPF
SAA
PPE
PPG
PPH
PPB
SAE PPC ICD
ICB
PPA
SAF
SAD
ICC SAB
PPD
Bill of Materials
FPA
FPA
FPA
Region 1
Region 2
Region 3
Supplier 1
Supplier 2
Supplier 3
PPA
PPJ
PPG
PPH
PPF
PPE
PPB
PPD
PPC
PPI
Purchased
Parts List
Med 41% 05/12 PO 276-54
Med 39% 05/12 PO 891-84
Critical 13% 05/12 PO 820-89
Buffer Status Due Date Order #
Purchased Items
Med 36% Region 3 FPA
Med 41% Region 2 FPA
Critical 11% Region 1 FPA
Buffer Status Location Item #
Distributed Items Manufactured Items
Med 34% ICB 05/22 WO 211-72
Critical 17% SAD 05/22 WO 832-41
Critical 13% FPA 05/24 WO 819-87
Buffer Status Item # Due Date Order #
Chad Smith
The Power of DDMRP (Planning Perspective)
Too Much Too Little Yellow
# o
f p
art
s o
r S
KU
Red Green
0
Chad Smith
Some DDMRP Early Adopters
Chad Smith
FMCG Example
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
21
-Nov
23
-Nov
25
-Nov
29
-Nov
1-D
ec
5-D
ec
7-D
ec
9-D
ec
13
-Dec
15
-Dec
2-J
an
4-J
an
6-J
an
10
-Jan
12
-Jan
5-Over ToG 4-Low 3-Medium
300 Materials are buffered without increase in RPW
inventory. Lead-times de-coupled
Dampened the bull whip, now operating more
effectively, and inventory optimized
Before
After
Replenishment lead time has been
reduced 82% to 9 days from 50
days, becoming Responsive with
18% less Raw and Pack inventory
Finished Goods down 45% with
99.7% Service
Chad Smith
Early Adopter Results
MRP
DDMRP
DDMRP Sneak Peek All material and © copyright Demand Driven Institute 2011, all rights reserved
Chad Smith
Early Adopter Results
Stock-outs reduced by over 66%!
0
100
200
300
400
500
600
700
Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Sep
'09A
$M
illio
ns
Longview Inv Longview TR
0
100
200
300
400
500
600
700
Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Sep
$M
illio
ns
Houston Inv Houston TR
High Inventories
Shortages
Massive Expedites
Low Inventories
High Service
Fewer Expedites
DDMRP Sneak Peek
All material and © copyright Demand Driven Institute 2011, all rights reserved
Chad Smith
C
Steel
Products
Component
Supply
(H/L)
Offshore
Products
Mining
Products
C
C
Suppliers
Drilling
Systems
Forestry
Products
C
C
Synchronization and Flow Challenge
C = Customer
= Remote Location
Supply Variability
Distortions &
amplification in
demand requirements
reverberate backward
Demand /
Information
Variability
End Item Assembly
inherits the amplifying
upstream variability.
Lead Time before DDMRP
Chad Smith
C
SP CS
OP
MP C
C
Suppliers
C = Customer
DS
FP
C
C
= Remote Location
= Time Buffer
= Strategic Replenishment Buffers
Chad Smith