Demand Driven Material Requirements Planning (DDMRP)

Copyright 2018 Eficent Business and IT Consulting Services S.L. - Brussels, October 3-5, 2018 - #OdooExperience - www.odoo.com
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Demand Driven Material Requirements
Planning (DDMRP)
Jordi Ballester Alomar

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

Introduction
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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

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.

What is the Objective?
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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

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.
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Foundry Component Assembler
Distortions to relevant materials
Distortions to relevant information
Final
Product

What is the Objective?
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The Primary Objective of Operations Management:
“Protect and promote the flow of relevant
information and materials.”

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)
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Foundry Component Assembler
Final
Product
Decoupled Lead Time Decoupled Lead Time

Methodology
10

DDMRP Components
11
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

Strategic Inventory Positioning
● Traditional MRP answers: How Much? (quantity) and When? (synchronization).
● There is a previous question… Where? (position).
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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

Strategic Inventory Positioning
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Bill of Material Structure Report Bill of Material Matrix

DDMRP Components
14
Strategic
Inventory
Positioning
Buffer
Profiles and
Levels
Dynamic
Adjustments
Demand
Driven
Planning
Visible and
Collaborative
Execution
1 2 3 4 5

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.
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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

Buffer Profiles and Levels
● DDMRP Buffer form view:
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DDMRP Components
17
Strategic
Inventory
Positioning
Buffer
Profiles and
Levels
Dynamic
Adjustments
Demand
Driven
Planning
Visible and
Collaborative
Execution
1 2 3 4 5

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).
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DDMRP Components
19
Strategic
Inventory
Positioning
Buffer
Profiles and
Levels
Dynamic
Adjustments
Demand
Driven
Planning
Visible and
Collaborative
Execution
1 2 3 4 5

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.
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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

Demand Driven Planning
● Planning screen in Odoo
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DDMRP Components
22
Strategic
Inventory
Positioning
Buffer
Profiles and
Levels
Dynamic
Adjustments
Demand
Driven
Planning
Visible and
Collaborative
Execution
1 2 3 4 5

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!
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Buffer Status
Alerts
Projected On
Hand Alert
Current On
Hand Alert
Material
Synchronization
Alerts
Lead Time
Alerts
Synchronization
Alerts
Independent Points ( ) Dependent Points

● Current On Hand alert on the Manufacturing App:
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● Current On Hand alert on the Purchase App:
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DDMRP in Odoo
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● 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
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Thank you!
Jordi Ballester Alomar
mail: jordi.ballester@eficent.com
twitter: @jbeficent_erp

Demand Driven Material Requirements Planning (DDMRP)

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