Demand Driven Material Requirements Planning (DDMRP), Version 2. Carol Ptak
simple, clear, and highly visible signals across the enterprise. This solution is called Demand Driven Material Requirements Planning (DDMRP).
Lean advocates often get accused of being anti-technology, but do Lean advocates really want manufacturing companies to entirely abandon the promise of technology? The answer should be yes when that technology is wasteful, confusing, and not reflective of reality, when it force-fits concepts so as to simply permit their use. Unfortunately, this has been the situation for quite some time with regard to traditional MRP and DRP (distribution requirements planning) systems.
Point 8 of the Toyota Production System states, “Use only reliable, thoroughly tested technology that serves your people and processes.”2 Until now the prevailing materials and inventory planning and execution technology, while thoroughly tested, have been largely inappropriate to serve the people and processes in companies transforming to a leaner approach. Chapter 3 clearly demonstrated that point.
Yet the proliferation and sustainability of Lean implementations has been negatively impacted by the lack of appropriate supply chain materials planning and execution technology. Many well-respected manufacturing analysts have concluded that there is tremendous potential for the incorporation of better planning and visibility software into Lean implementations. Manufacturing needs Lean methods to stay competitive in the more complex environment of the twenty-first century. Lean needs an effective customer-centric planning approach to bring that vision to reality.
What if there were an appropriate technology? What if a reliable, thoroughly tested method for a customer-centric pull-based planning and execution of supply chain materials with high degrees of visibility could be introduced to the MRP world? Under that condition Lean and MRP would both find an effective solution. This method is Demand Driven Material Requirements Planning.
Demand Driven Material Requirements Planning
This section will serve to introduce DDMRP—its basic foundation and its major components. But first it may help to understand what the term “demand driven” really means and the history behind it. The term was originally defined as the ability to “sense changing customer demand and adapt planning and production while pulling from suppliers all in real time.”
The History of “Demand Driven”
The term was pioneered by PeopleSoft in 2002 while Carol Ptak was the vice president of manufacturing and distribution industries. When Oracle acquired PeopleSoft in 2003, the term was largely abandoned. It was then resurrected in 2007 by AMR. In 2010 AMR was acquired by Gartner, and Gartner used the term as part of what it called its “Demand Driven Value Network” approach.
In 2011 the third edition of Orlicky’s Material Requirements Planning (Ptak and Smith) introduced the initial blueprint for Demand Driven Material Requirements Planning as an alternative formal planning and control logic. The year 2011 also marked the foundation of the Demand Driven Institute by Carol Ptak and Chad Smith. The Demand Driven Institute has published dozens of white papers and case studies on the DDMRP topic. A repository of case studies and white papers on DDMRP is available free at http://www.demanddriveninstitute.com.
In 2012 the Demand Driven Institute developed the Demand Driven Planner (DDP) program. The DDP program was designed to provide consistent global standards for the DDMRP approach and to teach and certify practitioners in those standards. From 2012 to 2017 over 3,000 people took the DDP program on six continents. 2012 also saw a partnership between the Demand Driven Institute and the International Supply Chain Education Alliance (ISCEA). The ISCEA provided testing and certification infrastructure and issued the Certified Demand Driven Planner (CDDP) certificate.
In 2014 Demand Driven Performance: Using Smart Metrics was written by Debra Smith and Chad Smith. This book extended the term across the enterprise into finance, scheduling, shop floor control, and strategy, effectively defining the Demand Driven Operating Model. This will be defined and discussed later in this chapter.
In 2016, with Demand Driven Performance: Using Smart Metrics as a guide, the Demand Driven Institute released the Demand Driven Leader (DDL) program. The DDL program was designed to provide consistent global standards for the Demand Driven Operating Model (including DDMRP) and to teach and certify practitioners in those standards.
In 2018 the Demand Driven Institute launched it’s own testing and certification capability to support the growing body of demand driven knowledge and the proliferation of that knowledge around the world. These professional endorsements include the Demand Driven Planner Professional, Demand Driven Leader Professional and Demand Driven Fundamentals Professional certificates.
The original definition of “demand driven” still works in today’s more mature and larger demand driven body of knowledge. Additionally, this maturation and expansion has provided clarity on precisely what demand driven does not mean. It does not mean “make to order everything.” It does not mean “put inventory everywhere.” It does not mean “forecast better.” Becoming demand driven requires a fundamental shift from the centrality of supply- and cost-based operational methods (commonly referred to as “push and promote”) to a centrality of actual demand- and flow-based methods (commonly referred to as “position, protect, and pull”). The term “actual demand” is extremely important in distinguishing it from a rebranded and somehow superior forecasting approach.
Demand Driven Material Requirements Planning is a formal multi-echelon planning and execution method to protect and promote the flow of relevant information and materials through the establishment and management of strategically placed decoupling point stock buffers. DDMRP has roots in many conventional methods. Figure 5-4 shows the methodological foundation for DDMRP.
FIGURE 5-4 The methodological foundation of DDMRP
DDMRP combines some of the still relevant aspects of MRP and DRP with the pull and visibility emphases found in Lean and the Theory of Constraints and the variability reduction emphasis of Six Sigma. Do these methods all just naturally fuse together? No. At a minimum, as noted earlier in this chapter, there are conflicts between Lean and MRP. A similar conflict occurs with MRP and the Theory of Constraints. The final component of this fusion requires a few key innovations that are unique to DDMRP. While the remainder of this book will provide the detailed aspects of these innovations, Appendix E provides a brief summary of the four primary unique innovations.
Demand Driven Material Requirements Planning has five sequential components. Figure 5-5 illustrates these components, their sequence, and how they relate to the mantra “position, protect, and pull.” These five components are respectively featured in sequential chapters starting with Chapter 6.
The first three components essentially define the initial and evolving configuration of a Demand Driven Material Requirements Planning Model. Strategic inventory positioning will determine where the decoupling points are placed. Buffer profiles and levels will determine the amount of protection at those decoupling points. Dynamic adjustments define how that level of protection flexes up or down based on operating parameters, market changes, and planned or known future events.
The fourth and fifth elements define the actual operational aspects of a DDMRP