Editing Material requirements planning (section)

== Demand driven MRP ==

In 2011, the third edition of "Orlicky's Materials Requirements Planning<ref>{{Cite book|title=Orlicky's Materials Requirements Planning|last1=Ptak|first1=Carol|last2=Smith|first2=Chad|publisher=McGraw Hill|year=2011|isbn=978-0-07-175563-4}}</ref>" introduced a new type of MRP called "demand driven MRP" (DDMRP).<ref name="Ptak, Carol 2011">Ptak, Carol and Smith, Chad (2011). ''Orlicky's MRP 3rd edition'', McGraw Hill, New York {{ISBN|978-0-07-175563-4}}.</ref> The new edition of the book was written, not by Orlicky himself (he died in 1986) but by Carol Ptak and Chad Smith at the invitation of [[McGraw Hill]] to update Orlicky's work.

Demand driven MRP is a multi-echelon formal planning and execution technique with five distinct components:<ref name="Ptak, Carol 2011"/>
# '''Strategic inventory positioning''' – The first question of effective inventory management is not, "how much inventory should we have?"  Nor is it, "when should we [[make or buy]] something?" The most fundamental question to ask in today's manufacturing environments is, "given our system and environment, where should we place inventory to have the best protection from surprises?"  Inventory is like a break wall to protect boats in a [[marina]] from the roughness of incoming waves.  Out on the open ocean the break walls have to be 50–100 feet tall, but in a small lake the break walls are only a couple feet tall.  In a glassy smooth [[pond]] no break wall is necessary.
# '''Buffer profiles and level''' – Once the strategically replenished positions are determined, the actual levels of those buffers have to be initially set.  Based on several factors, different materials and parts behave differently (but many also behave nearly the same).  DDMRP calls for the grouping of parts and materials chosen for strategic replenishment and that behave similarly into "buffer profiles."  Buffer profiles take into account important factors including [[lead time]] (relative to the environment), [[Statistical variability|variability]] (demand or supply), whether the part is made or bought or distributed and whether there are significant order multiples involved.  These buffer profiles are made up of "zones" that produce a unique buffer picture for each part as their respective individual part traits are applied to the group traits.
# '''Dynamic adjustments''' – Over the course of time, group and individual traits can and will change as new suppliers and materials are used, new [[Market (economics)|market]]s are opened and/or old markets deteriorate and manufacturing capacities and methods change.  Dynamic buffer levels allow the company to adapt buffers to group and individual part trait changes over time through the use of several types of adjustments.  Thus, as more or less variability is encountered or as a company's strategy changes these buffers adapt and change to fit the environment.
# '''Demand-driven planning''' – takes advantage of the sheer computational power of today's hardware and software.  It also takes advantage of the new demand-driven or [[Push–pull strategy|pull]]-based approaches.  When these two elements are combined then there is the best of both worlds; relevant approaches and tools for the way the world works today ''and'' a system of routine that promotes better and quicker decisions and actions at the planning and execution level.
# '''Highly visible and collaborative execution''' – Simply launching [[purchase order]]s (POs), manufacturing orders (MOs) and transfer orders (TOs) from any planning system does not end the materials and order management challenge.  These POs, MOs and TOs have to be effectively managed to synchronize with the changes that often occur within the "execution horizon." The execution horizon is the time from which a PO, MO or TO is opened until the time it is closed in the system of record.  DDMRP defines a modern, integrated and greatly needed system of execution for all part categories in order to speed the proliferation of relevant information and priorities throughout an organization and supply chain.

These five components work together to attempt to dampen, if not eliminate, the nervousness of traditional MRP systems and the [[bullwhip effect]] in complex and challenging environments. The Demand Driven Institute claims the following: In utilizing these approaches, planners will no longer have to try to respond to every single message for every single part that is off by even one day. This approach provides real information about those parts that are truly at risk of negatively impacting the planned availability of inventory. DDMRP sorts the significant few items that require attention from the many parts that are being managed. Under the DDMRP approach, consultants selling it claim that fewer planners can make better decisions more quickly.  That means companies will be better able to leverage their working and human capital as well as the huge investments they have made in information technology. One down-side, however, is that DDMRP cannot run on the majority of MRPII/ERP systems in use today.

It is claimed by the companies selling it that DDMRP has been successfully applied to a variety of environments including CTO ([[configure to order]]), MTS ([[make to stock]]), MTO ([[make to order]]) and ETO ([[engineer to order]]) although detailed studies are rare.<ref name="Ptak, Carol 2011"/> The methodology is applied differently in each environments but the five step process remains the same.  DDMRP leverages knowledge from [[theory of constraints]] (TOC), traditional MRP & [[Distribution resource planning|DRP]], [[Six Sigma]] and [[Lean manufacturing|lean]]. It is effectively an amalgam of MRP for planning, and kanban techniques for execution (across multi-echelon supply chains) which means that it has the strengths of both but also the weaknesses of both, so it remains a niche solution. The problems with MRP (as listed above) also apply to DDMRP.
Additional references are included below.  
<ref name="Ptak, Carol 2016">Ptak, Carol and Smith, Chad (2018). ''DDMRP V2'', Industrial Press, {{ISBN|9780831136284}}</ref><ref name="Smith, Debra 2016">Smith, Debra and Smith, Chad (2013). ''Demand Driven Performance, Using Smart Metrics'', McGraw Hill, {{ISBN|978-0071796095}}</ref><ref name="Mondon, Caroline 2016">Mondon, Caroline (2016). ''Missing Links'', Industrial Press, {{ISBN|978-0831136079}}</ref>