ddw2014 demand driven mrp and drp supply order generation

Copyright © Demand Driven World, 2014

Demand Driven MRP and DRP Supply Order Generation


Demand Driven Planning vs. Execution

• Planning = Process of Generating Supply Order Requirements• Execution = Process of Managing Open Supply Orders

Demand Driven Material Requirements PlanningStrategic Inventory

Positioning

Buffer Profiles and Levels

Dynamic Adjustments

Demand Driven Planning

Visible and Collaborative

Execution


The Available Stock Equation

• Unique to DDMRP – used to create supply order recommendations

• On‐hand + On‐order – Qualified Sales Order Demands

On‐HandOn‐Order


Breaking it Down

• On‐Hand: Inventory physically in stock• On‐Order: The quantity of stock that has been ordered but not received

• Qualified Sales Order Demand: Sales Orders due today, in the past and qualified future spikes.


Qualifying Spikes

Today 2 3 4 5 6 7 8 9

Tota

l Qua

ntity

Ord

ered

Order Spike Horizon = Length of time in the future in which spikes are considered

Order Spike Threshold = Quantity in daily buckets which would qualify for available stock equation inclusion


Shifting From Forecast to Actual Demand

From:Forecast

Plant

Planning

Suppliers

Logistics

• Planned orders create supply orders in anticipation of need

• Forecast error associated with Planned orders results in inventory misalignments and expedite expenses

Typically 50-70% Accuracy

To: Sales Order

Plant

Planning

Suppliers

Logistics

• Only qualified sales orders within a short range horizon qualify as demand allocations

• Sales orders give a near perfect demand signal in terms of what will be sold and when it will be sold.

Typically 99% Accurate


What’s Different?

• Available Inventory – The on‐hand inventory balance minus allocations, reservations, back‐orders and (usually) quantities held for quality problems. Often called beginning available balance. (APICS Dictionary 14th Edition, page 10)

• Differences – Not on‐hand focused– No planned order derived allocations– Incorporates open supply– Used to create supply orders recommendations


Generating Supply Order Recommendations

10,000

5,000

Part Open Supply

On‐hand Demand Available Stock

Recommended Supply Qty

Action

r457 5453 4012 1200 8265 0 No Action

f576 3358 4054 540 6872 3128 Place New Order

h654 530 3721 213 4038 2162 Place New Order

r672 2743 1732 623 3852 0 Expedite Open Supply (Execution)

Supply generation is based what zone the available stock equation places the part

Available stock = on-hand + on-order – QUALIFIED sales order demand (past due, due today and qualified spikes)


DDMRP Intro9

Part/SKU Info

35 units

70 units

52 units

Replenishment Lead Time = 7 daysLead time = 7 days (Medium – 50%)ADU = 10Medium Variability (50%)Order Spike Horizon = 7 daysOrder 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


DDMRP Intro10

Order Spike Horizon

▼Order Spike Threshold

35

Sales Order Demand Supply Orders

1 2 3 4 5 6 7

Available Stock Today:

On-HandOpen SupplySales 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 18 176 5

9 10


DDMRP Intro11

Order Spike Threshold

35


2 3 4 5 6 7-7 -6 -5 -4 -3 -2 -1

37



55

72

48

79 Today’s Order Recommendation: 78

SPIK

E

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

18 176 5

9 10 30


DDMRP Intro12



3 4 5 6 7



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

SPIK

E

176 5

9 10 305


DDMRP Intro13


4 5 6 7



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

1348

Today’s Order Recommendation: NONE

78

9

▪

▪

10


▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 4

On-Hand

Available Stock

SPIK

E

6 59 10 30

5 6


DDMRP Intro14




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


78

▪

▪

5 6 7 8 9 10


11

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 5

On-Hand

Available Stock

SPIK

E

59 10 30

5 69


DDMRP Intro15




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


78

6 7 8 9 10


11

▪

▪

12

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 6

On-Hand

Available Stock

SPIK

E

9 10 305 6

9 10


DDMRP Intro16




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


78

7 8 9 10


11 12 1337

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 7

On-Hand

Available Stock

SPIK

E

10 305 6

9 10 20


DDMRP Intro17




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


78

8 9 10


11 12 13 1437

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 8

On-Hand

Available Stock

SPIK

E

305 6

9 10 206


DDMRP Intro18




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


78

9 10


11 12 13 1437

15

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 9

On-Hand

Available Stock

5 69 10 20

611


DDMRP Intro19




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


10


11 12 13 1437

15 16

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 10

On-Hand

Available Stock

69 10 20

611 10


DDMRP Intro20




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



11 12 13 1437

15 16 17

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 11

On-Hand

Available Stock

9 10 206

11 10 20


DDMRP Intro21




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



12 13 1437

15 16 17

▪▪

18

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 12

On-Hand

Available Stock

10 206

11 10 20


DDMRP Intro22




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



13 1437

15 16 17 18 1940

▪

▪

▪▪

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 13

On-Hand

Available Stock

206

11 10 20


DDMRP Intro23




1 2 3 4 5 6 7 8 9 10 11 12 13 14

-7 -6 -5 -4 -3 -2 -1

97

40

6



14 15 16 17 18 1940

20

▪▪

15 16 17

▪

▪

▪▪

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 14

On-Hand

Available Stock

611 10 20


DDMRP Intro24




1 2 3 4 5 6 7 8 9 10 11 12 13 14

-7 -6 -5 -4 -3 -2 -1

91

76

11



15 16 17 18 1940

20 2136

15 16 17

▪

▪▪▪

▪

▪

▪▪

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 15

On-Hand

Available Stock

11 10 20


DDMRP Intro25




1 2 3 4 5 6 7 8 9 10 11 12 13 14

-7 -6 -5 -4 -3 -2 -1

80

76

10



16 17 18 1940

20 2136

15 16 17

▪

▪

22

▪

▪▪▪

▪

▪

▪▪

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 16

On-Hand

Available Stock

10 20


DDMRP Intro26




1 2 3 4 5 6 7 8 9 10 11 12 13 14

-7 -6 -5 -4 -3 -2 -1

70

76

18



17 18 1940

20 2136

15 16 17

22 23

▪

▪▪

▪

▪

▪▪▪

▪

▪

▪▪

▪▪

▪

▪

▪▪

▪

▪

▪

▪

▪

▪

▪

▪

▪▪▪

▪

▪

Order Spike Horizon

▼

TOG = 157 ►

TOY = 122 ►

TOR = 52 ►

DAY 17

On-Hand

Available Stock

20


DDMRP Intro27

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 1710 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

DAYDemand

Av Stock

On Hand

Supply

Average Daily Usage over 17 day period = 11.8 Average On Hand Inventory = 71.6


DDMRP Intro28

28All 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


De‐Coupled Explosion• The explosion starts when a part’s

available stock position enters the rebuild zone

• The explosion stops at each stock position – No Matter What!!

101

201 203 204

302 303P

403P 404P

301

401P 402

304P

501P501P

301

404P

304P

203

101

Copyright © Demand Driven World, 2014 30

Available Stock Status = Relative Priority of Supply Order Generation

DDMRP creates resupply signals based on the “available stock” status of each buffer. This gives prioritized sequence based on actual need.


Distribution Network Planning Priority– Current Available Stock Positions

SKU Seattle Burbank Denver Chicago Newark Atlanta Dallas Overall

ABC 52% 90% 83% 76% 13% 21% 103%

CDF 78% 63% 76% 72% 68% 92% 63%

TUX 90% 55% 62% 17% 27% 56%

XYZ 63% 106% 47% 35% 90% 87% 89%


The Hybrid

Region 1 Region 2 Region 3 Region 4

Slow and Medium Movers

Fast movers go direct ship


Determining Fast versus Medium and Slow

• MOQ/ADU = Average order frequency• Comparing average order frequency across all parts produces

a “flow index”Flow Index

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 20+

# of

SKU Direct Ship Candidates Hub and Spoke SKU

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 20+

Volu

me

of S

KU

Direct Ship Candidates Hub and Spoke SKU


Hybrid Supply Order Generation

• Hubbed items = typical available stock equation• Direct Shipped Supply Order Generation:

– EASY: Imposed order cycle (e.g. every 6 days)– HARDER: Accumulation of supply order demand at the forward

locations to a set % of the sourcing unit minimum order quantity (e.g. until ADU would complete the allocation on the order completion date)

SKU Seattle Burbank Denver Chicago Current Combined Required Supply Order Quantities

Sourcing Unit

MOQ

Remaining to full batch

Combined ADU

Days Left to full MOQ

Lead Time

Order?

CBA 68% 62% 61% 71% 6043 15000 8957 3105 3 3 YES

FDC 88% 83% 76% 72% 2934 15000 12507 1907 6 4 NO


Prioritized Share

• If supply order is launched and fulfilled with less total combined supply order requirement than the sourcing unit MOQ then shipments are directed using a “prioritized share” equation


Prioritized Share for Direct Shipped Items

Region 1 Region 2 Region 3 Region 4

Deployment Schedule

♦

100

200

300

400500

600

700

800

900

1000

1100

1200

1300

14001500

1600

1700

♦♦

♦To Be Deployed

1,200

Region 4 620Region 3 510Region 2 70

SKU XYZ

ddw2014 demand driven mrp and drp supply order generation

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