5 Reasons Why Companies Need to be Demand Driven

Demand Driven Material Requirements Planning – also known as DDMRP – has the potential to transform a company from top to bottom when implemented effectively. This highly effective framework for supply chain planning involves a five-step sequence that prioritizes risk management and inventory efficiency. At its core, DDMRP centers on a position-protect-pull model. This provides cushioning and security across the supply chain, so last-minute changes and fluxes in the market don’t send companies into a tailspin.

DDMRP takes the best of traditional Material Requirements Planning and improves upon it, borrowing from flow-based methodologies like Six Sigma, Lean, and Theory of Constraints. The result is a hybrid system that upgrades antiquated processes and accelerates adaptation to an ever-evolving global marketplace. It’s no wonder supply chain powerhouses like Michelin and Shell rely on Demand Driven Planning to seamlessly move products from factory floors into consumers’ hands.

What do you stand to gain by making the switch to Demand Driven? The payoff is incalculable. We’ve tried to sum it up by narrowing in on the five most influential reasons that DDMRP needs to be a fundamental part of any company’s supply chain strategy.  Read on to learn more about the amazing ways Demand Driven planning can shift an organization’s perspective and pave the path to success.

• Thrive in a Volatile, Uncertain, Complex, & Ambiguous World

Back in the 1960s, when MRP methodology was first put into place, the global economic playing field looked much different than it does today. In that era, supply chains were remarkably simple, and it was possible to make highly accurate forecasts. At the same time, products themselves were far less complex, and product life cycles were longer. The takeaway? MRP was a perfectly fine supply chain planning tool for that bygone era, but in today’s infinitely more complex and uncertain world, it’s obsolete. DDMRP was built with the volatility of the 21st century market in mind; it’s designed to adapt and protect companies from the risks inherent in operating under such unpredictable conditions. Companies simply can’t afford to use the old-fashioned techniques of times past. Demand Driven gives them the possibility of succeeding despite – and even because of – the highly uncertain global market.

• Improve Customer Service

It’s at the forefront of any strong business leader’s mind: making the customer experience as satisfying as possible. This is just another compelling reason to make the leap to Demand Driven. Sophisticated, highly accurate, and adaptable long-range planning means lower lead times and improved performance on commitment dates. DDMRP gives supply chain planners the tools to make mini modifications as needed, so supply can be toggled to meet demand, landing in that sweet spot that results in customer satisfaction. On-time delivery and products available when they’re most desired; it’s a win all around, and savvy companies make  Demand Driven a cornerstone of their supply chain strategy to ensure it stays that way.

• Optimize Inventory

One of the greatest draws of Demand Driven is its emphasis on finding the “just right” fit for inventory. With DDMRP, companies are able to lower inventory levels and ensure supply orders are aligned with what you actually need, rather than a hazy forecast. Strategic decoupling and dynamically adjusting buffer levels allows supply chain planners to make “micro-adjustments” to inventory. No more overstocking and wasting precious resources – or running low on inventory when demand surges. The major players in the global supply chain choose to implement Demand Driven principles to maintain the upper hand when it comes to inventory. Taking control over resources and learning to use the DDMRP  “Net Flow Equation” instead of relying on outdated forecasting techniques gives these companies an edge in the marketplace.

• Reduce Costs 

It’s a domino effect. Getting an accurate read on stock orders means no last-minute scrambling. Expediting and overhead costs are slashed. Excess inventory is a thing of the past. Demand Driven pays in spades, since the Position-Pull-Protect sequence involves built-in buffers that allow supply chain managers to titrate their resources in real time. This kind of Demand Driven fine-tuning results in a reduction in expenditure and increase in the bottom line. As a bonus, companies may find that reductions in lead times allow them to charge a premium, which only serves to further boost the profit margin.

• Maximize Agility

Companies need to be nimble in our modern global marketplace. DDMRP maximizes flexibility and responsiveness, so that supply chain managers can roll with whatever is on the horizon. Managing inventory more effectively means freeing up energy, time, and resources that can be dedicated elsewhere – for example, towards responding to customer needs in real-time. Demand Driven is a necessity in today’s climate. It gives organizations the power to make corrections swiftly and enact micro-adjustments in response to shifting tides. 

Your company needs to get on board with Demand Driven methodology to solidify a bright future. Not sure where to start? Patrick Rigoni works with organizations of all sizes to support them in learning about and applying DDMRP in the real world. Team up with an expert and transform your supply chain strategy. Connect with us today to schedule a consultation with a Demand Driven leader. 

Ready to give DDMRP a test drive? Set out on your journey with a seasoned professional. Patrick Rigoni is the ultimate guide and resource on all things Demand Driven, and he’s available to consult with companies and supply chain leaders to put them on the path to success. Connect with him today to learn more about the exciting potential of DDMRP.