The Demand Driven Approach: A Comprehensive Guide

What does it really mean to be Demand Driven? If you’re looking for an introduction to this powerful supply chain planning technique, you’ve come to the right place. Patrick Rigoni co-developed Demand Driven methodology and concepts and is a Demand Driven Institute accredited Demand Driven Planner and Demand Driven Leader instructor. He’s even developed Demand Driven simulation tools to support companies in forecasting and optimizing their results. Simply put, Patrick Rigoni possesses a deep knowledge base on the subject.

Demand Driven Material Requirements Planning (DDMRP) integrates the best of traditional Materials Requirements Planning and Distribution Requirements Planning with flow-based elements of Lean, Six Sigma, and Theory of Constraints. The result is a supply chain planning framework that outperforms all of the traditional methods from which it is derived by harnessing the strongest aspects of each.

Let’s explore what sets Demand Driven MRP apart from the rest – and why you need to incorporate it into your supply chain planning toolbox in 2022. 

What is DDMRP?

Traditional Material Requirements Planning is based on the supply chains of yesterday. It does not take into account the volatility or complexity of today’s marketplace, nor does it align with the vast technological resources now available at our fingertips.

Supply chain planners needed a framework that was more agile; one that could keep pace with reduced customer tolerance times and longer cumulative lead times that are typical of our modern world. With lengthier planning horizons and shorter product lifespans, managing inventory has never been more important. That’s why Demand Driven Material Requirements Planning exists. 

Introduced in 2011 by the Demand Driven Institute after more than 15 years of research, DDMRP is centered on the mantra “Position, Protect, Pull.” Five distinct components offer a blueprint that moves in sequential order between these concepts. The outcome is protection and promotion of materials and information flow. Strategic “decoupling points” make it possible for supply chain planners who incorporate principles of DDMRP to manage and drive supply order with unprecedented efficiency. 

The Five Components of DDMRP

The best way to understand the sequence and rationale behind DDMRP is to follow the “Position, Protect, Pull” blueprint all the way through its five stages. Let’s take a glance at each one: 

• Position: Strategic Decoupling

To manage supply continuity variability, DDMRP emphasizes the placement of decoupling points of inventory in strategic locations within the product structure and supply chain. This results in shortening the planning horizon and reducing lead time. While traditional MRP couples everything together, necessitating a longer lead time, DDMRP creates shorter, self-contained planning horizons through the use of strategic decoupling. Big picture: variability at critical junctures is much less likely to cascade throughout the supply chain when strategic decoupling is employed. 

• Protect: Buffer Profiles and Levels

This means building in shock absorption at the decoupling points. A three-zone buffer is created by combining part demand information and DDMRP part settings. These can be viewed as “firewalls” rather than using the “fire extinguishers” common to traditional MRP. The result is a system that’s built to manage stock positions. 

• Protect: Dynamic Adjustments

Flexibility is embedded in the DDMRP sequence. Protection levels are designed to flex in response to market activity, operating parameters, and in anticipation of forecasted events. A resilient, responsive supply chain is within reach when seamless adaptability in the face of change is the expectation. 

• Pull: Demand Driven Planning

What sets DDMRP apart from its predecessors is its focus on shorter-range planning using only qualified sales orders as demand allocations. This results in highly accurate supply orders. By using a “Net Flow Equation,” supply chain planners can ensure daily calculations of supply orders are right on target. 

• Pull: Visible and Collaborative Execution 

Unlike MRP, Demand Driven Material Requirements Planning assigns priority based on buffer status. Open supply orders are carefully managed in real-time, so that potential disruptions to flow are visible. 

Success is Attainable

The results speak for themselves. When companies implement DDMRP into their supply chain strategy, they experience reductions in cost, lead time, and inventory, alongside improvements in customer service.  Priorities become crystal clear and it’s possible to optimize stock and allocate resources more efficiently. It’s no wonder this innovative methodology has been adopted by industries as varied as aerospace, biotech, and manufacturing.

Reach your full potential this year – contact Patrick Rigoni to schedule a DDMRP consultation and discover all the ways Demand Driven can benefit your company!