DDMRP vs MRP: Head to head, which wins?

Posted by Jonathon Vaiksaar on 19-Nov-2015 17:35:39

DDMRP as a methodology focusses on placing strategic buffers to enable lead time compression and by leveraging daily planning to react to daily sales orders. MRP has been commercialised since 1970 and has had minimal improvements since. DDMRP has its roots in Lean thinking and moves away from forecasting and having safety stocks to utilising buffers to absorb variability. This results in increased material availability as well as a reduction in working capital. This methodology has delivered phenomenal results in both service benefits and inventory reduction.

Companies who have adopted DDMRP found that they are able to increase their service levels and sales with the same amount of inventory. All that they are doing differently is leveraging strategically placed buffers to decouple the supply chain to react to only real demand orders.


DDMRP Revenue Inventory chart

But what is the power of DDMRP? Is it the daily planning, the de-coupling points, the lead time compression?

Using our simulation tool we have run nearly 4000 different combinations of forecast accuracy, sales variability and lead-time to understand in a head to head situation, is DDMRP always better than MRP?

DDMRP vs MRP

In our paper we review our findings and highlight how relatable it is to our experience using Replenishment+, the leading DDMRP solution as well as our global DDMRP implementation experience.

The paper addresses the following questions:

  1. What is the impact of DDMRP based on my existing forecast accuracy and sales variability?
  2. How can I increase service levels and sales without additional safety stock and increased inventory?
  3. What is the running savings and cumulative savings of DDMRP and MRP after lead-time compression?

The results show that DDMRP is not necessarily always the winner, but for a typical company with the forecast accuracy of 20-70%, there is a benefit of at least 17% in inventory reduction.

Inventory reduction delivered by DDMRP

Inventory reduction delivered by DDMRP

 

Todays’ supply chains must become more agile and responsive as well as at a lower cost in order to support ambitious growth plans to remain competitive in the market. DDMRP is a rapidly expanding concept and the early adopters are enjoying the benefits. As more big companies are increasingly making the switch, Olivehorse is able to support you make the step change, reaching your supply chain ambitions.

To view the results of the DDMRP Analysis, click the below:

New Call-to-action

Read more on: DDMRP