What is Demand Driven MRP?
Demand driven planning removes tentative demand from your action plan and uses strategic stocking of critical items to reduce manufactured item lead times and time to shipment. DBA pioneered the demand driven approach for small business by providing a common sense method to achieve rapid time to shipment with efficient utilization of inventory.
It is not a traditional forecast-driven MRP system
Demand Driven MRP is not a traditional multi-bucket, forecast-driven MRP system. It is a just in time planning system that only responds to current demand originating from sales orders. Future demand for items is handled with anticipatory demand driven stocking instead of forecast-driven explosions.
Designed for make to order and custom manufacturing
Unlike forecast-driven MRP systems, which are designed for standard products made to stock, Demand Driven MRP is designed for make to order and custom manufacturing as well as for making items to stock. Instead of generating lower level jobs and purchase orders from BOM explosions, Demand Driven MRP generates lower level requirements from actual job details, which can be customized to order.
How does Demand Driven MRP work?
Demand Driven MRP is comprised to two planning phases and three execution phases that are performed in the following sequential order.
Planning Phases
These first two phases establish your overall planning strategy for time to shipment and inventory.
1. Plan Times to Shipment for SO Required Dates
Time to shipment targets establish sales order required dates and are derived from item lead times and order policies. Strategic stocking of key sell items, subassemblies, and materials is used to reduce or eliminate lead time.
2. Plan Strategic Inventory for Stock Replenishment
Planned stock is replenished at demand-driven intervals for efficient utilization of inventory.
Execution Phases
These three phases execute that planning strategy that was established by the first two phases.
3. Generate Demand Driven Jobs and POs
Jobs and POs are generated on a daily basis in response to firm net demand originating from current sales orders. Job and PO target dates are established by item lead times within a master schedule where supply dates are aligned with demand dates.
4. Release jobs with Allocated Materials
Jobs are released to production when allocated materials become available and are rescheduled relative to the release date. The job supply date (finish date) is adjusted at job release, providing consistent and reliable feedback on progress.
5. Balance Production Flow with Job Priority
Released jobs are prioritized based on remaining production time relative to the required date. Job sequences are run in job priority order within work centers to balance production flow and ensure that all jobs meet their required dates.
How does Demand Driven MRP differ from other planning methods?
Demand Driven MRP is a complete departure from the planning methods used by most small businesses.
Daily job and PO generation instead of intermittent planning
All planning is done in advance with item settings that establish an overall strategy for time to shipment and inventory. Item settings drive job and purchase order generation, which is an automatic process that can be done daily to respond immediately to new demand. Daily generation is essential for timely feedback, increasing throughput, and reducing time to shipment.
Anticipatory stocking instead of forecast driven supply
Future demand for any item is handled with anticipatory stocking whereby a potential monthly demand rate is applied to the item's replenishment time to calculate a dynamic reorder point. Whenever net demand for the item falls below the reorder point, a job or PO is triggered to replenish stock before it gets depleted. Demand-driven jobs and purchase orders are automatically synchronized with actual demand without need for adjustments.
Demand Driven supply instead of blanket purchase orders
Purchased items planned for stocking are replenished by supply pipelines at demand-driven intervals. A monthly potential demand rate and a supply days interval combine to calculate a dynamic reorder point and minimum order quantity. Whenever net demand falls below the reorder point, a purchase order is triggered for the net demand amount or minimum order quantity, whichever is greater. Demand-driven supply is self-adjusting with shorter intervals when demand is greater than expected and longer intervals when demand is less than expected.
Dynamic reorder point and min order quantity instead of min-max stocking level
For stocking items a dynamic reorder point and min order quantity are calculated from a monthly potential demand rate, the item's replenishment time, and a supply days interval. Whenever any of these input variables are changed, the reorder point or min order quantity is dynamically recalculated. Whenever net demand falls below the reorder point, a job or PO is generated for the min order quantity or greater that replenishes stock before it gets depleted. Dynamic replenishment planning is essential for efficient utilization of inventory.
Time to shipment targets instead of ship date guesstimates
Item lead times and order policies combine to calculate time to shipment targets for top level items, which establish sales order required dates. Strategic stocking order policies are applied to selected items to remove lead time contribution and reduce time to shipment. Time to shipment targets provide customers with consistent and reliable make to order ship dates and enable an overall planning strategy for market competitiveness.
Demand driven Jobs and POs instead of manual planning
A Job or purchase order is generated whenever net demand for an item (on hand + inbound supply + current demand) falls below its reorder point. Items planned to order have a zero reorder point and therefore a Job or PO is generated whenever new demand materializes. Within each MRP session, jobs are generated for items level by level in lowest BOM level order so that the jobs generated at each level crate demand for Jobs at subsequent levels. Purchase orders are always generated last to ensure that each item has a complete job demand profile. Jobs and POs are only generated when needed in response to firm demand.
MRP Action Windows react only to firm demand in Job and PO generation
Instead of reacting to tentative demand, MRP will only react to firm demand. Each item has its own “action window”, which covers the time it takes to make or buy the item. MRP only reacts to demand within the action window, which is firm demand. Any demand outside the action window is tentative demand that is incomplete and highly likely to change as it firms over time.
Target driven scheduling instead of predictive scheduling
System target dates for sales orders, jobs, and purchase orders are based on time to shipment targets and standard lead days and job days allocations that are consistent from one MRP session to another. Schedule dates are target dates used to prioritize job release, work center scheduling, and shipping so that activities are performed in optimal order for maximum productivity and throughput.
Short term targets instead of longer term tentative schedule
All target dates for jobs and purchase orders are within the planning period of top level items, which means that all supply dates are short term and firmly set without need for the quantity changes, date changes, and specifications changes that are commonly required with longer term scheduling.
Job release instead of manual rescheduling
When Jobs are released to live production based on material availability, they are given new finish dates relative to the released date. This automatically adjusts the job schedule to reflect actual conditions and eliminates the need for manual rescheduling.
Automatic feedback instead of constant communication between the office and shop for Job progress
The Sales > Late Supply screen provides feedback to your office staff to update the Expected Ship date (and notify customers if needed) for Jobs that are running behind schedule. When the Finish date of the Job is after the sales order line item requirement date, it will appear on the Late Supply screen.
Priority allocation instead of material hording and constant expediting
The Sales > Picking Manager allocates your stock on hand in Required Date order to ensure that you are staying on time and in priority order across all sales orders company wide. DBA can allocate a very high volume of stock on hand across all of your sales order requirement dates in priority order. This consistency of allocation is nearly impossible to replicate with a manual planning system.
