DDMRP (Demand Driven Material Requirements Planning) is a relatively new inventory management methodology that aims to balance the trade-off between inventory holding costs and stock-out costs. DDMRP is designed to address the limitations of traditional inventory management methods, such as MRP (Material Requirements Planning) and EOQ (Economic Order Quantity), by incorporating demand-driven techniques.
DDMRP has several key features, including:
- Decoupling Inventory Points (DIPs): These are key inventory buffers that help to mitigate the effects of variability in demand and lead time. The DIPs are positioned at strategic points in the supply chain to provide a buffer between upstream and downstream operations, helping to ensure that supply can be maintained even in the face of uncertainty.
- Demand-Driven Lead Time (DDLT): This is a method for calculating lead time based on actual demand, rather than average or forecasted demand. By using DDLT, DDMRP can take into account real-world variability in lead time and adjust inventory levels accordingly.
- Protection Stock: This is an additional buffer of inventory that is maintained to protect against stock-outs and ensure that demand can be met even in the face of uncertainty.
- Real-time Replenishment: DDMRP uses real-time data to adjust inventory levels in response to changes in demand and lead time. This helps to ensure that inventory levels are always optimized, reducing the risk of stock-outs and overstocking.
DDMRP is designed to provide a more effective and flexible approach to inventory management, particularly in complex and unpredictable environments. By taking into account the interdependencies between demand, lead time, and inventory levels, DDMRP can help companies to optimize their inventory and reduce costs while still ensuring that customer demand is met.