Investigation of potential added value of DDMRP in planning under uncertainty at finite capacity

Abstract

The Demand Driven Material Requirement Planning (DDMRP) was introduced in 2011 to improve the performance of supply chain planning. The Demand Driven Institute (DDI) reports that DDMRP reduces the inventory levels by 31% (median) while improving the service level by 13% (median) and reducing the customer order lead time. Such results can have a significant impact on the financial performance of a company and provide a competitive advantage. In this project, we investigate how DDMRP operates in a capacity constrained environment. Qualitative and quantitative techniques were used to collect data about the real-life implementations of DDMRP for different size companies operating in various industries. Afterward, a simulation analysis was carried out to compare the algorithms of DDMRP and Advanced Planning System (APS). Our results show that DDMRP outperforms heuristics-based planning and provides similar results as a solver-based planning. Our survey confirmed the order of magnitude of the improvements claimed by the DDI in terms of service level, inventory level, and customer order lead time. In addition, we learned that implementing DDMRP forces the company to develop extended supply chain training programs across the company. These programs combined with the focus on product flow from the demand driven approach help the companies to streamline their operations. Streamlined operations is essential to maintain the service level high and the inventory low over time. This research proves that DDMRP can perform well in planning at finite capacity under uncertainty. DDMRP can reduce the working capital and offer a competitive advantage, which gives DDMRP the potential to be a game-changer in supply chain planning.