Better Planning, Driven by Demand

It addresses many issues in modern supply chains, such as:

• Increased complexity
• Short product lifecycles
• Greater product complexity and variety
• Long raw material and component lead times

Despite these issues, businesses are still under pressure to reduce their inventories and shorten customer lead times.

DDMRP offers planners an alternative solution to stabilize material flow and improve service levels without inflating inventory. With Microsoft’s native DDMRP capability in D365 SCM, there is now a builtin toolset that helps businesses move from forecast driven planning to a more responsive, buffer-based replenishment model.

DDMRP is a planning methodology that blends traditional MRP, with elements of lean thinking (pull), Six Sigma (variability reduction), and Theory of Constraints (addressing bottlenecks).

Demand driven means planned orders are created when the net flow (not on hand quantity) drops below the reorder point.

Forecasts do not directly generate planned orders but can influence the average daily usage (ADU) calculation. Combined with strategic inventory buffers at key points to decouple stages of the supply chain, this reduces the impact of variability such as the bullwhip effect and creates a more stable material flow.

What type of Business Scenarios can DDMRP support?

DDMRP works especially well in environments where SKU counts are high and/or variability is common. Typical scenarios include one, or a combination of:

• Long or unpredictable supplier lead times
• Organizations dealing with imported goods or containerbased logistics
• Seasonal and/or highly volatile demand
• Multisite/warehouse supply chains
• Distributors managing thousands of items

In each case, bufferbased replenishment helps stabilize availability without relying as heavily on forecast accuracy.

Buffer values are designed to be recalculated on a daily or weekly basis. This makes DDMRP an ideal solution for products where there is constant variability, and daily planning is required.

How complex is it to implement?

For some, it can be quite a daunting prospect to move away from trusted planning processes, ditching traditional MRP for DDMRP. Firstly, it is not necessary to move entirely to DDMRP. Secondly, it is possible to start with a handful of products which could be most suited to DDMRP, and as it is part of the Master Planning module it will work seamlessly with your existing MRP processes.

We would always recommend testing the setup and output with a handful of products, even beginning in a test environment until you are comfortable with the new process, and confident with the output DDMRP it is generating.

Decoupling points

Below we have an example of how production lead times can be compressed using decoupling points, increasing responsiveness to customer demand.

Typically, a delay or variability early in the chain travels all the way downstream. By placing inventory buffers (decoupling points) at strategic stages, companies create shock absorbers that prevent disruptions from snowballing. This often leads to:

• Shorter and more reliable lead times
• Reduced expediting
• More stable production schedules
• Better prioritization and visibility for planners

Decoupling is less about holding more stock and more about holding the right stock in the right place.

Production without decoupling points:

Production with decoupling points :

DDMRP and decoupling points are not just a useful planning method in manufacturing, they can also be used in sales and distribution as the example below highlights.

DDMRP Buffer Zones

At the heart of DDMRP are three colored buffer zones. The buffer zones are calculated using a combination of:

• Average daily usage (ADU) – you can choose whether to use historical or future demand, or a combination of both. You can also choose how many days backwards and forward to look.
• Decoupled lead time – the time required to produce or receive an item.
• Lead time factor – set depending on the length of lead time.
• Variability factor – set depending on the variation in demand.

Recommended ranges lead time and variability factors

• Red Zone – The area below the minimum quantity. The minimum quantity is also referred to as "top of red," and your planning strategy should be designed to ensure that stock levels are always above this point.

• Yellow Zone – The area between the minimum quantity and the reorder point. The reorder point is also referred to as "top of yellow." When this point is reached, the system should reorder. This zone is effectively your lead time demand (average daily usage x decoupled lead time in days)

• Green Zone – The area between the reorder point and the maximum quantity. The maximum quantity is also referred to as "top of green." This point is the maximum level that the stock will be replenished to.

The buffer zones :

Planners do not react to every demand signal. Instead, they manage Net Flow Position against these zones, making planning more stable. With these buffer zones, there is greater visibility of the inventory status based on both the on-hand quantity and the calculated net flow.

Recalculation of buffer zones

Buffer levels are recalculated manually or via a scheduled batch job, they are typically calculated on a daily or weekly basis. This ensures that any changes in demand are quickly identified and acted upon.

Buffer zone calculations and history in D365 SCM

Microsoft has embedded DDMRP directly within D365 SCM´s Master Planning module, making it easy for organizations to adopt it, especially if they are already using Master Planning.

Prerequisites

The Planning Optimization add-in and DDMRP for Planning Optimization feature must be enabled.

DDMRP Workspace

The Demand Driven Planning workspace is an operational home for planners. It provides prioritized lists of items by status that require action, focusing on Net Flow Position, not just a large list of planned orders. This workspace simplifies daytoday planning and ensures planners are always working on the most important items first.

DDMRP provides a new and practical way to manage supply chains facing uncertainty. With Microsoft’s builtin DDMRP feature in the Master Planning module, organizations can easily adopt a modern, flow based planning model that improves service levels, reduces firefighting, and stabilizes operations. For supply chain teams already familiar with traditional MRP, DDMRP offers a powerful extension and alternative that supports inventory planning, especially in complex environments requiring a high level of responsiveness.

If you’d like to explore whether DDMRP is the right fit for your D365SCM environment, our team would be happy to discuss and provide practical information on how you can implement it.