Demand-Driven MRP – Part V: Buffer Adjustments
This post is part of a series about DDMRP. After an introduction to DDMRP and a brief explanation of why DDMRP is needed, we have already covered the first two components of DDMRP: inventory positioning and strategic buffers.This one will be a relatively short post about the third component, buffer adjustments.
Manual Buffer Adjustments
The whole idea of DDMRP is that buffers are dynamic and adjusted automatically as average daily usage (ADU) changes. This automatic adjustment is quite robust and in many cases enough, but buffers might have to be manually manipulated if a big change in demand is planned or anticipated . This might happen for example because of the natural product life cycle (phase-in, phase-out), because of promotions or because of seasonality.
Initially DDMRP was somewhat poor in this regard (we’re not supposed to forecast after all), but I think that reality has imposed itself and with time DDMRP has incorporated different ways of buffer adjustments. The more frequent one is still what is now called a Demand Adjust Factor (DAF), which is nothing more than a factor that should be multiplied by the originally calculated ADU in order to obtain an adjusted ADU. A DAF less than 1 will decrease the ADU, while a DAF greater than one increases the ADU.
There are now other ways to adjust the buffer, namely zone adjustment factors and lead time adjustment factors but they are less common and should be easy to implement anyway, so we will focus on DAF here.
Implementation in SAP
In part IV we discussed how each zone (red, yellow, and green) is calculated using the average daily usage and other material attributes. To implement a Demand Adjust Factor we would need to be able to maintain a DAF per material and per period, perhaps in a transaction similar to the one used in standard SAP to maintain planned independent requirements (md61).
For this component, the DDMRP compliance criteria say that:
So in summary, in SAP:
- there should be a transaction to maintain DAF per material and period
- this DAF, if maintainted must be used in the zone sizing.
The next two posts will cover the last and most demanding DDMRP components: demand driven planning and demand driven execution.