Name: Understand Demand Driven MRP - SAP S/4HANA Manufacturing
Uploaded: 2022-3-30
Duration: 655 s
Description: In this microlearning you will find out about the key words for Demand Driven MRP, the concept behind it, and the benefits of using it.

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<div>In this microlearning you will find out about the key words for Demand Driven MRP, the concept behind it, and the benefits of using it.<br><br></div>

Understand Demand Driven MRP - SAP S/4HANA Manufacturing

Hello, and welcome to this microlearning. In this microlearning, we will focus on the keywords and concepts of demand-driven material requirements planning. Our agenda for today is to understand the concepts of DDMRP and when it's beneficial to use. My name is John Oxenby, and I'm a Solution Advisor with SAP. Average daily use, also known as ADU. This is a calculation of the daily usage of the part number. In our simple example, you see a consumption of 10 pieces over a period of five days, giving us an ADU of 2. We use the Manage Buffer Levels  tile. Three materials using demand-driven MRP are showed. One of the information sets is the average daily usage. In the detail screen, we will look at the average daily use. We can see that this material calculates its ADU on the past 10 days and doesn't consider future values. These values are possible to maintain as prior business requirements. There is also a possibility to look forward, and this is how a forecast can be used in demand-driven MRP. We can also see the consumption data from the period in question. A buffer is a strategic inventory buffer, which is sized relative to the ADU, monitored and dynamically adjusted when there are changes to actual demand. We can also expand the product tree to see all levels. As we chose Highlight Buffer Products, we can see the products with strategic buffers highlighted in green. We can see the buffer positions graphically from the same view as we used to look at the ADU. A decoupling point is an inventory position where a buffer is placed.  The decoupling also means that the MRP will use this point as the starting point when making calculations. The criteria to determine a decoupling point are, ABC, which is the value of the material, XYZ,  which is the volatility of the material, PQR, which is the frequency of usage and bill of materials for the specific material, EFG, which is the lead time of the material. This information can also be seen in our Manage Buffer tile. For our finished bike, we can see each of the values, including the underlying information of variability, lead time, value, and bill of material usage. Each decoupling point is an inventory buffer which acts only on qualified demand. It has four status levels, green, yellow, red, and blue. The planning and execution are focused on maintaining the integrity of these decoupling points. Decoupling lead time is specific to DDMRP,  it is constructed to absorb variability and compress lead times by calculating an intermediate lead time called DLT or decoupled lead time. Traditional MRP calculation uses what is known as cumulative lead time, which is manufacturing lead time plus the longest procurement lead time. This decoupling cuts the lead time for our finished product by 14 days based on our strategic buffer on the material with the longest lead time. This is a system example where we can see our entire bill of material exploded, showing the different lead times. You can see the materials planned as strategic buffers marked in red. You can also see the lead time and decoupled lead time clearly stated at each level of the bill of material. If we look at our finished good, we can see that its manufacturing lead time is 12 days. There are two semi-finished goods which are part of the bone. The first one is buffered. Therefore, its production lead time of 13 days would not be considered. This strategic place buffer will manage external shocks and be able to supply the components to the production line of the finished product. The second one has the production lead time of five days. Therefore, the decoupled lead time of the final product would be 17 days, five days due to the second semi-finished good not being a strategic buffer. And 12 days as the production lead time of the finished good. Qualified demand is important for DDMRP, it is all sales requirements which are due today or in the past. It also considers future order spikes based on sales requirements. Forecasts are not considered qualified demand. We look in the Replenishment Execution app. Here, we will see the DDMRP planned materials which require action. We will look at stock overview of one of them. Here, we will see that we have the end of decoupled lead time as well as the end of spike horizon. These are the two time horizons which are specific for DDMRP. Decoupled explosion means the ability to stop an MRP explosion at a decoupling point. The stopped explosion means that the planning to resupply the buffer position with re-start only when there is an actual qualified demand. We stay inside the Replenishment Execution app and choose a semi-finished material. When we go to the details, we will see that we are acting on an actual order. As in DDMRP, we only work on qualified demand. In this case, reservation against the production order DDMRP introduced a net flow equation to manage supply orders, which is using the following information: Available stock and stock already ordered through supply channels. Subtract qualified sales order demand. This equals the net flow position. DDMRP emphasizes disability as well as variability reduction in the supply chain. Besides using the concept from lean,  theory of constraint and Six Sigma, it also comes with a set of innovations. We have gone through them in the keyword section. Decoupled lead time through strategically placed buffers allows planning and execution to be compressed, providing short-term planning horizons, and therefore lowering the variability in customer promises. This shorter and more realistic timing protects the availability of the finished goods, which is sold. The net flow equation uses only three elements. What is available, what is incoming, and what is required. That is, qualified demand, or sets requirements. This means that 40 forecast will not impact neither the operational planning nor the execution. The decoupled explosion is the ability to stop a multi-level bill of material explosion at a decoupling point. This means that the decoupling point will react only to qualified demand in the shape of a production order. Hence, you will be able to act only on qualified demands also deep in the product structure. If we look at the planning view, we can easily see which materials to prioritize first, we also have the net flow position and the ability to create the supply order of the proposed quantity. The proposed quantity is usually the quantity required to reach top of green buffer decision. Also, in the execution view, we see that the priority is set according to the on-hand buffer status. We see the relevant information of how much stock we have on hand, how much stock is already being procured, which is the open supply. We also have a button to expedite supplies required. How does MRP and DDMRP compare on a high level? Although there are different options, conventional MRP on a finished goods level plan based on forecast. This is a major difference to DDMRP, which base its planning solely on what is known as qualified demand. And qualified demand as we can recall from the keyword section, means actual sales requirements. MRP uses the cumulative lead time for all levels of the bill of material. Depending on the number of levels of the bill of material, this will mean making calculations far into the future.  The lead time used is the decoupled lead time. This is a given as the buffers will maintain their integrity against system shocks. And hence, the need to look far into the future is less than with a conventional MRP. The tightly coupled process of conventional MRP is suggested by the fact that it runs all levels of a BOM with cumulative lead time. This means that they are also planned together. For DDMRP, the demand signal, doesn't go past the decoupling point. Hence, the buffers prevent the bullwhip to amplify further down the supply chain. First, and most importantly, the methods are complimentary, not exclusive. When you run DDMRP conventional MRP strategies are still valid. Forecast accuracy is an important factor in choosing strategy. The more difficult to forecast, the more likely DDMRP will be able to improve the situation. Lead time and buffer position is also important. The longer the lead time, the better the saving from the lead time compression, which we achieve through the decoupling points. Also, with a high BOM usage, DDMRP can serve as a postponement strategy. In this microlearning, we have looked at demand-driven MRP keywords and concepts, as well as discussed the differences between demand-driven MRP and conventional MRP techniques. Additional information and theoretical and practical examples on demand-driven material requirements planning can be found at the demand driven institute. Thank you for listening.