Demand-driven Material Requirements Planning – The Future of Inventory Optimization

Demand-driven Material Requirements Planning – The Future of Inventory Optimization

For years, businesses have relied on material requirements planning (MRP) to determine the necessary materials and components for product manufacturing. However, with the evolution of global supply networks, procurement from abroad has increased, resulting in longer lead times. This has led to challenges such as stockouts or overstocks due to uncertainties in demand forecasting, buyers demanding shorter lead times, and market fluctuations that are often projected inaccurately. 

As a result, supply chain shortages have become pervasive. MRP programs often assign planners with a number of tasks actions to complete, making it difficult to prioritize tasks.  

To address these challenges, many businesses are finding solutions in Demand Driven Material Requirements Planning (DDMRP).  

What is DDMRP? 

Demand-driven material requirements planning (DDMRP) is a modern approach to material and replenishment control that enhances the functionality of traditional MRP. 

Unlike traditional MRP, which primarily relies on forecasts and static planning, DDMRP is demand-driven, making it more adaptable and responsive to deviations in demand and supply that can cause production disruptions, shortages, and chaos in manufacturing facilities.  

DDMRP is typically used by manufacturers with multi-level bills of materials (BOM). However, it can also be applied to the distribution and retail networks. For many ERP manufacturers, MRP is adequate; however, DDMRP is particularly suitable in a volatile environment. 

DDMRP is a methodology with five sequential components. The first three components focus on determining the optimal setup for the model, while the last two focus on its day-to-day operations.

DDMRP in Microsoft Dynamics 365 Supply Chain Management 

DDMRP configuration is already added in the Master planning module in of Microsoft Dynamics 365 Supply Chain Management. So no additional license is needed. However, you must utilize the Planning Optimization Add-in to access DDMRP. 

DDMRP is seamlessly integrated into existing Supply Chain Management planning setups, complementing them with a new coverage code that enhances planning configuration. It does not replace current functionality but provides additional features for more effective planning. 

How Does MRP Based On Demand work? 

DDMRP functions differently from MRP because it uses a “pull” strategy instead of pushing inventory into the system based on anticipated demand. 

With a demand-driven strategy, DDMRP eliminates variability using “pull” for materials. DDMRP tracks utilization and manages replenishment through a straightforward visual system rather than relying on forecast accuracy and buffering for changes in demand and supply. Only essential items considered to be of strategic importance are covered by buffer inventory. 

The DDMRP is organized around a methodology known as “position, protect, and pull.” 

– Position: Bills of materials are inspected to locate strategic materials or components at key intersections within the structures. These essential components must be the primary target of control over all other elements in modifying the Theory of Constraints method, in which crucial resources known as “constraints” determine production limitations. 

– Protect: By using inventory as a buffer, the availability of these essential items is also guaranteed. However, this buffer inventory is dynamically refilled as needed rather than used as part of the initial MRP planning formula. 

– Pull: A cutting-edge pull technique is used to manage buffer inventory. It continuously tracks inventory levels and relies on visual cues to keep the buffer within a predetermined range. 


DDMRP and MRP (Material Requirements Planning) are the inventory management methodologies used to manage supply chain operations. While they share some similarities, they differ in their approach to inventory management.


DDMRP’s focus on decoupling points, buffer levels, and real-time demand signals makes it a powerful tool for optimizing supply chain operations. 

Compared to traditional Material Requirements Planning (MRP) methodologies, DDMRP offers several benefits, including enhanced responsiveness to demand changes, reduced inventory levels, and improved collaboration among departments and stakeholders. By strategically placing inventory buffers at decoupling points in the supply chain, DDMRP ensures that the right materials are available at the right time, optimizing inventory levels to meet customer demand.  

It provides additional functionality for improved planning configuration, making it a valuable tool for companies seeking to optimize their supply chain operations and achieve better inventory management. Need more accurate and real time data for your neterprise? Integrate SAP and Salesforce to enhance supply chain operations. 

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