Buffer management based on DDMRP –
Proof of concept via Simulation
CAMELOT SCM Forum Frankfurt 2017
Frankfurt, March 14th 2017
Demand Driven MRP: Introduction
The Demand Driven MRP concept, one of the key pillars of the Demand Driven Operating Model, is a
structured approach with 5 components
Position
1
Protect
2
Strategic Decoupling
Buffer Profiles and
Levels
3
Dynamic Adjustments
All contents © copyright 2017 Demand Driven Institute, all rights reserved.
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| © Camelot 2017 | Buffer management based on DDMRP
Pull
4
Demand Driven
Planning
5
Visible and
Collaborative
Execution
Supply Chain Simulation
Simulation allows for the risk-free testing and evaluation of strategic business decisions before
implementing them
Quick generation of quantitative results



Visualization facilitates acceptance of simulation results
SC parameters can be changed easily
Simulation runs require short time
Results of different scenarios are
available immediately

Single processes of your SC can be visualized
 Higher acceptance than
spreadsheet results
 No black box feeling
Evaluation of complex systems
Broad understanding of your SC



Benefits
of
Supply Chain
Simulation
Gain deep insights into the mechanisms
within your SC
Understand interactions between
SC stages and Identify
weak links

Risk free testing of different SC configurations



Evaluate different supply chain modes in
your SC before implementation
Test different concepts and structures
Analyze the impact of changes
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| © Camelot 2017 | Buffer management based on DDMRP
Global and complex SCs
can be analyzed
 Reveal how small
changes affect the whole SC
Simulation overcomes borders of common
spreadsheet software
Calculation of Business Cases

F
N O
F
A
A
M
A
E
B
L
E
K
J
D
D
B
C
Form.
WIP
C
D
I
B
C
Comp.
WIP
E
H
G
F
Pack
FGI

Predict the impact of innovative concepts
on your SC performance
 Estimate/ calculate expected benefits
Analyze the impact of changes in the environment
Supply Chain Simulation
There are two major ways to support a proof-of-concept initiative – using DDMRP software or using
a process simulation software like ArenaR
PoC based on CAMELOT Lean Suite
PoC based on CAMELOT ArenaR-Simulation
 Evaluate improvement potential based on available SAP
technology
 End-to-end simulation of DDMRP concept including buffer
management and capacity representation
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| © Camelot 2017 | Buffer management based on DDMRP
Supply Chain Simulation
Typical use cases for a DDMRP simulation based on the CAMELOT Lean Suite
Exemplary Use Cases
 Increase of service level at FG level in volatile
environments
 Reduction of lead times in the distribution
network
 Adjustment of supply chain configuration to
changing environment (trends, seasonality,
eve ts & pro otio s, …)
Simulation benefits
 Precisely determined DDMRP buffers and zones
with dynamically calculated lead times based on
SAP master data
 Identification of achievable benefits based on
improved service levels and reduced cycle times
 PoC provides insight into potential future IT
solution
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| © Camelot 2017 | Buffer management based on DDMRP
Time-dependent stock buffer
Supply Chain Simulation
Typical use cases for an ArenaR based DDMRP simulation
Exemplary Use Cases
 Optimized stock buffer placement
 Balanced inventory, service levels and leveled
capacity across the Value Chain
 Minimization of bull-whip effect and reduction of
complexity
 Robust performance in VUCA world (volatility in
demand and supply)
Simulation benefits
 Realistic situation based on realistic demand
signals, e.g. sales orders from 2016
 Consideration of holistic value chain, including
distribution, capacities and lead times
 Calculation of benefit cases (reduced
inventories, increased service levels, reduction
of variability along the value chain)
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| © Camelot 2017 | Buffer management based on DDMRP
Supply Chain Simulation
Filtering of relevant data and translation of results into business reality is key for a successful
evaluation by simulation
Business reality
Computerized simulation model
Filtering of
relevant business data
Key question
Simulation model
Business Data
Filtered Data
Analysis & testing
Recommendation
Reliable results
Risk-free evaluation
Translation of simulation
results into business reality
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| © Camelot 2017 | Buffer management based on DDMRP
DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
Step 1: Strategic decoupling helps to reduce lead times and complexity
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| © Camelot 2017 | Buffer management based on DDMRP
DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
Step 2 and 3: Buffer levels are calculated based on DDMRP methodology
ToG
ToY
Sales orders
SKU2
Main input factors:
Average demand
Product Arena
ID
SKU1
SKU2
SKU3
SKU4
SKU5
SKU6
SKU7
SKU8
SKU15
SKU16
SKU27
Slide 9
Top of Yellow Top of Green
ToY
ToG
17
18
19
20
21
22
23
24
15
16
27
2436
19475
2440
19475
3722
8112
3730
8111
30444
14972
40716
2988
23370
2993
23370
4595
9856
4605
9859
38100
19151
49575
ADU daily
112
1113
111
1113
158
412
158
410
1068
348
3535
| © Camelot 2017 | Buffer management based on DDMRP
Lead time
Variability
ADU factor for
DLT Lead time Variability MOQ min. order cycle
sporadic demand in days
factor
factor
days
1,99
1,00
2,02
1,00
2,50
1,47
2,52
1,48
4,20
11,77
1,57
7,0
7,0
7,0
7,0
7,0
7,0
7,0
7,0
7,0
7,0
4,0
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
0,5
2,0
2,0
2,0
2,0
2,0
2,0
2,0
2,0
2,0
2,0
2,0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Red Base
Red Safety
Total Red
Yellow Zone
With Lead
time factor
Green zone
390,66
3895,07
389,70
3895,07
551,95
1440,27
551,75
1434,52
3737,81
1217,81
7070,00
781,32
7790,14
779,40
7790,14
1103,89
2880,55
1103,51
2869,04
7475,62
2435,62
14140,00
1655,15
11685,21
1660,19
11685,21
2618,11
5231,34
2626,21
5242,12
22968,10
12536,20
26576,05
781,32
7790,14
779,40
7790,14
1103,89
2880,55
1103,51
2869,04
7475,62
2435,62
14140,00
390,66
3895,07
389,70
3895,07
551,95
1440,27
551,75
1434,52
3737,81
1217,81
7070,00
551,72
3895,07
553,40
3895,07
872,70
1743,78
875,40
1747,37
7656,03
4178,73
8858,68
DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
Step 4: Demand driven planning ensures replenishment to avoid out of stock situations
Demand Driven Planning SKU2
Location
Product
SKU1
SKU2
SKU3
SKU4
SKU5
SKU6
SKU7
SKU8
Slide 10
Beta SL
100%
99%
100%
99%
100%
100%
100%
100%
| © Camelot 2017 | Buffer management based on DDMRP
DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
DDOM behavior in 20% growth case shows sufficient capabilities to cope with the situation
Demand Driven Planning SKU2
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| © Camelot 2017 | Buffer management based on DDMRP
DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
DDOM behavior in event case – service level during potential event NOT acceptable
Event: project demand doubling the expected sales in June, July and August
Demand Driven Planning SKU2
Month
1
2
3
4
5
6
7
8
9
10
11
12
Slide 12
Beta SL
100%
100%
100%
99%
100%
100%
60%
95%
100%
100%
100%
100%
| © Camelot 2017 | Buffer management based on DDMRP
DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
DDOM behavior in event case – increase of inventory levels mitigates the risk of stock outs
Action: adjustment of buffer profile based on expected sales peak
Demand Driven Planning SKU2
Month
1
2
3
4
5
6
7
8
9
10
11
12
Slide 13
Beta SL
100%
100%
100%
99%
100%
100%
60%
95%
100%
100%
100%
100%
| © Camelot 2017 | Buffer management based on DDMRP
Wacker DDMRP proof-of-concept
Demonstration of DDMRP based on ArenaR simulation
How much (more/ less) inventory is required to buffer the decoupling points?
Simulation results
 The results of the simulation shows
- high service levels and
- a robust behavior with regards to demand
growth and demand disruptions
 The stock buffers required to achieve the high
performance are lower than the average
inventory levels today
Location Product
Beta SL
100%
99%
100%
99%
100%
100%
100%
100%
SKU01
SKU02
SKU03
SKU04
SKU05
SKU06
SKU07
SKU08
Total
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| © Camelot 2017 | Buffer management based on DDMRP
Inventory
simulation [to]
Historical inventory
data [to]
3
19
3
19
4
8
4
8
3
26
3
26
8
28
7
28
68
130
Contact
Dr. Ulrich Wetterauer
Principal
CAMELOT Management Consultants
Theodor-Heuss-Anlage 12
D-68165 Mannheim, Germany
Tel: +49 621 86298-320
Mob: +49 173-2698070
[email protected]
www.camelot-mc.com