Demand Driven, also known as Demand Driven Material Requirements Planning - DDMRP, is a methodology for planning and managing materials and inventories. The great difference of this methodology is that it allows companies to carry out a supplying the warehouse according to the real demand of their market.
With its use, organisations can accelerate the decision-making process from planning to execution of procurement. By focusing on the decrease of large inventory changes usually referred to as the whipsaw effect. Demand driven also reduces reliance on sales forecasts.
On the other hand, the concept of S&OP, in Spanish, sales and operations planning, refers to a planning method that seeks to reconcile the commercial forecast with the needs or requirements of the logistics and finance areas. planning method that seeks to reconcile the commercial forecast with the needs or requirements of the logistics and finance areas..
Demand Driven and S&OP aim to improve supply chain tasks so that problems with product availability do not occur. Problems that can lead to stock shortages, inventory failures, low production capacity and a decrease in the quality of services.
Demand Driven and S&OP, and the synchronisation of the production chain.
Both methodologies improve the integration of all areas of the company to enable companies to have well thought out and effective short and long term business plans.
The implementation of Demand Driven and S&OP helps to synchronize the supply chain with the sales area.. Synchronisation reduces operational costs and increases customer satisfaction.
What is Demand Driven for?
With Demand Driven, a production system known as demand pull can be implemented. This means that it is and directed according to the demand registered by the company's system.. The opposite of push systems, where sales are driven by production or inventory levels.
By implementing a DDMRP methodology, production is focused on customer needs. In addition, this method allows companies to be aware of their customers' updated purchases, better control their inventories, be more assertive with their decisions and achieve greater profitability and success with their offer.
It is a system that employs inventory buffer planning to absorb what is available in inventory and then activate production.
It is very effective in meeting short-term demand.
Customer perception of the company improves, and satisfaction levels for good service increase considerably.
It makes the real needs of the customer perceptible to the company through numbers.
Employee effort is reduced in terms of workload and time commitment.
Reduces stock investment and emergency-related expenses.
What is the S&OP for?
Sales and operations planning integrates different areas of business management, constantly reviewing demand and available supplies. It starts with establishing a production plan and other tasks related to sales fulfilment.. All with the aim of meeting business objectives, usually related to profitability, productivity and delivery times.
The S&OP determines production rates by following management's direction to maintain, increase or decrease product quantities in inventory or backlogs. It also tries to keep the labour force at stable levels.
This methodology also includes: planning of equipment, facilities, materials and finances according to production targets or plans. Therefore, it manages to have influence in areas such as manufacturing, engineering and marketing.
It is an important process that balances supply and demand in the supply chain.
Synchronise all tasks to increase effectiveness.
It integrates operational planning with financial planning.
It is a methodology that is worked month by month following the guidelines of an Annual Operational Plan. It pays off in the long term.
It requires collaboration between the company's departments to achieve a correct integration between processes.
Both methodologies are excellent options to improve production processes and achieve positive and profitable results for the end customer. We can help you to put some of these approaches into practice with comprehensive and innovative artificial intelligence solutions.
