Demand-Driven MRP in Excel – Learn How To Do It and Come Away with a Working System

by Kien Leong

DDMRP Stock Distribution

This website is an answer to the many questions we get about planning and spreadsheets.

It seems there are many people out there asking how to do material, production and distribution planning using Excel.

We write the articles on this site to show how data in MRP and ERP systems can be manipulated in Excel to do the planning that is needed to figure out what to buy, make and sell.

You might ask: Why are there so many questions about planning with spreadsheets?  Don’t we have those MRP and ERP systems to do exactly that?

Well, firstly there is a lot of spreadsheet use in planning.  Aberdeen Group estimate that 63% of best-in-class companies use spreadsheets for Demand Management (and a whopping 84% of laggards).  The Demand Driven Institute finds that 95% of companies use spreadsheets to augment MRP.  It is clear- the data may sit in an ERP system, but planners need to work that data manually in spreadsheets to do things that the system can’t.

So, why are so many companies using Excel to perform planning?  When we ask this question, two answers stand out:

  • Our system doesn’t do what we want it to do.  We need more flexibility.
  • Our system doesn’t show us what we want to see.  We want more transparency.

In that case, what is the problem?  Why is Excel the dirty little secret in the world of planning software?  What is the reason for Excel Hell?

The two reasons given the most are:

  • Manually working with spreadsheets is slow and leads to error.  We need more speed and quality
  • Our spreadsheets are disconnected from other systems and processes.  We need more integration.

If we just follow the recommendations of the MRP system, we buy and make too much of the wrong things and not enough of the right ones. And we can’t see the information we need.

If we pull out the data and work with them in spreadsheets we can plan better, and show the right information but it is a manual process – it takes a long time, we are too slow to respond and we often make mistakes.

MRP systems provide the wrong answers because they are dated and disconnected.  The planning logic for MRP was created in 1958 and the systems conceived in the 1960’s.  Much has changed in the world since then.  Demand volatility is up, product variety and mix is up, customers are ever more demanding:  There is more error in the forecast than ever before.  And MRP logic relies so heavily on the forecast.

Fortunately, the people who wrote the book on MRP have not been sitting idle.  There is a new methodology called Demand-Driven MRP (DDMRP).  DDMRP recognises that forecasting cannot be at the centre of the planning process.  You need to use actual customer demand to drive your purchasing and production orders.  And when you need to make decisions before you get the customer orders, you need to buffer inventory carefully and adjust those buffers according to the way demand is changing.

DDMRP teaches that the most important concept in the supply chain is flow.  The flow of the right material and product towards the customer, and the right information flowing back to the supplier.

at Production-Scheduling.com we have spoken before about the limitations with forecasting, and using a service level to size your inventory.  And creating flow in the supply chain is mother’s milk to us.

One of the appealing aspects of DDMRP is that it is integrated.  You take a look across the whole flow of raw materials, WIP and finished goods to work out where you place inventory, before what and how much.  It is flexible to respond to the way demand changes and has parameters so you can adapt the method to your own business.  And it is transparent in that you can learn the methods and simple visual techniques to manage the planning process.  Only then do we automate and make the right process happen every day at the touch of a button, making planning more responsive, faster with far fewer errors.

We would like to demonstrate how DDMRP works with Excel to offer an integrated, flexible supply chain planning system.  It will all be open to see how the logic works and how the rules apply to get the right inventory in the right place at the right time.  And it is fully automated, so there is no more cut-and-paste and manual spreadsheet error.

Here is the next chance to see this system in action and learn how it works;
on the 26 – 27 May we will be teaching a workshop in Birmingham, UK.

Demand-Driven MRP in Excel Workshop

Dates: 26 – 27 May 2016
Times: 9am to 5pm
Location: Woodbrooke Conference Centre
1046 Bristol Road
Birmingham UK, B29 6LJ
Cost: £900 + VAT
Instructor:
Kien Leong

 

This workshop is intended to teach the basic principles in integrated supply chain planning and the DDMRP method.

We will use a fully functional system with a fictitious manufacturing company to show how a DDMRP system works.  You will set up inventory buffers to position against variable demand and then see how they perform with a series of demand scenarios.

You will come away from this workshop with a fully functional DDMRP planning system in Excel- there is not licence or additional cost.  With the skills you learn here, you could connect the system to your own data and have a complete integrated planning system working as a pilot or even a live system.

What this course will provide:

  • 2 days of classroom and hands-on training on DDMRP in Excel
  • An overview of DDMRP and integrated supply chain planning concepts
  • A detailed look into our methods and templates for building planning systems in Excel
  • A copy of an unlocked,  fully-functional DDMRP planning system in Excel
  • The knowledge of how to connect it with your own data

What this course will NOT provide:

  • Certified training on DDMRP (please visit the Demand-Driven Institute for the CDDP and CDDL courses)
  • Ongoing support for the DDMRP system after the workshop (We can help you at additional cost as a consulting service)

What you will need to bring:

  • A Windows laptop with Microsoft Excel 2007 or higher installed

See the full workshop agenda.

If you have completed the CDDP or CDDL courses (certified DDMRP training )  this will be advantageous, but it is NOT a requirement.  We only have 12 places for this course to keep the class size small and a good level of attention to your questions.

Registration is now closed

You can also see our DDMRP in Excel system in a half-day workshop that Tony Rice will be presenting at SAPICS 2016, 12 – 14 June in Sun City, South Africa.  We will also be giving away a free copy of the DDMRP in Excel planning system to every participant in that workshop.

SAPICS-2016-Graphic-600

 

Participation is included for all delegates registered to the SAPICS conference.  Find out more about the SAPICS event here.

{ 10 comments… read them below or add one }

Paul Day May 17, 2016 at 10:11 pm

Great article without the hype. Refreshing to see people concentrate on delivering helpful info without the hidden sales talk! It will be nice to see u guys in Australia one day. Can you help me with a few questions that come to mind – Is it right to say that DDMRP is a dynamic reorder point system? In your opinion what is the implied customer service level which underpins the DDMRP buffer sizing? If DDMRP is best for MTS what technique do you advocate for MTO?

Kien Leong June 29, 2016 at 10:36 am

Hello Paul. Thank you for your generous comments. I hope to have a reason to go to Australia – lived for a while in Sydney and would love to go back.

Here are some comments in reply: Yes, DDMRP is a dynamic system for sizing buffers. It goes beyond what a typical reorder point system would do, but it is correct to say there is a stock point which triggers an order and this is sized dynamically. Customer service level is not a parameter directly in the DDMRP buffer sizing calculations: You could say that DDMRP aims at high service level for all items at their given lead-time and uses the ASLT to position stock to supply reliably to those lead-times. The buffer sizing is driven by demand levels, lead-times and variability measures. In practice there are manual choices about the grouping of SKUs, ADU calculation method and the process for planned adjustments; it is natural to have service level in mind when making these choices. DDMRP works with many MTO manufacturing because you will still need to manage raw materials well to maintain a high service level in make to order.

Zbigniew Sobkiewicz August 24, 2016 at 6:43 pm

Are you planning another workshop? Is it possible to test your DDMRP planning system (I’m after CDDP training)

Eddie Farias November 22, 2016 at 11:22 pm

Hi Kien,
I am also interested in knowing if you will be holding another workshop? Would love to attend and get the DDMRP tool.

– Eddie Farias
Planning Manager (ProteinSimple, San Jose CA, USA)

Rubel Rana September 20, 2017 at 7:45 pm

Hi.
Can you please help me by forwarding an excel plan with ghant chart

Ray Vincent Ayuda July 20, 2017 at 4:19 am

Hi Kien
Greetings can you give a soft copy of DDMRP tool.

Thank you very much

Ray Vincent Ayuda
Demand Planner(Manduae City Cebu Philippines)

Ray Vincent Ayuda July 20, 2017 at 4:19 am
JanWim van den Hoogen September 2, 2017 at 2:32 am

That is great mate. Will you please send one copy to me? I want to give it a try in my work.
thanks

ANTONELLA Bererere November 19, 2017 at 11:24 pm

Could you please send me a copy of the DDMRP excel tool? Thanks

ANTONELLA Bererere November 19, 2017 at 11:25 pm

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