Glossary and FAQ

The latest Demand Driven Dictionary from Patrick Rigoni is in reference to the standard APICS definitions from the Association for Supply Chain Management (ASCM) for all known and accepted terms in the Demand Driven body of knowledge. This dictionary is compiled to be used for research and as a complementary source of information and terms which are added and updated in the developing domain of Demand Driven.

A Frequently Asked Section (FAQ) is an added bonus in this page that shares responses to essential questions and inquiries from those who would like to learn more about the processes in the Demand Driven domain.




Actively synchronised replenishment (ASR)

It is the name that was originally assigned to DDMRP.It includes the methods for managing inventory and materials based on demand, used in systems for planning and fulfilling material and distribution needs. These techniques aim to reduce lead times and maintain or improve service levels while using less capital.

Adaptive Enterprise Foundations Professional (AEFP)™

The Adaptive Enterprise Foundations Professional (AEFP)™ certification, offered by the Demand Driven Institute, recognizes individuals who have a comprehensive understanding of the contrast between traditional supply chain methods such as MPS, MRP, and DRP and new flow-based techniques, including the Demand Driven Adaptive Enterprise (DDAE) Model.

Adaptive S&OP

The Demand Driven Adaptive Enterprise (DDAE) Model's strategic component manages the strategic adaptive cycle.

ADU alert

An alert that indicates a substantial alteration in the number of ADUs within a specified range of parameters, including quantity and time frame.

ADU alert horizon

A shorter rolling range that is specifically defined and used within the larger rolling horizon for determining ADU.

ADU alert threshold

An established level for variations in ADU that initiates an alert within the ADU alert horizon.

ADU-based recalculation

A method of dynamically adjusting buffers that are replenished according to a strategic plan, using a rolling time frame.

Adaptive Enterprise Foundations Professional (AEFP)

The Adaptive Enterprise Foundations Professional or (AEFP)™ is a certification offered by the Demand Driven Institute, which is a professional endorsement that verifies an individual's comprehension of the contrast between traditional supply chain strategies led by MPS, MRP, and DRP and the rising flow-based methods, such as the Demand Driven Adaptive Enterprise (DDAE) Model.

Artificial batch

Any batch that does not correspond to actual demand.

Association for Supply Chain Management (ASCM)

Association for Supply Chain Management(ASCM) is the top authority on transforming supply chain organisations, fostering innovation, and promoting leadership. As the largest non-profit association in the supply chain field, it serves as an impartial partner, linking businesses globally to the latest insights on all aspects of supply chain management.

Average Daily Usage (ADU)

It is the acronym of Average Daily Usage.The Average Daily Usage indicates the average quantity of an item consumed per day. This is determined by tracking the amount used for each Order and noting the date on which the Order was fulfilled.

Average inventory range

From a planning perspective, the quantity of the red zone in addition to the green zone.

Average on-hand position

From a planning perspective, the quantity is the sum of the red zone and half the green zone.


Bimodal inventory

A continuous probability distribution with two distinct modes is shown in an aggregate inventory view, where the two peaks (local maxima) represent inventory shortages and back orders on one hand, and excessive positions and overstocked positions on the other. A bimodal distribution for an individual item also displays these two distinct conditions over time.

Blended ADU

The ADU which is determined by utilising both historical data and projected predictions.

Buffer penetration

The buffer that is still remaining, usually shown as a percentage.

Buffer profile

A group of components that are overseen globally and possess comparable lead time, fluctuation, regulation, and ordering characteristics.

Buffer run chart

A graphical representation that displays the changes in the performance of a buffer over a period of time.

Buffer status alerts

Illustrate the current and future positions of the points where dependencies are separated throughout the network.

Buffer zone

A layer of classification within a buffer stock, usually identified by the use of red, yellow, and green colour codes for different sections of the buffer zone.


Capacity buffer

Capacity buffer refers to a surplus of capacity beyond current, combined, or anticipated future needs. It acts as a buffer for both fluctuations in demand and supply. The capacity buffer is constantly monitored over time.

Control points

A position within the logical product structure that makes it easy to plan, schedule, and manage a product or group of products,(ref APICS dictionary).

Current on-hand alert

An execution alert generated by current on-hand penetration into the red zone of the buffer.

Customer tolerance time

The amount of time potential customers are willing to wait for the delivery of a good or a service.


Demand Driven Adaptive Enterprise (DDAE)

The Demand Driven Adaptive Enterprise or DDAE model is a management approach that allows companies to respond to market shifts, navigate complex and unstable conditions, and devise market-driven innovation strategies. It combines the core principles of flow management with the latest research on complex adaptive systems (CAS).

The DDAE model covers the organisation's operational, tactical, and strategic levels through its three main components: The Demand Driven Operating Model, Demand Driven Sales & Operations Planning, and Adaptive Sales & Operations Planning. The model employs a process of emergence, feedback, and selection through adaptive cycles to continually adapt to the ever-changing and unpredictable supply chain conditions of today.

DDBrix game

A Lego brick-based game that will enable you to experience the efficiency of your supply chain under a demand-driven approach in an interactive manner.

Demand Driven Leader Professional (DDLP)

The Demand Driven Leader Professional or DDLP™ certification, offered by the Demand Driven Institute, is a professional endorsement that verifies an individual's ability to implement the concepts of the Demand Driven Operating Model, assess and assess an environment using the principles of the Demand Driven Operating Model and the tactical elements of Demand Driven S&OP.

Demand Driven Material Requirement Planning (DDMRP)

Demand Driven Material Requirement Planning or DDMRP is a technique for designing, strategizing, and overseeing supply chains to ensure the smooth flow of essential information and materials. DDMRP serves as the system for generating and managing supply orders within a demand-driven operational model.

Demand Driven Operating Model (DDOM)

The Demand Driven Operating Model or DDOM is a model for creating supply orders, scheduling operations, and executing them efficiently by combining actual demand with strategic decoupling, control points, and buffers for stock, time, and capacity. This creates a reliable and adaptable system that ensures the smooth flow of information and materials within the relevant range of operations.

The key parameters of this Demand Driven Operating Model are established through a Sales and Operations Planning process that aligns with business and market goals while minimising costs and reducing expenses associated with expediting orders.

Demand Driven Planner Professional (DDPP)

The Demand Driven Planner Professional or DDPP™ is a certification offered by the Demand Driven Institute, that recognizes individuals who have demonstrated their ability to utilise demand driven concepts, assess and evaluate environments utilising the Demand Driven Material Requirements Planning (DDMRP) methodology.

Demand Driven Sales and Operations Planning (DDS&OP)

The Demand Driven Sales and Operations Planning or DDS&OP is the DDAE model's tactical component that manages the adaptive cycle in a tactical manner. DDS&OP acts as a bridge between the strategic and operational decision-making ranges in the DDAE. It primarily operates in the tactical range, updating the DDOM based on current and emerging business strategies provided by Adaptive S&OP, as well as evaluating past and projected DDOM performance. DDS&OP also analyses scenarios proposed in the Adaptive S&OP process and recommends any necessary changes to leadership regarding DDOM's future capabilities and performance.

Demand Driven Supply Chain Professional (DDSCP)

The Demand Driven Supply Chain Professional or DDSCP is a fellowship level certification from the Demand Driven Institute, demonstrating an individual's expertise in effectively utilising Demand Driven principles and delivering sustained value to an organisation.

Decoupled lead time (DLT)

DLT or Decoupled lead time refers to the practice of keeping a certain amount of time between different entities in a manufacturing, service, or distribution network in order to separate the processes or entities from one another. The goal is to disconnect the rate at which something is used from the rate at which it is supplied.


The term DRP stands for Distribution Requirements Planning, which involves figuring out when to refill inventory in branch warehouses. This process uses a time-phased order point method where planned orders from the branch warehouse are translated into gross requirements for the supplier through material requirements planning (MRP) algorithms. In situations with multiple levels of distribution networks, this translation can continue down to other regional warehouses (such as master warehouses and factory warehouses) and be incorporated into the master production schedule. The demand for the supplier is considered dependent, and the standard MRP principles apply. Additionally, replenishing inventory calculations may be based on alternative planning methods like period order quantities or “replacing what was used,” instead of just the time-phased order point approach.

Decoupled explosion

Stopping the rapid expansion of bill of materials at any disconnected point.

Decoupled lead time

The longest unprotected or unbuffered sequence in a bill of material is referred to as a qualified cumulative lead time.

Demand driven

Demand driven refers to a method of planning and organising supply chain activities based on the actual demand from customers or end-users.

Demand adjustment factor

The Demand Adjustment Factor (DAF) is a time-based modification to the ADU input.

Demand Driven Institute (DDI)

A global organisation dedicated to advancing the Demand Driven Methodology (DDM) and providing education, certification, and resources to organisations looking to improve their supply chain management.

Demand driven supply

Demand driven supply refers to a type of supply chain management where the production and supply of goods is based on the actual demand of the customers. This approach differs from traditional supply chain models where the production and supply of goods is based on predictions or forecasts.

Dynamic buffers

Buffer levels that are adjusted in response to changes in key part characteristics, either automatically or through manual adjustments.



Acronym for enterprise resource planning.

A framework that outlines, categorises, and normalises the business procedures needed for effective planning and management within an organisation, allowing the organisation to leverage its internal knowledge to gain a competitive edge. An ERP system contains extensive databases of information, including master files, cost and sales records, financial information, product and customer analysis, and historical and current transaction data.

Execution horizon

The process of orders from beginning to end, including the creation and release of the order and its eventual closure.


Flow index

Comparison of the average frequency of orders for all components.

Forward ADU

ADU determined based on forecast


Green zone

The highest level of an override buffer that is continually replenished. When the net flow position is in this zone, no additional supply will be generated.


Lead times

The amount of time necessary to complete a task or sequence of steps.

Within the realm of logistics, lead time refers to the interval from the identification of an order requirement to the delivery of the goods. This can encompass various stages such as preparation time for the order, waiting time, processing time, transit time, and time for receiving and inspection. Alternative term: total lead time. Related terms: manufacturing lead time, purchasing lead time.

Lead time adjustment factor

A factor that multiplies the lead time for a specific part.

Lead time alert

A warning that the actual lead time may be longer than the planned or expected lead time.

A notification or alert generated by a part that is being managed for lead time. This alert is activated when the part reaches a different level in its buffer, with the green, yellow, and red zones indicating increasing levels of urgency.

Lead time alert zone

The lead-time alerts are defined by the percentage of lead time within a certain zone, known as the LTM alert zone. This zone is divided into three equal sections, each colour-coded as green, yellow, or red.

Lead time factor (LTF)

The Green and Red Base zones are calculated by multiplying the average demand by a lead time period, using specific coefficients. It is not necessary for the LTF value used for the calculation of the Red Base zone to be the same as the one used for the Green zone.

Lead-time-managed (LTM) part

A crucial component that is not regularly kept in stock will receive extra attention during its production timeline. These types of components, referred to as LTM parts, are critical and have a long lead time but do not have enough demand to warrant being kept in stock. One-third of the lead time for this part will have a warning system divided into three sections.

Lean manufacturing

A manufacturing philosophy that prioritises reducing the utilisation of all resources, including time, in all business operations. This involves removing any non-value-adding aspects of design, production, supply chain management, and customer management. Lean manufacturers employ multiskilled workers throughout the organisation and utilise highly automated, flexible machines to produce a large variety of products. The lean production approach includes principles and practices aimed at reducing costs by removing waste and streamlining all manufacturing and support processes. Other terms for this concept are "lean" and "lean production.



Acronym for material requirements planning. A group of methods that incorporate information from the bill of materials, inventory records, and the master production plan to determine the material requirements. It suggests issuing replenishment orders and adjusts open orders as needed when their due dates and demand dates do not match, taking into account the time frame involved.

Market potential lead time

The lead time that will enable an increase in price or the acquisition of additional business through existing or new customer channels."

Master settings

The parameters of the Demand Driven Operating Model (DDOM) overseen by the Demand Driven Sales & Operations Planning process.

Material synchronisation alert

An alert triggered by the first instance of a current or projected negative balance in at least one DLT.

Matrix bill of material

A matrix-style chart that displays the components needed for multiple products within the same or similar category. It organises the components in columns and the parent products in rows (or vice versa) to easily show the shared components among them, as per the APICS dictionary.


Net flow equation

An equation used to determine the availability of a buffered item, which takes into account the current stock on hand, the amount on order (also known as open supply), and subtracts any unfulfilled demand. This calculation was previously referred to as the "available stock equation."

Net flow position

The net flow equation calculates the position of a part based on its buffer values, previously referred to as the "available stock position."

Non buffered part

All components that are not in stock.


Occurrence-based recalculation

A technique for modifying buffer sizes according to the quantity and intensity of designated events within predetermined fixed periods.

On-hand alert level

The proportion of the buffer status alerts that are utilised in determining whether a yellow or red colour designation should be assigned in the red zone.

Operational relevant range

The validity period of assumptions for the current operating conditions in a Demand Driven Operating Model (DDOM) is referred to as the operational relevant range, which is determined by the decoupled lead time of a specific part.

Order spike horizon

A specific time period in the future that is used to identify when an increase in orders, known as an "order spike," occurs, in conjunction with a set limit for the spike. Typically, the time frame for identifying order spikes is set to one DLT.

Order spike threshold

The order spike threshold is a specific value used in conjunction with the order spike horizon to identify sudden increases in orders. It is usually stated as a percentage of the lowest possible level (or "red zone") of a product's buffer inventory.

Over top of green (OTOG)

A condition where either the available inventory or the on-hand inventory exceeds the defined green zone, indicating an excessive amount of stock.


Past ADU

ADU that is determined based on the past.

Planned adjustment factor

Manipulating buffers based on strategic, historical, and business intelligence considerations.

Planned adjustments

Changes made to the buffer equation that influence the quantity of inventory by increasing or decreasing buffer levels and the associated zones at specific moments. These planned adjustments are frequently determined by various strategic, historical, and business intelligence factors.

Prioritised share

A method for assigning positions to a group of parts based on their net flow, in order to meet a specific constraint or requirement.

Projected on-hand alert

A warning produced by a prediction of on-hand inventory taking into account a component's delivery lead time, considering existing stock, incoming supply, and either actual usage or average daily usage.


Qualified actual demand

The demand component of the equation for available stock is made up of sudden increases in orders, overdue demand, and demand that is required to be fulfilled today.

Qualified order spike

The total daily demand that exceeds the threshold within the designated time frame for order spikes.


Ramp-down adjustment

Changes made to the buffer equation can have an impact on inventory levels by decreasing buffer levels and the corresponding zones at specific times. Typically, adjustments for reducing inventory are used during the process of removing parts.

Ramp-up adjustment

Changes made to the buffer equation that impact inventory levels, by increasing buffer levels and the corresponding zones at specific times. These adjustments are commonly used during the introduction of new parts.

Red zone

The most critical area in a buffer that receives and overrides replenishments is the red zone. This zone is designated with a red colour to indicate a severe situation. It encompasses both the red zone safety and red zone base.

Red zone base

The section of the red zone determined by lead-time factors.

Red zone safety

The size of the red zone is determined by factors that affect its variability.

Relative priority

The priority of filtering orders by zone colour as a general reference compared to buffer penetration as a discrete reference.

Replenished override part

A specific area has been carefully chosen and placed using a three-zone buffer that is set in a fixed manner (manually defined buffer zones). Adjustments to the plan can still be made while utilising these buffers.

Replenished part

A section that is strategically planned and managed using a dynamic buffer system divided into three zones for planning and implementation. The buffer zones are determined based on buffer profiles and specific characteristics of the part, such as ADU and DLT.


Sales order visibility horizon

The period during which a company typically becomes aware of sales orders or actual demand that is dependent on other factors.

Seasonality adjustment

Adjusting buffers to follow seasonal patterns can have an impact on inventory positions through changes made to the buffer equation.

Significant minimum order quantity

A minimum quantity required for an order that establishes the green zone of a buffer.


The significant increase or decrease in the level of a value over a brief period.

Stock out (SO)

A product that is not immediately obtainable in inventory (according to the APICS dictionary).

Stock out with demand (SOWD)

A product that is not currently in stock and has a requirement.

Stock out with demand alert

A notification indicating that an item has been strategically stocked due to a shortage of inventory and the presence of a need for it.

Strategic adaptive cycle

The process by which a company evolves strategically involves a loop of emergence, feedback, and selection. Emergence is a change in the system that is brought about by external or internal factors. Feedback is a system of signals and triggers that are monitored by adaptive agents. Selection is the decisions, actions, and learning that occur in response to these signals and triggers, which may or may not lead to further strategic changes.

Strategic inventory positioning

The method of identifying the optimal location for storing inventory in order to minimise the impact of fluctuation and effectively fulfil market demands while maximising the use of available funds.

Strategic relevant range

The validity period for assumptions used in long-term planning and decision making is within the scope of the Demand Driven Adaptive Enterprise (DDAE) framework. The strategic relevant range is usually considered to be beyond the total lead time required for making capacity and infrastructure decisions in the given environment.

Supply chain

The network of suppliers responsible for delivering products from raw materials to the final customers, utilising either a planned or transactional flow of information, merchandise, and finances.

Supply chain controlling

Supply chain controlling refers to the management and coordination of all the activities involved in the procurement and delivery of goods, services, and raw materials. This includes overseeing the flow of information, goods, and money between suppliers, manufacturers, distributors, and customers. The primary objective of supply chain controlling is to ensure an efficient and effective supply chain process while minimising costs and maximising profits.

Supply chain cycle

A straightforward illustration of the progression of operations and dealings that occur from suppliers creating goods until the final distribution to consumers.

Supply chain management

The implementation of supply chain activities with the aim of maximising value, constructing a competitive foundation, optimising global logistics, balancing supply with demand, and evaluating performance on a global scale. This includes the stages of design, planning, execution, control, and monitoring.

Supply chain monitoring

Supply chain monitoring refers to the practice of using a collection of instruments, such as analytic software, to monitor and evaluate the efficiency of supply chain activities.

Supply chain performance measurement

The evaluation of organisational structures, processes, and resources within the supply chain, both for individual firms and the supply chain as a whole, is achieved through the use of supply chain performance measurement. This measurement serves as a basis for understanding the entire system, affecting behaviour and providing information on the performance of supply chain participants and stakeholders.

Supply chain production planning

Supply chain production planning is the process of coordinating and optimising all production-related activities in a supply chain, from raw material sourcing to delivery of finished products to customers, to ensure that production is efficient, cost-effective, and meets customer demand.

Supply offset

Altering the timing of when a demand adjustment factor is applied to take into consideration components with lengthy lead times.

Synchronisation alerts

Alerts that are created to draw attention to issues related to dependencies.


Tactical adaptive cycle

The enterprise's development cycle within the relevant tactical range is determined by a process of emergence, feedback, and selection. Emergence involves a change in the system's configuration, triggered by external or internal factors. Feedback is a set of predetermined signals and triggers that are monitored by adaptive agents. Selection involves making decisions, taking actions, and learning in response to the signals and triggers, which may or may not lead to another reconfiguration at the tactical level.

Tactical relevant range

The validity of assumptions for the near-term range of the Demand Driven Operating Model (DDOM) covers the past, present, and short-range future in terms of operation and adaptation. The tactical relevant range is usually considered to be the period spanning one cumulative lead time in the past to one cumulative lead time in the future.


The process of identifying key elements and dependencies within an organisation or system to develop effective business rules and operating strategies that increase efficiency, transparency, and fairness is known as thoughtware. Within the DDMRP framework, thoughtware specifically pertains to determining the optimal inventory positioning factors.

Top of green (TOG)

TOG is determined by adding together the amounts of the red, yellow, and green zones, with the highest level being the green zone.

Top of red (TOR)

The amount of the top level in the red zone.

Top of yellow (TOY)

The total amount of the top level in the yellow zone, TOY, is determined by adding together the red and yellow zones.


Variability Factor (VF)

A coefficient used to determine the safety zone in the red zone by applying it with the base of the red zone.


Yellow zone

The middle layer of the buffer level is coloured yellow to indicate a warning. This yellow zone serves as the area where buffers are replenished and overridden.


Zone adjustment factor

Modifying the buffer zones for components by multiplying the zone's value with a factor.

Frequently Asked Questions (FAQ)

What is the difference between a DDMRP buffer and a safety stock?

When you make a plan with MRP and you have some components with safety stock, MRP will try to not use them. In technical words, MRP nets to zero which means it always attempts to bring your stock levels to zero, or to safety stock. This is good in theory but a disaster in practice, because every time you re-run your MRP the demand will have changed, maybe even slightly. MRP will nevertheless recalculate all the plans in order to achieve its net-zero result. So the safety stock is actually never intended to be used and the plan changes all the time creating a lot of instability. DDMRP does exactly the opposite. All the stock in the DDMRP buffer is intended to be consumed to absorb the variability and thus create stability in the plan. A small change in demand will not affect the plans on the other side of a DDMRP buffer.

Can I use DDMRP to manage long lead time components?

Absolutely yes. The yellow zone of the buffer is there just for that. It represents the stock that will be depleted while waiting for your deliveries to arrive. When the buffer triggers a replenishment order it considers the yellow zone and thus places the order considering the appropriate lead time.

How do I apply DDMRP when my demand is intermittent?

This is an issue that many companies will need to deal with. You calculate your buffers using your ADU (average daily usage) but you have many days where you are not actually selling (using) anything. The trick is that you need to calculate your buffer zones as if these days with 0 sales weren’t present. After that you will need some additional adaptations to your buffer.

I am a pure MTO company, therefore DDMRP doesn’t work for me, right?

As a matter of fact, DDMRP will be beneficial especially for a MTO environment. The reason is that in most cases you will not be a pure MTO unless you are in an Engineering to Order business (and even there DDMRP works very well, but that is for another day). Most MTO companies will store either raw materials or intermediate components that allow them to supply their customers within the lead time that the customers require. And this is where DDMRP can help, primarily for deciding which raw materials and components need to be stock (and which not), and then what is the right levels of those stock buffers.

If DDMRP doesn’t use forecasts, how can I plan for the long term?

DDMRP in a narrow sense is an operational tool that only manages orders. But you can apply projected demand (in the form of projected ADU) to your buffers and thus simulate how they will generate supply orders in the future. You can also simulate how the buffers themselves will adapt to different demand (e.g. if demand is increasing the buffer will increase accordingly). This allows you to calculate capacity, labour and storage space requirements as well as estimate your future inventory level and the number of supply orders you will have in the future. In short you can get all what you need to make your tactical plans.

I need to send a forecast to my suppliers so they can plan their capacity. Can I do that with DDMRP?

Yes. This is where there is a lot of confusion about the methodology. DDMRP in a narrow sense only deals with orders and so it is blind to the future. But the methodology allows you to simulate how your buffers will generate supply order in the future based on projected demand. These simulated supply orders can be given to your suppliers as a forecast. It is important that they are clearly identified for what they are: non binding forecasts. The actual orders will be generated by the net flow equation within the agreed lead time.

I am managing products with a short shelf life. Can DDMRP deal with these products?

Yes. You can do that at two levels, the S&OP level and Operational level. At the S&OP level you simply convert the buffer zones from units to days. To do that you just divide the units by the ADU. Now you can compare your calculated buffer with the time you can keep the product in storage before they expire. For instance you know that on average you will have Red + 50% of Green in stock. If that calculated value is more than the time you can keep your stock in storage you know you will have a problem. So the solution will be to reduce the replenishment lead time, reduce the lot size (Green Zone), and better control variability (Red Zone). Operationally you want to make sure that you will always have sellable products in your buffer. This can be done if your DDMRP software can manage the stock at batch level with sell-by date. The trick is simply that if the system projects that there will still be some batch quantity still remaining at the sell-by date, it will “sell” that quantity. If it’s a small quantity then the buffer will calculate through it just normally. If it is a big quantity then the buffer will see it as a spike and potentially trigger a replenishment order to replace it with fresh stock.

My products are highly seasonal. How can DDMRP help me manage them?

Yes, DDMRP makes managing seasonal products very easy. You can do that by adapting the parameters of your buffer stocks and there are many ways you can do that. Typically you will increase your buffer some time in advance of the start of the high season. How much in advance will depend on the lead time to procure and build the stock. The system will react by generating supply orders that will build the stock necessary to support the sales for the high season. Then, when you are at the top of the season, you bring your buffer down to its nominal value. Now the products in stock will be sold and will not trigger any new replenishment until the stock reaches the off-season level.

How is it possible that DDMRP inventories go down to 20-40% as reported by many companies and consultants, when DDMRP is literally about creating buffer stocks that weren’t there before?

Indeed this is counterintuitive but it can be explained. There are three elements of this. Firstly, in a traditional MRP planning there should be no stock in theory except for the safety stocks. In practice there is stock everywhere. So the statement ”that wasn't there before” is not true. The difference is that MRP is not built to manage stock: according to the MRP plan all positions are netted to zero so there should be no stock but we know that this isn’t true. When you implement DDMRP you will actually manage those stocks and thus make them very visible. Secondly, in DDMRP you decide which materials will be buffered (= will be stocked) and which will not be in your end-to-end supply chain. This is a critical decision making process that will impact the overall inventory investment. For instance, you can calculate that by buffering an intermediate component that is common to many MTS finished products you will reduce the stock requirements for those finished products and thus the total inventory goes down. Thirdly, in a traditional environment we observe what is commonly known as bimodal inventory distribution. This means that we have several products that are understocked and several other products that are overstocked at the same time. With DDMRP you will create a more balanced inventory, where all products are stocked at the right level. So some products you will actually increase the stock, while others you will reduce. Now, this bimodal distribution is not symmetrical: you generally have many more products with too much stock than products with not enough, so when you rebalance those stocks the total inventory will go down.

I would like to try DDMRP but my planning team is not quite ready as we are still failing to properly apply the basics of planning. Don’t we need to be proficient with basic planning methods before moving to these advanced approaches?

As a matter of fact: NO. DDMRP is an advanced method but not in the sense that it builds on top of traditional planning. It is just a different approach to planning. Thus, becoming proficient in traditional planning is a waste of time and may actually be counterproductive because a big deal of DDMRP is about un-learning some traditional planning and learning something completely novel. In a sense when you implement DDMRP you are taking two steps back in order to be able to make a huge leap forward on a different road.