DDMRP in Telecom and Electronic Supply Chain Management

The telecom and electronic sectors are continuously evolving at a lightning pace. With the rise of emerging technologies, altering customer attitudes, and the continued emphasis on digitalization, these companies must prepare for the long term and be adaptable.

What are the problems faced by Telecom and Electronic Supply Chains?

Telecom supply chain management is facing a significant issue related to customer service. They receive millions of customer calls every day, making it difficult for these companies to manage the entire process. With millions of users and a wide range of products and customized solutions, operational responsibilities have grown increasingly complex, as face-to-face assistance is no longer available. Even simple operations like service setting, invoicing, order fulfillment, and payments have become problematic. Forecasting is another issue that these companies are facing, and these often tend to over forecast their requirements for the future. The electronic supply chain industry is also facing the forecasting issue due to factors like the quality of components and the availability of the components that lead to inventory problems resulting in issues like shortage of the required materials.

So, what can be the solution to these problems? The answer to this question is Demand Driven Material Requirement Planning(DDMRP).

What is DDMRP?

Demand Driven Material Requirements Planning(DDMRP) is a quantitative strategy for optimizing the supply chain performance of multi-echelon manufacturing companies. The strategy is based on the concepts of ‘decoupling points’ and ‘stock buffers,’ which are designed to overcome the shortcomings of previous methods used by most Material Requirement Planning(MRP) systems. The approach provides the quantities to be purchased or manufactured for any Stock-Keeping Unit(SKU) in a multi-level Bill Of Materials(BOM).

How to implement DDMRP?

Companies in the Telecom and electronic supply chain can implement DDMRP quickly on their supply chain points. Using strategic decoupling, they can easily know the path of the buffers that would help them determine which buffer would occupy how much space of the inventory. One of the significant steps that would benefit the electronic supply chain is that they could adjust the buffers dynamically, that is, adjust the buffers based on external factors like future events, quality of material, and many more. In addition, companies should use demand-driven planning to avoid overstocking or undersupply of the product. They should always find out the actual demand of their product in the market and then manufacture according to that. Finally, companies can use the DDMRP software to execute orders by the manager. 

How could DDMRP help the Telecom and Electronic supply chain companies?

It is fantastic if your company is not having any inventory issues along the supply chain, even when demand for your product increases or you are releasing a new product. However, this is not the norm. Studies have shown attempts to forecast demand, which is the traditional resource planning method, to be unproductive. It is unusual to strike the demand right on the nose. Instead, you will nearly always have an excess or a supply deficiency. Demand-driven resource planning is a cutting-edge approach to supply chain management that ensures timely corrections. That way, you won’t have a lot of excess stock that you can’t sell or have to rush to satisfy orders from eager consumers because you’ve run out. Being capable of making these micro-adjustments all along the road implies happier consumers and reduced capital investment.

Avigilon – An electronic supply chain company that implemented DDMRP

Avigilon manufactures and designs high-definition surveillance solutions that provide unbeaten image detail. They deliver the best image quality and the most straightforward system to use for better ROI. They are the providers of the End-to-End HD surveillance system. They provide the following components: HD IP cameras, lenses, analogue Encoders, Network Switches, NVRs, and workstations. They also provide the best in class software to control this system called the Avigilon Control Center Software. They also have various products like box bodies, 180 & 360-degree panoramic cameras, micro dome cameras, dome cameras, PTZ cameras and bullet cameras. It had a revenue of $51.1 million in the third quarter of 2013.

Before they decided to implement DDMRP, the lead time and planning horizon depended on customers. They had issues related to space in that they had not planned where they should keep the stock. They had no clear priorities, which led them to expedite more and more, which resulted in frequent overtime. The order backlog grew, and their service was also facing severe problems due to undersupply of the products to the customer.

In October 2013, they started to work on data to implement DDMRP, and In November 2013, they organized a 3-day workshop. The outcome of the November workshop was that they were able to create a project map so that they could implement the new demand flow system. A short plan to elevate the production was proposed, and the test stations and four feeding assembly lines were un-dedicated to increase the flow. They used strategic decoupling at various supply chain points and against control and visibility. The short independent planning and execution horizon with the investment in the buffers’ flexibility helped reduce the lead time. In January 2013, the DDMRP implementation was launched.

Results

The results of the DDMRP implementation were that in 2013 Avigilon had a near-perfect customer service level of more than 99%. The overtime and expedited freight costs were reduced sharply. There was a significant increase in the production volume. There was a significant shift in their planning process from building something to fill orders to using stock buffers that could be replenished, which increased the plant performance with low stress. As a result, Avigilon was able to build center stock buffers to support its sales growth. Since the signals were based on the pull and priority, the buying and planning of the product were simplified. The visibility that the time and the stock buffer provided helped the resources to remain synchronized according to market priorities and the right time. To plan the additional requirement of the resources, they started using DBR+ resource loading graphs.

The future planning of Avigilon is to make their employees familiar with the use of intelligent metrics of the new system and focus on improvement opportunities so that they can reach their sales goal.

British Telecom – A telecom supply chain company that implemented DDMRP

British Telecom has multiple supply chains that have different demands. It has a complex distribution network having 2 national distribution centers, 96 forward stock locations and 13 transport hubs. It receives almost 30k orders per day from B2C consumers and has almost 2.2 million deliveries and returns annually from B2B consumers.

British Telecom’s major problem was related to forecasting accuracy. The forecast was not great at the mix level, this often resulted in over forecast, but there were also as many under forecast as over forecast items. Instead of improving the forecast accuracy, they decided to go for a change and implement DDMRP in their supply chain management. They simulated the DDMRP implementation using the 6 months data of the actual orders per day.

Two groups of SKUs had been over and under forecasted but had an excellent accuracy at the aggregate level. The results of this simulation were that the stock was balanced, and the inventory was dramatically reduced to half. Since the simulation was not based on the forecast, there was no chance of forecast error. The service was up to the mark, and the load on the factory stabilized.

Results

British Telecom experienced tremendous growth after the implementation of the DDMRP in their supply chain management; some of the key results were:

• The supply chain was free from the risk of forecast accuracy. 
• There was a strong positive impact on cash flow and ROI. 
• The service level improved and moved as high as 99%.
• The supply chain capacity was increased as the goods were produced at the actual demand of the market, so there was a significant reduction in the buying or storing of things that were not needed at that time.
•  Cost savings — less planning effort with better results – lower expedite costs.

What are the future steps that British Telecom would take?

The future steps of British Telecom are:

• Based on the analytics and reports, they would continue to improve the flow of the goods as goods flow is more critical; if the goods flow well, the cash flow also increases.
• Communicate with suppliers – at the supplier / BT interface, demand-pull is reverting to forecast push.
• Orchestr8 and DDS&OP methodology ensure that British Telecom covers the operational and tactical relevant ranges; the next step is to connect to the strategic recommended range.
•  Continue to invest in education and training.

Conclusion

The fact that the DDMRP is a better method for production playing than forecasting based on the past is proved from the above case studies. The traditional inaccurate forecasting system has always created a problem for Telecom and Electronic Supply chain companies. DDMRP helps them overcome the problems caused by these forecasts and gives better inventory management.

To know more about DDMRP from Patrick Rigoni, get the latest information in our DDMRP Page.