Key Terms
In order to understand the R+ methodology, you must first understand the building blocks of DDMRP.
Basic Definitions
Decoupling Point
All buffers are also known as decoupling points. A decoupling point is the location where you create independence between supply and use of material by establishing a buffer.
Decoupled Lead Time
From the level 0 item, there can be several branches in the BOM structure. the decoupled lead time is the cumulative lead time of the longest branch of non-buffered items.
In R+, the decoupled lead time is referred to as the R+ lead time.
Buffer
A calculated amount of inventory that protects the flow of materials and cash in a supply chain.
Buffer Profile
A combination of letters and numbers that tells you details about the part type, lead time, demand variability, and green zone method. Also determines the variability and lead time factors and the green zone method.
Key Definitions
Net Flow Position
Net Flow is used to identify your current inventory position and is calculated as follows.
On Hand Inventory + Incoming Supply - Qualified Demand = Net flow Position
This net flow position is used in the calculation of reorder quantities, as well as identifying inventory alerts and priorities.
Qualified Demand
Qualified demand is defined as demand due today, past due demand, and any order spikes. See Spikes definition below.
Daily Usage
Daily usage is a measure of the rate of usage for a specific part. It is measured as a rolling average over a user defined time horizon. In R+ we have three daily usage types:
Average Daily Usage - A backwards measure of usage based on historical demand
Forward Daily Usage - A forward looking measure of usage based on forecast
Blended - A combination of forward and historical data
These daily usage statistics are used in R+ to determine zone sizing.
Item Types
Four item type categories:
Manufactured Items (End Item)
Manufactured Items (Intermediate Items)
Purchased Items
Distributed
Lead time Factor
To establish the variability factor, first you have to first establish lead time categories. The example below has 3 categories, but it is usually better to have five:
Long(L)
Medium (M)
Short (S)
The values of long, medium and short should be established relative to you business and part types. This lead time category will then be used to determine the Lead time Factor
The LTF will be applied to a part’s average demand within its lead time in order to supply values used in the green and red zone determination
Variability Factor
Similar to lead time, for variability factor, you must first establish variability categories for supply and demand.
Supply
High (H) Supply Variability = consistent issues with supplier lead times and reliability
Medium (M) Supply Variability =occasional delivery/reliability issues from supplier
Low (L) Supply Variability = little to no issue with supplier
Demand
High (H) Demand Variability = customer demand changes regularly and dramatically
Medium (M) Demand Variability = occasional changes in customer demand
Low (L) Demand Variability = consistent order behavior from customers
From there you can establish the variability factors:
Spikes
A spike is a demand order that is large enough to be considered disruptive to your inventory position. In R+ this is typically defined as any order that accounts for 50% of your red zone.
Spikes Qualification
Once you have determined what you want to be considered a spike, you then need to establish a forward looking time horizon for "qualifying" spike. In R+ we determine a number of lead times to look ahead. In the screenshot below this is two lead times. For example, if the lead time is 10 days, R+ will look ahead 20 days for a spike. This is important because if you are using a historical ADU, the spike qualification will help you compensate for large order in the pipeline and prevent stock outs.
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