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Zone Definitions

The buffer consists of 3 parts: the Green Zone, the Yellow Zone, and the Red Zone.

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Green Zone

The green zone determines order size and order frequency for a part. The green zone is calculated by using one of the following 3 methods. The largest resulting value is used to size the green zone.

  1. Calculated Method = Average Daily Usage x Lead Time x Lead Time Factor

  2. Order Cycle Method = Order Cycle Days x ADU

  3. Minimum Order Quantity value (MOQ)

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In R+, if the MOQ is the largest value, it will always be the size of the green zone, regardless of which green zone value you choose. This ensures that you are not ordering less than the MOQ that you have for that part.

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Yellow Zone

The yellow zone is the heart of the demand coverage in the buffer. Put another way, it represents the amount of protection/coverage that you need until you next receive supply for that item. It is calculated by:

Average Daily Usage x Lead Time

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Red Zone

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Traditional DDMRP

The red zone consists of 2 parts: the red zone base and the red safety. The total red zone is the sum of the red zone base and the red safety. The red zone accounts for variability in the buffer. It is calculated in three steps using the following formulae:

  1. Red Zone Base = Average Daily Usage x Lead Time x Lead Time Factor

  2. Red Zone Safety = Red Base x Variability Factor

  3. Total Red Zone = Red Zone Base + Red Zone Safety

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Statistical Red Zone

There is another way to calculate a Red Zone in R+ called the Statistical Red Zone method. This method uses a calculation that is based on standard deviation of demand and a probability factor that determines the accuracy of the safety protection to generate the red zone size. The calculation for this method is:

The calculation for the statistical RZ is: (z factor for probability%) x SD of DD x SQRT(LT + OI)

  • Z factor = the NORM.S.INV excel function for the assigned probability%

  • Probability% = The value can be a number between 0 and 1 (0.95= 95%)

  • SD = standard deviation of historical demand over the defined horizon

  • SQRT = square root

  • LT = effective lead time

  • OI = the order interval

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