Buffer Levels

Overview

DDMRP uses strategic stock positions called buffers which are placed at critical decoupling points. The following can be accomplished once you correctly position the buffers:

• Reduced total inventory
• Material shortages largely eliminated
• Reduced nervousness in the system
• Less disruption due to higher tolerance of supply and demand variability

Once the buffer part is positioned, buffer levels and profiles need to be established for the part in order to be considered by MRP. Buffer levels are color coded buffer zones, which are used in the planning phase to manage inventory levels of buffered or lead time decoupled component parts.

Factors

Buffer zones are calculated based on the following factors:

• Part Type: This indicates whether the buffered or decoupled part is manufactured, purchased, purchased (raw) or manufactured recipe. Lead time categories for one part type can be different from the other part type.
• Variability Factor: This is evaluated by considering the supply and demand situations. In IFS applications it is evaluated based on the historical issues made for a defined horizon in the past. Variability can also be categorized according to the part type.
• Minimum Order Quantity: There can be certain limitations for batch sizes and some batch validations can be rightful (e.g., in purchasing, batch size can be limited if there exists delivery restrictions. With manufactured parts, manufacturing process performs well with some batch sizes).
• Imposed Order Cycle: This determines how frequently we can place orders restricted due to some delivery policies.
• Average Daily Usage (ADU): This is calculated based on the historical issues within the defined horizon.
• Unprotected Lead Time: This is the cumulative lead time defined as the longest unprotected/unbuffered sequence in a bill of material.
• Lead Time Factors: Defined as the percentage of average daily usage over unprotected lead time. The rule of thumb is the longer the unprotected lead time the smaller the lead time factor should be. Lead time factors for Green and Red Zone can be set individually.

Calculations

Yellow Zone is calculated as:

• ADU * Unprotected Lead Time

Green Zone, consider the largest value of the following:

• ADU * Unprotected Lead Time * Green Lead Time Factor      (Note that if there is an adjustment defined it will be applied to this calculation)
• ADU * Imposed Order Cycle
• Minimum Order Quantity

Red Zone, calculated as the sum of the Red Base and the Red Safety:

• Red Base = ADU * Unprotected Lead time * Red Lead Time Factor     (Note that if there is an adjustment defined it will be applied to this calculation)
• Red Safety = Red Base * Variability Factor