DDMRP relative priority for production execution: an assessment by simulation

Abstract

Demand-Driven Material Requirements Planning (DDMRP) was designed to improve supply chain performance in complex and uncertain environments. Literature on the topic suggests that production replenishment orders should be dispatched for execution based on the buffers’ penetration ratio of the products ordered, which is a measure of protection against stock depletion. However, the actual performance impact of this dispatching rule remains largely unknown as is the impact of different lot transfer policies. A simulation analysis was carried out to compare the performance of the lowest net flow position, the highest buffer penetration ratio, earliest operation due date and first-come first-served rules under synchronized and unsynchronized lot transfer policies. Results of our study show that the choice of dispatching rules is contingent on the setting of top-of-yellow and top-of-green, which determine the re-order quantity, and on the demand mix of products. The earliest operation due date rule shows great potential to outperform the rule typically applied in a DDMRP context specifically for a high demand mix. These findings provide important insights for improving industrial practice and for guiding future research on DDMRP.