The Demand Driven Adaptive Enterprise model is a management and operational model designed to enable enterprises to adapt to complex and volatile environments. The model utilizes a constant system of innovation and feedback between three primary components; a Demand Driven Operating Model, Demand Driven S&OP and Adaptive S&OP. A Demand Driven Adaptive Enterprise focuses on the protection and promotion of the flow of relevant information and materials across the strategic, tactical and operational relevant ranges in order to drive sustained return on equity performance.
It is neither simply right-to-left nor simply left-to-right in nature. It is both at the same time. It is a bidirectional system that seeks to drive adaptation through a cycle of configuration, feedback and reconciliation through the three components.
The DDAE model incorporates all four of the prerequisites for relevant information discussed earlier in this blog.
Prerequisite #1: Understanding Relevant Ranges.
The DDAE model uses three connected and reconciled relevant ranges; Operational, Tactical and Strategic.
The Operational Relevant Range is typically seen in hourly, daily and weekly buckets but can span up to the longest decoupled lead time of a part/SKU. It is the time range that matters between decoupling point (which defines planning horizons in a Demand Driven Operating Model). Day-to-day operations are managed within the Operational Relevant Range.
The Tactical Relevant Range blends the present with the short-range past and future. It typically spans at least the cumulative lead times for products/SKUs into the past and into the future. Thus, it represents a period (present, future and past) typically at least twice cumulative lead time. The Operational and Strategic Relevant Ranges are reconciled in the Tactical Relevant Range through the DDS&OP process.
The Strategic Relevant Range is typically seen in monthly, quarterly and annual buckets of time. This range typically starts at the cumulative lead times of products and looks further into the future depending on the time required to adapt the model. Business Plan parameters are devised and revised within the Strategic Relevant Range through the Adaptive S&OP process.
Prerequisite #2: Implement a Flow-Based Operating Model.
The DDAE model incorporates a flow-based operating approach called the Demand Driven Operating Model (DDOM). A Demand Driven Operating Model (DDOM) is a supply order generation, operational scheduling and execution model utilizing actual demand in combination with strategic decoupling and control points with stock, time and capacity buffers in order to create a predictable and agile system that promotes and protects the flow of relevant information and materials within the operational relevant range. A DDOM’s key parameters are set through the Demand Driven Sales & Operations Planning (DDS&OP) process to meet the stated business and market objectives while minimizing working capital and expedite-related expenses.
The DDOM is designed around four basic elements:
- Pacing to Actual Demand – The Demand Driven Operating Model uses only actual demand for supply order generation. There are no planned orders and no Master Production Schedule used in the DDOM.
- Strategic Decoupling Points – The Demand Driven Operating Model uses strategically placed decoupling points to compress lead times, shorten planning horizons and dampen demand and supply variability.
- Strategic Control Points – The Demand Driven Operating Model uses strategically placed control points for scheduling and resource and order synchronization.
- Dynamic Buffering – The Demand Driven Operating Model protects its decoupling and control points through dynamic stock, time and capacity buffers.
The heart of the DDOM is the innovative method of supply order generation and execution known as Demand Driven Material Requirements Planning (DDMRP). DDMRP utilizes strategically determined decoupling point buffers to compress lead times and minimize the distortion to relevant information (transfer and amplification of demand signal distortion) up the supply chain and the distortion to relevant materials (supply continuity variability) down the supply chain. Detailed resource scheduling is accomplished through Demand Driven Scheduling. Demand Driven Scheduling utilizes the strategically determined placement and scheduling of control points protected by a combination of stock, time and capacity buffers. Demand Driven Execution is the management of open supply orders and released manufacturing orders against the real-time status of stock, time and capacity buffers.
The necessary configurations for DDMRP and Demand Driven Scheduling come from Demand Driven S&OP. In the Demand Driven Operating Model, the conventional notion of a Master Production Schedule is replaced with Master Settings managed in the DDS&OP process.
To be continued…