A new paradigm for supply chains
The Aerospace and Defense industry is grappling with disruptive forces—from market developments to technology innovations to the effects of unforeseen shocks. For the supply chain function, the virtual lifeline to humanity, the criticality of maintaining operations and outmaneuvering uncertainty is heightened during these times. Global supply chains are being severely impacted along all dimensions of the value chain.
This comes on top of the major changes in how aerospace and defense companies interact with customers, suppliers and manufacturers. Elevated customer expectations, increased market volatility, new digital technologies and expanding data volumes have all massively increased supply chain complexity.
However, the way supply chains are managed and run has not kept pace with the challenges.
- More complex, connected products and innovation programs require digital continuity right across the product lifecycle.
- Long lead-times mean higher inventory levels throughout the production cycle for manufacturers and suppliers.
- Multilevel supply chains and vertical integration can prolong and complicate planning processes, with major dependencies between parts-production plants and assembly plants.
- Specialized suppliers (plus nationally imposed constraints) reduce sourcing options and create heavy dependencies on sole-source suppliers.
- Sourcing is made more complex with multilevel quotas, subcontracting processes and the use of closed/dedicated collaboration platforms between OEMs and suppliers.
The big picture? Supply chain leaders need better visibility into multilevel supply chains, ensuring fluid operations between all internal players. They also need more control over critical suppliers, securing on-time delivery, in the right quantities, to minimize the risk of disruption.
DDMRP for the demand-driven enterprise
Demand-driven material requirements planning (DDMRP) is an innovative solution that disrupts traditional approaches, helping planners reimagine how to best serve the flow generated by demand orders between different points in the supply chain.
Under this model, the supply chain is divided into multiple interdependent entities, each with its own MRP run. The connectors between these entities are inventory buffers that act as shock-absorbers to handle variability and protect the flow.
These buffers are placed, for example, at the end of production processes for parts with long lead times or which create bottlenecks. They can also be placed on critical sub-assemblies (or those with long lead times), on critical parts whose suppliers have frequent quality issues, and/or on parts with complex supply processes.
What changes for supply chain with DDMRP?
Thanks to its dynamic buffers, DDMRP helps ensure service is more reliable, revenue is maximized, and inventories are minimized. Additionally, it keeps expenses to a minimum and ensures cash flow follows the rate of product flow to market demand.
Demand-driven enterprises enjoy reduced overall lead-times for end-product production. They get better inventory control and stabilization of flows between plants/suppliers, as well as a reduced risk of stock shortages and supply disruption. Decision making and forecasting are transformed with increased visibility over complex sourcing processes and real-time information on demand between plants.
How SAP® solutions support DDMRP
SAP enables the demand-driven enterprise and supports DDMRP through a comprehensive suite of solutions, including both SAP Integrated Business Planning (IBP) and SAP S/4HANA®. Some of these solutions have been co-developed with Accenture, such as DDMRP calculations and execution in SAP S/4HANA with supply chain extended manufacturing.
In addition, SAP S/4HANA Finance helps companies move to real-time finance and advanced finance analytics, providing a simple way to adapt financial KPIs and follow up a demand-driven transformation. And SAP Ariba® for procurement helps drive savings and enable supplier collaboration along the entire source-to-settle process.
How can Accenture help?
A DDMRP transformation requires numerous, often jointly executed activities to be seamlessly coordinated. Accenture can help your business align all the moving parts and accelerate the journey:
- Awareness and training
We can help deliver breakthrough inventory, manufacturing and service results by involving all enterprise functions in DDMRP training.
- Simulation and value case
Our business case tool identifies and assesses the best areas to apply a DDMRP approach, including the financial impacts.
We can help design and run a pilot to demonstrate and analyze DDMRP performance and provide key insights for the design of new tools and work processes.
- Change management
A demand-driven operating model requires significant change – we can help manage this across business processes, planning responsibilities, job functions, and more.
Thanks to our end-to-end capabilities, our deep SAP knowledge, plus our collaboration on SAP DDMRP development, we are uniquely positioned to help you choose the right tailor-made solution for your company’s own demand-driven transformation.