A company called b2wise provided me with five references to talk about their software solution. It turns out this is a great solution for Sales & Operations Execution. The confusing thing, however, is that they call this a Demand Driven MRP (MRP stands for Materials Requirements Planning) system.

DDMRP is a niche supply chain philosophy. No wonder. Despite being a long-term supply chain practitioner, I struggled with the vocabulary. The references I talked with gave me a much clearer understanding of what it is and how it works.

What is Sales & Operations Execution?

In the supply chain realm, we speak of Sales & Operations Planning, also known as Integrated Business Planning. This process seeks to forecast demand and match it to what a manufacturer can produce. It is a demand-supply balancing process.

Supply chain management operates over three planning horizons. The strategic planning horizon typically spans several months to years. In this horizon, companies may look at new product launches, long-term demographic trends, and changing company strategies, and realize they don’t have enough, or the right kind of, capacity. Because it is a long-term forecast, there is enough time to procure and install the necessary assets.

The tactical planning horizon usually covers a shorter timeframe, often from weeks to months. Supply chain decisions focus on how to operate the existing network to meet demand at the right cost and service level.

The operational planning horizontypically spans from weeks to days, and even to hours and minutes - operational decisions that need to be made immediately. It deals with day-to-day operations, including short-term procurement, handling inbound raw material shipments, scheduling production runs, and customer replenishment.

Companies engaged in S&OP do improve their strategic and tactical planning. They typically reduce inventory levels while improving service.

But companies often think that S&OP will make their short-term operations less chaotic. They are usually disappointed in this. And in recent years, due to fluctuating tariffs, wars, COVID, the need to decouple from China, climate events, and other factors, supply chain nervousness has increased significantly.

That is why the term “Sales & Operations Execution” has come into being. It rests on the hard-won knowledge that a different process is needed in the operational planning horizon. Although, what the process should be is in dispute. It turns out, b2wise is a wonderful solution for operational execution.

The DDMRP methodology, developed by the Demand Driven Institute , is built on the mantra of Position, Protect, Pull, and Adapt .

Inventory Positioning involves identifying critical points in a supply chain – whether that be raw materials, sub-assemblies, or finished goods - to act as inventory buffers. By decoupling the supply chain at these nodes, a company prevents the bullwhip effect. The bullwhip effect occurs when minor changes in customer demand cause large, chaotic fluctuations in orders further upstream and lead to excess inventory.

Protect involves Buffer Management. On the inbound side, buffers can be established for every raw material or raw material families. The same is true on the outbound side. Because of variability in supply and demand spikes, companies tend to engage in unnecessary procurement, and operations become chaotic or “nervous.”

This is said to be a Pull- basedsystem, driven by “Demand-Driven Replenishment . ” Orders are triggered strictly by actual consumption (qualified sales orders and order spikes) rather than by demand forecasts.

Finally, this is an Adaptive system, based on continuous improvement. Buffers are not set in stone; they adjust dynamically based on lead times, delivery variability, market risk, and real-time market behavior.

In short, the DDMRP philosophy is said to shift supply chains from cost-centric, forecast-driven "push" systems to flow-centric, demand-driven "pull" systems with inventory located at critical “decoupling” points.

This is where I struggled with the vocabulary. Unless a supply chain engages in make-to-order manufacturing, and all raw materials are purchased after the order is booked, a company can’t get away from forecasts and can’t be fully “demand-driven.”

The assertion that forecasts are unnecessary turns out to be false. The inventory buffer is an inventory forecast. Like a demand forecast, it is a calculated number. Factors in the buffer calculation can include historical material consumption, raw material lead times, variability in on-time deliveries, geopolitical and supplier risk factors, and customer dynamics. Demand forecasts can be used if the forecast accuracy is high. For new product launches, a demand forecast would almost always be a factor. The weight assigned to various inputs changes over time in response to events, so the buffer calculation for a material can change daily.

One reference offered a good explanation for why overreliance on demand forecasts hinders execution. The more granular a forecast, the higher the error rate. If you go from regional product family forecasts to stock keeping unit forecasts at the distribution center level, you greatly increase forecast error. Yet factories need to procure and stock the materials required to produce individual SKUs.

I am not the only one who has struggled with the DDMRP vocabulary. Whenever a new supply chain system is implemented, culture change is a major issue. But it is even more difficult for DDMRP. The director at a global chemical manufacturer told me that this “is hard for the people who have been a long-standing supply chain person; grasping the concept is, I think, the most important challenge that we had.”

B2wise’s customers love the solution. They have achieved several benefits.

One reference told me that daily changes in demand can generate thousands of assignment changes generated by their MRP system. That volatility has been reduced by a factor of ten. Another reference said the number of alerts has been reduced from 1,600 per day to approximately 600.

The b2wise solution can also help to simplify the S&OP process. A supply chain director said it eliminates all these discussions, which are mainly focused on the forecast, and elevates the discussion to more strategic issues.

The solution itself is described as easy to use. One reference showed me the decision tree they use to help classify an inbound raw material. This decision tree allows a planner to select the appropriate inputs for the buffer calculation. Is this inbound part used frequently or infrequently? Is it a high or low-cost item? High value. Does it have a long lead time, yes or no? It does. This item should use the lumpy buffer inventory calculation.

One company was dynamically setting policies on tens of thousands of inbound parts. Without an easy-to-use system, that level of complexity would be overwhelming.

A company serving the aeronautic industry said that their goal for the solution is 2 hours and 30 minutes in efficiency improvements per person per day for their procurement team. They are well on their way to achieving this. The goal is for their team to move from firefighting to spending more time becoming a specialist in procurement and stock management. “Use the extra time you save on analyzing data to set better stock policies.”

Happier, More Engaged Workers

The director at the chemical company said their company measures engagement every year. One key ratio is the number of actively engaged employees to those who are actively disengaged. The supply chain team had the worst ratio of any team in the company. With the new approach, this team went from a one-to-one ratio to a spectacularly good 175-to-one ratio! The solution “completely changed the way our people work.”

The environment changed drastically, from “constant burnout, firefighting, overtime, and working weekends” to being able to go home at night and spend time with their families

Turnover has gone from 35-40% to almost zero in the function. This director pointed out that it is “expensive to hire people – the cost is much higher than most companies realize.” Further, “people engagement helps you to navigate tough times;” new hires don’t yet have the domain expertise to do this effectively.

Less, but More Accurate, Inventory

One reference said days of inventory outstanding were improved 13%. At the same time, raw material service, having the right raw material to start a batch when it was scheduled, improved from 74% to 90%. Raw materials more than 90 days old were reduced by 30%.

A manufacturer of complex life sciences machinery saw their raw materials inventory reduced by 20% in the first year. Their final device inventory was reduced by 43%.

Saving money on inventory is counterproductive if the service level to customers decreases. At one multinational, on-time deliveries improved from 93 to 95%.

Demand planning systems' primary benefit also comes from reductions in inventory. None of the companies I talked to were using advanced supply chain planning solutions at the factories or procurement sites where they were using b2wise. Nevertheless, one supply chain director believed b2wise does not have to replace a supply chain planning system. “It can just augment it and improve it.”

Respondents believed this solution was much less expensive than SCP. And potentially quicker to implement. The long pole in implementation is not system configuration but culture change.

Procurement and Obsolescence Savings

At one company, obsolescence in both raw materials and finished goods decreased by 30%. This also means procurement savings because the company was not overbuying.