I know many of you have already run short of your favourite ‘Tipple’ during these difficult times and the ban on liquor sales. My name is Ken Titmuss and I live in Cape Town and over the last few years I have spent my time educating people in the DDMRP methodology and implementing DDMRP systems for my clients. Luckily, a DDMRP buffer has save my ability to have my normal glass of wine, occasionally. Here is how it works. I just look at the overall number of bottles in my ‘cellar’ and not at the individual cultivars or brands. Normally have a mix of about 50%/50% reds and whites.
Living in the Western Cape I enjoy buying my wine for the local farms. My ADU or Average Daily Usage is estimated at about 0.333 bottles per day. I generally replenish my wine cellar stock approximately every 2 months, or 60 days, I like Nice-Round-Numbers (NRN). And when I buy, I usually buy 2 cases of wine at a time, usually one carton of white and one of red.
So, I set up my DDMRP cellar buffer with a Minimum Order Quantity (MOQ)of 24 bottles, the lead time of 60 days, my ADU is 0.333 bottles per day. I have used a Lead Time Factor (LTF) of 50% and a high Variability Factor (VF) of 100%, as demand for the wine can vary considerably due to dinners and parties.
So, calculating the buffer:
The Yellow Zone is LT x ADU = 60 x 0.333 = 20 bottles.
I have a significant MOQ of 24 bottles, so that is the sizes of the Green Zone.
Then, for the Red Zone:
Red Zone Base = LT x ADU x LTF = 60 x 0.333 x 0.50 = 10 bottles
Red Zone Safety = Red Zone Base x VF = 10 x 1.0 = 10 bottles
Total Red Zone (ToR) = 10 + 10 = 20 bottles
Therefore, the Average Inventory in my wine cellar buffer is Total Red Zone (ToR) + half of the Green Zone = 20 + 12 = 32 bottles. That is, at my current ADU, enough for about 96 days, or about +/- 3 months.
After 42 days in lockdown, I see I have 22 bottles still in my cellar stock, enough for nearly 2 months. This puts the On-Hand balance just above ToR.
My Net Flow calculation is now, On-hand + On Order + Todays Usage = 22 + 0 – 0.333 = 21.666. With Top of Yellow (ToY) at 40 bottles, I need to order as Net Flow is in the Yellow Zone and I therefore need to order up to the Top of Green (ToG), which is 64 bottles. So, order size is Top of Green – Net Flow = 64 – 22 = 42 bottles.
It seems I need to find a wine farm that will accept my order for delivery of 42 bottles after lockdown, which ends, hopefully before I run out in about 2 months.
So, if DDMRP has worked for my wine cellar and is taking the shock out of our current situation, why will it not work for any SKU, anywhere in the Supply Chain. If you are not using DDMRP to manage your stock positions, then maybe you should be.
At least, for the time being, I can still say “Cheers!”. Keep well and for most of you, not using DDMRP, sober!
This article was presented by:
CFPIM, CSCP, SCOR-P, CPF, CS&OP, PLS, CDDP, CSCA, CDDL, CLTD, DDPP, DDLP, AEF, CSSC, CPIA Chief Executive Officer at Kent Outsourcing Services
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Ken is a Supply Chain, Operations and Manufacturing consultant over the last 30 years. He have worked with well over 200 companies.
The opinions expressed in this article are those of the author.
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