strategic inventory positioningstrategic inventory positioning - - The first step in demand driven requirements planning (DDMRP) is applying six positioning factors to determine where inventory should be placed. The factors are 1) customer tolerance time, 2) market potential lead time, 3) variability in rate of demand, 4) variability in rates of supply, 5) inventory leverage and flexibility and 6) the protection of key operational areas. Under DDMRP these six factors are applied across the entire bill of material, routing structure, manufacturing facilities, and supply chain to determine the best positions for purchased, work-in-process, manufactured and finished items
Perspective: Traditional MRP systems are push systems based on forecasts of demand for finished products and generally focus on local optima throughout the supply chain. In contrast, DDMRP is a pull system based on strategic placement of inventories across the supply chain with strategic buffers positioned for critical raw materials, work-in-process, finished goods and possibly distribution inventories. The system is based on measures such as buffer status that better reflect both a firm's and a supply chain's ability to respond effectively to customer demand.