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Demand-Driven Buffer Level Management

Demand-driven replenishment (DD) helps to plan and manage supply chains efficiently based on customer demand, rather than through traditional MRP procedures. It forms the basis for a reliable material flow by defining buffers at strategically important points and adjusting these buffers regularly.

Products at all Bill-of-Material (BoM) levels are classified based on average demand, lead time, BoM usage, and variability to identify whether they are relevant for demand-driven replenishment. A well-balanced buffer level is proposed for DD-relevant products to ensure that they are sufficiently stocked to meet average demand, but in low enough quantities to prevent excessive storage costs or losses due to expiry. An app helps planners manage safety stock, reorder point, and maximum stock through the buffer level proposals. To support the calculation of buffer levels, predictive Material and Resource Planning (pMRP) can be deployed.

Key Process Steps Covered

Buffer Positioning:

  • Classify products based on their goods issue value, usage across BoMs, and variation in actual demand to help identify whether they are relevant for Demand-Driven Replenishment
  • Display and change master data records relevant to Demand-Driven Replenishment for several products simultaneously
  • Optionally, use different scenarios, such as inbound protection, to position buffers efficiently within your supply chain

Buffer Sizing:

  • Classify products relevant to Demand-Driven Replenishment based on their decoupled lead time, and helps define inputs for their buffer settings
  • Review and maintain buffer profiles for variability and lead-time factors depending on product classification
  • Generate buffer (stock) level proposals for products based on their average daily usage, decoupled lead time, buffer profiles, and several other factors
  • Manage safety stock, reorder point, and maximum stock using buffer level proposals
  • Use predictive Material and Resource Planning (pMRP) for average daily use calculations (optional)
  • Optionally, use machine learning capabilities for the prediction of lead times

Benefits

  • Avoid the bull-whip effect in production by providing decoupling points with strategic stock positions
  • Enable immediate production of individualized products using adaptive component buffers
  • Ensure highest service levels at lowest possible inventory along all BoM levels
  • Improve material requirements planning based on high-quality data that is updated regularly and is used as input, such as for stock levels
  • Use predictive Material and Resource Planning (pMRP) or Machine Learning (ML) for reliable input to buffer level calculations (optional)


Where is Demand-Driven Buffer Level Management(1Y2) being used?

This Scope item is used in the following way:

  • As a management function of Extended Production Planning and Scheduling within Manufacturing Scope Item Group

Process flow of Demand-Driven Buffer Level Management (1Y2)

Find below the process flow of the scope item Demand-Driven Buffer Level Management as it is defined for release S4H-OP-2009.

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Ref: Manufacturing of S4H-OP-2009


Best Practices related to S/4HANA

*1) Yearly Updates are released per September of each year
*2) The Quarterly updates are released per Februari, May, August and November
Details of future releases can be found in the SAP Roadmap section of each product. Go to SAP Roadmap Product Finder.


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