THE DEMAND DRIVEN ADAPTIVE ENTERPRISE (DDAE) MODEL
The Demand Driven Adaptive Enterprise (DDAE) model is a management model enabling enterprises to sense market changes, adapt to complex and volatile environments, and develop market driven innovation strategies. The fundamental principles of flow management are combined with the emerging science of complex adaptive systems (CAS).
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A QUICK INTRODUCTION
Dick Ling and Carol Ptak discuss the DDAE model with a group of executives. The video is provided courtesy of DDI Global Affiliate Camelot Management Group.
A LONGER INTRODUCTION
Carol Ptak and Chad Smith discuss the framework to convert an organization to a Demand Driven Adaptive Enterprise. Video recorded July 19, 2022.
THE THREE COMPONENTS OF THE DDAE MODEL
The DDAE model spans the organization’s operational, tactical, and strategic ranges through its three primary components: The Demand Driven Operating Model, Demand Driven Sales & Operations Planning, and Adaptive Sales & Operations Planning. The model utilizes a process of emergence, feedback and selection through adaptive cycles to continuously respond and adapt to the complex, changing, and volatile supply chain circumstances in existence today.
THE DEMAND DRIVEN OPERATING MODEL (DDOM)
A Demand Driven Operating Model (DDOM) is a supply order generation, operational scheduling and execution model utilizing actual demand in combination with strategic decoupling and control points and stock, time and capacity buffers in order to create a predictable and agile system that promotes and protects the flow of relevant information and materials within the operational relevant range (hourly, daily and weekly). A DDOM’s key parameters are set through the Demand Driven Sales & Operations Planning (DDS&OP) process to meet the stated business and market objectives while minimizing working capital and expedite-related expenses.
DEMAND DRIVEN SALES & OPERATIONS PLANNING (DDS&OP)
The tactical component of the Demand Driven Adaptive Enterprise (DDAE) Model managing the tactical adaptive cycle. Demand Driven S&OP is a tactical bi-directional integration point in a Demand Driven Adaptive Enterprise between the strategic and operational relevant ranges of decision making. Operating primarily in the tactical relevant range, DDS&OP maintains and updates the parameters of the DDOM based on current and emerging business strategy supplied by Adaptive S&OP and the systematic review of past and projected DDOM performance. DDS&OP evaluates scenarios proposed in the Adaptive S&OP process in order to provide relevant DDOM projections. Additionally, DDS&OP recommends strategic alterations and/or internal innovations to leadership involving DDOM future capability and performance.
ADAPTIVE SALES & OPERATIONS PLANNING (AS&OP)
Adaptive Sales and Operations Planning is the integrated business process that provides management the ability to strategically define, direct and manage relevant information in the strategic relevant range and across the enterprise. Market Driven Innovation is combined with Operations Strategy, Go-to-Market Strategy and Financial Strategy to create strategic information and requirements for tactical reconciliation and strategic projection to effectively create and drive adaptation.
THE DDAE MATURITY PATH
THE DDAE STAGES OF MATURITY
The DDAE model has a defined development path for companies to achieve increasing levels of success by maturing their demand driven transformation. This path has five distinct stages.
DDI EDUCATION FOR EACH STAGE
DDI has a powerful suite of educational products designed to support an organization's journey through the DDAE stages of maturity. You can learn about all of these products in our EDUCATION SECTION.
STAGE 1: LOOKING FOR A BETTER WAY TO MANAGE IN VUCA WORLD
The development path starts where most companies find themselves today - locked in a constant struggle trying to drive operational efficiency by controlling or minimizing cost though legacy planning tools and techniques while trying to acheive high rates of service. What does it take to break out of Stage 1? Moving a company out of Stage 1 and beginning a Demand Driven transformation requires the embrace of two key points. The extent to which these two points are driven by senior management will often determine how quickly a company can break out of Stage 1 and how quickly it can move through Stage 2. These two key points are understanding the VUCA World is here to stay and a commitment to flow-based efficiency.
STAGE 2: BEGINNING THE EMPHASIS ON FLOW-BASED OPERATIONAL EFFICIENCY
Fortunately, initiating Stage 2 does not require a huge technology swap-out or complete corporate culture shift. Stage 2 is about initiating and developing a better individual and organizational understanding about appropriate planning and control rules and the benefits of managing for flow. A shift into Stage 2 is typically initiated by the implementation of Demand Driven Material Requirements Planning (DDMRP) or Demand Driven Distribution Requirements Planning (DDDRP).
Why does this dramatic shift to flow start with something as seemingly banal as a different planning process rather than some big strategic consulting project or technology investment? DDMRP/DDDRP is the first lesson in learning how to properly manage to the principles of flow-based efficiency in the VUCA World and while bringing with it immediate and dramatic bottom line effects.
STAGE 3: SYNCHRONIZE, LEVERAGE, AND ADAPT OPERATIONAL CAPABILITY FOR BETTER FLOW PERFORMANCE
Stage 3 is the first level in which an organization can really begin to describe itself as a Demand Driven Adaptive Enterprise—and thus the reason why Stage 3 is named DDAE I. DDAE I consists of a fully implemented Demand Driven Operating Model (DDMRP, Demand
Driven Scheduling, and Demand Driven Execution methods in use). In some environments, DDMRP/DDDRP are sufficient to constitute a fully implemented DDOM. These types of environments often include distributors or batch or repetitive processors with simple routings, flat bills of material, and/or limited diversity of resources such as injection molders, bottlers, or any operation with single-stage processing, manufacturing, or assembly. In these environments, the maturation of the DDMRP implementation would be synonymous with the maturation of the DDOM and be sufficient to achieve Stage 3.
STAGE 4: LEVERGING & ADAPTING OPERATIONAL CAPABILITY ACROSS THE ORGANIZATION & INTO THE MARKET
Stage 4 builds on the accomplishments of Stage 3 and completes the expansion of Demand Driven concepts to the strategic adaptive cycle. All three components of the Demand Driven Adaptive Enterprise model are now implemented (DDOM, DDS&OP, and Adaptive S&OP). At this point the organization has a strong and resilient DDOM. Personnel are highly experienced and skilled in its operation. The company’s operational capability is now a highly competitive weapon in the market.
The tactical and strategic adaptive loops are both in place, and the organization is learning how to use them and reconcile them effectively in a bidirectional manner. This process drives internal innovation, reveals lucrative opportunities, and allows for effective flow-based scenario analysis. The organization is now sensing market changes and adapting internal processes to react to those changes. As the organization matures through Stage 4, sustaining as well as accelerating momentum becomes a key focus to move to Stage 5.
STAGE 5: SENSE, ADAPT AND INNOVATE ACROSS THE SUPPLY CHAIN (SUPPLIERS AND CUSTOMERS)
Stage 5 is the final stage of maturation. The journey to get to Stage 5 will not be short for most organizations. In most cases it could take several years, and there will be many obstacles, challenges, and system shocks along the way; the VUCA World will guarantee that.
A Stage 5 company will have some key characteristics. Company personnel, particularly the DDS&OP team and leadership, understand and see the supply chain as a complete interconnected network identifying opportunities for better creation and protection of flow across the nodes. The organization becomes a valuable and strategic supply chain partner by facilitating flow between itself and its suppliers and customers in mutually beneficial ways. In many cases the organization is seen as a true leader and is often consulted by its supply chain partners on decisions and directions.
DOES YOUR LEADERSHIP TEAM WANT TO KNOW MORE?
if you have a management team that would like to better understand the need for and the benefit of moving to the DDAE framework CONTACT US.
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Our Cofounders Carol Ptak and Chad Smith will spend an hour online with your leadership team to answer your questions for no charge.
