Guide · Buffer zones

DDMRP buffer zones explained, with a worked example

Size the red, yellow and green zones for one item, then use net flow position to decide whether to order and how much.

Updated October 15, 2026

A demand-driven buffer is a target range for one stocked item, split into three colored zones. Yellow covers average demand over the replenishment lead time. Red is the safety layer under it. Green sets how much you order at a time. This guide sizes all three for a single made-up item, then uses the result to make an ordering decision.

The example item

A distributor stocks a seal kit with these planning inputs:

Inputs for the example item

InputValueWhat it means
Average daily usage (ADU)40 units/dayRecent average consumption or sales per day
Decoupled lead time (DLT)15 daysLongest cumulative lead time along the unbuffered path upstream
Lead time categoryMedium → 50%Lead time factor used to size red and green
Variability categoryMedium → 50%Variability factor that adds red safety
Minimum order quantity500 unitsSupplier won't accept smaller orders
Order cycle10 daysYou prefer to order about every 10 days

Step 1: yellow zone

Yellow is the demand you expect while waiting for a replenishment order:

Yellow = ADU × DLT = 40 × 15 = 600 units

Use the decoupled lead time, not the full end-to-end lead time. Trace each supply path upstream until it reaches a stocked, maintained buffer (or the end of the chain), add up the lead times along the way, and take the longest of those unbuffered paths. A buffer on one branch doesn't shorten a longer branch that has none. For a distributor buying a finished item, the DLT is usually just the supplier's lead time.

Step 2: red zone

Red has two parts. The base scales with the lead time factor; the safety part scales the base by the variability factor:

  • Red base = ADU × DLT × lead time factor = 40 × 15 × 0.5 = 300
  • Red safety = red base × variability factor = 300 × 0.5 = 150
  • Red = 300 + 150 = 450 units

Longer lead times get a smaller lead time factor (common starting points are 70% for short, 50% for medium and 30% for long lead times) because the yellow zone is already large. More erratic demand or supply gets a larger variability factor (common starting points: 25%, 50% and 80%). These are starting points to tune, not rules.

Step 3: green zone

Green is the largest of three candidates:

  • Minimum order quantity: 500
  • Lead time factor amount: ADU × DLT × lead time factor = 300
  • Order cycle amount: ADU × order cycle = 40 × 10 = 400

Green = max(500, 300, 400) = 500 units. Here the supplier's MOQ sets the size of the green zone; the actual order quantity is worked out in step 5.

Step 4: tops of the zones

Zone boundaries for the example item

BoundaryCalculationUnits
Top of red (TOR)Red450
Top of yellow (TOY)450 + 6001,050
Top of green (TOG)1,050 + 5001,550
Average on-hand targetRed + green ÷ 2 = 450 + 250700

The average on-hand target is a useful sanity check against today's inventory: if the item usually carries far more than 700 units, the buffer suggests there's room to bring stock down.

Step 5: decide whether to order (net flow position)

Ordering decisions use net flow position, not on-hand alone, so stock that's already on order isn't ordered twice:

Net flow position = on hand + on order − qualified demand

Qualified demand is demand that's past due or due today, plus qualified spikes: days within a set horizon (often the decoupled lead time) whose total demand exceeds a set threshold (often a share of the red zone). Suppose the item has 520 on hand, 300 on order and, by those rules, 90 units of qualified demand:

  • Net flow position = 520 + 300 − 90 = 730
  • 730 is above top of red (450) and at or below top of yellow (1,050), so the item is in the yellow zone.
  • At or below top of yellow means order now, up to top of green: 1,550 − 730 = 820 units.
  • 820 already meets the 500-unit MOQ. If the supplier also ships in packs of 100, round up to 900.

Note the difference between a minimum order quantity and an order multiple: an MOQ of 500 allows an order of 820; only a pack size forces rounding to a multiple.

What happens when demand changes

Buffers should move with demand. If average daily usage rises from 40 to 50, yellow becomes 750, red becomes 562.5 and green stays at 500 (now the MOQ and the 10-day order cycle tie). Top of green rises from 1,550 to 1,812.5, about 17% higher. Recalculating ADU on a regular schedule, and planning known changes such as promotions or seasonality in advance, keeps the zones from going stale.

Common mistakes

  • Using the full lead time. Ignoring upstream stock points makes yellow and red too large.
  • Triggering orders from on-hand. On-hand ignores open supply and leads to double ordering; use net flow position.
  • Treating MOQ as a pack size. It inflates orders when the supplier doesn't require multiples.
  • Setting and forgetting. ADU and lead times drift; stale buffers end up either too lean or bloated.

What this calculation doesn't cover

This is a first-pass sizing of one buffer. A full demand-driven approach also decides where to place buffers in the supply chain, adjusts them dynamically, and manages execution by watching on-hand against the red zone. This guide and the calculator are independent and are not affiliated with or endorsed by the Demand Driven Institute.

Try the same numbers in the buffer zone calculator; it shows every formula with your inputs and can process a CSV of many items in your browser.

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