Theory of Constraints Handbook - James Cox Iii [193]
Dealing with the more problematic environments should highlight how good the TOC solution is for most other environments.
MTS That Is Not MTA
There are certain cases where it makes perfect sense to use MTS, but this is not coupled with a commitment to maintain perfect availability. We can identify two categories of such cases:
1. The reasons for MTS come from capacity management and not for ensuring availability.
2. The organization is trying to provide a certain level of availability but cannot, or even does not wish to guarantee it.
Let’s analyze the aspects of the two categories. The first one has already been demonstrated by the seasonality approach where sometimes high stocks, well above the target levels, are used on a few fast runners to free capacity during the season itself. Preparing for any peak of demand that requires capacity above capabilities forces the capacity planners to look for MTS even in MTO situations. Of course, if the MTO orders are all fully customized to the requirements of the clients, this is not possible but it could be that stocking some components would still relieve the pressure of capacity on the CCR.
The other category is typical of situations where the possible demand fluctuations are too high to provide excellent availability or the surplus inventory is very expensive to hold. In such situations, the marketing approach could be that we do not promise availability, so if you really want to buy, be fast! Examples of where availability cannot be guaranteed are:
Launching new products, especially new innovative products.
Promotions where a peak demand is anticipated, but perfect availability should not necessarily be offered to the clients.
A short demand peak where replenishment within the peak is impossible.
Products with very short shelf life where the truly varying costs of producing them are high relative to the Throughput.
There is no point in committing to availability in such cases. Still, providing availability can be the main force behind the decision about how much to produce, but full commitment seems risky.
What should the process of managing MTS look like? Two distinct problems for MTS are not present in MTA. First, how do you decide how much to make to stock? The decision should be based on a forecast that recognizes both the reasonable minimum and maximum sales within the reliable supply time and being aware of the damage of shortages and the damage of surpluses.
Second, how do you prioritize a production order for stock and not for availability? Checking the state of the downstream inventory relative to the target level does not make sense. It seems to us that when the stock is intended for an anticipated peak of sales, setting a date for completion and treating the order as an MTO makes more sense. The date in such a case is not really artificial because the stock is targeting a certain peak demand event.
In the cases within the second category but where no special event is the trigger, the marketing approach of creating an atmosphere of being “hard-to-get” makes the replenishment technique still valid. However, the target levels are intentionally low and the expectations are to be in the red (or even in the black) most of the time. The expediting efforts might be much more restrained and most of the DBM recommendations are not going to be granted.
Implementation Issues
Some of the implementation issues have already been addressed within this chapter, especially determining the initial values of the target levels. Certainly, the process of deciding upon the initial values of the target levels should be as short as possible. There is no need to be precise—a very rough estimation is more than enough.
An important point is the initial calculation of the targets. One should assume the replenishment times to be much shorter than the current one. In many cases, cutting the current replenishment