Theory of Constraints Handbook - James Cox Iii [212]
2. Disable the DBM (cooling period).
3. Back to normal (or sometimes even above normal).
Note that Steps 2 and 3 in both cases are the same—the same actions need to be performed in order to treat these SDCs correctly. Only the first step is different in both cases.
Figure 11-10 describes a typical SDC with these steps across time, containing the management of two consecutive SDCs—one sudden increase and then a gradual decrease in demand.
Stock Buildup
In this phase, the purchase order is issued to the supplier to replenish the stock to the forecasted buffer level after the SDC (notice that the changed demand pattern [sales] is after the SDC and not during it). Two different environments (distributor and manufacturer) exist. Each is a little different.
Distributor situation: If the SKU is a purchased item, and the supplier has no problems supplying the larger quantities (the required quantity is the difference between before and after the SDC), the best way to perform the buildup is a one-time order from the supplier. The order should be received a full supplier lead time before the suspected start of the SDC, with some extra time buffer to cover for the supplier’s unreliability (Murphy always strikes). For example, a distributor holds a buffer of 200 units from a specific item in the CWH to manage normal consumption. The regular lead time of this supplier is two weeks. During Christmas, he knows consumption doubles. He should double the buffer (to 400) of this SKU approximately 2.5 to 3 weeks before Christmas sales increase.
FIGURE 11-10 The Inherent Simplicity steps for managing a typical SDC. (© 2010 Inherent Simplicity. All rights reserved.)
Manufacturer situation: If the SKU is manufactured by us, or by another manufacturing supplier that cannot support providing large quantities from his inventory, the best way to perform the buildup is to manufacture/order the missing quantity in batches, over a longer period of time, depending on our production capacity or on our supplier’s ability to supply. Again, provide a time buffer by requesting delivery one receipt cycle ahead. For example, let us take the same case as above, only this time a batch of 80 units per 2 weeks is the maximum manufacturing can handle. In this case, the buffer should be adjusted three times—once increased by 40 units approximately 7 weeks before Christmas sales start, then by 80 units 5 weeks before, and then by another 80 units 3 weeks before. Sales should be monitored to ensure that the orders are appropriate.
Disabling the DBM (Cooling Period)
After changing the buffer size to reflect the future demand, disable the DBM algorithm in the same way it is disabled during the cooling period after a DBM buffer change.32 It is important that while the changes are realized, the DBM will not start operating as the whole purpose of treating the SDCs this way is to ignore the reality because we have better knowledge of the future reality. Normal DBM activity will disrupt the proper handling of an SDC and might have very negative ramifications; hence, the need to disable it during this time.
Back to Normal
After realizing the changed buffer size at the CWH/PWH/RWHs to get ready for the different future demand, the SDC occurs within a small time frame. It is important for the chain to be very responsive in the replenishment to the consumption points and in the decisions to increase or decrease the buffers at the various consumption points according to the DBM mechanism after the SDC.
Stock Builddown
Usually, a Sudden Demand Increase33 is accompanied by a Sudden Demand Decrease, which brings the demand for the SKU back to “normal.” Sometimes, this situation is less problematic because the demand drops very gradually, allowing the DBM to adjust. The traditional after-Christmas sales and end-of-year sales are an example of a more gradual decline caused by the dumping of excess inventories at significantly lower prices. The point is that it is very important to try to refrain from being left with excess inventory after