Theory of Constraints Handbook - James Cox Iii [227]
ASR builds upon the traditional replenishment approach of replacing what was taken or used to create a dynamic and effective pull-based solution to answer the challenges of today’s manufacturing landscape. Through new approaches in inventory and product structure analysis, new pull-based demand planning rules, and integrated execution tactics, ASR is designed to directly tie material availability and supply to actual consumption throughout the BOMs, thus removing the “islands of MRP” obstacles that most supply chains face. Additionally, this approach is a prerequisite to effectively utilize pull-based scheduling and execution methods like Lean and DBR in more complex manufacturing environments. Additionally, ASR has a unique way to incorporate required elements of strategic planning with little or no exposure to the variability and volatility that gets companies in trouble with traditional forecasting techniques.
ASR has five main components.
1. Strategic Inventory Positioning
2. Dynamic Buffer Level Profiling and Maintenance
3. Dynamic Buffers
4. Pull-Based Demand Generation
5. Highly Visible and Collaborative Execution
They are discussed in the next sections.
1. Strategic Inventory Positioning
The first question of effective inventory management is not, “How much inventory should we have?” The most fundamental question to ask in today’s manufacturing environments is, “given our system and environment, where should we place inventory to have the best protection?” Think of inventory like a break wall to protect boats in a marina from the roughness of incoming waves. Out on the open ocean, the break walls have to be 50 to 100 feet tall, but in a small lake the break walls are only a couple of feet tall. In a glassy smooth pond, no break wall is necessary.
In the same way, inventory is the break wall against the variability experienced from either supply (externally and internally) or demand unreliability. Remember that a company has to think holistically across not only the enterprise but also across the supply chain. Putting inventory everywhere is an enormous waste of company resources. Eliminating inventory everywhere puts the company and supply chain at significant risk. Strategically positioning inventory ensures the company’s ability to absorb expected variability without having to disrupt every part of the plant and the supply chain. Important factors to consider carefully in determining where to place inventory buffers include:
Customer Tolerance Time—The time the typical customer is willing to wait or the potential for increased sales for lead time reductions.
Variable Rate of Demand—The potential for swings and spikes in demand that could overwhelm resources (capacity, material, cash, credit, etc.).
Variable Rate of Supply—The potential for and severity of disruptions in particular sources of supply or specific suppliers.
Inventory Flexibility and Product Structure—The places in the “aggregate BOM” structure that leave a company with the most available options (primarily key purchased materials and subassemblies/components). The aggregate BOM structure can be defined as the holistic BOM across the company with all identified product interrelationships. The more shared components and materials there are, as well as the deeper and more complex the aggregate BOM is, the more important this factor is. Through a process known as BOM decoupling, variability is absorbed, cumulative lead times are compressed