Theory of Constraints Handbook - James Cox Iii [228]
The Protection of Key Operational Areas—It is particularly important to protect critical operational areas from the bullwhip effect The bullwhip effect is the cascading disruptions through a dependent sequence of events. This undesirable effect of MRP and push distribution systems is well known. The APICS Dictionary (Blackstone, 2008, 15) defines bullwhip effect as “(a)n extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.” (© APICS 2008, used by permission, all rights reserved.)
Within manufacturing, it can be eliminated by synchronizing the pull across the production processes. MRP does not do this.
The longer and more complex the routing structure and dependent chain of events (including inter-plant transfers), the more important it is to protect key operations. These types of operations include areas that have limited capacity or where quality can be compromised by disruptions. In some cases, the creation of new part numbers and an insertion of an additional level in the BOM (as opposed to deleting layers) are necessary in order to decouple long and complex routings or sequences.
These factors are applied across the entire BOM and supply chain to determine positions for purchased, manufactured, and subcomponents and finished items (including service parts). Purchased parts chosen for strategic replenishment tend to be critical or strategic parts and long lead time items. Typically, this will be less than 20 percent of purchased parts. Manufactured parts chosen for strategic replenishment are often critical or strategic manufactured and service parts, at least some finished items, and critical subassemblies.
FIGURE 12-3 A supply chain for finished product A (FPA).
Typically, this will be under 10 percent of manufactured parts (for some environments with many manufactured service parts this percentage could be higher). On the fulfillment side, most parts will be strategically replenished—that is the whole point of having warehousing positions. It is important to note that on the fulfillment side, there is no difference between ASR and what is known as the TOC solution called replenishment (often referred to as the “distribution solution”). In Fig. 12-3 is an example of a supply chain for one product called Finished Product A (FPA) after the positioning has been determined. Notice that the “bucket” icon represents strategic replenished positions. Four of the ten purchased components are “buffered.” Three of the ten subassembly/intermediate component positions are buffered as well as the finished product itself. Finally, the stock positions of FPA in all three regional warehouses are buffered.
The position of these buffers is accomplished through a combination of “thoughtware” and software. The “thoughtware “is the application of most of the above factors in consideration of the business objectives and operating rules by the people that have experience and intuition in the environment. In complex environments, software is often required to do the heavy computational lifting in order to analyze product structure, cumulative