Theory of Constraints Handbook - James Cox Iii [229]
2. Dynamic Buffer Level Profiling and Maintenance
Once the strategic inventory positions are determined, the actual levels of those buffers have to be initially set. Based on several factors, different materials and parts behave differently (but many also behave nearly the same). ASR groups parts and materials chosen for strategic replenishment and that behave similarly into “buffer profiles.” Buffer profiles take into account important factors including lead time (relative to the environment), variability (demand or supply), and whether the part is made or bought. For instance, you could have a group of purchased parts that are long lead time and high variability (subject to frequent disruptions in supply) and you could have a group of manufactured parts that are short lead time and high variability (subject to frequent spikes). These buffer profiles produce a unique buffer picture for each part as their respective individual part traits are applied to the group traits. A list of both group and individual part traits that can apply to create that unique picture for every part is given in Table 12-2.
TABLE 12-2 Part Trait Examples
This unique buffer picture is not just what the top level quantity should be. In Fig. 12-4, we see that ASR stratifies the total buffer level into different “zones.” ASR uses a five-colored zone stratification approach. Light blue (LB; some authors refer to this as the white zone) describes an overstocked position. Green (G) represents an inventory position that requires no action. Yellow (Y) represents a part that has entered its rebuild zone. Red (R) represents a part that is in jeopardy. Dark red (DR, some authors refer to this as the black zone) represents a stockout. This color-coding system (the words used in the text and the abbreviations used in some diagrams as the figures are in black and white) will be used for both planning and execution priority and visibility and is integral to the power of the ASR solution. From a planning perspective, the color-coding will determine if additional supply is needed based upon the available stock position (on hand + open supply - demand allocations [including qualified spikes]). From an execution perspective, the color-coding will determine actions (primarily expediting or resource schedule manipulation) based on different types of alerts. This will be explained in the section titled “Highly Visible and Collaborative Execution.”
Because each part within a buffer profile has different individual traits, it yields individual buffer levels and stratification zones for each part within that group (see Fig. 12-4). It is important to note that the zones need not be of equal proportions. Instead, the percentage of each zone is determined by the type of buffer profile to which the part belongs. The illustration to the right in Fig. 12-4 shows three parts in the buffer profile group “A-10.” Each of the parts has a different top level and stratification levels because they have different individual part traits.
Note: companies will know if their buffer profiles are correct when the on-hand (not available stock) inventory position should average in the lower half of the yellow zone.
The color-coding also allows planners and executives to see how many overstocked as well as out-of-stock parts there are at any one time. If you combine the raw material value with the overstocked items, you can determine quickly how much excess cash is stored in excess inventory. Remember, that while being able to see stockouts is important what is really damaging is stockouts with demand allocations against them, which reinforces the need for visibility based on the available stock equation.
FIGURE 12-4 ASR stratifies the total buffer level into zones.
3. Dynamic Buffers
Over the course of time, group and individual traits can and will