Theory of Constraints Handbook - James Cox Iii [235]
The purpose of the ASR execution concepts is to increase the amount of accurate and timely information available to the entire chain. This highly visible and collaborative execution capability creates a remarkably effective supply chain that can respond to real market demand without manual workarounds and other disconnected subsystems. Purchasing, Manufacturing, and Fulfillment personnel thus are able to see and communicate a bigger picture that is clear, concise, prioritized for action, and shows the ramifications of decisions and actions based on the dependencies in the aggregate material supply and fulfillment system.
The five ASR components (strategic inventory positioning, dynamic buffer level profiling and maintenance, dynamic buffers, pull-based demand generation, and highly visible and collaborative execution) work together to dampen the nervousness of MRP systems and the bullwhip effect on MRP systems in complex and challenging environments. Utilizing this ASR approach, the planners no longer must try to respond to every single message for every single part that is off by even one day. The ASR approach provides real information about those parts that are truly at risk of negatively affecting the planned availability of inventory. ASR sorts the significant few items that require attention from the magnificent many parts that are being managed. Under the ASR approach, fewer planners can make better decisions more quickly.
ASR Implementation Considerations
1. What happens to inventory levels in an ASR implementation? Similar to the focus on Lean manufacturing, while significant inventory reductions are an effect of implementing the ASR approach, this concept is not intended to focus on inventory reduction. Inventory is a result rather than a focus. ASR should never be implemented with the sole purpose of inventory reduction. Dramatic reductions in inventory, however, are a result of the overall approach rather than the primary objective. The system drains the inventory that is not needed for real protection of due date performance. Now the inventory that is in the system is really working and generating a positive return on investment (ROI).
In early adoptions of the ASR approach, the impact on inventory is consistently somewhere between a 20 to 50 percent reduction in the first year. However, at the earliest stages of the implementation there is typically a temporary increase in overall inventory levels because parts may need to be buffered that were not previously inventoried. This additional inventory is combined with substantial inventory dollars that exist over the top of the required ASR buffers. As that excess inventory (items now residing in the blue zone) drains down to within the buffer parameters, then companies begin to see significant inventory reduction and a highly improved level of turns.
2. Does my ERP system offer ASR functionality? At the time of this writing, no ERP system has the total functionality identified in this chapter. Most systems do support both min/max as well as MRP with an input of a forecast or master production schedule (MPS) for inventory planning. None of this push-based approach really enables the five components of ASR. Min/max levels are static and usually are not reviewed after the initial system setup. There is no adaptive mechanism to update levels based on the experienced volatility and actual demand on the system. Remember that forecasting and MPS are inherently to drive a push system. ASR is inherently a demand-pull and replenishment system—sensing and adapting to actual market demand and volatility. The BOM decoupling analysis is not supported by any ERP system today. This decoupling is a key ASR component for positioning the break walls to absorb cumulative variability arising from both supply and demand. The concept of ASR lead time is totally foreign to any ERP system. ASR lead time