Theory of Constraints Handbook - James Cox Iii [236]
3. What are the specific business benefits expected from implementing ASR? In addition to resolving the MRP compromises and the effects associated with them, there are additional business benefits when the ASR approach is implemented.
a. Protect and increase flow by significantly reducing the negative impact of variability in dependent and interdependent systems. This can include both demand variability from the marketplace and supply variability starting with external sources and then continuing internally through operations.
b. Create a decisive competitive advantage by developing and exploiting ways to significantly compress product and materials lead times to the marketplace. This ensures that lead time offers are significantly better than what the market is expecting. In most cases, a highly competitive lead time can be achieved with no investment in equipment or traditional lead time reduction initiatives.
c. Highly improved on-time delivery performance to the marketplace. If lead times are dramatically reduced and flow is improved, then significant improvements in service performance can and will follow. This provides another opportunity for a competitive advantage in the marketplace.
d. “Right size” inventory through the strategic inventory positioning process. This ensures that the right amount of protection is carried in the right places based on the rate of demand pull from the market and potential disruptions in supply and demand. The critical difference with ASR is that these are dynamic buffers that constantly reflect the changing market and supply conditions.
e. Enable better execution. The ongoing management process in ASR becomes relatively simple once the analysis is complete and buffers are established in the correct places. The execution side ensures early identification of potential problem areas such as a supplier that is going to be late or a delayed work order that could potentially impact buffers. This allows action to be taken before these small disruptions become big problems.
4. What kind of manufacturing environments should consider ASR? Characteristics of environments where ASR delivers the significant business benefits listed are as follows. The more of these characteristics that an environment has, the more significant the benefits will be.
Environments with sets of highly repetitive builds (either product or process).
Environments that will reward you for shorter lead times through either premiums or increased sales.
Environments that frequently use the same purchased component or raw items.
Environments that utilize the same components across multiple parent parts.
Environments with deep and complex BOMs.
Environments with longer or more complicated routings that create significant scheduling or lead time difficulties.
Environments that are considering or currently using pull-based scheduling and execution.
Case Studies
In early implementations of this approach, a very powerful insight was realized—the business benefits are complementary and happen collectively. Unlike the typical expectation of inventory versus customer service tradeoffs, in the early implementations of ASR there have been no tradeoffs. Not only does inventory significantly go down, customer service dramatically improves.
Case Study 1: Oregon Freeze Dry
Oregon Freeze Dry is the world’s largest custom freeze dryer. Prior to implementing ASR, they used traditional MRP with standard minimum batch practices. By implementing ASR only (no DBR or S-DBR) with no additional capital expenditure, overhead, or other improvement initiatives, Oregon Freeze Dry reported the following gains: Mountain House Division:
Sales increased 20 percent
Customer fill rate improved from 79 to 99.6 percent
This was accomplished with a 60 percent reduction in inventory
Industrial Ingredient Division:
60 percent reduction