Sunday, February 3, 2019
| | Inventory Is Evil! Series Inventory Is Evil! Volume 2 | Number 2 | February 2019 | | | | This month let's talk about increasing inventory velocity.
Have you ever wondered why you can't achieve the reduction anticipated?
As leaders we need to develop the ability to see decoupled processes within the supply chain. One such area is the relationship of MRP and pull systems.
What if I were to tell you that your MRP is a push system?
To many this is counter-intuitive to everything we have been taught.
Most MRP's have a nice report which projects inventory on hand balances into the future, +1, 2, 3, 4, … periods. If you have used this type of report then future inventory levels/performance look great.
However, the actual results are never reflective of such reports predictions. What is driving these differences?
One, is over-forecasting. Another is what I would like to discuss today. | | That MRP acts as push system in the short to medium term.
Yes, yes…I know there are action/exception messages for de-expedites, expedites, cancels, etc.
But how many of your planners really do a good job of managing de-expedites or cancels?
Not many, right?
Naturally this inventory arrives as released. It's either driven by a forecast or dependent customer demand.
The team and system cannot react fast enough for changes in demand.
So how do you address this? - Reduce lead-times.
- Reduce minimum buys.
- Eliminate the "vendor" and build partnerships.
- Source quality.
- Source locally.
The critical process step is to get suppliers on long-term agreements, or memorandum of understanding; with finished goods, work in process, raw materials authorizations that greatly reduce pipe line inventory exposure for both supplier partners through to customers.
Then establish pull systems/processes. - Just-In-Time processes.
- Kanban's.
- Shop floor supermarkets.
Pull Definitions: - Succeeding node makes order request for preceding node. Preceding node reacts by producing the order, which involves all internal operations, and replenishes when finished.
- Driven by actual usage demand and not forecast.
- "In a pull-based supply chain, procurement, production and distribution are demand-driven rather than to forecast. However, a pull strategy does not always require make-to-order production. Toyota Motors Manufacturing is frequently used as an example of pull production, yet do not typically produce to order. They follow the "supermarket model" where limited inventory is kept on hand and is replenished as it is consumed. In Toyota's case, Kanban cards are used to signal the need to replenish inventory." Lean.org
If you're not achieving projected inventory performance then you might have more PUSH nodes than PULL nodes or more decoupled points than originally understood.
Don't get me wrong, there is a place for MRPs. However, they're not the solution for everything executing demand signals. It's important to understand when to use a MRP vs. Pull/JIT/Kanban signal.
Break through the denial. Don't accept mediocrity or excuses. Seek breakthrough/step functional improvements to inventory performance.
in·?ven·?to·?ry / 'in-v?n-?t?r-e / noun Inventory is the term for the goods available for sale and raw materials used to produce goods available for sale.
in·?ven·?to·?ry is evil! / 'in-v?n-?t?r-e is 'e-v?l / phrase Left unchecked inventory has many negative unintended consequences to profitability.
It hides problems; therefore, it delays fixing problems! | | | | | | Your Supply Chain, Your Supply Change, Your LeadershipTM | | | Thanks in advance for your time. As always, thanks for being a loyal client. Looking forward to helping you and your team again soon.
Carpe diem,
Art Koch
Arthur Koch Management Consulting, LLC
info@arthurkochmgt.com
+1 (336) 260-9441
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