Page 63 - How To Implement Lean Manufacturing

44 Cha pte r T h ree

Planning time This is the time that the order takes to be processed and sent to the pro-
duction line.
Waiting time This is the time the order is waiting to be processed. This is sometimes
referred to as queue time.

Production time This is the time it takes to produce the desired quantity.
Delivery time This is the time to get the lot from the production line to the storehouse.

Buffer stocks
This is the incremental volume of inventory, above the cycle stock’s inventory volume,
which is held to account for external variations, and is calculated based on historical
data of the variation of these external causes.

Safety stocks
This is the incremental volume of inventory currently held that is above both the cycle
stock and buffer stocks. It is held to account for internal variations in supply to the
storehouse.

Question 2: “Just What Is Causing the Need for Inventory?”
The need for each of the three types of inventory is caused by different factors. These
factors are:

• For the cycle stock, the need for the inventory is caused by the size of the picked-
up shipment, which, for a constant demand product, is a function of how
frequently the shipment is picked up. In addition, some inventory is needed to
cover the time it takes to plan the shipment, make the shipment, and move the
shipment within the plant. This is the replenishment time calculation.
• For both the buffer and safety stocks, the need for inventory is one of the world’s
best kept secrets. The need is caused by variation. When we have more variation
in the system, we need more inventory. The buffer stock size is usually deter-
mined by two variables: changes in customer demand, and variations in delivery
conditions. Often, this is due to weather, or in the case of products that cross an
international border, customs can be an issue. So, the sources of variation for
this volume of buffer inventory are somewhat outside of the control of the
plant.
• Regarding safety stock in particular, the large sources of variation are issues of
supply to the storehouse. These sources of variation include such items as line
outages due to machinery failure or stock outs. Poor cycle time performance
can cause production to fall short of goals, and of course quality problems can
also be a major cause of variation. All three of these issues, which happen to be
the three aspects of OEE (Overall Equipment Effectiveness), are largely under
the control of the plant.
• In the case of the buffer and safety stock inventories, there is a simple way to
calculate the volumes needed. If the variation of the volume swings is calculated
over a reasonable time frame and stated as a standard deviation, your variation
is now converted to numbers so we can have a common understanding of it.
Now if you have a stable system and hold 2.33 standard deviations of inventory,