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CHAPTER 24 Buffer Profiles and Level Determination 407

prove overwhelming. These families should not be confused with the traditional notion
of product families described in Chapter 11, which tend to be components or end items
grouped by like characteristics in terms of physical configuration or markets. With buffer
profiles, the familial connection is made based on several factors relating to behavioral or
policy-related traits. The buffer level or top-side limit of each material, part, or end item
will be the summation of zones. These zones are color-coded and sized by a combination
of various inputs. These color designations will become critical to management of the
buffers between the defined limits.
There are four key factors that will tend to form the various groups in most envi-
ronments.

Factor 1: Item Type
The first grouping will be made by determining whether an item is manufactured (M),
purchased (P), or distributed (D). The reasons to group by these designations are
■ Frequently, companies designate the control of these different item types to dif-
ferent people or groups. Intuition about behavior is frequently limited to those
groups.
■ From an organizational perspective, there tends to be a varying degree of direct
control over these item types. The assumption is that companies have more direct
control over something within their physical control. Sometimes the amount of
control that extends to purchased and distributed items depends on the vertical
integration of the enterprise.
■ Relative lead-time horizons can be very different among these item types. Short
lead times for purchased items could be up to a week. Short lead times for man-
ufactured items could be one to two days. Depending on the positioning model,
lead times for distributed items will be inbound transportation time plus any
administration, pack, and unpack times.

Factor 2: Variability
Variability can be segmented into three slices—high, medium, and low—with the two
dimensions of demand and supply. In this case, however, the supply and demand vari-
ability is only with regard to the discrete part or SKU number.
demand variability: The potential for spikes in demand against this particular part or
SKU number. Once again, a variability designation can be calculated by a variety of
equations or determined by rules of thumb with intuitive planning personnel.
Mathematically, demand variability or uncertainty can be calculated through standard
deviation, mean absolute deviation (MAD), or variance of forecast errors. 1

1 APICS Dictionary, 12th ed. New York: Blackstone, 2008 p. 101.