Page 82 - Orlicky's Material Requirements Planning

CHAPTER 4 Inventory in a Manufacturing Environment 63

■ Inventory leverage and flexibility. The places in the integrated BOM structure (the
matrix BOM) or the distribution network that leave a company with the most
available options as well as the best lead time compression to meet the business
needs. Within manufacturing, this is typically represented by key purchased
materials and subassemblies and intermediate components. This becomes more
important because the BOMs are deeper, more complex, and have more shared
components and materials. This concept will be explored more fully in Chapter
23. The critical component of determining these points is called actively synchro-
nized replenishment (ASR) lead time. Within distribution networks, this typically
requires realignment of the network to a hub-and-spoke model. This is covered
in more detail later in this chapter.
■ Protection of key operational areas. It is particularly important to protect critical
operational areas from disruption. In lean, these areas are called pace-setters. In
theory of constraints, they are referred to as drums. Whatever manufacturing or
operational methodology a company ascribes to, these resources typically repre-
sent control points that have a huge impact on the total flow or velocity that a
particular plant, resource, or area can maintain or achieve. Similar to the BOM,
the longer and more complex the routing structure and dependent chain of
events (including interplant transfers), the more important it can be to protect
these key areas. These types of operations include areas that have limited capac-
ity or where quality can be compromised by disruptions.
The preceding six factors must be applied systematically across the entire BOM,
routing structure, manufacturing facilities, and supply chain to determine the best posi-
tions for purchased, manufactured, and finished items (including service parts). The big-
ger the system these factors are applied to, the more significant the results can be. Later
in this book we will examine the impact of the solution on an integrated supply chain.
Purchased parts chosen for strategic buffering tend to be critical and/or strategic
parts and long-lead-time items. Typically, this will be less than 20 percent of purchased
parts. Manufactured parts chosen for strategic buffering are often critical or strategic
manufactured and/or service parts and at least some finished items and critical sub-
assemblies. Typically, this will be under 10 percent of manufactured parts (for some envi-
ronments with a significant number of manufactured service parts, this percentage could
be higher). On the fulfillment side, most parts will be strategically buffered. This is why
the distribution warehousing positions exist. This is covered more fully in Chapter 24.
Figure 4-4 is an example of a supply chain for one product called Finished Product
A (FPA) after the positioning has been determined. Note that the “bucket” icon represents
strategically replenished positions. Four of the ten purchased components are buffered.
Three of the ten subassembly/intermediate-component positions are buffered, as well as
the finished product itself. Finally, the stock positions of FPA in all three regional ware-
houses are buffered. Remember, the example is in relation to one end item only.
The position of the strategic buffers is accomplished through a combination of busi-
ness rules and technology. The business rules are the application of critical positioning