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Supply Chain Synchronization
Part 4 of 6


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OPERATING AT THE PUSH/PULL BOUNDARY

The rubber meets the road where the push planning pro­cess interfaces to the pull production process. The sup­ply chain trading partners should decide the optimum place for this to occur. When the push/pull boundary is upstream with the supplier, the supply chain is being operating as build-to-order, but the customer delivery time is too long. See Figure 2. The customer has to wait for too many operations to be completed. When the push/pull boundary is downstream with the distribu­tor, the supply chain is being operated as build-to-stock, but the customer service level is too low. The customer experiences the high probability of a stockout depend­ing on actual product mix. When the push/pull bound­ary is in the middle of the supply chain, in the factory,

neither customer delivery time nor customer service level are optimal. But only one trad­ing partner can operate as the push/pull boundary. The conversion of push planning into pull production is a necessary but in­dependent action from synchronization.

 

One optimizing solution is to introduce postponement into supply chain distribu­tion. Postponement is used to trade infor­mation for inventory. The product is kept generic as close as possible to the customer; this may require some product reengineer-ing. A postponement center takes each cus­tomer order, and quickly converts a generic subassembly into a customer-specified fi­nal product. The postponement center is the push/pull boundary. Generic subassemblies are pushed into the postpone­ment center, while customer specified complete products are pulled out of the postponement center. This is very effective for multitiered distribution.

A different optimizing solution is to op­erate the factory in short sequences of mixed model production. The push plan is to run a sequenced schedule of specific model quantities. The factory's material handling times, machine setups, and tooling change-overs have to be continuously improved to the point where mixed model production is practical. Preventive maintenance programs and trained machine technicians must be in place to deal immediately with the wear and tear of changeups. The pull production is modifying the planned schedule to actual demand consumption. Sequences are rear­ranged and quantities are repeated to match actual in­coming orders. Mixed model production can be very effective in a supply chain where the factory ships di­rectly to the end customer or ships through a single tier of distribution.

HOW TO DETERMINE THE SYSTEM CONSTRAINT

 

Eli Goldratt's theory of constraints describes how the constraint within a group of work centers limits the throughput of the whole factory (see Figure 3). The constraint produces product at its full capacity, while every other work center effectively has some excess ca­pacity. The first work center in the chain is tied, or syn­chronized, to the constraint in order to eliminate the buildup of unnecessary work-in-process ahead of the constraint. The constraint is scheduled to only work on jobs that have customer orders behind them to avoid the buildup of unnecessary inventory after the con­straint. And, if for some reason one of the other work centers falls behind, it can use its excess capacity to

catch up. This model has direct applicability to a sup­ply chain where the work centers become the trading partners, the constraint becomes the system constraint, and the synchronization signal becomes the broadcast signal.1 The system constraint controls the end-to-end throughput of the supply chain. Since some of the trad­ing partners operate with excess capacity, proper syn­chronization throughout the supply chain prevents the buildup of excess inventory upstream and downstream from the system constraint. For synchronization to work properly every node in the supply chain must be "capable." This means that there is adequate capacity at every node in the supply chain, yet one node will be the system constraint.

The first step is to define the capacity required per node for the supply chain to be capable, and the second step is to identify which node is the system constraint:

      Compile a list of SKUs delivered through the supply chain.

      Verify that each SKU is processed through each trading partner by comparing supply chain routings.

INVENTORY MANAGEMENT UNDER SYNCHRONIZED OPERATIONS

Under synchronized operations, there will be some in­ventory at every node of the supply chain and some in­ventory within every pipeline. When customer demand is light, node inventory will be large and pipeline inven­tory will be small. When customer demand is heavy, node inventory will be small and pipeline inventory will be large. In fact, the sum of the total inventory in equiva­lent SKU units of all the node inventory plus all the con­necting pipeline inventory will be constant. If it is at all possible to eliminate some nodes in the current supply chain, then do this optimization before starting synchro­nized operations. This is because the total supply chain inventory investment is driven mostly by the number of nodes.

Then, before synchronized operations can begin, enough inventory must be put in place at each node to support one synchronization cycle at maximum throughput. A synchronization cycle is the time between the broadcast of one demand signal from the system constraint until the next; this is typically one day. From then on each node must manage its inventory on a first-in, first-out (FIFO) basis to ensure stock rotation.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11


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