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Organizations are focusing on supply chain strategies that will directly impact the bottom line and customer satisfaction. Supply chain performance impacts over 85 percent of customer and supplier experiences, re­flected in responsiveness, ease of doing business, reli­ability, satisfaction, and quality. Because of this, enhanced supply chain management applications al­low an organization to

      Determine accurate promise dates real time, based
on available inventory and capacity

      Select the best distribution point and method

      Reduce lead times and cycle times to create more re­
sponsive operations

      Determine relative probability of a customer order
or supply alternative

     Support the virtual inventory concept.
Additional activities that enable more effective cus­
tomer-driven planning include (see Figure 4)

     Tours of customers' facilities

     Joint product design meetings

Recent trends that leverage technologies to support customer-driven strategies include

      Driving the supplier's MPS system directly from the
customer's system via integration

      Demand-driven planning and supply, such as point
of sale reporting

      Reviewing and optimizing organizational infrastructure

      Dependency on extranets and e-business models

      Increasing dependence on data warehouses

      Accelerated information flow across geographical,
technical, and organizational boundaries to drive
business growth

      Manufacturers selling directly to consumers, taking
on role of wholesalers and distributors

      Future marketing focused on shopping experience
rather than product

      Bolt-on applications becoming routine additions to
ERP suites

      Moving from mass marketing to micromarketing to
reaching segments of one

      Trading exchanges providing noncompetitive plat­
forms among industries.


For those organizations not ready for state-of-the-art integration techniques, there are several practical meth­ods of integrating customer information into the mas­ter planning process that can be used effectively.

Scheduling Sharing

If we are going to produce what the market needs, we must know what the market needs. Understanding the needs and expectations of the customer requires getting to know

them. Open communication about ex­pectations, limitations, and abilities is a first step towards becoming customer-driven. The goal—knowing exactly what customers are producing, and what they need to produce it. The ability to forecast customer requirements has long been a thorn in the side of many organizations. Linking customer and supplier production schedules is an ef­fective way of integrating demand man­agement with customer satisfaction, as product is managed as one inventory. Schedule sharing provides a way to as­sist the customer in accurately forecast­ing future demands, while at the same time increasing the supplier's visibility and adaptability in the future.

The customer's schedule becomes the supplier's schedule, causing the supplier to simply be an extension of the customer's facility. Suppliers re­ceive regular communications with customers' current inventory levels, desired minimum and maximum quantities, and production schedules. Communication channels can be EDI, fax, or simply sending copies of MRP outputs through the mail. Ultimately, integra­tion would provide this information directly into the supplier's MPS calculations.


Kanbans are the utilization of cards or other signals to authorize production. The signal, or kanban, is a standard container or lot size in which the quantity is based on the amount of time needed to fill the con­tainer once the kanban is received. The process re­sembles the method once used by the milkman. Empty containers on the porch authorized him to leave full bottles. No bottles, no milk. If the kanban authoriza­tion is present, action is taken. If there is no kanban, no action is taken.

This same method can easily be applied throughout the supply chain. Contractual agreements are established between the sales and purchasing departments, provid­ing forecasts and future demand requirements. Ship­ments are only scheduled upon receipts of signals by the supplier, so that a kanban for finished goods reflects an actual customer demand, not simply a date on the sched­ule. Communication channels can be established with something as simple as a fax machine. Kanbans can be sent directly between production lines, reducing addi­tional ordering times. In this way, a real customer order causes the shipping location to empty which in turn re­leases a kanban for replenishment, authorizing the ship­ment without paperwork or intervention.

Kanbans can stand alone, or can be combined with techniques such as MPS/MRP or schedule sharing. Schedule requirements are given to suppliers, or pro­duction, communicating what to make medium and long term. These are converted to specific production and supplier shipments via kanbans. In this way, future visibility is provided for planning materials and capac­ity down the supply chain, yet actual inventory is not produced or moved until required.

To Be Continued

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

Lean Manufacturing Articles and click on Series 12


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