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Lean Manufacturing Articles

6. DEMAND FENCES
Problem

There are some situations in which companies wish to forecast the sale of end items to drive manufactured and purchased components to stock, but do not want to convert the product to its finished, packaged, or final assembled configuration until a customer order is in hand. They may do this to keep their inventories in the most flexible position or in a more stable state until the last moment. Standard master schedules either drive products to stock against a forecast or wait for an order to be entered before buying or making anything other than safety stocks.

Implications

Customers may not be willing to wait the full lead times for delivery. Converting products to finished goods too soon may make the company less flexible for its cus­tomers while raising total inventories.

Solution

Setting a demand fence at the lead time of the finishing operations allows you to bring all components to stock based on a forecast, but only convert the finished goods for which you have orders. Some companies also use demand fences to bring in long-lead-time raw materi­als, but not convert them to manufactured components until they have customer orders.

To Be Continued

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

Lean Manufacturing Articles and click on Series 14


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