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The ABC classification will then be used to build a model for manufacturing and purchasing. The result will be sound purchasing, manufactur­ing, and inventory strategies—all synchronized.


A form of mixed-model sched­uling will, then, become your company's purchasing and shop loading strategy. (See Figure 4.) It is imperative that each day or week a certain mix of product is introduced to the factory floor. This is a modified version of mixed-model scheduling. As its name implies, its purpose is to stabilize the factory by defining a run order launching mix. For example, each mix MIGHT include:

a.   Daily line rate for each production area.

b.   Daily labor hours rate.

c.   Certain mix of A, B, and C items to control the num­
ber of setups and/or line start-ups.

d.   Certain mix of product families by forecast percent
to assure high customer service to various product
lines or market segments.
(A-D are examples of business rules.)

These strategies must be rethought, at least quarterly, to allow for seasonality or changing marketplace conditions.


This modified scheduling process may look confus­ing and difficult—IT IS! But every effort must be made to bring a sense of flow and stability to the entire sup­ply chain. Formal education will be needed to fully un­derstand this concept.



Most companies have safety stock; few have safety-stock policies. A formal safety-stock philosophy is needed for all major components and product lines. Safety stock should be primarily established based on customer de­mand instability as well as purchasing and manufactur­ing reliability and response times.

An example of safety stock business rules follow:

     A items: 2 weeks safety stock

     B items: 4-6 weeks safety stock

     C items: 10 plus weeks safety stock

With this logic, a company's safety stock would eas­ily turn 15 to 20 times per year.


Remember: C items are only a small portion of your dollar inventory. If you manufacture a 20-week supply of C items, your average C items inventory is approxi­mately 10 weeks. A 10-week supply of an item, which only represents 5 percent of your dollars, has almost no impact on inventory turns or investment.


In addition to the typical math­ematical approaches to setting safety stock, the following factors should be considered when setting level of safety stock (to manually adjust the quantity):

      Inventory class (ABC) of parent

      Criticality of end use (will this shut
down a customer job site)

      Location of customer (distance)

      Ease of manufacturing to produce

      Warehouse space

      Safety/hazardous material

      Design of the product life

      Spare parts usage (warranty work or


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