Season Three, Episode Seven, Chapter Two
The Adventure Continues.
Julie and Matt found out a few short weeks ago that their manufacturing plant will be facing a 100% increase in demand. 100%. That’s double their current demand. Knowing they are barely able to keep up with the current demand, they realized they needed to do something other than business as usual. But what would they do?
Today, we find Julie, Matt and two other members of their team attending a Demand Driven Planner workshop. There is a certification possible, but right now Julie and Matt just want to evaluate if this methodology is as promising as it seems. We catch up with them during a break in the class.
“Matt,” asked Julie. “Are you seeing what I’m seeing?”
“I can’t say for certain, since you didn’t say what it is you are seeing,” replied Matt. “If you’re seeing that MRP’s strength of using the bill of materials to show us the demand of all the dependent components is also part of what is causing so much chaos, then yes.”
“It’s hard to believe, but it’s so true,” reiterated Julie. “Every time there is any change in the top-level demand (like the demand of the finished good), then every single lower level component also changes. Even if a customer wants just one less or one more, MRP recalculates and changes the demand of every component in the bill of materials.”
“It’s clear that when anything changes, everything changes. No wonder we are facing such constant chaos,” said Matt. “The system is designed to work that way. When customers were willing to wait, it probably wasn’t so bad. But today, when no one is willing to wait, it’s a disaster.”
Margaret raised her eyes to stare at Julie and Matt. Margaret is an inventory analyst that works for their company. She’s been at the company for about 2 years. “You know,” she started. “We spend a lot of time trying to fine-tune the precision of this long chain that we call supply chain. We get right down to the decimal point sometimes.” She paused for effect. “And then the data we feed into that long chain of precision is the opposite of precise. Or maybe more accurately - it’s Precisely Wrong.”
“Right,” replied Julie. “Now that we’ve identified one source of our agony, what do we do about it? Where do we begin?”
“We are only part way through the class,” offered Matt. “But it seems that we start with Strategic Positioning. We need to look at our business and determine the best places in our product structure and supply chain to buffer inventory. Where does it make the most sense for us to maintain levels of inventory? We’ll use the 6 positioning factors to make that determination.”
“And once we’ve determined those buffer locations, we’ll have developed separate pockets of precision buffered on each end by the strategic inventory positions.” Julie was excited. “Managing shorter windows of precision means that when one thing changes, it will only impact the connected pocket of precision. Once the next buffer is reached, the chaos stops.”
“Okay class let’s resume, shall we?” the instructor was ready again. “Now that you’ve learned about the Decoupled Explosion, it’s time to introduce the related concept of Decoupled Lead Time.”
Julie, Matt and Margaret grinned with anticipation. Time to continue their Demand Driven Journey.