There are several methodologies for a range of applications.
The underpinning of any process is the replenishment of inventory, whether it’s physical property or information.
Let’s begin with some baselines. PFEP (Plan For Every Part) is built in an Excel database and should cover every explicit part detail such as: part number; units per pack; packs per case; dimensions and weight; supplier; supplier’s location.
Cadence is the manner the inventory will be replaced or moved. This links to your engineered timed delivery routes (TDR) and is fundamental to how inventory will be moved and replenished. It will help define which of the following replenishment methodologies is most suitable:
Direct link. The upstream and downstream work centres are physically connected by a conveyor, or are adjacent. In either situation, the downstream work centre works on whatever product emerges from the upstream.
Broadcast. It’s used when major subassemblies are on a final assembly line. The subassembly and main assemblies are often custom-made and not interchangeable. In this system, a master schedule is prepared that determines the sequence and timing of final assembly. A message will be broadcast to feeder departments or suppliers so the arrival of the component is synchronized just-in-time to the final assembly when needed.
Two bin system. Use it for lower cost items (fasteners). When the items are consumed from one bin you switch to the second while the first bin acts as a trigger for replenishment.
Re-order point (ROP). They maintain a stock of each item that may be required at the downstream work centre, which pulls stock as required. When stock levels fall to a designated minimum or re-order quantity, a purchase order or other signal is sent to the upstream work centre for replenishment to the maximum quantity. While some features of ROP resemble kanban, it normally works with larger lot sizes and much longer lead times. Moreover, the replenishment signal is initiated when the stock is at the lowest allowable point, not when it’s withdrawn.
Probability carts or racks. They’re used where a minimum number of options and the randomness of the mix does not justify a full stocking location for the SKUs. If replenishment cadence were hourly, the cart or rack would hold 1.5 hours of the mixed components. When the refresh time approaches, the holes in the cart or rack are replenished.
MRP/ERP. A vast amount of data concerning process, work times, inventory at every stage, suppliers, lead times, sales forecasts and sales orders can be used to schedule almost every production situation. Practice, however, presents a multitude of problems. Generally, the most complex systems have the broadest application. Broadcast and Direct Link, for example are only feasible under certain conditions whereas modern MRP systems can be used in nearly every situation. But the simpler systems, properly applied, work better in many ways. Kanban is about midway in terms of simplicity and range of application.
Kanban. Literally translated, it means visual authorization to replenish, withdraw or schedule. Kanban, often confused with a two-bin system, can have several triggers active within the supply chain. But in very simple terms kanban uses a small stock of product located between the upstream and downstream work centres. A signalling system informs the upstream work centre as each withdrawal is made. This allows the work centre to schedule replenishment along with any other items it must produce.
Parent-child relationships avoid the use of supermarkets. In this strategy the child replenishes from the parent while the supplier or feeder department replenishes the parent.
Kanban requires rules, procedures and the discipline to carry them out: no production without a kanban signal; and do not arbitrarily change authorized stock levels. More complex systems using containers or cards may have some additional rules.
All replenishment methodologies need to focus on increasing the velocity of inventory flowing through your process while minimizing investment and labour management, making the type of methodology important. It’s hard to justify using an ERP/MRP system to manage fasteners that cost a fraction of a cent.
It’s important to first decide on your refresh rate to establish the cadence and apply the appropriate methodology. This can range from something simple to something very complex, and involve when to add your supplier’s preferred lot size; how to optimize the inbound freight system according to weight; and optimization of the trailer.
Keep in mind, managing inventory is about finding the right balance based on supply and demand, and keeping it moving efficiently to eliminate waste. It’s imperative that you constantly look at how to reduce batch sizes to improve agility and velocity.
Richard Kunst is president and CEO of Cambridge, Ont.-based Kunst Solutions Corp., which helps companies become more agile, develop evolutionary management and implement lean solutions. Visit www.kunstsolutions.com. E-mail firstname.lastname@example.org.