In my last posting we
discussed the replenishment system known as the Min/Max system. In this posting we pointed out some of the recurring
problems organizations routinely experience when using this system. This posting will be about how TOC overcomes
the problems of excessive inventory and stock-outs routinely experienced with
the Min/Max system.
The TOC Distribution and
Replenishment Model eliminates the use of minimums and maximums and replaces
them with a system that monitors the actual usage. Replenishment occurs at a
minimum weekly and possibly daily for highly used items. The end result of
these actions will be sufficient inventory in the right location at the right
time with zero or minimal stock-outs to support production activity. Instead of
using the minimum amount to trigger the reorder process like the Min/Max system
does, replenishment should be triggered by daily usage with vendor lead time to
replenish being factored in.
When the TOC
Distribution and Replenishment Model is used to manage the supply chain there
is always sufficient parts inventory to continue production work. The total
inventory is also much more stable, through time, without the large gaps and
gyrations from zero inventories available to maximum inventory as noted using
the Min/Max system. In other words, the
stock-out problem essential goes away for good.
The figure above
depicts how the inventory and stock-outs look as a function of time using TOC’s
replenishment method and as you can readily see, there are virtually no
stock-outs while the total inventory has been significantly reduced when
compared to the Min/Max system figure displayed in my last posting. When you consider the impact on your
production output having virtually no stock-outs, I think you will agree that
this replenishment method is a better way of doing business.
In this and the
previous posting I have only covered the basics of both replenishment methods,
but I encourage you to take a good look at what is happening within your own
company. If you are having a problem
with stock-outs and you have an excess in inventory, then you may be using the
Min/Max system of replenishment. If you
are, I encourage you to look into the TOC replenishment method.
Bob Sproull
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