Читать книгу Demand Driven Material Requirements Planning (DDMRP), Version 2 - Carol Ptak - Страница 13
ОглавлениеTo understand why precise high-powered tools like MRP are not living up to their potential as well as the direction for a potential solution, let’s start at a fundamental level. All for-profit entities have the same objective: to drive shareholder equity. Thus the rules and tools within a for-profit entity must be aligned to that objective. There is in fact a fundamental principle that aligns business rules and tools to that objective.
Manufacturing comprises a bewildering and distracting variety of products, materials, technology, machines, and people skills that obscure the underlying elegance and simplicity of it as a process. The essence of manufacturing (and supply chain in general) is the flow of materials from suppliers, through plants, through distribution channels, to customers; the flow of information to all parties about what is planned and required, what is happening, what has happened, and what should happen next; and the flow of cash.
An appreciation of this elegance and simplicity brings us to what George Plossl (a founding father of MRP and author of the second edition of Orlicky’s Material Requirements Planning) articulated as the first law of manufacturing:
All benefits will be directly related to the speed of flow of information and materials.
“All benefits” is quite an encompassing phrase. It can be broken down into components that most companies measure and emphasize. All benefits encompass:
Service. A system that has good informational and material flow produces consistent and reliable results. This has implications for meeting customer expectations, not only for delivery performance but also for quality. This is especially true for industries that have shelf-life issues.
Revenue. When service is consistently high, market share tends to grow—or, at a minimum, doesn’t erode.
Quality. When things are flowing well, fewer mistakes are made that are caused by confusion and expediting.
Inventories. Purchased, work-in-process (WIP), and finished goods inventories will be minimized and directly proportional to the amount of time it takes to flow between stages and through the total system. The less time it takes products to move through the system, the less the total inventory investment. The simple equation is Throughput * lead time = WIP. Throughput is the rate at which material is exiting the system. Lead time is the time it takes to move through the system, and WIP is the amount of inventory contained between entry and exit. A key assumption is that the material entering the system is proportionate to the amount exiting the system. The basis for this equation is the queuing theory known as Little’s law.
Expenses. When flow is poor, additional activities and expenses are incurred to close the gaps in flow. Examples would be expedited freight, overtime, rework, cross-shipping, and unplanned partial ships. Most of these activities are indicative of an inefficient overall system and directly cause cash to leave the organization. These types of expenses were described in Chapter 1 in relation to the bimodal distribution.
Cash. When flow is maximized, the material that a company paid for is converted to cash at a relatively quick and consistent rate. This makes cash flow much easier to manage and predict. Additionally, the expedite-related expenses previously mentioned are minimized, limiting cash leaving the organization.
What happens when revenue is growing, inventory is minimized, and additional and unnecessary ancillary expenses are eliminated? Return on investment (ROI) moves in a favorable direction. Thus the fundamental principle is established that the rules and tools of a business should be built around the protection and promotion of flow.
Establishing Flow as the Foundation
It is difficult to foster the flow of relevant information and materials through a system when the components of the system cannot relate their actions to that flow. It’s become cliché to say that our organizations have “silos.” Those silos typically result in friction, conflict, and communication difficulties between functions. This is because we tend to control segments of our organizations through different metrics. Figure 2-1 lists an organization’s primary functions and the respective primary objectives and example metrics to accomplish those objectives.
The actions that each of these functions might take to meet their primary objectives and metrics often come into conflict. As an example, sales typically has a different primary metric than operations. It can frequently be the case that when operations looks to maximize its primary metric, it may compromise or jeopardize the primary metric of sales and vice versa. When quality maximizes its departmental metric, then operations might be adversely affected.
Yet we have already established that when a system flows well, service, revenue, quality, inventories, expenses, and cash are all better controlled. All these elements directly protect the primary objectives of the functions in Figure 2-1. But if flow is not made visible and incorporated into the routine and metrics, then how can it possibly be protected? Flow, if encouraged, measured, and made properly visible, can align all these objectives with the system goal of maximizing return on shareholder equity.
FIGURE 2-1 Organizational functions, objectives, and metrics
Thus, aligning the functions to the promotion and protection of the flow can be the bridge between local actions and the global benefits. Furthermore, this alignment should significantly raise the quality and timing of relevant information and corresponding relevant materials in a system.
Additionally, the protection and promotion of flow is a unifying concept within major process improvement disciplines and their respective primary objectives. Dr. Eliyahu Goldratt, the inventor of the Theory of Constraints had a primary objective of driving system throughput. This was accomplished by a focus on total system flow. Late in Dr. Goldratt’s life, his writings became very specific about the interdependence between the Theory of Constraints and Taiichi Ohno’s work with the Toyota Production System (TPS) and flow. Most in the West might say that the goal of TPS and any Lean system is to eliminate waste. When things flow well, there is indeed less waste. But TPS is not just about waste elimination. When Ohno’s writings are examined closely, it becomes evident that the primary goal was in fact flow as described in his River Production System for Flow. Additionally, the quality movement driven by Dr. W. Edwards Deming and his 14 points for quality heavily relied on flow. The need for flow is obvious in this framework since improved flow results from less variability.
Any discussion or time spent on ideological battles between these disciplines is a complete waste of time and quite frankly, boring. Focusing on flow is about achieving a common objective through a common strategy based on common sense (also leveraging physics, biology, economics, and management accounting).
Goldratt, Ohno, and Deming did not invent the concept of flow. Their disciplines simply built off the works and concepts of industrial giants that changed manufacturing forever and gave birth to the corporate management structure in use today. To these industrial pioneers the concept of flow was simply common sense. These industrial pioneers include:
Frederick Taylor, a founding father of operations management. Taylor developed the processes for time standards, product routings, tools, methods, and instructions as well as variable costing system and standard variance analysis. He developed the concept of planning as an actual business function.
Henry Ford, a founding father of mass production. The processes used in early Ford production were based on the fact that the slowest task governs flow and that when there is synchronization of activity to, through, and from those tasks, total system speed and velocity are protected. Ford was well known for his focus on the value of “no wait time.”
F. Donaldson Brown, a founding father of management accounting. During his time at DuPont, Brown developed the DuPont ROI in addition to cost, volume, profit analysis, and flex budgeting. Brown defined relevant information for decision making and pioneered market segmentation at scale—all of which was based on a foundation of the promotion of flow.
Relevant Information and Materials
Yet there is an important caveat to Plossl’s first law that becomes crucial and central to determining whether flow translates to better ROI performance. It has already been hinted at several times in the preceding text. The great basketball coach John Wooden said, “Never mistake activity for achievement.” A company cannot just indiscriminately move data and materials quickly through a system and expect to be successful. Today organizations are frequently drowning in oceans of data with little relevant information and large stocks of irrelevant materials (too much of the wrong stuff) and not enough relevant materials (too little of the right stuff). When this occurs, there is a direct and adverse effect on return on investment.
Thus the flow of information and materials must be relevant to the required output or market expectation of the system. To be relevant, both the information and materials must synchronize the assets of a business to what the market really wants; no more, no less. Having the right information is a prerequisite to having the right materials. With this is mind, Plossl’s first law can be amended to:
All benefits will be directly related to the speed of flow of relevant information and materials.
But in the highly complex and volatile New Normal, is it even possible to promote and protect the flow of relevant information? What stands in the way?
A massive amount of research and literature has been devoted to the phenomenon known as the bullwhip effect. However, very little, if any, of that body of knowledge has been related specifically to the objective of protecting and promoting the flow of relevant information and material. APICS Dictionary defines the bullwhip effect as:
An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip can be eliminated by synchronizing the supply chain. (p. 19)
This definition clearly deals with important points discussed earlier in this book. “Inventory can quickly move from being backordered to being excess” is descriptive of the oscillation effect that occurs with the bimodal distribution. Additionally, this definition deals with both information and materials. “Communicating orders up the chain” is the information component, while “moving product down the chain” is the materials component.
In this respect, the bullwhip is really the systematic breakdown of relevant information and materials in a supply chain. Figure 2-2 is a graphical depiction of the bullwhip effect. The wavy arrow moving from right to left is the distortion to relevant information in the supply chain. The arrow wave grows in amplitude in order to depict that the farther up the chain you go, the more disconnected the information becomes from the origin of the signal, as signal distortion is transferred and amplified at each connection point. An MRP characteristic known as nervousness combined with batching practices creates this transfer and amplification, respectively. Both are explained in Chapter 3.
In the figure, the wavy arrow moving from left to right is the distortion in relevant materials in the supply chain. The wave grows in amplitude from low-level suppliers to the end item producer (OEM) to show the accumulation of delays that occur due to chronic shortages and late shipments. This transference and amplification occurs due to batching practices and the inherent synchronization problems associated with the probability of simultaneous availability; both are explained in Chapter 3.
It could and should be argued that the prevalence of the bullwhip effect is a fourth indicator of conventional planning logic deficiency. Chapter 3 describes how this logic, driven by one key attribute, directly leads to the bullwhip effect.
FIGURE 2-2 The bullwhip effect
The flow of relevant information and materials is the fundamental principle to achieve sustainable success across the supply chain. Is the concept of promoting flow difficult for people to grasp? Titans of early industry like Henry Ford, F. Donaldson Brown, and Frederick Taylor all understood this importance and built their models around it, models that provided the backbone of modern corporate structure. Later thought leaders such as Plossl, Ohno, Deming, and Goldratt built entire methodologies around the concept. The concept is a basic tenet of management accounting.
The concept is also intuitive. In general, most people within an organization seem to intuitively grasp why flow is so important. Yet there is a significant amount of evidence to suggest that most companies are incapable of really managing their assets with this fundamental principle. Next, the planning systems in use throughout the world to plan and manage the use of these assets are examined to discover why this is the case.
