In the last week or so, a couple more articles popped up thanks to the magic elves in the Twitter Box.

From DemandCaster: Whatever happened to JIT?

…The dominant term was JIT. But, JIT and Lean were bandied about interchangeably. There was no different save for the marketing spin of one author or consulting firm over another. But that has changed. The change resulted because the manufacturing base moved, mostly, to Asia. This was contrary to the principle of reducing lead times so central to JIT. The lead time for goods from Asia dramatically increased to four, five, six, or more weeks. Just-in-Time simply did not fit.No matter what the lead times, one could be “lean” by taking the slack out of the lead times. But as the overall lead times increased so much that planning was once again based on forecasts.

Not to mention the additional inventory in the supply chain pipeline thanks to the longer lead times.

From @chrischip: Just in Time Just Isn’t

…But don’t pull your hair out over inventory. Your customers won’t wait for you to ramp up to fulfill their order, and your forecast won’t save you because it isn’t correct. The answer is a buffer. What I hear time and time again is that the cost of a buffer is well worth eating when you can promise delivery from stock. Without that assurance, you may well lose the order, and that’s a heavier price to pay in terms of dollars and reputation.

Buffers are consistent with, and I would argue REQUIRED, to lower inventory investment. Several weeks ago I revealed my personal view with regard to maximizing inventory turnover:

The secret: The fastest way to reduce  on-hand inventory balances is to ship it.

Many supply chain professionals are penny-wise and pound-foolish: They focus on reducing inventory investment by slowing the delivery of component inventory and insist on sticking to corporate strategies, goals, and metrics with regard to ordering and stocking policies. This is the domain of ivory tower academics and corporate theorists. I work in a Manufacturing Plant, where we Build Things Customers Pay For.

It is far better to grasp the universe as it really is than to persist in delusion, however satisfying and reassuring.
~ Carl Sagan

If the sales exist to consume the finished goods, the proper strategy is to ensure 100% order fulfillment. Unless your forecast is perfect (it’s not), your inventory accuracy is 100% (it’s not), your suppliers deliver exactly what you need exactly when you need it with no quality rejects (they don’t), your machines have 100% up-time (they don’t), and you have 100% yield (you don’t), then you have to be honest with yourself as a material planning professional and do the right thing: Buffer.

Better never than late.
~ George Bernard Shaw

That doesn’t mean you start writing blank checks, however. At the risk of sounding arrogant (too late, I know! ), this is the domain of Smart People. Data-oriented decision-making. Bounded risk. Iterative modeling. Yeah, I can spew the buzzwords with the best corporate policy wonk. If you don’t have robust simulation tools, buy them. If you can’t buy them, build them. They won’t be perfect starting out. Probably won’t be right, either. But the second iteration will be better than the first. You’ll do it faster, too. Same with the third, fourth, fifth, sixth… Models will never be perfect, but like a good spouse they get better with age.

When strategies, tactics, and actions are set, execute in the real world using proven, time-tested material management techniques.

How?

Use inventory stratification and manage by exception. Remember ABCs? Remember Exception Reports? Classical stuff. Material Planning 101. APICS Basics of Supply Chain Management.

I don’t worry about C-items. Period. I want tons of C-items. If I go line-down because a penny-part wasn’t in stock, that’s not the cost of doing business – that’s a DISASTER: Shipments are missed, Revenue goals aren’t met, and all of the on-hand inventory associated with the assemblies that now can’t be built will just sit on your books, festering. I watch B-items to the extent that I don’t buy excess but I try to buffer with time; instead of coming in just-in-time, I try to pick up extra days/weeks whenever I can. Finally, I focus completely on A-items. I have a number of homegrown tools I developed to track the supply/demand of A-items over time and any volatility is ruthlessly drilled to root cause and strategies developed to balance the supply with the demand.

Better three hours too soon than a minute too late.
~ William Shakespeare

Most importantly, I am disciplined about reviewing data versus plan and taking action with a sense of urgency. You can’t set up your plans and walk away expecting your great plan will be executed flawlessly. You have to constantly check, double-check, triple-check. Plan and re-plan. This is where Exception Reports are worth their weight in gold. In most companies where bills-of-material are complex and just plain LONG, it’s impossible to do a top-down or bottom-up material analysis on any kind of cycle that permits rapid decision-making. Exception reports separate the wheat from the chaff. By definition, the A-items consistent of ~80-90% of your inventory investment dollars. Planning and re-planning ~5-10% of your components offers an increased likelihood of successfully managing 80% of the dollars, rather than attempting to manage 100% of the component investment with no likelihood of success.

A good plan violently executed now is better than a perfect plan executed next week.
~ George S. Patton

-again. No, I can’t go into it publicly. But most supply chain professionals will understand when I say it has to do with achieving the balance between what management says they want and what they say they need.

Yeah, that.

Which is funny because oftentimes when management makes a push to improve metrics there are always a cadre of homegrown materials people armed with excuses why the textbook approach won’t work in the real world.

The secret: The fastest way to reduce inventory on-hand balances is to ship it.

With regard to production scheduling, it is critical to know capacity and lead time. Many companies simply schedule to maximize revenue or achieve the customer’s need date regardless of what it means for operational excellence. Knowing capacity means you can assess and manage risk when outside forces require production schedules in excess of capacity. Contingency plans can be made to increase capacity and buy material inside lead time. With regard to our schedule, we were several months late starting due to redesigns from our customer. This required our manufacturing and test engineers to get creative and solve some capacity issues.

As far as material availability, I managed my “A” items tightly – super-tight. But I didn’t worry about the “B” and “C” items beyond ensuring I had enough on hand to build the schedule. That’s the whole point of inventory stratification: focus where the dollars lie. After that, it’s all about execution from the team: purchasing managing the supplier deliveries, and production control getting the material to manufacturing with enough lead time to build and ship quality product. In a prior post I stated:

As a Master Scheduler, I control much of the front-end of the manufacturing process – any variation on my part bullwhips through the organization. Variation isn’t something that can be avoided, however, but as a professional I need to be diligent about controlling those factors under my control… I track demands over time, supply exceptions over time, excess/obsolete over time… well, you notice “over time” is the critical factor. After each MRP run (we run weekly), I export all of my data and review several critical factors: has my backlog changed, is my planned order report correct, has my excess/obsolete moved unexpectedly in either direction, and has the exception report changed positively or negatively. There are many other items I track, but I start with these and use them to uncover issues and troubleshoot them prior to someone else asking me that dreaded question, “What happened?

So, by focusing on demand stability and material availability over time in a structured and disciplined manner, I did my part as Master Scheduler to maximize inventory turnover. When a team maximizes the inventory going out the front door, good things happen.

Among my career experiences I was fortunate to work in marketing for a period of time when a new VP was hired to bring organizational leadership to the business development process. The first thing he did was hunker down in his office with several members of his staff, dissecting the business development status of the company. After a couple weeks he emerged from his office to give a presentation to the staff, explaining that the first thing he does when he takes on new responsibilities is to put the challenge into perspective.

As I mentioned, this is a mature program with significant challenges. Taking my cue from this former manager, I pulled my usual post-MRP-run reports: Backlog, Planned Orders, Open Orders, On-Hand Inventory. I normally lay the data out in Excel and do the math: how many units have to be built, how many units are on-hand, how many units are being built in the open orders, and how many units remain to be built. Simply put, the way production scheduling and MRP work is:

On-Hand Inventory + Open Orders + Planned Orders = Backlog

Anything else, and you have a problem.

So, I pulled the data expecting to see everything balance and my challenge would be a function of lead time and material availability. Except, the data wasn’t adding up correctly.

By the end of the first 14-hr day I’d found some major human errors that had contributed to a portion of the problem. Once corrected and MRP was re-run, the numbers still weren’t adding up. By the end of the second day I’d found an open order that wasn’t consuming material properly. Once I showed it to my manager, she diagnosed the specific problem in about 30 seconds. I won’t go into it here because it was human error, not system error (although it would have been nice if the system hadn’t allowed the error).

So, my “normal” process for getting my arms around program materials responsibilities has been short-circuited. Fixing the issues in the system are beyond my abilities, but I’m fortunate to have a manager with the technical skills to do so and the integrity to shoulder that responsibility rather than pawn it off on me. Even so, this will be the biggest challenge of my career thus far.

I have many weeks of long hours ahead while I try to make sense of the situation from a schedule, capacity, and availability perspective. But as I tell my team, when the system is used properly, time is your friend – eventually, material is ordered properly, arrives on time, and you recover and stabilize.

photo credit: David G. Romero