I have always been fascinated by company executives who are surprised their MRP system fails. This is especially true in a High Mix, Low Volume manufacturing environment. The usual conversation goes something like this:
“We have made this investment in a great ERP system. We have hired professional buyers. We have sourced our product to the best suppliers out there, yet we are constantly surprised by inventory excess or inventory shortages. Why are we failing?”
What are the Key Challenges?
There are three basic challenges that your organization likely faces:
1. Sub-Optimization
2. Forecast Unpredictability
3. Failing to consider Historical Variances
Typically, the failure occurs before the MRP ever starts churning demand. Unless you are in a business environment where demand is stable, foreseeable or predictable, MRP will always sub-optimize the supply pipeline. Sub-optimization is where a process, procedure, or system yields less than the best possible outcome or output, caused by a lack of the best coordination between different components, elements or parts. As bad as sub-optimization may be, what is worst is the unpredictability of the sub-optimization. If you know ahead of time your forecast performance will fall within a given variance, you can at least use statistics to first measure your historic performance variance, judge how much your market can survive in these variances and then plan for the variances through inventory buffering and pull-systems.
What are the Warning Signs?
Inventory buffering almost always sets off alarms for the executive. Inventory translates into the cost of capital and their concern is justifiable. What we do at ATG is to work with our Clients to analyze these demand variances, establish the desired service level then model the inventory costs associated with different buffering and pull-systems. The final solution is to put predictability into the unknown.
These are always awesome collaborative discussions where the discovery sessions become eye-opening and provide those rare moments of epiphany for our Clients. Contact us today to learn how ATG can work with you and your team to achieve Accelerated Tangible Growth.
ATG specializes in helping primarily small to mid-sized contract manufacturers,plastic injection molders and sheet metal fabricators engage and retain the right new customers. Contact us today to learn more about our services and subject matter expertise.
