“The fact that in manufacturing and across the supply chain that the world around us has fundamentally changed.” – Carol Ptak
Related Podcast and Transcription: Supply Chain Thinking: Think Where
An excerpt from the podcast that I had with Carol:
Joe: Is there a relationship between ASR and TOC? Is the constraint the same, the hub?
Carol: That’s a good question, Joe. Think about what Lean and TOC??and the pull mechanism is called drum-buffer-rope both have in common. What’s the issue? Well, drum-buffer-rope activates resources when the drum, which is the constraint, works. So you don’t release material any faster than the drum can do its work. A Lean line can only work as quickly as the whole process flows, right? Because what Lean does is it strips the inventory out such that the whole line then becomes the constraint, if you will, so that the whole thing is either running or it’s out, it’s done. OK?
So now, what do both have in common as an issue? How do I get the materials? How do I enable material planning in this pull environment when everything on the materials side is in a push world? That’s really it.
The difference between the TOC view and the Lean view is really the same. They’re both pull techniques because, when you think about it if you take TOC, the drum-buffer-rope side, the buffer is sized for the variability in the process. And what happens, when you take enough variability out of the process, drum?buffer?rope starts to look a whole lot like a pull line, a Lean line. Because that’s the only reason the buffer’s there is because there is some kind of volatility that is causing that line to shut down, and that’s called the constraint.
Joe: So you’re saying that, since you’re living in a push world, you still have to stock that buffer, but you just have to stock…
Carol: Well, we’re living in a pull world. That’s the problem. That really is the core of the problem is we are living in a pull world.
Carol: So the push rules don’t apply anymore. Think about the technology that we’re using at every company. It’s like rings on a tree. We were able to do advanced planning and scheduling because we had ERP, enterprise resource planning. We could do ERP because we had MRP II, manufacturing resource planning. We could do MRP II because we had closed-loop MRP. That was a huge deal, when we could put material and capacity together. When we got to MRP II, we added the financials. As I always tell my students, “Good news is it’s integrated. Bad news is it’s integrated.”
Well, we could do closed-loop MRP because we had MRP, right? I mean, that was back in the ’70s, and that was when we had to spec the software first and then we’d implement it. I love listening to people complain now. It’s like, yeah, back in the old day, we had to write the spec first, write the software, and then implement it. But if you peel MRP back, it was BOMP and de?BOMP, back in the ’50s. If you look back in the earliest days, the first MRP system was called a BOMP processor, was written at the Castle Company up in Rochester, New York. Dick Ling was one of the key architects. IBM was in the middle of it. And they wrote it in 8K of memory, because that’s all we had.
If you peel that back even further, what’s at the center of BOMP? Inventory. What was the assumption? “I’m going to have this inventory everywhere.” It’s an inventory-driven system.
Well, if you think about the fact that we now have more market volatility, we have excess capacity, and we’ve got these crazy, fickle customers, and our product variety has gone skyrocketing crazy, what’s at the center of all of our approaches today, all of our business rules today, demand? The current systems, we’re all fighting. Whether you’re Lean or you’re TOC, everybody’s fighting their systems, because the two underlying cores are very, very different.
Joe: I have to agree with you, in theory. But the difficulty is let’s go back to the hub. You’re still basing your hub on a forecast, a guesstimate?
Carol: Absolutely. But, if I’m going to put a hub based on a forecast, and then I’m going to monitor it based on a green-yellow-red replenishment level, what we find is that the amount of inventory I carry is significantly less because my first question was “Where do I put my inventory?” instead of “How much?”
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