Demand-Driven Performance FAQ
Providing customers what they need, when they need it, while lowering the overall cost of delivery and improving ROI
07. Configure And Manage The Supply Chain To More Effectively Address The Challenges Associated With Achieving Operational Performance (DDPSC07)
07a. How do we nullify the effects of variability in supply so as to improve operational performance in terms of Reliable Lead Times?
The key to nullifying the effects of variability in supply resides within the Planning and Execution Management processes. Most supply chain business processes are made up of a number of sequential process steps that define the product conversion and/or product delivery process, some of which have converging and/or diverging flows (see DDPSC03).
Each process step usually has some amount of Required Work Content (RWC) associated with it and there is usually some type of ERP or MRP system in place that captures transaction information registering work content completion at reporting points throughout the conversion and/or delivery process.
When it comes to the variability associated with work completion, whether it is the result of process variability or work queuing because the resources required to perform the work are not readily available, the resulting effect is always the same - a time delay in the movement of product through the supply process.
Based on the product mix, order quantities, the timing of orders and the availability of the required resources to perform the work, the amount of time delay in workflow will undoubtedly vary at each Reporting Point (RP) and as a function of time. It is the accumulated variability that defines what the overall distribution of lead times looks like and ultimately what would be a reliable lead time (DDPSC06, Part 1 of 3).
When the time delays at each of the individual process steps accumulate to the extent that a sufficient amount of the accumulated delay cannot be recovered by recovery methods such as expediting, overtime or premium freight, then the lead-time is exceeded and the delivery is late.
If we really want to have reliable lead times and on-time deliveries then our planning process must account for these time delays at a level of detail sufficient to enable execution management to effectively and efficiently adjust workflow priorities.
Effective execution management makes adjustments in workflow priority based on actual to planned movement and the resulting impact on delivery performance outcomes.
Stated another way, Planning and Execution Management must become an integrated process, supported by software tools that enable businesses and entire supply chains to operate as an integrated system.
07b. How should the Planning Process effectively account for demand, process and resource variability?
In order to have reliable lead times and on-time delivery performance, the planning process must account for the time delays resulting from demand, process and resource variability at a level of detail sufficient to enable execution management to effectively and efficiently adjust workflow priorities. That means the planning process must be able to incorporate time buffers into the resulting plan that are sufficient to absorb the time delays as they occur at each reporting point and keep them contained within planned lead time of the order. We call these time buffers, Allocated Time Buffers (ATB) and they are sized to account for the majority of the time delay associated with work getting through each reporting point. An additional amount of time buffer is allocated to the overall conversion or delivery process, which is called the Safety Time Buffer (STB).
The initial sizing of time buffers is one that simply looks to get a reasonable approximation of the time it takes for work to reliably get through a reporting point and on to the next. As such time buffers are often based on a quantification of peoples' experience with the conversion or delivery process. By summing up the RWCs, ATBs and STB we are able to compute the Reliable Lead Time (RLT). If in the end, the computation of RLT based on the experiential input data doesn't correspond with reality or is deemed to be too long, then those reporting points with the largest ATBs are to be re-examined for possible reductions in ATBs or identified as areas for possible process improvements (See DDPSC07 Figure 4).
For a planning process to enable execution management to effectively and efficiently adjust workflow priorities, the planning process itself must provide the framework whereby the amount of time buffer consumed by any given time delay at any reporting point can be easily translated into its projected impact on delivering on-time. Without a clear connection between actual and planned movement and the impact on delivery performance outcomes, workflow priorities have no real meaning.
07c. What is the framework that the Planning Process should provide to enable effective and efficient Execution Management?
A planning process that utilizes the work calendars for the resources performing the work in combination with the Required Work Content (RWC) and Allocated Time Buffer (ATB) for each reporting point in the conversion or delivery process can then compute the planned start and finish dates for each reporting point. That same planning process would also compute the amount of Planned Time Buffer that would be remaining at the completion of each reporting point, if every reporting point reported its RWC complete as planned. Knowing the planned finish time and the Planned Time Buffer Remaining for each reporting point provides the framework in which to monitor actual to planned movement (See DDPSC07 Figure 5).
By utilizing the exiting ERP or MRP transaction data that registers work complete at each reporting point throughout the conversion or delivery process, the execution management system can then compute the actual amount of Time Buffer Remaining at regular reporting intervals. Fast moving work would be reported as finished earlier than planned, and slow moving work would be reported as finishing later than planned. In either case the amount of Actual Time Buffer Remaining can be computed and compared to the Planned amount of Time Buffer Remaining for each reporting point not yet complete, and the relative impact on delivery performance outcomes and work flow priorities adjusted.
The final result is that Planning and Execution Management become an integrated process with decision support technology that enables businesses to operate as an integrated system (See DDPSC07 Figure 6) and supply chains to operate as an integrated system of systems (See DDPSC07 Figure 7).
For a more in-depth overview of how properly located and sized time buffers can be used to create work flow visibility and prioritization, thus providing for a more cost-effective use of capacity to deliver on-time, please view: Work Flow Prioritization - Cost-Effective On-Time Delivery Performance.