I had the pleasure of speaking with Steve Cimorelli this month. He recently published a second edition of his book Kanban for the Supply Chain: Fundamental Practices for Manufacturing Management, and I had a lively discussion with him about materials requirements planning (MRP) versus kanban pull techniques and the importance of synchronization.
One general question I asked him was: "Which component parts or products are the best candidates for a kanban system?" Here is his answer:
Kanban works best when applied to parts with stable and repeatable demand. An effective way to quantify stability is to determine the mean (average) and standard deviation of daily or weekly demand for all parts under consideration, then calculate a “coefficient of variability” or CoV (CoV = Standard Deviation / Mean) for each part. Parts with a small CoV have more stable demand patterns than those with large CoV values. Another useful criteria is frequency of usage because frequently used parts tend to be more stable than infrequently used parts. Creating a scatter diagram of these two values on a simple Excel chart, can help you visualize where to "draw the line" on CoV and frequency rules. Finally, ABC class codes, which allow parts to be categorized according to both cost and demand, can add additional perspective to the equation. Many companies find it useful to set CoV, frequency, or other criteria differently by ABC code because A-items have a much higher impact on inventory investment than do B-items or C-items.
What do you think of Steve's advice? What type of parts or products have worked best for you in a kanban replenishment system?
Showing posts with label material requirements planning (MRP). Show all posts
Showing posts with label material requirements planning (MRP). Show all posts
12.21.2011
"Lean Versus MRP" or "Lean and MRP"?
I attend many Lean conferences throughout the year that focus on different areas of the supply chain. Presenters there often state how the concept of material requirements planning (MRP) is outdated and works as a detriment to Lean thinking. In addition, there have been many articles published that discuss the "Lean versus MRP" debate. I recently had an email conversation with Derek Singleton about this very topic. Derek is an enterprise resource planning (ERP) market analyst and writes for the Software Advice website. He has some interesting ideas about the use of software during the planning process, and I'd like to share his thoughts here:
Three Ways Manufacturing Software Can Adjust to Lean Principles
There’s a long-standing debate between manufacturing planning strategies. The debate is between proponents of material requirements planning software -- better known as MRP software -- and lean manufacturing advocates.
The crux of the dispute boils down to whether sophisticated software tools are needed to adequately plan production. Proponents of MRP software believe that today’s complex manufacturing challenges require formal planning tools to get an accurate picture of the production requirements. Lean advocates, on the other hand, argue that these planning tools actually get in the way of accurate planning because they’re too slow and transaction-intensive to pace to actual consumption, or adjust to demand fluctuations.
Three Components to Incorporate in Manufacturing Software
I see three main ways that manufacturing software can evolve to adapt to the demands of lean manufacturing. Each way focuses on bringing lean principles front and center of manufacturing software packages.
1. Make Value Stream Mapping a Core Software Component - One of the most important tools in lean manufacturing is create a value stream map to outline the flow of information and materials in the manufacturing plant. Modeling how information and materials flow through a shop floor will allow manufacturers to more easily identify production bottlenecks.
2. Monitor Cycle Times Intensely - The most important metric to know in manufacturing is how long it takes for materials to arrive on the dock and to leave in a completed product. In order to improve cycle times, these times need to be monitored and tracked. A subset of monitoring and tracking cycle times is keeping track of production status.
3. Locate Key Places to Add or Remove Inventory - While there’s ample functionality in manufacturing software for determining what to stock and how much to stock, there is little functionality to help manufacturers figure out where to stock. Functionality that can tell a manufacturer where to stock will help them figure identify the best places to protect against volatility, which will ultimately help avoid product shortages.
These are a few ways that I can see manufacturing software changing to adapt to the requirements of lean manufacturing. However, I’d like to hear your thoughts. What needs to change in manufacturing software to adapt it to lean manufacturing principles?
What do you think of Derek's ideas? What are your views on the role of MRP within a Lean initiative?
Three Ways Manufacturing Software Can Adjust to Lean Principles
There’s a long-standing debate between manufacturing planning strategies. The debate is between proponents of material requirements planning software -- better known as MRP software -- and lean manufacturing advocates.
The crux of the dispute boils down to whether sophisticated software tools are needed to adequately plan production. Proponents of MRP software believe that today’s complex manufacturing challenges require formal planning tools to get an accurate picture of the production requirements. Lean advocates, on the other hand, argue that these planning tools actually get in the way of accurate planning because they’re too slow and transaction-intensive to pace to actual consumption, or adjust to demand fluctuations.
Three Components to Incorporate in Manufacturing Software
I see three main ways that manufacturing software can evolve to adapt to the demands of lean manufacturing. Each way focuses on bringing lean principles front and center of manufacturing software packages.
1. Make Value Stream Mapping a Core Software Component - One of the most important tools in lean manufacturing is create a value stream map to outline the flow of information and materials in the manufacturing plant. Modeling how information and materials flow through a shop floor will allow manufacturers to more easily identify production bottlenecks.
2. Monitor Cycle Times Intensely - The most important metric to know in manufacturing is how long it takes for materials to arrive on the dock and to leave in a completed product. In order to improve cycle times, these times need to be monitored and tracked. A subset of monitoring and tracking cycle times is keeping track of production status.
3. Locate Key Places to Add or Remove Inventory - While there’s ample functionality in manufacturing software for determining what to stock and how much to stock, there is little functionality to help manufacturers figure out where to stock. Functionality that can tell a manufacturer where to stock will help them figure identify the best places to protect against volatility, which will ultimately help avoid product shortages.
These are a few ways that I can see manufacturing software changing to adapt to the requirements of lean manufacturing. However, I’d like to hear your thoughts. What needs to change in manufacturing software to adapt it to lean manufacturing principles?
What do you think of Derek's ideas? What are your views on the role of MRP within a Lean initiative?
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