Supply Chain through the Refrigerator

Using Metaphors to Promote Understanding.

Sometimes Supply Chain feels harder than Mission Impossible. Is five seconds really enough warning prior to something self-destructing?

Imagine your car had a warning system that told you whether or not you had fuel. Two settings: Yes (you have fuel) or No (you don’t). You could search and find out how much gas you have, but only while you are stopped. Only if there was no alternative would anyone agree to this system.

Wouldn’t it be cool if you were warned with enough time to prevent a problem? That’s why your car has a gas gauge. Even the gas gauge has evolved. Now the car will show you how many miles you can go before you reach empty. Though, I don’t have the courage to check the precision of that information.

Consider the eggs in your refrigerator. Seriously.

How do you know when to order them? Is it easy? Is the grocery store next door? Let’s assume you get groceries every three days, but you can get the eggs in one day if needed. On average, you use 3 eggs per day. And you buy in cartons of 12.

Knowing the current status helps you react appropriately. I calculate I will have, on average, 14 eggs in the refrigerator. When my status is 100%, I know I have 8 eggs and I’m getting my first warning. If my status is at 50%, I know my capabilities are reduced and a special trip to the store may be required. I’m not showing the math, so you’ll have to trust me. Or don’t you like eggs?

But knowing the quantity of the moment isn’t enough. I also require an ordering method that mostly keeps the egg balance within my quantity target minimum of 8 eggs and my target maximum of 20 eggs. According to my calculations, when the on-hand plus the on-order minus the day’s demand falls to 17 or below, I’ll add eggs to my grocery list. Next trip to the store, I’ll get eggs.

If I run out, or if my on-hand balance doesn’t remain in the range, then there are 6 basic components of the buffer to review. It’s not a new mystery to solve each time, simply look at the 6 components and adjust. And if it’s complicated, there are 5 advanced factors to assist as well.

I’m not advocating that you use this method for your eggs. Purely using this example as a demonstration tool. But imagine that you ask someone else to manage the egg supply in your refrigerator. Is there value in having a system for a new person to use? It’s the same in Supply Chain.

You might know that on average you want 14 eggs. But for someone who has no idea what normal looks like, again, wouldn’t a system add value? And if I could use the same system for managing many of my necessary raw materials, it would be much better than a separate methodology for each item.

If I’m managing, say, 400 components, what I’d really like is a list of items I need to expedite or reschedule and a separate list of items that I need to order. And put both of those lists from most urgent to least urgent please.

Enter Demand Driven MRP. For Supply Chains that want to succeed, it’s time to invest the time to explore this methodology.

John Melbye, DDPP, DDLP, CSCP

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