We can embrace the complexity and build a system where everyone is judged on the preciseness of their input and their output. Aligning the various complexities along the various steps of a process so that each step is exactly and precisely in line with the preceding and proceeding steps. Sound simple?
We all can agree that having the right amount of inventory is valuable. Yet most businesses have too much of the wrong stuff and too little of the right stuff.
Material Requirements Planning (MRP) has been the solution that has allowed manufacturing companies to manage their inventories and their production schedules for around 50 years.
Every argument you can give, every tweak that you perform, every data export and re-analysis that you explore that prevents MRP from failing, is exactly my point. The system doesn’t work as it is today.
The way we thought at the time made it seem true, but we sometimes aren’t able to connect the newly acquired information with the old knowledge. One I’m thinking about is related to supply chain, purchasing and inventory management.
It starts with planning and scheduling, doesn’t it? Deciding the dates to travel is maybe the first thing. That involves several potential allies. You don’t walk to the airport empty-handed and pick the next random destination. Sounds fun, but no, that’s not how it’s usually done.
Reality #1: We live in an imprecise world. Challenge #1: We have flawed data and inaccurate forecasts. Misconception #1. We think the right thing to
And since I imagine none of you would be happy without a gas gauge, then I ask you, “Why do you think Safety Stock is sufficient to manage millions of dollars’ worth of inventory?”
the more steps you have, the less likely your calculations will be completely predictable.
So, why are we still applying the solution when we no longer are facing the problem? There are only two possible answers to that.
We are looking at the wrong end of the problem.
If you’re frustrated and unable to see the path forward, it starts with inventory management and fixing the inadequate systems you’ve been forced to work with. Once you see the solution that I’ll present to you, you will never be able to “unsee” it.
Your goal is to maximize the money kept in the Saving’s account. And therefore, minimize the money in your Checking account. But don’t let the checking balance drop below zero.
Looking back, I don’t know what took me so long to realize that I have outgrown you. You never had an adaptable planning process – you only work if there is no variability.
We know intuitively that we must be agile in order to meet the changing and volatile customer demand. Why do we continue to insist that precision and the resulting chaotic emergencies are the best way to achieve agility?
