The key to an effective, streamlined manufacturing operation is aligning production capacity with customer demand. Whether you run a custom job shop or manufacture repetitive parts, you can benefit from using a supermarket concept to manage your flow of work.
Some people think that effective manufacturing is about having zero inventory, but it is really about having the right amount of inventory for your type of business. A made-to-order zero inventory strategy requires exceptional flexibility, which can be cost prohibitive. Alternatively, a right-size inventory strategy can help satisfy customers in a cost-effective manner.
A right-size inventory strategy employs the use of "supermarkets" located at appropriate points in the production process. Supermarkets are an effective technique when either of the following is inherent to your business: 1) wide variations in customer demand, or 2) manufacturing leadtime that typically exceeds customer (either internal or external) required leadtime. A supermarket smooths out the peaks and valleys in customer demand and provides a buffer for short leadtimes.
A supermarket in a manufacturing environment is not that much different from the commercial supermarkets we all have visited at some time. In both cases, you look at what you have on-hand, and when you reach a predetermined level of inventory, you replenish.
When establishing your supermarkets, ask yourself where the supermarkets should be located and how large the supermarkets should be?
In addressing the question of where to locate the supermarkets, consider the following:
n Are there shared resources that can cause bottlenecks? If you use your machines for multiple products, thereby limiting machine availability to any one product, you should consider putting a supermarket immediately before such machines. This assures that this bottleneck operation always has parts to run, thus maintaining maximum potential capacity. You may also consider putting a supermarket immediately after this same machine, thereby providing a small buffer of parts that can be used up until the machine is once again available to run that item.
- Do a number of parts converge at any particular step in the process, such as an assembly operation? If so, consider a supermarket containing all of the needed components right before such an operation. In this case, the supermarket provides component visibility and increases the likelihood that all parts will be available for this operation.
- Do you have equipment with long change-over times? In this case, consider one supermarket before the operation, to assure that there are enough parts to run in the unusually long setup, and one supermarket after the operation, so that the follow-up operations will have material available from this long change-over process.
- Does the output of a particular process go to many different follow-up processes? If so then, you should consider a supermarket right before the process that produces parts in many configurations, as this is the point of greatest material flexibility.
The size of the supermarket rests on the order point number and the production order quantity.
The order point number is based on the level of demand incurred during the lead time of the process. Simply put, the order point should be the demand per day multiplied by the replenishment leadtime. There is typically some type of safety factor built into this number to accommodate potential problems such as machine downtime, tool problems, demand variability or anything that can hinder making the parts within the normal lead time.
Order quantity is the amount ordered to replenish the supermarket and is based on the effectiveness and availability of the manufacturing process. For example, a batch process may require a higher order quantity than one that is truly continuous flow. Likewise, limited machine availability may cause the size of the production run to increase. If a machine is assigned to so many different parts that you only have access to it once per week, then the order quantity will likely be one week’s worth of parts. Using a demand rate of 100 units per day, this would mean the order quantity would be 500 units.
The supermarket size is the sum of the order point and the order quantity, so in our example the supermarket would have a maximum size of 750 units, with a reorder of 500 units issued when the inventory level reached 250.
Consider implementing a supermarket in your plant. It just may give you the flexibility you require to satisfy your customers at the right cost.