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Dynamic Buffer Management.pptx
- 2. Be The Future of Mobility Create | Collaborate | 2 Introduction Dynamic Buffer Management (DBM) is a tool of the Theory of Constraints, which allows to effectively manage the enterprise reserves by focusing on the actual consumer demand. DBM implementation enables to always have the right product in the right place at the right time. It works by understanding average rates of consumption for a given item, variability in consumption and the different types of lead-time involved in moving the item, from its point of production through to its point of consumption
- 3. Be The Future of Mobility Create | Collaborate | Introduction 3 The buffer status signals whether the target level is too large or too small and this can be used to signal automatic adjustments. The levels or quality of inventory is divided into four zones: Blue-Excess, Green-Optimum, Yellow-Watchful and Red-Shortage. These levels are then monitored for a pre- determined period and target levels are then re-adjusted to ensure that the right amount of inventory is held. For example, if an item is constantly falling in the blue (excess) zone the target is decreased by 33 percent to ensure that the item stock falls in the green zone.
- 4. Be The Future of Mobility Create | Collaborate | Buffer – Target Inventory Level 4 The buffer is the target inventory level calculated on the basis of recent historical demand, which ensures no shortage and to find the appropriate size of the initial target level the following 5 parameters must be considered: • The average rate of consumption. • The variability of consumption. We need to know how much demand we might have to fulfill. • The average replenishment time. • The variability of replenishment time, how reliable is our source of supply? We need to be reasonable certain that our replenishment will arrive before we have a stock-out and miss sales. • The service level to customers we want to achieve.
- 5. Be The Future of Mobility Create | Collaborate | Eliyahu Goldratt’s Target Level Management Rules 5 • When a penetration into the red zone occurs monitor how deep the penetration is. If the penetration is too deep or it persist for too long then the target level should be increased. • If the stock rises excessively or it has remained in the blue zone for a whole replenishment time period then the target level should be decreased. • Every time you increase the target level wait for a replenishment cycle before starting to check again. • Every time you decrease the target level wait for the inventory to get down below the new green level and only then start to check again for the conditions to decrease the target level further
- 6. Be The Future of Mobility Create | Collaborate | Working 6 Observation for a week with initial buffer targets Observation for 2nd week by increasing buffer target as inventory falling in red zone Observation for 3rd week by increasing buffer target further Buffer falls in risk zone after replenishment Buffer again falls in risk zone even after increasing target Buffer hovers in watchful zone after further increasing targets
- 7. Be The Future of Mobility Create | Collaborate | Example:1 7 Day Buffer Opening Stock Dispatch Day end stock Consumption Replenishment Priority 01-11-2021 1799 1300 1500 1514 1286 290 16% 02-11-2021 1799 1514 1500 2249 765 -450 -25% 10-11-2021 1799 2249 1500 2756 993 -950 -53% 11-11-2021 1799 2756 1500 3140 1116 -1340 -75% 12-11-2021 1799 3140 0 2048 1092 -240 -14% 13-11-2021 1799 2048 1500 2290 1258 -490 -27% 15-11-2021 1799 2290 1500 2783 1007 -980 -55% 16-11-2021 1799 2783 0 1750 1033 50 3% 17-11-2021 1799 1750 1500 2220 1030 -420 -23% 18-11-2021 1799 2220 1500 2822 898 -1020 -57% 19-11-2021 1799 2822 0 2232 590 -430 -24% 20-11-2021 1799 2232 1500 2920 812 -1120 -62% 22-11-2021 1799 2920 1500 3536 884 -1730 -97% 23-11-2021 1799 3536 0 2664 872 -860 -48% 24-11-2021 1799 2664 0 1957 707 -150 -9% 25-11-2021 1799 1957 1500 2613 844 -810 -45% 26-11-2021 1799 2613 0 1654 959 150 8% 27-11-2021 1799 1654 1500 2514 640 -710 -40% 30-11-2021 1799 2514 1500 3073 941 -1270 -71% Majority of days stocks are in excess zone (Blue zone) Considering actual dispatches by supplier in lot Buffer of 2 days Considering MAP Rs. 30, average daily inventory is Rs 73.7 thousand
- 8. Be The Future of Mobility Create | Collaborate | Example:2 8 Majority of days stocks are in watchful zone (yellow) Dispatches equal to replenishment required to match buffer Buffer of 2 days Considering MAP Rs. 30, average daily inventory is Rs 25.3 thousand Day Buffer Opening Stock Dispatch Day end stock Consumption Replenishment Priority 01-11-2021 1799 1300 14 1286 1790 99% 02-11-2021 1799 14 1790 1039 765 760 42% 10-11-2021 1799 1039 760 806 993 1000 55% 11-11-2021 1799 806 1000 690 1116 1110 62% 12-11-2021 1799 690 1110 708 1092 1100 61% 13-11-2021 1799 708 1100 550 1258 1250 69% 15-11-2021 1799 550 1250 793 1007 1010 56% 16-11-2021 1799 793 1010 770 1033 1030 57% 17-11-2021 1799 770 1030 770 1030 1030 57% 18-11-2021 1799 770 1030 902 898 900 50% 19-11-2021 1799 902 900 1212 590 590 33% 20-11-2021 1799 1212 590 990 812 810 45% 22-11-2021 1799 990 810 916 884 890 49% 23-11-2021 1799 916 890 934 872 870 48% 24-11-2021 1799 934 870 1097 707 710 39% 25-11-2021 1799 1097 710 963 844 840 46% 26-11-2021 1799 963 840 844 959 960 53% 27-11-2021 1799 844 960 1164 640 640 35% 30-11-2021 1799 1164 640 863 941 940 52%
- 9. Be The Future of Mobility Create | Collaborate | Example:3 9 Majority of days stocks are in safe zone (green) and watchful zone(yellow) Dispatches equal to replenishment required to match buffer Increased buffer from 2 days to 3 days Considering MAP Rs. 30, average daily inventory is Rs 50.8 thousand Day Buffer Opening Stock Dispatch Day end stock Consumption Replenishment Priority 01-11-2021 2699 1300 14 1286 2690 99% 02-11-2021 2699 14 2690 1939 765 760 28% 10-11-2021 2699 1939 760 1706 993 1000 37% 11-11-2021 2699 1706 1000 1590 1116 1110 41% 12-11-2021 2699 1590 1110 1608 1092 1100 40% 13-11-2021 2699 1608 1100 1450 1258 1250 46% 15-11-2021 2699 1450 1250 1693 1007 1010 37% 16-11-2021 2699 1693 1010 1670 1033 1030 38% 17-11-2021 2699 1670 1030 1670 1030 1030 38% 18-11-2021 2699 1670 1030 1802 898 900 33% 19-11-2021 2699 1802 900 2112 590 590 22% 20-11-2021 2699 2112 590 1890 812 810 30% 22-11-2021 2699 1890 810 1816 884 890 33% 23-11-2021 2699 1816 890 1834 872 870 32% 24-11-2021 2699 1834 870 1997 707 710 26% 25-11-2021 2699 1997 710 1863 844 840 31% 26-11-2021 2699 1863 840 1744 959 960 35% 27-11-2021 2699 1744 960 2064 640 640 24% 30-11-2021 2699 2064 640 1763 941 940 35%
- 10. Be The Future of Mobility Create | Collaborate | Example:4 10 Majority of days stocks are in safe zone (Green) Dispatches equal to replenishment required to match buffer Increased buffer from 2 days to 3 days Considering MAP Rs. 30, average daily inventory is Rs 63.7 thousand Day Buffer Opening Stock Dispatch Day end stock Consumption Replenishment Priority 01-11-2021 3148 1300 14 1286 3140 100% 02-11-2021 3148 14 3140 2389 765 760 24% 10-11-2021 3148 2389 760 2156 993 1000 32% 11-11-2021 3148 2156 1000 2040 1116 1110 35% 12-11-2021 3148 2040 1110 2058 1092 1090 35% 13-11-2021 3148 2058 1090 1890 1258 1260 40% 15-11-2021 3148 1890 1260 2143 1007 1010 32% 16-11-2021 3148 2143 1010 2120 1033 1030 33% 17-11-2021 3148 2120 1030 2120 1030 1030 33% 18-11-2021 3148 2120 1030 2252 898 900 28% 19-11-2021 3148 2252 900 2562 590 590 19% 20-11-2021 3148 2562 590 2340 812 810 26% 22-11-2021 3148 2340 810 2266 884 890 28% 23-11-2021 3148 2266 890 2284 872 870 27% 24-11-2021 3148 2284 870 2447 707 710 22% 25-11-2021 3148 2447 710 2313 844 840 27% 26-11-2021 3148 2313 840 2194 959 960 30% 27-11-2021 3148 2194 960 2514 640 640 20% 30-11-2021 3148 2514 640 2213 941 940 30%
- 11. Be The Future of Mobility Create | Collaborate | Conclusion 11 73.7 25.3 50.8 63.7 2 2 3 3.5 3 0.9 2 2.5 0 1 2 3 4 0 10 20 30 40 50 60 70 80 Example 1 Example 2 Example 3 Example 4 Days Rs Thousands Axis Title Analysis Daily Avg. Inventory Buffer Target days Actual Coverage days
- 12. Be The Future of Mobility Create | Collaborate | Conclusion 12 the inventory through dynamic buffer management that provides sufficient information for the supply of materials and shows the priority color of each reference, thereby avoiding reaching the blue zone or too much stock and going below red zone or loss zone. A target inventory level is ensured and has a management model, dynamic in time allows keeping a tight control of the money invested.