Introduction to Replenishment Pull
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1 Introduction to Replenishment Pull Dr. Lars Maaseidvaag October 26, 2010
2 Agenda Welcome Introduction of MBB Webcast Series Larry Goldman, MoreSteam.com Introduction to Replenishment Pull Dr. Lars Maaseidvaag, MoreSteam.com Open Discussion and Questions 2
3 MoreSteam.com Company Background Founded 2000 Selected Customers: Over 250,000 Lean Six Sigma professionals trained Serving 45% of the Fortune 500 First firm to offer the complete Black Belt curriculum online Courses reviewed and approved by ASQ Registered education provider of Project Management Institute (PMI) 3
4 Master Black Belt Program Offered in partnership with Fisher College of Business at The Ohio State University Employs a Blended Learning model with world-class instruction delivered in both the classroom and online Covers the MBB Body of Knowledge with topics ranging from advanced DOE to Leading Change to Finance for MBBs Go to for more information about curriculum, prerequisites, and schedule 4
5 Introduction to Replenishment Pull Dr. Lars Maaseidvaag Senior Master Black Belt MoreSteam.com MBB Faculty - Integrates the learning of Lean tools and concepts with advanced process modeling methods Operations research and management consulting Curriculum Director, Accenture/George Group 5
6 The Ultimate VOC Demand Why Pull? Demand can be satisfied ifidfrom a Replenishment Pull buffer Rep. Pull Demand Or demand can trigger a Core Process to begin Customer Demand Step 1 Step 2 Step 3 6
7 Implementation Scope Replenishment Pull buffers are used to decouple segments of the process from each other, and if needed, decouple the process from the customer completely Step 1 Step 2 Step 3 Bottleneck Rep Pull Rep Pull Step 6 Step 7 Step 8 Step 6 Step 7 Bottleneck Customer Demand Step 4 Bottleneck Step 5 Rep Pull 7
8 Core Process vs. Replenishment Pull Core Process Pull Focused on a Process Determines lead time Make to order Applicable everywhere Physical or electronic signals Replenishment Pull Focused on a Part Lead time is an input Make to stock Primarily manufacturing and distribution Physical or electronic signals 8
9 Key Parameters Cycle Time: The amount of time between the arrival of replenishment orders Lead Time: The amount of time a replenishment order takes to arrive Demand Rate: The mean and standard deviation of demand 9
10 Sizing Calculations Replenishment Pull SYSTEM Working Stock this is the on-hand inventory which cycles up and down WS = mean demand X cycle time Safety Stock this is the on-hand inventory which protects against variation SS = service level X SQRT(leadtime) X std.dev. of demand Replenishment Stock this is the on-order inventory which refills our stock RS = mean demand X lead time 10
11 Replenishment Pull Operation Maximum Inventory in the System is: WS + SS + RS Trigger point for reorder is: SS + RS Trigger Rule: if On-Hand + On-Order is less than or equal to Trigger Point then place an order to return the system to Maximum Inventory Example: Cycle time = 5 days, Lead time = 10 days, Demand = 2 / day, SS = 2 pieces 11
12 A Brief Look at Safety Stock Safety Stock = service level X SQRT(lead time) X std.dev. of demand Assuming Normal variation: SL = 2 yields 97.7% SL = 3 yields 99.87% 12
13 Tools Spreadsheet modeling tool Process Playground discrete event simulator 13
14 Replenishment Pull Summary Is a key component of a Lean transformation Is used to decouple processes from demand when synchronization is difficult or impractical 14
15 Thank you for joining us 15
16 Resource Links and Contacts Questions? Comments? We d love to hear from you. Dr. Lars Maaseidvaag, Senior Master Black Belt - MoreSteam.com [email protected] Larry Goldman, Vice President Marketing - MoreSteam.com [email protected] Additional Resources: Archived presentation: Core Process Pull Worksheet: Master Black Belt Program: 16
17 Join Us for Another MBB Webcast "Could Your Balanced Scorecard Use Some Lean Six Sigma? Maurice Klaus, MoreSteam.com Thursday, November 4, 11:00 AM (EDT) 17
18 Questions 18
19 Questions 19
20 Questions 20
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22 22
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