Exploring the strengths and weaknesses of supply chains.
There’s a lot of uncomfortable news these days, but there are also some very interesting things happening on a global scale. Systems are being tested like never before, and we’re learning a lot about the strengths and weaknesses of the supply chains that bring us the things we took for granted (until recently, anyway).
The current toilet paper shortage is sort of humorous, in a “Please don’t let me run out” kind of way, but it’s also a great example of how a supply chain can be stressed to the point of critical inefficiency. The problem is not that we’ve run out of t.p.; it’s that the supply/demand inventory levels have radically changed—nearly overnight.
Sizing inventory levels at any or all stages of a process is not normally (and shouldn’t be) a guessing game. Successful companies apply a significant amount of analysis to determine the right quantities of product to hold at any stage of their process.
Incoming goods are unique in that both the supplier’s lead time (how long it takes to produce the goods) and the shipping time—along with delivery frequency and needs—all play major roles.
Inventory levels for a product (such as steel for a fabrication shop) that is delivered weekly from a local vendor can be reduced thanks to the recurring replenishment orders and potential quick response in case of an emergency need.
Work-In-Process (WIP) supply is the material in-between two process steps. These quantity levels should be based on specific details such as how fast the supplying operation can produce the WIP, how quickly the receiving operation can consume the WIP, and even the shifts that each of those operations work.
For example: The WIP supply location between a machine that produces 500 parts in a day and a machine that produces 500 parts in a shift should hold around two shifts worth of the supplying operation’s output because it is a queue.
Finished Goods are products ready to ship to customers from production facilities or distribution centers. The amount on-hand should be based on sales projections for a given time period and how long it will take the supplier to replenish.
Tools such as Sales and Operations Planning and Plan for Every Part take into account sales history and projections along with internal production constraints. Effective companies use these kinds of tools to right-size their finished goods inventories.
When sizing inventory levels of any kind, there are two key questions:
1. How much product is consumed in a given time period?
2. How quickly can the product be replenished?
Robust supply chains have safety stocks built in to handle short interruptions or a localized spike in demand, but probably not enough to handle a sustained nationwide (or global, in this case) increase in demand.
What we have experienced in the past month with shortages of common items such as household cleaners, hand sanitizer, and toilet paper demonstrates what happens when the supply chain is shocked to the point that it can’t replenish itself before the next wave of demand hits.
Overbuying or panic buying creates artificial demand not planned into the previous inventory levels from which we are now drawing. As a result, we get empty shelves.
These supply shockwaves will continue for a time until everyone has enough to satisfy their internal comfort zones and the producers can ramp up to meet the increased demand.
Once the crisis abates and we return some normalcy to our lives, the world’s supply chains will need to readjust their inventories back to sustainable levels.
Polydeck’s LEAN Advantage
As a LEAN organization, Polydeck places great emphasis on maintaining a strong, responsive supply chain via our nationwide network of strategically-located distribution centers. Our comprehensive support capabilities provide drastically shorter lead times, enabling you to reduce on-site inventories and run your operation with continued confidence.
During this pandemic, our customers’ industries are essential businesses, and as such, Polydeck is also considered essential to maintaining production levels. We are making every effort to keep our employees safe, and we remain committed to responsive service. Our inventories remain well-stocked and ready to ship at a moment’s notice. In addition, we foresee no disruptions to our supply chain or our ability to fulfill your needs.
Written by David Burnsworth, Lean Deployment Manager for Polydeck.
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