Actively Synchronized Replenishment (ASR)

Actively Synchronized Replenishment (ASR) is a breakthrough technique that works with your existing ERP system to offer:

1. A solution to a chronic MRP-related problem that plagues many manufacturers – shortages of materials, parts, and components that block the smooth flow of work through the plant. By preventing the shortages, ASR boosts service levels and productivity, and reduces expediting and associated expenses including premium freight and overtime.
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   When the shortages cause even more damage – by continually frustrating efforts to implement “Pull-based” systems such as Lean and Theory of Constraints – ASR can have a make-or-break impact on the whole implementation effort and expense.
2. A distinct competitive edge through strategic lead time reductions in qualifying environments.
3. Significant reductions in total inventory investment … while improving service levels.
4. Significant increases in service levels (fill rates, on-time delivery) while reducing total inventories in the system.
5. The opportunity to eliminate the need for many of the common “work-arounds” (personal spreadsheets, databases etc) that drive IT departments crazy and make a mockery of a key objective of the ERP investment … but which Operations personnel will claim are essential if the job is going to be done.

Through some innovative and highly effective inventory buffering strategies – available for materials, parts, components, finished goods, and downstream supply chain inventories, whichever are strategically appropriate – ASR is able to capitalize on your existing ERP system:

In “complex environments,” thanks to a combination of factors, chronic shortages are almost inevitable without ASR.

A complex environment here can mean one with very broad or deep Bills of Material (one ASR user has 28 levels of BOM), or where there are thousands (or tens of thousands) of component records, or where Routings are long and complex and impose weeks-long long internal cycle times on manufacturing, or where offshore supply lines impose weeks-long supply lead times and serious levels of variability, or where demand variability is also high. ASR includes mechanisms to examine the Bills and pin-point exactly where the points of most leverage are for generating the maximum impact from strategic inventory buffering.

• ASR analyzes your Bills of Material from the crucial perspective of individual and cumulative lead times. The what-if capability can tell you, for example, “Hold a small buffer stock HERE … and you’ll reduce customer response time for these 5 products from 16 weeks to 6 weeks.”

• ASR also analyzes your Bills of Material from another powerful perspective – inventory impact. The what-if analysis from ASR’s perspective can tell you, for example, “Hold a small buffer stock HERE, at this common part … and by carrying an additional $25,000 of components you can actually improve the availability of used-on finished products while reducing Finished Goods inventories by $70,000 for finished product ‘X’ and $60,000 for Finished Product ‘Y’ and … etc. Very powerful.

Typical results of an Actively Synchronized Replenishment (ASR) include:

• Order fill rates boosted from 70% to 98%
• High material and component availability for Lean Manufacturing and TOC initiatives
• Weeks stripped out of lead times
• Inventories reduced … often greatly reduced. Although inventory reduction isn’t the prime motivator for ASR, in some environments the impact is major.
• Whole-plant Productivity boosted … literally, more products can be made and shipped with the same resources.

Results like these give qualifying ERP users the opportunity to achieve the business case that initially justified the investment, but which is often “missing in action” in practice. And the use of ASR carries with it no implied criticism, no challenge, no second-guessing or backtracking on the original ERP decision. It makes what you already have, work as well as you hoped it would when the ERP decision was first justified.

For companies in challenging environments that are attempting to implement “Pull” execution systems – commonly Lean Manufacturing, or perhaps TOC – ASR can be THE solution to the shortage problem that often ham-strings attempts to implement the Pull mechanism and creates so much “Push” versus “Pull” conflict between material planners and the Lean champions in an organization.

You can know in advance whether ASR makes economic or strategic sense for you.

One valuable aspect of Actively Synchronized Replenishment is that a corporation interested in ASR can get a comprehensive, custom-modeled PROOF that the solution applies to their environment (or doesn’t) … and some sense of the REAL value it brings them, often with $ values calculated … right at the outset of their interest.

This obviously makes sense - no-one wants to waste time or money on a solution that has only a marginal application to their environment.

ASR’s results provide benefits on all ends of the economic spectrum.

They help a company capitalize on the good times – for example, when they’re riding a hot market – much more effectively than their competitors can. And with reduced lead times, lower inventories and superior product availability they position a company to eat their competitors’ lunch when the economy weakens, potentially dampening or even eliminating the effects of a market downturn.

Are these outcomes relevant for your environment?

Would these be meaningful for you?

• The flow of work through the plant is protected against supply and demand variability. So, the flow improves substantially. So … there are fewer expedites, fewer rushes and panics, fewer resource-sapping recoveries from the fact that reality wasn’t quite as predicted. Better use of capacity. Better use of materials.
• Consequently, whole-plant productivity soars. In effect, costs per unit (in conventional terms) are substantially reduced.
• On-time performance is similarly protected against supply and demand variability; high performance levels are routine even given the reality of Murphy.
• Inventory is “Right Sized.” Inventories are aligned with real consumption, not forecasts that are often extremely unreliable. You no longer have “too much of what we don’t need, not enough of what we do …”
• Execution is greatly improved. You’ll see early warning of supplier problems, delayed work orders etc … in time to act and preempt the problems from becoming a schedule disruption.
• Shorter lead times give you the opportunity to bid for, and win business you might not have stood a chance of winning before ASR. Or to charge a premium price where faster-than-standard delivery carries a real value to the customer.
• With pin-point precision you can see the impact of holding or not holding inventories of materials, purchased parts, manufactured components, and finished products at the plant warehouse and down the supply chain.

In addition, for companies implementing the “Pull” systems such as Lean Manufacturing or Theory of Constraints …

• Strong support in terms of material, parts and component availability.
• A rational basis for materials planners (working with long purchase lead times) and plant schedulers (working with complex Bills and Routings) and production personnel (attempting to execute a Pull mechanism) … to ALL be aligned with a “Pull” agenda. The basis for many day-to-day conflicts simply evaporates.

So … what exactly IS Actively Synchronized Replenishment (ASR)?

ASR is a combination of some unorthodox strategic thinking, some tactics, and some tools that change how a manufacturer performs material planning and executes the production schedule and purchasing plan. It’s a combination of thoughtware and software that has implications at policy, procedure, measurement and behavior levels of an organization.

ASR has 4 functional elements:

1. Strategic Inventory Positioning.

With Actively Synchronized Replenishment (ASR) the primary question isn’t how much inventory to hold … it’s where to hold it for maximum performance (availability), competitive (lead times), or economic (inventory amounts) impact.

You use the ASR perspective on Bills, Routings, lead times and inventory to choose strategic inventory locations somewhere in the supply chain, … anywhere from raw materials at the plant, to the finished goods in a client’s warehouse or a client’s shop floor.

Once you know the locations, you’ll establish Dynamic Inventory Buffers of materials, or parts, or components, or finished products.

The starting point towards this is the Buffer Level Profile.

2. Dynamic Buffer Level profiling

The concept of Dynamic Stock Buffers is central to the ASR solution.

Essentially, the mechanism involves maintaining a buffer stock of materials, parts, components or Finished Goods where it most protects work flow, or most protects product fill-rates, or where it most effectively strips lead time out of the total lead time for a product, or where it most effectively supports inventory reduction in Finished Goods through the investment of fewer dollars in stock buffers within the manufacturing process or in materials.
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(SIDEBAR: In today’s Lean-oriented world, this talk of buffer inventory might immediately set all sorts of red flags flying, because of the Lean concept that unnecessary inventory is “Muda,” or waste. We’ll address all these red flags head-on later on this page… but at least understand that the overall impact is less total inventory, not more; and more importantly, the inventory is used to achieve its ONLY useful purpose – to increase profits. It is far from being “waste” in any pragmatic sense.)
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These stock buffers are highly tailored (modeled) to a company’s environment through the use of Buffer Profiles – enabling a planner to define, for example, seasonality, ramp-up or ramp-down characteristics, order min/max and order multiples, degree of variability, etc for any part, or for a group of parts with common characteristics. For example, one Buffer Profile might be for purchased parts with long lead times and high variability of the supply; a separate profile for purchased parts with long lead times and low supply variability.

The Buffers are considered “Dynamic” because they continuously reflect any appropriate seasonal adjustment factor, they reflect any ramp-up or ramp-down (phase out) factors, and they reflect changes in the average rate of daily usage … for example averaging daily use over 30, or 60 or 90 days.

The stock buffers are therefore set once but then automatically adjusted and maintained to ALWAYS be in sync with actual rates of consumption.

3. Pull-based demand generation

Again, the ASR mechanism of Dynamic Stock Buffers is worth examining in detail. But the concept is straightforward – as stock is used, so it is replenished. As consumption (demand) increases, replenishment rates increase. As consumption (demand) decreases, so does the replenishment rate. The planned stock level is ALWAYS tied to real demand … so you never have to experience the all-too-common reality of “too much of what we don’t need, and never enough of what we do need.”

The mechanism behind this is deceptively simple, and very effective.

4. Highly visible, and collaborative, execution

MRP, Materials Requirements Planning – the planning software embedded in ERP software – has never been a great tool for execution.

This was true 40 years ago when MRP experts were embedded in every sizable manufacturing business, and the MRP technology received even more attention in our factories than Lean Manufacturing or Six Sigma do today. It’s even truer today, as realities have tightened the screws on manufacturers.

What we need is an execution system that genuinely allows Purchasing, Manufacturing and Fulfillment personnel to see the bigger picture, to plan for today’s high-pressure environment, AND execute meaningful plans in detail.

For example, recognizing the level of variability in a supply line or in customer demands. Planning intelligently for it. Being able to quickly see the true ramifications of a late delivery of some purchased goods. Being notified immediately of the potential for out-of-stock situations in purchased or manufactured parts, and being able to see immediately the ramifications … and what corrective steps are needed. Or highlighting where there is a lack of synchronization between component availability and “parent” need for those parts.

Reality check: if this opportunity is for you, you are probably not a small company

While there are certainly exceptions, if you are well-placed to REALLY capitalize on ASR, you’ll probably have revenues of at least $100 MM, and quite possibly $1 Billion or more.

ASR is independent of the popular improvement “movements” … but supports them ALL

ASR is “agnostic,” meaning – it has no “religious” affiliation with any of the popular improvement technologies, but rather enhances them all.

The basic Replenishment mechanism (substantially expanded and refined for ASR) originated with Theory of Constraints, and the ASR development team certainly has more than 100 man-years of TOC experience.

But the ASR technique is so effective in part because it understands and exploits a failing in the MRP logic embedded in every ERP software package … and again, the team behind Actively Synchronized Replenishment has decades of MRP and ERP experience.

And ASR is a Lean-enabler; it literally makes Lean Manufacturing implementations feasible where before ASR, even the most heroic attempts to improve materials and parts synchronization led to chronic shortages and frustration in attempts to implement a “pull” flow through the resources of the plant.

ASR is a proven approach

While Actively Synchronized Replenishment IS a breakthrough technique, applicable to almost any manufacturing environment, you are NOT pioneering with ASR. The replenishment technique itself has been implemented in scores of businesses world-wide, and the full ASR solution has already yielded superb results in a variety of companies.

The Obvious Questions

Click on the link inside the question to be taken to a detailed explanation page.

1. How can I learn more? What’s my next step if I want to pursue ASR a little further?
2. Is there a high-level Executive Overview anywhere?
3. What are the principal performance issues that ASR resolves?
4. Which companies are best positioned to capitalize on ASR? What are the performance characteristics or other characteristics that make them a great “fit” for ASR?
5. How is “Strategic Inventory Positioning” accomplished? What’s involved? Isn’t it a huge task to identify where the impact is greatest?
6. What goes into a Dynamic Buffer Profile? How is it different between parts? How is it different from setting Order Points in pre-MRP days?
7. What is Pull-based demand generation? Isn’t this the same as the traditional Order Point approach? How is the replenishment any different from traditional replenishment?
8. What is meant by “Highly visible and collaborative execution?” Don’t we have this right now?
9. Is there any software to help with this?
10. Who is using ASR today? What results have they experienced?

And, some reservations (and potential red flags) you might be considering – especially if you’re an Operations specialist with solid MRP or Lean Manufacturing know-how:

1. Don’t we do this (strategic inventory positioning) now? We seem to have too much WIP already and it hasn’t stopped our problems with shortages.
2. Isn’t this just the old Re-Order Point method?
3. Why would we deliberately do this … doesn’t our MRP calculate what we need and plan to make sure we have enough?
4. Wasn’t MRP “invented” to deal with the difference between dependent demand and independent demand on products … and isn’t this treating a dependent demand part as if it is independent?
5. Aren’t we trying to reduce or even eliminate inventories, especially WIP inventories? Isn’t this contradictory? Won’t this actually increase inventories?
6. This seems contradictory to what we’re trying to do in another way, too … we’re trying to flatten our Bills of Material explicitly to eliminate opportunities to hold inventory at stages within the manufacturing process. We thought this was considered a Best Practice … isn’t it?
7. This also sounds like deliberately adding one of the types of “Muda” (waste) that Lean thinking tells us we should be trying to eliminate. Isn’t this contrary to Lean Manufacturing? Aren’t we just adding “just in case” inventory after years of being told it’s the wrong thing to be doing?
8. How would we know where we’d get the most leverage from holding a buffer stock?
9. How do we know how much we should hold of any part or component or material? One concern is that we’d just get stuck with a lot of inventory we don’t need. Another is that our demand is all over the place, sometimes we’ll need more than at other times. And our forecasts are no basis for holding stock, not unless we want to fill the plant to the roof with inventory … and we’d probably still be stuck with shortages of some products we most need.
10. How do we replenish parts that get used? How often? How many at a time?

Your Next Steps

1. Download, read and distribute the ASR White Paper “Beyond MRP: Meeting the Current Materials Challenge.”
2. Sign-up to be informed of public webinars; consider sponsoring a company-dedicated webinar of your own.