ASR: Pull-Based Demand Generation

An ASR Recap:

There are 4 major elements to Actively Synchronized Replenishment (ASR):

  1. Strategic Inventory Positioning - literally, where in the Bill of Material structure, or where in the supply chain, should we hold inventory to provide the maximum benefit to performance?
  2. Dynamic Buffer Level Profiling - establishing the “profiles” for the Buffer Stock, such that parts with high variability and high volume (for example) will have a different profile than parts with high volume and low variability, or parts with low volume and high variability, etc.

  3. This page’s focus: Pull-based Demand Generation - stock buffer levels are replenished as actual Demand Pull moves Buffers into their Rebuild Zones. Every order generated is assigned a due date, based on a quoted lead time or a cumulative lead time for the part.

  4. Highly Visible and Collaborative Execution - Execution is one of the Achilles heels of the ERP/MRP world; MRP was never intended to be an execution tool.

The Basis for Replenishment

As there is demand for a buffered part, it’s inventory level will drop into the Yellow (rebuild) Zone. A supply order will then be issued that reflects order rules such as order maximum, minimum, multiples, etc. And that order will carry a clear due date.

(Think about this; in many ERP/MRP systems, what is the due date for a make to stock order? How is priority determined? What happens to priorities if the environment also has custom orders with customer-committed due dates?)

Actively Synchronized Replenishment (ASR) is a PULL-based system because the stock Buffer for buffered parts is rebuilt - Replenished - in sync with actual consumption of the parts, i.e. in sync with demand. If demand increases, replenishment will be for larger quantities so that the same number of days of inventory is maintained. If the rate of demand is increasing at a rate that outstrips the Replenishment rate, the part will penetrate too deeply and remain too long in the Red Zone, … and the system will respond with an increase in the Buffer levels. When demand decreases, so does the basis for replenishment.

This is the key to solving the issues of “too many of what we don’t need, not enough of what we do need.” How many systems in common use have some form of Min/Max and Re-Order Point where the parameters no longer bear any resemblance whatsoever to current replenishment lead times, to actual rates of consumption, to real variability? And certainly they don’t change “on the fly.”

With ASR, they do. This is part of the beauty of Actively Synchronized Replenishment (ASR).

The reality of Order Spikes

Also, ASR needs to recognize the realities of there being “Order Spikes” for some parts, perhaps for some parts just for some customers. Ideally we’d like customers to recognize the value of a steady flow of parts to them, rather than occasional big “slugs” of work, but … for many customers, order spikes are a reality. ASR  needs to be constantly scanning ahead to identify any spikes and ensure that the Replenishment system recognizes their size and timing, such that the spike can be handled routinely.

Decoupling the Bill of Material

One way to view the concept of Strategic Buffering is that the Bill of Material explosion from Finished Goods to Raw Materials STOPS whenever it hits a buffered part; the stock Buffer decouples the Bill of Material.

In the right inventory locations, this has tremendous benefits for many companies, most particularly those where demand changes tend to “cascade” throughout a Bill of Material creating a myriad of order actions and reschedules every time. (In challenging environments, this might be so many that a planning department literally cannot respond to them all.)

The  stability this brings to some environments is stand-alone justification for ASR even without the advantages of improved availability, increased productivity, compressed lead times and right-sized (typically reduced) inventory.