Why the ASR Opportunity exists

The Problems that Actively Synchronized Replenishment (ASR) solves are not new

The problems that ASR solves are not new – they’ve been causing serious damage to manufacturers’ performance for many years without even a halfway-effective resolution. And many (but not all!) of the elements of the solution have been known for years, … in theory even if not in a practical form.

So how come Actively Synchronized Replenishment (ASR) has just emerged (in 2007/2008) as the solution? In what way is it breaking new ground? How is it able to generate such a degree of leverage on performance in companies already familiar with advanced manufacturing technique?

The quick answer …

The need for ASR (i.e. the existence of the performance problems) is created because of a combination of realities that INEVITABLY create the problems. This combination always HAS created them. But changes in the manufacturing environment and in markets are actually making the problems even more damaging today.

The problems – especially the problem of chronic shortages – have mostly gone unsolved, to this day. Companies have tried to solve them by attempting to have better forecasts, or by flattening the Bills of Materials, or by trying to go strictly make to order, or (at an individual manager level) using custom-built spreadsheets or Access databases … and none of these have worked.

The solution exists today also because of a specific combination of circumstances that

a) Positioned one company – Constraints Management Group, LLC. – to be able to solve the problems in principle.

b) Drove them to create and implement the solution in practice because it was blocking performance improvements in some of their clients, and

c) Equipped them (with an in-house software development team and a willingness to commit a hefty budget) to make the solution viable as a commercial software package for companies beyond their immediate client base, along with the accompanying “thoughtware” for any manufacturer with ERP.

The combination of realities that make the performance problems inevitable

The combination of realities that creates the need for ASR in some challenging ERP environments is:

1. The MRP logic embedded inside ERP software was developed 40+ years ago, and reflects operating assumptions that were valid 40 years ago. The logic hasn’t changed since.
2. However, the realities of manufacturing for many companies have changed dramatically in those 40 years; so while the logic itself (the Bill of Materials explosions and related MRP calculations) is still solid, the operating assumptions for MRP are no longer valid for many organizations.
3. In challenging environments, this creates a conflict … today’s manufacturing realities make it more important than ever to have the (re)-calculating power of MRP … while those same realities render the flawed operating assumptions in MRP’s 40-year-old approach, devastating.

The elements that make the solution viable

The key elements that combined to generate a viable solution are:

1. The mechanism that is at the heart of the Dynamic Stock Buffers has only recently been expanded and refined from its simple Theory of Constraints origins to the necessary level for routine use; and, ASR applies it inside an organization where the standard TOC application never has applied it.
2. The mechanism has only recently become available as commercial software.
3. Associated software tools that can analyze hundreds of thousands of Bill of Material component records, looking for specific combinations of characteristics, and reporting the “what if” impact of one buffer location versus another, have had to be developed specifically for the ASR solution to make it viable in practice. (It would take years to manually perform the same search in some of the challenging MRP environments in which ASR is most effective.)
4. The thoughtware that makes the software effective challenges some newly sacred cows. The strategy and tactics that are so obviously powerful when you understand ASR, can be viewed as being contrary in some ways to “Best Practices” … at least as defined by some dogmatic disciples of modern movements. The irony is that ASR might be THE key to success for those same movements in many manufacturers.

This might be a good time to get a comprehensive picture of ASR by downloading the ASR White Paper, “Beyond MRP – Managing the Current Materials Challenge.” Just click on the link.

---

For those interested in going deeper …

1. Expanding on the MRP issue

• Inside every ERP package there’s a module or function called “Material Requirements Planning,” or MRP.
  

  Its purpose is simple … explode the demand for finished products (originating from forecasts or sales orders or master scheduled orders or some combination) through the Bill of Materials to determine “gross” requirements for components at every level of the Bill of Materials, and requirements of materials and purchased parts; then “net” those requirements against on-hand stock and open or planned “supply” orders … work orders for manufactured parts, purchase orders for purchased parts.

  The outcome is a calculation of net requirements, and also a host of suggested activities (expedite, slide, launch a new order, cancel an order) necessary to re-sync existing supply orders against changed demands.

  What most managers don’t realize is that even in the most modern, multi-million ERP software package … the detailed MRP logic “embedded” in the ERP package is actually more than 40 years old! It hasn’t changed whatsoever in that time.

• However, the world of manufacturing HAS changed substantially in that time.
  

  The markets place more pressure on lead times than ever before.

  Manpower is “leaned” more than ever before … in the shop and in the front office.

  Inventories are being “leaned.”

  Forecasts are as inaccurate as ever … or even more inaccurate.

  Offshore sourcing has substantially increased the lead time for many materials and parts.

  Variability is very high in the supply lines … even if a company is attacking variability internally with Lean or Six Sigma, the variability in long supply lines can be substantial.

  Then there are all the dynamic elements … new technologies, new materials, new products, new markets are always emerging. Suppliers are changing. Product life cycles are shrinking. There’s more product variety. Volatility is high.

• The combination – especially in challenging environments such as those manufacturers with multiple-layered Bills of Material that cannot and SHOULD NOT be flattened in reality despite what “Best Practices” gurus suggest – can be devastating.
  

  For example, a change in top level demand – perhaps as simple and routine as sales orders arriving differently than the forecast suggested – can cause a “cascade” of changes in net requirements through layer after layer of Bills of Materials, across hundreds or even thousands of component records, causing MRP to spew out so many “reschedule” messages that no-one will ever get to them before they change again.

• So, just when the need for MRP is at it’s highest – to help complex Bill of Material environments plan and re-plan materials and component needs to reflect changes in demand and supply – so its value is diminished by its poor “fit” to today’s realities.
  

  The system easily becomes unstable, the output “to be executed” plans are not really viable, and the execution of the MRP output plan simply becomes impractical.

2. The problems that ASR addresses

When changed manufacturing and marketing realities, 40-year-old MRP logic, and a challenging manufacturing environment come together … there are many negative consequences. These of course are the problems that ASR can solve or relieve, including:

1. When you realize that all it takes is the lack of a single component or material to hold up assembly or fabrication of a product that might have thousands of components and sell for hundreds of thousands of dollars … it’s easy to see how the inadequate synchronization from “standard” MRP can easily lead to frequent shortages.
   

   When you add demand variability (markets expecting aggressively short lead times and extreme levels of responsiveness) and supply variability (lots can happen during long lead times from Asia) and complex Bills of Materials (thousands of parts, multiple layers in the BOM) … the shortage problem becomes chronic.

2. If a company with these problems is attempting to implement a Lean-style “Pull” execution system in the plant, there is the potential here for a nightmare.
   

   While trying to duplicate what Toyota and similar companies do today, it’s easy to forget that in Japan, home of Lean, work on reducing variability had been proceeding for decades before the low-inventory kanban “Pull” mechanism was introduced. Whereas what we’re seeing in the West is often a worsening of whole-system (not necessarily process) variability as lead times extend to Asian supply sources.

   Companies are spending serious dollars (and energy) on Lean initiatives, we see Kaizen events by the score, we see the variability sometimes reduced in individual processes with lean or Six Sigma … but unless there is excellent synchronization of materials, parts and component availability with the Pull systems, the outcome is often frustration.

3. The most common attempts at a solution – but which fail to address the Synchronization problem

Commonly we see four different attempts at solving the poor synchronization issue:

• Workarounds as described above i.e. personal Excel spreadsheets, personal Access databases, etc.
• Attempts to flatten the Bills of Material.

This is straight out of the “Best Practices” textbook and there are definitely some environments where flattening the Bills can be a good idea.

However, there are some environments – for example, we have a client with 28 levels in their Bill of Materials – where the BOM simply cannot be flattened; in fact, we’d argue it SHOULD not be flattened.

While this is may sound counter-intuitive … we can sometimes ADD a layer to a Bill of Material and by so doing we can generate serious performance improvements in terms of product availability and reduced lead time that would NOT be possible without that extra layer.

• Attempts to move to pure “make to order.”

Again, this is straight out of the “best Practices” text book and again, it can be 180 degrees away from what makes the most sense. It is often simply not feasible due to the cumulative lead times in the whole product build.

• Attempts to develop more accurate forecasts.

This is quite possibly the largest red herring of all and can consume an astonishing amount of time and energy with little or no benefit.