ASR: Frequently Asked Questions

FAQ 1. How can I learn more? What’s my next step if I want to pursue ASR a little further?

Step 1: Download the White paper “Beyond MRP: Meeting the Current Materials Challenge”
Step 2: Register for an ASR public webinar or request a private webinar
Step 3: Contact us to discuss a private webinar; or an on-site visit by Chad Smith or Carol Ptak; or, an on-site event where a small team will model your environment to identify the scale of the opportunity for you.

FAQ 2. Is there a high-level Executive Overview anywhere?

Link to the ASR Executive Overview.

FAQ 3. What are the principal performance issues that ASR resolves?

Depending on the company’s circumstances, performance issues include:

• Ensure high availability of materials, parts, components and finished goods even in complex Bill of Material environments, even with high supply and demand variability … greatly improved fill rates, service levels, productivity, on-time plant performance
• Slightly different emphasis on the same thing but worth restating … improve flow of work through the resources of the plant by minimizing/eliminating shortages, especially valuable in support of Lean or TOC “Pull” mechanisms … creating improved on-time performance and productivity
• “Right size” your inventory … typically, record some serious inventory reductions.
• Compressed lead times (strategic use of inventory can strip weeks out of a lead time)
• Better execution of the Operations plan (plus, greatly improved plant stability … chicken and egg!)
• Less expedite-related waste (expediting in, expediting out, overtime)
• Competitive advantage for the whole supply chain

FAQ 4. Which companies are best positioned to capitalize on ASR?

What are their performance characteristics or other characteristics that make them a great “fit” for ASR?

Link to ASR User Characteristics.

FAQ 5. How is “Strategic Inventory Positioning” accomplished?

What’s involved? Isn’t it a huge task to identify where the impact is greatest?

This step is absolutely pivotal.  Without the right inventory positioning no inventory/materials solution will live up to its potential.   It’s not a huge task given the right approach and visibility within the environment.  That visibility is gained through a combination of thoughtware and software.  Thoughtware is applied to analyze the business environment and its rules and assumptions in order to create a compatible ASR design.  In complex Bill of Material scenarios (deep, broad, many where-used) software does the heavy computational lifting and analysis to point out areas of opportunities both to add stock positions and to take them away.

For more information see: ASR and Strategic Inventory Positioning.

FAQ 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?

The profile sets the parameters for determining the size of the “Top of Green” inventory level in a Buffer, as well as the size of the individual Buffer Zones (Red, Yellow, Green). Factors such as lead time, demand variability, supply variability, average daily usage, order minimum, maximum and multiple, ramp-up and ramp-down and seasonality factors all play a role.

The “Top of Green” for a part can be hugely different from the “Top of Green” for a different part based on usage volume alone; but differences in the variability of demand and supply will also differentiate one product from another, for example.

The technique of Strategic Buffering is radically different from Re-Order Point; to begin with, the actual quantity to the “Top of Green” and in each Zone is dynamically adjusted as parameters change and as demand rates change, plus the Zone basis for Buffer Management – managing priorities based on %age penetration of the Buffer – has no equivalent in Re-Order Point Control.

There is more information on ASR Buffer Profiles here.

FAQ 7. What is Pull-based demand generation?

Isn’t this the same as the traditional Re-Order Point approach? How is the replenishment any different from traditional replenishment?

Pull-based Demand Generation simply means supply orders to replenish Buffer stocks are released (with a due date) to be in sync with the rate of consumption of the materials or parts or components or Finished Goods in question. The foundation is definitely based on the standard Replenishment model, which was in turn advanced as part of the Theory of Constraints (TOC) approach; the use inside ASR is expanded beyond the TOC approach by the Constraints Management Group, of Enumclaw, WA.

See previous question for some of the differences between ASR and Re-Order Point control.

You’ll find more information on ASR Pull-based demand generation here.

FAQ 8. What is meant by “Highly visible and collaborative execution?”

Don’t we have this right now?

Certainly in an ERP/MRP environment there is an intention of synchronization and collaboration, and in a well-ran company of course there is bound to be some degree of collaboration; but ERP/MRP is simply not an effective Execution tool. (The emergence of short-lived MES or Management Execution Systems in the 90’s was an attempt to address this shortfall, too).

With ASR, the Zone Colors are highly visible, the degree of penetration sets the sequence for reporting, and with the ability to have independent planning, purchasing and scheduling in a stable environment the degree of collaboration is very high.

There are also a number of tools with ASR in support of good execution (high visibility or otherwise). You can learn more of ASR’s Execution approach here.

FAQ 9. Is there any software to help with this?

One software application has been developed that is 100% ASR compliant.

Other software packages offer Buffer Management by Zone and support for the basic Replenishment and priority management activities, but the software does not have the ability to analyze and model the Strategic Inventory Positioning that is the foundation for ASR.

FAQ 10. Who is using ASR today?

What results have they experienced?

Typical results include fill rates improved to the 98% level and better, the elimination (or near elimination) of shortages and corresponding improved support for production schedules, inventory right-sized (and typically significantly reduced), improved productivity, and compressed lead times.

You can see some ASR success stories here.

FAQ 11. Don’t we do this (strategic inventory positioning) now?

We seem to have lots of WIP inventory already, too much really, and it hasn’t stopped our problems with shortages. How will adding MORE Buffer stock help?

There is a big difference between simply holding a stock of a material or component or a Finished Good, and Actively Synchronized Replenishment (ASR)!

The starting point with ASR is to identify precisely where the inventory should be buffered to provide the benefits (lead time compression, elevated service levels, reduced inventory); without that up-front analysis, inventory, no matter how much, is disconnected from its impact.

Most WIP in non-ASR environments is in place either to protect a local performance measure on a resource, or as a by-product of having batch sizes that generate more than the company really needs, or as the outcome of a practice of releasing work too early into the plant to keep people and equipment busy. None of that has anything to do with Strategic Inventory Positioning.

FAQ 12. Why would we do this – doesn’t our MRP calculate what we need and plan to make sure we have enough?

The justification for implementing ASR is simply that it generates performance levels that in many environments are far superior to anything that ERP/MRP can generate.

MRP’s breakthrough 40 years ago was that the emerging power of the computer in the 1960’s could be used to calculate – via the Bills of Material and access to Inventory balances, Demand (Forecast and Sales Orders), and Supply Orders (Work Orders, Purchase Orders) – the exact Net Requirements of every part and material in a Bill of material, and to recommend actions to ensure supply and demand lined-up.

This was a great step forward from the Re-Order point system that had previously dominated Production & Inventory Control; and the logic developed in the 60’s is 100% intact in our ERP systems today.

The problem is that manufacturing realities have changed dramatically, and created a conundrum where at the same time as MRP logic is more essential than ever for calculating and recalculation requirements in a fast-changing world with complex Bills of Materials, frequent new product introductions, and short product cycles, … the logic is also poorly suited to deal with other realities of manufacturing.

Actively Synchronized Replenishment (ASR) is tangentially a return to the stock buffers that manufacturers used to hold pre-MRP … except that ASR is 180 degrees removed from the old Re-Order Point system.

The Buffers in ASR are laser-pin-pointed for maximum impact (availability and avoidance of shortages, lead time compression, inventory reduction), the ASR Replenishment method is a far superior model with dynamic changes to Buffers depending on real life factors, the Buffer management priority control method is central to ASR but has no equivalent in Re-Order Point control (or anything else).

FAQ 13. 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?

Yes, as explained in the previous FAQ point, both these statements are somewhat accurate; but the ability to use Buffer Stocks strategically (versus, stocks simply being the left-overs of a too-large batch size policy or being the basis for protecting local departmental performance) completely transforms the solution, and the use of buffers eliminates a lot of the “nervousness” of an MRP system in an environment where there are complex Bills of materials, or long lead times on Asian-sourced materials, and variability in supply and demand.

The replenishment of the Buffer stock using the ASR technology genuinely is treating dependent demand parts as if they are independent, in MRP’s eyes, which could be construed as sinful by staunch MRP devotees; but the issue is irrelevant since treating the inventories of some dependent demand parts as if the demand is independent makes complete sense when you look at it through ASR’s lens.

FAQ 14. Aren’t we supposed to be trying to reduce or even eliminate inventories, especially WIP inventories?

Isn’t the Buffering strategy of ASR contradictory? Won’t this actually increase inventories?

The role of Inventory is to help a company make more money. Too much inventory of too many things can certainly be considered waste (Muda, in the language of Lean, which is the most emphatic management philosophy in terms of inventory reduction). But too little inventory can be far more devastating in certain markets and economies, where it costs lost sales, lost contribution, lost profit, damaged customer satisfaction, and can even lose a company the opportunity even to bid on some major contracts.

So ASR reflects an almost-obsessive focus on having the right inventory to meet demands, rather than an obsessive focus on not carrying any surplus.

However! This does not present Lean ASR users with a dilemma because correctly positioned and sized Buffers WILL lead to reduced total inventories in the system. It’s just that the inventory reduction doesn’t come from an all-out war on Inventory, but rather as a side effect of a judicious strategic use of inventory.

FAQ 15. 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 (flattening Bills) is considered a Best Practice … isn’t it?

Flattening the Bills of Material in some environments is definitely a sensible activity, where work can realistically flow from material to finished goods with no need or justification for intermediate inventories, and no need or justification for Word Orders at every stage.

However, there are some manufacturing environments where a deep (multi-level) Bill of Material is simply necessary, and flattening the Bills is not only unnecessary it’s virtually impossible and would likely be harmful.

In these environments, Actively Synchronized Replenishment (ASR) can bring another dimension to the table – one that is definitely counter-intuitive. A judicious and thorough analysis of a manufacturing environment can reveal that ADDING another level to a Bill of materials can actually provide the basis for lead time compression, improved service levels, and reduced whole-system inventories.

If this captures your interest you should register your interest in a public ASR webinar where we’ll provide a detailed example.

FAQ 16. This also sounds like deliberately adding one of the “Mudas” (wastes) that Lean thinking tells us we should be trying to eliminate.

Isn’t this contrary to Lean? Aren’t we just adding “just in case” inventory after years of being told it’s the wrong thing to be doing?

This is addressed within FAQ 14 but there are some ASR perspectives worth explaining.

ASR is “non denominational” in terms of, it focuses on business performance outcomes rather than claiming to be a part of any particular management philosophy. So, if holding more inventory of a component at some stage in the manufacture of a product offered the opportunity to better-support a kanban mechanism where the execution of the plan is continuously stumbling over shortages, while compressing a product lead time, becoming more competitive, and enabling the reduction of total system inventories … ASR would consider this a good use of inventory even if a stand-alone Lean view of the specific component suggested that the Buffer stock was “muda.”

In an environment where variability in the upstream supply chain and in the plant itself regularly led to shortages of materials and components needed to support a “Pull” execution system … yes, a strategically buffered component could be considered to be holding “just in case” inventory, a label that makes such inventory almost automatically “evil.”

But the reality is that by judiciously and conscientiously buffering against the variability the “just in case” inventory can make a tremendous favorable difference to a company’s performance, with very little downside. It can literally make a Lean implementation viable in environments where it had been failing for months, or even years.

And, with the Buffer in place, efforts to reduce or eliminate the variability in the supply line can be made systematically using Lean or Six Sigma technologies while the performance of the plant is “immunized” against the variability.

FAQ 17. How would we know where in the Bills and Routings we’d get the most leverage from holding a buffer stock?

There are several factors to be considered here, including:
* Customer Tolerance Time (CTT) – exactly how long is a customer prepared to wait for their product?
* The variable rate of demand, and the variable rate of key sources of supply
* Inventory flexibility, and product structure
* Minimizing the bull-whip effect
* The presence and location of resource constraints in their work flow

For more information see: ASR and Strategic Inventory Positioning.

FAQ 18. 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.

The only calculation that’s essential is the starting point for a Buffer of a specific part; from that point on, the amount of Buffer stock for a part is constantly being adjusted to reflect rates of demand, variability, trends or seasonality, order maximums and multiples, etc. And, the initial calculation is itself parameter driven.

FAQ 19. How do we replenish parts that get used? How often? How many at a time?

Modern manufacturing philosophies usually call for small, more frequent batch rather than fewer, large batches; but ASR forces no philosophy onto a user.

This is therefore entirely a decision for the company, where they get to define order minimums, maximums and order multiples that are to be figured into the Order quantity released to replenish a Buffer.

Naturally, we expect that an ASR user will be conscious of the many advantages of smaller transfer batches between processes, and the advantages in some situations of smaller process batches at resources.

---

---

---