Demand variation is an environmental condition. For some it is high, for some it is low variation, but all environments experience it. This variation either gets absorbed in safety stock or capacity—And, the leaner you run the more you have to balance the two.
It is this trade off that many organizations ignore. Just because a tool can product 1,000 cases per week does not mean that it can expected to produce 52,000 cases per year. Because it won’t be the right product at the right time. “Trapped Capacity” is the amount of production capacity that is consumed absorbing variability. Intuitively, supply planners know it exists but traditional rough cut capacity procedures ignore it. But if you want to run lean, you need to quantify it, put it in your schedule, and take measures to recover it.
Figure 1-The relationship of inventory and capacity to lean manufacturing
OUR SOLUTIONS BALANCE YOUR CAPACITY AND SAFETY STOCK BASED ON:
- Demand Variation and Forecast Error both
- Actual efficiencies and performance
- Safety stock and inventory deployment plan
- Changeover impacts
- Contingencies for hold, breakdown, and unplanned maintenance
Bottom Line: You need a coordinated capacity and inventory policy to run lean
Read more with our white paper: Recovering your trapped capacity
