Verinata s Pull Based Replenishment Model- Drum Buffer Rope. Mike Crowell

Transcription

1

2 Verinata s Pull Based Replenishment Model- Drum Buffer Rope Mike Crowell

3 Today s Goal To discuss the case on how and why Verinata chose to implement a pull based replenishment model for our raw materials and field kit supplies. What were the drivers How we went about implementing Lessons Learned

4 Agenda Verinata Health Challenge and Requirements choosing a replenishment system Push vs. Pull 101 Drum Buffer Rope Model How it was implemented Inventory System Overview (ERP Model) Inventory Control Process Buffer Sizing and Management Buffer Report Tool Requirements for success Q&A

5 Requirements Replenishment System had to support Raw Critical Reagents, Consumables, and reagent mfg. Vendor Managed Inventory levels at the Client Site Take CLIA out of the Supply Chain Easy and quick to Implement Scalable and not overly complex Easy to manage with limited resources Do it in such a way that we are adding value to the end customer by effectively balancing inventory investments with commercial demand. SCM= Optimization of Extended Enterprise - Achieving Synchronous Flow to Add Value for the Customer and with ZERO production stock outs!

6 Push vs. Pull 101 A PUSH based replenishment system is typically an MRP driven system that plans for expected demand based on forecasts, historical sales, capacity utilization, and EOQ. Most successful when a MFG can decide in advance on how much to make through a master production schedule. Demand uncertainty is relatively small A PULL based systems utilizes actual demand (lab consumption) as the signal to pull needs downstream. (examples also include: Kanban, LEAN, TPS). They are ideal for environments when expected demand is not known. Production is demand driven.

7 Characteristics of Pull Based System Because you production process are designed to produce only what is required, your business becomes leaner, as result of not holding excessive stock levels. No BOM or WO required- Just a simple Item Master List Make to Order Demand is what shows up on your dock each day (no OM) Turn Around Time is crucial Relatively easy and quick to implement (no need for MFG Module) BOM s are not reliable rendering MRP suboptimal. Leaner environments lead to reduction in waste improved quality Better fill-ratios Less Transaction Processing Less storage space! Value Add!

8 Drum Buffer Rope Verinata decided to employ a PULL based replenishment system called Drum Buffer Rope (DBR) Drum=Current rate of Lab Demand Buffer= is considered our optimal inventory required to reliably replenish. The Rope is the signal to release (pull) more materials into the system. Suppliers Lead Time Lab Demand Rope Buffer Drum

9 Inventory Systems Overview -How we Implemented Each SKU in the inventory system is treated as if it has independent demand with specific reorder points known as the Buffer Level value. Utilizing the simple Reorder Point Method (Min/Max) a Calculated Buffer Level Value is populated as the MAX or Order Up To"in the ROP equation. Inventory Replenishment runs 2x a week and creates purchase orders attempting to fill the buffer level (MAX)

10 Inventory Control Process-How we Implemented Materials are physically maintained and counted at the Point of Use in the lab. Materials Clerk performs daily counts of active inventory CLIA lab personnel are not involved in txns, they just take what they need allowing them to focus on their competencies. Any deficit between inventory records and physical count are considered consumption and are simply issued in the inventory control system to the consuming group. ~500 SKU s 2 man hours/day

11 Systems Overview PO Module Requisition Workflow Approval Buyer Dispatch PO to Supplier Receiving Requisitions are created for any items below their Buffer Level Supplier Inventory Module Replenishment Process runs, 2 times a week New System On- Hand Inventory Materials' Clerk- Counts and Issues to consuming group System On- Hand Inventory is adjusted up Putaway Consumption by Clinical Lab, R&D, Commercial, etc.

12 Buffer Management-Sizing the Buffer Buffer= (LT+RF)*ADU (Lead Time Days+ Reorder Frequency Days * Avg. Daily Usage) Example Item # ACME Reagent UOM= Bottle Lead Time=5 Reorder Frequency = 7 Average Daily Usage= 2 (5+7)*2=24 Units Set your Reorder Points as MIN=0/MAX=24 Want to reduce your inventory by half?

13 Managing the Buffer Set it But Don t Forget It! Buffer= (LT+RF)*ADU (Lead Time+ Reorder Frequency * Avg. Daily Usage) Both Lead Time and ADU are subject to variability, Managing the Buffer Level a critical (but simple) activity. Buffer Manager (1 hour/day)

14 Buffer Reporting Buffer Split into Thirds Buffer Penetration over time is used as a tracking signal and displayed on a buffer report Alerts the Buffer Manager when to take action on resizing the buffer +/- Example: If buffer has been in red >10 days /30 days you may want to increase the Buffer level. Buffer Target Level >66% >33%-<66% <33%

15 Buffer Levels are managed daily via the Buffer Report..to ensure buffer levels are sized appropriately. 15

16 What are the requirements of good pull replenishment? Suppliers must be engaged, responsive and agile. Performance metrics with suppliers focus on reducing Lead Time. Diligent inventory control to capture average daily usage. Daily counting of consumption and lab replenishment. Timely demand signals to suppliers so as not to skew reorder frequency. Inventory PO s should be processed as a priority otherwise variability will increase. In short, PULL based systems require all SCM partners to be able to quickly respond to actual demand. TEAMWORK & COLLABORATE! Verinata. Content is proprietary and confidential.

17 Outcome Achieving a synchronous flow between supply and demand Zero Stockouts affecting CLIA production 10% increase in inventory turns month over month 50% reduction in Inventory carrying costs Close collaboration with supply chain partners make for more effective partnerships/understanding our needs Increased Inventory intimacy Scrap and Obsolescence reduced 138% Best in class Turn Around Time Limited Resources required to manage the system (.25 FTE /Material Clerk and.25 FTE/Buffer Manager) Verinata. Content is proprietary and confidential.

18 Requirements to success Lessons Learned Build a Reactive and Agile Supply Chain Invest in a collaborative supplier relationship at all levels Share usage and forecast information often Use sequestering agreements where possible Focus on Lead Time reductions Willingness to place more frequent orders for product Commitment to managing the buffer levels daily Resist the temptation to work against the system Issue to consuming group in Purchasing UOM (conversions are for MRP) Verinata. Content is proprietary and confidential.

19 Recap Verinata uses a pull based replenishment model called DBR This model reduces wastes as it reacts to actual demand not expected demand. It requires agility and responsive action on SCM Suppliers become strategic partners in enablement. By reducing waste we directly add value to the customer (customer is not willing to pay for our waste in the SC) Verinata. Content is proprietary and confidential.

20 Verinata. Content is proprietary and confidential.