Verinata’s Pull Based Replenishment · PDF fileVerinata’s Pull Based...
Transcript of Verinata’s Pull Based Replenishment · PDF fileVerinata’s Pull Based...
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Verinata’s Pull Based Replenishment Model-
Drum Buffer Rope
Mike Crowell
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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
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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
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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.
• and with ZERO production stock outs!
SCM= Optimization of “Extended Enterprise” - Achieving Synchronous Flow to Add Value for the Customer
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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.
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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!
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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
Drum Buffer
Rope
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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)
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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
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Systems Overview
Requisitions are
created for any
items below their
Buffer Level
Requisition Buyer
Dispatch PO
to Supplier
Workflow Approval
Supplier
Inventory Module
Receiving
PO Module
Putaway
System On-
Hand Inventory
is adjusted up
Consumption by Clinical Lab, R&D, Commercial, etc.
New
System
On- Hand
Inventory
Materials' Clerk-
Counts and Issues
to consuming group
Replenishment
Process runs,
2 times a week
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Buffer Management-Sizing the Buffer
Buffer= (LT+RF)*ADU (Lead Time Days+ Reorder Frequency Days * Avg. Daily Usage)
Example
• Item #000590 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?
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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)
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Buffer Reporting
• Buffer Split into Thirds
>66%
<33%
>33%-<66%
• 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
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Buffer Levels are managed daily via the Buffer Report
15
..to ensure buffer levels are sized appropriately.
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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!
© 2011 Verinata. Content is proprietary and confidential. 16
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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)
© 2011 Verinata. Content is proprietary and confidential. 17
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Requirements to success
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)
Lessons Learned
© 2011 Verinata. Content is proprietary and confidential. 18
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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).
© 2011 Verinata. Content is proprietary and confidential. 19
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© 2011 Verinata. Content is proprietary and confidential. 20