Throughput #3
If you want something new, you have to stop doing something old.”
— Peter Drucker
Breaking with tradition can be hard — but sometimes it’s necessary to get the results you need.
That was the case for one of our clients, a well-established manufacturer of heavy industrial products for the oil and gas, energy and chemical industries.
The company has many experienced people working in a couple of manufacturing locations and multiple service centers across North America.
They’d been focused on making high quality products, following traditional industry rules.
And they were doing ok, but they knew they could do better.
So they decided to upgrade their ERP system.
But they soon realized that a new ERP system wouldn’t solve their supply chain expertise and people availability problems.
The case for demand-driven replenishment
Shortly after the ERP upgrade, the manufacturer decided to break with the status quo: they added our demand-driven replenishment technology and expertise to increase the capability of their new ERP system.
Demand-driven replenishment is a Theory of Constraints approach to supply chain management: a pull-based system that responds to customer demand in real-time.
Together we developed a plan to assess and improve their inventory management processes, starting with one of their service centers to prove the concept.
We soon discovered that they had 50% too much inventory overall AND a significant stockout situation — a typical inventory imbalance problem.
To protect sales, they first needed to get rid of the stockouts, which unless done carefully, can increase overall inventory in the short term.
Within a few short months the overall inventory levels dropped more than 10%, and they are on target for an additional 20% reduction by the end of the year.
We presented the case study during the TOC Innovation Summit. You can see it here ⬇
Curious about how demand-driven replenishment could work for your operation?
Send me an email (address below) and let’s discuss.
Thanks for reading,
— Jack Warchalowski, Montera CEO
[email protected]
Connect with me on LinkedIn
Subscribe to Throughput, Montera’s manufacturing performance newsletter