tends to be accumulated or amplified. In Lean, these areas might be referred to as pacesetters. In the Theory of Constraints, they can be referred to as drums. Whatever manufacturing or operational methodology a company ascribes to, these resources typically represent control points that have a huge impact on the total flow or velocity that a particular plant, resource, or area can maintain or achieve.
The preceding six factors must be applied systematically across the entire BOM, routing structure, manufacturing facilities, and supply-demand network to determine the best decoupling positions for purchased, manufactured, and finished items (including service parts) in order to protect and promote the flow of relevant information and drive return on investment performance.
Applying the Positioning Criteria
As an example, let us apply these six factors to a relatively simple environment. In our example, only two finished products are made. Figure 6-1 shows the bill of material for the two products: FPE and FPF.
The numbers in the circles represent the manufacturing or purchasing lead time in days for each discrete part number. For instance, FPE takes 2 days to make when all components are available, and 204P has a purchasing lead time of 20 days.
For each part number in this example, there are three relevant lead times. These are described in the APICS Dictionary as:
Manufacturing lead time (MLT): The total time required to manufacture an item, exclusive of lower level purchasing lead time. For make-to-order products, it is the length of time between the release of an order to the production process and shipment to the final customer. For make-to-stock products, it is the length of time between the release of an order to the production process and receipt into inventory. Included here are order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. (p. 98)
FIGURE 6-1 Product structures for FPE and FPF
Cumulative lead time (CLT): The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each bill of material path below the item; whichever path adds up to the greatest number defines cumulative lead time. (p. 38)
Purchasing lead time (PLT): The total lead time required to obtain a purchased item. Included here are order preparation and release time; supplier lead time; transportation time; and receiving, inspection, and put-away time. (p. 142)
Considering these definitions, for FPE the manufacturing lead time is 2 days, while the cumulative lead time is 26 days (20-day purchasing lead time + 4 days manufacturing lead time for 101 + 2 days manufacturing lead time for FPE). In the case of FPF, the manufacturing lead time is 3 days, while the cumulative lead time is 27 (20-day purchasing lead time + 4 days manufacturing lead time for 101 + 3 days manufacturing lead time for FPF).
To properly apply the six factors, we will need additional information about the environment. Figure 6-2 shows the product and routing structure of both FPE and FPF together. A “routing,” as defined by APICS, is “information detailing the method of manufacture of a particular item. It includes the operations to be performed, their sequence, the various work centers involved, and the standards for setup and run.” Together, the BOM and the routing paint a relatively complete picture of the view needed to consider positioning for this scenario. Note that no run rates and setup times have been defined, as these will not be relevant for this simple example.
Once a part 205P is introduced to the manufacturing process, it is run through a series of resources (A > B > C > D) and combined with a converted 204P at resource Z. Part 204P is run through a series of resources (B > C > E > F). Resource Z is an assembly operation and the final step in producing intermediate part 101. This conversion process (from 204P and 205P to 101), assuming concurrent activity across paths, takes four days on average. Thus 101’s manufacturing lead time is four days.
FIGURE 6-2 Product and routing structure for FPE and FPF
Resource Z is a “convergent point.” A convergent point is any place where routing legs come together. As discussed in Chapter 3, these points of integration occur most often where significant delays accumulate because all parts must be present for the resource to perform its operation. Resource Z requires a converted 204P from resource F and a converted 205P from resource D at the same time and quantity. This make resource Z a candidate for a resource that we would like to protect as much as possible—a critical operation.
Part 101 is a “point of divergence.” A divergent point means that part 101 can be directed into different manufacturing paths culminating in various end items. A divergent point represents a commitment that cannot be practically or cost-effectively reversed. An example would be the introduction of a sheet of steel into a fabrication process. Once the sheet is cut, the options available to use it are narrowed significantly. Thus the decision to cut it precludes it from being used in many other ways.
For this example, part 101 is directed to resources S and T to either begin the process to convert it to FPE or be combined with the purchased part 102P to be finished into an FPF. The conversion into FPE takes two days, and the conversion to FPF, a more complicated build, takes three days. Thus the manufacturing lead time is two days for FPE and three days for FPF.
When checking with sales and customer service, we find that the customer tolerance time for both products is at three days. FPF has lower volumes, as it is a higher-end product, but the market expects it within the same time frame as the lower-end product FPE. Additionally, sales has indicated that there are frequent opportunities in the market for FPE to win quick-turn business. Customers are not inclined to pay more for the items, but the volume would definitely increase with the capability to offer same-day fulfillment. Finally, with the exception of quickturn requests, this company typically receives sales orders at least three days in advance for both products. Occasionally there can be large orders, but those larger orders tend to have at least two weeks of sales order visibility.
When checking with purchasing, we discover that the suppliers for 204P and 205P have decent reliability. Occasional disruptions do happen, but overall both have performed well over the last year. The supplier for 102P, however, is a different story. This supplier is notorious for late deliveries and even routinely produces suspect quality. Figure 6-3 summarizes the positioning criteria information for this example.
FIGURE 6-3 Example decoupling point positioning answers
Based on these answers, how should decoupling point positioning be approached in this environment? The impact of each of the criteria on the model is considered:
