THE PROPOSED INJECTIONS
3.4 THE ‘PROCESS’ VIEW OF THE PROPOSED INJECTIONS
3.4.2 BACKGROUND TO GIVE FOCUS TO THE INJECTION
To develop a theoretical background to the solution, the analogy of the supply of bread to the consumer will be used.
The supply of a loaf of bread to a consumer in an ideal setting can also be viewed as a supply chain or flow in a system. For this example the whole supply chain will belong to one owner. The supply chain will consist out of the following sub-systems:
1. The wheat stored in silos on the owner’s farm.
2. The mill which will supply flour to the various regional flour suppliers.
3. The regional suppliers of flour.
4. A number of bakeries within different regions which will order and receive flour from the regional supplier.
The consumer takes pleasure in perfect service, knowing that bread will always be available whenever he wants it. All he has to do is walk to the bakery and buy a loaf of bread. This scenario is of course only valid if the assumption is made that enough wheat has been harvested earlier in the year, and
that it went through the various processes in the supply chain to end up as bread in the bakery. The analogy serves to highlight four principles that a supply chain must comply with. These are:
1. All parts in the supply chain are connected. In an ideal situation all the relevant role players in the supply chain will have just enough wheat or flour available in their inventory to satisfy the demands of their downstream branches of the supply chain. For example, the regional flour supplier should always have flour available on request from any bakery in the region.
2. Most of the inventory is kept as far upstream in the supply chain as possible. In this instance, most of the wheat should be kept in the silos, and should only move down the value chain when it is needed. The flour will only be distributed to the regional supplier when the regional supplier has distributed flour to the bakeries in the region. The reason why inventory should be kept as far upstream as possible can be explained as follow: Inventory held at a supply point should be equal to the maximum consumption within the replenishment time of the inventory.
The maximum consumption is a future estimate made by management, usually based on statistical data and past experience. This future estimate has a lot of attributes influencing it, and is therefore subject to variability. In this example, the variability of consumption at the regional flour supplier (supply point) will be much lower than at one bakery (consumption point). This is as a result of the fact that the demand from a supply point is the aggregated consumption of all the points it feeds. Statistical fluctuations average out as was explained in chapter 2. Thus the relative variability of demand at the regional supplier is much lower than at a consumption point such as a bakery. In doing this the overall inventory in the system will be reduced, which could save the management of the value chain money. Holding the inventory upstream has another positive effect, in the sense that it reduces the replenishment time to the next sub-system in the supply chain. The replenishment time will now only be a function of transportation time and how long it takes to place the order by the downstream sub-system, as the flour can now be delivered immediately. A fast replenishment time has a knock-on effect in the sense that forecasted consumption accuracy deteriorates with the length of time forecasted. This has the effect that the replenishment time to the consumer is reduced as well as the maximum forecasted consumption.
3. The flour will only be distributed as a result of a trigger initiated at the end of the process. In this instance, enough bread is sold at all the bakeries in one instance that results in an order for additional flour from the regional supplier. In other words some kind of pull trigger is initiated to activate parts of the upstream supply chain. In the case of this example the status of the inventory level at the sub-systems upstream of the bakery will be such that the effect of this pull trigger only stops when the first storage facility is reached. In this case it can be seen as the harvested wheat in the silo of the supplier.
4. The excess capacities of the upstream dependent sub-systems in the value chain (in this case it is the regional flour supplier, the mill and the wheat in the silo) are sufficient to maintain the
demand for flour in every bakery. Excess capacity needs to be built into the upstream sub- systems of the supply chain. This is necessary to ensure that flour could be provided to all the bakeries in the region if the maximum forecasted amount of bread is bought in all the bakeries. The “perfect performance” of the supply chain (a 100% guarantee that there will always be bread available) can only be guaranteed if the required capacity of the last sub- system (the bakeries) is used as the finite capacity. In other words, the bakeries should serve as constraint that determines the capacities of the upstream subsystems of the supply chain.
Because the proposed solution to the push problem will enable the continuous delivery of high value projects, the solution has to:
• Ensure that the constraint in the system is in the last stage of the system;
• Operate as a pull system with pull triggers situated in the last stages of the value chain;
• Ensure that there are strategically placed value buffers upstream of the constraint to cope with any variation that may occur in the supply chain and manage flow of projects.
Before the management model is discussed in detail, the following assumptions and definitions need to be highlighted:
1. Work done in any stage of the project lifecycle can be seen as a project on its own. For example, the conceptual design phase and final design phase could be scheduled as two separate projects within a new product development process.
2. All the projects in the different stages of the project life cycle (not only the value delivery phase) are scheduled according to the Critical Chain multi-project scheduling methodology.
This means that the work on each project is scheduled with aggressive duration estimates and that a project is scheduled with protection against the effect of variability in the form of various buffers as was discussed in chapter 2 of the study.
3. Key (constraining) resources are those resources that personify the organization’s competitive advantage. These resources are finite and their productivity needs to be maximized in order to achieve the maximum system productivity.
4. Using CCPM techniques, will imply that built into the model is the theory that projects and key tasks are staggered around the schedule of a key resource (constraining resource). The schedule of the constraining resource will therefore be used as the definition of the internal system capacity and the whole system will be synchronised to this capacity.
5. Key resources will be needed in the different phases throughout the project lifecycle, not only the value delivery process.
6. As part of the CCPM techniques a well-managed work buffer will be in place at all times for the
The conceptual model within Wheelwright and Clark’s [52] development funnel, as discussed during this section of the chapter, is shown in figure 22.
Value acquisition stage Value delivery stage
Figure 22: The conceptual model within Wheelwright and Clark’s development funnel.
The boundaries for the proposed management model are the two different processes that are evident throughout the project life cycle – the value acquisition and the value delivery process, and are discussed accordingly.
Phase 1 Phase 2
Value buffers within Cooper’s stage-gate process
The system constraint
VB
Using CCMPM to schedule and complete projects Review filter
Wheelwright and Clark’s development funnel
Arriving value opportunities
Pull trigger
Work flow