Theory of Constraints in Supply Chain Management
The Theory of Constraints (TOC) analyzes the impact of supply together with the demand and emphasis on the supply side. If it is possible to respond to demand, there is no need to rely on forecast at all.Solution is based on constant renewal of the consumed stocks.
Aggregating as much as possible at the source – the plant or central warehouse.Determining inventory targets (Buffer size) at all stock locations.Enabling the transfer of real consumption data from all stock locations.Shortening the replenishment time as much as possible,replenishing as frequently as possible from the plant or central warehouse to the consumption points.Monitoring the buffer sizes according to consumption and readjust them accordingly.The measurement of the actual usage of the stocks dynamically and readjusts the inventory levels is called Dynamic Buffer Management (DBM).
To successfully implement the TOC methodology to manage a distribution environment, following are taken care by the add-on module
Replenish the different locations according to consumption and guarantee material availability either to procure or produce
Assuring requirement quantities on time both for production purposes and as well for sales and distribution
Monitoring of stocks
Automatic creation of procurement proposals for purchasing and production.
Dynamic Buffer Management
To change the buffer size constantly and kept it at the right size to support the current consumption points
Differentiator from SAP ERP
SAP Enhanced Planning Module makes differentiation between Planning and Execution. Buffer Management functionality of the Module prioritizes the inventory levels based on the changing reality without re-planning.
Auto Planning Run generates the requirements for internal as well as for external
ConversionAuto conversion of these requirements to respective orders
* Conversion of planned order to Production Order
* Conversion of Purchase request to Stock Transfer Order
* Conversion of Purchase request to Purchase Order
* Conversion of Purchase request to Sub-contract Order
* Generation of Consignment Fill
Dynamic Buffer Management
To change the buffer size constantly and keep it at the right size to support the current consumption from the consumption points
* Inventory in the system decrease
* Increase In Sales
* Inventory turns increase
* Internal transfers between regional WH drops
* Obsolescence drops
* Operating expenses stays about the same
* Relationship with suppliers and client significantly improve