Prerequisites to a successful Produce-to-Demand system
The main idea behind Produce-to-Demand is to keep less inventory on hand in order to reduce other costs. With less finished goods inventory readily available, any major issues with manufacturing reliability, raw material availability, or capacity to flex production up or down will create service failures. To avoid this, specific prerequisities are needed:
- Materials must be in place or quickly available. Partnering with your suppliers is a great way to ensure a reliable source of raw materials with a short lead time.
- At minimum, production reliability in the 85-90% range. Unreliable productions requires more finished goods inventory on hand to buffer the consequences of not receiving needed product from the plant.
- Available line capacity - and people to run these lines. Capacity must be available to flex production up when demand comes in high, and the number of additional changeovers cannot push the plant above available capacity.
- Production line changeovers can be accomplished in a reasonable time. An hour-long changeover is obviously more feasible in a Produce-to-Demand environment than one lasting half a day.
- A method of quickly identifying demand. Systems are needed to manage near-real-time inventory and to "see" product needs on a shift-by-shift basis - preferable hour-by-hour.
- Strategic alignment. Senior management, departments, and groups inside the supply chain need to work together.
- An ability to invest. This could mean hiring the skills required to make Produce-to-Demand happen, or purchasing additional production capacity - both have often shown to result in significant payback and be cash flow positive.