There is a view that all buffers are waste, particularly from some Lean practitioners. “If you see inventory waiting anywhere in a supply chain then it should be reduced to zero”. However, businesses should be Lean not Anorexic and buffers can be used to increase the flow of product and profit.
The strategic placement of buffers can increase the profitable flow of product to customers. In this context, buffers are no longer waste, in fact they can be a competitive advantage. Please see 10 high-powered building blocks that simplify the way you look at your complex supply chain for more information on the broader supply chain implications of buffers.
There are three types of buffers in a supply chain generally and a factory specifically;
Inventory or Stock Buffer
Extra material between transformation processes or between processes and demand. An inventory buffer is sized according to risk rather than time.
Early arrival of material or resources before necessary activities, before transformation processes or before demand. Time is used to safeguard an upstream or downstream process or delivery point.
Otherwise known as sprint capacity, a capacity buffer can be used to restore a inventory or time buffer after a delay or stoppage. It can also be used to fulfill unexpected demand.
Buffers are used to protect a process or a delivery point from the effects of batching or variability;
Ideally a factory should support a constant flow of product without interruption, like the flow of water through a pipe. Lean proponents advocate one-piece-flow which is like a steady pipeline of single pieces, in Toyota’s case cars.
In some processes the product needs to be distributed to different places with different demand or, the product needs to be held in a device for a while, such as a batch cooker. In these cases material must be time buffered in some way so that the downstream processes, or demand points, are not starved.
There are 4 types of variability;
- Demand Variability
- Supply Variability
- Operational Variability
- Managerial Variabiity
These are a statistical reality and the only certainty in a supply chain is that there will be uncertainty and variability. There will always be variability because perfection simply costs too much. There are 2 ways that buffers benefit a factory and supply chain when applied to variability
- Buffers guard the customer from the variability in our supply chain. Without the strategic placement of buffers in supply chains and factories, then the customer would have too much product availability at some times and none at all on other occasions. This results in lost sales, wasted stock and expedite related expenses, all of which reduce the flow of profit.
- Strategic placement of buffers can increase effective operating capacities and reduce costs by exploiting the statistical nature of variability.
Hence the strategic placement of buffers in a supply chain is actually a vital part of a robust profit making strategy.