distribution core conflict clouddistribution core conflict cloud - Distribution's core problem is the dilemma of how much inventory to hold to balance the requirements of reducing costs and protecting throughput. For a distribution manager to be viewed as managing well (objective A) the manager must reduce costs (requirement B) and at the same time the manager must protect organization throughput (requirement C). In order for a manager to reduce costs the manager must hold less inventory (prerequisite D). In order for the manager to protect throughput the manager must hold more inventory (prerequisite D'). The problem revolves around the inability of the manager to have the right inventory at the right place at the right time. The objective of distribution is to have the right product at the right place at the right time. See the evaporating cloud below.
The basis of the TOC solution challenging three of the BD assumptions: replenishment time is long; vendors are unreliable; and forecasts are unreliable. The key to evaporating the cloud is recognizing that in a distribution environment the client is the constraint and to exploit the constraint distribution must plan and control to have the right inventory at the right place at the right time. To accomplish this, distribution must order daily, replenish frequently, and strategically hold inventory at the factory or central warehouse. The pull through the supply chain must be based on actual consumer consumption without significant batching occurring across the supply chain. The central warehouse buffers the statistical fluctuations of both supply and demand. The consumption at the plant warehouse becomes the basis for scheduling the production processes. Buffer management is used to dynamically adjust buffer levels throughout the distribution and manufacturing systems.