Original Date: 08/14/2000
Revision Date: 01/18/2007
Best Practice : Demand Pull Planning System
In 1992, Howmedica Osteonics developed the Demand Pull Planning System which is based on the philosophy of placing just enough material on the production floor to satisfy the rate of customer demand. The company developed its new philosophy by exploring concepts from other reliable systems (e.g., lean manufacturing, just-in- time, KanBan, finite loading, levelized scheduling, one-piece flow), and blending the best processes from these systems to best fit its situation.
In the past, Howmedica Osteonics used a traditional push system which employed Material Resource Planning (MRP) techniques to control and track everything. Push systems tend to place an overabundance of parts on the factory floor, which leads to large volumes of work in process (WIP), excessive inventories, significant overhead for tracking parts, large queue areas consuming valuable floor space, and high cycle times. This approach also typically results in higher costs and low customer service. In 1992, Howmedica Osteonics developed the Demand Pull Planning System which is based on the philosophy of placing just enough material on the production floor to satisfy the rate of customer demand.
Howmedica Osteonics developed its new philosophy by exploring concepts from other reliable systems such as lean manufacturing, just-in-time, KanBan, finite loading, levelized scheduling, and one-piece flow. By blending the best processes from these systems to best fit its situation, the company developed and implemented its current system. The Demand Pull Planning System reacts to new work orders, that are reported by the Sales Team and tallied each evening, by producing a simple, daily spreadsheet within minutes. The Production Planner then makes decisions on the day’s production for each manufacturing cell, based on the spreadsheet, and issues the work orders. Each cell calls up the necessary material and produces only the assigned orders of the day. The Demand Pull Planning System eliminates non-value-added tasks and reduces WIP, cycle times, and operating expenses. In addition, this system keeps parts moving throughout the manufacturing cell before new parts are issued. Problems are no longer masked by large volumes of WIP, and root cause of problems can be immediately identified and corrected to reduce scrap and improve reliability.
Howmedica Osteonics has successfully implemented the Demand Pull Planning System in all of its manufacturing cells that produce orthopaedic hip and knee implants. The result as of August 2000 is a magnitude of cost savings and benefits, including:
Decrease in lead times for Type A hip implants from 62 to 16 days. Decrease in lead times for Types B, C, and D hip implants from 33 to two days.
Decrease in lead times for Type A knee implants from 83 to 15 days.
Decrease in lead times for Type B knee implants from 46 to nine days.
Cost reduction of Past Due Orders from over $5 million in 1992 to less than $0.5 million in 2000.
Cost reduction of Total In-house Inventory from $31 million in 1992 to just under $17 million in 1997.
Availability of premium floor space for production growth.
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