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10 Areas to Consider in Transformation Buffer Management

July 10, 2019 Posted by: Ryan Matthews
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Companies undertake large scale “lift & shift” initiatives to reduce operational costs and improve efficiency. Transformation buffer planning and execution are critical in ensuring continuity of supply to customers during these initiatives. The need for having a buffer plan in place during transformation is determined by whether there will be a production gap caused by moving manufacturing assets from one facility to the other. The plan must hold until after the new facility has proven velocity and quality at full production volumes for a period of time, determined by the type of industry and operations. The strategy must be responsive to changes in plans and timelines of other work-streams and act as a bridging solution.


10 Key Considerations & Challenges

1. Capital Investment vs. Transfer of Assets: Decisions on capital investment must be made based on the total budget allocated to the project, Net Present Value (NPV) of assets, the complexity of manufacturing processes and ability to build buffer on time. If the assets require transfer internationally, border crossing complexities need to be factored into the decision-making process.

2. Production Part Approval Process (PPAP): PPAP plan for parts from the new facility determines the buffer levels and must account for operational inefficiencies, due to the new workforce and machines. Enough slack must be provided in the project timeline to account for delays in machine installations and supply chain readiness.

3. Alternate Sources of Supply/Outsourcing: The decision to build buffer for a part is made as a last resort, owing to inherent uncertainties and complexities. Options to produce parts at a different facility of the manufacturer or temporary outsourcing of manufacturing to an external supplier must be investigated.

4. Systems & Integration: The level of integration between ERP systems of customer and manufacturer determines the nature of buffer and phase-in/phase-out plans. An ideal ramp-down and ramp-up will be impossible to accomplish if the systems are incapable of splitting orders between facilities. System capabilities also determine whether the complete plan or parts of it could be automated.

5. Rough-Cut Capacity Planning (RCCP): RCCP check must be performed after buffer levels are determined to ensure man/machine plans can support buffer build requirements. Constraints must be resolved by modifying PPAP plans or by investing in new assets rather than transferring.

6. Demand Variability: Demand for parts could fluctuate during the production gap period, and the buffer plan must be responsive to these changes. The plan must be refreshed periodically based on the nature of the product and industry. Historical demand and long-term forecasts must be looked at along with the current forecasts and the padding for buffer must be determined based on the coefficient of variation of demand by part.

7. Supplier Risks: Analysis must be performed on the capacity, lead time, and quality of parts from external suppliers, to ensure that they can keep with the spike in demand induced by buffer plan. Risks need to be mitigated through collaboration between all groups in the transformation.

8. Product Changes: New products may be introduced, or improvements could be made to existing products during the transformation period. Some of these changes may be critical if related to safety and the buffer plan must be designed to adapt to these changes.

9. Buffer Preservation: Shelf life of parts must be identified. Adequate preservation strategies must be employed, so products last through the intended period of coverage.

10. Inventory Burn Off-Plan: While the buffer plan is designed to protect customers, care should be taken to not overbuild inventory, and a burn off-plan must be in place. Inventory scrap limits must be established early in the process to drive visibility and accountability across the organization.


CGN’s Transformation Buffer Planning Solution

CGN Global recently completed a multiyear, cross-country transition of product lines to a greenfield facility for a Fortune 500 client. Parts were segmented based on annual volumes and a dynamic buffer plan was designed and deployed to adapt to changes in demand patterns, asset transfer plans, PPAP plans, and ensure continuity of process and product improvement programs throughout the transition. Phase-in/phase-out plans were developed and coordinated through establishing and managing a source of supply governance framework. CGN developed and executed a plan for inventory burn-off and scrapping, if there was excess material.

CGN’s program control towers and governance processes has increased visibility and communication and identified and resolved issues proactively. The plan covered about 3800 parts supplied to  35+ customers. Our buffer plan ensured continuity of PPAP’s and asset transfers and ensured completion of the project on-time, while achieving a 95% product availability during the transformation period.

Developing and deploying an effective buffer plan, along with the organization of phase-in and phase-out products requires cross-functional alignment and collaboration between all groups in a company, including: supply chain, manufacturing, engineering, quality, and procurement.

CGN Global partners with customers to aid in a smooth transition of product lines, by creating and managing a single safe source of information, relevant to buffer planning and associated work-streams.

Are you planning for your next lift and shift initiative? Get in touch with us for more details.