Constraint Assessment · Extract
Manufacturer with a growing order backlog: from purchase to delivery
End-to-end map · average days per backlogged order
- Order intake1 d
- Planning2 d
- Procurement3 dRoot cause: volume-discount lots, beyond what the current plan needs
- Warehouse3 dFull: no space to receive
- Production12 dWhere everyone looked: waiting for material
- Delivery2 d
Working timeWaiting timeRoot causeConstraint it createdWhere everyone looked
The backlog started in procurement. Buyers were measured on lowest unit price, so they ordered in the supplier’s lot sizes to earn volume discounts: more than the current production plan needed. The material would be used in time, but the leftover of each lot took up warehouse space, new material could not be received, and production waited. Change how procurement is managed, and the space problem goes with it.
Validated points of change, ranked by impact
| Change | Expected effect | Validated with | |
|---|---|---|---|
| 1 | Allocate warehouse rental cost to procurement, and add it to the buyers’ KPI beside lowest price | Lots sized to the production plan, not only to the unit price | Procurement, Finance |
| 2 | Track a new financial ratio: purchase price plus storage cost, per unit actually used | Buyers see when a cheaper lot costs more to hold | Finance |
What the CEO didCancelled the warehouse expansion that management had requested, on receiving the report.