It’s All About Throughput


Manufacturing is ultimately about throughput, which is the rate at which your system generates sales relative to inventory investment and fixed overhead cost.  For high throughput you need efficient inventory, which means you must replace job linking with decoupling.

What is job linking?

Job linking is the oldest and most widely used planning method.  Top level jobs are planned to cover projected sales demand and then jobs and POs are linked in a multi-level BOM explosion to cover demand for subassemblies and materials.  Job linking is popular because it is easy to conceptualize and visually connects all the supply and demand relationships.

What is decoupling? 

DBA Manufacturing’is a demand driven MRP system based on decoupling, which is the opposite of job linking.  Instead of responding to tentative demand from sales projections, decoupling only reacts to firm demand from actual sales orders.  Instead of multi-level BOM explosions, each sell item, subassembly, and material is planned individually to order or for stocking.  Instead of trying to predict future demand, inventory is used to protect against potential demand.

Why is job linking problematic? 

Job linking has two insurmountable problems.  First, top level jobs planned in response to sales projections cause planning errors.  Second, BOM explosions amplify these planning errors exponentially at each lower job level.  Let’s examine these two phenomena.

Top level jobs are the root cause of planning errors

Actual sales orders always differ from sales projections because no one can predict the future with complete accuracy.  As sales demand changes and firms over time, jobs that were planned to cover projected sales get misaligned with actual sales demand, which results in shortages, overstocking, and job delays.

BOM explosions amplify planning errors

When multi-level BOM explosions are used to drive demand for subassemblies and materials, planning errors amplify due to a phenomenon known as the “bullwhip effect.”  Whenever components are multiples of the parent quantity, planning errors at the parent level multiply at the component level.  Multiples of multiples cause errors to compound exponentially at each lower job level.  Like the power of a bullwhip, minor planning errors at the top quickly grow into major planning errors among lower level items.

Inventory gets out of control

As demand changes and firms over time, job linking requires constant job and PO revisions to keep planned supply aligned with actual demand.  By the time misalignments are detected at the sales item level, lower level jobs and POs are already received or in progress and it’s too late for intervention, which results in shortages, stock accumulation, and job delays.  Inventory gets out of control and throughput suffers.

Decoupling solves these problems 

Decoupling only reacts to firm demand from sales orders, which ensures that planned supply is always aligned with actual demand without need for constant job and PO revisions.  Decoupling has no BOM explosions and thus there is no bullwhip effect to amplify planning errors.  At the individual item level, a monthly safety factor protects against potential demand, which minimizes shortages and eliminates stock accumulation.

Decoupling is a lot less work  

Job linking is very hard work because every planning cycle requires new sales projections and constant job and PO revisions.  Decoupling is a lot less work because it is driven entirely by item settings that only need periodic review.  MRP sessions are largely automatic and are done daily for rapid response to new demand.

If you already use DBA Manufacturing:

Even though DBA is a demand driven MRP system designed for decoupling, some companies ignore the item settings and impose their own version of job linking on the system.  When used this way, DBA has the same inventory problems and low throughput as all other job linking systems.  If this is what your company is doing, you can dramatically boost throughput by replacing job linking with decoupling and letting the item settings generate demand driven jobs and POs.

If you are considering DBA Manufacturing

All the ERP software packages for small and midsize companies are based on job linking planning methods, which is why these systems have low throughput in spite of their high price tags and extensive feature sets.  By contrast, DBA is based on decoupling and demand driven MRP, which enables high throughput at a fraction of the cost and complexity.