Development of a Buffer Monitoring

Dashboard

by

SHEVON ANGELIQUE
DELPORT
29137251

Submitted in partial fulfilment of the requirements for the

degree of

BACHELORS OF INDUSTRIAL ENGINEERING

in the

FACULTY OF ENGINEERING, BUILT ENVIRONMENT AND INFORMATION

TECHNOLOGY

UNIVERSITY OF
PRETORIA

October 2012
Executive Summary
Theory of Constraints is a powerful philosophy and could improve productivity as well as
inventory control if implemented successfully. However, to date the implementation of
Theory of Constraints principles as embedded in resource planning systems has been less
successful. One possible reason for this lack of success is the challenge to match TOC with
MRP-based Enterprise Resource Planning (ERP) system.

Since most industries are converging to ERP for improvement of management,

competiveness, communication and productivity, it would be of great value to be able to
embed resource planning principles of TOC into an existing Enterprise Resource Planning
system.

The purpose of this project is to define and develop a functional model in an Excel spread
sheet using data from a MRP based ERP system that will monitor buffers for effective
management. Data from Syspro will be exported into an Excel spreadsheet. Two buffer
monitoring models were developed using Excel and pivot charts. One model was developed
where the buffer penetration was calculated for a current buffer monitoring dashboard and
summarised in a graphical dashboard with colour zones. The other was developed
incorporating Time Phase Planning which is an MRP principle as well as using the concept of
Dynamic Buffer Management which is in essence a TOC principle, also with colour zones.

Analysing the buffer monitoring dashboards can be used to assistance in establishing whether
the current buffer level is sufficient or not. If a product’s buffer penetration has four
consecutive Green Zone Periods, the buffer level is too high. Three consecutive Red Zone
Periods means the buffer level is too low. In either scenarios the buffer would be increased or
decreased by 20%.

Factors that contribute to choosing a specific buffer monitoring system were discussed and
the conclusion was made that buffer management can be achieved by evaluating past buffer
penetrations as well aswith projected buffer penetrations which will assist in allocating the
correct buffer level for the planned future demand and supply.

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Table of Contents
Executive Summary .................................................................................................................... i

1. Introduction ........................................................................................................................ 6

1.1. Background ................................................................................................................. 6

1.2. Problem Statement ...................................................................................................... 8

1.3. Project Aim and Scope ................................................................................................ 8

1.4. Project Approach and Deliverables ............................................................................. 9

2. Key concepts of TOC and MRP ....................................................................................... 11

2.1. Theory of Constraints ................................................................................................ 11

2.1.1. Buffer Management in TOC .............................................................................. 13

2.1.2. Dynamic Buffer Management............................................................................ 15

2.2. Material Requirements Planning ............................................................................... 16

2.2.1. Forecasting ......................................................................................................... 17

2.2.2. Dependant Demand ............................................................................................ 17

2.2.3. Time Phased Planning........................................................................................ 18

2.2.4. Economic Batching Quantity ............................................................................. 18

2.2.5. MRP in a Syspro ERP-Environment.................................................................. 18

2.3. Case Study- TOC and MRP in practice .................................................................... 19

2.4. Key Findings from Literature Review ...................................................................... 21

3. Requirements Analysis of the Production Planning Dashboard ....................................... 22

3.1. Swim lane Diagram for a Buffer Monitoring System ............................................... 23

3.2. Entity Relationship Diagram ..................................................................................... 24

3.3. Functional Requirements........................................................................................... 24

3.3.1. Non-Functional Requirements ........................................................................... 25

4. Process Blueprint of a Buffer Monitoring Dashboard ...................................................... 26

4.1. Required pre-conditions ............................................................................................ 26

4.2. Considering the primary TOC Principle: Buffer Management ................................. 26

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 4.2.1. Buffer Penetration Logic.................................................................................... 27

4.3. Analysis of TOC buffer Penetration and Quantity On hand ..................................... 28

4.3.1. Construction of the Graphical outputs ............................................................... 29

4.3.2. Screen Layouts of the Graph.............................................................................. 30

5. Process Blueprint of a Projected Buffer Monitoring Dashboard ...................................... 34

5.1. Required pre-conditions ............................................................................................ 34

5.2. Considering the principle: Buffer Management ........................................................ 35

5.2.1. Buffer Penetration Logic including Demand and Supply .................................. 35

5.2.2. Analysis of TOC buffer Penetration, Quantity On hand, Supply and Demand . 36

5.2.3. Construction of the Graphical outputs ............................................................... 38

5.2.4. Screen Layouts of the Graph.............................................................................. 39

6. Dashboard Selection ......................................................................................................... 43

7. References ........................................................................................................................ 45

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List of Tables
Table 1: Table Format in Excel ............................................................................................... 26
Table 2: Example of Data in Excel .......................................................................................... 28
Table 3: Table Format in Excel ............................................................................................... 34
Table 4: Example of Data in Excel .......................................................................................... 37

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List of Figures

Figure 1: ERP Implementation .................................................................................................. 7

Figure 2: A Focussed Process for Breakthrough and Continuous Improvement..................... 13
Figure 3: Dilemma of inventory management ......................................................................... 14
Figure 4: Framework of manufacturing resources planning system ........................................ 16
Figure 5: ERD of Syspro Data ................................................................................................. 24
Figure 6: Defining Colour Zones for Buffer penetration ......................................................... 27
Figure 7: Graphical Output Logic ............................................................................................ 30
Figure 8: Filtering Data on Graphs .......................................................................................... 31
Figure 9: Choosing RED zone ................................................................................................. 32
Figure 10: Graph with RED Zone ............................................................................................ 32
Figure 11: Defining the Colour Zones for MRP-TOC Model ................................................. 36
Figure 12: Graphical Output Logic .......................................................................................... 39
Figure 13: Filtering Data on Graph .......................................................................................... 40
Figure 14: Filtered Graph according to Colour Zones ............................................................. 41
Figure 15: Filtered Graph according to specific warehouses .................................................. 41
Figure 16: Filtered Graph ready for analysis ........................................................................... 42

v
1. Introduction
1.1. Background
iPlan is an industrial engineering consultancy firm that design, manage, implement and
support business processes that carefully balances best practices to suite their clients’
needs.

Part of iPlan’s business objective is to implement Enterprise Resource Planning (ERP)

systems to support and automate business processes. These systems integrate all
departments in a business, from manufacturing through to finance. ERP according to
Umble, Haft and Umble (2002) provides two major benefits that do not exist in non-
integrated departmental systems: (1) a unified enterprise view of the business that
encompasses all functions and departments; and (2) an enterprise database where all
business transactions are entered, recorded, processed, monitored, and reported.

Taking a closer look at an ERP system, one of the sections in the system is Operations
and Logistics, which consist of many functions including inventory management,
materials management, plant maintenance, production planning, project management,
purchasing, quality management, routing management, shipping and vendor evaluation
according to Umble, Haft and Umble (2002).

ERP systems have many operations and logistics advantages according to Umble, Haft
and Umble (2002) such as reduction in inventory, better forecasting of demand and
improved cash management.

ERP implementations have traditionally acquired a poor history in delivering on these

benefits. iPlan has developed a methodology highlighting the specific objective of an
implementation, with the accompanying benefits:

6
 Source: iPlan Website
Figure 1: ERP Implementation

iPlan have completed many successful MRP-orientated ERP system implementations in

the industry and have often enhanced planning with TOC principles. The TOC
enhancements, however, remain largely project and customer based, without
standardisation and formalisation as part of a standard ERP solution offering.

Goldratts Theory of Constraints is a philosophy that identifies the constrained resources

and sets the system’s capacity according to that resource.

In contrast, ERP systems deploy a Manufacturing Resource Planning (MRPII) model,

using time phased planning as well as bills of materials to identify materials needed for
production, MRP provides forward visibility of material requirements, but is complex and
requires a lot of data with high levels of accuracy.

7
1.2. Problem Statement
TOC principles such as constraint management, synchronised processes and buffer
management have been well accepted in industry, but no ERP solution have included
these philosophies in their solution. iPlan have successfully developed customer specific
solutions as part of implementation projects, but these have never been properly defined
or researched.

There is therefore a need to define a buffer monitoring system with TOC principles
(Buffer Management) as well as MRP principles (Time Phased Planning).

1.3. Project Aim and Scope

The aim of this project is to develop an add-on module to an existing ERP system,
SYSPRO, which will use MRP based data, but will deploy Buffer Management Principles
while using buffer penetration to identify the need to change the level of buffer for a
product to create a practical and simple planning environment.

The MRP principle of Time Phased planning is integrated within the Buffer Management
Principle. Thereafter an examination will be done as to when and where these types of
models can be used in a manufacturing environment.

The following aspects will be addressed in the project:

 Research is done to deliver a detailed literature review of TOC and MRP resource
planning principles. This review will be presented in the form of a user
requirement specification for the proposed module.
 A process and system blueprint is defined, which includes:
o Environmental pre-conditions;
o Data inputs and integration;
o Buffer Penetration Logic;
o System outputs and integration; and
o Reports

8
  A technical specification must be compiled. This must include:
o Screen layouts;
o Data interface points;
o Output calculations; and
o Report layouts
 An Excel spread sheet solution will be developed in Excel. With the help of iPlan
this solution can be used by Syspro. It will be used for final sign off by the
various role players.
 The Excel spread sheet will be handed to the iPlan development team and will be
developed accordingly.

1.4. Project Approach and Deliverables

Phase 1: Literature study, system analysis and requirement specification
A literature study will be done to ensure that the solution is based on best practices within the
environment. This must be combined with a thorough understanding of the SYSPRO
environment.

The deliverable of this phase is a user requirement specification, outlining the basic
functionality requirements and the desired outcomes.

Phase 2: Process blueprint

A blueprint will be defined for the solution. The blueprint will describe the sequence of
events within the solution, highlighting:

 Required pre-conditions
 Data and user inputs
 Calculation logic
 Data and graphical outputs

The deliverable of this phase is a blueprint document, signed off by the project sponsor.

9
Phase 3: Technical specification
The technical specification transforms the blueprint into a systems or technical document. It
includes:

 Entity relationship diagram

 Data structures
 Screen layouts and keyboard logic
 Technical interfacing

The deliverable of this phase is a technical specification signed off by the iPlan development
manager and project sponsor.

Phase 4: Prototyping
Prototyping will be done in Excel, building a working solution based on the previous phases.
The prototype will be presented to the various role players within iPlan for sign off.

The deliverable of this phase is a presentation workshop and sign off by the iPlan
development manager and project sponsor.

Upon completion of the prototype, the solution and supporting documents will be handed
over to the iPlan development team for inclusion in their suite of products.

10
2. Key concepts of TOC and MRP
2.1. Theory of Constraints
Goldratts Theory of Constraints is a philosophy that identifies the constrained resources and
sets the system’s capacity according to that resource.

Theory of Constraints uses a planning and control system called Drum-Buffer-Rope, the
drum represents the master schedule for the constrained resource, and this could be seen as
the beat of the system as the system cannot run any faster than the constrained resource. The
buffer represents a time period that the bottleneck will receive material earlier, this makes
inventory accumulate by the bottleneck to assure the bottleneck never waits for material
unnecessarily. The Rope is a sort of communication within the production which will specify
if the buffer is in need of material of not.

Goldratts Theory of Constraints has “Five Focusing Steps of TOC” listed below:

1. Identify the system constraints

2. Decide how to exploit the system constraints
3. Subordinate everything else to that decision
4. Elevate the system constraints
5. If, in the previous steps, the constraints have been broken, go back to step 1, but do not let
inertia become the system constraint.

(Jacobs, Chase, and Aquilano. 2009)

Theory of Constraints recognises resources as bottlenecks and non-bottlenecks or a critically

constrained resource. The TOC process identifies the constraint and helps to achieve the
determined throughput is reached.

11
Goldratts philosophy has certain rules which are as follows:

1. Balancing Materials flow rather than balancing capacity leads to more efficient
production management
2. The level of resources utilisation at areas other than at production system bottlenecks
is defined by system limitations and not the potential at the specific location.
3. Utilisation and activation of a resource are not synonymous.
4. An hour lost at a bottleneck is an hour lost for the entire system.
5. An hour saved at a non-bottleneck does not provide any value for the system.
6. Bottlenecks determine throughput as well as the level of inventory in the system.
7. The transport batch does not have and often should not be the same as the production
batch.
8. The production batch should be variable over time along the entire production
process schedule.
9. Production schedule should be created with respect to all limitations of the
production system.
10. Lead times are a product of the schedule and cannot be established in advance.
(Goldratt, and Cox, J., 1992)

The benefits in applying TOC in a company according to Cargo Solutions (2012):

 Lead Times – Mean reduction of up to 70%
 Due date performance – mean improvement of 44%
 Inventory levels – mean reduction of 49%
 Revenue – mean increase of 63%.

In TOC implementation there is no ERP system that supports the concepts, according to
Schragenheim, (2011). It is stated that the differentiation TOC makes between Planning and
execution does not conform to ERP systems, ERP does planning, without full consideration
of the uncertainty, and builds everything around it. ERP re-plans as much as necessary, the
execution in TOC-Buffer management- means prioritising based on changing reality without
re-planning. Buffer Management is reactive on what is happening in reality. Keeping a close
eye on what is happening to the buffer at all times and when the buffer levels on average are
low, more inventories are added.

12
Figure 2: A Focussed Process for Breakthrough and Continuous Improvement

2.1.1. Buffer Management in TOC

Buffer management is effectively using time buffers to manage and improve throughput.
It provides information based on actual and planned performance. In a system where
buffer management (operations strategy tool of TOC) is implemented, choosing the right
buffer size in TOC is not a necessity if the inventory level is controlled and monitored
correctly. This is not the optimum way to manage inventory. An excess amount of
inventory might evolve which will then push up costs of the company. The size of the
buffer level is dependent on the demand and supply of that specific item. Demand is the
factor that affects the rate of depletion and supply is the rate at which the depleting item
can be fulfilled (replenished) again.

There are two management approaches according to Yuan, Chang & Li (2003):
 Hold high levels of inventory in order to face peaks of demand and ensure
availability
 Hold low inventory in order to cut expenses, to insure quality and reduce
returns due to shelf life, changes and becoming obsolete.

13
 To be able to monitor the inventory levels accurately, three issues need to be addressed,
namely: How often should the inventory status be determined, when a replenishment
order should be placed, and how large should the order be. (Yuan, Chang & Li (2003))

Figure 3: Dilemma of inventory management Source: Yuan, Chang & Li (2003)

Buffer management applies a type of heuristic method; this does not provide a continuous
monitor approach to assist in the changing of demand. TOC buffer management has 3
objectives mentioned by Yuan, Chang & Li (2003) which are protecting throughput,
reducing inventory and decreasing operating expenses. Sizing the buffer correctly with a
safety factor of 1.5, this provides extra protection for unexpected demand.

Three controlled zones are used in buffer management: green, yellow and red. Each zone
has one-third of the buffer. When the buffer is in the green zone, no action is needed.
And if the buffer reaches the red zone-immediate action needs to be taken. This single
focusing tool which will be used in a production plan is an advantage towards TOC.

If the buffer is too large, the level will always stay in green, and if too small, the level will
be in the red zone. TOC claims that after several iterations the right level will be
achieved.

TOC buffer management according to Yuan, Chang & Li (2003) is also used as a tool for
reducing operating expenses. A higher buffer size decreases the need for emergency
shipments. TOC is unfortunately not very rigorous. If wanting to implement TOC buffer
management in the real world, a method is needed such as an ERP system. Theory of
Constraints relies on forecast implicitly based on historical demands.

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 2.1.2. Dynamic Buffer Management
Dynamic buffer management is a principle to dynamically change the levels of buffers when
required. The initial buffer levels are calculated with this formula:

According to Cushing (2012).

ToC replenishment days is non-other than the lead time a product has from the replenishment
order until the product has been manufactured and received by the warehouse.

The Paranoia factor will cover management’s concern of too high buffer levels or too low.
This factor will vary with all types of products; this will be a high number if there is a
frequent need for the product or not having that product will result in a major loss. A lower
number will be used when the need for that product is low and failure to make the product
available not that detrimental.

The Variability factor is like a safety factor and will be a high value when the demand
variability is high.

Dynamic Buffer Management is used to monitor the levels of buffer by looking at a certain
past time period of what has happened with respect to the stock on hand, replenishment
supply and the consumption of a product.

With using buffer penetration (the ending buffer level divided by the initial buffer level) will
categorise the product in the different colour zones as above in 2.1.1(prof this refers to the
buffer management of TOC) the monitoring of the buffer levels is made simple.

Action will be taken with regards to the level of buffer for a certain subject when 3
consecutive periods are in the red zone, the buffer level for the next period will be increased
by 20%. When a buffer levels penetration is in the green zone for four consecutive periods,
the buffer level must be decreased by 20%.

15
 2.2. Material Requirements Planning
ERP systems deploy a Manufacturing Resource Planning (MRPII) model, using time phased
planning as well as bills of materials, the master production schedule information as well as
dependant demand to identify materials needed for production. MRP provides forward
visibility of material requirements, but is complex and requires a lot of data with high levels
of accuracy. The strength of MRP comes from the ability to deal with uncertainty, complexity
and variability (S. T. Enns 2001). The is a need for an accurate requirements plan for a
manufacturing company to be successful in satisfying the customers demand as well as
improving productivity and maximising the companies resource usage. In order for an MRP
system to be successful in this, a few elements of the MRP system will be discussed and they
are:

 Forecasting
 Dependant Demand
 Time Phased Planning
 Capacity Planning
 Economic Batching Quantity
 MPS Re-planning Frequency

Financial Top management Marketing

Planning “Game plan” Planning
MPC
boundary
Resource Sales & Operations Demand
Planning Planning Management

Front end
Master Production
Schedule

Detailed Detailed
Capacity Planning Material Planning
Engine
Material &
Capacity Plans

Back end Shop-floor Vendor

Systems Systems

Source: Vollman, Berry & Whybark

Figure 4: Framework of manufacturing resources planning system

16
 2.2.1. Forecasting
Forecasting is an estimation of the future demand that a company will come across, it is of
great importance for the forecasting of products to be accurate to ensure that the production
plan is correct to a certain degree that there is not a shortage or an oversupply of inventory.

Forecasts as well as sale orders are used to generate the gross requirement for the master
production schedule which then is used in the MRP based ERP system. A master production
schedule is a plan for production for end items. It breaks down the end item into the quantity
that needs to be made in a certain time frame. The MPS is bound to change, reason being, the
accuracy of the future forecast demand and the actual demand will be different. If the
forecasting is incorrect it will have a direct effect on the MRP-ERP system. According to
Yeung, Wong and Ma (1998) the quality of the MPS will directly affect the production
efficiency on the shop floor, the inventory costs of the system and the customer service level.
(Lee and Everett and Adam (1986))

2.2.2. Dependant Demand

Dependant demand is the demand of a product that is derived from another product. This
demand can be calculated and is not needed to be forecasted. In MRP dependant demand
provides the central foundation for priority planning. This could get very complicated if a
manufacturing company has a product that has numerous components and each component
needs to be derived from the dependability of the primary product demand. A problem arises
when an order is put in for the primary product and is retracted, if the dependant demand of
the components are not retracted as well the inventory levels might be of oversupply.

Safety stock is kept for the fluctuation in demand as well as for late deliveries. This could
help in fixing the forecasting error. If the correct quantity of safety stock is used, reductions
of costs are seen while too much safety stock increases the inventory costs.

17
 2.2.3. Time Phased Planning
According to Enns (2001) in practice MRP planned lead time are set higher than necessary to
cover for worst case scenarios. If this may be the case, it results in longer actual lead times
and more orders being set out to compensate for the planned lead time.

Enns (2001) also states that time phased order releases are controlled by the planned lead
times associated with each stage in the bill of materials.

2.2.4. Economic Batching Quantity

The most economic order quantity is calculated by taking into account the cost of handling
inventory, the cost of processing a purchase order and the cost of set up. The larger the
batch, the less flexibility there is to meet requirements, the larger the lead time and average
stock holding. The larger the EBQ, costs are lowered for set up. To name a few lot sizing
techniques that are used (1) Lot-for-Lot, (2) Fixed order Quantity, (3) fixed period quantity,
and (4) economic order quantity.

Lot sizes vary from company to company; the lot size should be determined by taking the
capacity-constrained assumption and the set up times.

2.2.5. MRP in a Syspro ERP-Environment

Syspro is an MRP based ERP system that links all departments of a company together, one of
the modules in Syspro is called Requirements Planning that integrates Sales orders,
quotations, work in progress, and bill of materials in order to find out what the material
requirements are of the manufacturing company.

It is of great need for this requirements planning module to have an inventory forecast, sales
orders, purchase orders and work in progress.

Integrations between modules are made, the inputs of the requirements plan are as follows:
BOM (the demand for parent creates the demand for components (Dependant Demand)),
quotations, work in progress (Operations create capacity requirements), inventory (which is
the on-hand quantity and safety stock which balances supply with demand), inventory
forecasts and sales orders.

An accurate requirements plan for a manufacturing company to be a success is needed in

satisfying the customers demand as well as improving productivity and maximising the
resource usage.

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 2.3. Case Study- TOC and MRP in practice
An opportunity was given to visit a factory in the Cape Town where the planning principles
of TOC such as Drum-Buffer-Rope and buffer management is used to dynamically change
the buffer sizes. The processes incorporate Syspro functionality with a strong human
component in the form of a master planner as well as using a system called Symphony which
allows Swartland to see all the past buffer penetrations and adjust the levels of buffers
accordingly. Swartland only change their buffer levels when 3 or more consecutive previous
time periods were in a red or green zone.

Source: iPlan
The High Level Business Process Model above is what Swartland adhere to; Dynamic Buffer
Management will play a key part in the design of the Buffer Monitoring Dashboard.

This factory has a so-called buffer penetration dashboard, when there is 100% buffer
penetration; the buffer level is in the black zone if no buffer is available.

Swartland have inventory buffers as seen in the above generic diagram namely: finished
products, Sub-assemblies and raw materials buffer. A make to stock approach is taken, there
is a central warehouse where all products are delivered to and from there, and distributions to
various customers and warehouses country wide are made.

The demand for the Material Requirements planning run is based on the level of buffer
(Safety stock), actual sales orders, jobs and purchase orders. The dependant demand is
calculated by the Bill of Material for each product demand. The available stock is the actual
stock less those already allocated to sales orders and works orders.

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A visualisation of how TOC philosophy is implemented in the factory with respect to the
critically constrained resources. An alarm will be sounded as well as a robot system will be
lit red when the process for some reason has stopped.

After the visit a clearer understanding toward Theory of Constraints principles was
established such as:

 How TOC works in practice with the help of a MRP based ERP system,
 How TOC states that the concentration of the process need be on the critical
constrained resource which will determine the heart beat (production rate) of the
process.
 How dynamic buffer management work.
 There is still a need for human intervention when changing the buffer levels.

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 2.4. Key Findings from Literature Review
A system is needed that identifies capacity constraints and helps maintain the optimal stock
holdings in warehouses as well as work in progress areas that will create a realistic
purchasing and production schedule.

TOC and the buffer penetration principle is used in practice where one needs to dynamically
change the buffer size to minimise out of stock cases as well as reduce the amount of
inventories.

According to dynamic buffer management as discussed in Chapter 2 the buffer penetration is

calculated (Current Stock available divided by the Initial Buffer level) and is given a colour
code. If the buffer penetration is in the Red Zone for three consecutive periods prior to the
current time period, the buffer level needs to be increased by a third and a replenishment
order is released, in turn, if in the green zone for more than 4 time periods, the buffer level
will be decreased.

In support of the above TOC, MRP introduces Time Phased Planning and forecasting where
the projected demand and supply can be determined. Using data from an MRP based ERP
system, this time phase planning can be incorporated into a projected buffer penetration
calculation. Not only will this help in planning for production but also introduces forward
planning of production priorities. This will enable the production planner to see whether the
process has the capacity to produce the needed products as well as increasing the buffer level
when 3 consecutive future time periods are in the red zone.

This projected buffer monitoring dashboard will be a key identifier as to whether the initial
buffer size calculated is approximately correct.

Based on the above, two models were built. One is based on only the current period, current
stock level and buffer levels. The other will incorporate the demand and supply taken from
the Time Phased Planning of MRP. This will be a buffer monitoring dashboard with the
projected buffer penetration for a defined planning horizon.

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3. Requirements Analysis of the Production Planning Dashboard
Two buffer monitoring dashboards were developed; one considering only the quantity on
hand of the products in the warehouses. The other will consider the MRP principle – Time
Phased planning and incorporate that into a buffer monitoring dashboard with variables such
as the planned quantity demand and the planned supply for a certain time period. A
dashboard is defined as a user interface that has all the relevant information needed. An
entity relationship diagram was used to understand what data will be used and needed, as well
as the relationship of the different entities.

The functional requirements below are related to both dashboards.

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 3.1. Swim lane Diagram for a Buffer Monitoring System
Swimlane Diagram of the Buffer Monitoring Dashboard
Phase
Syspro

Receive Data Fill up buffer levels

Calculate Initial Are there Black
from Syspro in Generate Pivot Chart No when capacity is
Buffer Levels products?
Buffer Monitoring Dashboard

.xls format available

Production
Planner
Are there 4
Decrease the buffer Yes
consecutive periods in
level by 20%
the Green Zone?

Increase the buffer

Are there 3
Buffer level acceptable level by 20% and
No consecutive periods Yes
Replenish
in the Red Zone?

23
The swim lane diagram above illustrates the data flowing in from the ERP System Syspro as
well as how to determine the necessity to increase or decrease the buffer levels. This shows
the sequence of steps that will be followed and ultimately the need for a new buffer level can
be determined.

3.2. Entity Relationship Diagram

As explained above the ERD represents the data and variables the Buffer Monitoring system
needs to take into account. An ERD helps identify the relationship between each variable.

SKU Code Per Warehouse

SKU CODE Warehouse
PK SKU CODE_WarehouseID
PK SKU CODE ID PK WarehouseID
SKU CODE_Warehouse Product_FK1
Product Name Warehouse name
SKU CODE_Warehouse Product_FK2
Quantity On Hand
Buffer Amount

Customer Orders

PK Customer Order ID
Purchase Orders Allocated Quantity
PK Purchase Order ID

Outstanding Quantity

Figure 5: ERD of Syspro Data

3.3. Functional Requirements

The primary functional requirement is to determine whether the initial calculated buffer is
correct. When the buffer level is correct, the replenishment orders will be made up and until
that level of buffer. When the buffer is determined to be incorrect, too high or too low, a
correction must be made by increasing or decreasing the buffer level by 20%. With a
projected Buffer Monitoring Dashboard, the production planner will be able to see when the
initial buffer level is too high or too low and adjust accordingly.

Buffer penetration is calculated by deducting the current stock on hand. With the new
improvement to buffer monitoring, an addition to the buffer penetration calculation would be
to deduct the supply and add the demand. 100% buffer penetration means that the products
are depleted and zero stock is available, whereas 0% means that the buffer has not been
penetrated and the stock is at the top level of the buffer level.

24
Sorting the buffer penetration of each product code into a colour coded zones, the
replenishment priority for these products will be made visible to the production planner. In
the projected buffer monitoring dashboard three consecutive periods of the red zone will
allocate that the buffer level is too low. Four consecutive green zones allocates that the
buffer is too high, therefore it can be lowered. A black zone will evolve in the second
dashboard which will then take priority, this will be an indication that the buffer of that
period is far too low and needs to be set higher. The black zone appears when there is a far
too high demand for a certain product and the buffer penetration is above 100%, meaning
there is a backlog of products that need to be made that the current supply and stock on hand
cannot resolve. If this product is black in the current period, a replenishment order will need
to be made as soon as the production capacity allows it. Red zoned products will be between
zero and a third of the buffer level (67% - 100% buffer penetration) and will follow the same
rule of three consecutive periods in the red zone means a too low buffer. Yellow zoned
products will be between one third and two thirds of the needed buffer level and green zone
will be between two thirds and the buffer level maximum.

A mandatory requirement would be to generate a graphical representation of the products that

are categorised in the colour zones, the red zone being the highest priority or in the case of
the second buffer monitoring dashboard the black zone, which needs replenishment and
buffer adjustment.

The ideal function in a buffer monitoring dashboard would be the ability to ‘Click’ on the
relevant bar in the graph to see the individual products and buffer penetrations in order to
create a replenishment order for that specific product to lift the buffer level or merely until
the buffer level. Excel does not have this function; however iPlan’s development team would
be able to design this function in their final model.

3.3.1. Non-Functional Requirements

The non-functional requirements that will play an immense part in order for buffer
monitoring dashboard to be as efficient as possible, the data received from Syspro has to be
accurate and in the first dashboard the data is needed as current as possible. This will allow
the inventory levels to be kept at the correct levels which would directly decrease costs and
obsolesces.

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4. Process Blueprint of a Buffer Monitoring Dashboard
Data was taken from Syspro, where a model in Excel was developed that implemented buffer
penetration in terms of buffer management based on TOC. The calculations of buffer
penetration (taken from Buffer Management and iPlan) were calculated and with this, a pivot
chart was developed in order to distinguish which product is penetrated by what percentage.

The intention of this would be to see how TOC buffer management essentially works with
raw current data received from Syspro.

4.1. Required pre-conditions

The data from Syspro will be needed in the following format:

Table 1: Table Format in Excel

Field Type Description

Stock Code Text This defines the type of product stored in the warehouse
Warehouse Text This defines in what warehouse that specific stock code is
Quantity On Number This is the amount of on hand stock available for a specific stock
Hand code at a specific warehouse
Buffer Number This is the amount that the specific products level of inventory
needs to be

It is assumed that this buffer field is the initial calculated buffer using the formula that was
given by (Cushing, 2012) before entering into the Excel Data sheet.

4.2. Considering the primary TOC Principle: Buffer Management

When looking at the principle Buffer management based on TOC, the variables that are
considered in calculating the buffer penetration are only the current stock on hand and then
the proposed buffer level.

26
 4.2.1. Buffer Penetration Logic
Buffer penetration, calculates the percentage that the buffer level is penetrated by. Of the
buffer level, what quantity of goods is available and what needs to be replenished. A simple
formula to manage the buffer follows:

The colour zones will be as follows:

Figure 6: Defining Colour Zones for Buffer penetration

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 4.3. Analysis of TOC buffer Penetration and Quantity On hand
A model was set up in Excel with the data from Syspro. With this data, the buffer penetration
is calculated using the above mentioned formula; colour codes will be allocated to the various
products with the following Excel Formula:

Below is an example of how the data will be given in Excel as well as the calculation of the
buffer penetrations and colour zones:

Table 2: Example of Data in Excel

StockCode Warehouse QtyOnHand Buffer Buffer Penetration Colour

260SKELETJAM PF 14 15 7 GREEN
260SKELETJAM RF 6 12 50 YELLOW
70ARCHITRAVE PF 16 18 11 GREEN
BSHRZFS2 PF 145 300 52 YELLOW
BSHRZMS2 RF 41 45 9 GREEN
BSHRZMS2 SF 11 12 8 GREEN
BSHRZMS2 TF 18 17 0 GREEN
BSMLDMS0 SF 12 15 20 GREEN
BSSBTMS0HS SF 10 12 17 GREEN
CATSTAND PP 13 50 74 RED
CBSTDLI012062 RF 15 20 25 GREEN
CBSTDLI015114 RF 20 80 75 RED
CCDLS PP 2 90 98 RED

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 4.3.1. Construction of the Graphical outputs
The best way to monitor the buffer levels is to do it graphically. A graph can be used by the
production planner to see how many products in a specific warehouse are in need of
replenishment in the current state. As well as see whether the buffer level is satisfactory and
accurate.

The amount of data that was given to do an analysis with was plentiful and a way was needed
to be to graph all of the data into a summary for this monitoring system. Through trial and
error the method in Excel that would best suite this type of data would be by use of a pivot
chart.

A pivot chart condenses great amounts of data, filtering of data is made easy with a pivot
chart which is ideal in the case of a buffer monitoring dashboard tool as one would like to
choose which warehouse, product or colour zone and then analyse. The specific pivot chart
chosen for the graphical outputs will count within each warehouse how many products are in
zone green, yellow and red currently. This will give the production specialist an idea of
where the buffer levels are accurate or lacking.

29
 4.3.2. Screen Layouts of the Graph

4 5 Index Function
Figure 7: Graphical Output Logic 1 Filters data according to the stock code
2 Filters to a specific colour zone
3 Count of colour zoned products
4 Filters data to a specific warehouse
5 Warehouse with all their colour zoned products

30
The above graph will be the dashboard when only looking at the current stock on hand. The
numbering on the graph and related table indicates what each filter can do.

What a production planner would ideally want to see is the amount of red products per
warehouse in order to analyse the buffer levels and send out a replenishment order for that
product, the graphs that follow illustrate how one can filter until only the red products are
shown:

Click on relevant
colour, in this case
RED and click OK

Figure 8: Filtering Data on Graphs

31
Figure 9: Choosing RED zone

Figure 9 shows when clicking on the filter for the different colours, the colours pop up and
one can be chosen, in this case, the red zone will be chosen.

Figure 10: Graph with RED Zone

Considering Figure 10, this can be used as a buffer monitoring dashboard where it will
concentrate on only the red zoned product. This will give the production planner an idea of
the current status of the warehouses. At the moment the graph illustrates the amount of

32
products that are in the red zone. The percentage buffer penetration for each product might
need to be visible to the planner. Although the above graph solves the problem of having a
single summarised view; more development is needed concerning this issue. iPlan can take
this and further develop this model by enabling a requirement of when a red bar in the graph
is selected, a pop up screen of the products that are summarised in that bar appears with the
necessary information of the buffer penetration, buffer levels, etc. Buffer penetration allows
the production planner to see exactly how full the buffer is in the system. 100% buffer
penetration is a bigger priority than 67%. If the buffer penetration percentage is known, the
priority for a replenishment order can be established.

33
5. Process Blueprint of a Projected Buffer Monitoring Dashboard
A model was developed in Excel that integrated TOC buffer management as above with time
phased forward planning. The formula for buffer penetration was altered to incorporate the
projected buffer based on expected or planned future demand and supply of a product. The
same steps were followed as in the Process Blueprint of a Buffer Monitoring Dashboard in
the previous chapter.

This dashboard is different to Chapter 4, with regard to the period of time. The projected
buffer penetration is now visible in the dashboard which will improve proactive planning and
prioritisation. This dashboard is an addition to the first dashboard, where the principles of
Dynamic Buffer Management are used.

As mentioned previously, one can now see whether an initial calculated buffer will be
sufficient for the projected demand and supply. When the buffer penetration is in the red
zone for 3 consecutive times, the initial buffer level is not high enough. An adjustment of
20% can be made. When the buffer penetration is in the green zone 4 consecutive times, the
buffer level allocated is too high and would be lowered by 20%.

5.1. Required pre-conditions

The data from Syspro will be needed in the following format:

Table 3: Table Format in Excel

Field Type Description

Stock Code Text This defines the type of product stored in the warehouse
Warehouse Text This defines in what warehouse that specific stock code is
Quantity On Number This is the amount of on hand stock available for a specific
Hand stock code at a specific warehouse
Quantity Number This is the demand expected for a specific time period
Allocated
Quantity On Number This is the expected replenishment for a specific time
Order period (Supply)
Buffer Number This is the amount that the specific products level of
inventory needs to be
Time Phase Date This is the expected time period as to which the demand and
supply orders be fulfilled

34
Once again the buffer given by Syspro is assumed for this Excel model that the initial
calculated buffer was calculated using this formula:

5.2. Considering the principle: Buffer Management

Two key principles namely Dynamic Buffer Management and Time Phased planning were
evident from literature. In order to incorporate these two principles a dashboard was
developed that not only the current buffer penetration be visible but also the futures. For this
model the supply and demands of the products were taken into account. With this model it
can be seen that buffer management can not only be used for the current time period but also
for the future forecasted demand and supply. This allows the production planner to plan
ahead if there is available capacity to do so.

5.2.1. Buffer Penetration Logic including Demand and Supply

The buffer penetration once again calculates the percentage that the buffer is penetrated by,
what quantity of goods is available and what needs to be replenished. A simple formula
follows for the current buffer penetration:

For the buffer penetration formula of the next time phase will be as follows:

Where the Stock On Hand(t+1) will be calculated using the following formula:

35
The colour zones will be as follows:

Figure 11: Defining the Colour Zones for MRP-TOC Model

The reason for having a black zone is since demand and supply have been introduced to the
equation, more than 100% buffer penetration can be possible as it merely means that the
amount of supply is not enough to cover that products’ demand. The cause of this could be
the buffer level is too low. This product will then need immediate attention.

5.2.2. Analysis of TOC buffer Penetration, Quantity On hand, Supply and

Demand
A model was set up in Excel with the data from Syspro. With this data, the buffer penetration
can be calculated using the above mentioned formula; this will then be put into the different
colour zones using this formula on Excel:

The black will now indicated that the buffer penetration is more than 100%, as there might be
a future demand for the product but not a supply. The production planner would need to
make this colour zone the priority product and thereafter the red zone will take priority.

36
Below is an example of how the data is presented in Excel as well as the calculation of the buffer penetrations and colour zones:

Table 4: Example of Data in Excel

StockCode Warehouse QtyOnHand Buffer QtyAllocated (DEMAND) QtyOnOrder(Supply) Buffer Penetration Colour Time Phase
260SKELETJAM PF 14 15 0 0 7 GREEN Current
260SKELETJAM RF 6 12 0 0 50 YELLOW Current
70ARCHITRAVE PF 16 18 0 0 11 GREEN Current
BSHRZFS2 PF 145 300 50 0 68 RED Current
BSHRZMS2 RF 41 45 0 0 9 GREEN Current
BSHRZMS2 SF 11 12 0 0 8 GREEN Current
BSHRZMS2 TF 18 18 0 0 0 GREEN Current
BSMLDMS0 SF 12 15 0 0 20 GREEN Current
BSSBTMS0HS SF 10 12 9 1 83 RED Current
CATSTAND PP 13 50 0 50 26 GREEN Current
CBSTDLI012062 RF 15 20 15 0 100 RED Current
CBSTDLI015114 RF 20 80 20 0 100 RED Current
CCDLS PP 2 90 0 0 98 RED Current
CDBFLHS0 RF 10 10 0 0 0 GREEN Current
CDBFLHS0 SF 6 7 0 0 14 GREEN Current
CDELPHS0 TF 3 3 0 0 0 GREEN Current
CDSPNHS0 PF 193 340 4 33 35 YELLOW Current
COL-HRO1.8HX3.0D PK 2 5 0 0 60 YELLOW Current
COL-HRO2.4HX3.0D PK 1 20 0 0 95 RED Current
COM008 PF 98 100 0 0 2 GREEN Current
COM008 RF 5 60 0 0 92 RED Current
COM022 RF 17 50 0 0 66 YELLOW Current
COM057 PF 5 20 0 0 75 RED Current

37
 5.2.3. Construction of the Graphical outputs
The same method will be followed as the above chapter 4; unfortunately the amounts of
warehouses as well as the time periods make it very hard to use this pivot chart as a single
focusing tool. Before using this graph for analysis, filtering to a specific warehouse will
enable an enhanced buffer monitoring dashboard.

This pivot chart still counts within each warehouse the amount of products that are in the
green, yellow, red and now black zones within the specific time periods.

38
 5.2.4. Screen Layouts of the Graph

5
6
4
Index Function
1 Filters data according to the stock code
2 Filters to a specific colour zone
Figure 12: Graphical Output Logic
3 Count of colour zoned products
4 Filters data to a specific warehouse
5 Warehouse with all their colour zoned products at the specified Time Phases
6 Filters data according to the Time Phases

39
The above figure illustrates all the time periods and warehouses, in order for it to become a
buffer monitoring dashboard filtering of the data is needed.

Figure 13: Filtering Data on Graph

Clicking on relevant colour, in this case RED and BLACK. This will allow the production
planner identify which buffer levels are going to be too low. One can also choose the Green
zone to see whether the initial buffer level that was calculated is too high.

40
Filtering of this graph to make the priority colour zones more visible is shown below:

Figure 14: Filtered Graph according to Colour Zones

Figure 14 above is still not clear enough to identify where the initial buffer level is too high
or low. Further filtering is needed such as selecting specific warehouses.

Figure 15: Filtered Graph according to specific warehouses

The specific warehouse that the production planner would like to focus on can be chosen.

41
Figure 16: Filtered Graph ready for analysis

Figure 16 above can be used to see whether the initial buffer level is correct or close to
correct. Three consecutive red zoned periods noted here will give the production planner an
idea as to when his buffer level will be too low and that it will be in need of an increase of
20%. This is the concluding outcome for this project.

This illustrates that the principle of buffer management can be used not only for current stock
levels, but also for projected time periods for the planning horizon for demand and supply.
This allows for time phased planning (MRP principle), if there is capacity available to
manufacture more products, this buffer monitoring dashboard will establish which product
will be in the black or red zone in the future. And the buffer levels can be changed
accordingly.

42
6. Dashboard Selection
With the two buffer monitoring dashboards developed, the use of each will come into play
with different environments. Some factors to consider when choosing a certain buffer
monitoring system:

 The type of environment

 Type of demand; Stable or dynamic
 Product Type and obsolescence
 Cost of product
 Production capacity
 Inventory capacity

The type of demand will have a definite impact of choice. In a dynamic demand environment,
planning ahead and getting the initial buffer levels and future levels accurate is a great
necessity to eliminate stock outs. The second buffer monitoring system will be ideal as one
can see the projected demand and then analyse whether the current buffer level is suited.

A high buffer level for a product that will gain obsolescence if on the shelf is not ideal. The
current stock buffer monitoring dashboard will be sufficient in this case.

In both dashboards the production capacity plays a major role, if there isn’t capacity to
increase the buffer level or merely fill the initial buffer level a problem will arise that top
management would have to take care of.

The more expensive the product is, the more accurate the buffer level needs to be. The
second buffer monitoring dashboard will aid in achieving a more accurate buffer level which
will also result in a faster inventory turnover.

The less inventory space a warehouse has, the more accurate the buffer level will need to be.
Wasted space (too high buffer level of a certain product) creates less space for a product that
might need a higher buffer level but is unable to as a result of an unnecessary high buffer
level of another product.

In conclusion buffer management and dynamic buffer management can be used not only with
past data and past buffer penetrations but also with a projection into the future. This will
assist with production planning; reducing obsolescence and unnecessarily high buffer levels
and the accuracy of a replenishment order sent through to Syspro to fill up the buffer level.

43
The concept of the projected buffer monitoring dashboard incorporates not only a buffer
management principle but also added time phased planning from MRP and a projected buffer
monitoring dashboard was developed.

This will be beneficial for a company who has an MRP-based ERP system in place as well as
combine buffer management in their production planning.

44
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<http://www.cargosolutions.co.za/toc_overview.asp>. (accessed 4th May 2012).

CUSHING, R. (2012). Dynamic Buffer Management (DBM) for Inventory and the Supply
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G.R RUSSELL & T.D FRY (1997): Order review/release and lot splitting in drum-buffer-
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INHERENTSIMPLICITY. (N/D). TOC Implementation & IT.

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