Inventory classification based on decoupling points

Inventory classification based on decoupling points. Access to the published version may require subscription. The ideal state of continuous one-piece flow may never be achieved. Still the logistics manager can improve the flow by carefully positioning inventory to buffer against variations. Strategies such as lean, postponement, mass customization, and outsourcing all rely on strategic positioning of decoupling points to separate forecast-driven from customer-order-driven flows. Planning and scheduling of the flow are also based on classification of decoupling points as master scheduled or not. A comprehensive classification scheme for these types of decoupling points is introduced. The approach rests on identification of flows as being either demand based or supply based. The demand or supply is then combined with exogenous factors, classified as independent, or endogenous factors, classified as dependent. As a result, eight types of strategic as well as tactical decoupling points are identified resulting in a process-based framework for inventory classification that can be used for flow design. 1. Introduction Increasing customer requirements for customization, cost issues, and ever shortening product life cycles result in a dynamic behaviour and structural complexity of the logistics system that are very demanding. The decisions are not only a complex matter due to the intricacy of each individual decision but also the sheer volume of decisions adds weight to the burden. In addition, the reduction of inventories in the logistics systems leads to stronger dependencies across the material flows, which increases the risk for knock-on effects of disturbances as pointed out by, among others, Goldratt and Cox (1984). Considering these characteristics in combination, it is obvious that logistics managers need tools to simplify and automate decision-making. Important concepts in this context are abstraction, in order to retain only information that is relevant for a particular decision problem, and aggregation, to focus on groups of entities where the same decision can be implemented. From a decision-maker's perspective, the implications of applying abstraction (selecting relevant information) and aggregation (grouping of information) are significant. Abstraction is usually applied through hierarchical decision-making. At the lowest level, detailed decisions are usually made with a local and short-term focus. At higher levels, issues of more strategic character are handled. Typical examples at the strategic