Operations Management - Essay Example

? Contemporary Issues in Operations Management AFFILIATION: Question a Since all the relevant information about Return on sales is mentioned in the question, the data has been used to derive the relevant cost and income amount so that desired Return on Sales i.e. 10% and 15% can be calculated. In the case, it has been mentioned that the fixed cost will remain constant; hence, the following table shows the detailed calculation of achieving targeted Return on Sales. Actual data (?m) Increase in sales by 8% (?m) Increase in sales by 16% (?m) Sales Revenue 20 21.6 23.2 Variable cost (25%) 5 5.4 5.8 Contribution Margin (Sales Revenue- Variable cost) 15 16.2 17.4 Fixed Cost 14 14 14 Net Income (Contribution Margin – Fixed Cost) 1 2.2 3.4 Return on sales 5% 10% 15% From the figures in the above table, it is proved that if the current sales turnover is increased by 8% and 16%, then Return on Sales will rise by 10% and 15% respectively. Question 1 (b): When profit calculation is being done, it is important to take account of fixed costs especially when using TOC based initiatives. The concept of TOC relies on three most important elements i.e. Inventory, Operating expenses and Throughput (Choe and Herman, 2004 and Herroelen and Leus, 2005); all these three aspects need to be carefully monitored so that the production processes are enhanced and the output level of the organization increases. Throughput is described as sales revenue minus total variable costs; Inventory is defined as the amount of total money invested in the business which can be or is to be sold; and Operating expense is the amount of all non-variable costs that are associated in converting inventory into throughput. It is evident from the explanation of the three important elements of TOC based initiative that both types of costs are important when calculating the profit. The real profit amount is that one which is retained by the business after it covers its fixed and variable costs. From the table given in Question 1(a), it can be concluded that Fixed costs are important when calculating Net Income as it is the profit that is left when all the expenses are paid off by the company. The main fixed costs for any manufacturing concern like Hi-Fidelity Ltd. is the machinery that is used in the production processes and its cost needs to keep at a minimal level. Fixed cost constitute majority share of the cost and that is why it needs to be kept constant; if not constant, then it should not increase at an accelerating rate as well. Hence, in TOC based initiative, Fixed costs are the crucial part of profit calculation as they help in determining the Return on Sales so that the company can decide about the increase in sales required so that it is able to earn high Net Income in the long-run. Question 1 (c): It has been revealed by the studies of Bhardwaj, Gupta and Kanda (2010) and Godratt Institute (2009b) that the organizations that implement the concept of TOC require less time for initial improvement phase than that required in both lean management and six sigma methods. TOC concept allows the organizations to focus on one area in one time whereas the other continuous improvement processes require the professionals to keep on monitoring the systems to identify issues in other areas and they necessitate the need of continuous up gradation of the systems as well. The major benefit gained from the application of TOC based initiatives is that they manage the variations effectively rather than reduce them which differentiates TOC from lean and six sigma. TOC helps the organizations in saving time and managing the complete execution process properly. Since the main aim of the concept is to identify the constraint that is creating problem in the company’s production process, the next step is to resolve it so that the variation can be managed. The best aspect of TOC concept is that it follows a systematic approach which can be described as follows: 1. Identifying the starting conditions of the system – what are the system inputs, who are the influencing stakeholders and what resources are available and required for changing the system i.e. people, time, budget and etc. 2. Setting the rules for managing the system which comprises of planning the production process, executing it properly and finally collecting feedback to detect the time for correction. 3. Finally, addressing the target or goal of the system. The main area of focus in TOC based initiatives is managing the variation by bringing changes in the production processes. The companies have to first identify their own position, then plan out the changes required, implement them properly and take feedback to make modifications as required and finally ensure that the set targets are being met. Since TOC follows the focused approach, it allows the organizations to follow one direction rather than trying to solve multiple problems in one go. In the case of Hi-Fidelity Ltd., TOC concept can be applied in the existing systems as the main area of concern is to improve the existing system which means that the production process needs to be altered so that the products are developed in accordance with the demands of the customers. Hence, the throughput needs to be increased by cutting down the setup time on the constraints, resolving the quality problems and material shortages; all of these attempts will help the company to make successful improvements in the company’s performance. Question 2 (a): In the case of Hi-Fidelity, the cloud diagram is allowing Sarah to identify the core conflict that is being faced by the company. The cloud diagram is known as Core Conflict in the TOC concept which is the main area that needs to be addressed (Herroelen, 2006). Although TOC focuses on one particular problem but it helps the management to identify the main issue and take the necessary initiatives to change it. The cloud diagram drawn by Sarah shows that the customers are dissatisfied with the long lead time that the company is taking in supplying them the goods and she is confused whether to delay or shortened the projects’ completion time; hence the production team needs to resolve the dilemma in hand. According to Goldratt Institute (2009a), the Core Conflict or the cloud diagram is helping the operations and production team to challenge the logical assumptions created by the company. It is basically the starting point for working on the complete solution of enhancing the organization’s performance. After careful analysis of the cloud diagram, it can be concluded that the main goal is to manage all the projects well. In order to ensure proper management of the projects, there are two pre-requisites available i.e. either to reduce the cost or ensure short lead time. The challenging assumption in case of reducing the cost is that if the projects are released early, the cost will go down and projects will be completed on time. In this specific scenario, it is believed that when projects are released early, the inventory cost will go down, warehouse charges will reduce and production processes will become efficient as well. Other false assumption is that the reduction in costs will ensure proper management of projects which is the goal of the company. While, the challenging assumption underlying the other case is that when the releasing time of the projects is delayed, it will lead to shorter lead time which will eventually help in managing projects appropriately. If the lead time is shorter, then it does not necessarily mean that the projects are being managed properly. The flawed assumptions in the case are to ensure short lead time by delaying the release of projects and reducing costs of the projects by completing projects quickly. The cloud diagram has highlighted the main dilemma for Hi-Fidelity Ltd. that in order to manage the projects properly, both costs and lead time need to be worked out so that the projects are completed on time and the customers are satisfied with the company’s performance as well. The best way for handling the problem is to decide whether to do multi-tasking or not which will require three steps to be done; first one is to identify the resources, second is to set the rules and third is to measure the performance against the set goals. The company will have to decide that whether it needs to reduce multi-tasking or number of concurrent projects. By limited number of concurrent projects, the production of the products is enhanced as there is focus on one project at a time and reduction in multi-taking will ensure that the customers’ requirements are properly fulfilled. Hence, the main dilemma at hand is to either reduce the multi-tasking of projects or put some limitation on the number of concurrent projects so that the customers get their orders on time and projects are managed properly. Question 2 (b): The Critical Chain Project Management (CCPM) is a relatively new concept and it is an extension of TOC concept. According to Doyle (2010), the organizations need to create contingency plans so that they can address the problems as soon as they arise (Sears, Sears and Clough, 2008). The concept of CCPM revolved around creation of buffers that help the organizations to handle the issues in situations when they deviate from their agreed plans. The main idea of CCPM is that an organization’s output is limited to a resource constraint which is known as the critical resource (Gupta, 2010); the critical resource productivity needs to be optimized so that the organization’s output is optimized simultaneously. CCPM can be best described as the ultimate solution for making a plan, schedule along with performance management of the project environment. The concept can be successfully applied in two kinds of environments i.e. single project environments and multiple project environments in which the resources are shared among various different projects at one point in time. CCPM is beneficial for single project environments as it allows removing of any existing behaviours that are deviating from the goal of the project like expansion of work just to fill the time that is available; project network or plan can be drawn that comprises of task and resource dependencies along with time estimates when safety is removed and a schedule is designed to show the buffers and critical chain of the project. In multi-project environments, all the benefits of single project environment can be incorporated along with one major positive aspect that is the release of projects can be staggered according to a harmonizing mechanism known as a drum which means stating a rule for managing the operations of the company such as there should by only four projects in single flow at any given point of time. In order to complete all the projects on time, CCPM mandates the frequent updating of approximate time required for completing in-progress tasks; the update information helps in updating the buffers’ status so that the corrective action can be taken when necessary. In case of Hi-Fidelity Ltd., it is mentioned that the customers are facing problems in terms of delay supply of the finished goods and there is less visibility of the project status and only monthly reports are provided monthly. With the help of CCPM, they will be able to identify the bottlenecks in the process and preventive measures will be taken to ensure that right amount of stocks are available for the customers. The company has already lost two OEM customers and with the implementation of CCPM, the important tasks will be performed carefully and by following the schedules as per agreed terms and conditions, the company will be able to keep its customers happy and satisfied. The major benefit to Hi-Fidelity Ltd. for the implementation of CCPM in their production process will be that the project status will be visible with the help of critical path designing and projects will be well-maintained with the help of buffer management. CCPM is best known for the buffer identification and management so that any problem is addressed instantly the signals are received in the system. With the help of CCPM, the concerned authorities will be able to prioritize the flow of work by deciding about the buffer penetration; able to identify when to expedite potential delays as red zone will be highlighted; signals will be give when there will be a need for escalating the increased capacity and identify the main sources of delay and improve them with target improvement activities. Hence, CCPM will provide frequent updating of estimated time that is required to complete in-progress projects; information will be used in updating of various buffers’ status which will provide details about taking corrective action when needed. Therefore, all the hassles will be addressed before they actually arise and the customers will be provided all their orders on time. Question 3 (a): The five steps of focus of TOC as identified by Goldratt Institute (2009a) and Nave (2002) comprise of: 1. Identification of the constraint. 2. Deciding on the method of exploiting the constraint. 3. For the above decision, subordination and synchronization is important. 4. The constraint’s performance must be elevated. 5. In case the constraint has been shifted, the company can go back to step 1. In case of retail distribution, the first step is the identification of the constraint which in this scenario is to identify the target market that what is the company serving, what are the customers looking for in the shop, what factors are important for them, is the inventory level properly maintained and etc. Once the constraint is identified, the next step is to exploit them; in case of retail distribution, it is important that the shop has appropriate level of stock in uncertainty as well so that the customers are satisfied with their purchasing experience at the outlet. The third step incorporates establishing a plant warehouse so that there are aggregate stock buffers, target inventory levels need to be set at each stocking point to rule, signal consumption daily and replenish stock periodically so that there is no shortage of inventory and simultaneously utilise Buffer Management. In order to elevate the constraints, buffer management needs to be properly implemented which means that flow of work needs to be prioritize on the basis of stock buffer status, identify the points for expediting the potential delays (if the stock buffer availability shows red, the next order is placed), follow the signals to escalate intervention and identify and target main sources of delay for improvement. When the constraint gets broken, the step one should be repeated so that there is continuous improvement going on in the company. Question 3 (b): The important factors that Hi-Fidelity Ltd. Operation’s team will have to take into account when deciding about the inventory level for each distribution node are the demand of the customers, availability of suppliers and raw materials, lead time required for production and transportation facility for moving the finished goods from the warehouse to the retail shop. One important concept for the company is to set target level for each distribution node and it can be done by applying the concept of buffer zone. Buffer management is the name of the control mechanism and it will help Hi-Fidelity to set the buffer which is the target level i.e. the stock that will ensure appropriate availability to the market. The main aim of buffer management is to look at the on-hand stock to determine the priority (the buffer status). In order to determine the inventory levels, following three questions need to be addressed: 1. Where to hold inventory? 2. What is the inventory level i.e. replenishment level? 3. With multiple items in distribution, how do companies know when to change the replenishment level? The main rule in deciding the target inventory level is “The maximum forecasted consumption within the average replenishment time, factored by the unreliability of the replenishment time.” The main concept applied is the Buffer management which is the control mechanism. The “buffer” is the target level which is the stock that should protect the availability to the market. Buffer management is looking at the on-hand stock to determine the priority (the buffer status). There are three zones i.e. green, red and yellow zones; the emergency level, the red-zone, is aimed at identifying situations when the on-hand stock is too low which signals that there is an urgent need to expedite those products. It is important that the emergency level should provide enough time to expedite an order. It is recommended that the default is to fix the emergency level at 33% of the target level. The warehouse will allow the company to ensure that the inventory level is properly maintained and the company’s sales are boosted at an optimum level. The benefits of a plant warehouse are that the raw materials will be available at one place and the customized systems will be assembled in one place and then distributed from one central location. The plant warehouse will help the company to ensure that inventory is fastly replenished, final products are provided to the customers quickly which will help it in reducing the lead time and finally, the inventory cost will be minimized. Question 3 (c): All the organizations who have applied the concept of Make-to-Availability and TOC Distribution solutions have been successful in increasing their production processes and earn good amount of revenue (Jacobs and Chase, 2011). The concept of Make-to-Availability is a relatively new concept and it is developed on the consumption-driven approach. The major benefits for Hi-Fidelity will be in terms of managing their inventory levels and reducing their operating expenses. The company will be able to fulfil the orders of the customers on time and the order lead time will be reduced. The main problem faced by the company is inability to meet the customer’s requirements and delay in completion of the projects. With the help of Make-to-Availability concept, the inventory will be stored in one warehouse and the production of the products will be done with utmost ease. As Make-to-Availability orders do not have due-dates the priority of buffer management is critical to make the daily decisions on the floor. Source: Goldratt Institute 2009a For the same item, more than one production order could be in the floor in Make-to-Availability situations. The buffer status of an order is defined as: (target level – finished-goods – older-orders) *100/target level The buffer status is dependent on the quantity ahead and not on the quantity of the order itself. As daily sales in Make-to-Availability could fluctuate pretty much the priority of an order could rise quickly within one day. By identifying the buffer zones, Hi-Fidelity will be able to ensure that is has appropriate level of stock in place and will be able to meet the demands of its largest OEM with utmost ease. Since the entire inventory will be in one place, the distribution of the systems to all the distributors will be done conveniently. As the company will be making customized products and everything will be stored on efficient IT system, it will be able to meet the VMI demand of its largest OEM. The company will be able to operate more flexibly, the production schedules will be tightly followed and there will be more replenishment of the inventory. The target inventory levels will help the company to ensure that it has adequate raw materials available in its warehouse and the products will be made in accordance with the requirements of its largest customer. The concept of TOC will allows the company to ensure that it has one centralized warehouse where it can store its entire important inventory in adequate amount and ensure that the output level is achieved within the agreed time period. With the help of buffer management, the organizations are able to achieve their optimum level of inventory along with implementing the TOC concept as it allows them to store their key raw materials in single warehouse and the figure allows the operation teams to develop well-planned schedules for their production. Therefore, Hi-Fidelity will be able to set priorities for the flow of work on the basis of stock buffer status, identify the time to expedite potential deals (if the stock buffer gives red signal, then the next order can be demanded), it will signal when there is need for intervention and eradicate the sources that are creating delays in the process. Question 4 (a): Drum-Buffer-Rope (DBR) approach is one of the most effective methods for applying the concept of TOC organizations. The approach is developed to manage the company’s operations when there is some internal resource constraint that is hampering the effective production processes (Tukel, Rom and Eksioglu, 2003). In Hi-Fidelity case, the main internal constraint is the inefficient utilization of the capacity along with inability to meet the specification requirements of the customers and long lead time. The DBR approach can be described as TOC method for appropriate scheduling and managing of operations and three elements are used for the explanation of the concept i.e. drum, buffer and rope. The drum is the constraint which processes the work in a particular sequence on the basis of customer’s requested due date and resource’s finite capacity. Buffer is the protection of shipping schedule so that the finished goods are delivered on time. Rope is the mechanism to choke the raw materials release so that it matches the consumption at the constraint. The rope is also described as the planned lead time that is offset from the drum for Raw materials release and completion of customer’s order. The DBR approach will help the company to restructure its production methods by ensuring that inventory level is properly maintained in a properly developed warehouse, the stocks are available in limited and required quantity so that the customers have instant access to their desired number of systems. The approach will allow the company to set the time buffer that will help it to meet the varying demands of the customers. Question 4 (b): Camp (2010) described that the DBR approach comprises of three key elements i.e. Drum, Buffer and Rope. The concept was developed to help the businesses in identifying the constraints that can have significant impact on the production processes. In case of Hi-Fidelity, the drum is the market demand which is linked to the entire plant and it is the customized production facility provided to its retail distributors; the buffer is the time or inventory level which will ensure that the constraint remains protected from creating any bottlenecks and rope is the material availed to the rate of the constraint (Cox, Blackstone, and Schleier, 2003). It is important to choke the material release which should be directly connected to the drums which is the shipping schedule and machine schedule. When the material release is choked than it will help in decreasing the level of inventory and fewer inventories will ultimately result in shorter material lead time. The companies that are making customized products will have to meet the due dates as quoted by the customers have to plan out their work so that the work is ready to be shipped at a predetermined amount of time prior to the quoted shipping date. The buffer management will help the company to set its rope length as the work will be given in the production process at the rate as determined by the drum and the time is set in accordance with the predetermined length of the buffer which ties the release of work directly to the constraint/control point. The buffer status of every order signals how urgent the order is i.e. according to the state of the on-hand stock (plus older orders for the same item) relative to the target level, thus, the list of production orders is sorted according to their buffer statuses in descending order, is the critical information for the operator at the work center area to decide what to do next. As daily sales could fluctuate pretty much the priority of an order could rise quickly within one day. The behaviour of the finished-goods stock also reveals whether the buffer, the target level, is about right or not. For instance, the target level should be high enough to prevent too frequent or too deep penetrations into the red-zone. When the depth of Red zone penetration is equivalent to the red zone’s size, buffer size needs to be increased; on the other hand, when the stock of finished goods is in the green zone for long period, the target level needs to be decreased. Question 4 (c): Hi-Fidelity Ltd. will be able to ensure that its production is improved as it will be aware of the demands of its customers, the forecasts will not be required as it will be fulfilling the orders as they are placed, the inventory level will be properly maintained in one place, the inventory replenishment will increase and the inventory maintenance cost will decrease. The potential benefits specifically related to the company’s enhanced performance will be made evident from the customer satisfaction as they will be able to get their desired level of products according to their specifications. The material release should be directly connected to the drums – the shipping schedule and the blue machine schedule which will help in decreasing the inventory level and it will mean shorter Material Lead Time. The DBR concept needs to be applied by implementing the following steps: 1. Identify the demand for products and Capacity Constrained Resource which is known as Blue. 2. Exploit the Blue resource task schedule (Drum) and delivery schedule of raw materials for product (Drum). 3. The release of work into the system to support the schedule for Blue and delivery schedule for product’s raw materials need to be subordinated which means that work release should be according to the schedules and it will be the rope length. Source: Goldratt Institute 2009a The potential benefits of the usage of buffer management concept by applying DBR concept is that the workers will be aware of their tasks and will be productive, unnecessary steps will be eliminated; when the critical resources come, they are ready to be utilized; the milestones for the project will be set and it will allow the senior management to ensure that the process is going at a smoother pace and finally, if any changes are required, then they can be easily made as the process becomes flexible. Question 5: The concept of Theory of Constraints (TOC) is being studied for long time and it has helped many companies in enhancing their performance by focussing on the key vital steps in the production processes. The underlying approach of TOC is that the production processes are complex systems that have inherent simplicity (Davies, Mabin and Cox, 2004). The application of TOC helps the organizations to set holistic approach towards the processes and rules which have their basis on systematic approach; the aim of TOC is to exploit the inherent simplicity that is prevalent in the existing systems by focusing on limited physical and logical points of leverage that will synchronize every part of the production process to achieve the goal of continuous and step by step change in the process for improving the process along with organization’s performance (Dilmaghani, 2008). The Theory of Constraints (TOC) was introduced in the market with the aim of helping the companies to align their production processes. The main focus of this theory developer was on the fixed area of improvement so that the operations team had a clear direction about the way in which they want to progress (Gupta, 2010). Likewise, the researchers realized the need of integrating the continuous improvement processes such as Lean and Six Sigma so that if there is any problem in the production process, it is eliminated and replaced by the steps that will enhance the production of the final outputs (Watson, Blackstone & Gardiner, 2007). In order to help the production level of various companies, all three concepts are properly integrated into the production processes so that the final output level is properly enhanced. The major difference between TOC based initiatives and Lean and six sigma production processes is that TOC emphasizes more on managing the variation by using strategic buffering rather than targeting improvement in the production processes. Both lean and six sigma focus on reducing variations those are wasteful for the company while TOC manages the variation so that the existing system works smoothly. The companies are realizing that they cannot solely rely on the traditional concept of process improvement and hence, they are focusing their attention on designing their production processes that will help them in eliminating any unnecessary steps and develop best production methods for increased performance of the company. The concept of TOC like other two concepts has various similar aspects and follows systematic approach so that any problem that is identified can be rectified easily and with proper care and consideration (Camp, 2010; Choe and Herman, 2010). According to Claporto (2012) and Rosen (2008), the main objectives of the operation processes can be classified into four major ones as follows: 1. Improving the flow of operations and shortening the lead time. 2. The primary objective of efficient flow of production process must be translated into the practical mechanism that prevents over production. In TOC, time is used to prevent overproduction, lean inventory is used and Six Sigma space is used so that the production level is enhanced. 3. Abolishment of local efficiencies is main task. 4. Balance flow with focused process must be in place TOC, Lean and Six Sigma when implemented in combined form help in developing the basic foundation for the production process as it helps the companies to design their production schedules so that the inventory is kept at the optimum level, proper stock is produced so that high level is maintained and the demands of the customers are adequately met. The primary aim of TOC, Lean and Six Sigma is to help the companies in ensuring that the inventory replenishment takes place on an increasing rate and the final output meets the standards as set by the customers (Gupta, 2008). Hence, the concept of TOC, Lean and Six Sigma help the companies to develop adequate understanding about the production processes that should be properly developed and implemented in the business environment so that they can respond to the varying demands of the customers. Both Lean and TQM address the whole system by concentrating on flow and the elimination of variation in the delivery system. Question 6 (a): The Theory of Constraints (TOC) is the best concept for all those organizations that want to ensure that their production processes become efficient and the management team takes care of meeting the demands of the customers by designing and developing the products and services according to their requirements. The extensions of the concept has been done by numerous people and three concepts are being extensively applied in numerous organizations as they have helped them in earning good streams of revenue and successfully prosper in their respective fields. The study of Jacobs and Chase (2011) has concluded that the three methods are the ideal ones for ensuring best production of final goods that are produced in the right quantity and at the right time. The concepts are Critical Chain Project Management (CCPM), Drum Buffer Rope (DBR) and Make to Availability and Distribution. Almost all the three concepts allow efficient utilization of time and resources and provide buffer zones so that the lead time is reduced, inventory levels are developed to their optimum levels and stocks are available in required amount. CCPM allows the companies to identify the critical chain of the company to identify the resource constraints so that the project is completed on time and the inventory level is sufficient enough to meet the demands of the customers. In CCPM, the constraints that are causing problems are removed such as the expansion of the work just to fill up the time; a plan or project network diagram is developed so that all the task and resource dependencies along with time constraints can be worked out, planning and scheduling becomes easier; and the method helps in identifying the buffers and critical chains so that safety time is removed from individual tasks. While, DBR method allows the companies to ensure that adequate buffer level is maintained so that the lead time is maintained and the inventory and stock level is properly in place as well. In DBR, time and buffer management is done with the help of its three crucial elements i.e. Drum (the constraint which processes work in a specific sequence based on the customer requested due date and the finite capacity of the resource); time buffers (which protect the shipping schedule from variability; and finally a rope mechanism (which chokes the release of raw materials to match consumption at the constraint). DBR uses buffer management to continuously improve a production environment. Make to Availability and Distribution ensures that the products are developed in accordance with the customers’ specifications so that they can distribute their products in appropriate manner. In this process, the central warehouse is first decided and for each point in the distribution network, inventory level is identified by using the stock buffer formula. The inventory targets are monitored according to the zones and main foundation of the concept is move to order daily and replenish periodically. Hence, the time and buffer management is properly applied with the help of this concept as well. Question 6 (b): According to Jacobs and Chase (2011) and Claporto (2012), there are three methods that are the best for ensuring best production of final goods that are produced in the right quantity and at the right time i.e. Critical Chain Project Management (CCPM), Drum Buffer Rope (DBR) and Make to Availability and Distribution. Although all of these methods ensure that the products are produced according to the demands of the company’s customers but there are some variations in each of them. In the DBR concept, the primary aim of the drum, buffer and rope is to provide the foundation for designing the production schedule that allows the protection of any disruption creation, inventory is available according to the required level and in order to minimize the overall lead time, the small batches of products are produced. The steps followed for buffer management and aggregation comprise of identification of blue capacity constrained resource and the demand of products in the market, the next step is exploitation of delivery schedule of product’s raw materials and blue resource schedule and final step is to release the work according to the scheduled tasks. In this concept, time and schedules are the key determinants in buffer management. In case of CCPM model, the buffer management and aggregation is done by allowing the production processes to be flexible so that the production methods are flexible enough to respond properly to the demands of the customers. According to this method, a project network is first developed so that the critical chain is determined. The critical chain helps in making the schedules accordingly by ensuring that buffers are set at this level so that the inventory is available in right amount. In order to ensure that appropriate level of inventory is maintained, CCPM requires frequent updates of estimated time required to complete in-progress tasks. This information is used to update the status of the various buffers, which in turn provides the information needed to know when corrective action is truly necessary. Whereas, in Make to Availability and Distribution concept, more emphasis is on inventory replenishment and that is why adequate attention is given on the production schedules so that the right quantity of systems are produced and adjustments are made in accordance with the customers’ specifications. As MTA orders do not have due-dates the priority of buffer management is critical to make the daily decisions on the floor. As daily sales could fluctuate pretty much the priority of an order could rise quickly within one day. The behaviour of the finished-goods stock also reveals whether the buffer, the target level, is about right or not. The binding priorities of the inventory are according to the colors i.e. green, yellow and red; Green is up to 33%, yellow between 34% and 66% and red about 67%. It is a known fact that a red order has a decisive priority over yellow or green and yellow order has a priority over green. For instance, the target level should be high enough to prevent too frequent or too deep penetrations into the red-zone. When the depth of Red zone penetration is equivalent to the red zone’s size, buffer size needs to be increased; on the other hand, when the stock of finished goods is in the green zone for long period, the target level needs to be decreased. 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