Using Theory of Constraints to Find the Problem about High Level Inventory in the Aerospace Industry

Abstract

In aerospace industry, cause each component of the plant is specify and time-critical, lot of operation management tools are apply to improving material management efficient. By using theory of constraint (TOC), we construct a "Current Reality Tree (CRT)" to realize a firm\'s material management objectives and requirement, and what they do to fulfill them. In the second step, through CRT, we diagnose the material management systems\' Undesirable Effects (UDEs) and find where the system\'s root problems or conflict material management actions are. We choice an aerospace manufacturer company as a case. The analysis result point out each department has different goals to fulfill. First, the material management department introduce Economic Order Quantity (EOQ) to reduce average material cost, but inventory management department using flexible purchase system to reduce the inventory cost on the contrary. Second, the operation department purchase universal material to increase the material utility, but increasing the average inventory turnover rate, and then decrease inventory management department performance. In the end, we apply Collaborative Planning, Forecasting, and Replenishment (CPFR) and Balance Scorecard System (BSC) to redesign the whole inventory system, by eliminating the conflict inventory management activities from different department, we increase the whole system inventory management performance.