Demand Flow Technology
Encyclopedia
Demand flow technology is a strategy to define and deploy business processes in a flow, driven in response to customer demand. DFT is based on a set of applied mathematical tools that are used to connect processes in a flow and link it to daily changes in demand.
DFT represents a scientific approach to flow manufacturing for discrete production. It is built on principles of demand pull where customer demand is the central signal to guide factory and office activity in the daily operation. DFT is intended to provide an alternative to schedule-push manufacturing which primarily uses a sales plan and forecast to determine a production schedule.
. Costanza founded the John Costanza Institute of Technology in Englewood, CO in 1984 to provide consulting and education services for manufacturers to implement the methodology.
DFT uses applied mathematical methods to link raw and in-process materials with units of time and production resources in order to create a continuous flow in the factory. The objective is to link factory processes together in a flow and drive it towards customer demand.
Early adopters of DFT included American Standard Companies
General Electric
and John Deere (Deere & Company
).
In the early years, DFT was regarded as a method for "just-in-time" (JIT), which advocated manufacturing processes driven to actual customer demand via Kanban
. It was introduced as a way for American manufacturers to adopt Japanese production techniques, such as Toyota Production System
(TPS), whilst avoiding some of the cultural conflicts in applying Japanese business methods in an American company. Later, it has come to be seen as a lean manufacturing
method that allows factories to implement techniques such as one-piece flow, TAKT-based line design, Kanban
material management and demand-driven production.
Demand Flow Technology is promoted as a method particularly suitable for high-mix, low-volume manufacturing. in 2001, Costanza was awarded a patent for this approach for mixed-model manufacturing.
DFT is a pathway to achieve demand-driven manufacturing capability. It is used as a framework to guide the design, implementation and deployment of demand driven manufacturing in a repeatable form. In this way, it is similar original concept of Just-in-Time (JIT) that was first deployed in Japanese manufacturers using a foundation of total quality management.. More recently, Just-in-time has been more commonly used to describe supplier delivery methods, rather than a production philosophy. DFT assumes basic process capability that can arise from TQM and statistical process control
(SPC) principles and embeds it in a framework of management that can more easily achieve demand driven in a repeatable way.
A production schedule
based on MRP will tend to cope with high product mix by allocating each model to a multiple of a shift or a day. This means that the whole product mix is supplied across a scheduling cycle of a multiple of weeks. This tends to extend the lead-time or increase dependency on the forecast. DFT offers “The ability to accommodate a range of volumes for any product, any day, based on the direction of actual customer demand” .
The SoE usually takes the form of a table with the product code, process ID, task description and sequence, required work and set-up time for machines and labour, and quality check criteria. The SoE intends to define times that are reasonable, realistic and repeatable to perform to the necessary quality. Many of the strengths and criticisms of DFT as a methodology stem from the Sequence of Events. The SoE are the foundation of process definition but are not used as work instructions. To communicate standard work at the work center, use Operation Method Sheets.
In an MRP systems environment, the SoE represents a drill-down from the routing that provides a tabular view of the Product Synchronization at the process level. A DFT manufacturer would therefore use the SoE as the master record of process definition and derive routings and ISO documentation from it.
, and many other lean manufacturing derivatives, a DFT line is designed for variable output rates according to daily demand. Thus, the demand data that are used for line design represent a limit quantity not an actual rate of supply. The relationship between the Dc and the average daily demand will be driven by the required service level of the product item to market demand. A higher service level will call for capacity that can supply a higher daily rate than the average over a long range. This will likely affect the resource productivity
and inventory levels. A greater mix on the line is able to provide a higher level of service for any given level of resources and inventory.
Where HE is Effective Hours, S is the number of shifts and DC is the demand at capacity. This ratio can b expressed for finished products at the end of the line and is referred to as Takt-Time. It can also apply at the process where bill of material relationships, process yield and optionality can affect the dependent volume for any given Dc at the finished goods level. At the process, this ratio is known as operation cycle-time.
based on a visual signal to replenish a point of consumption with required material. A typical material Kanban system in DFT is “Single Card, Multiple Container” and enables card or container quantities to be consumed and replenished without shortages.
Material Kanban provides an alternative to kitting as a way of issuing material to the production floor. A DFT environment will strive to simplify the definition of warehouse
locations for material and reduce the number of transactions required to control the flow of material during production. The aim of Material Kanban is to connect the material flow with actual requirement at the process and provide a more robust availability of parts to production whilst reducing the response-time to the customer.
and will move over time. The flex-fences will be different for different product items or groups and should be calculated individually. Order policies, purchasing, inventory and production capacity will all be set against these flex fence boundaries, so these calculations will sit at the heart of operations planning
.
Unfortunately, this is a calculation-intensive and critical process that is largely unsupported by MRP
/ERP
systems. The lack of system tools and clash with conventional MRP planning routine are primary reason why demand-based management has not had the same level of adoption experienced by the rest of the DFT principles.
Effective response to demand can be described as a distribution curve, with some orders taking longer to fill than others. The result is variation and uncertainty in the manufacturer’s ability to serve the market. Working capital
is required to hedge this response lag and uncertainty.
DFT aims to reduce both the variation and duration of response to demand. This can be seen as a more capable fulfillment that provides a higher level of customer service at a lower level of working capital. The intended results are improvement in delivery performance together with increased cash-flow and return on working capital.
, Stanleyworks,, Flextronics
, American Standard
, Trane
, AstraZeneca
and many others. It has a strength in those manufacturing operations that are expected to supply a high mix to an unpredictable and volatile market. It is often seen as the science behind flow manufacturing for discrete manufacturers, whose products do not naturally flow across the manufacturing processes.
and production resources
As a result, manufacturers are forced to rely on an outdated routine for planning that is largely unchanged since the 1960s.
DFT represents a scientific approach to flow manufacturing for discrete production. It is built on principles of demand pull where customer demand is the central signal to guide factory and office activity in the daily operation. DFT is intended to provide an alternative to schedule-push manufacturing which primarily uses a sales plan and forecast to determine a production schedule.
History
It was created by John R. Costanza, an executive with operations management experience at Hewlett Packard and Johnson & JohnsonJohnson & Johnson
Johnson & Johnson is an American multinational pharmaceutical, medical devices and consumer packaged goods manufacturer founded in 1886. Its common stock is a component of the Dow Jones Industrial Average and the company is listed among the Fortune 500....
. Costanza founded the John Costanza Institute of Technology in Englewood, CO in 1984 to provide consulting and education services for manufacturers to implement the methodology.
DFT uses applied mathematical methods to link raw and in-process materials with units of time and production resources in order to create a continuous flow in the factory. The objective is to link factory processes together in a flow and drive it towards customer demand.
Early adopters of DFT included American Standard Companies
American Standard Companies
American Standard Companies, Inc. was a global manufacturer of air conditioning systems and services, bath & kitchen products and vehicle control systems. The company divested all but the air conditioning business in 2007, and renamed itself Trane....
General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
and John Deere (Deere & Company
Deere & Company
Deere & Company, usually known by its brand name John Deere , is an American corporation based in Moline, Illinois, and the leading manufacturer of agricultural machinery in the world. In 2010, it was listed as 107th in the Fortune 500 ranking...
).
In the early years, DFT was regarded as a method for "just-in-time" (JIT), which advocated manufacturing processes driven to actual customer demand via Kanban
Kanban
, also spelled kamban, and literally meaning "signboard" or "billboard", is a concept related to lean and just-in-time production. According to Taiichi Ohno, the man credited with developing Just-in-time, kanban is one means through which JIT is achieved.Kanban is not an inventory control system...
. It was introduced as a way for American manufacturers to adopt Japanese production techniques, such as Toyota Production System
Toyota Production System
The Toyota Production System is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers...
(TPS), whilst avoiding some of the cultural conflicts in applying Japanese business methods in an American company. Later, it has come to be seen as a lean manufacturing
Lean manufacturing
Lean manufacturing, lean enterprise, or lean production, often simply, "Lean," is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination...
method that allows factories to implement techniques such as one-piece flow, TAKT-based line design, Kanban
Kanban
, also spelled kamban, and literally meaning "signboard" or "billboard", is a concept related to lean and just-in-time production. According to Taiichi Ohno, the man credited with developing Just-in-time, kanban is one means through which JIT is achieved.Kanban is not an inventory control system...
material management and demand-driven production.
Demand Flow Technology is promoted as a method particularly suitable for high-mix, low-volume manufacturing. in 2001, Costanza was awarded a patent for this approach for mixed-model manufacturing.
Demand-driven manufacturing
The central tenet to DFT is the primacy of customer demand in daily execution of the operation. According to Aberdeen Group,- “Demand driven manufacturing involves a synchronized, closed loop between customer orders, production scheduling, and manufacturing execution; all while simultaneously coordinating the flow of materials across the supply chain.” [Aberdeen Group, 2007] .
DFT is a pathway to achieve demand-driven manufacturing capability. It is used as a framework to guide the design, implementation and deployment of demand driven manufacturing in a repeatable form. In this way, it is similar original concept of Just-in-Time (JIT) that was first deployed in Japanese manufacturers using a foundation of total quality management.. More recently, Just-in-time has been more commonly used to describe supplier delivery methods, rather than a production philosophy. DFT assumes basic process capability that can arise from TQM and statistical process control
Statistical process control
Statistical process control is the application of statistical methods to the monitoring and control of a process to ensure that it operates at its full potential to produce conforming product. Under SPC, a process behaves predictably to produce as much conforming product as possible with the least...
(SPC) principles and embeds it in a framework of management that can more easily achieve demand driven in a repeatable way.
Mixed-model production
Mixed-model production is the production of a wide range of product models using a certain degree of shared resources and common material. It is commonly accepted that modern manufacturing places a greater pressure on producers for more choice in the product offering.. Products are increasingly assembled from standard components and sub-assemblies, using machines and automated systems as well as manual labour. DFT is designed to handle this mix and provide a way to establish mixed-model production lines.A production schedule
Production schedule
The production schedule is a project plan of how the production budget will be spent over a given timescale, for every phase of filmmaking.* CastActors* Special Effects* Wardrobe* Special Equipment* Stunts* Extras/Silent Bits* Props* Make-up/Hair...
based on MRP will tend to cope with high product mix by allocating each model to a multiple of a shift or a day. This means that the whole product mix is supplied across a scheduling cycle of a multiple of weeks. This tends to extend the lead-time or increase dependency on the forecast. DFT offers “The ability to accommodate a range of volumes for any product, any day, based on the direction of actual customer demand” .
Product synchronization
The first tool to be used in a DFT implementation, product synchronization is a definition of relationship of processes in a flow to build a product. It takes the form of a diagram, usually created in pen and paper or whiteboard and formalized with a visualization program such as Microsoft PowerPoint or Visio. It displays how the processes relate to each other in a flow, with the conversion of raw material to finished goods. A process is defined by “A logical grouping of value-adding work performed to a common volume”.Sequence of Events, SoE
Each of the processes in the Product Synchronization requires a standard process definition. In DFT, the Sequence of Events provides this definition. In the Quantum Leap, the sequence of events is “The definition of the required work and quality criteria to build a product in a specific production process.”The SoE usually takes the form of a table with the product code, process ID, task description and sequence, required work and set-up time for machines and labour, and quality check criteria. The SoE intends to define times that are reasonable, realistic and repeatable to perform to the necessary quality. Many of the strengths and criticisms of DFT as a methodology stem from the Sequence of Events. The SoE are the foundation of process definition but are not used as work instructions. To communicate standard work at the work center, use Operation Method Sheets.
In an MRP systems environment, the SoE represents a drill-down from the routing that provides a tabular view of the Product Synchronization at the process level. A DFT manufacturer would therefore use the SoE as the master record of process definition and derive routings and ISO documentation from it.
Operation method sheets
These are visual description of work in motion, materials and the required quality check. In the purest form, operation method sheets are drawn in wire-frame to show the significant contours of the product form and clearly represent work in motion and quality without visual noise. The OMS has three stages of activity: total quality check, work, and verify. This establishes the concept where each operator checks the output quality of the operation immediately upstream. This can contribute to a total quality culture and parts-per-million capability.Mixed-model process map
The sequence of events and product synchronization define how tasks and quality check compose the process for any given product. The mixed-model process map shows how products and processes form a requirement for resources. In such a map, the products and processes form a matrix with products as rows and processes as columns. At the intersection are most commonly actual times (standard times at the process from the sequence of events), but could also display yield and optionality ratios.Demand at capacity
Demand at capacity is the volume of production for a single product item at capacity. It is a fixed value that defines the maximum daily rate of supply. The Demand-at-Capacity is often confused with the daily rate of production. In contrast to Toyota Production SystemToyota Production System
The Toyota Production System is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers...
, and many other lean manufacturing derivatives, a DFT line is designed for variable output rates according to daily demand. Thus, the demand data that are used for line design represent a limit quantity not an actual rate of supply. The relationship between the Dc and the average daily demand will be driven by the required service level of the product item to market demand. A higher service level will call for capacity that can supply a higher daily rate than the average over a long range. This will likely affect the resource productivity
Resource productivity
Resource productivity is the quantity of good or service that is obtained through the expenditure of unit resource. This can be expressed in monetary terms as the monetary yield per unit resource....
and inventory levels. A greater mix on the line is able to provide a higher level of service for any given level of resources and inventory.
Effective hours
The effective hours is the time available for a given resource to produce product or perform process set-up or changeover. It is defined per shift and represents the total available time to perform tasks set in the SoE. Non-productive time such as equipment maintenance, breaks, 5S activity and continuous improvement is deducted from effective hours. Setup time is included as it is arguably a form of productive time and calculations for batch size optimization and dynamic Kanban will require setup and run-time to be managed from a common pool of resource time.Takt & Operation Cycle-Time, OP c/t
Takt-time is the ratio of time to volume and in DFT is expressed asWhere HE is Effective Hours, S is the number of shifts and DC is the demand at capacity. This ratio can b expressed for finished products at the end of the line and is referred to as Takt-Time. It can also apply at the process where bill of material relationships, process yield and optionality can affect the dependent volume for any given Dc at the finished goods level. At the process, this ratio is known as operation cycle-time.
Material Kanban
DFT shares a conventional definition of material KanbanKanban
, also spelled kamban, and literally meaning "signboard" or "billboard", is a concept related to lean and just-in-time production. According to Taiichi Ohno, the man credited with developing Just-in-time, kanban is one means through which JIT is achieved.Kanban is not an inventory control system...
based on a visual signal to replenish a point of consumption with required material. A typical material Kanban system in DFT is “Single Card, Multiple Container” and enables card or container quantities to be consumed and replenished without shortages.
Material Kanban provides an alternative to kitting as a way of issuing material to the production floor. A DFT environment will strive to simplify the definition of warehouse
Warehouse
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload...
locations for material and reduce the number of transactions required to control the flow of material during production. The aim of Material Kanban is to connect the material flow with actual requirement at the process and provide a more robust availability of parts to production whilst reducing the response-time to the customer.
Production Kanban
Production Kanban is designed for a replenishment quantity that may be smaller than a lot size or batch. It is based on a “dual card Kanban” system where a “move” card or container represents the quantity required by the downstream point of consumption and a “produce” card is kept on a display board and accumulates to a replenishment batch.Demand-based management
Demand-based management is an approach that defines tolerance capability for demand in order to unify material and production planning under conditions of demand uncertainty. It uses “flex fences” to set the upper and lower boundaries of supply against a definition of the current daily rate of demand. The current rate is usually some kind of smoothed averageAverage
In mathematics, an average, or central tendency of a data set is a measure of the "middle" value of the data set. Average is one form of central tendency. Not all central tendencies should be considered definitions of average....
and will move over time. The flex-fences will be different for different product items or groups and should be calculated individually. Order policies, purchasing, inventory and production capacity will all be set against these flex fence boundaries, so these calculations will sit at the heart of operations planning
Planning
Planning in organizations and public policy is both the organizational process of creating and maintaining a plan; and the psychological process of thinking about the activities required to create a desired goal on some scale. As such, it is a fundamental property of intelligent behavior...
.
Unfortunately, this is a calculation-intensive and critical process that is largely unsupported by MRP
MRP
The initialism MRP or M.R.P. can stand for many things:Business, economics and management* Manufacturer's recommended price* Manufacturing resource planning * Marginal Revenue Product, see Marginal revenue productivity theory of wages...
/ERP
Enterprise resource planning
Enterprise resource planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application...
systems. The lack of system tools and clash with conventional MRP planning routine are primary reason why demand-based management has not had the same level of adoption experienced by the rest of the DFT principles.
Value and results
Companies that implement DFT are typically looking for an improvement in the response to customer demand. This is reflected in the lead-time or replenishment time for finished product and will affect the level of inventory that is held to buffer response requirements.Effective response to demand can be described as a distribution curve, with some orders taking longer to fill than others. The result is variation and uncertainty in the manufacturer’s ability to serve the market. Working capital
Working capital
Working capital is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is...
is required to hedge this response lag and uncertainty.
DFT aims to reduce both the variation and duration of response to demand. This can be seen as a more capable fulfillment that provides a higher level of customer service at a lower level of working capital. The intended results are improvement in delivery performance together with increased cash-flow and return on working capital.
Applications
Demand flow technology is applicable in a wide range of product environments and has been successfully deployed in many different industries. Companies who have embraced demand flow technology include John DeereJohn Deere
John Deere was an American blacksmith and manufacturer who founded Deere & Company, one of the largest and leading agricultural and construction equipment manufacturers in the world...
, Stanleyworks,, Flextronics
Flextronics
Flextronics International Ltd. is an electronics manufacturing services provider that offers services to original equipment manufacturers . It also provides supporting supply chain services, including packaging and transportation throughout the world, as well as design and after-sales...
, American Standard
American Standard
American Standard may refer to:* American Standard, a brand of plumbing fixtures made by American Standard Brands.* American Standard, a brand of HVAC equipment made by Trane....
, Trane
Trane
Trane Inc. is a subsidiary of Ingersoll Rand and is the successor company to the American Standard Companies. It is a global provider of heating, ventilating and air conditioning systems and building management systems and controls under the Trane and American Standard brand names...
, AstraZeneca
AstraZeneca
AstraZeneca plc is a global pharmaceutical and biologics company headquartered in London, United Kingdom. It is the world's seventh-largest pharmaceutical company measured by revenues and has operations in over 100 countries...
and many others. It has a strength in those manufacturing operations that are expected to supply a high mix to an unpredictable and volatile market. It is often seen as the science behind flow manufacturing for discrete manufacturers, whose products do not naturally flow across the manufacturing processes.
It is simple
Demand flow technology provides a simple, logical method based on applied mathematics. The technique is based on simple operators of addition, subtraction, multiplication and division so it does not rely on advanced mathematics.It is repeatable
DFT forms a step-by-step guide to converting production from a scheduled-push to a demand-pull and flow system. Although it is applicable to a wide range of products, the steps are consistent and work in the same way. It does not depend on the judgment of an expert in the same way as lean or Six Sigma and can be taught to a broader audience though short training workshops.It is effective
At its heart, DFT formalizes the natural flow of material, processes and information required to build a product. It is not so much an invented technology as a description of the optimal way to align a factory towards customer demand.It is customer-centric
DFT places the customer at the center of the operation. It enables companies to formalise a customer-centric view with practical tasks and actions that guide behaviour in the organisation. It moves the concept of customer-driven to an achievable plan of action beyond a statement of philosophy.It aligns business and customer goals
The concept of maximizing shareholder value is often seen as a conflict with the quality of customer service.. Demand Flow Technology, if applied correctly, can unify financial and customer objectives in a holistic approach to managing operating capital and growing a business.It is constrained to the factory
Demand flow techniques have been widely applied to the factory, yet have failed to gain widespread acceptance in corporate management. All too often, it tends to be limited to production planning whilst operations and material planning continue to be dominated by use of ERP/MRP systems. The holistic ideal of demand flow may be fractured by this conflict.It is unsupported by systems
Major ERP/MRP vendors have largely ignored the advantages of Demand Flow techniques, or been acquired before their products have had a chance to gain market share. The advocates and users of Demand Flow have largely failed to challenge the inadequate logic that conventional MRP uses for planning capacityCapacity planning
Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time...
and production resources
Capacity planning
Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time...
As a result, manufacturers are forced to rely on an outdated routine for planning that is largely unchanged since the 1960s.