In-plant material buffer sizes for pull system and level-material-shipping environments in the automotive industry

Traditionally automotive assembly plants operate with at least two weeks of frozen vehicle orders enabling them to calculate the amount of material needed for the next two weeks. Implementing a pull system between the plant and its customers, and level-material-shipping between the plant and its suppliers, changes the amount of material buffer needed within the assembly plant. The pull system eliminates the frozen vehicle-order schedule, without which plants cannot calculate the material needed, but must use inventory to buffer the line from random demand. Level-material-shipping, a just-in-time principle that provides suppliers with a constant shipping schedule, forces plants to use material inventory to buffer the line from un-level demand for parts resulting from un-level production or an un-level model mix. We model these effects to derive formulae for the buffer needed to provide a given service level in the face of demand variability, un-level production, and un-level model-mix.