How To Choose A Right-sized Manufacturing System
Chapter 6 - Basics of Planning
Planning More Effectively
It is easy to say “We should do better planning” but actually accomplishing this goal is often very difficult – virtually impossible without strict procedures coupled with a computerized system.
Effective planning is often illusive for manufacturing firms whether they are small or large, but for different reasons:
Small manufacturing firms usually lack the manpower required to “get organized” and implement sufficiently strict policies and procedures where planning is possible. Without strict procedures, small firms generally will revert to “seat-of-the-pants” operations where all efforts of focused on getting through to the end of the day.
On the other hand, large manufacturing firms have so many activities going on – engineering, purchasing, production, quality control, order entry, shipping – among people who don’t have a natural inclination to coordinate their activities, that effective planning becomes very difficult. In companies whose size would suggest that planning plays a major role in their apparent success, you may find precious little planning actually being done.
Nevertheless, great benefits can be achieved if you can assist your client by implementing a reasonable set of policies and procedures, and leading the way to a right-sized planning system.
A while back, I happened on an acquaintance at the grocery store one Sunday afternoon. I know Greg is a bachelor so I was surprised to see him wheeling 2 full grocery carts down the aisle. After exchanging pleasantries, I asked Greg what he planned to do with two carts full of groceries. Blushing slightly, he explained that, despite the urging of relatives and friends, he never got into menu planning. “So, I just come here every Sunday and buy everything in the store’s sale flier,” explained Greg. “Since starting this, I’ve never run out of groceries during the week.” After exchanging more pleasantries, we went our respective ways.
On the way home that day, I was struck with the realization that many of the manufacturers I’d met over the years do exactly the same as my friend Greg. Absent an effective means for planning, they respond by purchasing a load of inventory – just in case they need it.
No one could argue that just a little planning wouldn’t significantly reduce the inventory either Greg or any manufacturing company chose to carry.
For Greg, running out of strawberry jam probably wouldn’t disrupt his meal production for the week. He’d probably just swap in grape jelly and enjoy his BP&J sandwich just as much. If you are a manufacturer, the cost of poor planning can be extreme. Running out of model 57T34 roller bearings could bring an entire production line to a standstill. Effective planning of production and planning activities becomes imperative.
Production Planning
For most manufacturing companies, the Production Department creates the demand that drives most manufacturing activities. Production demand may originate with customers who lodge sales orders, but this demand is first observed in Production.
Production planning begins with an accurate understanding of the time required to build the product, starting from the lowest level subassemblies all the way up to the finished good. The bill of materials section of any manufacturing software you purchase should allow you to clearly document production lead times, that is, the time (in hours or days) required to complete any particular assembly.
Most manufacturing software includes a Master Production Scheduling (MPS) module. This module computes start and completion dates, beginning from the expected customer ship date of the finished good, and working back, assembly level by assembly level, to determine when production should begin. For companies where production is driven from a forecast rather than firm sales orders, the MPS module can usually accept a list of items and completion dates. Some more sophisticated software can examine historical sales activity and produce a forecast for the future.
The job of the MPS module is to analyze the inventory of the finished good, matched up with the demand created by sales orders and/or a sales forecast, and predict the shortage of subassemblies over any range of time. Basically, it answers the question “If you want to ship this on such and such a date, when do you have to start building it?”
Purchasing Planning
Unless you are carrying way too much inventory, the MPS module of a computerized manufacturing system will identify shortages for all the raw materials and purchased parts required to complete the assembly of finished goods and subassemblies. Since the MPS starts with the ship/completion date of the finished good and walks back through lower and lower levels of subassembly, the MPS module will also be able to determine when any raw material is required for a particular production step.
The purchasing module of a manufacturing system will know who the suppliers are for each raw material item, and the estimated order lead time for each item. So, as the MPS module is walking its way down through a bill of materials structure, it can be examining the available inventory of any of the raw materials it encounters. From there, the software will be able to predict exactly when each item should be ordered so that it becomes available just in time to be used in the assembly process.
The notion that not all the required material is needed on Day One of the production process is the key to effective purchasing planning. By purchasing only the required amount of material, and never purchasing it before it is actually needed (or, sadly, after it is needed) inventory holding costs can be dramatically reduced and missed ship dates virtually eliminated.
You may set your sights on a manufacturing management system that helps you maintain an inventory. Far more valuable is a manufacturing management system that helps you maintain NO inventory.
Running a manufacturing plant on no inventory may be an unachievable goal. Nevertheless, any effort you make in that direction will pay off handsomely.