Although production and materials planning can be overlooked in its importance in most companies if going smoothly, it is cornerstone to success. Unfortunately, when not going smoothly, it can bring a company to its knees. For example, production might not know what to run, changeovers can be out of control, customers become unhappy, materials shortages persist, resources are scrambling to catch up with changing conditions, and chaos ensues. Read more about this topic in our article, The Million Dollar Planner.
An Industrial Equipment Manufacturer Case Study
An industrial equipment manufacturer struggled to keep up with month end sales goals when receiving last minute notice from Engineering of final design of the engineer-to-order item (bills of materials) before the item was scheduled to ship to meet customer requested dates. There were multiple stages to the manufacturing process (fabrication, weld, paint, final assembly), and parts had to be shipped offsite for process steps and married up along the way at the “right” time to make the orders come together.
The bottleneck and pacing item was the machine shop, yet visibility was limited to seeing which parts had to complete production at the same time, and the production schedule was completely manual based upon paperwork on hand since there was a lack of visibility in the system. The production supervisor would go through the work order packets, pick out manufacturing differentiators (size, material type, etc.) and group the packets in piles by the optimal run sequencing. For example, you run different sizes on different machines, and you would sequence by material type to be most efficient with changeovers.
Although the machine shop pulled out the stops on a regular basis to meet sales goals, it required constant expediting and coordination of process steps, was sub-optimal based upon the work order packets available at the time, and the process was completely dependent on a person (who also turned into a single point-of-failure). Since there was a lack of visibility, sales order availability frequently moved from month-to-month, creating concerns with predictability. And the machine shop ran less efficiently than it would have if there was visibility to the full scope of work order packets.
As we provided consulting support to this client, we learned about the optimal sequencing triggers (size, material type, etc.) and looked for ways to identify these triggers sooner in the process. Of course, it is never as easy as it appears. Thus, we had to work upfront in the sales quoting process to get a better picture of the demand plan by adding configuration strings (high-level identification of the item) into the process and system early in the process. By adding this information into sales orders, the team had better visibility to what was coming down the pike prior to Engineering’s final design so that we could gain visibility to plan capacity and materials (master scheduling) instead of reacting to sales orders late in their life cycle. We integrated this visibility into a SIOP (Sales Inventory Operations Planning) process to build a monthly cadence and review of critical sales and operational forecasts.
To address the machine shop scheduling, additional triggers had to be identified and incorporated into the data. Sales order statuses were also key to the process as sales orders went through engineering, production engineering, customer approval, material availability, and work order creation before the items were available to be scheduled. We built these statuses into a planning report along with key triggers and dates (incorporated from a production status review process). Once this report was built, a dashboard was developed for improved visibility and ease of use. This powered the production scheduling process and replaced the packets process so that the system automated the 80/20 and focused attention on what was meaningful to optimize the production schedule and ensure the parts married up at the right time.
Master Scheduling & Production Planning Results
As the client gained visibility to required capacity and materials, they were able to start making directionally correct decisions early in the process with the master scheduling process. As capacity bottlenecks arose, they were able to address proactively before “running into a wall”. For example, we gained visibility that paint was a future bottleneck, and so the head of Operations was able to put together the appropriate capital requests, gain approval, and order an additional paint system to support sales growth goals. Additionally, offload capacity was needed to supplement the weld area, and so leadership was able to pursue additional options prior to negatively impacting customers.
From a materials standpoint, Purchasing was able to look into the future and secure materials ordered from the Russia-Ukraine region while they were still available. While every client struggled to maintain service levels during COVID, our client was able to keep one step ahead and sustain higher levels of service for customers.
As the production scheduling process was upgraded, our client gained visibility to the machine shop and could optimize efficiencies and gain capacity. The head of Operations said he was able to double capacity to support sales growth. The production schedule was no longer dependent on a person; it became part of a process. Thus, this key resource could focus attention on further optimizing machine shop performance.
The Bottom Line
Pay attention to your planning processes as they will drive bottom line business results. Changing from reactive to proactive sounds far easier than it is when you get down to the details, but rolling out the appropriate process, data, and ERP system upgrades will propel progress. If you are interested in talking about implementing a master planning and production scheduling process upgrade to improve visibility and results, contact us.
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