Increasing Throughput with Production Planning
Every production planner has the challenging job of managing a complex set of conflicting priorities – meeting customer requested ship dates and new product trials, supporting manufacturing and logistics performance objectives, and addressing finance’s objectives as it relates to inventory levels and cash flow. Almost every plant manager or production planner believes their customers and sales organizations throw large orders over the wall with unrealistic due dates. If they don’t ramp up quickly enough, they will be blamed when the customer complains. If they do ramp up, the customer changes its mind, leaving manufacturing holding the bag with obsolete inventory, extra costs, and excess people they will have to get rid of when corporate or the Board meets again. So, how do we schedule the customer’s orders while not left holding the bag?
There are production planning and scheduling strategies and techniques that provide a directionally correct production plan that Operations can execute against to deliver customer requirements while increasing throughput and accelerating working capital. There is no magic bullet as each situation is unique with different circumstances (types of skills and availability of people, work center and machine capacity and utilization, equipment flexibility, surge capacity flexibility, backup capabilities). Instead of thinking there is one road to success, get a handle on your situation and start with a dose of common-sense questions.
Common Sense Questions
From a best practice point-of-view, get on top of your demand. Ideally, you have a SIOP/ S&OP process (sales, inventory & operations planning) process with a clear picture of demand. However, in 80% of the situations, this is not the case. Thus, start with demand although don’t get too wrapped up in creating the perfect demand plan that you lose sight of your production plan.
Use a directionally correct approach, look at historical sales and growth rates and include input from Sales, Marketing and Customer Service to quickly develop a base demand plan. For more details on developing a demand plan, read about creating predictable revenue with demand planning best practices. The bottom line is that you’ll need a place to start with what to produce, but don’t waste time. Focus your energies on your production plan and start by thinking through common sense questions:
- How does your demand plan (orders, quotes, forecast) translate into a base unit of measure such as hours or units?
- Which machine groups require additional attention to meet your forecast?
- Do you have capacity bottlenecks in meeting your customer commitments?
- Will you need to move and/or cross-train people to meet your production plan?
- Do you know the optimal sequencing for your key machines?
- Can you focus continuous improvement lean efforts on reducing changeover times and increasing flexibility on your critical machines?
- Can you level the production schedule by planning ahead with capacity requirements?
- Can you plan ahead for peak season by producing lengthy production runs of C’s during low season to prepare for peak season?
- Can you better balance capacity from other facilities to meet customer demands while maximizing throughput?
- Can fix the production schedule to the timeframe required to create stability in your manufacturing process (but not longer)?
- Can you stabilize the schedule so that you can ensure a reliable supply of materials/ ingredients will replenish the line without creating disruption?
- Can you schedule to produce the products requiring additional skills and/or maintenance and engineering support when those skills are available?
- Can you utilize outside processors and/or offload capacity of machine operations to maximize the capacity at your key constraints?
- Can you create strategic inventory and/or capacity availability to support changing customer needs?
- Can you allow for a certain percentage of your production schedule for drop in orders?
- And keep thinking…..
Develop a Master Production Schedule
Start with whatever products are required based on orders and forecasts, and start by putting into groups by work centers, production lines, or cells. You’ll have to start by prioritizing by due date or time periods. At this point, you’ll have items or work orders required in certain timeframes. Then, you’ll evaluate these requirements vs. inventory levels, economic order quantities, order multiples, and other variables. If you have systems / tools such as ERP/ MRP, it will do the 80/20 for you so that you can review the recommended work orders. Otherwise, you’ll have to manually calculate. This will create your base schedule.
Now comes the tricky part that is as much art as it is science. How you will account for and incorporate the answers to the questions above into your production schedule will be important. Frequently, the key is who to prioritize, how to account for the impact on throughput and efficiencies, and how to create flexibility in your scheduling process. The way these issues are incorporated into the production schedule will dictate your ability to grow and will determine your level of customer service, inventory, obsolete and slow moving inventory, underutilized capacity, manufacturing performance etc.
For example, in a food manufacturing client, it was important to create a product wheel cycle of products to increase reliability, level load the facility and maximize throughput. As you can imagine, it makes sense to produce light colored food items (such as vanilla) prior to dark colored items (such as chocolate) for the same reason it is easier to replace white paint with black paint rather than vice-versa. Thus, you create a product wheel from light to dark with key changeovers as you go. Of course, it is never that easy. You need to account for difficult to run flavors such as caramel, and you have to be careful not to mix allergens and non-allergens. In certain circumstances, you had to plan for a Kosher Certification. How these nuances are incorporated into the production schedule will recover capacity and increase throughput or not. Listen to a client success story to hear more about the results that can be achieved with a solid planning and scheduling process.
Incorporate the Master Production Schedule into Monthly Review Cadence
Review your master production plan as a part of your monthly SIOP/ S&OP process. Gather inputs from Planning, Purchasing, Operations, Maintenance, Engineering, Quality, Continuous Improvement, New Products and whoever touches the manufacturing process. Continually update your master production schedule, compare with available capacity and make adjustments to product wheels and/or production groups or realign across sites so that you can increase and recover capacity from a directional point-of-view. If you are chasing pennies, don’t bother. Spend 80% of your time on the 20% of your product groups or machine groups that will drive a directionally correct master plan on a rolling 12-month basis. This will highlight strategic decisions and/or bottlenecks that require attention to meet your customer needs.
Refer to our blog for many articles on demand planning / sales forecasting. Also, read about how to implement SIOP in our book, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue & EBITDA Growth. more about these types of strategies in our eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19. If you are interested in talking about what it would take to purse the demand planning and SIOP journey in your business, contact us.
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Creating Predictable Demand Revenue with Demand Planning Best Practices