Master Production Scheduling: from possible to profitable

Transcription

1 Management briefing Master Production Scheduling: from possible to profitable How to improve production planning in an increasingly complex manufacturing environment PRODUCTION PLANNING

2 Planning for profitability With approximately 400 concurrent orders and 25 different treatments per order, manual planning became increasingly difficult. Ron van Hout, Manager, Planning and Warehousing Vlisco Until recently, frozen periods and time fencing were among the few ways to keep a Master Production Schedule (MPS) in touch with reality, especially given machine breakdowns, rush orders, material unavailability, inaccurate demand forecasts and unreliable lead times. With the sheer volume of input information escalating and the bewildering variety of operations that can be performed, it s no wonder many firms settle for plans that are merely feasible. If they are able to create workable schedules of what to produce, when and on which machines, these manufacturers would be satisfied. But do these plans factor in business goals that are measured by key performance indicators (KPIs) like increasing resource efficiency, reducing lead times, increasing service delivery and cutting inventories? Today, many of the world s most successful manufacturers are discovering new processes to create an MPS that delivers plans that are not just feasible, but profitable. They find that their costs are reduced, their profits are increased and their customers are delighted. Read on to discover how they are doing so well. 2 Supply chain planning & optimization

3 Devising plans that meet all business goals Creating efficient work orders, managing inventory levels and customer service is a complex process. And it is made harder by unreliable lead times. You also have to make daily decisions on the size and timing of your production runs for different items. Your decision making needs to factor in issues such as the stock coverage of different products, resource utilization, campaign efficiency and delivery performance. Factors such as the complex effects of quality assurance, maintenance, breakdowns, changing priorities and supply shortages make planning an MPS even more of a challenge. Just imagine if you had end-to-end visibility over all your organization s plants around the world. Think of the possibilities: If you could visualize your entire supply chain If you could build scenarios and assess their impact on your MPS in advance If you could integrate your MPS into your company s overall planning. With the right systems in place, you could increase your level of control over production, allowing you to focus on achieving the optimum plan that drives profits for your business. And if you could improve the reliability of your lead times, you would improve inventory levels and customer service, too. Supply chain planning & optimization 3

4 MPS assessment checklist Assess your organization s MPS approach. Is your supply chain planning in good shape? 1. Your current planning tool allows you to create plans that deliver profits, not just orders. 2. Your work orders account for stock coverage and capacity utilization. 3. Your planning is demand driven and linked explicitly to actual production. Yes No 4. Your resources are used efficiently. Bottleneck resources never have to wait for input materials to become available. 5. Taking your entire supply chain into account, you operate on the basis of finite capacity planning. 6. You plan using KPIs that include on-time delivery, productivity, inventory levels (days of inventory, average inventory level by stocking point), and order acceptance (requested versus confirmed orders). 7. You can incorporate transportation lead times into your MPS. 8. Production can adapt easily when disruptions occur, from machine breakdowns and supply hitches to inaccurate demand forecasts, rush orders and quality failures.! A negative answer to even one of these points indicates you have room for improvement. 4 Supply chain planning & optimization

5 3 key capabilities you need for a plan that is profitable not just feasible 1. Visualize your whole supply chain in one place To run a profitable operation, you need total visibility of your entire supply chain including the predicted usage of all resources and projected stock levels. An MPS cannot be isolated from other company systems it needs to be linked to enterprise resource planning (ERP), manufacturing execution system (MES) and material requirements planning (MRP), purchasing and procurement. Trying to optimize the performance of individual machines doesn t work. You need an overall view that allows you to optimize the performances of all your machines. You need to be able to determine which of your resources are critical, and which aren t. Critical resources need special attention in your planning. Of course, inventory is absolutely necessary to your supply chain. But it is a costly necessity. It is costly to store you are not sure whether you will be able to sell everything that you have in inventory (and at what price). Your company s cash is tied up in inventory. When you can visualize your entire supply chain, you are better placed to achieve the best balance between inventory costs, machine utilization and availability, order fulfilment, staffing levels and customer satisfaction. It is also easier to deal with disruptions. Aim to reduce excess inventory and simultaneously increase delivery performance. Supply chain planning & optimization 5

6 2. Explore what-if scenarios within your MPS 3. Incorporate short- and mid-term demand signals into your MPS Instead of making decisions in the real world and then watching their effects unfold on the shop floor, wouldn t it be better to first explore those potential effects virtually? Suppose one of your suppliers is having trouble fulfilling an order. You need to source from an alternative supplier. One is more expensive and can deliver tomorrow morning; the other is less expensive but can only deliver two weeks later, meaning that you could miss your deadline. So which would be the better option? Can you fully understand the trade-offs of each decision in terms of finance, operations, supply chain and sales? You would be able to explore your tactical options to see which option leads to the best outcome. The system would indicate if it would be better for you to shut down a machine for maintenance or run an extra shift. Ideally, you should be able to make profit-driven decisions. It s not just about fitting in orders where you can but ensuring that these orders deliver the best return for your company. Choose a system that enables swift comparison of different possibilities and select the option with the best impact on your KPIs. Most companies are moving towards intensifying supply chain efficiency. When you can revise demand signals in your MPS frequently and react to them quickly, you have a better chance of achieving a profitable plan. Suppose you receive a new order from a customer, or you have seasonal demand spikes. You need to adapt to these changes. Ideally, you should have an MPS solution that incorporates those changes automatically in real time. It takes all factors into account especially your production reality to create an optimal plan. An ideal system would allow you to build alternative scenarios and test them to see their impact on your business goals through KPIs. Is there such a thing as a perfectly optimized plan? No. You would never be able to execute it because you would be constantly refining it, in pursuit of perfection. But it is possible to attain the optimal plan, without compromising on the speed of operations. It s not only about having a plan. It s about having the best plan. 6 Supply chain planning & optimization

7 The Quintiq implementation methodology is a robust tool which has helped our strategic initiative to re-engineer our production process. Within the first 3 months, the KPI measurement framework showed a reduction in manufacturing cycle times by almost 30% for some products, with a corresponding reduction of work in progress. During the last 12 months, delivery lead times for some high-end products have been reduced by 25% and even 50% in some cases. Periklis Tsahageas, Project Manager, Elval Supply chain planning & optimization 7

8 Are you ready to plan for profit? Are you ready to join the ranks of leading manufacturers that plan for profit? Here are 5 moves to ensure that your plans deliver profit: 1. Reduce costs and improve profit margins through lower inventory levels and improved resource utilization. 2. Gain better knowledge of how your operation works, at its best. 3. Take stock of your supply chain to ensure efficient planning whether you are executing orders that are make to stock, make to order or assemble to order. 4. Deal with disruptions quickly and more efficiently. 5. Keep your customers happy by delivering on time. How do you achieve all of this? By having a planning system that accommodates your operational reality and factors in all your operational constraints and market dynamics. Contact us today to find out how Quintiq s Master Production Scheduling solution can deliver significant improvement to your company s operations and bottom line. Offices: info@quintiq.com Web: Supply chain planning & optimization 8