Planning and scheduling methods

Planning and scheduling is about finding the answers to 10 questions:

What, how many and where…

would you like to sell, make and buy?

If you distribute products across multiple depots, there is a 10th question – where to send product to?

Most people associate Excel with copying, pasting and a  lot of manual manipulation of data. Our approach provides the answers to the 10 questions with one click.

Planning Data Flow

The physical movement of material through a factory is buy, make, sell. With production planning, you work in the opposite direction to the material flow. First you plan what you are going to sell, then what you are going to make, and that determines what you are going to buy. All the time you consider the inventory buffers that you want to keep in between.

Integrated Planning

Integrated planning involves the balancing of supply and demand to answer the 10 questions. If you are just a buy/sell company, it is quite simple, but for a manufacturer, it is more complex.

Demand Management

The planning process starts with demand. Your best guess at what you think you are going to sell, represented by sales orders and a sales forecast.

• Make-to-Order companies typically do not use  sales forecast for production.
• Make-to-Stock companies do not use sales orders to raise work orders.
• Configure-to-Order companies will forecast sales of the “base” product
• Outstanding Sales Orders – are maintained in your ERP system.

Sales Forecasts – are often maintained outside the Enterprise Resource Planning software system. Companies with established products, use sales history as the basis for the forecast. Hi-tech consumer electronics, on the other hand, have short product life cycles, so other techniques need to be used.

Forecast Accuracy – forecasts can never be 100% accurate, it is always your best guess, but better accuracy, or “demand predictability”, improves your ability to deliver high service levels with low inventory. The first step to improving accuracy is to measure it, and make individual salesmen or product managers accountable.

Forecast Consumption – sales orders received may have been forecast, in which case the forecast is consumed so that demand is not double counted. The system may apply a number of rules to do this.

Inventory Replenishment

Inventory holding policy is expressed in days or weeks of cover. The policy is influenced by:

• Demand predictability
• How quickly manufacturing can respond
• Supply lead time
• Supplier reliability

Any product inventory that is below the minimum (safety stock) now, will appear on the list of products to make, with a required date of today. The Excel-based planning software system then projects dates in the future when inventory will need to be replenished.

Dynamic Buffer Resizing – by measuring the number of times that the safety stock has been penetrated in the past, and the safety stock level can be adjusted up or down.

MRP1

Material Requirements Planning software (MRP1) – is a technique developed in the 1970’s on mainframe computers. The original approach was batch orientated and inflexible, but we have blended it with finite scheduling in such a way that it is flexible and dynamic.

It takes the list of products to make, and explodes them through a Bill of Materials (BOM), to identify the gross requirement for every bought and made component. Inventory and WIP (Work-in-Progress) is subtracted from this to establish the net quantities of components that need to be bought and made to support the schedule.

Capacity Planning

A Rough-Cut Capacity Plan – assesses whether there is approximately enough capacity to manufacture what is needed, and gives an indication of how lumpy the demand on manufacturing is.

The list of components to make, is combined with the Routings to calculate the number of hours required at each work centre. This is then compared with the hours available. In this example, if we did some of November’s work in October, we should be able to make everything that we need.

Finite Scheduling – goes into a lot more detail, and calculates the start and stop time of every production activity.

It is complex, and our Finite Scheduling Tutorial starts by introducing you to the subject, and then moves into more detail, one step at a time.

Our 3-Pass Scheduling logic complies with Demand Pull principles, and will:

• Recommend the delay of certain operations, to allow others to catch up, and avoid building WIP
• For seasonal demand that exceeds capacity, recommend when to start the inventory build-up to ensure you can supply customers during the seasonal peak.

Excel’s date and time functions calculate points in time to the nearest 3000th of a second. This is spurious accuracy for most scheduling calculations, but it allows us to treat time as a continuum.

Many other systems work in time buckets of a day or a week. We use buckets for reporting, but all the underlying calculations use continuous time logic.

Purchasing

Unlike conventional MRP planning software, our approach ensures that purchasing activity is closely synchronized with the production schedule. It compares purchase orders that have already been placed, with what needs to be purchased, to support the schedule. There are only 4 things you can do with a purchase order:

• Place
• Chase
• Delay
• Cancel

Purchase Action reports drive the purchasing activity on an exception basis. Most companies focus their attention on placing and chasing purchase orders, but very few focus on delaying or cancelling them, an activity which can have a significant impact on obsolescence and cash flow.

Kanban

Kanban is a system of physical signals used to pull material through a manufacturing process. Kanban is the Japanese word for “card”, but other devices are also used. A Kanban is triggered when an inventory buffer drops below a pre-determined level, and signals an upstream manufacturing operation to replenish the buffer. By linking all the manufacturing processes together, a Kanban system becomes a very effective manufacturing execution system to synchronize production activities and get them to respond to customer demand.

Execution vs Planning – Kanban is very responsive in the near term, but has a short time horizon. A planning and scheduling software system is less responsive in the near term, but looks much further ahead.

Managing a supply chain is like steering a ship in the mist. You can steer around objects that you see right in front of you, but you also need radar to anticipate obstacles beyond your field of vision.

Our approach to planning and scheduling is “Kanban friendly”, it seamlessly picks up where Kanban let’s go. As projected demand fluctuates, the system will re-calculate the size of the inventory buffers and the number of kanbans in circulation.

Vendor Managed Inventory

When you have learned to be lean and responsive within the 4 walls of your factory, it is time to extend your view of the supply chain to include your major customers and suppliers.

The traditional “place an order once a month” behavior, is not particularly responsive, is administratively cumbersome, and is often supplemented with informal expediting.

Kanbans should circulate between you and your customer. For example, when your customer returns an empty stillage or container to you, it is your authority to fill it with product and send it back to them. The number of containers in circulation will control the size of the inventory buffer between you and your customer. The planning and scheduling system is given visibility of the inventory on your customer’s premises, and your customer’s sales forecast. This allows the system to plan beyond the Kanban horizon.

Similar arrangements are made with your suppliers. Give them visibility of your production schedule and inventory buffers, and make them directly responsible for replenishing the buffers.

Next: Putting it all together in building a production scheduling system.