99% of the companies that bring us on board for consulting projects can accelerate bottom line business results by better utilizing their ERP system. The typical 80/20 equation holds true – at least 80% of companies underutilize their ERP system by a significant amount. Even the 20% that utilize their ERP system to a better degree than most have opportunities.

In almost 20 years of consulting, we have found only 1 client that couldn’t utilize their ERP system to a greater degree as their manual work around processes would fall apart. They required an ERP upgrade before they could utilize their system to a greater degree. Every other client could make progress (improve customer service levels such as OTIF on-time-in-full, reduce lead times, increase efficiencies, reduce waste, automate manual functions, reduce inventory, etc.) by better utilizing their ERP system. It didn’t matter if they had a tier 1 ERP system such as SAP or Oracle, or a tier 2 or 3 system such as Epicor, SAP Business One, Microsoft Business Central, Sage 100 etc. It didn’t matter the industry – aerospace, building products, life sciences/ healthcare products, or food and beverage. These statistics apply across the board. To learn more about how to better utilize ERP, read our article, The MacGyver Approach: Leveraging Your Underutilized Asset.

Building Products Manufacturer Case Study

A building products manufacturer struggled to get the “right” inventory to the “right” distribution center at the “right” time to service customers successfully. There were four production facilities supplying around 12 distribution centers across North America. Each production facility also functioned as a distribution center for their region. This consulting client used SAP, and although they were on an older version of the software, the system could support a complex distribution network. However, they were underutilizing the ERP system.

There were various levels of expertise at the production facilities, different processes at different facilities, and different use of the ERP system and different data integrity at different sites. This is not uncommon. In 80% of clients, the employees using the ERP system are NOT resistant to change once they understand how it works, how it will help, and how what they do fits into the big picture. Until they understand how to perform their daily tasks to successfully serve customers and accomplish their goals, they will do whatever it takes to do what’s needed including developing manual processes, updating spreadsheets, etc. That is exactly the situation as we entered this client.

We started by understanding the current business processes and use of the ERP system. By documenting the high-level processes, we could identify gaps and opportunities. We quickly addressed quick wins. There are typically a few quick wins at every client; however, to make sustainable progress, the key is to review how the business processes connect with and interface with each other. Once a full view of the business processes and interfaces emerges, the current use of ERP will also become apparent. Finally, the use of data, integrity of the data, and reliability of the data for decision-making will also emerge during the process review.

In this client situation, we started by sharing best practices among production facilities. One production site had a more advanced use of planning functionality, and so we worked with the second priority site to set up the appropriate system settings, update data, and roll out upgraded planning processes. This use of SAP in conjunction with upgraded planning processes and coordination with Sales and Operations propelled service levels to jump from low 60%’s into the 80%’s within a few months. Next, there was additional SAP functionality that could upgrade the planning process across both sites, and so we worked with SAP experts to test and roll out additional SAP functionality to further automate what made sense. This resulted in a solid production plan.

From a replenishment standpoint, it started with a solid production plan. Beyond a solid production plan, the replenishment process to supply the distribution centers with the appropriate product to satisfy customers required a directionally correct forecast. The forecast was the trigger to supply the distribution centers. Thus, we worked to better utilize the advanced planning module of SAP to whatever degree feasible on an accelerated timeline in addition to upgrading the business process for reviewing the demand plan with the Sales Team. This step was incorporated into the monthly SIOP (Sales Inventory Operations Planning) process to gain executive alignment and to ensure the forecasts passed the smell test.

In addition, we reviewed the current replenishment process including the MRP and replenishment or transfer order settings. We performed inventory analysis to determine optimal settings for safety stock, minimum orders, etc., and rolled out process improvements in conjunction with SAP functionality. These process and ERP utilization improvements allowed us to improve our service levels greatly and rectify relationships with customers. As the process smoothed out, we started to look at ways to optimize inventory levels while maintaining higher levels of service.

Results with Better Utilization of ERP

Results followed the rollout of improved utilization of SAP in combination with process upgrades and associated education. Most importantly, service levels improved from around 40% to the 90%’s. Lead times were also shortened in a critical site that produced a core product line. This made a dramatic impact on customers’ perception and and turned unhappy customers into customers looking for opportunities to expand business with our client.

In addition, the critical site increased output and capacity as manufacturing got in front of what was needed to support customer requirements. Manufacturing efficiencies improved as the production schedule transitioned from reactive to proactive.

From a replenishment standpoint, as upgraded replenishment planning was rolled out, service levels improved. And, as MRP settings were updated with optimized variables, inventory levels were reduced without impacting service levels negatively.

Finally, as the process and system upgrades were rolled out, the team was educated and gained confidence with their core tasks. Additionally, as processes were automated, the team could spend more time on exceptions and less time performing mundane tasks. This freed up time for additional improvements to grow revenue and profitability.

The Bottom Line

Pay attention to your business processes in conjunction with your use of ERP. The better you utilize ERP in a smart way to accomplish your goals, the more focus will go to exceptions, bottlenecks, and additional process and technological upgrades. If you are interested in talking about how to better utilize your ERP system to drive superior customer service, customer growth, profitability and cash flow, contact us.

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Better Utilize Your ERP System

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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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Production Planning Best Practices to Recover Capacity

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Lisa Anderson was quoted in a SelectHub article recently on the best production planning software for the manufacturing industry in 2023. She says a wishlist of key features for your facility is key.

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Best Production Planning Software

Production planning software is a manufacturing solution that helps you plan for and supervise essential workflows in the production process.

Our analysts compiled a detailed list of the best production planning software with the top benefits, features and limitations. We’ll also discuss top benefits, must-have features and the best way to choose the right manufacturing planning software for your business.

Key Features

When you shop for new solutions, you must have a wishlist of features needed for your facility.

Lisa Anderson, founder and president of LMA Consulting Group Inc., discussed sequencing similar items during production as an essential capability.

“If you think about it in terms of colors or flavors, you would want to run all the dark flavors together. You would want to not run them before you go to a light flavor. So basically, the ability to tie together like items in a production run, and know how much time you’ll need for that category of items.”

Anderson also elaborated on the importance of what-if scenario planning.

“You want to be able to see, ‘Well, what if I have a second shift? How can I rearrange my production plan? Can I find a more efficient way to do it where I can minimize waste or maximize efficiencies? What if I have this situation or that situation?’”

Here’s a helpful list of the best production planning software features to consider when browsing vendors and resellers.

To read the full article, click here.

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Does Production Scheduling Matter?

The best companies focus on production scheduling. Even though Production Schedulers aren’t typically highly paid positions, the function will make or break your ability to serve customers, improve operational performance and accelerate cash flow. Thus, it should be a key priority if you want to achieve profitable growth.

Are There Best Practices for Production Scheduling?

Yes, there are best practice concepts for production planning and production scheduling. No matter the client, industry, and people, these concepts “work”. On the other hand, each situation is unique, and so the key to success is to tailor to the different set of circumstances and priorities at each client. For example, there are different people, processes, ERP systems, data sets, customer requirements, and more. The best way to determine your best path forward is to relate to different examples and determine which tools and skills best apply to your situation.

Client Example: Succeeding in Process Manufacturing with Production Scheduling

In an absorbent healthcare products manufacturing company, product started as materials at one end of the production line, was converted into an absorbent healthcare product and was packaged at the end of the line. All things considered, it was a simple process with one step. And, so why was production scheduling important? Depending on the production schedule, downtime, waste, and inefficiencies increased – or decreased. To increase output, better serve customers, and reduce stock levels (of both raw materials and finished goods), we had to schedule the fewest significant changeovers, sequence items in the most efficient order, and ensure the appropriate resources and support were available at key junctures. This optimized production, but didn’t address customer orders. Thus, we also had to balance operational needs with the appropriate inventory levels and sequencing of customer orders to meet customer needs while also optimizing production. After rolling out best practice production scheduling practices, we won awards from customers, improved operational performance, and reduced inventory levels, freeing up cash flow to invest elsewhere.

Client Example: Succeeding in Job Shop Manufacturing with Production Scheduling

In an industrial manufacturing company of storage solutions, there were multiple steps in the production process from fabrication to weld to paint and assembly. Although it sounds obvious, you need to have product available from the step prior before you can start the next step; however, in these types of companies, marrying up parts that go together in the next step operation is often an issue. There is no point in having 1 piece ready if you need all parts for the next operation. Thus, production scheduling must focus on clarifying the customer requirements and backwards scheduling the operational steps. Once you have this base schedule, the key to success often relies on scheduling certain material types together and sizes together. In this client, labor scheduling is also a critical priority to understand which work centers are scheduled to run on which shifts (and days) so that backward scheduling can ensure the correct parts are available at the “right” time. Otherwise, you have too much WIP (work-in-process) inventory and are chasing your tail to keep product flowing. Once a clear schedule was achieved, the fabrication schedule became visible, and production output immediately increased. Next, items could be optimally sequenced to further increase efficiencies and provide visibility to sales of product availability, thereby improving service levels.

Client Example: Succeeding with Kanbans with Production Scheduling

In a building products (piping) manufacturer, there was a combination of process and job shop steps to the production scheduling process. In this situation, we utilized Kanbans to pull product through the operation steps. During the busy season, we’d add Kanban cards and pull product through the process steps quicker. In this situation, the key was to level load the shop and ensure we kept enough resources to support production on a quarterly basis. We developed a high and low number of employees required to support the quarterly volume, and so long as we maintained these employees and/or reliable temporary resources, our Kanban system would meet customer orders in the most efficient way possible. The ERP system was important in supporting the production scheduling process by driving the backend (Kanban sizes, number of cards and barcoding) as well as providing capacity reporting by work cell which translated back to the demand plan. Results followed. They were able to respond more quickly to spikes in demand with higher service levels and were able to minimize costs by level loading production and minimizing spikes/ troughs in operational resources.

What’s In Common No Matter the Consulting Client?

There are a few items in common across the board for every successful production schedule. A few supporting factors that pop to mind include:

• Production scheduler(s): You need a well-rounded resource who is excited about optimizing several conflicting priorities as balancing sales, inventory, and operations is not a good fit for the a person who likes black and white assignments.
• ERP system tools: Whether it is MRP (material requirements planning), advanced planning systems, MPS (master planning), or a report showing orders, inventory, changeover groups, and more, you will need to use your ERP system to create a solid schedule. In 90%+ of our consulting projects, we expand the use of ERP and utilize advanced functionality to improve the process.
• Operational data & information: It is impossible to schedule effectively if you don’t understand your capacity. How many people are required to run certain machines and support different work cells? Do certain products require additional support? Are your people flexible to run multiple machines? Can they go across work areas? How many people do you have in total? How many shifts run which lines? Are support resources in place?
• Customer orders / demand plan: If you don’t know what is needed to ensure high service levels, you cannot schedule effectively.
• Training & education: You will need to prioritize training (how to’s – click here, perform the job in this sequence, etc.) and education (why are you sequencing in this order, what are your order policies and why do they matter).

Don’t fret if these priorities are not in place. In 99% of our clients, they are not in place when we start. Yet most can be quickly put what’s needed in place at least to the degree required to start gaining results. They are not of equal priority in every client. In fact, half the battle is determining what needs to be done in what order, who has the capabilities to jump into scheduling and thrive, how to extract directionally correct data from Operations and your ERP system, etc. What is clear is that if you focus on this priority, your customer service, operational performance and cash flow will thank you!

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Why Care About Labor Scheduling?

If you are interested in avoiding the non-stop shortages and extended lead times that have plagued us the last few years, you should care about labor scheduling. Almost every disruption we experienced from baby formula to computer chips to the Southwest Airlines fiasco related to the shortage of resources. From a client point-of-view, EVERY single client, even the best of the best and industry leaders, lost revenue due to shortages and extended lead times. One of the ingredients to success is the topic of labor scheduling.

What is Labor Scheduling?

At its simplest, labor scheduling is determining which people (and which skills) you should have at which sites at which work centers at what time (shift) to ensure the right products can be delivered to the right customer at the right time.

In many manufacturing operations, it can seem pretty simple. For example, an industrial manufacturer runs one eight-hour shift across all work centers five days a week. However, even in this simple situation, the question becomes how to handle surges in customer demand or how to occupy your resources when volume drops off. In a distribution environment, the question becomes how many people do you need to pick, pack and ship to meet your carrier schedules and customer pick up requests. In the transportation industry, the appropriate type of truck driver (long haul vs. local) needs to be in the “right” place at the “right” time to deliver customer orders. Even in the service industry, the key is to have the appropriate number of resources in the “right” place at the “right” time to service customers. Long wait times in restaurants illustrate this importance.

Even in these simple situations, labor scheduling will become more complex. For example, in working with clients in a stable environment and consistent demand by work center, you might have the appropriate numbers of people, but not the appropriate numbers of people with the required skill sets. For example, an aerospace manufacturer required a high-skilled machinist to run their 6-Axis CNC machine whereas they required a completely different skillset to run the punch press. Unless they had the appropriate numbers of 6-Axis skills on the appropriate shift, operations stopped.

What is Complex Labor Scheduling?

Take labor scheduling up a notch, and you’ll gain complexity quickly. For example:

• Building products manufacturer: Although they could determine the number of people required to support their sales forecast, they struggled with labor scheduling in their Canadian operations to get the “right” products produced at the “right” time to service customers. The main issue is that they scheduled each production line without looking at the big picture. They did not have enough resources to run all production lines simultaneously, and certain items required extra people to run. Additionally, certain items had to run at the same time as other items so that they would be available for the next operation at the same time. Unless you planned across all machines in combination with labor schedules, service would suffer.
• Consumer products manufacturer: Taking it a step further, if your volume exceeds a five-day schedule, alternate schedules will need to be evaluated. A consumer products manufacturer struggled with service levels due to their inability to scale up to meet the increased demand. Of course, they utilized overtime, but their resources were tired, absenteeism increased, and production was unreliable. They tried adding people and running different shift configurations to increase output but continued to struggle.
• Bottling company: Taking it a step further, if you throw union rules into the mix, complexity deepens. In this case, they had relatively predictable volume on a quarterly basis; however, the volumes changed from quarter to quarter and from line to line based on peak season adjustments. Several, if not all production lines required a 7 day per week schedule. When the forecast became available, it had to be analyzed in comparison to the potential shift configurations (five 8 hour shifts starting on various days of the week, staggered five 8’s, four 10 hour shifts, a hybrid of 5 8’s and 4 10’s, a bridge shift to make sure the lines could run 24 hours a day continuously even during lunches and breaks). And, finally, you had to layer in the union requirements in terms of forced overtime, voluntary overtime, off days, and much more.
• The ports: Taking it a step further yet, the L.A. or Long Beach ports require more than the appropriate number of people at the correct dock at the right time. There are multiple terminals and so you have to plan resources (labor, equipment) to the terminal and dock level. To ensure the equipment is available, you need to plan the appropriate resources to get the appropriate equipment to the right place at the right time. You need to know where the specific containers on the ship are going so that they can be routed appropriately. The gate operators need to be on the same schedule. And the truck drivers need to be at the right terminal at the right time to get the “right” load to transport to the “right” warehouse (or train) to avoid congestion and service customers. At this just begins to explain the complexity.
• Airport scheduling: As we’ve seen with the Southwest Airlines chaos that unfolded over the holidays, if you don’t have the “right” plane in the “right” place at the “right” time with the “right” pilot and flight crew, appropriate ground crews, gate agents, and more, the system will come to a halt.

Maximize the Benefit with Optimized Labor Scheduling

There are many best practices that will optimize your labor schedules. However, there are no formulaic solutions. Instead, they are highly dependent on your unique situation, skill requirements, customer requirements, workforce preferences, and several other factors. With that said, there are a few common themes:

• Flexibility: Building flexibility into your labor schedules is a “must” with today’s constantly changing customer requirements and Amazon-like service expectations.
• Backup plans: Optimize isn’t the same as minimize. To optimize labor schedules, you will need to have “excess” resources and capabilities for critical areas to account for the most likely (and forecastable) issues that arise. For example, a client had a significant number of key resources for the bottleneck operation go to Mexico on vacation during the Christmas season every year. Instead of being surprised every holiday, putting backup plans in place would ease the pain.
• Focus on conflicting goals simultaneously: There needs to be a focus on customer service, cost, and cash flow simultaneously. They will often conflict with one another. For example, if you increase the run size to improve operational efficiencies, you will have excess inventory which might unnecessarily absorb resources and cash. On the other hand, if you focus solely on serving customers, you might change over too frequently or between flavors or sizes that create quality issues and cause the line to break down at night. You’ll not only increase cost with reduced operational efficiency, but you might waste materials and have people idle until expert resources can arrive to resolve the issue.
• Think big picture: Do not plan in isolation. Instead, focus on how each element impacts the rest of your schedules. Look at connections and down-the-line impacts.
• Elevate scheduling beyond the analyst: Production and labor scheduling often falls to entry level or analyst resources. If there are enough complexities, provide supplemental resources (from other departments, consultants, other facilities) and expertise to ensure maximum benefit.

Final Thought

Labor scheduling should not be relegated to whoever is available. Too many clients leave it to supervisors or analysts without the full picture to schedule properly. If you don’t schedule, chaos will follow. Why not reevaluate what you are doing and optimize your labor schedules especially as supply chains continued to evolve and change. Your labor schedules must evolve as well.

Refer to our blog for many articles on planning, inventory and related concepts. Also, read more about these types of strategies in our eBooks, Thriving in 2022: Learning from Supply Chain Chaos and Future-Proofing Manufacturing & Supply Chain Post COVID-19. If you are interested in talking about what it would take to right-size your inventory, contact us.

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Production Scheduling Best Practices Drive Increased Customer Service, Operational Efficiencies and Inventory Turns

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Manufacturing Challenged with Supply Chain Chaos

Manufacturing has struggled to produce what customers want on-time without spending a fortune and tying up excess cash unnecessarily in the wrong, “just-in-case” inventory. It is a tough environment spiraling out of control with supply chain chaos.

In the current state of affairs, there are historic levels of supply chain disruption and shortages, causing significant inflation and creating a bullwhip effect. When companies cannot obtain the materials and products required to keep production running and satisfy customer demand, they tend to over order, hoping they’ll get product sooner. This creates inflated demand, further extends lead times and inflates prices in addition to causing “fake” demand down-the-line (bullwhip effect). Suppliers try to keep up with demand, attempt to hire people and procure additional materials, and this continues down-the-line.

At some point, demand falls off (at least for some of the products, even if total demand stays intact), and the wrong materials and products end up in the wrong place at the wrong time. This creates panic in the opposite direction with customers postponing and canceling orders, and the effects are felt down-the-line once again with a new bullwhip effect. The bullwhip started at the beginning of the pandemic, and it has been swinging from side to side and creating volatility ever since with no signs of slowing down. Disruptions abound with the Russia-Ukraine war, the China-Taiwan tension, the computer chip shortages, and typical weather events. Check out the latest events to consider in our Supply Chain Chats video series.

Proactive Planning to the Rescue

Successful manufacturers will get off the bullwhip swing. Instead, they will take control of their end-to-end supply chain with proactive planning. This starts by getting a better handle on their sales forecast by developing a demand plan. Given the level of volatility and complexity in today’s simplest of supply chains, they must get a picture of future demand. A combination of statistical formulas, sales and market input, customer demand, and proactive management will go a long way to providing a view into demand.

Next up, you’ll need a master schedule which will provide a long-range production plan and capacity plan. These proactive plans will allow you to determine the machinery and equipment required to support your production plans, the staffing and training plans needed to bring your plans to fruition, the purchase and supply plans (inclusive of insource, outsource, offload, and outside processing) needed so that you can proactively work with suppliers and source partners, and the storage and distribution plans required to support your customers. The best planners are constantly evaluating alternatives to maximize customer value, efficiency and profitability, and working capital. These plans do not address the shorter term.

Handoff to Production Scheduling

Production scheduling picks up where master planning leaves off and addresses the short-term planning horizon. Since the strategic decisions typically arise with the master planning data, the powerful value of production scheduling is often overlooked. Plans rarely fail in formulation. They fail in execution. The production schedule is that execution.

Production scheduling provides a plan of what will be produced on which line, in which operation, in which sequence, at what time to achieve three objectives simultaneously:

• Customer service: Satisfying the customers need on-time as measured by OTIF (on-time-in-full) or OTD (on-time delivery) and to the customers’ expected lead time.
• Profitability: Scheduling the production facility in the optimal manner to maximize output with the least amount of labor, minimize scrap, and minimize operational resources and costs.
• Working capital: Achieve high levels of customer service and profitability with the least amount of inventory throughout the network to support production and customer demand.

Good production schedules will maximize service, profit and working capital. Bad production schedules will not only suboptimize these three outcomes, but chaos and confusion will follow.

Production Scheduling Factors

Material planning should consider the following factors when production scheduling:

• Run size – the best set run quantity based on economic order quantity concepts. It is rare to see a client with full information to complete an official analysis on EOQ; however, every client has at least directionally correct information to make an informed decision to get the process rolling.
• Run frequency – typically, you’ll set a sequence that makes sense with your customers’ demand patterns (volumes, frequencies), operations and quick-change capabilities, lead time requirements, etc.
• Service policies – your production schedule and changes to the production schedule will have to be configured around your service policies
• Constraints – your production schedule will also have to be configured around your capacity constraints (machinery, tools, labor, storage), maintenance and quality constraints, bottleneck operational constraints, material / ingredient constraints, etc.
• Sequencing – you’ll also need to consider sequencing priorities to support operational performance objectives.

Production Scheduling Sequencing

A critical priority in production scheduling is sequencing. Following the graphic, you’ll see the sequencing priorities in a beverage operation:

• Customer demand: Items, volumes
• Packaging and/ or sizes: If you are producing soft drinks or power drinks, you start with packaging (6-pack cans, 8-pack bottles, 2-liter, etc.) and sizes (12oz, 20oz, etc.). Packaging and sizes will dictate which production line(s), equipment, and machinery will be required to support the production schedule.
• Manufacturing capacity: Once you know you are running cans on the production line, you will want to make sure you have enough machine and equipment capacity to run enough cans to meet your needs.
• Labor capacity: Assuming you have enough machine capacity, you will need to make sure you have enough labor capacity on the appropriate shifts needed. If not, you’ll need to find a way to allocate capacity from a different line, cross-train resources, and/or hire resources.
• Flavors: When it comes to sequencing, you’ll want to start at the top level (bottles), go packaging and sizes (8-pack 12oz), and then go to flavors (coke, diet coke, cherry coke) to minimize changeovers.
• Allergens: When it comes to food and beverage, you clearly need to segregate allergens and sanitize between allergens and non-allergens. You would not want to sanitize after producing for an hour!

In working with hundreds of manufacturers across multiple manufacturing environments (process, job shop, configure-to-order (CTO), engineer-to-order (ETO)) and industries (aerospace, food and beverage, building and construction, healthcare and life sciences), these same principles apply. Sequences are determined by the following: size, material type, surface finish, accessories, labor requirements (# of people needed to run the item), subsequent operations, and many more.

Production Scheduling Strategies

Production scheduling is art and science. The best planners use a combination of art and science. There are a few alternative strategies although the best figure out the “right” combination of strategies that best supports the business:

• Reorder point / Kanban – in essence, you schedule to an agreed upon reorder quantity when your item falls below a specified level (reorder point).
• MRP – in this case, you schedule to customer or forecast requirements within a time period in quantities based on the economic order quantity (assuming you’ve set that quantity in the system).
• Production wheel – this strategy level loads across changeover groups to create a sequencing of changeovers that is optimized for production yet meets service policies.

There are tradeoffs, benefits and costs to each approach depending on your customer demand, service policies, operational constraints, production sequencing factors, bottleneck operations, and other issues. Frequently, we see a combination of approaches based on what makes sense for each unique situation. Common sense production scheduling yields the best results!

Client Example

Sticking with the food and beverage example, a food bar manufacturer wanted to gain significant improvements in operational performance from an optimized production scheduling process. They successfully satisfied customer requirements and had recently upgraded their manufacturing facility and equipment to gain operational efficiencies. Thus, the next logical step was to optimize the production schedule to gain full production runs in optimized sequences which they thought would provide a 10-point improvement.

After resolving related bottlenecks that clouded the production scheduling picture, we worked with sales to stabilize the demand plan for a 4-month window and then translate that demand into a level loaded monthly production wheel. Of course, no operation can be fully level loaded because business conditions and customer requirements change. However, by gaining the 4-month window into demand, grouping like-items, sequencing in a logical order to minimize changeovers and disruption, integrating an ABC flow with certain groups of items running more frequently than others (weekly, monthly, quarterly), and allocating capacity for non-forecastable orders or supply disruptions, we optimized the schedule and were able to maintain resiliency with changing conditions. Of course, conditions changed (ie. pandemic arose, inventory became a higher priority), and we were able to pivot to changing conditions and deliver significant results.

A solid production schedule will turn chaos into stability. As stability is achieved, operational costs are reduced, expedite costs minimized, inventory turns increased, lead-times reduced, obsolete and slow-moving inventory minimized, employee morale improved, etc.

Refer to our blog for many articles on planning, capacity and related concepts. Also, read more about these types of strategies in our eBooks such as The Road Ahead: Business, Supply Chain & the World Order. If you are interested in talking about what it would take to optimize your production scheduling scenario, contact us.

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Material Availability: State of Affairs

Since the pandemic, it has been a constant battle to ensure material availability, let alone to proactively manage cost and service. Even the most proactive and successful clients have experienced brief shortages of key materials and extended lead-times. The rest have been plagued with these issues.

Material costs have been skyrocketing as inflationary pressures persist. We don’t need to look further than the impact of oil and gas prices. No matter the industry (food and beverage, building products, aerospace and defense, life sciences and healthcare), the increase in oil and gas prices has had an impact. Typically, oil and gas prices will relate to a material used in the manufacturing process somewhere in the end-to-end supply chain, if not in every link in the supply chain. And, of course, the price of oil and gas will directly impact the transportation costs in every supply chain. The same is true for labor cost and, unfortunately, a whole host of other inflationary impacts on materials.

During these inflationary times, every piece of material (or ingredient) is significant and will impact cost. Clients are experiencing escalating prices yet limited availability and extended lead times, negatively impacting service and margins. For example, a consumer products manufacturer experienced successive price increases with every purchase order for several months in a row. In a life sciences manufacturer, suppliers didn’t pass on successive price increases with each order; however, the price increased dramatically early on. It became a race to pass on price increases to keep up with changing conditions. Unfortunately, another industrial products client hadn’t kept up with price increases, and so when we helped them develop a customer and product profitability model, it became apparent that quick adjustments had to be made before customers refused to absorb the changes.

The Impact on Material Planning

Material planning becomes increasingly critical during these volatile times. Not only is production not possible without materials and components, but if schedules have to change or manufacturing runs cut short, the increased waste and reduced efficiencies have become increasingly costly. Certainly, if production runs behind and expedited transportation is required, not only will freight costs be higher due to rising fuel prices, but expedited freight charges will be staggering – if you can find someone to deliver it on an expedited timeline at all.

From the service viewpoint, it is quite clear that if you cannot produce to customer demand, your customer service will suffer. Although the most proactive clients have put a full-court press on managing OTIF (on-time-in-full) and jump through hoops on a daily basis to minimize impacts to the customer, the vast majority of companies have seen a negative impact on OTIF and lead times. The “average” companies have truly suffered. It is no longer good enough to be “average”.

Given the significant impacts, there should be an all hands-on deck approach to upgrading material planning capabilities to best serve customers and minimize negative consequences on cost. It is a frustrating position to navigate on a daily basis, and so the best clients are also realizing that they must invest in these employees (provide support, training/ education, outside resources, etc.) to simply retain this critical talent.

Material Planning & Relevant Factors

Material planning (also known by many names including purchasing, buying, and production control depending on the company) focuses on how to ensure the “right” materials arrive at the “right” place (facility) at the “right” time. Frequently, material planning is also associated with MRP, material requirements planning from a process perspective.

Material planning should consider the following factors:

• Order frequency – have you set up purchase contracts or commitments to receive on a daily, weekly, monthly, seasonally, or sporadic basis?
• Order size – what minimum order size requirements have you set up in your supplier agreements? Is the order size by item, shipment, or blanket purchase order?
• Supplier reliability – how predictable is your supplier’s performance? Will your receipts arrive +/- a day, week or month? Do you receive advance notice?
• Supplier lead time – what is your standard lead time by supplier or commodity? How much notice do you receive for delays or shortages?
• Transportation lead time – where is your supplier located, could they produce and ship from multiple facilities and what is the typical mode of transportation and associated lead times for each?
• Service policies – what service policies have you negotiated in your supplier contracts? What has been their performance?
• Supplier network flexibility and recovery capabilities – if your supplier has multiple plants and/or locations that could produce and store your material, have you discussed this possibility? Have you worked with your supplier to run appropriate trials to support flexibility?
• Safety stocks – have you set up a safety stock agreement for critical materials and suppliers?
• Forecasts and/or consumption information – are you sharing consumption and/or forecast information with suppliers so that are in the loop with changing demand patterns, expected opportunities and/or deviations from the norm?
• ABC value – have you set up your items as A B or C based on volumes, value or another method to designate frequency and importance?
• Storage constraints and warehousing costs
• Inventory objectives

Material Planning Strategies

A material requirements plan should take the factors described above into account when building a plan. Typically, you’ll start with near-term work orders, and review longer term demand to determine your material plan based on what’s needed to support this master production schedule while considering your supplier agreements and associated service policies and your inventory objectives.

Depending on many factors including your manufacturing environment, supplier network, level of collaboration and agreements, your product and commodities mix, your tools (ERP and related technologies), and your objectives, there are multiple material replenishment strategies you could follow. Conceptually, consider the following options:

• Reorder point / Kanban strategies – in essence, your suppliers replenish an agreed upon reorder quantity when as materials are consumed.
• MRP strategies – in essence, you purchase based on the latest mix of work orders, sales orders, forecasts, and transfer orders as needed when reviewing your inventory and purchase orders in process.
• DDMRP strategies – demand-driven material requirements planning (MRP) which is more sensitive to variations in demand and supply.
• Supplier managed (also known as vendor managed inventory) – the supplier makes sure you have the appropriate inventory to support production requirements, managing within agreed upon service and inventory policies

There are tradeoffs, benefits and costs to each approach depending on your demand, supply, factors, and objectives. Frequently, we see a combination of approaches based on the supplier, commodity, relevance to the business, etc.

Incorporate Material Planning into a Monthly Review Cadence

Review your material plan summary information and related impacts as a part of your monthly SIOP/ S&OP process. Gather inputs from appropriate parties, compile and synthesize data, and design a monthly review of the material plans required to support the master production schedule and related customer requirements. This will impact inbound freight, storage requirements, and production capabilities to support customer orders, and it will be directly impacted with changes to production sourcing (production facility, reshore/ nearshore, offload), supply chain networks and stocking strategies.

Refer to our blog for many articles on planning, capacity and related systems. . Also, read more about these types of strategies in our eBooks such as The Road Ahead: Business, Supply Chain & the World Order. If you are interested in talking about what it would take to purse the replenishment planning and SIOP journey in your business, contact us.

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As originally published in Brushware Magazine on March-April, 2022

According to FactSet Insight, revenue growth is predicted at 7.5% for 2022 which is substantial when considering it is following record-breaking growth in 2021. Clients and colleagues are seeing record increases in sales revenues and pricing. The companies that have product and can satisfy customer needs are continuing to grow faster than the average as they take market share from the competition whereas the companies struggling and waiting for supply chain disruptions to ease are deteriorating. The strong are getting stronger, and the weak are getting weaker.

There are several operational and supply chain priorities required to be ready to absorb additional sales. A critical one is to have base planning and scheduling processes with an eye to collaborative and concurrent planning processes with programs such as SIOP/ S&OP (sales, inventory, and operations planning), what if scenario planning and advanced insights into down-the-line impacts. In essence, the best way to say ‘yes’ to profitable revenue growth is to have the ability to rapidly assess capabilities and impacts and be assured of your ability to execute.

Base supply chain planning processes include demand (forecasting), capacity (machinery, equipment, resources, suppliers, storage, transportation), production, inventory, replenishment, material, and logistics planning. Read our supply chain planning category blog articles for best practices. People in these positions are often seen as analyst level and are underappreciated given the gravity of the impact on the ability to successfully grow and scale. Clients start to appreciate the relevance of these processes as the strategic aspects are incorporated with SIOP and IBP (integrated business planning processes). As executives realize that when they create a predictable revenue forecast (at a product or customer group level) and determine the best and most profitable way to fulfill it, their service levels increase, lead times decrease, profitability and efficiencies soar, working capital accelerates, and team engagement increases, their interest is peaked.

It is no longer enough to plan in a bubble. As supply chain disruptions occur, material shortages and extended lead times impact production schedules. As COVID causes absence rates to peak or the Great Resignation impacts the production workforce, production schedules change, customers are prioritized, and logistics plans are thwarted. The base planning processes cannot work in silos. Instead, immediate what-if scenarios should be reviewed, down-the-line impacts should be evaluated, and options assessed (offloading volume to a supply chain partner or using a backup supplier). Planning has become strategic and should go from customers to suppliers and include the links in between the two.

For example, a building products client ran out of a critical material. They quickly assessed which products and customers would be impacted and were able to determine the degree to which they should pivot to a more expensive alternate material that would meet customer specs. Based on this what-if scenario, they were able to reallocate manufacturing resources, replan trucks to replenish their service centers, adjust orders with customers to make sure priority needs were met, and evaluate storage impacts so that they could divert loads to nearby branches as needed. They served their strategic customers when the competition couldn’t, thereby gaining customer loyalty and expanding sweet spot business,

By having a monthly focus on the strategic with a SIOP process, the executive team is agile and able to pivot quickly with changing customer needs and end-to-end supply chain impacts. In addition, by focusing on a solid planning base, the right product is delivered at the right location at the right time at the right profit margin. The strategic and tactical are constantly realigning, optimized and in sync. The strong grow and scale, and the weak shrink.

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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

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