Production planning and operations has always been a challenging task. The decision making process involved on a daily basis around which orders (production orders) to process within the available capacity based on customer requirements, sales team escalations, quality issues, machine setup and maintenance requirements can be a very daunting task. The questions that make planners struggle are a method to make the production process consistent and sustainable in this uncertain environment.
Planners usually play around with buffers to manage the uncertainties. There are primarily two kinds of buffers – capacity and inventory. Planners have an option of booking less than the available capacity. The remaining capacity would buffer against uncertainties. The problem is representing this information to the executives. The sales executives will look at the booking and determine that they should be able to book more orders given the open capacity. Planners can use a variety of mechanism to create a conservative plan. The run rates and the yields are based on averages which are based on past information and heavily influence the capacity. Any small changes to the run-rates and the yields can influence the capacity planning considerably – which directly reflects the amount to book in the sales process.
The other way to buffer against uncertainty is managing the inventory levels. The inventory levels are a function of the demand and supply variability, demand pattern and equipment uptime. The safety stock buffer is primarily maintained to buffer against the variability. This in fact helps to keep the production steady while letting the inventory buffer levels move up or down on a daily basis based on production execution and shipment.
Lean principle and just-in-time production are two medium of production that the planners employ during the production planning process. For the built-to-order industry, where the production process starts only when the order is received, planners have to plan around the capacity buffer. The challenge is to determine a consistent product mix for production and the start times which would in effect reduce the over work in process in the supply chain. For this industry, the Sales and Operations is an important part of the planning process, to determine the sales booking mix adhere to the capacity constraints. For the repetitive business, where the manufacturer is producing the same material consistently, inventory buffer management becomes as important aspect of planning. The planner has to ensure that the buffer can handle spikes in demand and supply reliability while the production is producing material consistently.
Any other buffers?
1 comment:
Sunil - you are right on the money. Inventory buffer management is quite a dilemmma for majority of the manufacturers in the US. Even though at first this sounds like antithesis to lean manufacturing, but when you can't make products flow any further thats when you have to introduce buffering of items as a schock absorber. Once this is clear and clarified in planners mind then comes the next challenge of how do you calculate buffers for each and every item given both variable volume and mix. There have been several books written on this and of course there are some commercial software available today that does a very decent job in calculating these numbers dynamically.
The critical thing that would differentiate a great lean manufacturer from a regular one is how diligently they collect and analyze their buffers frequently and take remedial action before its too late. For instance, a buffer for an item entails cycle stock (avg demand * lead time), buffer stock (buffer againts demand variability) and safety stock (buffer against supply variability). If the manufacturers are consistently using safety stock month after month, they should start an investigation on its usage. This typically would indicate that either their suppliers are not delivering the materials on time or machines have been breaking down at an alarming rate or whatever the case may be -- the point is they need to be vigiliant on this and aim to gradually minimize both the buffers, if possible.
TPS (Toyota Production System) is not only about takt, heijunka, cycle time and flow, its also about quality and availability/uptime of the machines/assets -- I honestly believe the US manufacturers are completely ignoring the fundamentals of Lean Manufacturing. My hope is that they all keep the picture of a traditional "Lean House" in their office, and continually keep re-drawing "their own" as they streamline their proceses until they reach the nirvana.
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