Most manufacturing enterprises have a formal approach to planning and executing production. However, it seems that at a practical level, there is some combination of planning and executing as well as expediting (working to recover to meet late or potentially late demand). I think that most of us would agree that ideally, we would have a sound plan where there is accurate demand (forecast and/or actual), adequate resources and capacities are in place both in-house and at suppliers, and all the supply chain is on board and executing to the plan.
In reality, there is a lot of expediting that occurs, at least in my experience (the extent of which depends on the industry and the complexity of the products and the supply chain). A lot of manufacturing companies even have a formal position with a job title something like “Material Expediter” or “Production Expediter” (although the actual job descriptions can differ from what I am describing). What I have found in working with some customers who do a lot of expediting, is a basic lack of maintaining data accurately in their formal ERP/MRP system.
A lot of the “planning” tends to occur off-line in Excel spreadsheets or other tools. This may work in some isolated areas, but from an overall enterprise perspective, much of the supply chain does not have visibility into these off-line plans. I correlate this to Project Management on a large project where there is no up to date project schedule that the entire project team can work to.
Team members work tasks that they are directed based on meetings, phone calls and other types of somewhat ad-hoc communication. This can be somewhat effective, but not having the formal MRP system reflecting the current plan disables the capability to orchestrate the entire supply chain and efficiently execute the plan. This leads to a lot of expediting rather than planning and executing. Why don’t we always keep the formal MRP system up to date? There are lots of reasons, including:
- too time consuming;
- off-line tools are easier and more flexible; and
- certain processes or functionality is not supported in the formal system.
An example of # 3 above, is provided in a blog post from a colleague of mine called Do YOU have enough Supply? This describes a process to allocate limited supply to demands that recently, seems to becoming more prevalent in certain industries. A process like this may not be supported in the formal MRP system, so it is likely done off-line. Changing or enhancing the MRP system to support new functionality generally takes some significant time and money, and usually has to compete for priority with other fixes and enhancements needed. I know that many of you will agree that this expediting approach is far from ideal, and also may say "not us, not me". But I also know from experience that this occurs and sometimes with some very practical reasons. In situations like this, what can help solve the problem is a system with capabilities in a couple of key areas:
- Detect and report data integrity issues in the MRP system for clean-up
- Easily configurable to support additional planning functionality
- Available for sharing and collaboration across the supply chain
I would like to hear any insights, experiences and suggestions you may have regarding this expediting versus planning situation.
Discussions
We often recommend enhanced linkages between user departments and purchasing to help alleviate some of the expediting risk; this goes hand-in-hand with better planning and increased transparency. I'd also caution any company with a "master expediter" to take a long hard look at their process; chances are they are spending a lot of money and time on a function that really should be eliminated.
The processes and methods I have found that eliminate expediting sometimes come as a culture shock to the organization but many times if their really fed up with chasing parts people are more than happy to try something different. These processes include the following:
1. Continually watch what your selling as compared to what your building and your desired FG inventory levels.
2. Adjust the ERP plan frequently; this stuff of looking at the forecast a couple of times a year or quarterly and adjusting just doesn't work. Depending on volitility of the market place and product complexity it should be atleast bi weekly if not weekly.
3. Convert material input flow and interal work flow to some form of demand driven flow or pull process and away from hard scheduled transactional delivery dates. In onther words let the input and through put flow emmulate the demand on the organization.
4. Integrate a buffer planning process into this demand driven flow so there is up side and downside flexibility to cover a predetermined percentage of volitility.
5. Above all frequently communicate your forecasted and flow needs to your suppliers and internal workers alike. Use EDI kan ban signals if possible a couple of times per week if not daily again depending on the business.
So it all comes down to equal parts, frequently updated plan, demand driven flow techniques and a really top notch communications network with a little buffer thrown in to cover the unexpected. Like a good recipt, it works.
We often recommend enhanced linkages between user departments and purchasing to help alleviate some of the expediting risk; this goes hand-in-hand with better planning and increased transparency. I'd also caution any company with a "master expediter" to take a long hard look at their process; chances are they are spending a lot of money and time on a function that really should be eliminated.
The processes and methods I have found that eliminate expediting sometimes come as a culture shock to the organization but many times if their really fed up with chasing parts people are more than happy to try something different. These processes include the following:
1. Continually watch what your selling as compared to what your building and your desired FG inventory levels.
2. Adjust the ERP plan frequently; this stuff of looking at the forecast a couple of times a year or quarterly and adjusting just doesn't work. Depending on volitility of the market place and product complexity it should be atleast bi weekly if not weekly.
3. Convert material input flow and interal work flow to some form of demand driven flow or pull process and away from hard scheduled transactional delivery dates. In onther words let the input and through put flow emmulate the demand on the organization.
4. Integrate a buffer planning process into this demand driven flow so there is up side and downside flexibility to cover a predetermined percentage of volitility.
5. Above all frequently communicate your forecasted and flow needs to your suppliers and internal workers alike. Use EDI kan ban signals if possible a couple of times per week if not daily again depending on the business.
So it all comes down to equal parts, frequently updated plan, demand driven flow techniques and a really top notch communications network with a little buffer thrown in to cover the unexpected. Like a good recipt, it works.
The other thing is that companies typically don't understand the core importance of data integrity in ERP systems and deciding who will be responsible for maintaining various background item data held on the system, or who will be responsible for driving product life cycle management through all the various screens in the system, etc. So people load new items and don't fully understand all the fields where they may skip loading certain information. Or product is going to become obsolete and people don't understand BOM effectivity dates with coordinating component and finished goods inventory to balance with last sales and avoid excess stock.
In my experience most companies are not very willing to share updated forecasts, inventory levels, change information, or lean projects with supplier or internal workers until it's too late, then they end up in a severe expedite/over inventory mode. On the planning side it doesn't really take an extremely accurate long term forecast or plan. What is required is as I have stated previously, the admission that the forecast will always be wrong to some degree. Then implement the processes of frequent reforecast, system and supply chain flexibility, buffers to handle the unknowns, true collaboration between all business partners, team management between business partners, and the idea that internal department managers are there to support each other not to compete with each other. All of these processes strike at the heart of corporate culture, not necessarily at system implementation. Again, just by implementing a system into a company with poor business practices just means the company will dig itself into the hole faster; the system is not going to change anything.
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