This is a follow-up to my post from a few weeks ago: Expediting versus Planning. I received many comments and recommendations on this subject as to whether much of the expediting that occurs is in fact related to planning deficiencies. After reading and reflecting on the comments I received, it seems to me that the premise that effective planning by itself will reduce the need to expedite is not necessarily true.
Obviously, effective planning is critical to reduce expediting. Without a good plan, then what do we execute? However, no matter how good plan is, it will always change.
Forecasts by definition are not accurate. As we all know, changes and disruptions can occur in an almost infinite number of ways throughout the supply chain. The best plan will always be out of date almost immediately after it is published. (Just to be clear, when I say plan, I am referring to the MRP plan.)
Given the assumption that a plan is crucial, together with the realization that the plan will not be accurate, we are led to the conclusion that we need a stable plan, but be able to adjust the plan as and when needed. We need to be able to adjust the plan only when significant enough factors warrant a change to the plan, and with enough lead time and stakeholder buy-in to execute properly.
To restate, I believe that the following are important:
- Plan Accuracy and Stability - The MRP plan needs to be stable enough to enable effective execution but we need to be able to detect exceptions that are significant enough to warrant a change
- Responding to Change - The capability to effectively respond to required changes needs to be in place
How do we effectively accomplish the above?
Plan Accuracy and Stability
- First, the plan needs to start with an effective Sales and Operations (S&OP) process. The more robust the S&OP process, the better that the high level plan will be.
- We need to be able to detect or sense the need for changes, and once needed changes are detected, we need to be able to discern which are significant enough to warrant a change to the plan.
- We also need to be able to prioritize these since there may be more than we can deal with.
The key is that potential problems such as material shortages and late customer orders need to be detected for the future. Obviously, once late orders or shortages have occurred, they are easy to detect (maybe even by way of angry calls from customers or buyers getting urgent messages from production regarding shortages.)
Referencing a recent blog post by Kerry Zuber, "Driving performance improvement through exception management", Kerry states that in some organizations, there can be as many as 30,000 action messages generated by an MRP regeneration. This exemplifies the complexity of the MRP plan and sheer volume of exceptions in many organizations.
The organization cannot work all of these recommended actions, but which ones are the right ones to work? Which ones signal that something in the higher level plan needs to be adjusted? A second level, automated process needs to be in place in this type of environment to prioritize actions and also alert the responsible parties.
The capability is required to detect what future demand will be late due to the mis-alignment of supply schedules, issues with capacity in the supply chain and other issues. If the future state/impact cannot be detected, then adjustments or contingencies cannot be put in place to avoid or mitigate them. And as mentioned, we also need to be able to determine which of the detected changes require action and by who.
Responding To Change
Once changes are detected, we need a process to effectively implement these changes. This involves two key process and system capabilities: simulation and collaboration.
We need to be able to simulate what-if scenarios to determine how best to deal with the change. For example, it is difficult to calculate what the impact of a supplier changing commitments on a PO schedule will be in many environments without being able to simulate what that change in the commitment does to the overall plan. In developing a response to the change, we need to be able to simulate multiple action alternatives and assess how well they will solve the problem and also whether they are achievable.
These simulations cannot be done in a silo. Any significant change needs to be collaborated on with the extended supply chain. Collaboration is certainly required with other internal organizations and potentially with affected external suppliers. I realize that the above is very high level and probably over simplified, but I believe the general concepts are necessary in a complex manufacturing environment to optimize planning.
Without an optimized plan, execution cannot be effectively and efficiently accomplished and we have to resort to a lot of brute force exercises, including expediting. Even the best of plans needs to be monitored for required adjustments and we need to have effective processes and systems in place for responding to these changes.
Has your organization implemented a process for responding to change?