An S&OP Barrier: Understanding material needs/availability across projects

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I recently read the blog ‘Have you crossed a silo lately’ revealing how organizational silos continue to hinder implementing S&OP.  Eliminating roadblocks isn’t easy and is multifaceted.  Once some of the tough questions suggested in the article are asked and answered, barriers can be eliminated one by one. One such silo that hinders an S&OP implementation may be found in project centric environments where two conditions exist (Aerospace is one such environment these conditions can be found).

  1. Multiple projects require common material/sub-assemblies from the same facility(ies).
  2. Shared common materials and assemblies are expensive and/or have long lead times.

Such an environment can lead to unhealthy competition between project managers for materials/sub-assemblies needed to support their projects.  To mitigate this, material/sub-assemblies that typically meet requirements to be configured as “Common” stock are often configured as “Project” stock instead.  This simplifies financial reporting within projects and enables material planning within project silos.  Unfortunately, it also reduces the motivation to communicate across project lines and can lead to unnecessary project material surpluses and delays since ERP engines commonly don’t look for materials across project boundaries.

How does one eliminate this S&OP roadblock?

The key is to automate evaluation of material availability across projects for material not configured as ‘Common’ stock.  This evaluation must become part of standard daily practice and occur as spot checks within the formal S&OP process as a final check.  In most systems, such evaluation can be performed but it’s often a time consuming manual process.  To evaluate cross-project supply and demand you need the equivalent of a mini MRP check for components that would otherwise be silo planned within their ‘Project’ (within their ‘Pool’ in RapidResponse terms).  This cross-project material availability evaluation should be an automated daily task (requiring no planning analyst labor).  The output could be a warning if opportunities to improve project schedules or reduce/eliminate surplus material exist by re-assigning inventory/Orders/WIP to another project.  In RapidResponse, this would be facilitated through the use of a daily alert based on a special cross-project evaluation resource built to meet the customer needs. With such a strategy, the key question arises, “How automated (if at all automated) should the decision to act on such an alert be?”  At one end of the spectrum is a primarily manual process.  An alert that project A needs material from project B to meet schedule is generated.  The analyst would then review the situation (through the use of a simulation scenario in RapidResponse) identifying positive/negative impact on both projects and request sign off on desired manual transfers of inventory/Orders/WIP across project groups.  In an automated solution, specific conditions could be defined where Inventory/Orders/WIP would automatically be re-assigned from one project to another to minimize analyst evaluation time.  Requirements for auto-transfer of inventory/WIP/Orders across projects could be set up with a wide variety of conditions to meet customer needs.  Examples could include allowing automatic transfers only if……

  1. The surplus material in project A to be auto-moved to project B is less than x dollars. Or
  2. Project A inventory/WIP/Orders re-assigned to meet project B needs can be replaced within existing system lead times +20% to meet the next scheduled project A demand for the part.

There are a whole  host of possibilities/conditions that can be identified and built. As further food for thought, one could go one step further in the S&OP process evolution and directly link Project Management activities with the supply chain to see the immediate impact of proposed re-assignment of inventory/WIP/Orders project task schedules further down the project chain. For more information on RapidResponse Integrated Project Management, check out this blog by Andrew Bell entitled: First Solar Shines the Light on Integrated Project Management ...or a few of my past posts: Another Link In The Chain: Using Project Management to Drive the Supply Chain Another Link In The Chain: Connecting Project Management to the Supply Chain Enhanced by Zemanta

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