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 No More Planned Confusion!

 by Dave Biggs

The first and second articles outlined the inefficiency and chaos that occurs when more is scheduled than manufacturing and suppliers can produce. The #1 cause of poor delivery records and missed financial goals is overloaded schedules. The insidious aspect is that the overloading occurs as a result of good intentions!

It's difficult to forecast customer's future purchases, so in order to meet customer expectations, the master schedule is increased above forecasted requirements. When a customer order goes late, we leave it in the schedule with a past due date so it doesn't lose its place in line and keep the pressure on. To "make the numbers," certain key jobs are expedited -- especially at the end of the financial period. When an important customer complains, their order is pushed to the top of the list to resolve the situation.

Perfect forecasts will never exist, credibility has to be maintained with the customers, and it is necessary to "make the numbers." So how can this problem be solved?

Examining the root cause of the inefficiencies, the uncoordinated activities, provides a hint. Suppliers can't deliver all that is in the schedule, so they pick and choose what seems best. Usually determined by what has been screeched about loudest and what they need to make their numbers.

The work centers on the manufacturing floor can't make everything in the schedule, so they pick and choose what seems best -- the long runs that increase machine utilization, items that have easy setups or what their favorite expeditor has requested. The results, discussed in article 2 of this series, are inventory increases and a decrease in customer service.

One obvious solution is to just get the suppliers and manufacturing to increase their output. Some people have tried this, but after a heroic, costly one-time effort, found out that none of the motivations that caused the overload in the first place went away. They still couldn't perfectly forecast. They still had to make the numbers, and the overload quickly built up again.

The solution is to use the master schedule to meet the customer's expectations, and to "make the numbers." Instead of expediting individual parts, use the master schedule to coordinate everyone's activities.

But what about the inaccurate forecasts? Since forecasts won't ever be perfect, it is best to periodically examine the forecast and master schedule and make adjustments according to how the customer orders are actually materializing. A good process to use for the review is S&OP (sales and operations planning). Here's what the dialog might sound like during an S&OP meeting:

"The customer delivery lead times on product XYZ are stretching out because customers are ordering more than we forecast."

"OK. Do you think the total sales revenues for this year are increasing?"

"No, we don't think so."

"Well, there must be something else that we forecast that isn't selling."

"Product family A133 isn't selling at the forecast rate, and we should turn that down."

"Manufacturing, what do you think about that?"

"These products don't use exactly the same work centers, but lowering the plan on the A133's will allow us to shift people. It will be a challenge, but we can do it."

A different dialog might happen on making the numbers, but the master schedule still needs to coordinate the company's game plan. The numbers discussion might sound like this:

"What do the numbers look like for the next four weeks?"

"Weeks 1 and 2 are fully booked. Week 3 is nearly booked and it's pretty certain that it will fill up. We're a little worried about week 4. The schedule for BZ128's is used up and most of the large customer orders use those."

"I thought Wal-Mart had a big order that was going to make the revenue goals."

"Same situation, that order is currently in week 6, because we don't have any BZ128's until then."

"Manufacturing, what will it take to get the BZ128's moved in?"

"Well, there's a distribution order due to ship next week. If we hold out about 100 of those, we have the raw materials to build the other 225."

"From a sales viewpoint, I don't think it's a good idea to steal the 100 from distribution. Can you move in the delivery of the raw material?"

"It's possible. From our discussions the other day, I suspected that we didn't want to divert distribution's order, so purchasing has been looking into expediting some material."

R. D. Garwood, Inc.'s SOP STARTER KIT provides a complete explanation of the sales and operations planning process, including how to get started. To eliminate unnecessary confusion, it's best to use the master schedule to communicate what needs to be completed. This doesn't mean expediting stops. It does mean that we use the master schedule to make sure that when the raw material is expedited, everyone else does everything else to get the job shipped on time.

It's ironic to see expeditors working on those few known critical jobs not due until next week just to be sure it gets done on time! What isn't seen is the unintentional disruption to the jobs that are in the late bucket and due this week. But, that's what happens if a well-managed S&OP process isn't in place. Does any of this sound familiar in your company?

Our SOP Starter Kits are $15 each and are available from our online bookstore. Get yours now and begin putting an end to your company's planned confusion today!

All Contents Copyright � 2002 R. D. Garwood, Inc. All Rights Reserved.