Avoid common pitfalls.
A good, or even a world-class scheduling process, is not sufficient for success. In the 36 years I’ve spent in production planning, and implementing planning and scheduling systems globally for Procter & Gamble, in a diverse group of consumer goods businesses, I’ve learned that it is the quality of the production plan that counts.
A Solid Foundation
Before discussing the importance of a good production plan and how to ensure its success, it’s worthwhile to take a step back and consider the definitions of planning and scheduling. Here are mine:
Planning: decide which products to run, and in what quantities, during each time period.
Scheduling: choose the best sequence in which to make the products for each time period, in a way that setup costs are minimized, without running out of stock or missing customer due dates.
What is a Good Production Plan?
The following are key considerations for a quality production plan, to ensure that your scheduling and execution will be successful:
- The plan requires no more than the available capacity, after taking all capacity losses, such as setups, maintenance, team meetings and process improvement time into account.
- Uses realistic or demonstrated production rates for every product in the plan.
- All products required to be produced are included, in the correct quantities, and in the correct time period.
- Agreed upon demand from all sources is included.
- Inventory is at target levels at the end of each planning period.
- When multiple production levels are involved, the lot size criteria are used at each level (make/pack or feeding/consuming operations).
With a good production plan, the schedule will fit. The scheduling task becomes one of choosing the best timing and sequence for the planned orders to maximize customer service and minimize setup times and costs.
Without a good plan, no amount of scheduling effort will make the schedule fit, and even the most advanced and expensive advanced planning and scheduling system will be unable to create a schedule that satisfies customer demand and is feasible to execute.
Case Study: Unanticipated Roadblocks
A large European plant that supplied snack food to the world market implemented an advanced planning and scheduling system. They thought it would solve all their problems. At the time of implementation, demand and customer orders were at 120% of the plant’s capacity. At startup, the site couldn’t create a schedule that met customer service objectives. They complained that the software didn’t work. What was going on?
- If orders are 20% over capacity, somebody is not going to be served.
- Who decides which orders are filled and how do they make the decision?
- Likely it’s a fork truck driver, deciding which loads to fill, which to cut, or giving everyone only part of what they asked for.
- Or maybe the orders shipped latest in the day get cut?
- When the schedule doesn’t fit, who decides which orders are cut during the scheduling process?
- What criteria are they using to decide what to make and what not to make?
- When orders exceed demand, an Advanced Planning system will make arbitrary decisions about what to produce and what not to produce, based on its own cost rules.
- These may not align with business objectives.
- More than likely they are based on best estimates of inventory holding and setup costs for each product.
What is the right way to handle a systemic shortage? Allocation should be a management decision. Management should be deciding which products and customers to prioritize, and which products won’t be produced.
The Rest of the Story
The project team sent the snack food plant back to the drawing board and told them to come back when they had constrained their demand to be equal to demonstrated capacity. They did so, and their Advanced Planning and Scheduling startup was successful.
A key takeaway for the project team
The project team learned to ask assessment questions about demand management, and whether there was a process in place to ensure a feasible plan over the entire horizon.
They learned to stop or delay projects early when the business didn’t meet the assessment criteria. Continuing meant that they would end up with a failed project or a delay later in the project.
Gain a sense of your readiness to start a planning and scheduling project by reviewing the Project Readiness Assessment we’ve compiled based on years of experience implementing production plans. How does your business stack up?
Mac Jacob, CPIM, SCOR-P, was a key contributor to building Procter & Gamble’s supply chain, ranked as one of the four best in the world by the Gartner Group. He started in project management, production planning, warehousing, and shipping in a small manufacturing plant, and then became the planning manager for Luvs Diapers for North America. He realized that it was the supply chain systems that were holding back the business and led a project that eventually became P&G’s global SAP/MRP II implementation. At one time or another, he was the business leader, developed the work processes, and wrote the original training materials for most of P&G’s supply chain planning systems.
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