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Global manufacturing today faces significant operational challenges. Companies that were unable to meet these challenges have been left behind (for example, in High Tech think Blackberry and Compaq). The Industry Renaissance has transformed invention and production for the needs of today’s customers. How should manufacturers adapt to meet the challenges and shift from product-centric to customer-centric operations?
In addition to adapting strategic operations, manufacturing companies also require a tactical ability to plan and execute flawlessly at the facility level. Traditional processes lack visibility and the ability to capture real-world constraints. Only purpose-built solutions deliver realistic plans that can meet customer orders while managing the variability of supply and demand.
Manufacturing Operations Management (MOM) and Planning & Optimization are both critical parts of the optimal solution. They also must be working together in harmony to achieve maximum benefit from their capabilities:
MOM Specifics: Visibility, synchronization and control over ALL operations: production, quality, warehousing, maintenance and field operations. The value created by MOM is both in efficiency and costs. Successful companies have been able to increase product mix and volume without capital expense by running existing manufacturing and assembly lines more effectively. By intelligent allocation and distribution of tasks and immediate updating of material requirements these companies have reduced cycle and takt times and reduced inventory levels.
Planning & Optimization Specifics: Planning, scheduling and optimizing production considering ALL constraints: material, capacity, labor skills, tools and setup. The value provided by planning and optimization is the ability to quickly and proactively identify potential manufacturing challenges such as bottlenecks and the impact on customer demand. By running simulations (proactively and on demand) successful companies have been able to deliver on customer due dates and increase customer service levels while simultaneously reducing inventory and cycle time.
Each solution has inherent value but are less effective when implemented in isolation. Manufacturers that execute without having a realistic plan are working blindly. Those that plan without effective execution are setting unachievable goals.
In numerous case studies, manufacturers have found that the limited visibility to shop floor activities and poor planning led to problems with over-scheduled machinery and equipment. Unforeseen bottlenecks and constraints constantly delayed productions and the only way to ensure on time deliveries was to expedite, add labor or overstock inventory and WIP; all at great expense.
Using both MOM and planning & optimization as part of an integrated process provides significant value. Thanks to material synchronization and optimal planning, inventory reductions of 40% or more have been achieved and cycle times reduced by up to 50%. More importantly, the ability to balance demand from sales, purchasing, manufacturing and finance leads to optimal outcomes for meeting customer orders at the lowest cost.
There are two well-known axioms that point out the need for this conjunction:
1.“No plan survives contact with the enemy” (from military history). The “enemy” in thiscase is the real world turbulence of shop floor variability and changes in customer demand.Due to the nature of increasingly customized orders and shortened lead times it is inevitablethat the production plans will need to be revised. This happens within tactical operationaltimeframes e.g. dropping in a priority customer order or a sudden shortage of raw materials.It is impossible to eliminate this variability (even with higher level planning processes) sothe important capability to add is the ability to react to changes and to quickly re-planproduction. This allows us to see the impact and, if necessary, evaluate trade-offs to settle ona compromise between (for example) cost and customer service levels.
2. “By failing to prepare, you are preparing for failure” (Benjamin Franklin). Hope is never aneffective strategy yet many manufacturers are planning production without truly effectiveprocesses or systems to provide insight and visibility to what the true outcome of productionwill be in the context of meeting customer demands. Spreadsheets are still a common toolin this process but are woefully inadequate in supporting a scalable and reliable planningprocess. The end result is a lack of agility and a production capability that becomes veryreactionary. Perhaps manufacturers in this state may still able to meet customer demand butthey would do so at the expense of skyrocketing costs of inventory and expedited logistics.Few companies today have the luxury of high customer service levels at any cost.
While the emphasis may vary with specific needs, most industries can benefit from this combined solution.
What about your industry?
All manufacturers perform the same critical tasks – procure components and raw materials; process those materials through the application of manpower and equipment; store and account for materials and finished goods; sell and deliver those goods to customers directly or through a distribution network; account for all of this activity and plan for the future. The advanced scheduling and dynamic management outlined above applies to all manufacturers in all industries, anywhere on the globe. And the more complex or volatile the value network is, the more these tools are needed and the less useful are spreadsheets and traditional ERP planners.
Complex discrete manufacturing includes industrial equipment, aerospace, transportation (cars, trucks, motorcycles, etc.), appliances, and products with many parts – deep and/or broad bills of materials. These manufacturers manage many parts/components and therefore have many suppliers and considerable inventory to order, track, and coordinate. Complex manufacturers also tend to have complex manufacturing processes with many steps and a lot of people and equipment to coordinate.
The typical consumer goods manufacturer may have more simple bills and processes (although some processes may be very complex); equipment and asset scheduling is critical – keeping the production lines running is paramount. Raw material and component inventory is equally important as any shortage or quality issue may disrupt that all-important production schedule. Consumer goods manufacturers are also likely to have a more complex value network with customers who are very sensitive to availability and service levels. Distribution logic is as important to consumer goods manufacturers as supplier management is to complex product makers.
Process manufacturers, including food, beverage, pharmaceutical, and chemical among others, have similar equipment utilization concerns as consumer goods manufacturers and also operate under rigorous regulatory requirements for electronic records and sign-offs, quality mandates, and stringent traceability obligations. Fully integrated systems with built-in quality management systems and electronic signatures are essential for compliance in the fast-moving twenty-first century manufacturing environment.
While the emphasis may vary with the specific needs of the industry and market, all types of manufacturing can benefit greatly from operations that are both well-planned and executed.