The key to control and automation
A few years ago there was a common phrase which referred to the need for automation “automate or evaporate”. The technology advances that have been made in recent years are remarkable. If this technology is operated alongside best practice management principals it can support the journey to excellence in a highly competitive market positive. However we face a real risk that we forget about the process and people in favour of focusing on the new and exciting technology.
Master Supply Planning or what used to be referred to as master production Scheduling (MPS) is one of those best practices which must not be forgotten. In fact we are in danger of suffering from the ‘lost art of Master Supply Planning’. While this is a ‘technical’ subject it is also about management. A properly managed Master Supply Planning process provides a great opportunity to gain control and increase our ability to meet world class standards in:-
Although Master Supply Planning in isolation cannot achieve the above objectives, without properly managed Supply Planning as the foundation, success is unlikely to be achieved. If the Master Plan is not effectively managed it can destroy all of the great efforts across other functions such as sales, marketing and manufacturing. There is no point in producing high quality, competitively priced products which are not available when the customer needs them.
Master Supply Plan
“It is the anticipated build schedule for those items assigned to the Master Planner. It represents what the company plans to produce expressed in specific configurations, quantities and dates”
The key words in this definition are “anticipated build schedule”. It is a statement of what the company can do based upon demonstrated performance to meet market demands and when it can meet those demands.
It is not a wish list, or what the company would like to produce, or simply a restatement of the sales forecast, it is a statement of how the sales forecast will be met.
It is possible to have the situation when the Master Supply Plan is overloaded and changed frequently that a factory could be producing at maximum capacity and yet not satisfying any customer orders. In other words producing lots of unmatched sets of components or ingredients which results in lots of inventory but very poor customer service.
The Master Supply Planner
The role of Master Planner is to balance supply, demand and optimise cost and inventory. Demand comes from the market in the form of forecasts or orders and the job of the planner is to balance those demands with supply from the factory by ensuring capacity and materials are available. This is a key role and not simply a factory scheduling function. The Master Supply Planner holds a key position that requires knowledge of the factory, the supply chain and the market place. It also requires credibility with all functions. The Master Planner could be seen as a fulcrum balancing the forces of the market place and the resources of the supply chain and factory. Simply said the Master Planner has to manage the flow of inventory and product to meet customer demands while recognising the constraints and available resources.
Integrated Business Planning
Over the past 40 years the evolution of ERP (MRPII) has shown that it is not any one particular aspect that makes the difference but the integration of all the business functions within a framework of planning and control that allows us to move towards an environment of business excellence and world class performance. Relative to Master Supply Planning (which drive materials and capacity planning) it is Integrated Business Planning (S&OP) that is most significant. IBP is the process that balances aggregate demand and supply plans while integrating new product development and financial plans (budgets). It is through this high level balancing process that major conflicts (gaps) are identified and resolved so that the master planning process can balance the plans in detail. If IBP is either ignored or does not effectively resolve the major conflicts and gaps then no amount of effort at the master supply planning level will ever overcome those conflicts and the organisation will be condemned to eternal ‘firefighting’! Therefore it is vital that a company manages the master supply plan in line with its capacity. There are two sides to this, the first is the load and the second is the amount of change. By load I mean the total that is in the master plan while change is the amount of schedule/plan changes in terms of dates or quantities that occur inside the various time fences defined in the planning horizon. Both load and changes must be managed effectively.
Managing the Load
Ensuring that the load in the master supply plan does not exceed the overall resources is achieved by comparing the total requirements for all items within a family with the aggregate supply plan for that family agreed through the IBP process. The temptation to overload the master plan is great. The master planner is always trying to respond to changes in demand, usually short term increases and often in a none coordinated or planned manner. If these changes are not considered as part of an aggregate total it is likely that the master plan will be overloaded at the ‘front end’ resulting in past due schedules and once again the inevitable fire fighting.
If these circumstances exist then the scheduling information being given to production and the vendors is worse than useless. It does not provide a valid indication of what is really required, it simply represents what we would like to do – ‘a wish list’. However promises have been made to customers based upon an overloaded schedule. The question therefore becomes not how to meet customer promises but which customers to let down. Nobody wants to disappoint
customers, but when an overloaded master plan exists (through our own mismanagement) we must face facts and reschedule the plan. It is the IBP process that prevents major surprises at the aggregate demand level being greater than the ability to supply. However it is managing the master supply plan that prevents us from making mistakes and promises that we cannot achieve at individual product and customer levels.
Managing Changes to the Master Supply Plan
Changes are a way of life in business today. The master supply plan is no exception, requests to change the master plan will occur continually. These changes may be due to problems in supply, with vendors or customers ‘not reading our forecasts’ and ordering what they want! The question is not whether we respond to these changes; the question is when we respond and at what cost. Obviously we only want to make changes that are absolutely necessary and that can be achieved. We therefore need to answer the following:-
• Is the change absolutely necessary? • What effect does it have on our IBP plan?
• Have we got or can we get the materials?
• Have we got or can we create the capacity?
• How much will this change cost, including disruption cost?
With the likely volume of change then its going to be impossible to assess every change in detail. Therefore it is essential that a company establishes a clear and robust time fence and abnormal demand policy that represents guidelines for change of the master supply plan.
Time fences are not intended to introduce inflexibility or be a ‘sales prevention’ process. They are simply an acknowledgement and contract between demand and supply that there are boundaries inside which changes are more difficult and more costly to make. The truth is that these boundaries exist, time fences are simply an acknowledgement of their existence.
Making these time fences as short as possible is of course desirable in order to be as flexible and responsive as possible in a business excellence and customer focused environment. Typically operations and sales will be on opposite sides of the table during the discussion of where these time fences should be however it is not a debate of where they should be it is more an understanding of where they are. The debate should be about how through continuous improvement and lean techniques they can be reduced while at the same time improving forecast accuracy at the cumulative lead time.
These time fences then permit the establishment of a set of rules which govern changes inside given time fences. The master supply planner’s job is then to manage those rules. Without rules and understanding in place you loose accountability for change and begin the fire fighting once again.
A properly managed master supply plan provides an excellent environment for gaining control and meeting customer requirements. Without it the journey towards business excellence, customer service and world class performance will be considerably hampered.