Growing your Manufacturing Business
with Better Planning and Scheduling
This paper will walk through important ideas and questions that manufacturers face every day,
regarding the planning of their production processes. It will also serve as a guide to understanding the differences between planning and scheduling solutions that are ERP, APS and spreadsheet based.
How important is effective planning & scheduling to a manufacturer?
How well the material flows through the factory has a direct impact on costs, inventory levels and reliability and responsiveness to your customers. Having short, reliable and predictable lead times allows for:
- Quick response to customer demands. You win those orders, not your competitors.
- Stability. With long planned lead times, it is harder to predict whether production will be early, on-time or late.
- Reduced inventory throughout the process. Because raw materials can be converted into finished goods quickly, inventory levels can be sized without carrying too much at any point. - Investing in the right resources. To provide short lead times, critical resources must be used
effectively to maintain flow, while non-critical resources must have enough protective capacity so that they do not become temporary bottlenecks.
If you are a manufacturer, having visibility and managing the resources and materials used to make your products is paramount. Demands and supplies will change; the production process itself may have inherent variability.
If you could have visibility over how to manage and reduce lead times, would that be beneficial to your company?
If you could predict the effects of changes to supply, demand and capacity, how would that be an advantage in your marketplace?
How are planning and scheduling typically accomplished?
Planning and scheduling are typically accomplished through a combination of human effort and software. This allows for a blend of the human expertise and understanding with the power of a computer to do large numbers of calculations quickly.
Software can include: 1. Spreadsheets
2. ERP modules and features
3. Advanced planning & scheduling (APS) systems
In our experience, the most common combination is the use of spreadsheets to support the planning process. Why is that?
What are the pros and cons of using spreadsheets?
It is our contention that spreadsheets are used today because they are readily available, and cost very little. In fact, this accessibility allows companies to shortcut a software selection process completely – there is very little need to involve IT or management in this choice, and the planner is free to make this important decision on how to plan production essentially on their own. There are certainly pros and cons to this situation.
What are the pros?
- Personalization. The end user can make their spreadsheets look and act however they wish, to the best of their capabilities.
- Flexibility. Spreadsheets are simple to start with, and can become powerful calculators and reporting tools in the right hands.
- Support. Users feel that they can find answers to their “how to” questions on the internet easily.
- Insight into the company’s processes. Users describe the experience of creating their own spreadsheets as helping them learn about their own processes and planning policies, since they have to program some logic into the tool itself.
- Reliance on the planner to make the final decisions. An expert can use spreadsheets to spot problems based on their experience and knowledge, even if the sheet itself is simple in design. What are the cons?
- Reliance on in-house experts to design, and use, the spreadsheet. There are several risks involved with this approach:
o Cost. Although the software itself costs very little, most spreadsheets are created without using good programming techniques. Often, the initial and ongoing efforts to keep them running are not concerns to IT and management.
o “Experts” may in fact have limited knowledge of planning techniques that could benefit their company, resulting in an inadequate solution that is offset by firefighting and sheer human effort. For example, it is uncommon for spreadsheets to be able to load
demands within a limited resource capacity, or to help planners see when and where they should buffer the production process against uncertainty.
o Once a spreadsheet is working fairly well, the daily routine of data entry and expediting occupies much of the focus, limiting the creators’ capabilities to make improvements to their spreadsheets
o It can be difficult to detect errors in the logic of the spreadsheet, and in some cases, copy/paste of the raw data itself can compound the possibilities of mistakes
o If a reliable spreadsheet system is in place, there is a concern about what might happen if the designers and users move on to another position or company
- Scalability. A spreadsheet is designed to address immediate concerns in planning; they can be difficult to modify as the business changes. At some point, spreadsheets become cumbersome in many environments, which seems to contradict the idea that they are easy to use and implement.
- Potential for human resistance to change. As time passes, companies become invested in the tools they have created, and believe there is probably no better way to do the job. This can be true for any member of an organization – end users, IT and management.
Having read through these pros and cons, you may have the feeling that the creators of spreadsheets are to blame for the approaches they have created. This is far from reality. In most cases, they have done the best they can with the tools they had at hand.
Furthermore, sometimes manufacturers will look to other systems to automate and standardize some of their “tribal knowledge.” We contend that tribal knowledge should be one of your company’s main assets – not something to be taken lightly. Any successful transition to a new approach will need to find the right balance of letting your team apply its expertise to a given situation, while taking advantage of the visibility and optimization that technology can bring.
What about using modules provided by an ERP system?
Once a manufacturer feels that spreadsheets have run their course, they often look to ERP systems to be more than transactional processing, database management and accounting systems. The promise of ERP was to include nearly every business process that an enterprise might need, including planning & scheduling.
How well is that promise being fulfilled? Apparently, not very well. It is our experience that most attempts at using production scheduling modules of ERP systems result in companies reverting back to using spreadsheets. Why might that be?
Most ERP systems at their heart are designed to be transactional processing and data storage systems. Planning and scheduling requires a different form of computer power: the ability to model capacity and
material constraints, load resources effectively and provide the ability to compare “what if” scenarios, for example. ERP was simply not built for planning.
However, many ERP vendors recognize that and do have planning/scheduling modules intended to work properly. Many ERP providers have lists of features that seem useful on the surface, and do offer the additional benefit of being integrated with the rest of the system and supported by the same software company. Are there potential flaws with this approach?
One downside with ERP’s production scheduling/planning modules being “integrated” is that there is an inherent inflexibility – the opposite of what human planners want, and what manufacturers need to model their own processes and policies! The planning modules are designed to work a certain way with the rest of the system, and if your company requires something different, that can be an issue.
Although changes can be made to most ERP systems, this typically involves the dreaded “customization” of code to make those changes.
Another important issue is the focus of the ERP company – it is hard for a single software provider to be an expert on accounting, product configuration, bills of material, human resource management, data collection and planning. ERP systems’ strength is the breadth of doing many things, at the possible expense of not having the depth in all areas in their portfolio. Planning and scheduling software
requires depth and flexibility, and it is rare for ERP companies to invest the required amounts to develop and maintain their planning modules. There is little pressure for them to do so, since planning may only be a portion of what a manufacturer perceives as its needs. Even if needed, there is the thought that “as long as it is better than using a spreadsheet”, that will somehow be good enough.
What about so-called Advanced Planning & Scheduling software?
Advanced Planning & Scheduling (APS) systems have existed for decades at this point, yet they are not widely adopted yet. There are several reasons why that may be:
- The spreadsheet culture is widespread and ingrained in many organizations already
- APS itself is a very broad term, allowing vendors to claim some level of feature support, while not always being complete solutions. This also has the side effect of “solutions” being offered in a wide range of prices. It is confusing for manufacturers to try and sort through a decision on their own.
- The early history (in the 1990s) of APS implementations is littered with projects that did not meet expectations, or outright failed. The fear of another failed software implementation can be a powerful mental roadblock for organizations to steer through successfully.
- Many early APS systems were acquired and absorbed by ERP companies, resulting in the lack of focus on improving those early attempts
- Some APS providers have difficulty proving their own case to their own potential customers. What should APS software and implementations be able to deliver? In terms of software, flexibility is king. Being able to integrate with data from any source; apply logic, constraints, and rules that come close to modeling the reality of the production process itself. Being “user friendly”. Providing clear
visibility of potential issues, and monitoring potential business performance at a high level. Acknowledging that even perfect data and optimal techniques may result in a plan that cannot be executed when conditions change – therefore, strategically protecting against this real-life variability must be a part of the system to ensure flow and some stability. Allowing “what-if” scenarios for comparison. In short, the software must allow the planning team to make the best decisions for the manufacturer reliably and quickly every day, and those plans must be able to be executed.
The implementation should also provide the vision for running the business better – using the system to achieve the results expected by management and ownership. Simply automating the status quo is not enough.
How should a manufacturer begin the search for a new approach?
Making a change to improving the planning process requires a commitment from three types of roles in an organization, each of which must be involved in the search and decision process:
1. Management and owners 2. End users
3. IT
The search often starts with the planner (the end user) feeling pain from their spreadsheets being too cumbersome. The planner is seeking that convenience/ease-of-use factor again. Any proposed solution must still address this need, or it will not be successful. However, this is not enough to justify making a change.
Management may also be feeling pain – perhaps they are feeling pressure from their competition, or that there is a feeling that compensating with human effort and expense may not be the best approach. This pain is still not enough – management must be able to see that a new solution will drive business results quickly and reliably. Expectations must be set on what the new solution should do: reduce lead times, improve customer service measures, reduce inventory and/or reduce other expenses. Without a business case that can be proven, there will be no decision to make a change.
IT also needs to be involved. On the one hand, any new system must be easy to work with and integrate into the existing infrastructure. There must be no hassles with the new provider’s support and
implementation. However, in some cases, there is a culture of IT wanting to be involved in projects involving software. This is neither good nor bad; it is simply a matter of leveraging their expertise at the appropriate level.
Each role should define “why” a new system is needed. What results are expected? Then, organize for an evaluation. Although understanding “what” features might be needed, and “how” a system should work, don’t simply list requested features and technical requirements. It is more important to talk with candidates about “why” those features are important, and then understand “how” the provider will help you achieve your objectives.
Lastly, any successful project will involve money. Expect that any significant improvement will cost not only money, but time and effort as well. Work with your potential providers to develop a clear financial justification, and clearly outline what must happen to achieve the desired return on investment. You are a manufacturer – planning and scheduling the flow of materials through your resources reliably and profitably should be a primary business objective. It can be shortsighted to dismiss vendors based on their cost, without considering the value and benefits they will provide. An upgrade to your planning and scheduling procedures should be done with the long-term rewards in mind. The “APS Software Selection Guide” is a great place to gather more ideas. It is available for free download at
http://info.planettogether.com/aps-selection-guide.
By Pete Nelson
pete.nelson@planettogether.com
By Cees Molenaar
