The Reality of Your Manufacturing World

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The Reality of Your Manufacturing WorldBy Kien Leong On May 17, 2011

Manufacturing software is an hungry beast. You need to feed the system with data. Get it right,

and your manufacturing planning system will reflect reality.

The cost of getting it wrong goes way beyond inaccuracy.It can force the business into an ill-fitting strait-jacket. Discipline that fixes the wrong processes

can be deadly to business performance.

Successful implementation of manufacturing software depends on good master data. As we all

know: Garbage In, Garbage Out.

An Alternative To Software Sticker Shock

The SAP solution to the data problem is simple: Change your business to fit the system. Oh,and budget another million or two for the consultants to help you do this.

the trouble is, executives often lavish plenty of attention on the buying cycle but perhaps less on

project execution. The result is flawed data and system routines that do not correctly reflect the

business requirements.

Clients ask us to build them manufacturing planning and scheduling systems in Excel for three

main reasons:

1. Flexibility. They need to manipulate the master data in a way that is not supported by

off-the-shelf manufacturing software systems.

2. Speed. They need to develop a planning capability and do not the time to go through

the usual bureaucracy and politics required for IT budget approval.

3. Cost. They need manufacturing planning software, but their business does not support

the cost of implementing a large package system.
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So, people want something that is better, faster and cheaper. No surprise there.

Small Businesses and Multinationals Have the Same Needs

Interestingly, in the list of priorities, cost almost always comes last. There are an increasingnumber of Software-as-a-Service (SaaS) solutions for ERP that can give you a system with a

handful of users for a few hundred dollars per month. So, low cost is not the primary goal that

brings clients to request spreadsheet planning systems.

Another interesting point: this list of priorities is the same, no matter if the client works for a

small enterprise or a large multinational company.

We usually have a mix of clients on the go: from a six person craft workshop to the multi-billion

Fortune 100 company. They need better, faster and cheaper.

There is no budget for Advanced Planning and Scheduling/Optimization. This could be because

the cost of the system is in the same ballpark as than their annual revenue. Or it could be

because they already have one- the unfortunate fact that it doesnt work is no excuse to go buy

another application.

The Boundaries of Flexibility

So, Excel-based systems can be more flexible, faster to develop and a better return on

investment. They can be fitted to the business, rather than fitting the business to the system.

However, dont take this flexibility too far. Any system needs inputs that conform to standards

and should be mapped onto real-world processes. You need to give the system a model that

represents the real world.

In aSimple Truth About Capacity Planning,I touched on a foundation of successful planning

with capacity constraints. This hints on requirements for data that linkdemand in units ofproduct with production load in units of time.

Lets wrap this up with the other master data items that are the key essentials to providing a

planning system with inputs.

Item Master. This is the beginning. It is the list of all product and parts in the business. It will

usually have some kind of hierarchy based on groups and families. Any attribute for SKUs and
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part numbers is listed here. Als0 included are parameters such as material lead-times, order

policies and stock settings.

Demand. This usually comes as a set of tables, including open sales orders, demand history,

sales and customer forecasts. Each line item is an actual item line, so we can link the raw

demand. Forecasts are often family level and apply to a period rather than a single transaction.

Bills of Material. There are two types of BOM: a multilevel BOM that lists all parent and child

relationships; and a product BOM that gives all dependencies for products and sales items.

Critically, the BOM should be in a single table. Many MRP users are familiar with viewing

BOMs one product at a time. Despite the fact that everyone in manufacturing knows what a

BOM is, getting a single data table for all Bills of Material is often a challenge.

Open Purchase Orders. One of two elements to supply for material planning. A list of open

purchase orders combined with inventory and total demand are master data inputs tomaterial

availability projections and purchase action calculations.Inventory. The other master data to form material supply. Even for companies who do not

have an MRP system, there is usually an accounting system that transacts material and it can

be an alternative the source.

Routing. A list of the process steps that need to be performed to convert material to parts and

products. Process Routings should specify work centers that can perform the work to a

standard time and quality. Each work center can comprise of multiple resources (machine

and/or labour). For businesses that havecustom products and engineer-to-order, the Routing

needs to come from an order or product configurator.

Calendars. This is the beginning and end time for production shifts. This should be the time

that is available to do work, set up or changeover but not perform maintenance. Calendars give

capacity to production resources. Companies often do not have accurate shift calendars

maintained in an MRP system, so these can often be managed in Excel.

Resources. A list of resources that perform work in production. They are grouped into work

centers and it is this level that links to the process routing. Usually, this is either machines or

people whichever is the constraint.

Work Orders. An Excel-Based planning and scheduling system will usually generate a work

order signal to manufacturing. The transaction may still be managed in the host MRP system.We need some kind of report on completions to calculate the net requirement for production. In

fast, high volume production this may be a back-flush and the information may be in the

inventory file. For longer production cycles, it is usually important to get some kind of WIP

report from the production floor.

Nine basic elements that form the reality to your manufacturing.
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These are the input tables that we use to drive an operations planning and scheduling system.

They can be database connections or more simply, text filesthat are generated by the host

system and placed in a shared drive.

Excel-based planning and scheduling systems offer plenty of flexibility, can be developed

quickly and are very cost effective. This flexibility is limited to certain key master data that need

to accurately represent the business.

These master data elements are the hooks with which an Excel planning system can run the

business. Put the right attention to building this master data set, and the Fast Excel Method can

give you powerful planning software to be deployed quickly at a manageable cost.

Design Your Own System

Design Your System Questionnaire & Quotation Request

To fully understand the questions, please watch the P-S Cycles presentation , and then read

explanations of the features of Excel supply chain management systems.

Pleasedownload the model system data layout, populate it with as much of your own data asyou can, and email it to us. We will run the P-S Cycles model system with your data, and send

you the results.

Print the 9 page explanation now (Right-click link and choose Print Target)

Read the explanations on the screen as you complete the questionnaire .

Design Your System - Questionnaire & Quotation Request

This form enables us to understand requirements and get back to you with a fast and accurate

quotation.

Name*

First Last

Company Name
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Job Title

Email*

Phone

Type of products you manufacture:*

Details of your existing ERP/MRP system

Description of your manufacturing process

Make-to-Stock/Make-to-Order*

o Most finished products are made to order


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o Most finished products are made to stock

MATERIAL REQUIREMENTS PLANNING

o Is there just one work centre for each finished product?

o Are products made from manufactured sub-assemblies?

o Do products and/or sub-assemblies go through more than one work centre?

o Does the BOM have more than one level?

o Does the BOM reside in the host system?

o Is each level of the BOM in a separate table?

o Do you hold manufactured sub-assemblies in inventory?

o Is dynamic re-allocation of inventory appropriate for your business?

o Is there a record of materials in work-in-progress?

o Do you have an existing MRP system with pegging?

PURCHASING

Do you maintain purchase order records in:

o Do you want a purchase action report?

o Do you want purchase exception reports?

CAPACITY PLANNING

Do you want to maintain routing data in:

How is your manufacturing process constrained?

Do you want the system to consider:


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o Are there opportunities for a rules-based BOM?

o Are there opportunities for rules-based routings?

o Do you have inventories of semi-finished products?

o Do you want capacity planning charts?

o Do you want variable sized capacity time buckets?

o Do you have standard times for each product at each work centre?

o Do you have standard times attached to an attribute of the product?

o Should change-over or set-up times be considered?

o Do you want to apply lead-time offsets for capacity planning?

o Do you want to use closed-loop MRP?

What is an appropriate planning horizon?

What is an appropriate horizon for reports?

FINITE SCHEDULING

Do you want to use finite scheduling?

o Yes

o No

If no, then proceed to the end

Submit


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Simple Truth About Capacity PlanningBy Kien Leong

It was easy to see where they were going wrong. Their system was ignoring a simple truth

about capacity planning.

This is good news. We can provide the client with a fix that will transform their capacity planning

process and get them quick results.

I was consulting to a company who is manufacturing industrial goods. The Operations Director

invited us because he was unhappy with their planning capability. He was showing me the

system that his planners were using to manage materials and production capacity.

Here is a replica of the chart they were using to

manage capacity.

What are the units on this graph? I asked.

Well, the horizontal shows days or weeks. And the vertical tells us how many units we need to

make. He replied.
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And this yellow band? What does that represent?

He explained that this was capacity. The capacity was indicated in a range because some

products take longer to produce than others.

So, capacity in units can be anywhere in this band, depending on product mix?

Exactly our problem. Our planners have to manually check the capacity with production. They

try to limit the mix in any single day to make it more predictable.

This is good news to me. It means we can solve their problem quickly simply by looking at

capacity planning in a different way.

The problem here is units of measure. Customers order units of product, purchasing buys units

of raw material. It is not surprising that planners think in pieces, cartons, kilos and meters. In a

high-volume/ low-mix manufacturing business this is all you may need. A production line is

rated in units per hour and calculating capacity is straight-forward.

In a high-mix business, you want to use the same resources to make different products. And

those products will likely have a different work content. So the production rate in units per hour

is changing.

The obvious point here is that production resources are not measured in units of the product

they make. You hire operators, buy machines and then deploy them over time. The products

that they make all have a standard time for each operation. Multiply production volume by these

standard times to get the load. Compare total load-hours (run plus setup) with capacity

(available hours) to get an apples-to-apples comparison.

The simple truth about capacity planning is that it is measured in time. This is a fact that many

planners ignore. It is very common to find capacity planning or level-loading processes that tryto balance production using units of product. The result is either inflexible manufacturing

using single model production lines or unpredictable capacity.

There are two general trends in manufacturing that make this problem worse: Toward higher

mix production and faster response. Customers want more choice and they want it fast.


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Furthermore, outsourcing and automation can drastically change the work content in the

product. The differences in production time from product to product is set to widen.

These are general trends. Each business has its own product mix, process definitions and

customer requirements. I would guess that most readers are finding that product mix is getting

bigger, and lead-times are getting shorter. Anyone who is seeing an opposite trend, leave a

comment below and let us know!

So, moving from production volume (e.g. in pieces) to production load (in minutes) is a key

component of capacity planning. The usual way to do this is with a process routing that defines

the standard times for each operation and the work-center or resource type that is required to

perform the work.

Some manufacturers have very detailed process routings. They meticulously update the

standard times and use them for planning and cost control. Other companies have some

process data that would benefit from a clean up. And some manufacturers dont have standard

products at all. They are required to calculate the production times for each and every order

they receive.

For some companies, capacity planning can be done by exploding demand tables with a

process routing. For others, a capacity planning project will start with a way to generate a

process routing.

We have Excel tools that can help with both of these. The Fast Excel Development

Template has a tutorial to exploding tables. There are plenty more examples that we can give

you to download and customise to your business.

Can you give us some feedback here? We have two types of capacity planning tools that we

can give to you for free. There will be an Excel workbook to download and a companion video

tutorial to go with it.

What I would like you to do is leave a comment below and tell us which you would like us torelease first.

1. Process Routing Generator. Choose this one if you DO NOT have a process routing or

standard times for each production operation. You may have highly configured products,

engineer-to-order or simply not have the data in an up-to-date way.
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2. Capacity Planning Tool. Choose this option if you DO have a process routing and

would like to use it to create capacity planning charts.

Capacity Planning ToolBy Kien Leong On April 5, 2011

Heres what Ive got for you: a functional capacity planning tool, built in Excel.

What it will do for you: Calculate the required load on production from sales demand and

compare it with capacity that is available from acalendar of work centers.

What you can do next: read on to find out exactly what this is, and how it works. After that you

can download it and swap out the sample data for your own.

To get this straight away, Members can login on the sidebar to the right. If you havent joined

yet , you cansign up for free here and then download immediately.

We developed this capacity planning tool to show you how capacity planning works in the Fast

Excel Development Method. This is how planners can get good visibility on capacity needed to

meet demand. Compare it with capacity available from the current calendar, work centers and

production resources.

Many production planners and master schedulers try to plan capacity using units of product.

This can work if the factory is low mix and has very steady demand. If different products have

different work content, then planning a mix of orders into shared resources can be impossible to

do this way.

Good capacity planning compares apples with apples. Effective planners need to balancedemand and capacity using a single measure of time.

So, exactly what are we giving you here? Lets look at the results. Here are the reports that it

generates:
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Capacity planning report - work center over time

This is a view of required production load for a given work center over days and weeks of

production. It compares it with capacity based on the actual shift calendar.

Capacity planning report- a week over work centers

This is a view of required production load for a given week over different work centers. It also

compares the production load required for demand with the capacity available from the

calendar.
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The work centers you see here are just the ones in the sample data. You can upload your own

work centers, calendar and process routing that matches your own production.

Here is the input on the demand side.

Sales Orders

Bills of Material

The sales orders exploded with the BOM create a total demand for all parts and products. Of

course, you need to be sure that your BOM contains parent records that match the sales order

items.

The inputs on the supply side are as follows:

Calendar
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Work Centers

Routing

Naturally, you need to be sure that the manufactured products and parts in the sales orders and

bills of material have process routing records. Also, that the due-dates in the sales order table

are covered with calendar records.

Input files are text files that need to be placed in a specified folder location on your hard drive.

Read this post about using text files to link between Excel planning tools. Alternatively, for a

quick-and-dirty alternative you can paste your data on top of the input sheets and run the tool

from a Cut-and-Paste option. I recommend that you use the text file method, as you run the risk

of refreshing an imported file over the top of cut-and-paste data. That could be frustrating.

We have tried to make this tool reasonably foolproof, but it will only perform as well as the data

that is shoved into it. If you get errors, then it is probably the wrong format of data. Run the tool

with the sample data set a few times first, and get familiar with the way that the inputs will

change the result.
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Documents

The Reality of Your Manufacturing World