Projects
Projects
I did my Practical Summer Training
at Cadbury India Limited.
This was a wonderful experience for me, as I got to know so many things
related to Mechanical Engineering. The Training was full in the sense that
I learned Commissioning of the Projects, how to handle projects, in
short Project Management.
For my B.Tech Project I chose a completely different
field, keeping in view my exposure. In fact it is a very upcoming field
viz. MRP II and ERP stuff. It revolves
around "To manage your Enterprise more
efficiently"; enterprise can be anything,
banking, finance, manufaturing, producation, in fact any company can be
more enterprise efficient. My project also involves a certain company,
TIMEX Watches Ltd (India).
The more I have worked on this project the more confident I am in handling
such situations.
In the not too distant future, MRP II as an integrated management process will become commonplace...Most companies will be using continuous improvement techniques and the use of supply chain management and efficient customer response will spread.
As manufacturing companies begin to focus on the year 2000 and beyond, we frequently are asked: What will be the role of Manufacturing Resource Planning (MRP II) in the future?
The answer depends largely on whether companies choose to utilize MRP II as an integrated management process for the entire business enterprise or as a manufacturing software tool.
Those companies that are choosing to utilize MRP II as an integrated management process are significantly improving their business performance and competitive positions.
What these and other companies have in common is their approach to MRP II. They do not view it as a manufacturing system or a software tool. They apply the concepts and techniques of MRP II across all functions of their companies.
Their motivation isn't to improve the performance of one functional area in the company. Their motivation is to better manage the supply and demand sides of the business. Their focus is on results -- improving their competitiveness in the marketplace and improving their company's overall business performance.
One measure of how a company manages the supply and demand sides of the business is how well their resources are being utilized. Inefficient utilization of resources drives costs up and customer service down.
"A company's business performance is reflective of how well their resources are utilized. It is all about creating value for your customers and shareholders. That is the whole purpose."
What is changing, however, are the methods and approaches to resource management and planning. Herein will give an overview of how MRP II is evolving and changing -and how I believe MRP II will be applied in the year 2000. Developments that I will cover include Sales and Operations Planning, the simplification of MRP II through Continuous Improvement, and Supply Chain Management.
MRP II Is Evolving into an Integrated Management Process Where once the focus of MRP II was entirely on manufacturing or operations, MRP II in the year 2000 will be utilized as an integrated management process that extends horizontally across the company, including product development, sales, marketing, manufacturing, and finance. It also will extend vertically throughout the company's supply chain to include the acquisition of raw materials, suppliers, customers, and consumers.
The fundamental purpose of MRP II is to establish a process that links projected demand plans to supply plans, so that the resources of manufacturers, their suppliers, and especially their customers are utilized in the most efficient and cost effective way. To do so requires a process for anticipating demand and planning and scheduling resources in a manner that supports a company's strategic and financial goals. It also requires a process to fulfill demand and execute the plans to produce the product. The key is the interaction and communication between these two processes -- as well as between suppliers and customers.
Five major elements for successful utilization of MRP II are as follows :
Successfully managing the companies can only occur when: Strategies are tied to tactics, supply is resolved with demand, the financial system is tied to the operating system, aggregate planning is translated into detailed planning, and planning and execution are linked together via a two-way flow of information and a spirit of cooperation among all functions.
With this approach, companies utilize MRP II as a people process supported by the computer, rather than the other way around. People -- and their behavior and discipline in utilizing the MRP II process -- is vital. When people understand how to utilize the MRP II process, tools, and techniques, the data and information will be highly accurate, and they will make sound decisions when selecting hardware and software.
"Too many companies start off by buying computer systems and putting the emphasis on the computer systems. That's not where the emphasis should be. The emphasis should be on educating and empowering the people."
When MRP II is utilized as an integrated management process, there is a free, uninhibited flow of information between departments and functions. The information is expressed in terms and units of measure that each function understands and can apply to their planning and scheduling.
What makes this information flow possible is the introduction of Sales and Operations Planning (S&OP) to the MRP II process.
S&OP was developed in the mid-1980s and is becoming more widely
practiced by companies.
Many companies credit S&OP with being the major factor in improving
demand forecast accuracy, better managing resource allocations, and better
executing the company's sales and production plans.
S&OP Will Become a Standard Management Practice in the years to come.
The senior management from all functions of the company -- sales, marketing,
product development, manufacturing, and finance -- should participate in
the S&OP process.
They should meet regularly, usually monthly, to update the company operating
plan by projecting future demand and analyzing the company's resources
and capacity.
During Sales and Operations Planning, the executive management team makes the key decisions in how to allocate the resources when projected demand and supply plans are out of balance. They work together to resolve any issues that will prevent the company from achieving its operating plan. This results in a single plan that all functions operate from in executing the plan.
Viewing the sales and production plans over at least an 18-month period gives senior management the ability anticipate and resolve problems before they occur. There also is greater understanding throughout all functions in the company of the implications of the decisions that are made during S&OP.
"Everything we do today has a reason. Everything is tied together. Before, we would make a change for what seemed to be the right reasons, and we would cause many other things to happen that we hadn't anticipated. Now when we make changes that cause other things to happen, we aren't surprised -- we expect it."
Major developments in software also will enable companies to perform extremely rapid simulations to predict the impact of changing conditions on the sales and operations plans and the company's financial performance. Companies now are able to perform simulations, but the process is often cumbersome and slow, limiting the number of simulations that can be performed.
Many executives view S&OP as the process that enables them to take
charge of running the business.
"MRP II, for us, is all encompassing; it is a way of life and how
we run our business. I don't understand companies that approach it strictly
from a manufacturing standpoint. The main advantage is for marketing. It
enables you to understand the dynamics of the market and the dynamics of
your company. Everyone in the company can see the sales plan through the
forecasting system. Everyone can see the production plan. It even can be
used to directly input your customers 'forecasts into your planning system."
The advent of Continuous Improvement techniques also is changing the way MRP II is applied in companies. In most cases, it is resulting in a simplification of MRP II planning techniques. There is great synergy from combining the attributes of MRP II with the attributes of Continuous Improvement. MRP II gives companies the ability to effectively plan and control the business environment; whereas Continuous Improvement changes today's environment. Good controls make changes easier; changes make planning and control more effective, and so on.
The purpose of Continuous Improvement techniques, like Just-in-Time, kanbans, and setup reduction, is to simplify the production process and eliminate waste. As a result, Continuous Improvement has helped to make easier many MRP II planning techniques and eliminate some planning activities altogether.
When companies utilize flow processes, for example, routings are eliminated and the number of items in a bill of material are frequently reduced. The fewer items to plan, the more straightforward the planning process becomes.
As flow lines are created, detailed capacity planning often is no longer necessary; rough-cut capacity planning at the S&OP and master schedule levels as well as finite scheduling are sufficient and effective for those products produced in the flow lines.
Shop floor control traditionally uses dispatching to communicate what jobs to work on next. With kanbans, however, a visual control is used to authorize production, often eliminating the need for work orders as well.
Although a kanban is a powerful production control technique, it is not a planning technique. The kanban can communicate to the shop floor what to make, when to make it, and how much to make -- but only for the time frame. Kanbans cannot predict what materials nor how much will be needed in future time periods. The visibility of changes in future demands is the job of MRP II.
In a Continuous Improvement environment, companies make a conscious effort to eliminate anything that hides problems. When the reliance on safety stock, scrap factors, and yield factors is minimized -- or eliminated all together -- the planning process is simplified. Also, as cycle times are dramatically cut by reducing queues, the need for replanning and communication of exception action messages is lessened.
The practice of Continuous Improvement will become commonplace in the next decade as pressures mount to significantly reduce cycle times, cut costs, and improve quality. The ramification will be greater emphasis on front-end, long-term planning, using Sales and Operations Planning, Master Scheduling, Rough-Cut Capacity Planning, and Finite Scheduling.
Another development that should become more widely utilized in the year 2000 is Supply Chain Management. Some companies are already beginning to employ Supply Chain Management.
ECR involves directly tapping into customers' inventory and forecast information, using Electronic Data Interchange (EDI) and computer networks, to determine when to produce and deliver product to their customers.
The purpose is to better manage supply and demand between customers and suppliers, just like MRP II enables companies to better manage supply and demand internally between sales and manufacturing. ECR is an extension of MRP II's principles and techniques that enables companies to reach beyond distribution centers all the way to the ultimate consumers. Use of ECR is expected to slash $30 billion in costs over the next five years from the process of making, distributing, and selling food.
"MRP II gives you the ability to do ECR. Without being proficient at scheduling, planning, capacity management, inventory management, and inventory accuracy, you couldn't begin to think about doing ECR. Trying to do ECR without MRP II would add costs, rather than drive costs out,"
Provide benchmarks and performance measurements for strategic planning, people and teams, total quality and continuous improvement, product development, and planning and control.
In the year 2000 and beyond, MRP II as an integrated management process will become commonplace. Most companies will be using Continuous Improvement techniques, and the use of Supply Chain Management and ECR will spread.
The companies will continue to break with tradition. They will reengineer their business processes -- including resource planning and management -- to meet the marketplace demands and achieve their strategic and business goals.
The innovative companies are never satisfied. MRP II will continue to evolve as changes prove to be beneficial in helping companies to become stronger competitors through improved business performance.
Have you tried to understand the connection between MRP II and JIT and felt there seemed to be something lacking, some critical piece of understanding? This article is a going to attempt to bridge these concepts, provide that missing piece which is scheduling. Many of the MRPII/JIT implementation failures have been caused by not understanding the dynamic nature of scheduling and how planning must fuse MRPII, JIT and Scheduling together as a responsive, constantly improving process.
Along with understanding how scheduling plays a role in the MRPII/JIT environment, there are two other objectives. One is to convey the importance of scheduling to the reader. The second is to provide a better understanding of how to logically approach the exercise of scheduling so that the planner can feel like they are in control of the process.
Pull Planning
Like a Popeye saying, "You are what you are and you gots what you gots." MRPII is doing the (qualified) best with what you have today. JIT is a goal. MRPII embodies pull planning, making the product just before it is needed. The logic is cascaded through every planning step, saying, if this is when the material is needed, then the precursor needs to be started this much earlier - very linear logic.
Mapping what the lead-times and rates are, is very valuable. A MRPII program is a fancy calculator that applies planning constants - rates and lead-times to offset, in time, every planning step and determine the necessary amounts, based on lot size logic. Basically the programmer must capture this type of information and program it into the calculator. Note that the lead-times may be long and lot sizes large. Today the programmer must develop their program based on the current situation. But at the same time they run the risk of automating a problem. However, this was the second problem. The first was overcompensating for not even knowing what the planning constants were exactly. Overcompensating translates to making more than is necessary and doing it earlier than necessary. An integrated MRPII program solves overcompensation.
JIT seeks to eliminate the non valued-added waste in the supply chain. JIT is the endeavor to reduce to a minimum the planning constants - lot sizes, setup times, lead-times, scrap, unnecessary steps, etc. The results of the JIT effort would allow you to go back and reprogram the calculator to use the new improved planning constants. In this way, the goal would simply be, having planning constants that are at their physical (theoretical) limits and having perfect knowledge & confidence in these numbers, all programmed into the MRP planning calculator.
Push Planning
Still, the pull planning of MRP and JIT is neither feasible nor optimal. What is this, JIT and MRPII wont solve all my problems? It certainly wont help you raise your kids. Something else is needed. Once this is accepted, then we can move on.
To illustrate this point consider these situations - seasonality causing demand to exceed capacity during the seasonal peak; demand exceeding the overall capacity; the JIT goal is a long ways off due to budgetary or resource constraints; or the business is very capital intensive as in the process industry. This is where scheduling comes in.
Making product earlier than is needed is push planning. Ignoring the need to make push planning part of the planning process is like driving a car that is hot and fast (we'll call it the JIT model). Its not going to go anywhere until the light changes. The light is a physical constraint to the car's speed. The linear logic described does not recognize that, when two things require the same resource at the same time (a physical constraint), which one should get it. Just wanting it, isn't enough. Soloman was willing to split the baby but the mother chose. Important point. Who chooses and based on what? Production doesn't know what to do until this choice is made.
You see MRPII and JIT narrows down the choices and establishes the need date, but did not answer when it could be realistically produced, or should be.
Answering this question should have started a long time ago. Planning typically is done in phases. Long range aggregate supply demand balances are used to strategically determine the utilization of existing capacity and whether new capacity needs to be authorized. Once a year, capital plans are reviewed for new products and adjustments to capacity for existing products. The decisions made during this planning step provides the available capacity and the basic structure of the supply chain.
Tactical planning deals in the medium range to make decisions about incremental adjustments to the capacity and/or customer service levels. Sales and Operational Planning is performed once per month to monitor and adjust plans where incremental changes can be made. Changes to rail fleets, storage, contract capacity and major swings in raw material purchases will require three to five months. The decisions during this planning step provides narrower boundaries and guidance necessary to do the scheduling exercise.
Operational planning is another name for scheduling. In the context of the previous planning steps, operational planning characterizes the conversion of a plan that can change, without penalty, to a schedule in which money will start to be spent.
Defining the planning constants was not very important prior to this step. However, the objective must stay in clear focus. That objective is - a Quality schedule, so that everything comes together just at the right time. There is a real tradeoff between detail and accuracy. By definition the more detail, the less accurate. If a raw material needs to be ordered months ahead then the level of detail required may just be by week. All calculation could then be done on a weekly basis. The exact delivery date could be firmed up later. The point is to reserve a given quantity of material within a specific period.
It wouldn't make sense to call a vendor up every week to change the exact date of delivery. Plus or minus a week doesn't matter to them more than one month ahead of time. Operational planning covers the range of commitments - where loose plans are communicated to when specific schedules (to the day or even hour) are conveyed.
Thus far the role of scheduling has been defined. From some of this discussion there is a degree of inference made about its importance. Did you get it? MRPII will double book the schedule. Some customers are not going to get what they wanted on time unless some push planning is applied. There is much more at stake. Push planning is only one aspect of scheduling.
Impact on Asset Management
Push planning causes inventories to build in a make-to-stock environment. A different sequence will cause the first scheduled product (A) to carry additional inventory for the length of the second scheduled product's (B) campaign. Therefore, enough A must be made to satisfy demand for the full length of B's campaign. If five products are cycled through the same equipment, now the inventory is going up geometrically for A, B, C and D. Some questions jump out. Is there enough storage for this much A, what is the value of A verses the other products, is there a shelf life problem, how good was the forecast as far out as A was made? These questions will impact the sequence picked for the schedule and the size of the campaigns for all affected products.
The challenge of scheduling has to do with the satisfying multiple objectives simultaneously. Customer demand was the first. The second is physical capability, having enough capacity. Every time equipment is changed over from one product to another, capacity is lost. This is in conflict with the inventory scenario just discussed. Inventory consideration promotes more, smaller campaigns.
Scheduling is directly impacting fixed and working capital. Combined with it's potential affect on customer service, quality scheduling is critical to your business. Hopefully the point has been made about how important scheduling is and its strategic position with respect to MRPII and JIT. In other words, no matter how advanced those MRP programs are in your organizations, scheduling is a long term part of that picture. The last segment to discuss is how to get control over scheduling.
Its not adequate to talk about the decision making process of what the schedule should be, without understanding what is driving the process. Understanding demand is as tricky as the sequencing question, but must be put under control to get scheduling under control.
Demand is an ambiguous word. In a make-to-order business, demand is simply customers orders that have been booked. The schedule is then driven by backlog.
The process industry is not so simple. It assumes that its business is make-to-stock. This type of business must schedule its production by forecasts.
Production must be started before all the orders are available. As the process industry goes toward more diversity and specialty markets, it can no longer afford to make all of its products in a make-to-stock mode, however, some portion of manufacturing will still need to be started before the orders are available.
Picking orders over forecast to drive production is not a free will choice, if you will pardon my regression into an old philosophic predilection. It is dependent on the responsiveness of the supply chain and customer service expectations. Let's assume it takes one day to package and four days to make the unpackaged product. If the customer is willing to wait five days - no problem. One day, then you must forecast the generic product and the last step is order driven. This is the classic Make-to-Assemble environment.
The intent here is to give you a flavor for the considerations. This whole area is another topic in itself. Before we leave it one more point would be appropriate though.
If it is assumed that scheduling is forecast driven then the question is - when is the forecast changed? The temptation is to monitor the orders and react immediately to orders exceeding forecasts and slowly to orders below forecasts. There needs to be a conscience game plan on how to react to these situations - how long to stay the course and how much to change when its time.
The slower the supply chain, the less a business is able to react to changing market situations. But let's also flip this around. A car can also be over driven. Speed up - slow down - speed up - slow down. Similarly, quality can often suffer from changing rates too often. There is no point of reacting faster than the system allows you to. Compromise is the key until the JIT effort solves this problem.
Assume we have massaged all this and the manufacturing plant now trusts the demands placed on it. Basically the demand pattern is controlled and the process is demand driven. The first objective has been reached. This would be equivalent to a single in a baseball game.
A few constraints that cause push planning are, production capacity, labor, limited raw material availability and storage. Only two will be discussed to make the points on how to manage constraints. With a little latitude on the English language, we will call the process of leveling constraints, feasibilizing the schedule.
The first constraint is production capacity. Leveling this constraint means sequencing the order of products made, changing the start date of the campaigns and its size, effectively changing the number of required changeovers.
Raw materials may only be available at certain times and/or only at a fixed maximum rate. This will cause the scheduling to sequence the order of products made, change the start date of the campaigns and their size, and cause adjustments to the rate in which product can be made.
These two constraints illustrate that different scheduling parameters are used to feasibilize the schedule depending on the cause of the constraint. Other constraints will similarly required their own set of parameters. Feasibilizing the short term is a double. Feasibilizing the short and long term is a triple.
The scheduling job could stop after satisfying demand and feasibilizing the schedule, against the constraints, and often does. Just doing these two steps does as much to improve customer service as carrying more inventory. But neither insures profitability. Scheduling has a direct affect on costs.
Block operating equipment means changing it over when switching from one product to another. Lost capacity is a hidden cost especially if more is needed and it is contracted or additional capital is spent to achieve it. Besides loosing capacity, every setup incrementally adds costs. Clean-out and scrap are two big contributors plus retooling (or repiping). The fastest growing cost area is the disposal cost of the solvents used for cleaning the equipment.
These are significant factors to the process industry. Since the process industry is very capital intensive, there is a strong desire to fully utilize available capacity. This means block operating several products on the same equipment. The point is, it does not come free. The "extra" cost is the setup costs. The combination of lost capacity and setup costs is a real motivation to minimize the number of campaigns. The results are high inventories.
The value of inventory can be argued but I will assume it to be the investment value plus the costs to maintain that investment. Thought of that way, the value is 25 to 35% of manufactured costs per year. The cash flow implications of this magnitude dramatically affects profitability.
The trade off between set up costs (including lost capacity) and inventory carrying costs is determined by the timing of manufacturing relative to demand and the number of campaigns. Finding the best cost position between these two is the optimizing process. That's a homer.
Many things can be optimized in the scheduling exercise - capacity, customer service, costs and profitability. These optimization objectives are often in conflict with each other. I would preferentially pick either costs or profits to optimize.
Capacity only needs to be optimized when there is not enough. Even then improving capacity should only be done relative to profitability. In other words, the extra inventory carrying costs could override the savings from setup costs and extra generated revenues from more product.
Customer service insures the long term. The net demand on manufacturing combines the sales forecast with the change in inventory caused by a stocking strategy, which should have been done with a fixed customer service level objective in mind. Therefore, customer service was already taken into account in the "Satisfying Demand" step.
Satisfying demand, feasibilizing and optimizing the schedule together are the characteristics of a quality schedule. These characteristics symbolize the traction between the tires and the road. The best MRP system and JIT program can not operate without a quality schedule. This is the qualification on MRP doing the best with what you have.
Committing delivery to the customer from inventory is fairly straight forward. It's either there or not. However, committing delivery based on the schedule assumes that the schedule will not change. The schedule therefore requires stability. Only a high quality schedule can maintain stability.
There are three dimensions to the job that a scheduler must be sensitive to since their time to do the job is limited. The first is the quality of the schedule as detailed above. The second is the number of products they are responsible for. The last is how far out in time they try to schedule.
There is a requirement for how far out the schedule should be developed. It has to do with the lead times. Commitments are made at various stages in the supply chain. In the ideal world, the schedule would be developed and frozen for the entire lead time. That is usually not practical. Optimally, then, the schedule should go out as far as the majority of costs have been incurred.
In plain language, let's not lose sight of what is the real objective for scheduling. It is not merely insuring the delivery of product on time. As illustrated, inventory carrying costs and set up costs are major contributors to the total delivered cost for the process industry. Scheduling is a critical process in controlling costs. Bottom line, you better schedule better than your competitor.