Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” Every company spends an enormous amount of energy to plan. How many meetings and revisions does it take to arrive at a final budget? The same is true for strategic or operational plans? Often this effort is incremental to the burden of everyday tasks.
For what results? Are we really able to measure the benefits of these processes? What if in this “VUCA” world (yes it is a thing, check here), there is no need to plan anymore, and being agile is all that matters. Obviously, agility is a strategic component of every organization, nonetheless, this agility still needs to be planned.
Let’s take the case of a capacity constrained resource. Can it be agile? Of course not! Planners will try to optimize this resource by minimizing the number of product changes. However, pressures on service levels will require production changes in seemingly scattered order, resulting in wasted productivity. Some planners may resort to managing their operations by short term firefighting. One must always try to avoid that. Then, how does one improve planning and gain flexibility? With an efficient planning process!
This efficient planning process starts with medium – long term demand forecasting, at an aggregated level. At this point, it is often useless to work at a detailed level, it will certainly be false. The best practice says to define the appropriate product family in order to aggregate volumes and allocate them to the resource with an efficiency rate that takes into account the average changeover times. This step is key because it identifies missed production volumes due to capacity constraints.. There is no point giving objectives to salespeople if they cannot be delivered. The company could choose to increase its capacity or , if it is not possible, it could prioritize some product families. At this point, the company is already able to inform the customer: All will agree that it’s best to handle a pre-warned customer than one who discover things afterwards. The first will for sure be annoyed but the latter will be furious…
The next step focuses on the medium term horizon (slushy), when the demand is not totally firm. Measuring the forecast accuracy ensure to meet the target service level by calculating an optimal safety stock. In addition, a careful analysis of the demand on that horizon allows to group requirements on a batch size basis. Of course, the batch size should not only be defined by the theoretical vision of the resource usage optimization. What is the point in defining a minimum production run corresponding to one day of production if it covers 3 years of demand? Prioritization and arbitration are really the key words to create a medium term horizon plan.
When implementing an optimal level of safety stock, the transition phase can be tricky because it requires arbitration between a short term demand and the creation of this stock. However; it is by doing this that the planner can define a short term frozen horizon in which the plan can be executed with optimal productivity. The organization will then be able to manage the real hazards, not only the order for the customer who cries the loudest.
Implementing an efficient planning process is not easy. It requires rigor, courage and a lot of communication within the company to share the common objective of delivering the right product, at the right cost within a finite production capacity.