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Production Planning
Production Planning and Master Scheduling are sometimes combined depending on the company and their available resources but they have very distinct and differing responsibilities. The main difference is that production planning works with MRP planned orders & MPS firm planned orders outside of the cumulative lead-time window while master schedulers work with converting the MRP planned orders into MPS firm planned orders and ultimately into work orders once they come into the execution window or inside the cumulative lead-time.
You can see the problem as any changes made by the master scheduler within the cumulative lead-time window can impact execution activities and create knee-jerk throughout the supply chain. Production planning is critical because you want the plan to be synced to demand, balanced across correct work centers and materially supported as it enters into the scheduling phase of the planning horizon.
Production planning is the process of modeling the available capacity in order to effectively balance workloads across the organization while keeping in sync with the changing demand picture. Capacity modeling is basically a mathematical analysis of how many units can be manufactured over a set time period utilizing a specific work-center(s) or resource(s). Usually these calculations are presented in time buckets such as Average Daily Rates (ADR) or how many units, on average can be made per day.
Averages are used because the complexity of each product manufactured on a given resource usually varies. So for example, product ‘A’ might have an ADR of 600 while product ‘B’ might have an ADR of 400 yet they both are manufactured on the same resource. So if half the day is spent on product ‘A’ and the other half day is spent on product ‘B’ then the total production on that resource for the day is 500 units. Rough cut capacity planning tools understand this complexity so that when you are scenario planning, based on the mix of products you load into the MPS, it optimizes the capacity utilization accordingly.
Some organizations only ‘firm up’ production plans inside the cumulative lead-time window and allow planned orders to ‘float’ beyond that window based on demand signals received. Other organizations might choose to firm up further into the future and even the entire year. There are pro’s & con’s to both approaches depending on the agility of your supply chain and the structure of your planning team.
Production planning is based on the demand signals received from the annual constrained forecast that are translated into supply or replenishment signals based on available inventory, lead-time and capacity. Additionally, these replenishment signals can change based on inventory adjustments, new or cancelled sales orders, shorted or missed production quantities, changes to system settings and a variety of other reasons.
Members of the production planning team work closely and collaboratively with the Master Schedulers to balance workloads across multiple work-center groups and manufacturing plants to ensure all resources are optimally loaded into the MPS module. They then work between Supply Chain, Procurement and Demand Management to ensure correct signals are being transmitted back into the MRP and are responsible for effectively communicating gaps between demand and supply as it relates to manufacturing and procurement capabilities.
This is achieved by monitoring ‘exception’ reports generated by the MRP system. Exception reports can be generated anytime and will ‘flag’ firm purchase orders, firm MPS planned orders and live work orders for production that need to be rescheduled or cancelled. Planned orders will automatically change with demand signals but firm MPS planned orders, firm purchase orders and live work orders for production will not automatically change which is why the exception reports are critical for identifying the changes that need to be made.
Many times, the production planners are organized into functional areas based on plant locations, work-centers, products manufactured and/or business segments. They are usually responsible for balancing demand & capacities and communicating with Master Schedulers, plant supervisors & managers, new product development teams, purchasing, distribution and demand managers to resolve any issues effecting the planning, timing and execution of production for their respective areas.
Production planners monitor and adjust planning loads beyond the planning time fence (cumulative lead-time) where changes can be made without disrupting actual work being conducted. They serve as the gatekeepers to ensure upstream & downstream activities are not disrupted due to changes made to the production loads that would otherwise interrupt execution activities. Production planners are also responsible for setting and adjusting planning parameters that effect how the MRP calculates things such as lot sizes for production, run frequencies, planning time fences, planning horizons and determinations of make-to-order versus make-to-stock.
During the annual budgeting process they are responsible for loading and balancing the annual production plan that is used to drive the overall supply plan that enables the organization to determine their ability to execute or constrain the unconstrained forecast for the company. This process drives visibility to the need for capital expenditures that may need to be made in order to fulfill the company’s revenue plan. They are responsible for modeling the production plan and ensuring that it stays in sync with the overall expectations of the revenue plan of the company.
This is one of the pro’s to firming up the MPS for the entire year is the ability to freeze production requirements and see less disruption every day from changes to planned orders. It provides a more stable picture for FP&A, purchasing & manufacturing and allows for more precise scenario planning to take place especially during the annual budgeting process.
Typically there is a need to calculate manpower, equipment utilization, cost of goods sold, projected inventory levels and departmental budgets and this becomes much easier with a frozen plan that is driven into the live environment of your companies ERP system. The con is that even some of the tier 1 ERP systems out there have very little in the way of tools to help you manage a planning horizon of the entire year. Their tools are usually designed for near term use such as current month or at most 3 months out. If you attempt to run reports for the entire year you may get 3,000 pages of useless data.
This becomes a pro in the case of letting planned orders float since they automatically adjust as signals change outside the cumulative lead-time window thus, less exception errors to react to. To compensate, many ERP software providers have extended their offerings by adding capacity planning modules like SNP offered by SAP. SNP is the acronym for Supply Network Planning which is basically an add-on feature used for planning your supply resources.
In many cases the Production Planner is left to his/her own devices and need to develop their own tools for managing this process off-line. Applications like Microsoft Excel, Microsoft Access and SQL Server are often used due to their compatibility with many of these ERP systems providing the ability to transfer data thru uploads and downloads. Many software development companies have taken notice of the need for effective tools that allow for this kind of scenario planning and visibility.
In the past decade there have been a large number of products developed with this exact thing in mind and there has been a vast effort to sync up with business intelligence reporting tools leading to the revelation of big data.
- Master Production Scheduling
Master schedulers monitor and adjust MPS planning loads within the planning time fence (cumulative lead-time) where any changes made have the potential to disrupt actual work being conducted. They serve as the front-line gatekeepers to ensure upstream & downstream activities are not disrupted due to changes made to the production schedule that would otherwise interrupt scheduled execution activities.
They are required to communicate with production planners, plant supervisors & managers, new product development teams, purchasing, distribution and demand managers to resolve any issues effecting the planning, timing and execution of scheduled production for their respective areas. They typically have the responsibility to ensure they have the materials, manpower and resources to meet the production schedule without disruption or delay.
Master schedulers are the ones who convert the firm planned orders into work orders for distribution to manufacturing floor for execution. They are required to monitor work order execution and report on schedule adherence and shop floor execution. They need to work closely with purchasing, receiving, material flow and shop floor personnel to ensure all scheduled work orders can be completed without disruption. They are required to collaborate with internal resources such as purchasing, product development, engineering and sales for the phase-in of new products and phase-out of discontinued products.
Master Schedulers also work with maintenance teams to incorporate the appropriate amount of scheduled down-time for any required equipment preventative maintenance. In many organizations they are the connection between the front offices and the production floor acting as a liaison to ensure plans are effectively communicated and carried out.
- Planning Horizons
The planning horizon is the amount of time an organization will look into the future when preparing a strategic plan. In manufacturing, a planning horizon is a future time period during which departments that support production will plan production work and determine material requirements. Typically this is one full (usually rolling) business year.
With the on-set of Sales & Operations Planning this can be extended two or more years however the planning is usually at an aggregated level versus a detailed level. Planning horizons are usually segmented into time-frames in which certain activities occur. Most common are the planning, scheduling and execution time frames. The execution window is the number of days/weeks which you have live work orders scheduled and issued to the production floor. In the below example we are representing that as one week.
The scheduling window is typically your established cumulative lead-time window less the execution window. In the below example we are representing that as four weeks. The planning window is all of the days/weeks outside of the cumulative lead-time window. In the below example we are representing that as weeks 6 thru 52.
Time Fences
There are several types of time fences depending on the organization and ERP package in use. The two main ones are the demand time fence and planning time fence. The Demand time fence is the point in time inside of which the forecast is no longer included in the total demand and projected available inventory calculations. Inside this demand time fence period only customer orders are considered. Beyond this demand time fence period and depending on the forecast consumption technique chosen it could be that total demand is a combination of actual orders and unconsumed forecasts or just forecast.
With the entrance of ATP & global ATP on the scene, there are now additional methods to prevent customer orders from being placed when manufacturing capability isn’t sufficient. These orders would then have to be dated into the future where adequate resources are available. Then there is the planning time fence which does not allow automatic changes to occur inside this time period during MRP regen. This is the amount of time, from the current day, where very few or no changes can be made to the master schedule without a full evaluation and collaboration from executive decision makers within your organization. Those changes would then show up on an exception message with a signal to expedite.
This allows time to investigate the feasibility of making the change and if further approval is required based on company/department policy. The reason for this fence is because if the master schedule is changed inside this time period, for any reason, this can be expensive to the company as additional production can cause delays/shortages in shipments to customers, disrupt the availability of raw materials to support production needs and basically amplify a knee-jerk reaction throughout the entire supply chain.
This is one of the main complaints from manufacturing operations is the need to stabilize the manufacturing loads and flow product into and out of their facility without interruption. The combination of a good demand management process, a balanced production plan, well trained master schedulers, a statistically calculated safety stock and properly established buffers/Kanbans can make this a reality.