Best of the Best Sales and Operations Planning Conference

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Best of the BestSales and Operations Planning
Conference

• Using SOP in Companies with Lean Manufacturing

Bill Kerber, CFPIM
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Agenda

• A few thoughts about Executive S OP and Takt
  Time
• Executive S OP Strategies
• Level
• Chase
• Hybrid
• Material Procurement practices
• Push versus Pull
• Negotiations and planning
• Questions and Answers

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Lean Executive SOP Do Different Things

• Lean Manufacturing
• Lean emphasizes/focuses on flow.
• It also has a focus on eliminating waste from
  processes
• Strong on execution
• Drives improvements to the operating environment
• Flow works best with stable and linear demand
• Executive SOP
• Tools for forward decision-making
• Strong on planning
• Long future horizon
• Balances demand and supply across the supply
  chain
• Can be used in many different environments
• They work best when they work together!

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Takt time

• Demand rate?
• or
• Production Rate?

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Takt time and Executive S OP

• Current Lean definition has Takt time as
  effective working time divided by demand rate
• In most circumstances, we would be better off
  making it effective working time divided by
  Production rate (from SOP plan)

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What does Takt Time Do?

• Sets the Beat in the form of pitch for
  production.
• Determines how many people work in assembly jobs.
• Provides the bar for operator balance charts
  for line balancing.
• For all of these, takt would be better
  represented by the production rate from SOP.

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Traditional Executive SOP Strategies

• Make to Stock
• Make to Order
• Finish to Order

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We have also have three production strategies

• Level- Most often associated with Make to Stock.
  To achieve a level production, a buffer against
  variable demand must be used.
• Chase Most often Make to order. Also could be
  called variable capacity.
• Hybrid-used in both environments
• Learning to See has couched this as making to
  shipment or making to supermarket.

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Level

• Buffer with finished goods inventory
• (al a TPS)
• Make to Stock

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Stock Amount
In this strategy there is no correct level of
inventory
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BOM Shape helps dictate strategy
Levels
of Parts
In this shape a few end items are made from
many parts, materials, and components. An
example would be an equipment manufacturer such
as automobiles, lawn mowers, capital equipment,
etc. This shape lends itself to making to
stock.
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How Lean fits in Make to Stock
Supermarket Here
Customer Lead Time
Pull or Push to finished goods
Replenish Finished Goods on pull signal
Or create mix leveled Heijunka schedule and push
to finished goods
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Mix and Volume variability definitions

• Mix variability is a measure of how often the
  models and their variants actually are sold.
• Volume variability is measured by simply
  determining whether the total amount of work
  required in the factory by the customer orders
  varies significantly from period to period.

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Leveling Production mix versus sales mix

• Forecast 100 A, 50 B and 50 C this month
• At 20 days in month, this is 10 per day
• Production sequence A B A C A B A C A B A C etc
• The actual sales may not equal the forecast.
• A finished goods inventory handles this.

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Leveling Mix

• Pull systems work better when mix is leveled
• Shared resources can be synchronized based on the
  production pattern.
• Capacity requirements for the value stream will
  fit the average requirements during each
  interval.
• FIFO lanes are kept to a minimum with regards to
  the need to balance operations for mix.

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Leveling mix in a high mix environment

• High inventory investment
• Potentially high obsolete inventory
• Potential poor customer service (reliant on
  forecast accuracy) (The forecast will most likely
  be inaccurate, due to the high mix variability)

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Leveling only volume

• The buffer for the value stream may (or needs to,
  or should) contain only high volume items
• We need to have separate strategies for high
  volume and low volume items when creating the
  schedule.
• Interval should be based on a time slice of
  volume and the number of items sold during the
  time slice.

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Leveling only volume, Cont.

• More elaborate capacity planning is necessary due
  to work content variations caused by varying
  mixes of products being sold.
• Cross training of operators is needed to handle
  required flexibility from various mixes as well
  as for absentees

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Level

• Buffer variability with lead-time
• Make to Order

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Backlog
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BOM Shape
In this shape many end items are made from a
few raw materials. An example would be an
injection molding company This shape suggests a
make to order strategy.
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How Lean fits in

• Make to
• Order

Customer Lead Time
Speed
Supermarket here
You must make the lead time fit market
requirements!
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Managing Backlog
Market Lead Time
Production Lead Time
Variable Backlog
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Managing Backlog

• Promised dates must be managed one of two ways
• Fixed lead time, vary capacity if backlog exceeds
  allotted time
• Variable lead time, governed by an aggregate view
  of sold versus capacity

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Chase

• Buffer variability with
• more flexible and agile manufacturing resources

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Chase Strategy
Production Demand Inventory (Backlog)
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Takt time and Chase

• Takt time has a different connotation in this
  strategy
• Think in terms of units of capacity, such as with
  adding production in chunks of lines, or adding
  time at the same rate

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Chase requires

• Cross training
• A way to know when to switch jobs during the
  workday (controlling flow)
• Adding or subtracting labor by using
• Temporary employees
• Overtime
• Subcontractors
• Or
• Staff for peak periods and work on improvements
  when slow

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Hybrid

• Buffer variability with
• common component inventory (produce to stock)
• finish-to-order with flexible finishing capacity
• (Postponement)

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BOM Shape
In this shape many end items are made out of a
few sub assemblies or intermediates that are made
out of many unique raw materials and parts. An
example of this would be a pharmaceutical
manufacturer with many package types from
standard product (aspirin), personal computers,
packaged chemicals This shape lends itself to a
postponement strategy.
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How Lean fits in Postponement
Assemble to order
Customer Lead Time
Supermarket Here
Backlog management here
Pull Components based on usage
Stock management here
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Supply chain issues from Executive S OP

• Buying capacity or items in the long term?
• If capacity, rough cut capacity from the
  Executive S OP plan should be used
• If items, must decide how to reconcile plan with
  short term actual

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Supply Chain Issues

• Choices for material purchasing
• Pull
• MRP
• Rough Cut Planning
• All will make have problems on long lead time
  items
• Mix sensitivity matters here

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Question Answer
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Thank You for Attending

• Business cards are available.
• Or
• WWW.Highmixlean.com
• Or
• 609-781-4830