Basics of smoothing the manufacturing plan
Filed Under Blog
One of the key problems for supply chain teams in many organizations but particularly for those in manufacturing environments are stable demand profiles. In scenarios where there are vast peaks and troughs keeping up with requirements (both forecast and real) can be complex and be easily derailed with either a sudden surge or slump in demand.
Production smoothing is an often used process which targets mitigating the uncertainty in demand (the peaks and troughs) whilst minimizing waste and driving manufacturing efficiencies. With its origins in the Toyota Production System and a tool often utilized in lean production leveling is now a widely utilized and important tool.
Smoothing production – that sounds difficult!
Modeling requirements to produce a smooth production plan is a fairly straightforward theory. When demand is consistent it is simple to level or smooth production to a regular drum beat. This is because it is easier to manufacture what is needed if you can easily estimate customer requirement. In reality though, for many organizations it is extremely difficult to accurately predict demand, because of constraints and variation.
The scenario of developing a production plan that gets it wrong is simple to understand. A production plan that realizes an output lower than what is actually demanded results in stock outs and unhappy customers. Conversely a production plan that outputs greater than requirement results in excess stock and ties up more cash in materials than is actually required.
Smoothing production aims to remove the peaks and troughs from production (and the corresponding signal that cascades to the supply chain). When smoothed, groups of the given products are produced in regular economic batch sizes at routine intervals. This is quite different from a manufacturing plan that just makes to order demanding materials and factory capacity as it goes.
With a smoothed profile batch sizes can be modeled to target reduced changeover times. This can dramatically reduce machine downtime and improve factory efficiency.
However, production plans don’t just take into account materials they also take into account other resources such as the factory workers and equipment – commonly referred to as capacity. Developing a manufacturing plan that requires more resources than you have physically available is obviously doomed to failure! What is required is to ensure that capacity and materials all work together to meet the production schedule.
Smoothing the production and developing a manufacturing plan is carried out by analyzing the products and then establishing an output volume based on actual and predicted demand coupled with targeted service levels. The particular advantages of this kind of system includes more than simply taking out waste. Flexibility within the company is one specific advantage that allows the customer to receive what they want when they need it thus ensuring a high level of satisfied customers whilst enabling the organization has improved visibility over costs.
Manufacturing plans do require a level of forecasting (which is typically mixed with firm future demand). So while over and under production cannot be completely eradicated – close attention to the performance of the plan coupled with regular “tuning” can help mitigate in the longer term. Organizations must be committed to processes that improve forecast accuracy – which may often involve closer collaboration with their market.
The key benefit to the supply chain is a settled demand pattern with suppliers being clear of priorities and requirements.. When the company flows its plan out to its supplier base ‘smoothing’ the order profile can be a key catalyst in removing bottlenecks and blips in the material flow.
For the plant, production smoothing also cuts out busy times that in turn reduce the need to bring in temporary employees whilst helping to reduce ‘dry’ periods that require layoffs. All this results a more stable workforce, employee loyalty, and commitment to the company than experienced if there were threats of job loss.
Whilst there are many advantages to “smoothing” production, it does require commitment from the operating company. It does need a degree of successful forecasting and it can take time to deploy and stabilize (as forecasting improves) it is a cultural shift away from making to order and requires adequate controls and leadership to ensure it is a success.