More control thanks to less planning

Not too long ago I spoke with a couple of planners at a manufacturing company. With a certain despair they confided that the planning they created had to be changed continuously. It was certainly no exception that the planning was changed at least 50 times between creation and execution. Even next day’s planning was subject to frequent changes.

Of course, changes to the production planning are not a bad thing by definition. There will probably be a good reason for the change more often than not. But is important to limit the amount of changes and not to turn the exception into the rule. If a planning is optimized upon creation, but changed 50 times afterwards, it is not difficult to imagine that there is not much left of the original optimal plan.

Besides, every change requires a lot of effort from the entire organization and creates instability. The planners have hardly any time left to execute their other responsibilities and suppliers are pressured to deliver the required materials earlier to have any shot at actually manufacturing according to the changed plan.

Planning horizon

After some inquiry I learned that most planning changes were a logical consequence of the planning horizon. The initial planning was created five to eight weeks in advance. When you come to think of it, creating a five to eight week planning is kind of similar to writing your grocery list five to eight weeks in advance. Once it is time to do your groceries eight weeks later, there will be hardly no resemblance between the original list and the items in your grocery cart. Most situations are simply not suited for rigid planning. The market requires the ability to quickly react to changes in the demand plan and flexibility is a prerequisite.

Luckily, the solution speaks for itself. If creating an eight-week planning is not such a good idea, then just create a planning with a shorter, for example three-week, horizon.

Of course this is easier said than done. Certainly if the packaging material has a five week delivery time. If the planning is created three weeks in advance, the packaging material cannot be purchased on order anymore. It is a necessity to either shorten the delivery times or keep packaging materials in inventory.

Unplanned inventory

Instead of immediately rejecting the latter possibility under the pretext of a dogmatic reasoning like “inventory is waste”, it is good to give the benefits a moment’s thought as well: a more stable, optimized production planning, a higher output and a lower inventory.

The shorter planning horizon will allow you to reduce the finished product inventory since you will be able to react faster to market developments. Besides, the inventory of packaging material is likely to drop as well. Because even in case the packaging material is purchased to order, when the planning is changed on a daily basis, I would venture to say that there is probably a pretty high inventory of packaging material. But an unplanned and uncontrolled kind of inventory.

Bas van Velzen
Senior Business Analist bij Involvation