Production Planning: The Common Challenges

    10/6/21 10:00 AM

    production-planning-challenges

    Everyone wants to optimize production scheduling

    While everyone wants to be good at production planning, not many are. The most common challenge we see is that everyone wants to use their respective ERP’s scheduling application, yet they struggle to make it work. And this struggle leads to the abandonment of the native ERP application and the subsequent creation of spreadsheets, custom reports, and a variety of other methods that attempt to manage production planning. Needless to say, these “Band-Aids” can cause challenges of their own, and ultimately result in a lack of a unified and coherent approach from a systemic standpoint.In this article, I’ll break down that challenge and two others that we commonly see in the manufacturing environment. Knowing how to address these challenges will open the door to better production planning, with ERP software or without.

    Top 3 challenges to good production planning

    1. There’s no system or production planning ERP in place.

    This is quite obvious, but it is a predominant issue. Many rapidly growing companies start with something like QuickBooks, and then realize it is not suitable for manufacturers. QuickBooks is a great accounting system for small to medium-sized businesses. But when you have a business that hits a certain volume of sales orders that have to be filled by work orders, things fall apart quickly. Especially if your manufacturing process has multiple operations and multi-level bill of materials. The complexity of the varying jobs tied with shuffling the schedule to address want dates, meeting inventory planning policies, scheduling to align with material lead times, scheduling to align with outside service providers, and finally scheduling to align with internal available capacity, is an extraordinary challenge for even the best organizations.

    The vast majority of manufacturers we assist have—at minimum—six variables that can affect their ability to make a customer’s desired ship date in a “to order” environment. The fact of the matter is that this can be done without a system. People do it every day. Everyone schedules. However, the cost and time involved is often inefficient and prone to a lot of mistakes. Errors usually result from manual entries, using an unintegrated system, and a reliance on verbal information exchanges.

    The environment of those using these homegrown “systems” is one of high stress because they are in a constant state of firefighting, expediting the next most important late order, working long hours, and repeating the same stressful and taxing episodes day after day.

    And of course, most businesses want to grow, and it is difficult to do that when you can’t get orders delivered on time. In that situation, the only way to grow is to add more people to manage the manual processes as volumes increase. Sure, you end up growing the revenue, but you also have linear growth in overhead and expenses that erode margin.

    This is often where we get involved as companies reach out and say, “We need help, but are not sure how to solve our issues.”

    2. There’s resistance to change after implementing a manufacturing-centric ERP.

    Moving from not having a formalized system to having an ERP system that can accommodate the needs for improved production planning is a big step. It is a big step because it drives significant change with how the company manages the business and affects many departments. ERP requires a formalization of processes. It requires a unified effort to achieve what is best for the entire organization versus just one department. Needless to say, the shifts caused by introducing an ERP system can present challenges to improved production planning.

    Companies need guidance on how to implement the new software, and have to be willing to follow that guidance. They need to trust their implementation project managers and consultants, who have implemented these systems hundreds of times. But getting buy in and trust can be a challenge.

    The difficulty resides in the fact that most current ways of doing things have to change. And change is hard. It can be challenging for long-time veteran employees who have performed their job exceptionally well using a somewhat limited toolset. But those employees have to adapt.

    To properly schedule, many factors need to be formalized in the ERP system. You’ll need to fine tune your ERP Production Planning. This may include creating or setting up the following:

    • Planning policies for all parts in order to drive MRP and proper inventory planning. This directly affects a company’s ability to properly plan production. It is impossible to produce product when you don’t have the needed raw materials and sub-assemblies called out by the engineering master and bill of materials.
    • A formalized bill of material, including accurate quantities AND costs.
    • Your outside services, such as heat treating, plating, anodizing, paint, etc. You need to set up vendors and transfer time, too.
    • Routing steps and operations needed.
    • Set-up times and a reasonable estimate for run rates and costs.
    • Capacity determinations.
    • Personnel and associated labor rates.
    • There needs to be a mechanism to capture labor in order to relieve the schedule. The ERP system needs to know what has been completed in order to know what remains to be scheduled.
    • Material consumption during production. Are you buying to the job? Are you issuing from stock? Are you building sub-assemblies and issuing from stock, or is the sub-assembly a component being built as part of the top-level work order? Are you simply back-flushing material at the receipt into finished goods, or doing auto-issue of materials when an operation is complete? There are other factors such as lot and serial trace where you have to document which materials were used, which causes other disciplines to kick in.

    3. There’s a capable ERP production planning application that no one knows how to use.

    This might be the biggest challenge we see with doing proper ERP production planning. Personnel simply don’t know how to use the application. Often, current employees are many generations away from the original ERP implementation team, and there are no documented procedures or formalized processes. The employees usually assume the system doesn’t work; or they try to use it briefly and fail, reverting back to whatever manual system they create in order to do their job. It’s not perfect, but it’s survival.

    And the core foundation data needed is typically not set up correctly. Core foundation information previously mentioned, such as planning policies, correct or properly structured engineering masters, having a true understanding of real capacity, along with managing the supply chain for insuring adequate material availability.

    It’s not easy to figure out on your own.

    What can be done to help with production planning?

    Like anything in life, you have to admit there is a problem and then ask for help. And help can be defined as getting a formalized system, so you have a way to manage proper procedures. Or, it can be defined as learning how to use your ERP system.

    Visual South can help in either case. Whether you have an ERP system or not, our Scheduling Workshop will provide you with an independent analysis of your current state, and prescribe ways to remedy overriding issues that are preventing you from having world-class production planning.

    If you are interested, please visit the Scheduling Workshop page and our Scheduling Workshop Overview blog to learn more about the process.

     Visual South can also review your entire enterprise and meet with all primary departments, such as sales, engineering, material management, production, quality, and accounting. We’ll help you document processes, identify issues, present suggested corrective actions, and create a plan to achieve desired improvements.

    If you want guidance, or to simply discuss the integrations with your business systems, please reach out for a free assessment. You can also take a dive into our huge resource library, as there are many insightful articles on all facets of production planning and scheduling, and shop floor execution as well.

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    Tim O'Brien

    Written by Tim O'Brien

    Tim has over 20 years of successful experience helping companies improve their processes and operations using enterprise software solutions. Those enterprise solutions include Enterprise Resource Planning for manufacturers, Service Management for service oriented companies, and Enterprise Asset Management in the process manufacturing industry.