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Advanced Planning Systems - Part 4 of 8

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Functional Questions

The planners of the future will address most business questions with models that answer basic questions about capital spending, resource planning, strategy analysis, and manufacturing and logistics scheduling.


The sourcing question evaluates where to purchase raw materials, manufacture products, and determine the ship-from location for different customers to satisfy orders. Least-cost-to-serve models enumerates all the possibilities and determine the lowest cost routing con­sidering raw material supplier, mode of shipment for raw materials, manufacturing location, mode of ship­ment of products, and stocking locations.

Sourcing models can be run in either a constrained or unconstrained. A constrained model takes existing facilities and loads them up based on the least cost. An unconstrained model finds the least cost routing and continues to load them up, indicating where additional capacity should be added to meet demand at the lowest cost facilities.

Capacity Planning

Another opportunity is to defer capital when designing and building a manufacturing plant. Typically, the fore­casts for the next five years are used to decide on the capacity of a new factory. The capacity is set based on the fifth year numbers. It's not uncommon that mul­tiple products are slated for the plant and the forecasts for each of the products is projected out for the five years. However, it's almost certain that mix will change and the total forecast will change.

Modern APS tools will explicitly model all unit op­erations and the routing of the product mix through the work centers. The results would project when indi­vidual unit operation capacity needs to be expanded over the same five-year period. As the forecasts change dif­ferent pieces of equipment might be needed or be de­layed when some forecasts don't materialize.

Outsourcing Evaluation

Outsourcing parts manufacturing is becoming increas­ing popular. This option provides additional capacity on short notice, a shorter lead time in ramping up for a new product launch, and a lower level of risk for unpre­dictable market demand. Models will be built to com­pare the initial capital costs of setting up for production and the incremental production costs.

Regression Analysis

Regression analysis will be employed to help determine the contributing drivers on critical business issues like customer service, forecasting, and costs and profits. Regression analysis takes numerous potential related variables and acquires data on these variables to deter­mine relationships between the variables and the results. The degree of relationship is quantified and those vari­ables that have negligible contribution are dropped.


APS has only limited value unless data is fed into the mod­els in a timely way. Advanced communication techniques are a natural fit with APS. Every available technique will be used to automate and expedite the collection of data.


Part 1  Part 2   Part 3  Part 4  Part 5  Part 6  Part 7  Part 8

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