Lean Manufacturing Planning

Master scheduling and material requirements planning systems require bills-of-material. Planning bills require parents, compo­nents, and quantities. The parent part number is a number given to the product family. The components in the planning bill consists of the various options, common and unique. The last element needed is the quantity. This is where the probability factor will be put. When marketing is asked what the probability the product goes out the door with a certain option and answers, 25%, this percentage is converted to a decimal (.25) and put into the quantity field.

Assigning these probabilities is the responsibility of marketing and sales. The creation and maintenance of the planning bill structure must also be assigned. Generally, this is done thru planning, scheduling, marketing, or sometimes engineering (not required or recommended). The mandatory part of this responsi­bility is that marketing and sales be held accountable for the planning bill mix factors. These mix factors can be determined by using history, future history (customer orders booked, but not shipped), marketplace conditions, knowledge of the customer, etc.

During the sales and operations planning process done at the senior management level, a statement of demand is agreed upon at the product family level. This statement of demand is exploded thru the planning bill to determine the expected mix demand for each member within the product family. For example, if we plan an expected demand of 200 units and the probability that we will need a certain option is 25%, then the expected demand for the option is 50. This explosion process is carried out for each product family and its members.

The expected demand for each option is then evaluated and responded to as appropriate. Another key to this discussion is that the expected demand at this lower level has been broken into common and unique items by virtue of using the planning bills. Which one of these groups (common or unique) generally present the biggest problem to manufacturers in the make-to-order envi­ronment? It's probably not the common items.

The problem children in this complex manufacturing world are certainly the unique items. Since this is true, some over-planning of these options can be done at the master schedule level. This over-planning is generally done in the first unsold period of the partially sold out zone. Once the over-planning at the MPS level is in place, the MRP system is used to plan material in matched sets of parts for forecast inaccuracy protection and is done only for items beyond the company's backlog.

Imagine being in a company where every possible engineered configuration is maintained (that's 600,000 of them in our exam­ple). What if planning bills are implemented and engineering only has to maintain bills from the planning bill down (remember, we're talking about 55 bills in the example). What a payback in engineering time—let the engineers do the things that engineers are good at, that of designing product and processes.

Have you ever tried to forecast the future? This is exactly what marketing tries to do every day. How accurate do you think your company's marketing forecasts are? Many people do not feel there is any truth in the marketing forecast. The accuracy of the forecast is dependent upon the forecasting level (aggregate is better than detail) and time (closer in time periods are better than ones in the distant future). Planning bills allow the forecasters of the world to forecast at the product family level, not the detail item level. The planning bill probabilities are then used to generate the mix level forecasts.

How about the inventory levels? In order to protect a company's ability to ship product when it relies on forecasts, many companies use some type of safety stock. By using planning bills, over-planning in the first unsold period of the partially sold out zone in preferred. This means that only items that are unique to the product are over-planned. The potential for significant inventory reduction is an opportunity that companies should not ignore.

Customers can be very demanding and if not satisfied can take their business somewhere else. Many times these customers want and need their desires met in a shorter lead time than a company's cumulative lead time. By using planning bills, these requirements can be met and satisfied without filling up the warehouse with inventory.

Planning bills are valuable and useful for companies that offer multiple options in short lead times. They are better suited to environments where the probabilities and demand quantities are larger, not smaller. Although they are effective in providing a competitive advantage, they do add complexity to the environment and should only be used where they truly do add that competitive
advantage.

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