While separating Master Planning and Scheduling was a priority,
building a link between Master Planning and Market Forecasting was
an even bigger priority. Dollar forecasts are nearly worthless for
Master Planning so a Master Plan becomes the forecast in the hands
of Manufacturing. During the life of a Master Plan, the unexpected
will happen, usually because of a change in demand, either up or
down. Downward demand changes result in a temporary increase in
warehouse inventory because in the absence of direct customer
orders, the Shop will produce additional "stock" for the
warehouse. If this possibility was anticipated at the time the
Plan was created, then a "back door" is included in the
Plan. The back door is designed primarily to protect the skilled
labor in the plant by giving them another group of work cells that
they may be moved to. This activity results in no change to the
Master Plan. It is when demand surges upward suddenly that
production is put at a disadvantage. A technique named
"virtual warehousing" was incorporated into the Master
Planning program. In virtual warehousing an additional bubble of
finished goods inventory is added to the planning horizon just
outside the commitment time fence. In our case that fence is 5
weeks from current date. If the need for the additional inventory
in the virtual warehouse arises, the planned orders are made firm
and allowed to move towards current week. Since the lead time for
most purchased material is greater than 5 weeks, procurement for
this material has already been accomplished and is therefore
available for use. If the anticipated increased demand does not
occur, then Master Planning moves the virtual warehouse further
out in the planning horizon. The purchased material has already
been ordered so MRP will simply delay the release of the next
planned release. This additional W.I.P. will be carried as long as
the virtual warehouse is in effect, but only for that material
that will be affected by lead times in excess of the commitment
time fence. If pull systems are used in the manufacturing shop,
then W.I.P. will be held to a minimum since only purchased
inventories will be increased.
Obviously the use of the back door at the
finished goods planning level is dependent upon the careful
execution of the virtual warehouse but the technique does not
require a very complicated or sophisticated computer program, and
in fact could be done manually.
For those product families that carry minimal
inventory in the distribution warehouse, virtual warehousing is an
ideal technique for protecting customer service. For product
families that are heavily warehoused in the distribution centers,
virtual warehousing is unnecessary because the additional
inventory is simply converted to finished goods.
Real-World Planning Bills
Traditional planning bills are percentage based
and generally require Master Planning to apply percentages to the
items in the bill. This is cumbersome and typically innaccurate.
Since planning bills are an integral part of the Master Planning
process in the Circuit Breaker Division, a quick and easily
maintainable system for these bills was needed. By defining each
family of products as a Planning Bill and then attaching an annual
usage to each item in the bill, the relationship of each item to
the total usage of the family is established by simply dividing
the individual item usage by the total family usage (Table 1).
Table 1. S Family Planning Bill
This type of planning bill is easily
maintainenced and has a high degree of accuracy since the annual
usage will be representative of the actual amount that will be in
the Master Plan and each item will have the proper relationship
within its respective product family.
With the foundation firmly in place for a
flexible as well as responsive Master Planning system, several
enhancements were possible within the manufacturing system.
Continuing Engineering developed an on-line real-time bill of
material creation system, which allowed for new customer orders to
be entered; item masters, bills, and routings created; and the
order on the shop floor within 4 hours. In a market where typical
delivery times average 8 weeks, the company has been able to
average 2 weeks or less. New Product Engineering has adopted some
specific Master Planning procedures for the introduction of new
products so that prototype production looks the same as all other
production and labor management and resource planning is always
complete. In the 8 years since the changes began, personnel in the
manufacturing and planning areas has been reduced by over 50%
and those people have been reassigned to other priority areas.
The revamping and simplification of the Master Plan and the
inclusion of some simple new techniques have made it possible for
the three plants in the division to achieve some dramatic
improvements in their planning and manufacturing activities
without investing in a major new software product. Those
techniques have laid the foundation for future improvements
throughout the system and more importantly have revised the
culture in place in the plant.
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