February 25, 2008

Hi MBBP Subscriber, 

One of the major challenges in industry today is the timely right sizing of operations:  

• Profit margins can be eroded by not taking timely downsizing actions, yet on the other hand...

• Market windows can be missed and customers lost by not upsizing the direct labor force in a timely manner. 

Today's MBBP Bulletin, “Resource Planning” addresses those two issues. 

Have a nice day, and stay connected. 

 
Bill Gaw
bg@bbasicsllc.com 
760-945-5596

Next Week’s Subject: Supply Chain Management 1 0f 2

 MANUFACTURING RESOURCE PLANNING

When shipments can't keep up with an upturn in business, sales people point to production efficiency as the problem, production people point to material shortages as the problem, and the materials people point to poor forecasting and scheduling as the problem. These problems cause significant negative impact on shipments and usually result in a company's failure to capitalize on business recovery opportunities.  

Whenever someone asks me, "Bill, what was your most difficult challenge encountered during your career as a production manager?" Without hesitation I respond, "Convincing our executive leadership of the need to increase the work force and then getting their timely authorization to do it!" 

Early in my career, I watched manager after manager fail to get the job done because they didn't have the proper resources in place to deal with the day-to-day challenges of meeting schedules.  

                 "Just Get Me the Parts!"

Most production managers will tell you that all they need to meet their schedules is the "parts" and in many cases they are absolutely correct. However, herein lies a business dilemma---when the "parts" finally do arrive, schedules still aren't met because now the problem is the lack of requisite resources. 

The problem is that although most production managers see the need for adding resources earlier, they are unable to persuade their executive leaders to authorize additional labor.  "Why add to your team's unfavorable labor variance ---first resolve your 'parts' shortage problem and then we'll talk about adding people!" was the standard executive rebuttal. Overcoming this "parts vs. resources availability" dilemma is a prime responsibility of all production managers and, the inability to do so, is a common cause of their downfall.  

              The Delayed Reaction Syndrome

To deal with what I call the capacity planning  "Delayed Reaction Syndrome" production managers must become experts at Resource Planning. Not in the overly sophisticated computer modeling type, but the practical short-term, "typical units vs. requisite resource analysis" type.  

Production managers will never convince executive leadership of their resource requirements based on standard ERP and financial data---because it is always "too little, too late." They must gain a time-phased, in-depth understanding of their resource and capital equipment requirements and develop programs and systems that will help them convince executive leadership that they are in control and timely action is essential. 

              4-Capacity Planning Control Points

Credible, short-term Resource Planning requires that production managers take control of their own destiny. They must work with their financial and sales people to develop unsophisticated, high integrity processes to monitor, forecast and control four primary Resource Planning activities: 

SALES FORECASTS: One thing we know about forecasts ---they're always wrong. Production Managers must be fully aware of how their portion of the forecast is generated and be cognizant of past performance to plan. There are two primary techniques to help improve the integrity of forecasts: a) establish time fences to control when products can be added and when they must be dropped from the forecast and b) develop forecasted Bills of Materials commonly referred to as planning BOMs to provide sales with the booking and scheduling flexibility they require. 

PEOPLE SKILLS: General Motors taught me early in my career that people are a company's most precious resource. Production Managers must ensure that their people are on a continuous learning curve or they will become complacent and their skills will become obsolete. A sound approach to developing and increasing people skills is to continuously perform technical and professional skills "needs vs. availability" inventories and establish an aggressive program to achieve compatibility. The goal --- workforce flexibility. (Such human resource inventories are crucial in protecting core competencies and high achievers during business downturns.)  

CAPACITY PLANNING SYSTEMS: Long-term capacity planning is normally accomplished by Enterprise Requirement Planning (ERP) and Capacity Planning (CP) computerized systems. The results can be used as an input to strategic planning activity. Short-term capacity planning is usually a home grown manufacturing "spreadsheet" system that uses a laborized "typical unit" method of forecasting that produces real-time labor and skills requirements. 

WORKLOAD OUTSOURCING: Manufacturing flexibility, production agility and reduced product costs are challenges that must be met and achieved by manufacturing managers. Effective outsourcing of processes that focus on company non-core business can be a worthwhile program. To be successful, the program should consist of a target pricing strategy, special material handling techniques, product focused logistics and strong supplier chain partnerships.  

Sharing the Knowledge

You are welcomed to share this bulletin with your team, peers, suppliers and upper management... simply use the “Forward to a Colleague” form that appears at the top of this Web page.