BUS606: Operations and Supply Chain Management

The production project pursued the following objectives, the development of pull planning method for the improvement of the OTD (order-to-delivery), the reduction of the stock in WIP and the reduction of the production lead times. The methodological steps are:

• At the beginning of the project a process recording has to take place. It can be done using value stream mapping (VSM) or commercial tools for process mapping such as Microsoft Visio or Airis.
• On the basis of the analysis of the current process, the challenges can be normally identified. Typical internal company challenges are:
  • No overarching coordination of delivery dates between sales and production;
  • Bottlenecks considered mainly in a reactive approach;
  • Complex process with different production types along the production process;
  • Current production planning and control strategy: normally a classic push control; where the operative production areas always have to keep running, whether it is necessary or not;
  • Volume or production unit as example tons of material as goal for operative production managers.
• Analysis of the impact of the facts analyzed. On the basis of the previously described challenges, the typical consequences of those common issues are:
  • Local optimization;
  • Initiation of production without complete customer specifications (blocked inventory);
  • Long lead times;
  • Insufficient delivery reliability;
  • High inventories levels.
• After recording and analysis of the current process and its impact, the development of a new concept has to be initiated. In this paper the so-called "bottleneck control" was selected. The principle of bottleneck control explains that the bottlenecks ultimately determine the performance of the entire production system and thus represent the clocks. If the bottlenecks are known, it is sufficient to plan the bottlenecks. Since bottleneck control also has a regulating effect on the production stock, there are two further positive effects: stock costs are reduced and throughput times are reduced.

The model suggests the implementation of four essential components for the design of the bottleneck control within an organization with ETO manufacturing:

1. Definition of machine groups or gates structures: first of all machines with similar process steps are classified and alternative machines in terms of technical processing and output have to be identified. By summing the total capacity of a gate structure, the output of a production process group per period of time can be determined.
2. Development of product families: to reduce complexity, all sales items that follow the same production path have to be grouped together. To do this, process modules and machine groups or gates have to be determined. This made it possible to link the new production product families with the sales product families. Additionally a list of typical bottlenecks per product family.
3. Determination and updating model of production lead times: lead times for each product family in each process step or machine groups have to be determined: waiting, processing, and transport times have to be settled by analyzing actual data. Lead time determination needs to have a correlation with product families in sales so the promises of sales employees to end-customers can be met. The lead times have to be updated based on real data feedback in a constant frequency period.
4. Production capacity forecast: in order to provide transparency, all machine groups and gates with robust capacity have to be forecasted on a time unit, as an example in an hour basis.
5. Interface to sales: controlled communication process between sales and production to assign realistic delivery dates.
   

The new pull production planning and control logic also includes two important prerequisites that are shown in Figure 3:

Figure 3. Pull-production control logic.

• Each item will have an order release;
• Each item will have a completion date.