While Indian Manufacturing Companies are trying to implement Ind 4.0 solutions, one more area that is begging for attention is ‘Production Planning’. The issues with Production Planning are more in Companies that are Assembly oriented where several Parts are needed to make one Assembly.
Automotive Vehicle Manufacturers manage their Inventories very well (?). But, this is more due to their usage of their ‘Volume Muscle Power’ and not due to Excellent Planning. Most of the Component Manufacturers suffer the consequences. Still, the Inventory Management in Automotive Industry is much better than the other industries like for example Capital equipment industry. But, even in Automotive Parts industry the Production Planning problems are quite severe in many Component manufacturing companies.
The Problems that happen are as follows:
- Production does not happen as per plan.
- Shop floor assembles whatever Product for which material is available!
- The Plan is changed several times.
- The Production Capacity is lost on a daily basis or Inventories of unwanted Products piles up as the Shop floor produces something to keep the Workforce Busy!!
There are several reasons for the Production Losses. Some of them are as follows:
- Material Shortages. This is by far the biggest reason for the Production plan changes.
- Break down of equipment.
- People related losses – Absenteeism / Shortage of People.
Material Shortages: Every Company in the Country is looking to improve their Top line. It does not make sense to say that Suppliers are failing on Deliveries. In most of the cases that I have investigated, the problem lies with the Company and not the suppliers. The Production Schedule is changed so many times that the Suppliers have given up on the Original Production schedule of the Company and they wait for the frantic calls of the Buyers to plan their Production! Once a change is made in the Production schedule, it will have a cascading effect on many Materials and therefore Suppliers.
Breakdown of Equipment: As I discussed in one of my earlier Articles, the basic Preventive Maintenance is not being done in many companies. They have to pull up their efforts in this area.
People related losses: The People Policy of Companies is to blame here. Many companies are simply using the ‘Temporary manpower’ concept beyond its’ due. The way the companies are dealing with the People element is giving rise to absolute lack of commitment on the part of the employee force. This is resulting in high Absenteeism and Attrition.
Forecasting: In these companies there is constant fight between Production and Sales on the issue of Forecasting. Sales say they can’t forecast what the Customer wants and Production and Materials say this is the reason for Production Planning Problems. Usually it ends up in dead lock. Many companies have given up on resolving this issue.
Some of the Consequences of this situation are:
High Inventories: Most of the companies that are having the Production Planning Problems are having high Inventories of Raw Materials, WIP and Finished Goods. While they are having Shortages of some materials, in anticipation of higher Production they get many more materials and pile them up.
Losing top line: These Companies also lose at least 10-15% of their Top line every year due to the mis match of their Production and Demand.
Lift your Game in Production Planning
Companies need to understand that there is no Silver Bullet for such problems. Every Company has to find their own solution. But, they can adapt some Best practices.
Forecasting: To address the issue of ‘not being able to forecast the demand of customer’, companies can form a ‘Production Steering Team’ that will have members from Sales, Materials, Production, Quality and so on. This team should meet every week with some agenda. The agenda will have two broad parts:
a) Reviewing the here and now issues with reference to Supplies from Suppliers and Supplies to Customers.
b) They should also review the Forecasting process, look at the Forecasting accuracy for each Customer and see how to address the problems of forecasting with reference to each Customer.
Many Company teams end up doing only (a) above. Looking at Forecasting as a process and improving its’ accuracy is not addressed objectively. When we become aware of the problem and start addressing the reasons for not being able to know the Demand of the Customer, we will be able to solve majority of the problems. I have seen companies improving significantly on Forecasting accuracy once they approach it systematically.
I know some companies who have graduated to understanding the Demand using some Data models and avoiding Forecasting inaccuracies.
It is also good to consider implementing the Supply Chain Management Concepts. Different people handling Procurement, Production Planning, Production, Sales/Customer Management adds up to the problems. The difference in Demand Planning at several stages in the company result in high Inventories and shortage of Materials for Production.
Combining Procurement, Production Planning, Sales / Customer demand Planning, Dispatches in to one function of Supply Chain Management can help in avoiding the differences in the Demand Planning at various stages.
Supplier Engagement: Companies have to work out their own Supplier Engagement models.
Companies need to engage with Suppliers on a regular basis and not just when there are problems. Suppliers also have to be given a safety net that if they plan their Production on the basis of Schedules from Customer and if really the Demand does not happen, the Customer will take care of the Suppliers. They may compensate the Inventory Carrying costs and so on. Please note that a good relationship with Suppliers will pay off on the long term. Many companies are focusing on the short term and trying to make money at the expense of Suppliers. Obviously this will not work and it is not working. Companies can measure the effectiveness of their Supplier Engagement model with the number of shortages that they are having on the shop floor.
Even after a very good Supplier Engagement, there may still be residual problems with some suppliers. These needs to be addressed systematically by categorizing the suppliers in to Red / Yellow / Green suppliers on the basis of the shortages they are contributing. The Reds have to be dealt with by the Procurement team in a time bound manner.
I have seen that this type of focused approach pays significant dividends to the Companies.
People Related issues: Companies need to work out a People Policy in a practical manner. They should have a hard look at their ‘Cheap Labor Policies’ and see whether it is Worthwhile to have such Policies. Every Company should have a sizeable Permanent Work force and they should learn how to manage the ambitions of the Work force. This is the only Solution. Unfortunately, the practice of avoiding Permanence to the Workmen has become a practice. The People on the Shop floor are treated as Dispensable commodity. No wonder that they are also treating Companies as Dispensable! I think the Companies are losing out on Shop floor efficiency / Quality in a big way due to this.
The Cost of ‘Cheap labor / Voice less labor’ practices is being felt in Quality losses, Productivity losses, Customer market share losses by the Indian Manufacturing Companies.
This is not the right practice and we need to have a good proportion of Shop floor employees as permanent. We also need to have ‘Self-Managed Teams’ concept on the shop floor so that the Permanent workmen can manage the smaller proportion of Temporary Labor.
Other Losses: There may be a few other losses that are affecting the Production on a daily basis. These needs to be attended to head on. Companies should stop dodging these issues and they stop behaving as if there are no problems. One example of such a problem is the ‘Fettling’ issue in Foundries. Every foundry loses a significant part of their Top line due to the Fettling issue and still they don’t solve it for decades together. I am happy to note a small percentage of companies who are trying to bring in Robots in this area and solving a very sticky problem of Foundries.
How to leverage Ind 4.0?
Once these Basic issues are resolved, Companies have opportunities to leverage on Ind 4.0 elements to further improve.
The Consumption pattern across Industries is becoming more transparent. Using this data, Companies can understand the Demand Patterns more clearly and be better prepared for the Upswing / Downswing of the Demand.
Companies today cannot leverage on such tools. This is like collecting and understanding the Quality Data much more before you really apply a tool like ‘Design of Experiments’.
The Planning of various resources within the company can undergo a big change. A Machine shop today has lot of Queuing / Waiting problems on a daily basis. Using a SCADA or a Customized Planning solution, the Machine Planning alignment can be improved much more. The main issue in a Machine shop is not Planning alone. When something changes, how do you Re-plan is the issue. This can be addressed by an AI powered Software that keeps learning from its’ experiences and Planning the Machine loading in a Dynamic manner.
Ind 4.0 has many uses in SCM. Monitoring the performance of your Fleet of trucks, Converting your Traditional Kanban in to E-Kanban and many other opportunities are there.
We need a Breakthrough: I notice that many companies are still in the ‘Denial’ status. Companies need to have a longer period outlook and aim at improving before it is too late.