Exceed Your Customer’s Needs with Priority Planning
The Production Plan, Master Production Scheduling, and Material Requirements Planning are major components of Priority Planning used to ensure that customer expectations are met.
The Production Plan
Using objectives set by the business plan, the Production Plan takes into consideration the overall quantities of the items to be produced, desired inventory levels, and the availability of equipment, labor and material.
The focus is to develop a plan that will satisfy customer demand yet strike a balance between the market and the product availability over the planned production period(s).
The Master Production Schedule
The Master Production Schedule or MPS, whether formal or informal, is the planned or forecasted ‘build schedule’ the company will sell to the market place. These numbers should match and support the Production Plan.
The MPS is not a sales tool but, instead, is the product mix or the configurations that the company believes it will sell.
Material Requirements Planning
The Material Requirements Planning (MRP) software takes the company’s Master Production Schedule of its end item products and determines the net requirements for materials as well as what production work orders are needed to build products over discrete periods of time.
The Bottom Line.
The Production Plan, Master Production Schedule, and Material Requirements Planning programs are major components of Priority Planning that is used to that customer expectations are met. The Production Plan is developed from the company’s business plan. The Master Production Schedule is the company’s build schedule for its products. The Material Requirements Planning (MRP) system provides the ‘time-phased’ materials and work order needed to build products.
Inventory Management. “Can You Avoid the ‘Deadly Sins’ of Inventory Management?” The purchase and storage of raw materials typically represents the single largest investment for a manufacturing company. To learn more, please follow this link, Inventory Management.
Sourcing Strategies. The strategic sourcing process is a subset of procurement. It is procurement’s responsibility to find and develop competent suppliers that are qualified to provide the firm with its needed materials. For more on this topic, please follow this link, Strategic Sourcing.
Manufacturing and Supply Chain Services
We are Manufacturing and Supply Chain Services, MSCS, specializing in enterprise wide procurement and supply chain management programs. Our company’s proprietary processes and services promote organization, control and cost reduction boosting your company’s bottom line. How can we help you?
Learn more about MSCS’s procurement and supply chain programs. Contact Us.
Is your company maximizing its performance by strategically managing the business?
Business’ achieve ‘world class’ by creating and operating high performing organizations. To get to that point requires a strategy that is driven by top management throughout the entire organization.
Strategically Managing Operations.
The three elements that make up strategic management include,
- Strategy Formulation
- Strategy Implementation, and
- Evaluation and Control
Each of these areas are addressed once the company’s ‘external’ (e.g., suppliers, stockholders) and internal or societal factors (economic, technological developments, etc.) have been analyzed and accounted for in the company’s plans.
Likewise, the company’s structure, culture, and resources are analyzed and accounted for in the company’s plans.
Typically, a firm’s strategy consists of the company’s,
- Mission, or purpose for existence
- Objectives, or what activities are planned to achieve the mission
- A strategy is how the company plans to reach its objectives, and
- Policies, or guidance of how decisions will be made
Strategy implementation is the idea of putting the company’s plans into action. This consists of developing,
- Programs, that is statements of the steps needed to complete the plan
- Budgets, or the conversion of a program into monetary figures
- Procedures, an outline of how to do the tasks needed to support the plan
Evaluation and Control.
To succeed, it is necessary to know if the company is making progress towards its goals and objectives. Therefore, the company must have ways to measure its performance.
These performance measurements must be expressed quantitatively, as well as qualitatively, such that each performance goal is specific, measurable, attainable, realistic and timebound.
These measurements, if properly constructed, show the company’s performance to the stated goals and objectives. If the results of the measurements show a need for improvement, the company can undertake corrective action and resolve weaknesses.
By following its strategic plans, a company can methodically and effectively manage its performance to succeed in its business environment.
The Bottom Line.
To maximize performance a company must strategically manage its business. This requires high-level planning that includes strategy formulation, implementation, evaluation and control. Performance goals are the yardsticks used to measure progress. The goals should be specific, measurable, attainable, realistic and timebound. By following its strategy, a company can effectively manage its performance and business environment.
Manufacturing and Supply Chain Services
We are Manufacturing and Supply Chain Services, MSCSGRP, specializing in ‘enterprise wide operations and supply chain management programs. Our company’s proprietary processes and services promote the organization, control and cost reductions boosting your company’s bottom line. We’re not satisfied until you are satisfied. How can we help you? Contact Us.
MSCS Group will be temporarily ceasing publication of all blogs and industry articles over the coming holidays. Our last publication for 2018 is Tuesday, December 11th. We will resume publication the week of January 7th, 2019.
We hope that you’ve had a good year and wish you continued success in 2019!
How many times has there been a debate at your company asking the question, “Is safety stock a good ‘bet’ to satisfy customers?”
Everyone knows that inventory costs money. And too much inventory is not a good financial decision. So, is safety stock really needed? If so, is there a ‘middle ground?’
Changing Customer Demographics
In today’s world, with quality and ‘fitness of purpose’ a given, consumers are focusing their expectations on product availability and delivery.
Furthermore, companies now more than ever have local and/or international competition.
That said, today the ‘order winner’ is a company that has the product (or something very similar to what the customer wants) in-stock.
What, then, is safety stock and how is it supposed to help?
Safety Stock Defined
In an imperfect world companies must plan to serve customers even though there are challenges to manufacturing or conveyance to the market place.
Therefore, ‘safety stock’ is a level of inventory (or buffer) planned to protect the company against fluctuations expected during the ‘supply and demand’ cycle.
This means preparing for something the company couldn’t visualize or hadn’t planned on occurring.
One such problem could be an unexpected ‘pent-up’ demand for the company’s products. Likewise, it could be customs holding an inbound shipment for two weeks, a transportation delay due to severe flooding in the south, or snow storms and plant closures in the northeast.
What Factors Determine the Amount of Safety Stock Needed?
There are several factors affecting ‘how much’ safety stock is enough, be it raw materials or finished goods.
The major factors include forecasting, gauging ‘demand during lead time,’ and what ‘level of customer service’ agreed to by executive management, sales and marketing.
Today, customer satisfaction is of paramount importance. Competition is fierce. Sales success means having what the customer wants and providing it when they want it.
And that’s where safety stock comes in, i.e., what fluctuations can you plan for in the ‘demand and supply’ cycle? It is important to remember that ‘order winners’ … those products available today, not tomorrow.
So, safety stock can be a ‘good bet’ to satisfy customers.
The Bottom Line. Companies have always debated safety stock. Today, most companies have competition. Consumer demographics have changed with product quality and ‘fitness of purpose’ a given. An ‘order winner’ can be determined by having stock. Safety stock is a level of inventory planned to protect the company against fluctuations in the supply and demand cycle. Factors affecting levels of safety stock are demand during lead time and the company’s ‘level of customer service.’ Winning means managing the ‘demand and supply’ curve and meeting the needs of the customer. Order winners can mean having the product available for the customer when they want it. That is, safety stock can be a good bet.
Sourcing Strategies. The strategic sourcing process is a subset of procurement. It is procurement’s job to find and develop competent suppliers that are qualified to provide the firm with its needed materials. For more on this topic, please follow this link. Strategic Sourcing
Procurement Strategy. Companies today are seeing more and more competition. Executives are looking to procurement to add value across the business enterprise. The Procurement Strategy has a major effect on the department’s ability to help the company reach its’ business goals. For more on this topic, please follow this link Procurement Strategy
Transforming Procurement Operations. Today, procurement is expected to bring value to the entire business enterprise. Some organizations have difficulty migrating their legacy processes to more advanced procurement models. For more on this topic, please follow this link. Transforming Procurement Operations
Manufacturing and Supply Chain Services
We are Manufacturing and Supply Chain Services, MSCSGRP, specializing in ‘enterprise wide Procurement and supply chain management programs. Our company’s proprietary processes and services promote the organization, control and cost reduction boosting your company’s bottom line. We’re not satisfied until you are satisfied. How can we help you? Contact Us.
What would happen to your customers if they could not get the products they needed from your company for a month, six weeks or a year?
What would your customers do? Do you think they would still be ‘your’ customers after something like this happened?
Furthermore, what would a significant disruption like this do to the company’s revenue stream?
Supply Chain Risks
Supply disruption happens in more ways and more often than we typically know about.
The Supply Chain Visibility provider Resilinc reported 41 weather events in the first half of 2018 affecting suppliers.
There are other supply chain risks as well such as labor strikes (west coast ports in 2015), global, regional and industry wide raw material shortages (e.g., copper, nickel), and global or regional political issues that can affect supply, costs, and product availability (e.g., foreign country boycotts, tariffs, etc.).
The trade magazine Material Handling and Logistics (MH&L) reported, in their ‘State of the Global Supply Chain’ findings, that ‘40% of manufacturing companies in the last 12 months (as of February 2016) reported a significant supply chain event that disrupted their business.’
The challenge is proactively mitigating supply chain risk and that means to ensure that you can provide what your customers need when it is needed.
This means addressing and eliminating as much ‘risk’ in a company’s supply chain as possible.
Where does a company start if it wants to mitigate the risk in their supply chains?
The first step is a review and ranking of the company’s product sales according to revenue contribution.
The second step is an analysis of what raw materials and components are needed to manufacture the company’s products. These items too are ranked by importance.
The third step involves generating a ‘priority listing’ so that the most important risk issues are addressed first.
The fourth step is to develop a viable ‘risk mitigation strategy’ for each issue.
Finally, the overall plan to mitigate the supply chain risk(s) is developed and presented to senior management for approval. Executive management will either approve the strategy as is or ask the team to revisit the issues and look for other alternatives.
The Bottom Line. Supply Chain risks or disruptions can be paralyzing to a company’s customers and detrimental to its revenue stream. There are many kinds of supply chain risks to consider, e.g., extreme weather incidents, labor strikes, geopolitical issues, etc. The challenge for companies is to proactively mitigate their supply chain risks. To mitigate risk in supply, a company should review their products, analyze raw materials, rank all issues found, and develop a ‘risk mitigation’ strategy. The final step in the ‘risk mitigation process,’ prior to implementation, involves senior management approval of the selected strategy.
Do you really know what your operational costs are and the details of the products or services that you are purchasing?
Many manufacturing companies know what they’ve spent in direct material and direct labor.
But when it comes to indirect expenditures, the clarity is just not there.
Ironically, a company can grow substantially and be spending tens to hundreds of millions of dollars on indirect expenses and not have the right process or program in place to analyze or manage it.
To properly analyze this type of spend, it is necessary to,
- Define the company’s indirect categories of spend
- Answer questions about ‘agency’
- Create, publish and support a ‘company-wide’ Procurement program
Defining the Company’s Operational / Indirect Spend
The first step in understanding a company’s ‘operational spend’ requires categorizing, coding and documenting the spend, i.e., the company must have a way of grouping and associating multiple transactions.
This allows the firm to document, tally and analyze dollar amounts and transactions in each category.
The next step, creating an agency doctrine, is more complex but perhaps even more important and must be addressed for a company to manage the indirect spend.
The important questions senior executives must ask themselves about agency is,
- Where, for what categories and amounts, and whom should have the responsibility for the stewardship of purchases on behalf of the company?
- What are the reasons that the control has been specified in this manner?
Creating, Publishing and Supporting an Agency Doctrine and Procurement Policy
For a company to control spend, there needs to be an agency doctrine, i.e., a written policy that specifically authorizes individuals to act as ‘agents’ for the company when expending company assets.
Likewise, the company will need to create a procurement program so that all company personnel (and suppliers alike) know what needs to be done to obtain the necessary products and services needed to support the company operation.
Senior Management Support
Understandably, the agency doctrine and procurement program must be thorough, working as intended (and absolutely should be tested before release).
However, unless executive management supports all facets of this program, it will not be followed and in that case not provide the information required to properly manage this spend.
The Bottom Line. Knowing what the company’s operational costs are is the first step that is needed to manage these costs. To properly analyze spend, companies must categorize what is being purchased. Likewise, the company must develop and publish an agency doctrine and procurement policy. Finally, executive management must completely support these programs.