Hundreds of companies implementing or operating“Manufacturing Review - Planning and Control system(MRPC)” have discovered astonishing benefits to be gained byformalizing and integrating this planning process. This involves amonthly review process by top management of all functional areasof the company. Its ultimate goal is to always keep the detailedsales, manufacturing, purchasing and capacity planning systems insynchronization with the latest Business plan.The Presentation deliberates on the basic philosophies, conceptsand mechanics of and MRPC, Sales and Operations Planning andMaster Production Scheduling, to provide a simple, step-by-stepimplementation plan to get it off the ground quickly and effectively.
i) Domestic Sales / Exports deptts are to ensure that Plants achieve utilisation of full capacity of three shifts.ii) Domestic Sales/Exports deptts are to identify the customers who can give us committed volumes every month.iii) Domestic Sales/Exports deptts may also explore customers for inter-mediatory products.iv) Production division to meet the Delivery dates committed to the Domestic / Overseas Customers.v) Import/Purchase Deptt are to meet all the requirements of Production division as per the dispatch dates committed to the customers.vi) Quality of the products needs to be maintained and improved as per customer’s current & future needs.vii) Lead times for each function are to be made lean.viii) Inventories are to be for the minimum holding period strictly following FIFO system.
This portion of Presentation makes it essential to highlight the keypoints for developing the MRPC process and involving the rightpeople.Business Plan - A statement of long-range strategy and income,cost and profit objectives usually accompanied by budgets,projected balance sheet, and a cash flow (source and applicationof funds) statement. It is usually stated in USD and grouped byproduct family. The Business plan and the sales and operationsplan essentially should be in agreement with each other.Impacts - Top management usually plans in sales, profit, etc. butto run the factory, a production plan stated in units, and alwaysequal to the business plan( in USD), is required.
Sales & Operations Planning - The function of setting the overalllevel of manufacturing output (production plan) and other activitiesto best satisfy the current planned levels of sales (sales planand/or forecasts), while meeting general business objectives ofprofitability, productivity, competitive customer lead times, etc., asexpressed in the overall business plan. One of its primary purposesis to establish production rates that will achieve management’sobjective of:i) Maintaining, raising, or lowering inventories or backlogs,ii) Attempt to keep the work force relatively stable.It must extend through a planning horizon sufficient to plan thelabour, equipment, facilities, material, and finances required toaccomplish the production plan. As this plan affects many functionsof the company, it is normally prepared with information frommarketing, manufacturing, engineering, finance, materials, etc."Impacts - As top management wishes to control inventories,backlogs and employment levels, it is required to ensure that thelevel of manufacturing output scheduled recognizes current salesplans and backlogs. Concurrence from all functions of thecompany that can affect or be affected by the plans, is vital toensure realism and commitment. The production plan must bestated in a unit of measure, by product family that can beconverted and reconciled to detailed end item schedules (themaster production schedule).
Master Production Schedule (MPS) – It is the anticipated buildschedule for those items assigned to the master scheduler. Themaster scheduler maintains this schedule and, in turn, it becomesa set of planning numbers which "drives" material requirementsplanning. It represents what the company plans to produceexpressed in specific configurations, quantities and dates. Themaster production schedule is not a sales forecast whichrepresents a statement of demand. The master productionschedule must take into account the forecast, the production plan,and other important considerations such as backlog, availability ofmaterial, availability of capacity, management policy and goals.Impacts - For the master production schedule to achievemanagement’s objectives, it must exactly match the productionplan (and reflect goals, constraints, etc.) and satisfy the sales plan.
Rough Cut Capacity Planning (RCCP)- The process ofconverting the production plan and/or the master productionschedule into capacity needs for key resources: manpower,machinery, warehouse space, vendors’ capabilities and, in somecases, Cash flow. Product load profiles are often used toaccomplish this.Impacts - The production plan and master production schedulemust match each other and be achieved for management’s goalsto be met. But, to be achieved, they require recognizing thephysical constraints of the factory and vendors, and the financialconstraints of budgets and cash flow plans, if any. Rough CutCapacity Planning allows production plans and master productionschedules (and changes thereto) to be checked and adjusted forreality.
Time Fence ( Lead time planning & control ) – It is a policy orguideline established to note where various restrictions or changesin operating procedures take place or can take place if required.For example, changes to the master production schedule can beaccomplished easily beyond the cumulative lead time whereaschanges inside the cumulative lead time becomes increasinglymore difficult to a point where changes should be resisted. Timefences can be used to define these points."Impacts - When Rough Cut Capacity Planning, forecast changes,customer orders or the constraints of demonstrated capacityidentify the need for rescheduling decisions, the procurement leadtimes of the various product families need to be considered. Topmanagement and all affected functions must formulate policy thatroutinizes the proper decision making guidelines, participants andmanagement approval levels.General Impacts - These definitions outline the mechanicsnecessary to effectively integrate a good Sales and Operating Planwith the other functions of a closed-loop MRPC system. Theimpacts mentioned earlier clearly define the need for activeleadership and participation by top management and all functionalareas of a company. This is necessary during the design,implementation and ongoing operation of formal Sales andOperations Planning and full MRPC.
.Planning Product Families. Most companies group their productsinto families or lines, but often based on the customer’sperspective. It is vital to additionally or alternatively define familiesfrom a manufacturing viewpoint also.The basic rule to follow is that all products in a family must have aconsistently proportional impact on costs, revenues and factoryand supplier capacities.All products must be grouped in maximum 10 to 12 families ( as itwill be possible to review such number of products in a 2 hourplanning meeting).The units of measure in which the family production plans areexpressed must also relate to the manufacturing process - pieces,sets, pounds, gallons, cases, etc. This allows the properexpression of rough cut capacity planning factors anddemonstrated capacities.These physical units of measure can then be converted back toRupees for financial analysis.Prepare Pilot Data. A few families should be selected which willbest demonstrate the benefit of the Sales and Operations Planningprocess. These may include families subject to seasonal demand,marketing promotions, volatile swings in actual demand versusforecast and/or limited capability to adjust manufacturing outputrates.
.Three month plan : Forecasts, actual customer demands,production and inventory plans and actuals should be posted forthe prior three months. Plans, forecasts and customer orders for atleast the next three months (to start) should also be posted. Thestarting production plans can be derived from the current planningprocess or annual budgets or current master schedules, dependingon what’s available.Any plans or forecasts that appear to require review or alterationshould be highlighted. Marketing and planning personnel shouldjointly prepare suggested changes for top management review andapproval.Monthly Meetings. The first few meetings often run longersince everyone is still becoming familiar with the process, formats,etc. It may take a few monthly meetings to fine tune the processand finalize the procedures and formats. Until everything is final, itmay be advisable to just review the initial pilot families, or to onlygradually add new families.
Implement Full Sales & Operations PlanningThe following key issues need to be resolved to ensure that the fullbenefits of Sales and Operations Planning can be achieved:Horizon. Establish how far out you need to plan based on thecumulative product replenishment cycle (manufacturing andpurchase lead times) and the visibility required for planningchanges in capacity (internal manufacturing, out sourcing, sourcingintermediates, additional capacities). Near the end of the horizon,data may be grouped quarterly.
Rolling Forecasts / Sales Plans. The shipment forecast/plan needs to be maintained continually through the full horizon. Bookings Versus Shipments. The forecast/ sales plan must be expressed by customer requested ship dates, not by when the orders are received. In make-to- order companies this may involve developing standard lead time offset averages by product family, to convert planned booking dates into shipment dates. Some companies find it useful to track shipments and bookings versus the customer backlog, to provide early analysis by marketing of potential forecast changes.
.Production Plans. The process of maintaining a rolling, monthly-updated production plan, separate from the master productionschedules, must be developed.Ongoing measurement of how closely the summary of the masterproduction schedules matches the production plans, by month,within tolerances established by family, should be initiated.Appropriate adjustments to the plan, based on changing customerdemands, forecasts/sales plans and inventory levels should thenbe implemented.Measurements. A set of standard measurements, by family,should be circulated and reviewed at each meeting. These shouldinclude • Customer service • Sales versus forecast/plan • Shipments • Master production schedule versus production plan • Actual production versus master production schedules versus plan • Level and frequency of schedule changes, within time zones.
Establish Demonstrated Capacity. For each family, the numberof units possible to be manufactured each month should bedetermined from recent past history. The historical averagesshould not be exceeded unless known increases in capacity areimplemented.Full Family Planning. Once the pilot families are being effectivelymanaged through the full horizon, all other families should beadded to the process, for the full horizon, representing virtually allmanufacturing activity. The use of "average product" planningitems for design-to-order business is often required, in both Salesand Operations Planning, planning and Master ProductionScheduling
Rough Cut Capacity Planning. Key manufacturing and supportcapacities (and short term schedule change) constraints should beidentified by family and expressed as load factors that can bemultiplied by the planned quantities to produce expected resourcerequirements. These may include:1. Total people2. People by department or skill3. Key work centers/lines- bottlenecks- fully loaded- proprietary (no alternates)- prone to break down4. Space5. Key support systems (expressed in units or for key purchasedmaterials)6. Inspection and Q.C.7. Design/engineering8. Levels of inventories in Rupees.
Lead Time Zones (Fences). Depending on the lead times toprocure and manufacture products within a given family, changinga schedule at different points in the future represents varyingdegrees of difficulty and cost. Exactly where these zones are foreach family must be defined. Appropriate levels of analysis andapproval should then be prescribed for proposed changes in eachzone. Factors to consider include the amount of potential disruptionin the factory and at support systems, the potential extra cost (airfreight, overtime, etc.), the impact on other commitments and theamount of increased inventory investment by delaying parts of theschedule already partially completed.
Management Objectives and Policies. A well functioning Salesand Operations Planning system will improve the ability to achieveobjectives and follow policies.Style of the Meeting. Several key approaches should beencouraged to maximize the benefits of this process.i) The various functions should avoid blame placing andcompetitiveness. This causes defensiveness and less than optimalcooperation. The focus should be on how to change or betterachieve future plans or forecasts, not on penalizing poor priorpredictions.ii) The focus should be on future months’ plans (generally 3 ormore months into the future). Short term plans are very difficult andcostly to alter. The management should ensure that stick to theforecasts and plans to avoid short term emergencies.
iii) A firm rule should be enforced forbidding time to be spent on "post-mortems" as to why a particular customer order was missed. The meeting should deal only with overall rates of shipment and production. Individual issues should be discussed outside this meeting. Specifics should be discussed only if there is potential impact on meeting future plans. iv) This process and the meeting should evolve to the point where middle management identifies problems and formulates suggested solutions before the meeting, so that top management’s time can be preserved for only evaluating and approving the proposals. v) A "pre-meeting meeting" of middle management (manufacturing, materials, marketing, design, etc.) often proves fruitful.
What do we achieve ultimatelyA good MRPC process can start to produce benefits even before itis fully operational. It provides a single set of mutually agreed &achieved figures, maintained monthly and expressed at a summarylevel appropriate for top management review.This system provide ready answers to:- Why have inventory levels changed?- Why have customer service levels changed?- Why has profitability changed?All of these questions can be tied back to performance versus theplans and forecasts, and the changes made to them. Price, costand volume variances, from both a sales and a manufacturingviewpoint, are easily visible.This process fosters an approach of Executive Consensus inrunning the business as opposed to one of Functional Selfishnessand Competitiveness between manufacturing, materials,marketing, design etc.Who will steer the system ?To make this system deliver the objective the whole processshould be steered by who is not directly involved in functional roleof either Production or Sales. Therefore ideally it should be DirectorFinance or Director-HR. This will ensure absolute neutrality indecision making and issuing guidelines.
Formal MRPC provides a single set of figures mutually agreed &achieved and a routinized process to ensure that topmanagement’s objectives and plans are accurately reconciled tothe detailed scheduling done in a company. The top executivesand heads of all functional areas in the company must participatein this process, along with scheduling and marketing personnel.Getting started first this system requires education. The next stepsinclude defining families and formats, preparing pilot data,developing a policy and meeting agenda and finally, beginning themonthly meetings.
There are several keys to effectively implementing this process including:I) Defining the horizonII) Maintaining a rolling forecast/sales planIII) Converting bookings to shipment forecasts/plansIV) Developing the plans and measurements for all familiesV) Establishing demonstrated capacity, initiating Rough Cut Capacity PlanningVI) Defining time zone criteria and incorporating management objectives and policies, and their potential alteration, while maintaining several key rules of style in making the meetings and the whole process effective. Ultimately we achieve management’s objective of plans, a process to maintain them and all functions commit to and can be held accountable for.