If your job description is a supply chain manager, production manager, planner, or something similar, how many times have you said to yourself,

 

“I gotta get off this merry-go-round! Every month or so it’s the same thing!”Overtime Vicious Cycle graphic

 

You know. You’ve been doing it (probably) for years.

 

Your well-trained APICS-certified folks do their RCCP (rough-cut capacity planning) based on the forecast demand, and the planners dutifully create their MPS (master production schedule). Then, everyone goes to work doing what needs to be done.

 

Of course, it is likely that almost everyone—after all these years—already smirks a bit at the MPS, knowing that “it ain’t gonna stick.” Sooner or later, everyone knows it’s all gonna fall apart.

 

Here’s WHAT happens

  1. Variability from the forecast leads, sooner or later, to some shortages or delays at a critical point in manufacturing, assembly, or elsewhere in the supply chain.
  2. Work-in-process (WIP) starts to pile up here and there across the shop floor or in supply chain facilities.
  3. Just as Little’s law tells you it will, cycle times start to increase.
  4. Completions are delayed.
  5. Customers (or, maybe, the sales managers) start to complain because orders are late (or, it’s clear they will be late if something doesn’t change soon).
  6. Management decides “Something’s gotta give!”
  7. Overtime and excess freight costs are authorized to overcome the log-jamb of WIP.
  8. Capacity is increased (thanks to the overtime and expediting efforts).
  9. WIP starts to subside, orders start shipping, and everyone breathes a sigh of relief.
  10. Overtime restrictions go back in place, until the next time.

 

Here’s WHY it happens

The answer is simple. Nothing in the standard processes of sales forecasting, RCCP, or MPS creation has any possibility of addressing variability that propagates up and down your production operations and throughout your supply chain via the bullwhip effect.

 

Until you find an effective way

  1. To strategically place and size buffers (i.e., stock buffers, time buffers and/or capacity buffers),
  2. Strategically manage buffer sizes,
  3. Provide clear visibility across the shop floor and through your supply chain on the status of each buffer,
  4. Begin taking supply chain execution signals from the buffer status instead of forecasts,
  5. Set execution priorities based on the relative state of each buffer,

    ... you will continue to ride the overtime merry-go-round and have lower profits than you could otherwise enjoy.

 

It really is that simple.

 

We have the solution. Please leave your comments below, or feel free to contact us directly if you prefer. We would be delighted to hear from you.

 

 

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