Why On-Time Orders?

Introduction
Most manufacturers are being pressured to reduce delivery lead-times and rely on their planning systems to meet their customer commitments. This works very well if everything happens as planned, but it's clear events don't always occur as expected and management tends to blame poor planning. But what if it isn't a planning problem?

Planning is more important than ever but is no longer sufficient to meet current challenges because the real challenge in meeting commitments isn't planning but making plans happen. So what if a major, unrecognized problem is simply lack of an effective methodology to make plans happen?

There's an old adage that says, “Plan the work and work the plan.”

There's a distinct difference between planning and working the plan and it's obvious a plan can't work itself. So what does it mean to “work the plan” and how is it done?

Working the plan is all of those behind-the-scenes activities that planners, schedulers, buyers and production supervisors do to ensure resources are correctly coordinated and deployed to meet current commitments, making the plan happen.

A materials manager has said:

“Just because something is planned doesn't mean it's going to happen.”

Planning by itself doesn't make things happen, people and processes make things happen. The need to respond faster is putting tremendous pressure on key users like planners, schedulers, buyers and operational supervisors. Not only are they struggling to meet daily commitments and relying on “brute force” solutions to get the job done, but they can actually become unrecognized production constraints.

Making plans happen cannot be solved by frequent re-planning or by dashboards that summarize the current state of sales, order positions, inventory, etc. Data mining can find relationships and help detect trends, but none of these support making plans happen because their focus is on preparing for (anticipating) future conditions and not on responding to current conditions.  New tools are needed.

The problem and solution will be explained using some sports analogies.

Communication and Coordination
A rowing team offers an excellent beginning point for this point.

This team isn't about individual efficiency because overall boat speed would be reduced if each individual rowed at their own best rate. The primary purpose of the coxswain is to shout a cadence so a rhythm is maintained that minimizes drag. Maximum effectiveness is achieved by coordinated effort.

This simplistic example demonstrates the importance of communication and coordination in meeting short-term objectives. However, the members of a rowing crew can't act independently of each other so an action-oriented team sports such as football, basketball, soccer and hockey are better examples where there are a combination of:

• Independent but interdependent actions by the members of the team.
• Actions and reactions can vary depending on what's currently happening on the field or court; particularly if something unexpected happens.

A brief comparison of basketball and football also has some real relevance to a discussion of meeting customer commitments.

Football and basketball
The biggest difference between basketball and football in this context is the amount of active coach oversight that occurs during play. Basketball has very little, not because there is no intent or desire to formally and frequently communicate but because there is no ability to do so. Once the whistle blows to start play, the game flows until the next whistle.

In football the action normally stops with a whistle at the end of each play and teams take advantage of the natural stoppages of play to coordinate their activities for the next play via a huddle, which is actually a very short, formal meeting. Basketball can't do this because the action is fluid.

The result is football has several coaches in the press box who review the game as it unfolds and compare it to their game plan and talk with the head coach on the sidelines. These “eyes in the sky” provide:

• Perspective - the elevation provides a much broader view of the action.
• Adjustments

The overall view of the field allows them to spot what's working and not working as the game progresses and they compare the game plan to events on the field, discussing and making changes as necessary. So their game plan adjusts to meet current conditions with guidance provided to the team on the field. Assume it's 4th and long on the first offensive series. Maybe they were testing something new, but more than likely it wasn't their intent to go 3 and out. It's way too early to change anything, so the plan stays unchanged and they focus on improving execution. This is “working the plan” – it sits between the game plan and execution on the field.

Therefore, the key points about football that are relevant to manufacturing are:

• Coaches in the press box who can monitor current conditions, compare them to the game plan and adjust their approach when necessary. Note this isn't a change to their game plan, but a modified version of it (plan the work and work the plan.)
• Huddles before every play to ensure all eleven players know what's expected of them and that they're coordinated.

This means there's a method to establish and maintain continuity from the game plan to the action on the field and a direct connection between senior management and events on the field.

Game Plans - What does this have to do with Meeting Commitments?
A great deal of emphasis is placed on preparing game plans; so much so that sometimes it seems there's no point in playing the game but just meeting in a room and comparing them. This is facetious, but a basketball coach recently said,

“Game plans make no difference to the game, it has to be played.”

There is a point when planning stops and the game plan gets put into action with game planners moving on to plan the next game. No matter how good the game plan, no football team would ever intentionally start a game without coaches in the press box or without the ability to communicate with the team on the field.

But this is exactly what happens in manufacturing! Item-based planning does a very good job of creating a “game plan” and passing it down through the bill of material structure to ensure all items are properly planned, and most manufacturing companies rely on their top down item planning system to manage items and just “assume” on-time shipment. There's an unstated but implied assumption that effective item-based planning based on individual efficiency will result in overall effectiveness and therefore material will flow and commitments will be met.

But what happens when the “game” starts and how is the “start” of the game defined? First, by definition, it's post-planning; which in this context means after customer orders are entered and commitment dates are established. While there may be a challenge in making valid customer commitments, there's an even bigger challenge in meeting commitments — especially without last minute surprises and unexpected extra cost (disruptions and expediting.)

So how does senior management know if current plans and customer orders will be met and, if not, then why not? In a top down item-based planning system senior executives have little if any “press box” visibility of commitment status and whether they'll be met and even less of what they can do to ensure resources are correctly deployed to meet them. 

But manufacturing likely has many more than “eleven team members” that need to be coordinated to ensure they're “pulling together” at any point in time. But there's nothing to ensure communication and coordination (like a rowing or football team), that's asking planning to do something it was never intended to do! It's like expecting a game plan in football to be successful without a lot of monitoring, adjusting and communicating via the press box and huddles. In reality, hardworking individuals may unintentionally be working at cross purposes resulting in mismatched components and last minute expediting perhaps with missed shipments.

The result is users spend far too much time digging data out of the system and too little time applying their knowledge to it. They rely on “brute force” effort to get material pushed through the plant but are overwhelmed so it's only a matter of time before events overwhelm their ability to respond.

So when the “game” starts, manufacturing operates like a basketball team when they need to operate like a football team because of the need to communicate with and coordinate multiple resources.

What's necessary?
The point of this football analogy isn't to suggest manufacturing should be (or even could be) managed like a football team, but to recognize the importance of several key elements in football that are missing in manufacturing:

• Coaches in the press box who provide an overview to monitor the current situation against the game plan and make adjustments if necessary
• A Huddle to provide a mechanism to ensure resources are coordinated in the short and near-term.

So How would manufacturing use these concepts to improve their ability to work the plan and make plans happen?

Coaches in the press box - aggregate balance
If demand and supply aren't balanced in the aggregate, it can't be made-up at the detail level. Manufacturing is good, they can get 15 lbs in a 10 lb bag, but they can't get 20 lbs in a 10 lb bag. And, if told to put 20 lbs in the bag, it's unpredictable exactly which 10-15 lbs will make it in and which 5-10 lbs will get left out. Plus the relative importance of the 20 lbs can change depending on oldest, newest, best customer.

This really requires a formal meeting with senior manufacturing executives with the general manager in attendance. Think about football at 4th and 2 somewhere late in the 4th quarter… should we go for it or kick? This is a key decision requiring input from all the coaches so they call a timeout so the coaches in the press box can talk with the head coach on the sideline. Key situations arise in manufacturing and a meeting without senior executives is a little like playing football without any coaches in the press box.

For example:

A consultant (we'll call him Bob) was talking with the master scheduler one morning and the sales manager poked his head in the door about every 5 mins. Bob asked the master scheduler what he wanted and he said they'd received a large order that would consume all their available-to-promise for a period and he wasn't sure if he should accept it. This was obviously important, so Bob left and coincidentally ran into the general manager as he was walking down the hall. Bob told the general manager about the master scheduler's dilemma and the general manager responded the order was strategic and it should absolutely be accepted even if it consumed all their ATP. Bob told him the master scheduler didn't know that and made a pitch for a weekly meeting. This is the memo announcing it.



From:	Ray
To:	Distribution List
Date:	June 1
Subject:	Weekly Mini S&OP Meeting
On Monday June 4 at 9:00 am we will hold our first weekly “mini” sales and operations planning meeting. The meeting will be conducted in the plant conference room and shall be held to 30 minutes.  The purpose of the meeting will be to review the current MPS/product mix as it relates to the original consensus of the monthly S&OP meeting. This review will allow for production and demand management decisions that can not wait until the next monthly S&OP. Only we as senior managers can properly evaluate the risk involved in various decisions; therefore regular attendance at this meeting is essential. Please plan to attend this meeting on Monday morning of each week with the exception of the week when we hold the monthly S&OP.


The 30 minute limit is significant because the intent is to limit discussion to exceptions or potential imbalances and not to have a general discussion. All key operations executives including the general manager need to attend the meeting so that two key elements are present:
• Ability to resolve conflicts
• Risk-taking presence

To summarize, sufficient authority needs to be present so binding decisions are made and priorities clearly understood.

The huddle - detect and prevent slippage
As quoted above, “just because things are properly planned does not mean they will always happen that way” means all properly planned items are at the same time candidates for slippage. Slippage is any break in the plan that disrupts both normal material flow and the rhythm of the plant that's preventable by timely Knowledge Worker (planner, scheduler, production supervisor, buyer) intervention.
Slippage is not new. When customer delivery lead-times were longer, users did manual, informal slippage detection and prevention. And, although it wasn't recognized it was even happening, it worked well.

This manual process consisted of:

• Manual data chasing to find the potential problems.
• Follow-up with suppliers (internal as well as external) to confirm dates.
• Communicate with colleagues to coordinate activities.
• Determine alternatives to overcome any current constraints.
• Feedback to internal customers in the event dates would be missed.

Now with shorter lead-times and staff reductions, users don't have the time to detect and prevent slippage. Planning is really a statement of intentions and doesn't catch slippage until it's too late.

But there's more involved because any plant of significant size has a “team” comprised of one or more planners, schedulers, buyers and production supervisors (their Knowledge Workers or “KW team”) and this “on the field” team needs to maintain a steady flow (rhythm) of material so production units are produced without “drag” (disruptions.) Individual efficiency really isn't the goal, contributing to the flow is but it needs a method to coordinate effort.

This leads to a discussion of the importance of production units. Planning is top down item-by-item and that's correct, but manufacturing is bottom-up by production unit to satisfy shipping units and coordination is key. This is not just semantics. A bicycle seat is just an item in planning, but in production it's a unit comprised of the seat itself plus all its components (post, frame and cover.)

To understand the subtle significance of production units, assume you're an operator and your instructions are to assemble seats. Your first question is, do I have all of the components I need? Therefore, working the plan has to have a method to check and coordinate the entire production unit, not just individual items. It doesn't do much good to have the cover and frame but not the post.

Timing becomes important so material is available when assembly needs it. Planning is approximate and “close” counts but, when final assembly is releasing production for finished bicycles, the seats need to be available to match-up to the correct frames when the supervisor needs them. It's not about precision (detail scheduling) but coordination. Visibility by production unit is necessary long before the release of production orders so slippage prevention can be done not only by production units but also by the complete shipping unit and customer order.

This methodology does the same thing for manufacturing that huddles do for football, it facilitates communication and coordination to help ensure customer commitments will be met by focusing on and preventing slippages in the plan before they create problems and add extra cost. It provides a means to keep the whole production organization focused on the few things that have to happen as the ship date approaches to get each order produced and shipped on time.

Conclusion
In a top down item-based planning system, Senior Site Executives (president, general manager, plant manager, vice-president-manufacturing - SSEs) have little to no visibility of commitment status and whether commitments will be met, and even less of what they can do to ensure resources are correctly deployed to meet commitments. In a costing article, a general manager was quoted as saying relative to his current costing system, “At the end of the month I always feel good or bad, but never smarter.” The purpose of On-Time Orders is to provide SSEs with a method to be “smarter” so they can ensure resources are correctly deployed to meet customer commitments.

This is accomplished by:

• Coaches in the press box (management oversight) to maintain aggregate balance so proper priorities are driven-down through the structure
• A Huddle (prevent slippage) to assure efforts are coordinated so material is pulled through the plant in matched sets of production units.

Together these provide a methodology to “work the plan” to make plans happen, it's not execution. As seen from the football analogy, execution is the actual running of the play (actual production in manufacturing) while working the plan is preparation to execute. But it's the lack of an effective mechanism to work the plan that causes slippage to happen… and why project reviews are separate from project planning. Project reviews are to monitor key tasks to ensure they're on schedule or, if they're not, how to get them back on schedule. So if potential slippage isn't detected and prevented, then bottlenecks are created and not only will current plans not be met but near-term on-schedule plans will encounter those bottlenecks and suffer slippage, just like driving down the interstate unaware there's a delay just ahead.

The implications of not effectively working the plan can be demonstrated by the following:

A senior manufacturing manager might say:

“We miss too many shipments; we need a better planning system.”

or

“We miss too many shipments; we need a better scheduling system.”

but they'd never say:

“We miss too many shipments, we need a better way to work the plan.”

On-Time Orders provides the ability to proactively manage the entire customer order backlog from customer order down through the bill of material structure to purchasing. It begins monitoring orders as soon as they're booked and identifies those critical events that must happen every day so they can be managed in order to get each order produced and shipped on time.