If you want to produce on schedule and at optimal cost, you have to establish a holistic, simultaneous production planning approach. I would like to explain to you in this article how this can be done.
Digitalization is crucial for more resilience
Disrupted supply chains and declines in production – the Coronavirus crisis still has the industry firmly in its grip. Many companies expect that the situation will hardly ease in the coming year and could even worsen, depending on the sector. Therefore, most companies have already learned lessons from the pandemic.
According to a study by Fraunhofer Institute in December 2020, 59 percent of 237 German manufacturing companies surveyed have restructured their production processes during the lockdown. In a recent study of around 190 executives from logistics and supply chain management by the Germany-based software company INFORM, 93 percent consider digitalization to be crucial for acting more resiliently in response to crises. Therefore, 63 percent of the respondents have already initiated or planned digitalization projects in the area of production planning and control.
Mastering the complexity of production
Series producers are increasingly realizing that production planning is an essential factor for their value creation. With targeted digitalization, companies want to increase their transparency, accelerate the process chain and make the complexity of planning manageable. These goals can only be achieved for the entire internal supply chain with simultaneous planning, which considers all influential factors at the same time and synchronizes them across the entire internal supply chain.
When companies in the process industry such as food and beverages, cosmetics or pharmaceuticals manufacturers want to optimize their production planning with the help of software systems, it’s not just about choosing a tool. Above all, it is about the method behind a software to plan all processes in such a way that in the end, a feasible, cost-optimal, and on-time production plan is created. To do this, however, you have to be able to plan all influencing variables in parallel, from material availability to throughput scheduling.
Transparency instead of planning chaos
Simultaneous production planning is a software-supported, integrated planning approach. With it, companies ensure on the basis of calculated production and sales forecasts, that they procure raw materials on time and at the same time also take into account the existing capacities and required pre-production. Companies are thus able to integrate the specifications of sales, procurement, production and strategic business development, which are often considered in isolation, into a cross-departmental planning process.
The need for manual intervention in the planning process can be reduced to a minimum because the planning software simultaneously records and takes into account all relevant influencing factors and parameters across all production stages.
Planning step by step is outdated
Without a specialized system, planning a timely and efficient process is exhausting. Many questions arise: Are there enough raw materials available? Which preliminary products have to be produced by when? Are there seasonal special orders? Does the production department have sufficient machine capacity to complete both standard and special orders on time?
The real problems arise when trying to answer these questions and when creating a plan from them – especially since the speed as well as the complexity of our working world has increased significantly. Classical planning proceeds step by step – without a holistic view! First, the primary requirements are transferred into material requirements and batch size planning. This is followed by lead time scheduling and capacity balancing before a final plan is drawn up.
Within this process, the unmanageable, multi-level dependencies lead to costly corrections again and again. With such an approach, the planner’s task is often only to find a way to a feasible plan. With the appropriate software, however, they can put the calculated result into practice!
Improve delivery reliability and customer satisfaction
In contrast to step-by-step planning, specialized software links the three essential sub-areas that are decisive within the supply chain for optimal production planning: Forecasting, procurement and production planning. For this purpose, it brings together all information on one platform without media discontinuities. The heart of such software is a specially developed, algorithmic optimization model.
The software calculates the order proposals to be ordered from the supplier at optimal cost, taking into account the respective influencing factors. At the same time, it schedules the production orders feasibly over the entire planning horizon, considering material availability as well as the actual capacities available.
In addition, the system calculates cost-optimized as well as dynamic batch sizes, also over the complete planning horizon, in order to utilize capacities efficiently and minimize inventories at all production levels. In this way, users sustainably reduce shortages. In addition, increased delivery reliability also improves customer satisfaction.
From theory to practice
For a long time, simultaneous production planning was only a theoretical concept. On the one hand, the existing hardware was not designed for such complex calculations. On the other hand, the algorithms available were also not sophisticated enough. However, INFORM was the first company to succeed in making theory practical. Today, highly specialized algorithms are able to simultaneously calculate several hundreds of thousands of variables and several million constraints for a feasible production plan. Simultaneous planning allows manufacturing companies today to look at their production planning from a completely new perspective.
The German cosmetics manufacturer Babor is also convinced of the advantages of simultaneous production planning. The family-owned company with 700 employees manufactures 2,500 cosmetic products based on approximately 15,000 components that are procured worldwide. In some cases, Babor has to order the natural raw materials for its cosmetics up to one and a half years in advance. In addition, the variety of products leads to a high degree of complexity in the areas of procurement and production planning with a direct impact on sales planning.
The cosmetics manufacturer has been using INFORM’s software since 2015. In terms of transparency, efficiency and agility, Babor has made great progress since then. The software’s intelligent algorithm automatically calculates the optimal production in the case of limited capacities and thus usually covers about 90 per cent of all operations. Only the rest of the cases require manual intervention. Simultaneous production planning is thus the perfect symbiosis of man and mathematics.
About the Author
Stefan Auerbach has worked for INFORM since 2015 and specializes in the field of Simultaneous Production Planning.