The Marriage of Real-time and Production Planning
Brian Hoey - January 25, 2018
Imagine for a moment that your company is in the businesses of manufacturing parts for both conventional and hybrid vehicles. Based on the demand from your customers over the past year or multiple years, you develop a plan for allocating resources and person-hours to produce the right proportion of hybrid parts to conventional parts based on expected demand. Unexpectedly, a sharp increase in worldwide oil prices triggers a shift in demand away from hybrids and toward conventional automobiles that rely on gasoline. How will your production plans cope with the sudden change? Will your factory floors continue to produce a surplus of hybrid parts while orders for conventional parts go un-filled, or do you have the necessary planning agility to shift production to align with new demand paradigms?
Hopefully, you are in a position to safely assume the latter. But for many complex businesses, rapidly adjusting to demand is a perilously involved tasked, requiring the ability to assess and respond to new circumstances virtually instantaneously. One of the keys to building this level of agility into production processes is the integration of real-time and production planning.
What is Production Planning?
As a refresher, production planning refers to the strategic allocation of resources (i.e. person hours, machine usage, container usage, etc.) during critical production processes. In this way it is related to Postmodern ERP, but limited in scope to the production floor itself. As is the case with Postmodern ERP, these planning solutions should ideally leverage interconnecting pieces of IT infrastructure and software in order to optimize the movement of resources through various production processes to meet demand in the most efficient way possible.
Also like Postmodern ERP, this type of planning is about more than just creating a pen and ink sketch of the production facility’s activities. While this kind of inherently static production schematic has helped to optimize throughput since the 19th century, the increasingly digitized world of Industry 4.0 demands more reactive, integrated solutions. Production planning can and should be a driver of increased visibility and agility within an organization, adding business value by bringing a measure of illumination to the complex relationships between demand, capacity planning, throughput, and supply streams both within and without a given company.
The Power of Digitization
If planning represents one facet of increased intra-operational connectivity, the integration of real-time data represents a significant value added proposition in that direction. Thanks to the rise of Industry 4.0, an influx of sensors, digitized inventories, and live shipment tracking have given planners a host of new and connected tools for building more responsive and flexible workflows. To wit, the increase in supply chain digitization has made it possible for data to be transmitted instantaneously throughout an organization. The ready availability of real-time data can be a boon to planners for a number of reasons:
- Promotion of end-to-end (E2E) visibility via more transparent digital interfaces
- Up-to-the-minute information for planners and decision-makers
- More accurate and more responsive forecasts
- Support for more advanced logistics
Powerful forces on their own, real-time and production planning represent the potential for significant added business value when integrated. By linking planning software with up-to-the-minute data about demand and various touch points on the value stream, manufacturers can respond to real-time changes in demand in order to create improved production plans. Not only will planners gain a more holistic view of the relevant production streams, but they’ll put themselves in a position to bolster their overall production control by better understanding potential future hurdles. The end result is a more agile, cost effective supply chain.
By responding to real-time changes in demand planners can help to optimize machine and person hour usage, so that no production time is wasted responding to the obsolete demands of the past. Instead, production facilities can be used in such a way as to ensure that the exact right proportion of products is being manufactured with no delay based on the present needs of the customers and the changing conditions of the market. The same principles can be applied to other processes across the supply chain:
- Planners might scale production processes differently based on changes in transport cost.
- A business may retool its supply stream based on forecasts that predict limited availability of particular parts.
- Inefficiencies in the on-time creation and shipment of products might be uncovered and remedied.
In this way, the further digitization of the supply chain can be leveraged towards a more flexible, more adaptable, and more cost effective production scheme—one that boasts enough agility to respond to ever-changing global conditions.