"I Promise”Marrying Materials and Capacity to Determine Realistic Promise Dates.
|Duncan Patrick - Executive Vice President of CMS Montera Inc.|
|Co-Presenter, Pete Milroy - VP Consulting of CMS Montera Inc.|
CMS Montera provides management solutions and software to accelerate projects and optimize operations for manufacturing, engineering, R&D, and project management organizations. These solutions provide greater visibility and synchronization to help clients dramatically grow through improving productivity. We work with clients to focus them on becoming more responsive, reliable and relevant to their customers.
In 2004, CMS Montera began the development of its Manufacturing and Project Management software called CMS RoadRunner. What was once a small "DBR Software” whose first schedule was displayed in a DOS Screen and survived the rigorous testing challenges of Eli Schragenheim, has evolved into an all encompassing enterprise-wide TOC solution software with four primary modules:
CMS RoadRunner is currently implemented in many locations across North and South America, Europe and the Middle East.
- Mx – Production Planning and Execution based on DBR and Buffer Management
- Rx – Inventory and Supply Management based on Demand Driven Replenishment (DDR)
- Px – Project Execution based on Critical Chain
- Bx – Business Performance analysis combining a TOC-based Operations Scorecard with Throughput Accounting.
The Concept of the Technological solution that this presentation will address is in an area where we have recently devoted a great deal of time and resource to solve the considerable challenges. The area is using the technology to help manufacturers promise their customers a realistic and achievable delivery date. We call it "Available-to-Promise” (ATP).
1 – What is the Power of the new technology? The power of the technology, like so many other times, is the ability to analyze and compare large amounts of data in a short period of time and provide users with relevant information – taking into account the client’s DBR and DDR design.
2 – What current limitation does the new technology eliminate or vastly reduce? ‘A’ Plants (those that have many raw materials and / or purchase parts being assembled together into a finished good) have two big challenges when it comes to promising when an order can be reliably delivered – predicting both capacity and material availability.
Typically, the number of finished goods SKUs is large and the number of raw material and purchase parts SKUs is even larger. As such, it is not possible to properly manage this manually or in spreadsheets. In addition, while many ERP systems claim to provide this functionality, their functionality relies on the continued use of the ERP’s MRP and scheduling functionality to make it work. In reality, rarely do clients use their ERP’s scheduling functionality as they prefer the flexibility of internal customized spreadsheets. Furthermore, during any successful implementation, scheduling is replaced by DBR and the MRP functionality is turned off in favor of DDR.
What’s more, many successful TOC implementations include designating finished goods as either make-to-stock (MTS) and make-to-order (MTO. Where as satisfying customer orders from stock leads to greatly reduced lead times and reliability, MTS creates a new problem for predicting capacity consumption to replenish the finished good stock.
So before and after many successful implementations, many clients still have a poor way to promise delivery dates.
3 – What policies, norms, measurements and behaviors are used to bypass the above limitation. Currently, many clients ‘guess’. Most clients leave the decision about the Promise Date to the Customer Service Representatives (CSR) who provide a date to the customer at the time of the order. The "guess” usually involves taking the input from some kind of material reservation system and promising a date. Often, when the CSR communicates the promise date back to the customer, the customer wants the order sooner and the CSR is then forced to negotiate internally with the production planner. Although, this negotiation often results in a better production date, it often also creates the ‘stealing’ of material from a previously promised order.
The ‘guess’ approach to order promising also often creates large imbalances in the way the plant is loaded (too much promised on any given day or week and not enough promised on other days or weeks). This sometimes creates the need to run overtime. In addition, the CSRs often have to call the customer again apologizing for a now late order.
4 - What policies, norms and behaviors should be used once the new technology is in place?
5 – Do the new rules require any change in the way we use the technology? Questions 4 & 5 will be addressed together. This area is a bigger challenge than building the technology to determine a more accurate ATP date. The new technology now provides a ‘best case’ delivery date considering both Drum capacity and material availability. The challenge is that many CSRs have been trained over the years to not trust the system. Their years of experience are worth much more than "new technology”. MTS items can be promised in a matter of days. MTO items can usually be promised with the standard lead time. The challenge emerges from the requirement to get the CSRs to enter less orders into the system. In the past, entering orders early and far out into the future was the way to reserve capacity and drive demand on the raw materials. Once DBR and DDR are implemented along with the new technology (ATP), only short term firm orders need to be entered. Years and years of CSRs asking their customers to order early and far out into the future needs to be reversed. If not, orders entered far out into the future (less accurate and more based on forecast) unnecessarily reserve capacity and material further extending the lead times for any new orders. We call this the ‘lead time cycle”.
6 – How to cause the change? The most important place to begin with this change is to ensure that the overall implementation of the TOC operations solution is framed inside the competitive advantage that will be created. We start all of our operations implementation with the impact that DBR and DDR will have on lead time and on-time delivery. We work with our clients to establish a Sales Lead Time Matrix that enables them to set lead time expectations by SKU. When this is in place, the requirement for the ATP functionality becomes unavoidable.
In addition, most operations based TOC implementation involve production staff and planning staff. The CSRs are often involved on the periphery. The new ATP technology profoundly impacts their role. As such, much earlier and deeper involvement of this function needs to be considered. Furthermore, it becomes essential to clearly explain the ‘lead time cycle’ to the CSRs to ensure that the New ATP technology actually delivers on its intended value.
Not only will this presentation address all of the above points, but we will also share our solutions to the design challenges we encountered when designing, building and implementing this new ATP technology. Challenges included:
- Allowing for early release of orders - demand smoothing
- Estimating time from Drum date to completion date
- Accommodating alternate drums (being able to run something on more than 1 piece of equipment)
- Estimating the capacity consumption required for Make-to-Stock
- Drum capacity modelling
- Accounting for demand orders that do not yet have supply orders created for them
- Ensuring usability across different types of organizations and different users (salespeople and production people)
Duncan Patrick is Executive Vice President of CMS Montera Inc.
CMS Montera provides management solutions and software to accelerate projects and optimize operations. Prior to CMS Montera, Duncan was a member of the senior leadership team of an industrial distributor, Ernst & Young management consultant, and Landman for Husky Energy.
Duncan’s business consulting career is focused on working with clients to assist them design and implement TOC solutions focused on accelerating project execution, optimizing production execution and synchronizing inventory replenishment.
Duncan holds an MBA degree from the Richard Ivey School of Business, Western University and a Bachelor of Commerce degree (with distinction) from The University of Calgary. Duncan is certified by the Theory of Constraints International Certification Organization in all aspects of TOC.
Pete Milroy is VP Consulting of CMS Montera Inc.
Peter helps organizations improve their performance by: developing and implementing Lean Manufacturing and Theory of Constraints based operating strategies, materials management and supply chain solutions, and measurement frameworks.
Peter has nearly 20 years of combined industry, consulting, and academic experience. Some of the industry sectors Peter has experience working with include Food, Industrial Products, Automotive, High Tech and Consumer Goods.
Peter is certified by the TOCICO in Supply Chain Logistics, Finance & Measurement, and CCPM, and is a Chartered Professional Accountant.