By Mike Hart
In my last post, I stated that “expediting is easy, planning is hard.” I think we all know what expediting is, but what exactly is manufacturing planning?
Manufacturing planning simply means that you will operate the factory according to a plan rather than reacting to events with expediting. Manufacturing planning involves five basic elements – capacity settings, lead times, reorder levels, MRP, and work center scheduling – each of which I will now briefly describe.
The first element of manufacturing planning is to establish your factory’s current capacity. Factory capacity affects job lead times and the number of jobs that can be efficiently released to the factory at any given time.
The factory is actually a collection of work centers. Each work center should be given a current capacity setting in terms of available production hours per day. Work center capacity settings vary with overtime, number of shifts, number of workers, and number of machines.
2. Lead Times
The second element in manufacturing planning is to establish lead times on your purchased and manufactured items. Lead times drive customer delivery dates, job schedules, and purchase order schedules.
Each of your purchased items should be given a lead time, which is the expected turnaround time between sending a PO to your vendor and receiving the item, plus a safety factor.
Each of your manufactured items should be given a lead time, which is the time needed prior to starting the job for procuring material or making subassemblies, plus the expected production time, which is the number of days it typically takes from job start to job finish.
If you are a make to order manufacturer, it is vital that you quote customers realistic promise dates that conform to your planned lead times.
3. Reorder Levels
The third element in manufacturing planning is to establish reorder levels (where applicable) on your purchased and manufactured items.
Each of your purchased items (raw materials and components) should be assessed as to whether it is more efficient to purchase to order or to maintain some stock on hand. If you decide to maintain stock on hand, a reorder level should be set that covers anticipated demand during the time it takes to purchase replenishment stock.
Each of your manufactured items (finished items and subassemblies) should be assessed in a similar manner. Is the item made to stock or made to order? If made to stock, you must establish a reorder level that that covers anticipated demand between each production run.
4. MRP
The fourth element in manufacturing planning is to use MRP (manufacturing resource planning) to automatically generate jobs and purchase orders based on your capacity settings, lead times, and reorder levels.
MRP compares each items stock on hand with its reorder level and demand from sales orders and other jobs and generates a PO or job as needed, taking into account open POs and jobs. Jobs and POs are backward scheduled from required dates.
MRP uses the same logic that a person would attempting to plan jobs and POs manually, but with far greater speed and, more importantly, with far greater accuracy.
5. Work Center Scheduling
MRP generates the overall job schedule. The final element in manufacturing planning is the daily scheduling of jobs to be run within each work center to insure that jobs are completed on time, according to the schedule.
Jobs should be run in priority order based on the how much estimated production time is left relative to the job’s scheduled finish date. Running jobs in the correct order within each work center synchronizes work center schedules and minimizes bottlenecks.
The Key to Efficient Manufacturing
The key to efficient manufacturing is to spend more time on planning, which automatically reduces the wasteful time spent on expediting. The quality of your planning settings gives MRP the inputs it needs to create master job and PO schedules that are realistic and achievable.
Mike Hart is the co-founder and President of DBA Software Inc., a leading provider of manufacturing software for small businesses.
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