2 reasons that make ERP unusable for production plans

Generally, the company ERP provides an MRP module for production planning that has been developed and sold by those who do not prepare production plans on a daily basis and purchased by those who never use it: the company’s IT department. There are mainly two reasons that induce planners to overcome the limits of ERP and to seek alternative or at least complementary solutions to allow an adequate production flow to respect deliveries to customers: the difficulty in recognizing the feasibility of orders and the dating of the same, and consequently of customer orders, at finite capacity.

A plan is a plan if it is feasible, otherwise it is a wish list

In manufacturing companies of a certain complexity, the planning system can propose thousands of new production orders over the time horizon. Some of these must be released in the department quickly to avoid delivery delays to customers and it is essential that the department is certain that these are feasible orders, that is, have components available. Otherwise we are not dealing with a production plan but with a wish list submitted to production, which in turn should skim off the feasible orders and monitor the feasibility of the other ones along time. Understanding which orders are feasible and which components should be solicited with the MRP module of the ERP is a difficult task: either we analyze the proposals one by one with the availability of their components or we try to re-elaborate the MRP output on a spreadsheet coarse method. Looking for the solution is even more frustrating if you think that with each new planning session you have to deal with new customer orders and production proposals that can call into question what was verified and decided in the previous session.

Resources have limited production capacity

The other reason that makes a production plan proposed by ERP unusable as it is is that it considers only some production resources and considers them to have infinite capacity. That is, it does not take into account the fact that:

  • several orders cannot be carried out simultaneously on a certain machine: that is, the resource actually works at finite capacity
  • an order is feasible at a certain date if the orders of its components are also likely to be feasible in time

It can be done

The solution to both limits of ERPs is to adopt adequate tools, capable of:

  • simultaneously elaborate all the constraints relevant to the production plan (machines, personnel and equipment with finite capacity, sequencing rules),
  • allow to preserve what has already been decided by the planner in previous sessions,
  • propose an output for immediate consultation regarding feasible orders and full of significant details (distinction between feasible, not feasible, feasible orders for partial quantities or which only require a transfer of components between warehouses to be feasible, etc.)

APS are generally the most suitable tools to overcome the limits of ERPs in the context of production planning but even among them the characteristics are different and the flexibility in managing the particularities of the company is not always guaranteed. Also for this reason Cowry is often called upon to replace previous APS in the company.

The value of simulation in crisis scenarios

Supply chains of companies are getting complex and extended: this increases risks and their management has become essential. If something unexpected happens in the market or to some supplier that interrupts normal flow of materials and resources, it is important to take prompt decisions, based on reliable scenarios. In these cases being able to make simulations is very useful: it can reduce immediate economic damages to the company and, indirectly, keeping customers trust. In many area making simulations is an established practice. In supply chain management the situation is a bit different: planning modules of ERP systems don’t allow simulations because they are anchored to current purchase and productiona plans. And also if they permit simulations, these are limited and simplified. The great usage of spreadsheets witnesses this situation. Also many APS systems lack in supporting simulations, especially if they are based on transactional technologies of ERP or MES, not well suited for massive computations. Unexpected situations for which would be usefule to make simulations can have different origins:

  • a supplier is having problems and the impact of its deliveries to our customers must be evaluated. How long will last our stocks of its components? for how long can we feed our production before finding other suppliers of the same materials?
  • our competitors in other countries have been damaged by catastrophic events: what will be the impact on our demand and how to fullfill it?
  • new norms are threating the demand for certain products (e.g.: plastic bags or some kind of food): which is the obsolescence risk of our stocks? what is the impact on our demand and production plants? how much time is needed to convert materials flows?
  • British customers foresee Brexit and want to increase stocks of our products: in the short term we have to manage an increase on plant saturation but future demand must not be overrated

Simulations are useful also without crisis or external exceptional events but for evaluating decisions:

  • phase-in/out of products and components
  • evaluation of new manufacturing arrangements or changes in the supply chain
  • comparison of the impact of different management techniques (kanban, rythm-wheel, etc)

In any case, to have effective answers for new scenarios is important to have simulation tools that are able to:

  • model adequately constraints and flows
  • represent the future effectively
  • elaborate scenarios quickly
  • mix real situations and hypothetical parameters, also exploiting unstructured data sources

It does not make sense to wait for crisis before adopting suitable tools to manage it.

Lean integration – part 2

The problem of integration is related not only to in house applications and processes but also to the ones of the company and its supply chain. In the previous post
we have described a lean and flexible solution for the internal integration and in this post we suggest one for integrating with suppliers. On the suppliers side
is increasing the number of relationships where, also without a formal blanket order, suppliers produce more than requested for a confirmed order, being aware
that the surplus quantity will be consumed by future orders. For the customer, the purchase lead time for surplus quantities of previous orders can be very different
from the lead time for new productions and conditions production plans and delivery dates to customers very much. An agile solution in this situations is modeling in
the APS the stock in the warehouse of the supplier and using the multi-warehouse MRP to manage distinct lead times for stock transfer and new production runs. The data
source to be used by the APS for the stock at the supplier site can be a spreadsheet, periodically updated by the supplier with the quantities for every item supplied.
This spreadsheet can be sent by e-mail by the supplier to the customer and put by the planner at the customer site in a folder of the internal network, where is
read directly by the APS. Or we can use a folder, shared between customer and supplier, containing the spreadsheet and automatically synced with Dropbox.

Lean integration technologies

In IT projects where a business application must be integrated with the ERP system, the cost of creating the data interchange routines can be very high, sometimes
as expensive as the business applications that must be added. Reasons for this are related to the fact that the company that wants to connect the applications can
work only with the manufacturer of two systems, especially if the integration technologies used by these are not accessible to the IT department of the company
(because the source code of the applications is needed or because legacy technologies must be used). These types of problems are faced also when we want to introduce
a planning system in a company and limit the diffusion of these systems only to big companies. All this is much true for older APS systems, which usually
feature less recent integration technologies. One of the most flexible and innovative approach to this problem is that used by Sikuli, a tool developed by MIT
(and used by leading company, as the website states) which has reached production grade status. It is an application that can be programmed not writing
code but describing the operations to be accomplished by the images of the button to be clicked, the text control to be filled and so on.
By the point of view of the processes where APS systems are involved, this tool enables the transfer of data towards the ERP database emulating a user who interacts
with his ERP user interface. It is a tool that can be used both for data entry (we used it to upload item master records on the ERP) and for routinely transfer
production orders or purchase requests. This means that the company that wants to export data from APS to ERP is able to create the interchange procedures on her own
and quickly, reducing the project’s costs. Further, from some systems (also from Cowry) it is possible to launch Sikuli directly, giving to it the order list or other data
as input. Systems’ integration accomplished this way it’s easier to do and to be tested and can reduce costs and lead time of the project’s integration phase.

Paneido has twenty years of experience with planning and scheduling systems. Our philosophy is making easy and fast the activities of every day and feasible the solutions to less recurring problems: phase in/out of products, rearrangements of production capacity, optimizations, etc.

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