There is a saying “Proper Prior Planning Prevents Poor Performance.” This philosophy is very applicable in manufacturing operations. Whether it is the measure twice, cut once admonition, or the advice that failing to plan is planning to fail, in manufacturing, operational performance is dependent upon bringing together the right parts, labor, and energy in the right sequence to produce the final product. Ensuring this happens is the role of production process planning activities.
For higher volume discrete and batch manufacturing processes, this activity is directly tied to an Enterprise Resource Planning (ERP) system. ERP was, in fact, the combination of MRP II (Manufacturing Resource Planning) functionality that was added to the traditional finance and accounting functions.
Manufacturing Resource Planning (MRP II) evolved from early Materials Requirement Planning (MRP) systems by including the integration of additional data, such as employee and financial needs.
The MRP II functionality was critical for the Make-To-Order (MTO) and Make-To-Stock (MTS) industries. The whole point of MRP was to ensure that there was sufficient raw material on hand to produce the inventory to meet sales forecasts.
Today’s ERP solutions are still mostly driven by this basic production model. The challenge for complex manufacturing operations that are usually Engineer-To-Order (ETO) or Configure-To-Order (CTO) operations is that production process planning can vary significantly for each unit produced and may often need to be adopted throughout the manufacturing operation. There are several reasons why ETO/CTO manufacturers face unique challenges, so should carefully consider where and how they perform their detailed process planning.
ETO/CTO Process Planning Starts in the Sales Cycle
In higher volume MTO/MTS operations, process planning is usually part of the product design effort. When dealing with higher volumes, optimization is usually based on how to achieve the fastest throughput based on machine capacity. The manufacturing processes are often highly automated and rarely change throughout the production run which allows for standardized costing models to be used.
In ETO/CTO operations, the production process becomes part of the proposal process and figures heavily into the quotation to the customer. Therefore, a detailed understanding of the actual cost of production must be embedded into the production plan if the product is to be delivered at the price quoted. Stated differently, the production plan becomes an embedded part of the design itself.
ETO/CTO Process Planning is Tightly Integrated with Change Order Management
In MTO/MTS operations, change orders occur but they tend to be limited to a model change or a corrective action plan to address a defect. The Engineering Change Order (ECO) rarely causes a significant change to the production plan. In this case, it is likely related to the use of a new part number or revision of a component material. There may be a process change such as changing a torque on a fastener, but it then applies to all subsequent production.
In ETO/CTO operations, there are often multiple ECOs for a single product. Sometimes it is because the production time might be measured in days, weeks, or even months such as in the case of shipbuilding. The ability to implement an ECO in real-time during a production run is best handled by the actual production system, usually within the Manufacturing Execution System (MES) instead of in the ERP system, as it is in MTS/MTO operations.
Read more on this topic here, Easing Change Management in Manufacturing.
Inventory Management for ETO/CTO Process Planning is Complex
Since ETO/CTO manufacturing deals with much lower production volumes than typical MTO/MTS manufacturing operations, the inventory management challenges are different as well. In higher volume manufacturing, raw material inventory is managed as part of the MRP process. In complex discrete manufacturing, the Work-In-Process and component part inventory is often part of the subassembly manufacturing process.
For example, in A&D it is quite common that certain variants of a system are produced in parallel, so it depends upon which subassemblies are available as to what labor gets assigned to certain production processes. Having information about the status of ongoing subassembly production in the operational software such as the MES simplifies and improves the performance of the overall production planning process.
Complex Discrete Manufacturing Relies on Project Management
The complex discrete manufacturing process is more of a project management exercise than a process management exercise. Having an execution system that is tailored to the data needs of this production model allows for the use of a more generic ERP system. By offloading production planning to the MES, if it is optimized for complex discrete manufacturing, manufacturers can leverage more traditional ERP applications, minimize configuration within ERP, and reduce the related support and maintenance costs of ERP. By crafting the architecture of your applications around the right functionality at each level in the application hierarchy, manufacturers can have the best of all worlds.
Dan Miklovic is the founder and principal analyst at Lean Manufacturing Research, LLC. He has a wealth of experience as an end-user, software vendor, consultant, and market research analyst. He led a plant applications development and implementation team at Weyerhaeuser, was a process system engineer at Scott Paper, led the network design team at a large engineering firm serving the pulp & paper and mining industries. His industry analyst experience includes roles at Gartner, Sustainable Collaborations Group, and LNS Research. He is currently a member of The Analyst Syndicate. He has authored dozens of articles, contributed to several engineering handbooks, authored a text on industrial networking, and was a co-host of World Business Review, a TV program seen on public television, CNBC, and other outlets.
You may contact Dan at [email protected].