In a fascinating report entitled The Magic of Levelled Scheduling, Alan Mitchell tells of the dramatic improvements achieved through the simple process of leveling production schedules.
In particular, Mitchell speaks of improvements actually experienced at three companies, which you will surely recognize:
- 3M
- Kimberly-Clark
- Wrigley (the chewing gum company)
Mitchell tells, “One 3M operation has boosted output by a third and almost halved material waste, without any extra investment in machinery or people. Kimberly-Clark has seen throughput increases of 15% at no extra cost, with much more predictable and stable production. For Wrigley, the chewing gum company, an output jump of 10% at its Plymouth factory was just the beginning. After leveled scheduling was introduced, huge amounts of space were freed up (50% on the packing floor), and that space is being filled with new machines to produce new products for new markets. In other words to deliver real growth.”
While such improvements may seem like a far-away dream to many small to mid-sized business enterprises, there is hope for improvement in almost any operation. It is possible to get much, much closer to “the dream” than where most executives and managers find their operations today.
Recognizing Your Current Reality
“The starting point,” declares Mitchell, is for management to admit to itself “that today’s production schedules are far from stable.” They are, in fact, completely the reverse of stability.
Unfortunately, today’s MRP or Material Requirements Planning systems are purchased and implemented with the best of intentions. Unfortunately, while trying to plan according to customer orders, they instead end up creating chaos all too frequently. Mitchell explains how and why.
MRP is designed to be responsive to customer orders. Every time the plan is calculated, the MRP system adjusts planned production schedules to reflect all the new customer orders before re-balancing back to a target stock level. As a result, each time the plan is calculated it triggers a change to the plan because actual orders will always be different to what was forecasted. What’s more, because something always seems to go wrong in production (a machine breaks down, a vital supply doesn’t turn up on time, somebody is off sick) very few production plans are ever met 100%. So, to make up for the difference between plan and actual output – and to accommodate the endless spikes and troughs of batch ordering from customers who are also using MRP to plan their orders – MRP systems end up issuing plans and replans on a frequent basis. Result: chaos rules. Fire-fighting becomes the norm.
Recognize the Underlying Stability
“The second step,” Mitchell sets forward in his report, “is to realize that demand for some products is more stable than for others.” In many industries, about six percent of the overall product range has relatively stable demand and, in turn, account for about half or more of overall demand.
This stable, relatively high volume product group has been dubbed the ‘green stream’ by Ian Glenday, inventor of a statistical process called the Glenday Sieve, which can be used to help identify these products. If possible, this should be discovered by looking at actual end-user consumption or “shelf take-away,” as it is sometimes called. Looking at orders placed by distributors and wholesalers may be misleading due to “the bullwhip effect.”
Repetitive, Flexible Supply
Once the underlying stable stream is identified, the next step is to begin moving from the production of big batches toward producing the same volume by running more frequent batches in small quantities.
For example, Mitchell says, “instead of producing 100 units of Product A once every four weeks or so, produce 25 units once a week, regular as clock-work…. Less predictable ‘red stream’ items are dealt with separately.”
What are the Results?
The new production rule becomes: “Produce to the RFS (repetitive, flexible supply) schedule. Never depart from the schedule.”
When this concept takes hold in the organization—with support from the executive level on down to the shop floor—”stability and predictability begin to replace chaos and fire-fighting,” Mitchell recounts from his experience [emphasis added].
The second noticeable effect of introducing RFS scheduling “is that both stock-outs and inventory levels of finished items, materials and work-in-process fall.”
Although this seems to be counter-intuitive, it happens simply because the former “big batch” philosophy required the firm to store the big batches of finished goods items (until they were consumed); meanwhile, the big-batch runs used up resources so that other items that were running low could not be produced on time to satisfy demand.
“Thus,” states Mitchell, “many, shorter runs [help] to tackle both problems at the same time….”
Wrigley company reported that, before moving to RFS, they “had one warehouse with 5,000 pallet spaces, and it was chock-full.” In fact, Wrigley had rented an additional 1,000 pallet spaces off-site to handle the overflow.
After implementing RFS, Wrigley’s production director Alan Richards reported that “we now have 4,000 spaces left” while “producing more volume that we were….” In fact, Richards continued, “We have started dismantling racking in our warehouse because we just don’t need it any longer.”
Creating New Opportunities for Profit
After the move to RFS, reduced inventory (while also reducing stock-outs) has liberated floor space for new equipment to produce new products. This is a “massive saving” for Wrigley, which previously had thought they would need to build a new factory for this expansion in production.
Stay tuned for more exciting information about the benefits of RFS (repetitive, flexible supply) and how to reap these benefits in your firm.
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Source: Mitchell, Alan. The Magic of Levelled Scheduling. Report. Accessed September 20, 2013. http://www.leanuk.org/downloads/general/the_magic_of_levelled_scheduling.pdf.
