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Production Leveling And Creating Continuous Flow

OPTIONAL: How SAP System supports Leveling in MPS and S&OP

World-Class Standards & Best Practices of Operational Excellence

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Agenda

1. Introduction: Customer relationship. Situation today.

2. Characteristics of unlevelled production

3. Why do we need leveling?

4. 4 aspects of production leveling:

Leveling of volume

Leveling of mix

Leveling of manpower

Leveling of flow (withdrawals, line feeding)

5. Transmitting leveled demand to production lines

6. S&OP: Sales & Operations Plan

7. MPS: Master Production Scheduling

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Agenda

Tools & transactions to support leveling in SAP system

1. Introduction: SAP functions to support production leveling

2. Long-term planning of S&OP: SAP transaction MC94

3. Operational & Tactical planning of MPS: SAP transaction MC94

4. Role & meaning of MRP parameters for lean-ruled planning standards

5. Types of planning approaches in MPS

6. Exercises & simulations using operative SAP system

7. Open questions & discussion

8. Summary & Conclusions

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Production leveling What does it mean?

Production leveling is the method by which we reduce as much as possible the demand variability to optimize the production resources needed

Leveling is a task which aims to repeat an identical process during several consecutive periods

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As a world-class benchmark in automotive industry „leveling” means:

Production leveling What does it mean?

Maintain steady production volumes with the same line balancing

Producing every day (or on regular basis) the same part numbers

Regular and sequential withdrawals (Sequencer)

Maintain steady plan of needs for components

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Characteristics of

Unleveled

Production

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(1) Production resources…

Equipment is specified to meet the peak demand

Manpower retained to achieve peak demand

Are 30% underutilized for 90% of the time

Manpower productivity is NOT under control

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Why do we need leveling?

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Why is leveling necessary?

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To reduce or minimize costs (MUDA)

To maximize utilization of the resources

To absorb system instability

To reduce stocks / inventory

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Four aspects of production leveling

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What should we consider when leveling production?

The leveling of volume

The leveling of mix

The leveling of manpower

The leveling of withdrawals and flows

There are 4 aspects to production leveling:

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Leveling of volume

Week Mo Tu We Th Fr

Total quantity required in period

Number of production days in period = Quantity to be produced

per day

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Leveling of mix (1) Using a monthly schedule

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Product Quantity Weeks

1 2 3 4

A

B

C

1,000

600

400

Monthly production schedule:

Green balls are made in the fourth week of the schedule during

last four days…

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Leveling of mix (1) The notion of production pace or Takt-time (TT)

Product Daily

6.00 noon 14.00

A

B

C

50

30

20

Task: Calculate production pace (takt-time) for the whole family ABC and for each product separately:

T/T = ... min

Time available is 8h =

480 min

T/T = … min

T/T = … min

T/T = … min

Quantity

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Leveling of manpower (1) Work content

Work content WC = 15 min

1

2

3 4

5

6

Work content WC = 10 min

1

2

3

4

Work content WC = 20 min

1

2

3

4

5 6 7

8

9

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Leveling of the flow (1) The Sequencer

Production „Sequencer”:

Withdrawal kanbans are spread evenly over the shift for each variant

Product Shift

6.00 14.00

A

B

C

50

30

20

Shift broken into 10-min slots (the pitch)

The Sequencer is used to transmit the leveled demand to production line through frequent and regular

withdrawals

The number of kanbans in any column cannot exceed the line capacity (work load) for that period of time

Quantity

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How to level?

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Sales & Operations Planning: S&OP (1) Medium-term projecting

January February March April May June

No leveling….

Volumes

…

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Sales & Operations Planning: S&OP (2) Medium-term vision

S&OP

M T W T F

Volumes

W1 W2 W3 W4 W5

W1 – Week 1

Days of the week

Goal: to produce every day the same mix of products of the same volumes

January February March April May June

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Sales & Operations Planning: S&OP (3) Example of a yearly customer forecast

I II III IV V VI VII VIII IX X XI XII months

Volumes

100

640 480 750 410 560 710 880 980 630 420 440 750

500

1000

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Sales & Operations Planning: S&OP (4) Managing different production takt-times

I II III IV V VI VII VIII IX X XI XII months

Takt 1

Volumes

Takt 2

Takt 3

Takt 1: (example) number of operators = 3

PPH = 0,95 Output expected = 23 / per shift 460 / per month

Takt 2: (example) number of operators = 4 PPH = 1,00 Output expected = 32 / per shift 640 / per month

Takt 3

Takt 2

Takt 1 Takt 1

Takt 3: (example) number of operators = 5 PPH = 0,93 Output expected = 37 / per shift 740 / per month

Takt 2 Takt 2

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Master Production Schedule: MPS (1) Leveling mix & volume

C C C C C

B B B B B

W1

A A A A A

W5 W4 W3 W2

M

c c c c c

B B B B B

A A A A A

T W T F

ZOOM

Decided production

A A

A A

A

B

B B

B

B

C

C

C

C

C

W1 W2 W3 W5 W4

A real customer demand…

leveling

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Leveling of Production in 4 aspects

Leveling of Supplies

Production leveling Objectives

Objective: Constant level of production, and NOT constant level of stocks!

Stock BOP

Filter

Our plant

Supplier Customer

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Leveling

0

50

100

150

200

250

1 2 3 4

Kwartał

Vo

lum

es Planned production

Shipment

End stock

Strategy for Leveling In practice of our plant functioning, in order to achieve expected level of

effectiveness our resources should be leveled over the whole year.

But … The customer demand is never leveled nor balanced!

Quarter 1 2 3 4

Start stock 20 40 40 10

Planned production 50 100 150 200

Available for shipping 70 90 90 60

Shipment 30 80 160 200

End stock 40 40 10 20

The chart presents the follwoing principle :

„If production is leveled, and sales is not, the

stock works as a leveling buffer.”

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„Variability” – is defined as a difference between maximum and minimum value of the demand

It is calculated by taking into account at least 20 items in the data

It is expressed in %

Demand variability

(Max – min) / 2

Average demand Demand Variability =

Exercise:

Calculate the demand variability for the case of S&OP levelling (p. 69)

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Tools & transactions to support leveling in SAP system

1. Introduction: SAP functions to support production leveling

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Model of resource planning

Functionality of SAP in production leveling

Strategic planning

Mid term plan

Sales and operation plan

Master production schedule

Material requirement Planning

Business Plan CCP – Critical capacity

Plan

Production activity control, execution and control of

operations, shop floor scheduling

S&OP

MPS

MRP

PAC

RP – Resource Plan

RCCP – Rough Cut Capacity Plan

CRP – Capacity requirements Plan

Input / Output control

Info

rmat

ion

ab

ou

t p

rio

riti

es

Op

eration

Man

agemen

t Executio

n

Man

agemen

t of reso

urces

Fore

cast

an

d m

anag

emen

t o

f d

eman

d

DEMAND SUPPLY

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S&OP MPS MRP

Definition Sales & Operation Planning Master Production Schedule Material Requirement Planning

Frequency Monthly Weekly Weekly

Horizon 18 months (Customizable) 15 weeks (Customizable) 12 months

Time Bucket Monthly Weekly Daily

Product aggregation Vehicle family for Sales forecast

S&OP family for Production

MPS family -

Scope Finished goods (mandatory):

Series

Pre-series

Semi-finished goods (optional)

Components (optional)

Finished goods (mandatory):

Series

Pre-series

Semi-finished goods (optional)

Components (optional)

ALL

Inputs Sales forecast

Last year sales forecast

Last month S&OP validated

Last week MPS validated

Actual customer demand

Actual production plan

Workcenter capacity

Supplier capacity

Inventory policy

SO&P demand forecast

Actual customer demand

Last week MPS validated

Actual Production Plan

Workcenter capacity

Supplier capacity

Inventory policy set during SO&P

Actual sales orders

Arbitrated production plan (IR)

Stock level

MRP parameters:

Offset parameters

Rounding parameters

…

Outputs Long-term production plan

Capacity (investment)

Headcount / OT

Sourcing forecast

Inventory policy

Sales forecast for Budget

Medium-term Production plan (Independent requirement IR)

Procurement plan

Inventory plan

Production orders

Supplier schedule lines / PO

Functionality of SAP in production leveling

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1. Set up of parameters before the initialization of S&OP – SM31 table T991

2. Creation of product group – MC84, MC86, MC62

3. Arbitration of long term sales and production – MC94 table ZSOP

4. Analysis of plant capacity – CM38

5. Analysis of supplier’ capacity - MCEA, MCEB, MCEC

Sales and Operation Plan (SOP) in SAP

Master production schedule (MPS) in SAP

1. Set up of parameters before the initialization of MPS – SM31 table T986

2. Arbitration of short term sales and production– MC94 table ZMPS

3. Analysis of plant capacity– CM01

Functionality of SAP in production leveling

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