Small Business
Business INSIGHTS e-News for Manufacturers
Solutions that help meet your operation's specialized cash flow demands. more >
PNC Advantage for Manufacturers
A customized banking approach to help your farm or agri-business run smoothly and profitably. more >
PNC Advantage for Agriculture
Balancing Push and Pull S&OP Systems

Production and inventory management to meet today's changing demands.

Decades ago, when stable forecasts determined production goals months in advance, Manufacturing Resource Planning (MRP) was designed for make-to-stock production. Today, MRP remains at the core of most Enterprise Resource Planning (ERP) systems. The MRP forecast-driven system "pushes" materials and production through the supply chain to the plant and then to the customer. In a "pull system," as each customer order is pulled from stock, a replacement is pulled from final assembly, which in turn draws parts and subassemblies from their lines. Requirements cascade back through the supply chain.

In general, says Professor David Simchi-Levi of MIT, where uncertainty is high, a pull-based system works best. Where it is low, push-based systems fit better. Since, as he says, an aggregate forecast is always more accurate than individual forecasts, a push-pull boundary can be established where a predictable generic-product family is customized into less predictable differentiated products. Actual demand data from the pull system updates the push system's MRP on a regular basis, allowing it to recalculate the forecasted materials requirements and scheduling.

MRP uses forecast-based plans to create the day's master schedule of the products to be manufactured. Bills of materials for those products are exploded. MRP schedules the components and subassemblies needed for finished goods production. Then MRP prints the day's production work orders for the plant. The master scheduler and production managers schedule the lines and work cells in the plant and distribute the work orders.

In many industries, today's customers want to order a varying mix and quantity of products, as needed. MRP was not designed for such frequently changing requirements that cause ups and downs in the supplier's production even in the course of a day.

In addition, MRP does not allow for unexpected disruptions in the plant, explains Narayan Laksham, CEO of Ultriva, a provider of lean supply chain solutions. Missing parts, defects, machines going down and expediting are all unplanned events that might affect the plant's ability to achieve the day's production goals. To track unplanned changes throughout the plant during the day, many schedulers transfer the day's schedule to a spreadsheet, continually updating it as production changes. At the end of the day, the scheduler must manually update MRP so it can recalculate the next day's schedule. Although some vendors claim that their MRP and ERP systems can be rerun frequently as changes occur, this often consumes too much time for rapidly changing operations.

In the last few years, Factory Management Systems (FMS) have been entering the market. With an FMS, the MRP-produced schedule or a company's pull-based schedule is automatically downloaded at the start of the day. The FMS schedules subassembly, component and final assembly. It can also use each item's process routing to optimize production lines and cells. The FMS automatically monitors actual production throughout the day, adjusting and rescheduling the component, subassembly and final assembly lines. With MRP alone, plant personnel have to make those routing and optimizing decisions at the start of the day and change them on the fly as conditions change. To allow MRP to adjust the next day's schedule, the FMS automatically uploads the actual production data, which may not be the same as the plan that the factory received in the morning.

Placing the push-pull boundary at the factory door by taking the plan from MRP, making execution more like a pull system and returning production data to fit the way MRP works is only one way to combine the advantages of both systems, but for many companies, an FMS has made managing that boundary more efficient and effective.

 



The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.