Finite Capacity Scheduling Improves Job Shop Order Promising
Charles J. Murgiano, CPIM, WATERLOO MANUFACTURING SOFTWARE
Published in The Fabricator
You are a high-mix, low-volume fabricator. The nature of your business dictates that at least some of your production is made to customer order. When a customer places an order, how do you and your customer service staff make delivery promises?
When prospective customers call your customer service department and ask for a quote, they typically want to know how much a job will cost and when they will get it. You may think that the price quote is most important. While price certainly influences your margins, the delivery date you supply can have a more significant impact on how your organization runs and, therefore, on your overall profitability.
How are you quoting delivery dates now? You’re probably basing them on an average lead time. By their very nature, average lead times are always wrong. This average probably wasn’t calculated carefully and almost certainly is not being updated continually. It may have been based on customer demands that have changed significantly. Also, the average lead time probably doesn’t consider the almost daily changes in shop floor capacity and performance.
Given the inaccuracies in your lead times, your customer service staff are probably using them as little more than a reference. Worse yet, in an eagerness to please customers and to hit company sales goals, they’re probably promising dates that are overly aggressive, and they may not be considering prior commitments. What choice does customer service have? If you aren’t the sole source for the part, and your company quotes a delivery date too far in the future, the customer will go to a competitor.
While lost sales opportunities are bad, saddling your business with overly aggressive promise dates is even worse. Overly aggressive promise dates put your operation in an immediate past-due state. Not only are you at risk of missing the orders just promised, but other orders in your shop could be pushed beyond their promise dates and, therefore, ship late. It’s a competition for available capacity. Some of those other (now late) orders might belong to the very customer that sent you the hot job in the first place. Talk about a Catch-22. “Yes, I know you did me a favor last week taking that order on short lead time,” the customer says, “but how could you be late on these other orders? You’ve had them for six months!”
Embarrassment aside, a manufacturer with many past-due orders is an inefficient manufacturer with an unnecessarily high cost structure. When you are behind and scrambling to catch up, you will use overtime injudiciously, break down setups prematurely, waste time expediting, run the “wrong stuff,” and build unneeded inventory.
How can you promise delivery dates better and therefore run your business more profitably? Start by acknowledging what we all know to be true: Your lead times are influenced by both your shop’s capacity and what other orders are already scheduled on that capacity. If you had a way to explicitly consider your capacity and the current load on that capacity, your promise dates would be much more accurate. Fortunately, such a way exists. It’s called finite capacity scheduling.
Considering Capacity and Constraints
At its most simple level, finite capacity scheduling software blocks out operation time (including setup, run, and teardown times) on machines. It calculates operation start and stop times and gives the shop floor a detailed, achievable dispatch list.
Finite capacity scheduling software has evolved into what often is called advanced planning and scheduling (APS) software. APS considers the totality of your capacity—not just machine capacity constraints but additional concurrent constraints such as tooling, labor, space in ovens, and material availability.
The constraints it manages allow you to build a very detailed model of your capacity and the load on that capacity. As you schedule existing operations of orders, relevant capacity is “reserved.” Operations are pushed forward or backward in time based on the priority assigned by the software’s algorithms. Highly accurate operation and order start and finish times are calculated. It’s also possible to include user-defined rules specific to the process and equipment characteristics of your shop.
Orders and operations for the work to be promised must be in the software for it to schedule. In some environments users can manually enter the needed data or transfer it from existing systems. However, it may be easiest for you to explode a bill of material (BOM) for a planned purchase order, netting on-hand component inventory and supply orders for needed components.
APS has other tools to help you keep your delivery promises. This includes forward/backward combination scheduling. Forward scheduling starts from today and schedules operations out in time. However, it can result in orders scheduled significantly earlier than needed.
Backward scheduling starts at the order’s due date and schedules operations backward toward today. However, it can result in operations scheduled before today, which of course is not realistic.
Forward/backward combination scheduling gives you the best of both worlds. Operations won’t start before today, but likewise won’t start significantly before their due date. Combination scheduling typically leaves gaps in the schedule. These gaps represent unused capacity that you can use for order promising.
Combination scheduling is similar to drum-buffer-rope scheduling used in the theory of constraints, where your constraint or bottleneck process governs your throughput, but with one major difference: You aren’t making assumptions about the bottleneck on any given day. This can be especially beneficial in a job shop, where bottlenecks change with the mix of work.
Another APS software tool is fit scheduling for a new order and promised delivery date, used when there are no available gaps in the schedule. Fit scheduling forces an order and promised delivery date into the schedule and pushes existing orders back in time. You’d use this feature when hot orders need to be delivered sooner than existing orders.
The customer may not accept every delivery date you propose. In this case, APS can run and save what-if scenarios. You also need to compare the what-ifs on your business’s key performance metrics. For instance, if you try a scenario where you force a hot order into the system, you will want to know which existing orders are affected and by how much.
Outside of regular scheduling, you also can simulate capacity changes (what if I added this machine or that person to this operation?) and sales/demand forecasts. If you want to simulate capacity changes and experiment with varying forecasts, you’ll likely need a software architecture that supports multiple users engaged in more than one type of task
Get Real on Delivery
Stop fooling yourself by promising unrealistic delivery dates. Improve both on-time delivery and shop floor cost performance by considering the true capacity limitations of your operation. Finite capacity scheduling is one tool that can help you get there. Match the tool with a competent scheduler, and success is yours to enjoy despite being tasked with managing one of the most complex production systems that exist—a custom fabrication job shop.
About the Author
Charles J. Murgiano is a principal with Waterloo Manufacturing Software. He has had more than ten years experience helping clients apply manufacturing decision support software. Mr. Murgiano received his MBA, Masters in Engineering in Operations Research and BS in Mechanical Engineering from Cornell University. Mr. Murgiano is active in the American Production and Inventory Control Society and is certified in production and inventory management by this organization.
This paper appeared in The Fabricator. The paper is being provided with compliments from Waterloo Manufacturing Software. For more information about Waterloo Manufacturing Software’s advanced finite capacity planning and scheduling system, TACTIC, or Mr. Murgiano’s other papers, contact:
Waterloo Manufacturing Software
P.O. Box 81264
Wellesley, MA 02481-0002
About the paper
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