The Renewed Importance Of Production Planning And Operational Excellence In The New Normal

The following blog is the second in a joint thought leadership series in collaboration with Supply Chain Matters.

This second in this series provides a specific focus for the now growing importance for increased operational excellence and efficiencies for companies whose products are anchored in process and batch manufacturing process environments.

Click here for Part One.

Background and Initial Takeaways

In our prior Supply Chain Matters commentary for this series, we summarized that after two plus years of continuous pandemic driven and industry focused supply chain related disruptions, 2023 and beyond now requires supply chain and manufacturing management teams to have a keener focus on Adaptation, Realignment and Response to likely continued business and economic uncertainties, geopolitical and macroeconomic forces. As The Wall Street Journal reported in its summary of the 2023 World Economic Forum held in Davos, Switzerland, company CEO’s are giving priority to efficiency and profitability, whether it is to reach a firm’s strategic goals, slim down the workforce, or streamline operations.

Such an environment requires manufacturing and supply chain processes to be able to more proactively sense, pivot and respond to market changes.

Production facility planning challenges occur when attempting to react, in a timely manner, to new customer or product needs. Removing predominantly manual efforts at this level enables companies to respond faster and instills greater supply chain agility and resilience at the production level.

The opportunity to overcome market or supply chain driven disruptions is by augmenting planning and scheduling at the production level, instilling more synchronized planning and reducing the feedback loop between planning, scheduling and operational execution processes.

Why Operational Efficiencies Are Even More Important

Companies whose products are dependent on continuous, or batch production techniques have continually strived for increased operational excellence, more responsive customer service levels, added efficiencies and improved asset utilization.

With 2023 and beyond presenting uncertain economic outlooks, threats of actual economic recession, coupled with uncertainty as to overall depth or duration, businesses are especially focused on needs for added efficiencies. Business’s must further be more proactively prepared toward the timing and sensing of market or product demand changes or shifts to ensure that return on working capital is optimized.

The focus often turns to improvements in working capital efficiencies, inventory and capacity management in addition to more efficient asset management. Opportunities often exist in the management, analysis and production planning performed within monthly tactical planning windows to those planned and executed at the daily or working shift level, which often have to deal with specific products and their constraint based variations.

The key to improvements is often associated with consistent, timely and actionable determination of constraints and in the weighting of operating policy decisions. Such decisions can relate to either maximizing inventory or product demand fulfillment, minimizing changeovers or inventory consumption. It is a complex challenge requiring consistent and relevant information.

Additionally, an evolving requirement across many product sectors is incorporating a particular business or industry’s sustainability needs and commitments as a factor in planning production and material resource levels. Not only are customers and consumers weighing a company’s sustainability actions in buying decisions, but investors and increasingly, regulatory bodies are holding companies accountable for their stated sustainability objectives and timelines. Efficiency efforts are geared toward eliminating waste and now more than ever, that has to include a sustainability context.

A further area for improvements relates to scenario planning through the collection, assimilation and synthesis of both internal and outside-in focused customer and market data. In turn, this can be coupled with the capability to leverage today’s availability of Cloud based digital twin technologies to better support what-if scenario based planning they would focus on what the changing of various product demand plans or planning parameters would specially have on operational, business or financial performance metrics and key performance indicators.

Refocusing on Operational Excellence

In the previous section, we identified a number of drivers for operational efficiency. When considering what to tackle first, businesses and their supply chain management and manufacturing operational teams should initially have a clear understanding of their supply chain and/or plant level metrics that need to be improved in both current and likely future business and performance needs. Further, an understanding of where bottlenecks, constraints or misaligned performance indicators exist is ever more important before undertaking a technology enablement decision. If needed, seek the assistance of external specialists or consultants if needed, including those knowledgeable on the latest successful techniques and approaches undertaken by other companies.

We advocate that manufacturers initially understand and address the various business goals and objectives established across strategic, tactical and day-to-day operational planning and control processes. The goal should be formulating the various capacity, materials and resource decisions that influence and drive a more integrative view of business objective needs. The objective should be to manage outcomes in the context of where plan agility or planning actions have the most leverage for more integrated business planning.

For process industry focused supply chains, strategic planning deals with longer term decisions such as facility and production line capacity. Tactical planning is usually performed at product family or product attributes levels in order to streamline planning and constraint identification. Operational capacity and manufacturing scheduling planning is generally performed at the individual product SKU level to include more detailed characteristics such as container sizing, formulation, production yield or waste.

The most important consideration in this exercise is identifying, remediating and rationalizing constraints where it has the most influence toward overall plan performance. As an example, material constraints such supplier lead times or planned inventory availability have more leverage and visibility at the tactical planning level. Considerations for planning for seasonal product peak periods can be allocated to augmented third party contract manufacturing or packaging providers.

How Technology Can Help

We advise readers to seek out technology augmentation that is least disruptive, given today’s business uncertainties, capital and investment constraints.

In prior published research and in our Supply Chain Matters ongoing technology focused updates, we have described what we term as technology control layer approaches, namely supply chain focused Cloud platform technology offerings that are positioned to extract and augment synchronization of processes and decision making. Such platforms are positioned above existing backbone ERP and specialty supply chain process management software applications. Such control layer approaches are positioned to extract and augment key analytics and insight information, provide timely context and process synchronization for either supply chain planning or customer fulfilment requirements, and to provide earlier warning to likely unplanned events or component supply and demand.

The good news here is that control layer technology providers like Replan understand such needs, and can help in that effort during the assessment process.

Once the business has an understanding of what KPI’s and constraints they want to improve, digital tools can enable rapid optimization of operational processes. They can help identify where the bottleneck resources are, and how to balance production to alleviate the constraints. They can further enable accurate, detailed scenario planning for sensitivity analysis on how to maximize ROI on continuous improvement or CapEx activities. These technologies provide a step-change in an organization’s ability to deliver operational efficiency improvements.

Summary and Reader Takeaways

With 2023 and beyond presenting uncertain global and regional economic outlooks, process manufacturers should consider redoubling efforts that enable added efficiencies including improved tactical and operational planning. Manufacturing and supply chain sustainability efforts are now increasingly tied to added efficiencies including planning decisions having a context toward avoiding carbon and resource waste.

Refocusing on operational excellence involves having a clear understanding of various supply chain and production processes that can be improved, along with where bottleneck constraints or performance indicators are misaligned. Seek assistance of specialists, consultants or technology companies with deep knowledge in these process manufacturing areas.

In the current global business environment where business change is constant and supply chain and production processes remain business critical in nature, seek out technology augmentation that is least disruptive.

In our subsequent posting in this market education series, we will bring added focus on the changing talent and skill needs implied when considering technology enabled transformation of production planning and scheduling practices.

Bob Ferrari