Question

In this unit you will learn more about the front end of the operational process employed by the company. Specifically, you will learn how to manage suppliers who provide the raw materials used in the production of the company’s textile products. Some challenges you will face are: 1) which suppliers provide the best quality raw materials; 2) which suppliers are the most reliable; and 3) which suppliers have the most competitive prices.

The simulation scenario will pose many opportunities for decision making and forecasting, and if you make a poor decision regarding suppliers it will impact the ability of Kibby and Strand to meet its contractual obligations, leading to dissatisfied customers. Since customer satisfaction weighs heavily on future contracts, you can’t simply make the best decision for the moment, but rather the best decision for the long haul. This scenario provides a realistic illustration of the issues textile companies face across the U.S. It’s extremely important that operations professionals have an above average comfortable level when it comes to establishing grounded assumptions and conducting and interpreting financial and operational forecasts. In its simplest form, forecasting is a process that represents an “educated guess”. In business, we use time series methods, the indicator approach, or regression analyses to forecast the nature of a situation or future values. The data we observe when forecasting fall into one of four types: trended patterns, seasonal patterns, cyclical patterns, or irregular patterns (Kros & Brown, 2013). Forecasting models are used to predict consumer demand, which, in turn, aids management in forecasting staffing requirements. In addition, to demand forecasts, management routinely engages in financial forecasting, which includes, but is not limited to: sales growth, economic predictions, and forecast future cash flows. In order to perform forecasts, it’s important that the management team signoff on the underlying assumptions used to complete these analyses, such as population growth and technology development. The following represents the typical steps one undertakes when preparing for and conducting a forecast (Investopedia, n.d.):

A problem or data point is chosen. This can be something like "will people buy a high-end coffee maker?" or "what will our sales be in March next year?"

Theoretical variables and an ideal data set are chosen. This is where the forecaster identifies the relevant variables that need to be considered and decides how to collect the data.

Assumption time. To cut down the time and data needed to make a forecast, the forecaster makes some explicit assumptions to simplify the process.

A model is chosen. The forecaster picks the model that fits the data set, selected variables and assumptions.

Analysis. Using the model, the data is analyzed and a forecast made from the analysis.

Verification. The forecaster compares the forecast to what actually happens to tweak the process, identify problems or in the rare case of an absolutely accurate forecast, pat himself on the back.

the student is to consider him or herself to be the Receiving Department Manager of Kibby and Strand, the company in the scenario.

Formulate an impact study for the COO on how the Receiving Department affects forecasting of production. Things to consider, but not limited to are: 1) how a shortage of raw materials might affect decision making with regards to production operations; and 2) the effect of raw material quality on production.

Answer 1

To maximize productivity, every company needs a sound production plan. However, effective planning is a complex process that covers a wide variety of activities to ensure that materials, equipment and human resources are available when and where they are needed. Production planning is like a roadmap: It helps you know where you are going and how long it will take you to get there.

Here are some advantages of an effective production plan and scheduling.

• Reduced labour costs by eliminating wasted time and improving process flow.
• Reduced inventory costs by decreasing the need for safety stocks and excessive work-in-process inventories.
• Optimized equipment usage and increased capacity.
• Improved on-time deliveries of products and services.

Key factors of a production plan

Effective planning hinges on a sound understanding of key activities that entrepreneurs and business managers should apply to the planning process. Here are some examples:

Forecast market expectations

To plan effectively, you will need to estimate potential sales with some reliability. Most businesses don't have firm numbers on future sales. However, you can forecast sales based on historical information, market trends and/or established orders.

Inventory control

Reliable inventory levels feeding the pipeline have to be established and a sound inventory system should be in place.

Availability of equipment and human resources

Also known as open time, this is the period of time allowed between processes so that all orders flow within your production line or service. Production planning helps you manage open time, ensuring it is well-utilized, while being careful not to create delays. Planning should maximize your operational capacity but not exceed it. It's also wise not to plan for full capacity and leave room for the unexpected priorities and changes that may arise.

Standardized steps and time

Typically, the most efficient means to determine your production steps is to map processes in the order that they happen and then incorporate the average time it took to complete the work. Remember that all steps don't happen in sequence and that many may occur at the same time.

After completing a process map, you will understand how long it will take to complete the entire process. Where work is repeated or similar, it is best to standardize the work and time involved. Document similar activities for future use and use them as a base-line to establish future routings and times. This will speed up your planning process significantly.

During the process map stage, you may identify waste. You can use operational efficiency/lean manufacturing principles to eliminate waste, shorten the process and improve deliveries and costs.

Risk factors

Evaluate these by collecting historical information on similar work experiences, detailing the actual time, materials and failures encountered. Where risks are significant, you should conduct a failure mode effect analysis method (FMEA) and ensure that controls are put in place to eliminate or minimize them. This method allows you to study and determine ways to diminish potential problems within your business operations. This type of analysis is more common in manufacturing and assembly businesses.

How to plan work

All other activities are initiated from the production plan and each area is dependent on the interaction of the activities. Typically, a plan addresses materials, equipment, human resources, training, capacity and the routing or methods to complete the work in a standard time. In order to do a good sales forecast, you should base it on a history of firm orders.

The production plan initially needs to address specific key elements well in advance of production in order to ensure an uninterrupted flow of work as it unfolds.

• Material ordering—Materials and services that require a long lead time or are at an extended shipping distance, also known as blanket orders, should be ordered in advance of production requirements. Suppliers should send you materials periodically to ensure an uninterrupted pipeline.
• Equipment procurement—Procuring specialized tools and equipment to initiate the production process may require a longer lead time. Keep in mind that the equipment may have to be custom made or simply difficult to set up. This type of equipment may also require special training.
• Bottlenecks—These are constraints or restrictions in the process flow and should be assessed in advance so you can plan around them or eliminate them before you begin production. When you assess possible bottlenecks, be aware that they may shift to another area of the process. Dealing with bottlenecks is a continual challenge for any business.
• Human resources acquisitions and training—Key or specialized positions may demand extensive training on specialized equipment, technical processes or regulatory requirements. These employees should be interviewed thoroughly about their skills. When hiring them, allow sufficient time for training and be sure that they are competent in their work before the job begins. This will ensure that your process or service flows smoothly.

The production plan provides a foundation to schedule the actual work and plan the details of day-to-day activities. As sales orders come in, you will need to address them individually based on their priority. The importance of the sales order will determine the work flow and when it should be scheduled. After this, you should evaluate whether or not you are ready for production or to offer the service. You will need to determine:

• If the inventory is available at the point where work is to start? If not, then the work needs to be rescheduled when supplies become available. There is no point in scheduling work that you will not be able to complete.
• Are your resources available? Do you have the necessary staff to complete the task? Are the machines being used?
• Does the standard time fit within the open time allowed? If not, then the work should be rescheduled.
• You should be careful to minimize risk factors; allowing too many what-ifs can delay delivery and be counterproductive.

Communicate the plan

After you have determined that you have met the criteria to start production, you will need to communicate the plan to the employees who will implement it. You can plan the production on spreadsheets, databases or software, which usually speeds the process up. However, a visual representation is preferred as a means to communicate operation schedules to floor employees. Some businesses post work orders on boards or use computer monitors to display the floor schedule. The schedule also needs to be available to employees ahead of time and kept up to date.

Consider change

One of the many challenges of production planning and scheduling is following up with changes to orders. Changes happen every day. You will need to adjust your plan in line with these changes and advise the plant. Dealing with change is not always easy and may take as much effort as creating the original production plan. You will need to follow up with the various departments involved in order to rectify any problems. As well, computer software can be helpful in tracking changes, inventory, employees and equipment.