Sorting Through the ERP, Lean MFG, APS, and MES Clutter - Part 3

Part 1 of this blog series started with a discussion of the fact that the ability to sense demand and become a demand-driven (responsive) business is more than just the catch phrase du jour: it has become a recipe for survival. For the past few decades, the providers of a multiplicity of by-and-large integrated manufacturing software solutions have been offering help for embattled manufacturers. From fully integrated business management systems such as Enterprise Resource Planning (ERP) down to more focused modular plant-level solutions, including Manufacturing Execution Systems (MES), and Advanced Planning and Scheduling (APS) systems, manufacturers have been perplexed by how to best combine and deploy these options and islands of information.

My posting concluded that ERP systems are good for long-term planning and transactional accounting, but not necessarily appropriate for scheduling and execution on the shop floor. Only those companies that have infinite (or lots to spare) capacity, low product mix, high customer tolerance for long order lead times, and low inventory holding costs could get by using ERP for scheduling.

In other words, not many manufacturers can be fully satisfied by ERP. The next logical question was whether Lean Manufacturing practices could alleviate the abovementioned ERP shortfalls. Part 2 then acknowledged that lean ERP capabilities are well suited for producing parts with level demand (so-called “runners” in Preactor’s apt lingo) but not necessarily for parts with variable demands and make-to-order (MTO) traits (so-called “repeaters” and “strangers”).

This realization has created a coming-of-age environment for APS systems, whose first generation of products a decade ago has had their share of mixed results. The final part of this series will analyze how APS, as a manufacturing glue of sorts, relates to ERP, lean manufacturing, and MES. Is there a value proposition for integrating all these disparate systems? 

How Do APS and ERP Relate to Each Other?

An APS solution’s ability to interoperate with ERP, MES, and other enterprise applications to connect the back-office with production is important. For starters, APS and ERP would seem to overlap but in fact they provide complementary features.

Namely, while, as said earlier, ERP provides some long-term planning (and preparation), APS is good at drilling down to the shop floor to manage individual orders or individual resources in real time. The beauty of a great APS system is that users can tell it what they desire to happen, and the system will show straight away whether and what can still be done under the circumstances. If the planner cannot achieve what is needed, he/she can suggest alternative scenarios and the system will then show the new results. The process can be reiterated until a satisfactory course of action is found.

The basic inputs to an APS model are the resources (machines, process lines, work centers, labor, etc.) and their shift patterns (to determine the available capacity). Combining this data with the routing operations for each product made (i.e., expected run time per process step and resource levels required to start) gives the required capacity, while the ERP orders that need to be scheduled provide the demand.

Where data is limited (or unavailable), estimates can be used initially and then updated later as the experience is gained about the actual start and finish times. Setup times can again be simple estimates or users can add more sophisticated data tables that define a variable changeover depending on the attributes and history of the previous job on a resource. By doing so, APS overcomes the typical guesstimates, simplifications, and fire fighting that ERP and its standard cost accounting approaches produce.

Rather, APS produces more accurate work in process (WIP) snapshots and suggests deliverable production plans that users can quickly change and optimize no matter what is thrown at them, especially in engineer-to-order (ETO) and build-to-order (BTO) businesses with uneven demand patterns. Preactor, which now has more than 3,000 installations worldwide, cites the following typical business benefits: a 15 percent increase in productivity, 40 percent reduction in inventory levels, and 60 percent improvement in lead times.

How Can APS Complement Lean Manufacturing?

Contrary to some lean manufacturing consultants that tend to say that APS (and ERP) force planners to make large batches (which leads to waste), APS and lean are not mutually exclusive. Value Stream Mapping (VSM) or similar techniques (mentioned in Part 2) are required to identify issues, streamline processes, and remove non value-add steps. Certainly, lean concepts and business objectives can be built into scheduling rules.

As mentioned earlier, Visual Process Control (VPC) and kanbans reduce inventory but mainly for so-called “runner” products that have relatively level demand patterns. For many other products with “to order” traits, lean concepts of balancing lines and finding a production rate (drumbeat) are insufficient.

For example, a typical car assembly line consists of the correct components being supplied to work stations on a moving assembly line at the correct rate. The problem is that if the plant makes for large batches, the storage space next to the assembly lines will become overloaded. On the other hand, if the plant makes too small batches, the changeover time for the machines that are feeding parts will be too high and the final assembly line will run out of parts.

In other words, if one tried to produce the components with the minimum changeovers, the plant would exceed its stock constraints for some parts and run short of others. On the other hand, if the plant tried to produce the parts in the hourly batch quantities of the production line, in an every part every interval (EPEI) manner, it would have too many changeovers and resulting capacity shortages.

One solution would be to dynamically change the batch size, taking into account minimum and maximum stock levels in each kanban bin for each part and for each type of car to be assembled. This dynamic batch sizing capability is also known as the Heijunka Scheduling Rule. Thus, APS can help lean by reducing non-value-add activities via smart sequencing of dependent changeover times to reduce waiting (queue) time.

APS also provides a tool to manage smaller batches in an efficient way, for example sequencing them to minimize setup time. This means that it is possible to configure an ERP system to generate orders on an MTO basis (rather than on a “to stock” basis with large quantities) and let the scheduling system dynamically aggregate batches (based on order or operation) to increase efficiency.

Via dynamic aggregation, dynamic batching, smart sequencing, companies can now trade off changeover frequency (as in the case of many small orders) against on-time delivery performance and utilization. APS can also empower the planner with a ‘what if’ tool to test alternative solutions to day-to-day problems.

Finally, APS and MES Working Together

As for the APS role in MES, APS fills MESA (Manufacturing Enterprise Solutions Association) International’s defined functional group for detailed planning: sequence and time optimization of the orders finely tuned to the performance of the machines, including their finite capacity and relationship to other resources. The need for agility in the manufacturing environment requires tightly coupled manufacturing execution with fast finite capacity scheduling (FCS) through automated, closed-loop interfaces that provide real-time visibility from the manufacturing environment, including material and capacity availability and production order updates.

As mentioned in Part 2, most MES products do not have good scheduling functionality in terms of sequencing. While much of the detailed manufacturing bills of materials (BOMs), routings (operations), and sequence-dependent setup information is the same master scheduling data required by MES (and ERP) products, they generally do not offer built-in schedule optimization engines. The majority of MES packages only provide basic manual sequencing of the production orders received from ERP or supply chain planning (SCP) systems and operator-initiated dispatching of the sequenced orders to manufacturing lines.

But the holy grail for execution is closed loop scheduling capability, whereby the scheduling engine has to have a data model, triggers, event driven/conditional rescheduling, etc. The goal is to respond quicker to changes in customer demand, supplier constraints, and constraints in manufacturing capacity or quality.

Astute APS products do not only offer execution screens that provide for manual production order and manufacturing resource status updates, but also offer automated updates or alerting of any significant deviations from the approved schedules. Integrating an APS engine with an MES application to reconfigure and re-sequence production orders based on real-time capture of events from the shop floor could be a potentially compelling value proposition for many manufacturers and their suppliers.

One More Case For Tight Integration

Needless to say, production planning and scheduling can be quite time consuming and difficult to manage when the process is not tightly integrated amongst the abovementioned enterprise systems, resulting in a “disconnect” among various departments and objectives. The more resources one has to manage, the more complex and overwhelming the planning, scheduling, and execution process becomes. Often the process involves multiple meetings with sales, purchasing, engineering, and production in an attempt to keep the disparate systems “in sync.”

Even when the scheduling process is fully integrated, some modern APS systems do not consider material as a constraint, resulting in scheduling operations or jobs unrealistically before the component part or raw material is available. Customer change requests and engineering change orders (ECOs) can be difficult and time-consuming to manage as well.

For customers operating manufacturing environments that encounter high levels of ECOs, integration of all these systems should automatically update scheduling and sequencing information for WIP and jobs that had not yet been dispatched when a change request (order) was issued.

Traditionally, the issuance of an ECO requires a manual interaction with either a plant-level scheduling or dispatching system or a more traditional APS offering. The main risk here is that the lack of integration between the manufacturing data model and the planning and scheduling model doesn’t allow for scenario analysis and communication of the impact of the ECOs on manufacturing capacity and costs.

Consequently, not all WIP orders can be identified and adjusted in a timely way, resulting in costly scrap (rejected goods) or rework. Not surprisingly, Aberdeen Group’s 2007 best-in-class report appraised how enterprise systems can work well together. To that end, 20 percent of best implementers of lean manufacturing use lean scheduling (i.e., lean-oriented APS) tightly integrated with MES and ERP. Lean scheduling software that empowers the planner lies at the heart of achieving lower WIP, better on-time delivery performance, and higher efficiency.

Needless to say, to get the most out of their scheduling optimization technology investment, companies must thoroughly rethink and change the way they operate internally. Dear readers, what are your comments, opinions, etc., in this regard? We would certainly be interested in your experiences with these software categories (if you are an existing user) or in your general interest in evaluating these solutions as prospective customers.
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