Brian G. Kingsman

A review of production planning and control: the applicability of key concepts to the make-to-order industry

The paper reviews ‘classic approaches’ to Production Planning and Control (PPC) such as Kanban, Manufacturing Resource Planning (MRP II) and Theory of Constrains (TOC), and elaborates upon the emergence of techniques such as Workload Control (WLC), Constant Work In Process (CONWIP), Paired cell Overlapping Loops of Cards with Authorization (POLCA) and web- or e-based Supply Chain Management (SCM) solutions. A critical assessment of the approaches from the point of view of various sectors of the Make-To-Order (MTO) Industry is presented. The paper considers factors such as the importance of the customer enquiry stage, company size, degree of customization and shop floor configuration and shows them to play a large role in the applicability of planning and control concepts. The paper heightens the awareness of researchers and practitioners to the PPC options, aids managerial system selection decision-making, and highlights the importance of a clear implementation strategy. WLC emerges as the most effective Job Shop solution; whilst for other configurations there are several alternatives depending on individual company characteristics and objectives. The paper outlines key areas for future research, including the need for empirical research into the use of Workload Control in small and medium sized MTO companies.

Production planning systems and their applicability to make-to-order companies

Abstract Most of the research in the production planning area has been aimed at the needs of Make-To-Stock (MTS) companies. The make-to-order sector, although constituting an important part of world industry, has received relatively little attention. This neglect may be based on an assumption that the systems developed for MTS firms can also be used by MTO companies. However, the requirements of the two sectors are quite different. This paper sets out to identify these differences and to determine whether the research to date can meet the needs of the MTO sector. Many important application areas are considered, these include production scheduling, capacity control and the setting of delivery dates. Popular production planning approaches, including MRP II, OPT and JIT, are also discussed. It is shown that there is a need for more research to provide production planning systems which have been designed specifically for the MTO sector.

Forecasting for the ordering and stock-holding of spare parts

A modern military organization like the UKs Royal Air Force is dependent on readily available spare parts for in-service aircraft in order to maximize operational capability. A large proportion of spare parts are known to have an intermittent or slow-moving demand pattern, presenting particular problems as far as forecasting and inventory control are concerned. In this paper, we use extensive demand and replenishment lead-time data to assess the practical value of forecasting models put forward in the literature for addressing these problems. We use an analytical method for classifying the consumable inventory into smooth, irregular, slow-moving and intermittent demand patterns. Recent forecasting developments are compared against more commonly used methods across the identified demand patterns. One recently developed method, a modification to Crostons method referred to as the approximation method, is observed to provide significant reductions in the value of the stock-holdings required to attain a specified service level for all demand patterns.

Modelling input}output workload control for dynamic capacity planning in production planning systems

Abstract Workload control has been described as one of the new production planning and control concepts available for practical operations. The main principle has been defined by as to control the lengths of the queues in front of work stations on the shop floor. If these queues are to be kept short, then waiting times and hence overall manufacturing lead times will be controlled. There are four levels at which this control of queues can be attempted; priority dispatching level, job release level, job acceptance and job entry level. The first of these is a relatively weak mechanism for the control of queues if used alone. A stronger instrument, controlled job release, entails maintaining a `pool’ of unreleased jobs in the production planners office, which are only released onto the shop floor if doing so would not cause the planned queues to exceed some predetermined norms. The main aim of workload control, for those who advocate its use as a job release method, has been defined as to control the lengths of the queues in front of work stations on the shop floor. However, the true objective is to process the jobs so as to meet the promised delivery dates with the machine and workforce capacities and capabilities available. The job release stage can itself only be fully effective if the queue of jobs in the pool is also controlled. Otherwise, jobs may remain in the pool for too long so missing their promised delivery dates. Thus a comprehensive workload control system must include the customer enquiry stage, (the job entry stage), to control the input of work to the pool as well and plan the capacity to provide in future periods so the shop floor queues are also controlled. A methodology and systems to do this at both the job release and the customer enquiry stage have been presented in previous papers. The purpose of this paper is to provide a theory for workload control in a mathematical form to assist in providing procedures for implementing input and output control. It enables dynamic capacity planning to be carried out at the customer enquiry and order entry stages for versatile manufacturing make-to-order companies. The theory shows that attention should be concentrated on controlling the differences between the cumulative inputs and outputs over time, and not the period individual inputs and outputs. Although aimed at make-to-order companies, the theory and procedures give a general capacity planning method for other production planning methods; for example determining the master production schedule in MRP systems.

Competitive advantage, customisation and a new taxonomy for non make‐to‐stock companies

Presents a new taxonomy for the non make‐to‐stock sector to enable a like‐with‐like comparison, arguing that existing taxonomies within the literature are inadequate for strategic research purposes. Presents empirical evidence which has been collected from 22 companies in three European countries – the UK, Denmark and The Netherlands. The data support the structure of the proposed new taxonomy and provide insights into competitive advantage and customisation issues in the non make‐to‐stock sector. Finally, two new labels for this sector of industry are proposed. “Versatile manufacturing company” is used to describe those manufacturers which are involved in a competitive bidding situation for every order which they receive, customisation by individual order. In contrast, the “Repeat business customiser” may only be in this position for the first of a series of similar orders from a particular customer, customisation by contract.

The stochastic dynamic production/inventory lot-sizing problem with service-level constraints

Abstract This paper addresses the multi-period single-item inventory lot-sizing problem with stochastic demands under the “static–dynamic uncertainty” strategy of Bookbinder and Tan (Manage. Sci. 34 (1988) 1096). In the static-dynamic uncertainty strategy, the replenishment periods are fixed at the beginning of the planning horizon, but the actual orders are determined only at those replenishment periods and will depend upon the demand that is realised. Their solution heuristic was a two-stage process of firstly fixing the replenishment periods and then secondly determining what adjustments should be made to the planned orders as demand was realised. We present a mixed integer programming formulation that determines both in a single step giving the optimal solution for the “static–dynamic uncertainty” strategy. The total expected inventory holding, ordering and direct item costs during the planning horizon are minimised under the constraint that the probability that the closing inventory in each time period will not be negative is set to at least a certain value. This formulation includes the effect of a unit variable purchase/production cost, which was excluded by the two-stage Bookbinder–Tan heuristic. An evaluation of the accuracy of the heuristic against the optimal solution for the case of a zero unit purchase/production cost is made for a wide variety of demand patterns, coefficients of demand variability and relative holding cost to ordering cost ratios. The practical constraint of non-negative orders and the existence of the unit variable cost mean that the replenishment cycles cannot be treated independently and so the problem cannot be solved as a stochastic form of the Wagner–Whitin problem, applying the shortest route algorithm.

Responding to customer enquiries in make-to-order companies Problems and solutions

Make-to-order companies are in the business of supplying products in response to a customer order in competition with other companies, on the basis of price, technical expertise, delivery time and reliability in meeting due dates. Dealing properly with enquiries is the major problem that MTO companies face. A lack of co-ordination between sales and production at the customer enquiry stage often leads to confirmed orders being delivered later than promised and/or being produced at a loss. The treatment of an enquiry is a multi-stage decision process. The initial decision is whether or not to prepare a bid, and if so, how much effort to put into the specification and estimation process. The MTO company has the choice of putting in a lot of effort to prepare a competitive bid or making a quick estimate with a high safety margin to allow for errors and unforeseen problems expecting further later negotiation with the customer. Consideration has to be given to the likely accuracy of the cost estimates produced. The feasibility of being able to produce the order with the current work load at different delivery times needs to be evaluated together with any extra costs incurred. An input/output planning approach based on the control of a hierarchy of backlogs of work is proposed to produce a dynamic capacity planning model to determine the capacity to provide at each work centre in future time periods, allocating overtime, transferring operators, process as split batches etc. In setting the price and lead time to quote to the customer, the probability of winning the order plays an important role. A model based on a chi-squared analysis of data on past enquiries is proposed to divide the market into sectors of similar orders. It is extended to produce a strike rate matrix for each sector giving the probability if winning orders in that sector as a function of the price and lead time quoted. A general model for the whole enquiry process is presented, together with a decision support/expert system. This indicates where the qualitative judgmental rules, typically used by companies, could be used to advantage.

A structural methodology for managing manufacturing lead times in make-to-order companies

Abstract This paper extends the ideas put forward in an earlier EJOR article to develop a methodology for controlling manufacturing lead times. Past approaches have concentrated on scheduling a given set of orders through the shop floor in some optimal fashion to meet their specified delivery dates. This is clearly sub-optimal since it covers only part of the total lead time. It is shown that a higher level approach is more appropriate in which the order book is deliberately moulded into a shape that can be produced profitably. This should be achieved at the customer enquiry stage, when the prices and delivery dates to quote are determined. Hence a structural approach has been adopted which includes customer orders planning and job release functions. The basic concepts developed include a hierarchy of backlogs of work responsible for a consequent hierarchy of lead times that add up to the total delivery lead time. Input/output control procedures aim at maintaining the backlogs, and hence lead times, within norms set by management.

Lead time management

Abstract In intermittent production systems, job shops, manufacturing lead times are often long and variable, yet only about 10% is due to the actual processing time. This is a major difficulty in planning production. Two alternative approaches exist for determining planning values for manufacturing lead times to use in production planning and control systems. The first is to treat them as independent uncontrollable variables. It is then a forecasting problem with the emphasis on minimising the impact of the forecasting errors. The second approach puts the emphasis on control and attempts to manage the average lead times to match pre-determined norms. This article reviews and compares these two approaches. It concludes that the second is the most appropriate but that it requires a close cooperation between the production and marketing functions of the firm. This is best achieved by regarding the firm as a hierarchical chain of backlogs connected by input/output relations.

Integrating marketing and production planning in make-to-order companies

Abstract Make-To-Order companies are in the business of supplying products only in response to a customers order. They may supply unique products made to a customers specification and/or a limited range of products. They range from the traditional job shop, e.g. cutting pieces of metal to a specific shape, to producers of machine tools, e.g. a vulcanising line. A major problem is the divide between sales/marketing and production. The production function is often faced with unrealistic delivery dates for incoming orders. This arises when the sales force quote delivery dates and prices which will maximise the chance of the company winning the order. The lack of coordination with production often leads to confirmed orders being delivered later than promised by sales and/or being produced at a loss, or alternatively production has to delay other orders with consequent extra costs. The need to integrate sales and production planning considerations at the customer enquiry stage in deciding how to respond has been pointed out by several authors, yet little research has been carried out. The paper will discuss some possible approaches to the problem. These essentially depend on estimating routinely the probability of winning an enquiry order, dependent on many factors including price and lead time etc. Companies do not traditionally keep records of this data, particularly records of unsuccessful bids and on competitors. In addition, the paper describes the experience of setting up a system to collect such data in a major UK company and the potential uses of such a database.