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Is your production plan truly demand driven?
Most supply chain professionals feel their production plan is driven by actual consumer demand. While it may be true at an overall aggregate level, we need to get into its nuances to see if there are gaps. In my opinion, there are three dimensions on which the differences usually crop up.
The first one is frequency of demand change. While consumer demand changes daily, production plans and production schedules (MPS) are usually derived from the monthly S&OP or IBP and updated weekly. The difference in frequency of demand change and production schedule change is one of the causal factors leading to a mismatch between supplies and demand.
The second one is the quantum of change. If the demand changes by a certain quantity, planners either schedule a much bigger run (EBQ) or don’t change the plan at all. The difference often leads to stockouts and inventory pileups.
The third dimension is the timing of change. If you practice frozen production schedule for a certain horizon, production schedule can only change with a time lag after the demand shift.
If we want the production plan to be demand driven, we must make MPS more dynamic, cut down on EBQ and do away with frozen production schedule.