Balanced Supply and Demand to Reduce Resources
Accurate, company-wide cost control lowers product costs and allows you to compete effectively.
There used to be a saying, “we’ll sell it cheap and make up for it in volume.” While that may have been true in the time of long production runs for stock times, times have changed. Today, if costs on EVERY job are not monitored then financial setbacks are eminent. As a modern manufacturer, to control costs you need to balance customer demand with the supply of your product. Unfortunately, this is easier said than done.
Balance Supply and Demand to Reduce Costs
Balancing manufacturing supply and customer demand to maintain optimal inventory levels is DIFFICULT because manufacturing is a very complex process involving a lot of moving parts. Here are just a few realities to consider:
- Forecasted demand drives the production schedule, but customer demand is not static
- The production schedule drives material requirements, but is based on a moving forecast
- Production schedules depend on bottleneck equipment or outside process capacity
- Costs change regularly as new production methods or machinery come on line
- Production time and cost temporarily increase as a new product is introduced
- Product lot size and time frames are forcing more, smaller jobs through the plant and introduces mix-mode manufacturing that all require planning and monitoring
Your success in conquering these cost-controlling challenges lies in your ability to address these two questions:
- How good is your Production and Material Planning?
- How well are you running your manufacturing business and performing against your target goals?
Material Requirements Planning (MRP) is a Powerful Planning Tool
MRP is a proven system that is used worldwide in production planning, scheduling, and inventory control. It aids in helping you meet your customer’s demand while only purchasing the materials you need to produce the products to meet those requirements.
The MRP system determines customer demand from orders and forecasts to create a schedule of production for finished goods. However, its accuracy in producing good results depends on all of the variables that it uses in the calculation – BOM, routing, and inventory. If the overall business does not have control of its data, the results of MRP will be poor. However, if time is taken during the implementation to set up the system with accurate data, and keep it accurate, then amazing results can be anticipated. The JAAS Advanced Manufacturing Software solution will help you keep your data accurate and up-to-date.
- The MRP Display screen is the central location for the planners. It displays what needs to be purchased or produced; all supply and demand can be reviewed as well as approving suggested orders
- MRP Exception Messages provides the planner recommendations to defer, expedite, and delete items, as well as warning of late orders
- The MRP Detail Inquiry screen tracks and displays all of the inventory item activity and why activity was generated
- A full MRP calculation, called a full regeneration, completely re-plans from the beginning and can run at any time. MRP is a bucketless system that plans requirements from every single demand and does not compile requirements for the periods of time where you define the time bucket
Production Management is the Heart of Measuring Cost
After you have planned, you must fabricate, blend or assemble the product. The goal is to accurately and quickly collect the total actual cost of manufacturing activities including material, labor, overhead, and outside processes.
The JAAS Advanced Manufacturing Software Production Management module, gives your organization the ability to control the entire production from raw materials and components to finished goods. The Production Management module can be used in these production environments: make-to-stock, engineer-to-order, make-to-order, job shop, repetitive, and batch.
- Production orders report the labor, material, machine, tools, fixed and variable overhead
- Schedule production with forward and backward scheduling methods
- Production orders can be changed to substitute operations or materials
- Create purchase or production orders to satisfy shortages for that specific production order
- Stock and non-stock material items can be used and tracked to a production order
- Labor Tracking can be applied to each order and non-production time can also be recorded
- If only production quantity is required to be recorded, you can backflush materials and labor
- Full lot and serial traceability throughout the lifecycle of the item is assigned by the system or entered manually through purchase receipts, inventory issues, and shop floor control transactions
- Improve accuracy and rapid input of information with barcode data collection to record labor and material as well as inventory issues, receipts, cycle counting, and physical inventory
Acting On Planned and Actual Data
Whenever the system runs MRP, when information is entered, or when a data collection device updates a transaction, that information is immediately available everywhere in system. What you do with that information, and how fast you react, will determine if you are truly controlling your costs or just observing them.
There are plenty of reports available, such as the Production Order Cost Performance that compares production performance of the target (standard/planned) costs with actual cost by multiple cost buckets including: material, labor, machine, tools as well as fixed and variable overheads. But the real benefit, because the information is totally integrated, is that you get the following:
- More accurate numbers because much of it comes from another part of the system or from data collection devices
- Timely information that you can act on quickly when a problem arises
- Highlight issues you uncover with your BOM and Routings
- Make plans to change planning variables in your MRP system so it performs better
- Purchase only what is necessary and have it delivered when you need it delivered
We ask two important questions to those looking to more expertly control manufacturing costs: “How good is your Production and Material Planning?” and “How well are you running your manufacturing business and performing against your target goals?” With the JAAS Advanced Manufacturing Software you will have the capability to address these questions — and once the system is implemented, you will feel much better about your answers.
Contact Us for more information.