Operations

Integrated planning

The market leaders are redesigning their planning processes and the market losers are seeing inventory levels rising and/or machine efficiencies falling due to shorter cycle times.

In today's commodity environment, low production costs are a prerequisite for survival. Real competitive advantage is obtained by offering shorter lead times, smaller order-size requirements and a high level of reliability. The key to market leadership lies in integrating all key functions; demand planning, raw material management, production planning & scheduling and logistics management. The core engine driving this integration is the planning department, the single platform where all important information comes together.

Many companies have been reviewing traditional functions and silo approaches, but many of the projects have not delivered the anticipated success. In our view, successful planning projects require a holistic and integrated approach undertaken on three levels — where each level has a different planning time horizon and a different frequency of activity.

At a strategic level, reliable demand forecast is used to allocate products and markets to available capacity in order to balance demand & supply, optimize cost on a corporate level and provide input for the sourcing process. Lack of matching between statistical forecasts and sales outlook would be an example.

At a tactical level, orders are allocated to machines while taking the availability of raw material and inventory positions into account. Forecast based (= demand) capacity reservations are converted into customer-order-based machine orders (= supply). The aim is to balance demand & supply on an individual site and machine level to reduce time & material losses and to optimize inventory positions. The information also provides the basis for optimizing transport planning and raw material management. Most companies still rely excessively on manual processes for highly repetitive planning tasks, as well as manual interfaces across functions (e.g. planning vs. order management).

On an operational level, final production schedules are sequenced as transport capacity and raw material is replenished. The desire is to meet due date quotations and hence achieve high-delivery reliability and customer satisfaction. Lack of statistical attention to supply variability (downtime) is best practice, therefore only inventory (= material buffer) is incorporated to balance production efficiency (=output) and working capital optimization.

Supply Chain management is all about information transparency and integration. All excellent Supply Chains have two things in common: process integration at each planning level, and a high degree of automated system support. The value is created by connecting and aligning the key functions of sales, logistics, production and sourcing. StepChange Consulting has the experience and resources to support your company in the development of the business case, solutions and implementation for Supply Chain transformation.

Production yield improvement

In an asset-intense process industry where three quarters of total costs are due to raw material and production processes, it is essential to have a daily focus on maximizing production yield and minimizing losses such as fiber, chemicals, water and energy. This is the single largest lever to improve bottom-line profits.

A lot of effort has been invested in data reporting systems but a disproportionately small amount has been invested in harvesting the benefit from this data. It is common practice to document and report yield development; however, some key actions remain untouched — standard processes across mills, machines, shifts and even individuals. Important operational decisions are quickly taken and are based on experience and intuition without direct quantitative and analytical support.

Our view is that a reduction of process variability is the key to a step change in yield improvement. The basis for this is a combination of quantitative and qualitative actions.

The starting point is performing a methodic analysis of variability, trends and loss reasons and also conducting detailed performance comparisons. The next steps are standardized processing of data for meaningful reports, best practice definition and inclusive development of standard processes. Group-wide understanding, acceptance and institutionalization of standard processes must be fostered by workshops, training and enablement.

To ensure sustainability of the achieved improvements, a management cycle of monitoring, controlling and rewarding performance has to be established. According to our experience, these efforts can lead to a production yield increase of 1-4%.

Maintenance effectiveness

One of the prime drivers of operating cost is maintenance spend, yet often maintenance is the least challenged. The perception of maintenance in an asset intense process remains as a "holy cow" best left untouched for fear of increased production outage. While other process areas have benefited from new technology, best practice process and organizational reengineering, the economic approach to maintenance has largely remained the same. New tools have been introduced, such as handheld devices to support predictive maintenance and condition monitoring, but the core processes and maintenance organizations have not changed significantly.

One of the key challenges that bedevils maintenance organizations is the interfaces between production, engineering and maintenance. Conflicting performance metrics and a lack of customer service approach across these departments cause dysfunctional behaviour and efficiency losses. A further challenge is the vicious spiral of reactive maintenance -- increasing time spent on fire fighting and reducing the focus on preventive tasks. Escalating costs are also a common characteristic for maintenance organizations. This is often the consequence of sub-optimal outside service management, comfortable internal resourcing coupled with traditional shift & overtime agreements, informal procurement channels, satellite spares storage and budgeting based on last year's costs plus a little extra.

Increased effectiveness combined with cost reductions are achievable through the following actions: maintenance strategy definition; prioritization and service level definition per equipment item; definition of spare-part requirements and cooperation across locations; comparison of insourced vs. outsourced services; standardization, visibility and control of service and spares sourcing and storage; redistribution of roles & responsibilities regarding condition measuring & monitoring and realignment of performance criteria; review of resource requirements, shift patterns and overtime; review work of planning, including shut-down and start-up practices.

It is essential that any of the key actions mentioned above are accompanied by training and workshops to foster wide-spread understanding, acceptance and institutionalization. This change management element is a crucial driver for sustained improvement within the maintenance area.

StepChange Consulting can help you with a structured and holistic approach to maintenance transformation that typically leads to a 5-15% reduction in maintenance spend.