Tuesday, May 21, 2013

strategy 10 for a Make To Stock policy?

I have no idea where it is coming from, but some people seem to think that when you use strategy 10, it protects your production schedule when you run your lines at full capacity!

Let's take a couple of steps back...

as we all know, the most used strategy is 40... Planning with Final Assembly. 40 allows for the Sales Orders to consume the forecast and if the Sales Orders exceed the VSF forecast, the available inventory is reduced and MRP generates a planned order to cover the additional requirement. most people think that is a problem since a planned order is created that falls right into the production schedule.

Not true if you do the right thing in the availability check !

When Sales Order quantities exceed forecasted quantities (and safety stock), the availability check can not confirm the full quantity to the requested delivery date and provides a delivery proposal. Only if you confirm the delivery proposal and do NOT fix the date, the newly generated planned order disturbs the production program. Would you and your customer have consented to the delivery proposal and fixed the date, the resulting planned order would have been scheduled far enough out. Many companies decide not to fix the date, so that the demand gets transferred to today's date and just in case the production scheduler will be able to produce a miracle, backorder processing would pick it right up. That miracle doesn't happen very often.

So if you run a production line at full capacity and you let - according to above - orders drop in anytime by not fixing dates, your production scheduler goes crazy. 

Then comes the 'fix-it-all' strategy 10. And people wonder why it doesn't fix a thing. All that strategy 10 does is taking sales order demand out of MRP. So if your forecast is exceeded by additional demand, no one will know about it. But you know what? The demand is still there! And it still does not get fulfilled, because no one can see it. No one but the customer of course.

When you use strategy 10, your forecast is of the requirements type LSF. An LSF is not consumed by Sales Orders but by the goods issue of the delivery. Sales Order demand will not reduce available quantity in MD04 and is therefore not MRP relevant. Additional demand does not trigger the generation of a planned order to cover the demand. 

And that is alright if - and only if - you tell your customers that if they are a customer who wanted more product than what was forecasted, they will have to wait until the next receipt based on next month's forecast comes in.

And you know how to tell the customer and make sure everybody in your organization knows about it? You fix the flippin' date ... in which case you might as well stick with strategy 40!