Saturday, November 23, 2013

some thoughts about lot sizing and what it could mean to production scheduling...

generally speaking, you want to keep the supply chain agile and flexible... and very often I try to convince my clients to do that with a fixed lot size. Now the term might be misleading (because it can convey the notion that the lot size will be fixed - when it actually won't be) but let me explain my thinking:

In the SAP supply chain, the MRP run does not schedule a production program. MRP simply meets demand with supply (driven by the lot size procedure) that is placed just at the date when the demand occurs. It does so without consideration of any resource constraints, So it is necessary to introduce another step to level, sequence and distribute production quantities in a way that they fit into available capacity and produce great service levels with the least possible inventory. 

If you use a periodic lot size procedure, MRP will generate a planned order that meets the total demand of that period. You can then no more split and distribute these quantities within that period (obviously a monthly lot size is worse in that respect than a weekly is).

My thinking behind using a fixed lot size is to generate many supply proposals (planned orders) in the least, feasible production lot, all sitting on top of each other on the demand date. If, for example, you have a weekly demand from a forecast of 10,000 pounds, you would get one planned order with 10,000 pounds sitting for delivery on Monday morning should you use a weekly lot size. But if you use a fixed lot size of 1,000 pounds (if that is the least, feasible quantity), you have now ten planned orders which you can distribute into the previous week. You can still make the entire lot of 10,000 on Friday afternoon, but now you do have the option to make 2,000 every day of the week or 5,000 on Tuesday and 5,000 on Thursday or... you get the idea!

what I see often forgotten, is that there is the need for that extra step of 'production scheduling'. Many people just take as a production program what's generated by MRP and that can cause you many problems in the factory - especially for MTS and it's associated mixed model scheduling with MTO