Surviving & Thriving in Times of Seismic Change

In case you haven’t noticed, the world as we know it is changing once again…

Mike Liddell, CEO of Lean Scheduling International and Author of “The Little Blue Book on Scheduling”

The inescapable truth is that few, if any of us, were able to predict and plan for the Coronavirus scare, but none of us should have been surprised by the fact that the world is constantly changing.

We also know that when the world changes quickly, then there is usually a dramatic changing of the guard. What we can predict with some certainty when change occurs is that both big and small companies who are unable or unwilling to react quickly (think dinosaurs) will get replaced by their nimbler competitors.

The fundamental question is that, since nobody can stop change, what exactly are manufacturers supposed to do when it hits them? What is happening, as we speak, is that all manufacturers are experiencing massive changes in their supply chains. There will be significant changes to the demand for their products, changes in the availability of materials, and changes in the short-term availability of the people that work for them.

There will of course be panic. Some will react with an abundance of caution and make drastic cuts just to be on the safe side while others will try and continue as if nothing happened. We will see that both of these responses are almost certainly a mistake.

If we look at past recessions, we have seen that most manufacturers will experience a double whammy because they will be too slow to react when demand initially drops and too slow to react when demand increases at the back end of the recession. The predictable impact of these mistakes is usually a massive overstocking of inventories (finished goods and raw materials) on the front end of the recession and missed opportunities to meet customer demand during the inevitable recovery.

Since we can all agree that it is almost impossible to predict when things will change, the question manufacturers are facing is, “How can I make sure that my company survives, and hopefully even thrives, when there is major change?”

The answer to this question is very important. Because it is clear that we cannot predict change and we can’t avoid it, so we must all accept that we will encounter change. The real problem is that most manufacturers are hopelessly ill-equipped to react quickly and intelligently when change happens. They do not have the built-in systems and processes needed to react quickly and intelligently, which means that some of them will not survive.

Anyone can create a plan, but a plan that is not realistic is just wishful thinking and is not worth the paper on which it is printed. The typical planning process allows you to forecast your demand and use some rough-cut capacity calculation to estimate what you can actually produce. This is a problem because in the real-world, managers must make tough decisions such as which customers or products get priority and how much emphasis you need to put on productivity versus on-time deliveries.

The problem is that without a fully functional APS (Advanced Planning & Scheduling) solution, you have no way of understanding cause and effect, which means all you can do is make a wild guess with little chance of success. If, however, you have a fully functional APS solution, then you have the ability to see the likely impact before finalizing a decision.

To be clear, scheduling with Excel will not work since it is too slow and requires too much manual effort. Because Excel does not consider sequencing or most constraints, it has no ability to understand cause and effect. This means you cannot predict the potential impact of real-world events such as cancelled/modified orders, missing materials, rush orders, changing shifts, or recent shop floor updates.

Because everything in a plant is connected, it is meaningless to make decisions in a vacuum. Does this mean that everything will happen exactly as scheduled? Of course not, but it will be a damn site more accurate than anything you could predict manually or with Excel.

Many of you out there have already invested in such systems, and for this, you deserve congratulating. It is important to point out that not all APS solutions are the same, but if you don’t have a really good APS solution, your company will find it difficult to compete and you will be at a severe disadvantage in these very trying times.

You can find more about this topic and others in Mike Liddell´s book “The Little Blue Book on Scheduling” or by contacting Mike at [email protected].