Scheduling Can Mean Inefficiency. (Ceo Journal).

I've wanted to write this particular column for a long time, but I never was able to tie all the disparate elements of the subject together well enough for publication, However, a situation arose recently with a foundry client that is struggling to improve its production schedule, It moved me to address this important topic despite any literary reservation I might have.

Why Schedule?

Most people in our industry think that the reason to schedule production is "to efficiently utilize manufacturing facilities." Others claim that schedules "define the financial conditions under which the business is to operate--how much and when revenue will be generated." Still others say that schedules "define, in sequence, that which the combined efforts of all employees is to achieve." Although these answers are correct on a tactical level and from their particular parochial perspectives, they're incorrect on the more important strategic level.

Production scheduling--like production itself--only has relevance in regards to a customer's requirements. So, the actual reason to schedule production is to ensure that the foundry can meet customer delivery requirements, and to meet them a minimum of 95% of the time.

Beyond that basic requirement, scheduling today has assumed two additional roles. First, the schedule must act as a tool for reducing cost by continuously driving down manufacturing cycle times. Second, the schedule can be used as a competitive weapon to transform those manufacturing cycle time reductions into customer delivery lead time reductions.

The Evils of Efficiency

I can't remember how many debates I've heard about the relative merits of scheduling around core production, melt or molds. That debate rages on because manufacturing types often don't agree on where the primary bottleneck is in the plant.

Naturally, they want to schedule around that bottleneck to maximize production efficiency. In fact, that's what many highly regarded authors and consultants have told them to do in books like "The Goal" by Eli Goldratt and Jeff Cox, and in "world class" concepts like the theory of constraints. But consider for the moment that manufacturing efficiency isn't as important as they think.

For the record, I do indeed believe efficient utilization of facilities and equipment is important, very important. But in regards to scheduling, it's not of primary importance--meeting the customer's most aggressive due date is. As long as those due dates determine where a job fits into the production schedule, being as efficient as possible after that is fine.

CEOs need to ignore pleas that certain orders must be grouped together because they are produced in a particular alloy (a heat-driven schedule) or that a mix of cored work and uncored work needs to be run each day to maintain the sand's integrity (a product mix-driven schedule). While these may be valid ideas on a tactical manufacturing level, they are not sufficient cause to sacrifice the strategic imperative of delivering on time and in the shortest time possible.

Avoid Backlogs

I wrote myself a note about backlogs and stuck it to my computer more than a year ago. It reads: "The concept of backlog presupposes a throughput-driven schedule where jobs are placed into production to maximize an outdated notion of manufacturing efficiency rather than to ensure the modern business imperative of customer satisfaction through on-time delivery and short lead times."

In an ideal situation, no backlog should exist at all. Foundry capacity and customer requirements should be so well synchronized that when orders come in, they are immediately placed into the schedule to be produced in the first available time slot. I call this synchronization "compatibility," I realize that in periods when demand surges, a foundry must accumulate some backlog until it can process that glut of orders through its system. In most other situations, CEOs should manage in ways that work to eliminate the cushion backlogs are thought to provide.

I wrote "are thought to provide" because that notion is only true from a manufacturing and efficiency point of view. From the customer's perspective, backlogs frequently mean longer lead times, frustration, damaged supplier relationships and often result in business eventually being pulled from the offending foundry.

CEOs need to stop thinking of a backlog as a measure of revenue to come. In today's industry, management at all levels needs to start fearing backlogs as an opportunity for competitors to undercut you with shorter lead times and better service.