As more manufacturers explore demand-driven manufacturing as a production model, one common concern is whether demand-driven manufacturing and batch scheduling can live in harmony. Good news: They can
From the earliest days, manufacturers have sought to be demand-driven. Sell one, make one was the pure ideal. But companies soon began to understand that by using more efficient manufacturing techniques -- such as batch scheduling -- they could be more standardized, more scalable and they could minimize costs, said Matthew Davis of Stamford, Conn.-based Gartner.
Now, with advances in technology among other factors, manufacturing organizations understand that it is possible to again seek the ideal demand-driven manufacturing model -- even as operations grow in complexity and the supply chain stretches globally, he said.
What is batch scheduling?
>Batch scheduling is the process planning manufacturing operations so that components of a finished product are fabricated in groups, also known as batches, and not in a continuous stream.
"Manufacturers do batch scheduling whenever they can because it reduces cost, because you don't have to redo the setups and you get economies of scale," said Gene Tyndall, executive vice president of global supply chain solutions at Tompkins International in Raleigh, N.C. "You set up a product and run it all day."
Batch scheduling is usually found in companies that make paper, chemicals, steel, plastic or even food -- companies whose manufacturing processes are largely fixed, Tyndall said.
"Think of a paper mill," said Mike Liddell, chief executive officer of Suncoast Technology Partners, based in Bradenton, Fla. The mill will need to mix a vat of a specific pulp for each product group. Multiple products may be made from that vat, but still, "It's not economically feasible to mix a vat for each customer's order."
The problem with a planning system that groups like-orders together is that it creates work orders that cannot be easily tied to actual customer demand, Liddell said. The system is looking for like items that can be batched, instead of listening for customer demand.
Enter demand-driven manufacturing
Demand-driven manufacturing has seen a resurgence in recent years, according to Tyndall. "Driving operations from actual sales is really the holy grail of supply chain," he said.
A demand-driven manufacturer is able to listen to its customers both internally and throughout the supply chain. And demand-sensing technology now allows organizations to understand the ongoing and variable requirements of their customers.
"What's brought us back to demand-driven is the technology," Tyndall said. "We can see faster what is really selling. If I'm making a particular product that's not selling, I'm just wasting money."
Demand-driven has brought with it a shift in thinking about costs. Manufacturers are beginning to realize the total cost of the supply chain -- not just the production costs, Tyndall noted. Production costs may not be a large percentage of total costs for a company, so efficiencies such as batch scheduling have fallen in priority depending on the type of manufacturing.
"There's greater cost in transportation, freight and customs, for example," he said.
Companies have found that while it's important to have low production costs, it's not the only driver anymore, especially considering long global supply chains and cheaper overseas production costs, he added.
But don't forget about batch scheduling
Can batch scheduling and demand-driven manufacturing work together? Tyndall says yes.
"The batches get smaller," he said. "The size of the batches now depends on what customers are actually telling you. Batch scheduling is still good practice."
Instead of setting up a batch for paper that will run for three days or more, he said, the plant may set up a shorter run. Workers will monitor what's happening with the product with near real-time technology from the demand side, and then they'll adjust for the next day.
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"This changes by industry, depending on whether a product has a short lifecycle like electronics, or if you're talking about a big commodity-driven manufacturer," Tyndall said.
Companies understand that certain products lend themselves more to batch scheduling while others can be approached in a much more demand-driven way, according to Davis. "If I have high volume, low variability, I can use batch all day, every day and be good with that because it's predictable. I've reduced cost," he said. "But if a product is low-volume or high-variability or a customer has asked for something specialized, I don't want to use batch, because I'm going to need to react faster in a much more demand-driven way."
There will always be tradeoffs to think about, Davis added. "You may raise your production costs a bit because you're doing smaller batches, but you're also lowering your distribution costs," he said.
By retooling companies to react faster to customer demand, manufacturers are moving away from a sell-what-you-make business model to a make-what-you-sell business model, Liddell said.
"It's a balance between increasing efficiency, minimizing inventories, minimizing cycle times and making on-time delivery," he said.
To the extent that either batch-scheduling or demand-driven processes increase effectiveness in any one of these areas, companies need to choose what's best for their specific needs and their customer's requirements, Liddell added.
Being demand-driven is not only having the ability to listen to what customers are asking for, but it's also bringing that information back to the supply chain to assess what it would take to make that particular demand a possibility, Davis said. "What is the tradeoff required? Is this something you still want under these terms?" Organizations need to understand there's not a one-size-fits-all answer, he said.
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This was first published in August 2013