Manufacturing tips for Kanban production control and BOM management

Implementing strong Kanban manufacturing techniques can greatly improve supply chain efficiency and productivity. In this book chapter excerpt, discover how Oracle supply chain management (SCM) software can help with Kanban in manufacturing - including Kanban setup and production control - and find out how Oracle SCM software can improve bill of materials (BOM) management.

Table of contents:
Oracle E-Business Suite Manufacturing and Supply Chain Management
Manufacturing capacity planning and production scheduling process
Manufacturing tips for Kanban production control and BOM management

Kanban Planning

Another type of planning that Oracle Applications provides is kanban planning, part of Oracle's support for Flow Manufacturing techniques. As noted in Chapter 1, kanban is a Japanese word that suggests "sign" or "signal." From a manufacturing perspective, a kanban is a visual indicator -- sometimes a card, sometimes an empty bin or rack -- that triggers replenishment of an item. The intent is to streamline the manufacturing and procurement process; rather than relying on a computer simulation to suggest when to order, kanban replenishment triggers orders based on an operator actually signaling that more material is needed.

The following book excerpt is taken from Chapter 8 of the McGraw-Hill Osborne Media book, "Oracle E-Business Suite Manufacturing & Supply Chain Management," by Bastin Gerald, Nigel King and Dan Natchek. Click to download the full chapter.

While kanban replenishment does not rely on MRP planning to launch the replenishment orders, effective use of kanbans does require appropriate sizing. If a kanban is too small, you might run out of material before it is replenished; if it is too big, you carry excess inventory. Oracle provides a kanban planner to size kanbans, and to resize them when necessary. In addition, though kanbans eliminate the launching of orders from MRP, MRP planning can still be valuable -- it can provide calculation of usage over time, which can be useful in supplier negotiations or when deciding to expand manufacturing capacity.

Kanban Setup

You designate items as kanban-controlled through the item attribute Release Time Fence. Setting this attribute to Kanban Item (Do Not Release) prevents you from releasing orders from the Planner Workbench.

For the purposes of planning, kanban setup involves defining pull sequences, which specify the source of replenishment and planning parameters for kanbanplanned items. For each item under kanban control, you define the subinventory and optional locator that you will replenish with the kanban. Then define the source of the replenishment (intra-org, inter-org, supplier, or production) and the appropriate source information. For example, for an inter-org kanban, you would specify the source organization, subinventory, and optional locator from which the material will be pulled.

The factors that control planning are the planning method, lead time, and lot sizing information for the specific kanban location. There are three planning methods:

• Kanban size With this method, you specify the number of cards or kanbans you desire, and the planning process calculates the size of those kanbans, i.e., how much material must be replenished each time the kanban is signaled. For example, if you elect to employ a simple "two-bin" replenishment system, you would specify 2 as the number of kanbans; planning would calculate how much material is required in each bin to keep the line flowing smoothly and efficiently.
• Number of cards Using this method, you specify the size of the kanban, and planning calculates the number of kanbans you need. For example, your kanban might be a rack or tote capable of holding a fixed amount of material, or you might determine the container size that an operator could move safely without assistance; planning determines how many of those containers you need.
• Do not calculate With this method, you size your kanbans manually. This method excludes an item from kanban planning, while still letting you use the kanban to signal replenishment.

In addition, there are lead times and lot sizes defined for each pull sequence that affect the planning process:

• Minimum order quantity This is defaulted from the item, but you can override for a specific pull sequence.
• Lead time This is the lead time to replenish one kanban from its source.
• Lot multiplier Use this if it makes sense to replenish in fixed multiples -- for example, if the item has a natural lot size.
• Allocation percent This represents the distribution of an item's demand across multiple locations.
• Safety stock days The number of days of safety stock you want to maintain.

Additional detail on kanban setup is provided in Chapter 15.

Kanban Calculations

Kanban planning calculates the required number or size of kanbans, based on the planning method you specified for each pull sequence. Basically, the process looks at the average daily demand you supply and the planning parameters from each pull sequence and determines how much material or how many kanbans are needed to supply that demand. The details of the calculation program are described in detail in the Oracle Master Scheduling/MRP and Oracle Supply Chain Planning User's Guide, part of the Oracle documentation library provided with the software.

Average Daily Demand

A key to kanban planning is the calculation of average daily demand. When you define a kanban plan, you specify the source of demand -- you can use a forecast, a master schedule (MDS or MPS), or actual production. For your initial kanban plan, you might want to use the same forecast or master schedule used for validating your line design on the Mixed Model Map (see Chapter 7). This forecast or schedule should be typical of the mix and volume of demand for which you are designing your line. On an ongoing basis you should check your kanban sizes against actual or planned production; this will give you early warning signs of changes in demand that might require intervention -- perhaps the creation of a non-replenishable kanban to accommodate a one-time spike or a shift in demand patterns that might require a permanent change in your kanban sizes. This ongoing evaluation is often overlooked in flow manufacturing environments, but the simplicity of the Kanban Planner makes it easy to do.

Once the demand is identified, the kanban planning process performs an explosion much like MRP to determine dependent demands for your kanban items. The planner then applies the factors you defined in your pull sequences and uses the calculated yields from your flow routings to determine the optimal size or number of kanbans.

Effectivity Date Changes

It is important to note that kanban planning does not take into account effectivity date changes. The explosion process determines average daily demand using the effectivity date you specify when you run the plan; it does not see pending bill of material changes. Because kanban planning uses the average daily demand, recognizing pending bill of material changes would result in incorrect kanban sizes. For example, if you were replacing one component with another, the average demand would be too low for each component, and the kanbans would be sized inappropriately.

Generating and Implementing Kanban Plans

To generate a kanban plan, you first define one or more plan names using the Kanban Names window. The only parameter you need to specify is the source of the demand you want to use.

Then, launch the plan on the Launch Kanban form. Specify the effectivity date to use when exploding bills of material. You can optionally limit the plan to a range of items or item categories, and you can enter start and cutoff dates to restrict the demand data the plan considers.

When the planning process is complete, you can view the results on the Kanban Workbench, shown in Figure 8-12. The Details button shows the results of the planning process and the kanban parameters upon which that plan is based. You can view the demand used by the Kanban Planner with the Demand button.

If you want, you can rerun a portion of the kanban plan with new parameters -- select one or more kanbans by checking the box to the left of each row on the Details window, and modify the desired parameters. You can modify the type of result you want to calculate (kanban size or number of cards), as well as source information, minimum order quantity, lead time, fixed lot multiplier, and safety stock days. For example, if you found that some kanbans were sized with odd quantities, you could specify the appropriate fixed lot multiplier. Save your changes, and click the Simulation Replan button. This will submit a request to run the Kanban Planner; when the planner completes, you can requery the form to see the new results.

NOTE
Though Oracle calls this a simulation, there is no way to simply reset the plan to its state prior to the replan. To reset, you can either run the Kanban Planner again or change the parameters back to their original values and run the "simulation" again.

You can compare different plans, or you can compare the plan with the values that are currently driving your production execution system. When you press the Compare button, the Find window will ask for the name of the comparison plan; by default, it will select Production (i.e., the current definitions from your pull sequences), but you can select an alternative plan if you want.

TIP
To filter out trivial or nonexistent changes between plans, consider including selection on the Variance field in the Find window. For example, including the criterion Variance Greater Than 0 will show only differences between the plans.

You can implement suggested changes from either the Kanban Details or the Compare Kanban Plans window. To implement a change, select one or more kanbans with their selection check boxes (or use the Select All button), and click the Update Production button. This will update your current pull sequences with the information from the selected kanban plan. You will need to regenerate and reprint the kanban cards as described in Chapter 15; for convenience, the Tools menu on the Kanban Planner Workbench provides a link to the Kanban Cards form and allows you to print selected kanbans.

Planning Parameters and Profiles

A number of parameters, profiles, and item and bill of material attributes control the planning process. These are described in detail in the user guides for Master Scheduling/MRP, Inventory, and Bills of Material, part of Oracle's documentation library. A few highlights are noted here.

Planning Parameters

The Planning Parameters form lets you specify execution defaults and repetitive planning parameters for your MPS, MRP, and DRP plans in each inventory organization. These parameters are copied to each plan you define, but you can override them in the Plan Options window.

MRP Profiles

There are almost 100 profile options that control the execution and defaults of MRP plans (number of workers, debug mode, etc.). Most of these can be set at the site level, but several may be useful to set defaults for individual users. For example, the profiles MRP: Default Forecast Name, MRP: Default Plan Name, MRP: Default Schedule Name, and MRP: Default DRP Plan Name provide defaults for the forecasts, MRP plans, master schedules, and DRP plans that a user will work with on various inquiry and update forms. A default plan name will open automatically when you invoke the appropriate form; this saves you from having to find or query the plan you want to use (though you can override the default if desired).

Item and BOM Attributes

Much of the detail of planning is controlled by the various item and bill of material attributes. These attributes were mentioned briefly in earlier chapters, but several key attribute groups (corresponding to tabs on the Master Items and Organization Items forms) are especially important to the planning process. These are described in the following sections.

General Planning Attributes

The General Planning tab (shown in Figure 8-13) includes attributes that control MRP and ASCP planning, as well as the simpler planning methods provided in Oracle Inventory (Min-Max and Reorder Point Planning). Of special interest are the following:

• Planner This field identifies the planner responsible for the item. Besides being a mechanism to select items in the Planner Workbench and sort various planning reports, the planner is required for ASCP to generate recommendations. The planner also must approve any move orders requesting the item. Define planner codes with the Planners form; optionally specify their employee name and e-mail address.
• Make or Buy This field, along with sourcing rules (described in Chapter 11), controls the default order type planned for the item. If it is set to "Make," planning explodes the item's bill of material and suggests discrete jobs to satisfy demand; if it is set to Buy, planning will not explode a bill of material and will suggest purchase requisitions. You can override the suggested order type based on the setting of the Purchasable and Build in WIP attributes. (This field also determines the default of the Based on Rollup attribute in Oracle Cost Management.)
• Order Quantity Modifiers -- Minimum, Maximum, Fixed Order Quantity, and Fixed Lot Multiplier These attributes determine the quantity of the planned orders that MRP or ASCP can suggest; use them if there is a natural or economic lot size for the item (e.g. certain products are not practical to order in small or odd quantities; others might require a separate order if the order would be more than a full truckload, etc.). But use these with caution in a "lean" manufacturing environment; they can inflate order quantities and contribute to excessive inventory levels.
• Fixed Days Supply This attribute, sometimes called "period of supply," tells planning to generate planned orders to cover requirements for a certain number of working days. This will limit the total number of orders that are generated over time, but will result in overall higher inventory levels; consider using it for inexpensive items where the cost of ordering exceeds the carrying cost of the early inventory.
• Safety Stock Method, Bucket Days, and Percent The safety stock method MRP Planned % tells planning to dynamically calculate safety stock as the percentage of the average daily demand in the buckets you specify. Non- MRP Planned means that safety stock levels come from Oracle Inventory, either calculated by the Reload Safety Stocks concurrent program in Oracle Inventory, or manually entered on the Enter Item Safety Stock form.

NOTE
Non-MRP Planned does not imply that planning will ignore safety stock in its calculation; it simply identifies the source of the desired safety stock levels. Whether or not planning uses safety stock in its processing is controlled by the plan attribute Plan Safety Stock.

Mix-Max Quantity information is not used by MRP or ASCP. Cost information is used in ASCP optimization; Source information is one method of defining a supply chain; both of these topics are discussed in Chapter 11.

MRP/MPS Planning Attributes

The MRP/MPS Planning Attributes tab (see Figure 8-14) includes the fields that pertain specifically to MRP planning. The following fields are important:

• Planning Method The planning method determines the types of plans in which an item participates.
• Forecast Control This attribute controls forecast explosion and consumption, as described earlier.
• Pegging This determines the pegging information calculated by the plan. End assembly pegging maintains a "peg" or link to the end assembly responsible for the demand; Soft pegging maintains a link to the immediate source of the demand; Hard pegging is used for Project MRP. Various combinations of these values are allowed.
• Exception Set The exception set controls certain types of exceptions. To define exception sets on the Planning Exception Sets form, give each set a name and set the sensitivity and time period for six types of exceptions: Shortages, Excess inventory, Overpromised inventory, Repetitive variances, Resource over-utilization, and Resource under-utilization. You may have different exception sets for different classes of items; for example, your definition of "excess" inventory will probably vary for inexpensive, fastmoving items versus expensive, slow-movers. Note that if an item has no exception set, the exceptions listed here will not be reported for the item.
• Shrinkage Rate The shrinkage is a decimal factor, usually small, that reflects an anticipated loss of the item during its manufacture or procurement; planning will inflate order quantities to account for this expected loss. Compare this with component yield, discussed later in this chapter.
• Acceptable Early Days This attribute filters out some "nervousness" in the plan. It suppresses "reschedule out" suggestions for existing orders if the order would be rescheduled by less than the number of acceptable early days. In other words, it defines how many days early an order can be before planning will suggest rescheduling it out.
• Round Order Quantities If enabled, this check box tells the planning process to round planned order quantities up to the next higher integer. Note that this affects planned orders only; it does not directly affect the calculation of dependent demand or of WIP requirements, which may be fractional due to yield factors.
• Repetitive Planning attributes Overrun % and Acceptable rate increase and decrease, as described earlier in the "Repetitive Planning" section.
• Calculate ATP This check box determines whether planning calculates and prints the available to promise on the Planning Detail Report; it does not affect the calculation of ATP for Order Management or Inventory inquiries.
• Reduce MPS This attribute lets you reduce master production schedule quantities based on the passage of time; use this only if you are not relieving the MPS through the creation of WIP jobs or purchase requisitions/orders (e.g., if you're using an external system for those functions).
• Time Fences You can specify a Planning Time Fence, which prevents new order creation or reschedule in suggestions; a Demand Time Fence, which you can use to ignore forecast demand either in planning or in loading an MDS; and a Release Time Fence, to define the window within which planning can automatically release orders from plans designated as Production. You define the length of each time fence either as a fixed number of work days or as the item's Total lead time, Cumulative total lead time, or Cumulative manufacturing lead time. Note that the use of the Planning and Demand Time Fences is further controlled by attributes of each individual plan.

Lead Times

Lead times in Oracle are divided into several elements. The relationship between these elements and the various types of lead time is shown in Figure 8-15.

• Preprocessing The time it takes to prepare an order for release; this might be the time it takes to prepare a shop packet for manufacturing or to prepare a purchase order. This is sometimes referred to as paperwork lead time.
• Fixed The portion of an item's lead time that does not vary with the order quantity. Setup time is a typical example; this is often a fixed amount of time, regardless of the size of the order. Planning uses fixed lead time to plan both manufacturing and purchase orders.
• Variable The portion of lead time that varies with the order quantity. Planning uses variable lead time to plan manufacturing orders only.
• Processing The time it takes for a supplier to fulfill your purchase order once released or the typical time it takes to complete a discrete job for the item. For manufactured items, this can be calculated from the fixed and variable lead times and represents the time it takes to manufacture the Lead time lot size quantity of the item; as such, it is an average. It is used to calculate the cumulative lead times. Planning does not use processing lead time at all for manufactured items; it uses the combined fixed and variable lead time. For purchased items, planning will use the processing lead time only if you do not specify a fixed lead time for the item.
• Postprocessing The time it takes to put away purchased material after it is received. Planning uses this for purchased material only; for manufactured items, you should include this in your routings if it is significant.

You can calculate fixed, variable, and processing lead times from your routing time, as described in Chapter 4. This process uses the lead time lot size, which you also specify on this tab.

The Lead Times tab also includes two types of cumulative lead time:

• Cumulative Total The "critical path" lead time, or the time it takes to buy the first piece of raw material, manufactures all the subassemblies and makes the item.
• Cumulative Manufacturing The cumulative lead time for manufacturing activities only; this is the cumulative total lead time, minus the purchasing lead time.

Cumulative lead times can be used to set the different planning time fences or the Infinite Supply Horizon in Oracle Inventory ATP rules. Using a cumulative lead time instead of a user-defined number of days means that these fences and horizons can shrink as you reduce lead times, without additional maintenance. Cumulative lead times are also helpful in reviewing proposed engineering changes; if you schedule a change inside an item's cumulative lead time, you may require expediting of material to satisfy the new demand. You can calculate cumulative lead times with the Rollup Cumulative Lead Times concurrent program after you have calculated or entered your item lead times.

Purchasing and WIP Attributes

The Purchasable and Build in WIP attributes control what types of orders you can release from the Planner Workbench. One or both of these must be enabled to allow you to release orders. The Make or Buy attribute and sourcing rules control the default type of order that is suggested, but you can override the suggestion with a different order type if the appropriate attribute is enabled.

BOM Information

The following component information from your bills of material is worth special mention in terms of planning:

• Operation Seq Identifies the routing operation at which the component is consumed. If you are planning by Operation Start Date, this information is used along with the Lead Time % from the item's routing to estimate when the component is needed. If your plan options specify planning by Order Start Date, this information is irrelevant for planning purposes; all material is planned to be available at the start of the job.
• Planning Percent Used in forecast explosion and in planning for Model, Option class, and Planning bills of material. The planning percent reflects the anticipated distribution of the component. Note that planning percents do not have to equal 100 percent. Certain optional components in a model will naturally total something other than 100 percent usage, and you can explicitly over- or underplan if you choose.
• Yield A decimal factor that represents the anticipated loss (or gain) of the component in manufacturing. Note that yield is expressed as a decimal factor and defaults to 1. A yield of .98, for example, represents that you expect to lose 2 percent of the component in the manufacturing process; planning will inflate the gross requirements of this component accordingly. Compare this with the item attribute Shrinkage; shrinkage represents an anticipated loss of the assembly in manufacturing or a purchased part during the procurement cycle. Planning will inflate the order quantity to account for shrinkage. It is expressed as a decimal quantity and defaults to 0. A shrinkage of .02, for example, indicates that you expect to reject 2 percent of the material during incoming inspection if it's a purchased part. These two factors, shrinkage and yield, are often confused. Though it is sometimes possible to manipulate the factors to give the same result, they are intended to model two very different events.
• Material Control For the most part, the material control attribute affects manufacturing execution, but two values have special significance in planning. A value of Supplier is intended to identify a part that is provided by your supplier as part of outside processing; you are not responsible for procuring this part, so planning will not plan it. A value of Phantom invokes planning's phantom-part logic; it will "blow through" these parts and plan for their components directly. (Internally, planning actually does generate orders for the phantom, but these orders are visible on the Planner Workbench only if you query them explicitly.)

Planning Manager

The Planning Manager is a concurrent program (not a Concurrent Manager, despite the name); its function is to manage many of the "housekeeping" activities required in the planning environment. For example, the Planning Manager performs forecast consumption and master schedule relief. It also processes the forecast and master schedule interfaces, validating the data and populating the forecast and master schedules tables.

It is important that the Planning Manager be active. If it is not, you might see some unexpected results in planning. For example, you will not see discrete jobs or purchase orders for master schedule item in your plans; the rationale is these might not have been reviewed for master schedule relief, and if that relief did not occur, planning might overstate the master schedule.

The Planning Manager typically runs continually in a production environment, though the program itself executes on a regular interval; during the day it will execute and then schedule itself (with the same concurrent request ID) to run again. The next day, a new concurrent request ID will be assigned.

You can determine if the Planning Manager is active by examining the Active check box on the Planning Manager form, by using the View Requests form (the program should be running or pending), or by examining its log file for recent activity. You start the Planning Manager on the Launch Planning Manager form; the only parameter required is the Processing Interval. Oracle recommends starting with the default interval of 30 seconds.

Summary

This chapter covered the common features of single-organization MRP and multiorganization Advanced Supply Chain Planning. It described the planning process and basic forecasting, master scheduling, and capacity planning terminology and activities. This chapter described engineering's impact on planning and the unique characteristics of repetitive planning and kanban planning. It also covered basic setup steps, including the critical item and bill of material attributes that control the planning process.

The following chapters provide details on Oracle Demand Planning and the unique features of MRP and ASCP.

Digg This!     StumbleUpon     Del.icio.us

RELATED CONTENT Supply chain strategies Tips for manufacturing production planning and scheduling with MES Using MES software to improve supply management planning and optimization Oracle E-Business Suite Manufacturing and Supply Chain Management Manufacturing capacity planning and production scheduling process A plant manager's guide to supply chain best practices Sales and operations planning for manufacturing Manufacturing plant information management Manufacturing supply chain strategy: KPI and execution in process industries Manufacturing operations management and planning based on strategic models Information integration in manufacturing: Process control and planning software Supply chain planning and execution Supply chain visibility software is key for global manufacturers Inventory management trends focus on improved forecasting Supply chain execution software manages daily manufacturing operations Demand planning software forecasts trends using past, present data Inventory management software helps manufacturers meet customer demand Supply chain planning software keeps up with manufacturing changes True challenge for manufacturing QA comes at supply chain level Understanding how technology can support manufacturing quality improvement initiatives Getting started with supply chain management training Closed-loop inventory management helps manufacturers build demand planning strategies Supply chain management software selection for manufacturers Supply chain visibility software is key for global manufacturers Inventory management trends focus on improved forecasting Supply chain execution software manages daily manufacturing operations Demand planning software forecasts trends using past, present data Determining the ROI of a WMS upgrade Inventory management software helps manufacturers meet customer demand Supply chain planning software keeps up with manufacturing changes Guide to systems integration with ERP ERP SCM integration expands manufacturing options ERP supply chain management guide

RELATED GLOSSARY TERMS Terms from Whatis.com − the technology online dictionary advanced planning and scheduling (APS)  (SearchManufacturingERP.com) closed loop manufacturing resource planning (MRP)  (SearchManufacturingERP.com) demand flow scheduling system  (SearchManufacturingERP.com) demand-driven manufacturing  (SearchManufacturingERP.com) discrete manufacturing  (SearchManufacturingERP.com) finite capacity scheduling  (SearchManufacturingERP.com) process manufacturing  (SearchManufacturingERP.com) supply chain execution (SCE)  (SearchManufacturingERP.com) supply chain planning (SCP)  (SearchManufacturingERP.com) supply chain visibility (SCV)  (SearchManufacturingERP.com)

RELATED RESOURCES 2020software.com, trial software downloads for accounting software, ERP software, CRM software and business software systems Search Bitpipe.com for the latest white papers and business webcasts Whatis.com, the online computer dictionary