We try regularly to highlight articles sourced from APICS, the Association for Operations Management, that we feel promote better manufacturing or production practices. In their March/April magazine, there are several of note, one of which we’ll recap here today, given its simple practicality. Appropriately, we’re talking here about keeping one’s approach to process improvement through technology simple.
Contributing author Bradley McCollum is a sales and operations planning manager for a consumer products company. He stresses the importance of simplicity in the design phase of S&OP, and gives an example from the supply side. He links a bottom up perspective with a clarity that comes from a top-down perspective, when he addresses a split between demand (“market-facing families”) and supply (“capacity groupings”).
McCollum reminds us that demand drivers typically have little to do with how we supply, and illustrates with a product his firm sells that can be manufactured internally and/or procured from vendors. These two supply paths have very different lead times, constraints and costs. It’s necessary to understand those differences between making and purchasing, but from a strictly demand perspective, where and how items are made is irrelevant. I simply have a single market-facing family on the demand side, and different supply groupings on the supply side.
Instead of requiring more detail to solve the issue, their answer was “to build a simplifying solution.”
Now, as he notes, just because it’s an assumption doesn’t mean it’s not vetted by history and testing – in fact, it must be. He needed to understand what portion of demand was provided by each supply group, and did the historical analysis to find that out. Once he did, McCollum found in his company’s case that 70% of demand – regardless of overall volume – was for items produced internally. The other 30% was for items sourced externally.
Since this was relatively consistent, instead of requiring greater detail in forecasting over long time horizons with elaborate rollup forecasts, they simply use this 70/30 assumption “to translate projected demand into supply-specific requirements.”
By checking these assumptions across the data from time to time, a balance could be monitored and maintained. The whole process enabled his teams to simplify what might have been a challenging ‘hump’ in the operations planning process yet still remain data driven — a real-world illustration of the K.I.S.S. principle. He ends his piece quoting Leonardo da Vinci, who said “Simplicity is the ultimate sophistication.”