Sponsored by:
BYLINE HERE AND OTHER CONTRIBUTOR INFOMATION
CI DILEMMA OCTOBER 2019
CI Dilemma
Survival of the loudest
A manufacturer is struggling to get its sales and production departments seeing
eye-to-eye, with on-site standards and sales targets beginning to slip as a result
I am currently embroiled in an internal
row around sales demand. The usual
conversation will include some words
around how bad our customers are at
forecasting and how we all have to
jump through hoops to make sure products
are delivered to the customer on time.
There is a barely concealed tension
between the sales and production
departments. Sales struggle to understand
production’s problems and production
seem to think sales are constantly doing
Caught in the crossfi re is the planning
and scheduling department, which is
trying their best to balance the everchanging
needs of the shopfl oor with our
commitments to the customer.
Unfortunately, with all of this going
on, it is easy to fall into a situation where
orders are overdue, and products are
manufactured on a “who shouts loudest”
basis. Nobody wins when this is happening.
How can I make things amicable again?
CI Solution Julian Winn, principal consultant, The Manufacturing Institute
Many years ago, supermarkets introduced
loyalty cards for customers. The main
reason for doing this was to track and
understand the patterns of demand for
their products. What they found was that
almost 80% of what people buy each week
is the same. This information can be used
to make supply chains and stock holdings
as effi cient as possible. Many goods are
perishable and it is important not to be
left holding stock that may be about to go
out of date.
One area where many companies have
little knowledge is their own sales demand.
In manufacturing, few companies can look
ahead with any certainty or fi nd the time
to look back at what they make and sell.
The good news is that all companies
know what they have sold, how many they
have sold and when they sold them. This
is because all of this information will be
on the invoice to the customer. It is usually
relatively easy to export this data in a
format that can be used for analysis in
Excel. Very importantly, the focus here is
on what was sold, not what was made.
Many companies speculatively make
products (for many diff erent reasons)
and these often end up in stock. We are
interested in actual customer demand –
in other words, actual sales.
Back in the 1980s Lucas Industries
developed the concept of Runner, Repeater
and Stranger products. They were trying to
understand patterns in their sales demand,
and use this to plan and schedule
production more effi ciently. To do this,
they settled on some basic defi nitions to
help with their analysis:
Runner – a product made and
sold every month of the year;
Repeater – a product made
and sold at least six to nine
months of the year;
Stranger – a product made
and sold for fewer than six
months of the year.
Lucas took one year’s worth
of sales data, to allow for seasonal
demand, and ran their analysis. What
they found was that typically 80% of their
sales volume related to less than 20% of
their products (where a product had been
sold in that year). Anyone who is familiar
with Pareto’s 80/20 rule may not fi nd this
result so surprising, but it’s what you do
with the results that counts.
Lucas used the results of their analysis
in a number of ways. They realised that if
they could dedicate equipment and people
to the Runners, and not mix these products
with highly unpredictable Strangers, it
would allow them to maximise production
effi ciencies on the Runner lines. They
recognised that because demand for
Stranger products was so much harder
to predict, they would need a more
fl exible work area and skilled people to
manufacture these as orders came in. In
some cases, they went back to customers
their best to promise the undeliverable.
for Stranger products and said that they
were going to either delist the product,
extend the lead-time or increase the price.
Clearly the ability to do this depended
on the customer, and in some cases
Stranger products were highly
profi table, but by following this
approach, many Stranger
products were delisted.
This leaves the Repeater
products, which were planned
in for manufacture every couple
of weeks. The approach here was
to align them with similar Runner
products, as a way to reduce the
downtime from change-overs and set-ups.
Another benefi t of this approach was
to help decision making around what
products to stock and what products to
make to order. The risk of stocking
Runners and Repeaters is clearly much
lower than that for a Stranger product.
The outcome for Lucas was a signifi cant
‘calming down’ of the production
operations. As a result, the hidden costs
of expediting products through the plant,
and much of the associated ‘fi re-fi ghting’
were signifi cantly diminished.
Many manufacturers have benefi ted
from this approach to sales demand
analysis. It allows a much more sensible
and rational discussion between planners/
schedulers, production and sales people,
and helps better decisions to be made
about what to make, and when.
HAVE YOUR SAY: Do you agree with our expert? Have would you get sales and production working in harmony again?
Send us your views and you could appear here next month. Email: chris.beck@markallengroup.com
10 www.manufacturingmanagement.co.uk
/www.manufacturingmanagement.co.uk
link