Demystifying Finite Capacity ERP Production Scheduling

Manufacturers of all sizes are often challenged to maximize the effectiveness of their finite capacity Advanced Planning and Scheduling (APS)

Many years ago, when I lead a regional ERP user group, I polled our members to see what topics they would most like to see covered at our annual meeting. They were offered a long list of subjects ranging from purchasing to cost accounting to inventory management. However, the greatest response was received for the subject of production scheduling.

It’s understandable why production scheduling and control is at the top of many manufacturers’ minds as areas they would like to improve. Scheduling is very dependent upon other facets of the operation being run effectively and under control. Production scheduling, as a result, is usually one of the last major ERP functionality to be brought under control.

However, I want to propose that most ERP scheduling implementations are never really ever brought under control and don’t ever provide an effective mechanism for shop floor control as originally had been hoped. This is because the system has been set up and used in a way that inadvertently creates feedback loops, thus generating schedule date (and in some cases, MRP order quantity) volatility. A system that can’t decide what is needed and when it is needed is indeed no system at all.

It is also important to recognize that ERP schedule volatility can be a major root cause of long lead times, material shortages, overstock, and poor on-time performance.

The Root of The Problem

Finite-capacity scheduling can be a very useful tool for manufacturers, but only if it is implemented and utilized in a way that truly supports the business’ requirements in a way that is consistent with the principles of a sound control system. The software also has to be capable of meeting these needs although many do not, even those that are advertised as advanced planning and scheduling (APS) solutions.

The root of the problem lies in understanding (really understanding) how the elements of ERP scheduling can form a control system that effectively meets a variety of business objectives. 

The first question to ask is what is a production schedule good for?

We can pose a variety of business questions that we would generally look to a production schedule to answer. Let’s organize some of these questions into two categories:

BASELINES:

• When does the customer need the product?
• When is a job due?
• When is each manufacturing operation due?
• Is this operation early or late?
• Is this job as a whole early or late?
• When are materials needed in-house?
• When should materials be ordered?

PROJECTIONS:

• When can the customer expect the product to be delivered?
• When is a particular job expected to be completed?
• When is a particular manufacturing operation expected to be completed?
• When is a material expected to be received?

You may recognize these as basic “scheduling” questions. The reason for separating them into two categories is that they both involve two different mutually exclusive scheduling assumptions that can’t coexist within a single schedule. That means that your ERP system to be able to answer all of these business questions at all levels.

You may also recognize that the questions listed on the left side involve “baseline” dates that should (in general) remain static to provide an accurate characterization of demand, whereas the dates on the right should be dynamically updated to provide up-to-date “projections” that characterize the organization’s ability to supply. The nature of these two classes of schedule dates are different and must be managed accordingly.

You should know that this is not something that you can generally expect an ERP consultant or software vendor to point out or even be cognizant of. 

This three-minute video further visually illustrates the issues involved and why they are problematic:  

So How Do You Solve this?

As the video points out, the solution is to separate the functions of the BASELINE and PROJECTED schedules, each configured to correctly calculate dates that appropriately address all of the applicable business questions for every operation, job, and order for all corners of the factory at all levels of the bill of materials. This provides the basis for a stable, scalable, and effective shop floor control system.

What Are the Benefits?

One of the primary benefits of adopting this approach to production scheduling is that you can often use your existing ERP software with no additional capital investment. With this methodology in place, manufacturers are likely to experience the following benefits:

• BASELINE due dates will be available to all corners of the factory and supply chain to drive more effective customer-driven work priorities
• Date volatility is greatly diminished since feedback loops have by and large been disabled
• PROJECTED completion dates will be more accurate, which can be useful in making reliable promises to the customer early in the order management process
• A stable BASELINE schedule can be used as the foundation for establishing lean pull-based signals throughout the factory to regulate material flow

Lean Manufacturing Flow

This last benefit of being able to institute lean shop floor signals must be underscored. This is not a standard approach, but rather an innovation referred to as the Lean MRP methodology. It offers the prospect of mediating lean flow using ERP in job shop environments even in those cases involving a large number of part numbers and deep bills of materials.

David Altemir is the President and Senior Consultant for Altemir Consulting