Many manufacturing companies react and build to customer orders. However, there is a fine line between waiting too long to begin fulfilling orders (resulting in unhappy customers) and overproducing (creating an unwanted surplus). Levelized production is a lean concept that encourages producing the same amount of product each day. This works in manufacturing environments that are reasonably predictable – recognizing that pure MTS (make-to-stock) manufacturing is less common than MTO (make-to-order) nowadays. To accomplish levelized production, history and forecasting numbers based on your ERP system are mandatory. Understanding this information will create balance and eliminate over/under production.
For example, let’s say a company receives orders for 60 widgets in a particular week: 30 orders on Monday, 10 on Wednesday, and 20 on Friday. Had this scenario been reasonably anticipated through order history and forecast (thanks to ERP), the manufacturer may have built 12 widgets per day for a week, or longer if the pattern is expected to continue. The production process is level and in sync with demand. This may appear to be an oversimplification, but proper ERP tools – lead times, scrap factors, bills of material, inventory positions, etc. – can help companies understand realistic numbers, establish sound “levels,” and manage their business better.
Here are just a few benefits of levelized production:
Reduced Labor Costs – Simpler Goals
Spikes in production demand may require additional work shifts, overtime expenses, or the employment of contract workers to help fulfill orders. In contrast, levelized production maintains steadier labor costs and simplifies expectations of production workers, schedulers, and supervisors.
Clearer Inventory Position
Understanding and predicting how much inventory is, or will be, on hand not only clarifies requirements of your production personnel, it does the same for financial expectations as the cost of carrying inventory is understood and minimized.
Improved Quality Control
In the event of a quality problem, with levelized production you immediately know the impact on units affected. Consider, in contrast, a large batch that is built and stored for a long period of time before a quality problem is found – not only is it much more costly, it’s also harder to get at the root cause.
Improved Customer Service
Levelized production prevents capacity from being fully booked and/or overbooked, increasing your responsiveness to special requests or to fulfill large orders on time. This results in better informed customer service personnel and happier customers.
Would you be interested in using ERP systems to feed a levelized production approach for your operation? If so, the experts at Acuity would love to hear more about your production planning processes and help you implement a strategy tailored to your business! Contact us today for more information.