A Pharmaceutical Odyssey

IntroductionJust-In-Time (JIT), a production philosophy pioneered by Toyota in the 1970s, it became popular with Toyota’s rapid growth and was quickly adopted globally by major OEMs during the 1980s and 1990s. The implementation of JIT by these OEMs attempted to integrate their operations with their suppliers and vehicle dealerships into a seamless supply chain.&nbsp;Implementing JITOnce JIT is implemented, a supply chain management system is expected to showcase the following characteristics/benefits:‘Pull’ based inventory movementInventory movement will be ‘just in time’ in the entire supply chain and is based on pull from the previous node or “bin availability”. For instance, when a bini signals that it needs replenishment, it initiates the movement of materials from the supplier or storage area to the production line. This movement is typically rapid and aligned with the production schedule. Forecasts will be used only for high level planning. E.g. for raw material planning but not for actual RM procurement or for planning production. The idea is that any movement of inventory before the actual need for it can generate excess inventory, and any movement later will create shortages.Frequent DeliveriesSuppliers, OEMs, and dealerships would practice frequent and small deliveries. For e.g., raw materials will be received just-in-time for production at the production line.Smooth and stable production flowA smooth and continuous production flow is expected to be seen at suppliers and OEMs without frequent stoppages or disruptions.Reduced/Stable Inventory LevelsSuppliers, OEMs, and dealerships will have very limited stock of raw materials, work-in-progress, and finished goods. These levels will stay stable – no large variability across the supply chain.Lean ManufacturingLean manufacturing principles, actively identifying and eliminating waste, focusing on value-adding activities, and optimizing processes is followed by the OEM and all suppliers.Continuous ImprovementCompanies/entities will have a culture of Kaizen (continuous improvement) and encourage employee involvement in identifying and implementing process enhancements. Actions such as standardization, quality initiatives, set-up time reduction, etc., are taken to reduce variability in the system and improve synchronization.To sum up, by emphasizing precise production and timely delivery of goods without excess inventory, JIT‘s pull mode of operations promises efficiency and reduced costs for suppliers, OEMs and Dealerships. The reports of benefits experienced by many international vehicle manufacturers in their operations attracted many large Indian OEMs to adopt JIT as well.However, even a small dipstick survey can indicate that all is not as expected.The challengesWhile most OEMs (75%) have implemented JIT practices in their processes, their supply chain partners have not been roped in JIT. This means the JIT implementation is not end to end in any Indian OEM’s supply chain. One exception seen is of an MNC OEM in India who has done a zero inventory model at dealer level, with real demand from end consumer demand triggering inventory movement. Some have also done a demand-pull replenishment for only spare parts from their OEM warehouse to dealers. However, most follow a hybrid push-pull system – i.e. of monthly/weekly forecast based ordering from dealers, scheduling monthly production requirements from suppliers with daily inventory movement to OEM plants as per demand.<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//1_1708591358.png" width="2084" height="2084"></figure>Poor stability in the supply chain – expediting and firefightingMoreover, the stability that a JIT supply chain is expected to offer is not realized. As per 90% of respondents in this survey, JIT is partially and ineffectively implemented by their firms. The lack of stability can also be seen in two parameters - the level of expediting and the variability of the inventory profile.With significant expediting and firefighting (75% of the respondents of this research indicated that JIT system involves a lot of firefighting), attempt is made to ensure 1-2 days of full kit at OEMs and suppliers but time to time kits are incomplete for production. The availability of full kits is found to be only 75% at OEMs and 70% at suppliers for assembly. Even if one item is not available, the plan has to be changed. Consequently, the production plan adherence is poor especially at suppliers (only 80-85%).<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//2_1708591390.png" width="2084" height="2084"></figure>Poor stability in the supply chain - inventory variability&nbsp;At the same time, even though suppliers (Tier 1) are included by most of the OEMs in a JIT partnership, there are clear signs that the inventory benefits are skewed towards the OEMs. Thus, while the OEM may have only one day or one shift worth of inventory, the suppliers hold 10-12 days of inventory for OEMs, even when they are only a few hours away from the assembly plants of the auto OEM. Similarly, dealerships maintain 1-3 months sales worth of stocks depending upon the season.&nbsp;<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//3_1708591415.png" width="2084" height="2084"></figure>90% of the survey respondents also reported that in the current practice, the inventory stays in the supplier’s books till it is inwarded in the OEM’s facility while it moves to the dealership account on a factory exit basis from the OEM. The trend is common across all OEMs surveyed and 90% of the suppliers affirmed this practice. Similarly, 85% of the Tier 1 suppliers tend to follow the same practice of inwarding with their suppliers.Further, the inventory of the entire supply chain goes haywire from time to time. For example, after COVID-19, the dealer inventory of the OEMs ballooned, and the reaction of OEMs for production correction had a significant lag (about 6-7 months of lag). After COVID, the glut in the market was followed by shortages since OEMs could also not ramp up when demand picked up. This infamous ‘bull-whip’ effect is part of every economic downturn.Combination of push-pull inventory movementA closer look at the supply chain can show other indicators to show that inventory movement is not fully ‘pull-based’. Many OEMs get inventory from suppliers in JIT. However, production in the entire supply chain (according to 100% of suppliers and OEMs surveyed) is based on forecasts rather than actual consumption or demand.<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//4_1708591437.png" width="2084" height="2084"></figure>However, market demand fluctuates, and these forecasts don’t match reality (accuracy is 60%-80%). Consequently, issues such as rescheduling, searching for missing components and daily expediting ensues. It is not uncommon for 15%-25% of the full kits needed for the day to be incomplete at many OEMs in spite of regular full kit meetings. Expediting by the OEMs leads to a change in what is demanded daily from the supplier vis-a-vis the order schedule. There is up to 25% variation experienced by suppliers with OEM schedules.<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//5_1708591453.png" width="2084" height="2084"></figure>&nbsp;Because plant scheduling and material planning of suppliers is based on the monthly or weekly forecast of the OEM, the suppliers’ ability to respond quickly to OEMs’ daily production plan changes is restricted. Even though the supplier keeps significant inventory buffers to try and prevent the situation (10-12 days), there is often a mismatch in what can be supplied and what the OEM demands; therefore, suppliers often fail to meet changing requirements at a daily level. It must be noted here that while some of this inventory kept by the supplier is by design, some is due to a change in plan by the OEM (made as per plan but not lifted yet). The Tier 1 supplier has a similar relationship with their vendors.Real problemThese findings from this research point to<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//jit1_1708592057.png" width="2084" height="2084"></figure>&nbsp;As can be seen in the study, in spite of JIT (or because of it), a majority of Indian Auto OEMs are struggling to effectively manage demand - especially at the SKU level, across various time horizons. Shorter product cycles, changes in regulations, and an accelerated introduction of new components into the market are aggravating demand fluctuations. In this environment of high demand variability across products, companies do not have the ability to do demand levelling, i.e. having a cadence of SKUs across time periods (Heijunka). Without this levelling, adhering strictly to a JIT-based approach (bin availability-based inventory movement) throughout the supply chain becomes difficult. Any attempt to do so is detrimental since small disturbances will have a cascading effect on the operations of all entities in the supply chain.Hence, a system has been established in India where JIT/bins are used within OEM’s operations and for moving inventory from suppliers to OEMs. So, large auto OEMs maintain little or no inventory (1 shift or day’s inventory inside their premises). However, they require suppliers to keep an adequate stock of supplies at warehouses near OEM assembly lines. Moreover, since production at the supplier is not based on JIT but on forecasts (inevitably inaccurate), this also leads to the accumulation of inventory. Wherever suppliers are larger than their own vendors, a similar situation ensues.Direction of solutionHow, then, can the automotive supply chain be improved? It is well accepted that a pull system is superior to a forecast-based approach because it minimizes waste, reduces excess inventory, and ensures production or ordering aligns precisely with real customer demand. So, any Direction of Solution proposed should protect these advantages and offer a practical and effective end-to-end pull system in this industry that offers a win-win-win (win for all partners).In an environment of inherently high variability, trying to eliminate it altogether, as attempted by the Heijunka, is impractical. However, variability can be dampened considerably with the help of buffers. For such a buffered system to be implemented and to make sure that this system responds to market demand with agility and also, the following steps have to be taken:<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//6_1708591534.png" width="2084" height="2084"></figure>The most effective starting point to implement a system of 'buffers replenishing buffers' will be on the demand side of the auto OEM. We can mitigate demand spikes at the dealer level by transferring inventory from the OEM to the dealer based solely on consumption rather than adhering to fixed sales targets/forecasts.This will involve the OEM creating a central warehouse to maintain FG inventory that can absorb fluctuations in demand from dealerships during the supply lead time. Production at the OEM should be driven by actual consumption from the warehouse (a fall in buffer level or norm), rather than on sales forecasts. This will improve load balancing and operational flow at the plant.Component suppliers can also maintain an FG inventory from which they supply the OEM's RM inventory based on daily consumption. The suppliers should transition to pull-based production, producing based on actual off-take from their FG warehouse rather than using monthly schedules. This will decouple them from any fluctuations in the OEM’s manufacturing plans as well. A similar system, which helps reduce supply lead-time and ensures adequate availability of feeding components from Tier II vendors, can be established.2 Implement an execution-based priority method to deal with variability in demand and capacity so that the system gets clear signals on what to focus upon when total demand across products exceeds capacity Procurement and production based on daily consumption rather than forecasts will allow for better responsiveness to changing demand patterns. However, since demand is not levelled, it is possible that total daily demand across products exceeds capacity at an entity (which is not a problem in an environment where demand is levelled). So, in this situation, a priority system is needed to identify which products to produce/dispatch, etc. For every item, a target inventory can be set based on ‘paranoid’ consumption during replenishment time (the maximum forecasted demand during the replenishment time factored by the fluctuations in the replenishment time). The prevailing level of stock, as compared to this target level of various products/buffer levels, can be used to signal priority using simple colour codes. For example, on a daily basis, some FG SKUs will have lower stock compared to the target level while others may have higher stock. A color-based priority system will, in this situation, signal the following:<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//7_1708591604.png" width="2084" height="2084"></figure>Naturally, Red SKUs should be prioritized over Yellow and Green. This system is important as reacting to small quantity consumption is clearly inefficient. Thus, the colour system provides the necessary flexibility for these decisions.<figure class="image"><img style="aspect-ratio:2084/2084;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//8_1708591628.png" width="2084" height="2084"></figure>The colour-based system can also trigger adjustments in inventory norms. For instance, if sales rates consistently exceed supply rates or supply, the norm can be increased. A mechanism can also be put in place to adjust the norm in preparation for known jumps or drops in sales (e.g. major promotional events by the OEM). This method of tracking priority zones of SKUs and periodic changing of norms of the buffers by forward and backward sensing of demand needs can be put in place (giving very high transparency in the system) with the help of end-to-end IT infrastructure.ConclusionThe study highlights the limitations of JIT (Just-In-Time) manufacturing. Clearly, implementing JIT is not advisable in the current automobile industry environment, as demand variability is high across products, and companies are unable to level demand as Toyota once could. Attempts by OEMs to avail themselves of the inventory benefits of JIT have resulted in the creation of two separate worlds within the supply chain: a JIT world at the OEMs and a non-JIT world at partner organisations. This has led to stock pileups with partners in the supply chain, resulting in increased costs and low capital turnover for suppliers and dealers, often leading to friction in relationships.To implement a pull system that can benefit the entire supply chain, a solution is proposed involving buffering and intelligent decoupling to absorb variability in the system. This approach ensures seamless flow, provides flexibility, and aligns the supply chain with market movements without increasing inventory levels in the supply chain.&nbsp;i Bins are storage locations or containers used to hold a specific quantity of components or materialsiii VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity, describing the unpredictable and challenging nature of modern business environments

Our study on India's auto industry could not find any end-to-end JIT implementation in the supply chains of auto companies. We explore why and propose an alternative pull system with buffers and smart decoupling to overcome the limitations of JIT while securing its advantages.

Just-In-Time or Just Not There? Reevaluating India's Automotive Supply Chain Dynamics

IntroductionJust-In-Time (JIT), a production philosophy pioneered by Toyota in the 1970s, it became popular with Toyota’s rapid growth and was quickly adopted globally by major OEMs during the 1980s and 1990s. The implementation of JIT by these OEMs attempted to integrate their operations with their suppliers and vehicle dealerships into a seamless supply chain.&nbsp;Implementing JITOnce JIT is implemented, a supply chain management system is expected to showcase the following characteristics/benefits:‘Pull’ based inventory movementInventory movement will be ‘just in time’ in the entire supply chain and is based on pull from the previous node or “bin availability”. For instance, when a bini signals that it needs replenishment, it initiates the movement of materials from the supplier or storage area to the production line. This movement is typically rapid and aligned with the production schedule. Forecasts will be used only for high level planning. E.g. for raw material planning but not for actual RM procurement or for planning production. The idea is that any movement of inventory before the actual need for it can generate excess inventory, and any movement later will create shortages.Frequent DeliveriesSuppliers, OEMs, and dealerships would practice frequent and small deliveries. For e.g., raw materials will be received just-in-time for production at the production line.Smooth and stable production flowA smooth and continuous production flow is expected to be seen at suppliers and OEMs without frequent stoppages or disruptions.Reduced/Stable Inventory LevelsSuppliers, OEMs, and dealerships will have very limited stock of raw materials, work-in-progress, and finished goods. These levels will stay stable – no large variability across the supply chain.Lean ManufacturingLean manufacturing principles, actively identifying and eliminating waste, focusing on value-adding activities, and optimizing processes is followed by the OEM and all suppliers.Continuous ImprovementCompanies/entities will have a culture of Kaizen (continuous improvement) and encourage employee involvement in identifying and implementing process enhancements. Actions such as standardization, quality initiatives, set-up time reduction, etc., are taken to reduce variability in the system and improve synchronization.To sum up, by emphasizing precise production and timely delivery of goods without excess inventory, JIT‘s pull mode of operations promises efficiency and reduced costs for suppliers, OEMs and Dealerships. The reports of benefits experienced by many international vehicle manufacturers in their operations attracted many large Indian OEMs to adopt JIT as well.However, even a small dipstick survey can indicate that all is not as expected.The challengesWhile most OEMs (75%) have implemented JIT practices in their processes, their supply chain partners have not been roped in JIT. This means the JIT implementation is not end to end in any Indian OEM’s supply chain. One exception seen is of an MNC OEM in India who has done a zero inventory model at dealer level, with real demand from end consumer demand triggering inventory movement. Some have also done a demand-pull replenishment for only spare parts from their OEM warehouse to dealers. However, most follow a hybrid push-pull system – i.e. of monthly/weekly forecast based ordering from dealers, scheduling monthly production requirements from suppliers with daily inventory movement to OEM plants as per demand.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//1_1708591358.png"></figure>Poor stability in the supply chain – expediting and firefightingMoreover, the stability that a JIT supply chain is expected to offer is not realized. As per 90% of respondents in this survey, JIT is partially and ineffectively implemented by their firms. The lack of stability can also be seen in two parameters - the level of expediting and the variability of the inventory profile.With significant expediting and firefighting (75% of the respondents of this research indicated that JIT system involves a lot of firefighting), attempt is made to ensure 1-2 days of full kit at OEMs and suppliers but time to time kits are incomplete for production. The availability of full kits is found to be only 75% at OEMs and 70% at suppliers for assembly. Even if one item is not available, the plan has to be changed. Consequently, the production plan adherence is poor especially at suppliers (only 80-85%).<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//2_1708591390.png"></figure>Poor stability in the supply chain - inventory variability&nbsp;At the same time, even though suppliers (Tier 1) are included by most of the OEMs in a JIT partnership, there are clear signs that the inventory benefits are skewed towards the OEMs. Thus, while the OEM may have only one day or one shift worth of inventory, the suppliers hold 10-12 days of inventory for OEMs, even when they are only a few hours away from the assembly plants of the auto OEM. Similarly, dealerships maintain 1-3 months sales worth of stocks depending upon the season.&nbsp;<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//3_1708591415.png"></figure>90% of the survey respondents also reported that in the current practice, the inventory stays in the supplier’s books till it is inwarded in the OEM’s facility while it moves to the dealership account on a factory exit basis from the OEM. The trend is common across all OEMs surveyed and 90% of the suppliers affirmed this practice. Similarly, 85% of the Tier 1 suppliers tend to follow the same practice of inwarding with their suppliers.Further, the inventory of the entire supply chain goes haywire from time to time. For example, after COVID-19, the dealer inventory of the OEMs ballooned, and the reaction of OEMs for production correction had a significant lag (about 6-7 months of lag). After COVID, the glut in the market was followed by shortages since OEMs could also not ramp up when demand picked up. This infamous ‘bull-whip’ effect is part of every economic downturn.Combination of push-pull inventory movementA closer look at the supply chain can show other indicators to show that inventory movement is not fully ‘pull-based’. Many OEMs get inventory from suppliers in JIT. However, production in the entire supply chain (according to 100% of suppliers and OEMs surveyed) is based on forecasts rather than actual consumption or demand.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//4_1708591437.png"></figure>However, market demand fluctuates, and these forecasts don’t match reality (accuracy is 60%-80%). Consequently, issues such as rescheduling, searching for missing components and daily expediting ensues. It is not uncommon for 15%-25% of the full kits needed for the day to be incomplete at many OEMs in spite of regular full kit meetings. Expediting by the OEMs leads to a change in what is demanded daily from the supplier vis-a-vis the order schedule. There is up to 25% variation experienced by suppliers with OEM schedules.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//5_1708591453.png"></figure>&nbsp;Because plant scheduling and material planning of suppliers is based on the monthly or weekly forecast of the OEM, the suppliers’ ability to respond quickly to OEMs’ daily production plan changes is restricted. Even though the supplier keeps significant inventory buffers to try and prevent the situation (10-12 days), there is often a mismatch in what can be supplied and what the OEM demands; therefore, suppliers often fail to meet changing requirements at a daily level. It must be noted here that while some of this inventory kept by the supplier is by design, some is due to a change in plan by the OEM (made as per plan but not lifted yet). The Tier 1 supplier has a similar relationship with their vendors.Real problemThese findings from this research point to<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//jit1_1708592057.png"></figure>&nbsp;As can be seen in the study, in spite of JIT (or because of it), a majority of Indian Auto OEMs are struggling to effectively manage demand - especially at the SKU level, across various time horizons. Shorter product cycles, changes in regulations, and an accelerated introduction of new components into the market are aggravating demand fluctuations. In this environment of high demand variability across products, companies do not have the ability to do demand levelling, i.e. having a cadence of SKUs across time periods (Heijunka). Without this levelling, adhering strictly to a JIT-based approach (bin availability-based inventory movement) throughout the supply chain becomes difficult. Any attempt to do so is detrimental since small disturbances will have a cascading effect on the operations of all entities in the supply chain.Hence, a system has been established in India where JIT/bins are used within OEM’s operations and for moving inventory from suppliers to OEMs. So, large auto OEMs maintain little or no inventory (1 shift or day’s inventory inside their premises). However, they require suppliers to keep an adequate stock of supplies at warehouses near OEM assembly lines. Moreover, since production at the supplier is not based on JIT but on forecasts (inevitably inaccurate), this also leads to the accumulation of inventory. Wherever suppliers are larger than their own vendors, a similar situation ensues.Direction of solutionHow, then, can the automotive supply chain be improved? It is well accepted that a pull system is superior to a forecast-based approach because it minimizes waste, reduces excess inventory, and ensures production or ordering aligns precisely with real customer demand. So, any Direction of Solution proposed should protect these advantages and offer a practical and effective end-to-end pull system in this industry that offers a win-win-win (win for all partners).In an environment of inherently high variability, trying to eliminate it altogether, as attempted by the Heijunka, is impractical. However, variability can be dampened considerably with the help of buffers. For such a buffered system to be implemented and to make sure that this system responds to market demand with agility and also, the following steps have to be taken:<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//6_1708591534.png"></figure>The most effective starting point to implement a system of 'buffers replenishing buffers' will be on the demand side of the auto OEM. We can mitigate demand spikes at the dealer level by transferring inventory from the OEM to the dealer based solely on consumption rather than adhering to fixed sales targets/forecasts.This will involve the OEM creating a central warehouse to maintain FG inventory that can absorb fluctuations in demand from dealerships during the supply lead time. Production at the OEM should be driven by actual consumption from the warehouse (a fall in buffer level or norm), rather than on sales forecasts. This will improve load balancing and operational flow at the plant.Component suppliers can also maintain an FG inventory from which they supply the OEM's RM inventory based on daily consumption. The suppliers should transition to pull-based production, producing based on actual off-take from their FG warehouse rather than using monthly schedules. This will decouple them from any fluctuations in the OEM’s manufacturing plans as well. A similar system, which helps reduce supply lead-time and ensures adequate availability of feeding components from Tier II vendors, can be established.2 Implement an execution-based priority method to deal with variability in demand and capacity so that the system gets clear signals on what to focus upon when total demand across products exceeds capacity Procurement and production based on daily consumption rather than forecasts will allow for better responsiveness to changing demand patterns. However, since demand is not levelled, it is possible that total daily demand across products exceeds capacity at an entity (which is not a problem in an environment where demand is levelled). So, in this situation, a priority system is needed to identify which products to produce/dispatch, etc. For every item, a target inventory can be set based on ‘paranoid’ consumption during replenishment time (the maximum forecasted demand during the replenishment time factored by the fluctuations in the replenishment time). The prevailing level of stock, as compared to this target level of various products/buffer levels, can be used to signal priority using simple colour codes. For example, on a daily basis, some FG SKUs will have lower stock compared to the target level while others may have higher stock. A color-based priority system will, in this situation, signal the following:<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//7_1708591604.png"></figure>Naturally, Red SKUs should be prioritized over Yellow and Green. This system is important as reacting to small quantity consumption is clearly inefficient. Thus, the colour system provides the necessary flexibility for these decisions.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//8_1708591628.png"></figure>The colour-based system can also trigger adjustments in inventory norms. For instance, if sales rates consistently exceed supply rates or supply, the norm can be increased. A mechanism can also be put in place to adjust the norm in preparation for known jumps or drops in sales (e.g. major promotional events by the OEM). This method of tracking priority zones of SKUs and periodic changing of norms of the buffers by forward and backward sensing of demand needs can be put in place (giving very high transparency in the system) with the help of end-to-end IT infrastructure.ConclusionThe study highlights the limitations of JIT (Just-In-Time) manufacturing. Clearly, implementing JIT is not advisable in the current automobile industry environment, as demand variability is high across products, and companies are unable to level demand as Toyota once could. Attempts by OEMs to avail themselves of the inventory benefits of JIT have resulted in the creation of two separate worlds within the supply chain: a JIT world at the OEMs and a non-JIT world at partner organisations. This has led to stock pileups with partners in the supply chain, resulting in increased costs and low capital turnover for suppliers and dealers, often leading to friction in relationships.To implement a pull system that can benefit the entire supply chain, a solution is proposed involving buffering and intelligent decoupling to absorb variability in the system. This approach ensures seamless flow, provides flexibility, and aligns the supply chain with market movements without increasing inventory levels in the supply chain.&nbsp;i Bins are storage locations or containers used to hold a specific quantity of components or materialsiii VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity, describing the unpredictable and challenging nature of modern business environments&nbsp;

Explore the challenges and benefits of Just-In-Time (JIT) in India's automotive industry supply chain. Learn how JIT implementation impacts inventory management and operational stability.

Have automobile companies in India really implemented Just In Time (JIT)? | Vector Consulting Group

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The hidden obstacles stalling your automated planning system. Discover how to overcome them for improved delivery reliability and higher productivity

Manufacturing Schedulers: What Works And What Doesn’t!

Mr. Srinivasan Prabhu, the Head of Planning at a major pharma company, is having a frustrating day with his colleagues in the Production Planning department. Despite the implementation of a cutting-edge scheduling system over the past several months, his team's workload has only increased. The company, which is heavily focused on exports, has been shelling out large amounts of money in penalties due to delayed deliveries to its customers. The primary objective behind the investment in the scheduling system was to improve the planning process and eradicate the issue of penalties altogether. However, Srini, as he is fondly called, is struggling to justify to the higher-ups why the expensive resource planning system has not delivered the expected results so far. Additionally, a recent audit of the operations team revealed that the tool’s schedule is not being followed either. Surface-level feedback suggests that change management and lack of proper training may be the issue. Still, Srini knows that if those were the issues, the planners wouldn't be able to update the past altered production data in the scheduler to keep up pace with the actual progress.&nbsp;During lunch, Srini discussed his frustrations with Mr. Madhur Seth, the Head of IT, who assuaged him of at least meeting the need of digitalisation of the supply chain. However, Srini needed to be more convinced about the benefits of digitalisation, as it had not resulted in any improvements in on-time performance, inventory reduction, operating expenses, or output. He also questioned the claim that digitalisation could reduce the dependency on people since the planning system was still heavily reliant on human inputs rather than generating schedules that can be strictly adhered to.Srini realises that there could be deeper, underlying issues at play preventing the scheduling tool from being used effectively. He feels that he needs to take a step back and re-evaluate the entire planning process to identify the root cause of the problem.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//image_1697116226.png"></figure>Seems like déjà vu?Have you ever felt like you've hit a dead end with your planning system, despite investing a significant amount of resources into it? Don't worry, you're not alone! Keep reading to discover the core issues that impact such implementations and learn how to establish a planning system that will make you reliable and on-time.Most advanced scheduling systems implemented in manufacturing plants lose relevance very quickly. Either the schedulers operate at a lag of a day or two as compared to the real-time situation on the shop floor, or the planners stop using it completely. And both of these situations have got nothing to do with any technical incapability of a scheduler to model unique rules or manage the complexity of master data. Let us understand why most scheduling systems are not able to survive for long in manufacturing organisations.Mapping the shop floor - Is an exact replica a cause of concern?The science of scheduling primarily focuses on maximizing the utilization of people and equipment, which requires a precise understanding of when resources are available and when they are occupied. Achieving this goal involves configuring a digital twin of the shop floor, where all system resources are mapped to their digital counterparts with identical parameters, including cycle time, set-up/set-down times, cleaning/maintenance schedules, and more.&nbsp;The most highly touted feature of such advanced planning systems is the Gannt Chart view of orders on multiple work centers including their start and end times. This view can give the users an impression of control and precision. Hence, if the parameters do not match, then the expected start and end won’t match at any work centre which will kill the purpose of the implementation itself.&nbsp;<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s1_1708606719.png"></figure>To generate this level of view,&nbsp;herculean efforts are required to configure the plethora of rules for scheduling, sequencing, batching, and routing at all work centres.&nbsp;A research was conducted by Vector involving production planners from 40 Organizations across industries (Equipment manufacturing, Textile, Garment manufacturing, Pharma, Automobile, aluminum casting, etc) for understanding the implementation success and usability of such production schedulers. The study highlighted the various problems that planners were facing. 70% of the respondents expressed that they faced one or the other problem with the scheduler. While many of these unhappy planners had multiple issues with it, when picking the most dominant issue they had with their scheduler, 48% expressed that there is lack of dynamism in the tools, 33% said that the tool is complex to use and 19% claimed difficulties with master data management.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s2png_1708607012.png"></figure><figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//sl_1708608213.png"></figure>70% of these respondents in the survey Vector conducted by Vector was of the opinion that following the schedule generated by the system threatened either delivery commitments or capacity utilization of critical workcenters or both. So, they modified the schedule before implementation. A probing through personal interview into why some are comfortable with the system generated schedule while majority are not, clarified that these were companies that had fairly stable demand, little or no RM issues, and significant extra capacity to able to absorb any random variability. Essentially their ‘constraint’ or bottleneck consistently is in the market and not operations.But in firms which have the constraint in operations, no plan survives first contact with the enemy called Variability.Let us understand how variability attacks these very tenets of a successful production scheduler implementation.In execution, there are two types of variabilities that hit the schedules– Inherent and Forced.&nbsp;&nbsp; <img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//image_1697116502.png"> Inherent variabilities&nbsp;Inherent variabilities are factors that are always present in any manufacturing plant, for e.g. delays in the arrival of raw material or packaging material, machine breakdowns, unexpected quality issues, changes in customer schedules, delay or early arrival of 3rd party inspector, changes in container schedules etc.These last minute variations cannot be modelled upfront on a scheduler, hence requiring additional modifications on the generated schedule to ensure proper utilisation levels.&nbsp;&nbsp; <img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//image_1697116538.png"> Forced variabilities&nbsp;Forced variabilities, on the other hand, are introduced by the participants themselves; for e.g., An escalation from the National Sales Manager for an order under execution ensures many batching/scheduling/sequencing/routing rules are forcefully set aside or modified, and the urgent order is expedited.These inherent and forced variabilities result in a continuous change of schedules at all work centres.This has got the following ramifications<ul><li>If a scheduler is set up to quote due dates against orders, those dates would shift frequently. As a result, the Customer Required Delivery Date (CRDD) itself is taken as the commitment. The only attempt will be to ensure that any new date re-casted due to variability and uncertainty is close to the CRDD. However, in cases when the load is higher than the available capacity, the likely readiness date will keep shifting away from the CRDD.</li><li>On the other hand, if the scheduler is not 're-run' based on the latest impact of variability, then all the Gantt Chart views of start and end dates lose their relevance, and the entire information becomes unusable within no time.</li><li>And if time buffers are used in scheduling to protect against the variability, then the schedule itself will not be precise enough to be shown at a minute level.</li><li>Finite scheduling at all work centres seems necessary to arrive at deterministic start dates in any of them when work centres feed onto one another. But if schedules keep changing in all work centres, then promised benefits of ‘Visibility’ and ‘Control’ become meaningless. These two terms are often marketed as the key selling points. However, if what is visible today changesdrastically in the next shift, then that ‘Visibility’ is non-actionable, which implies it will never give any ‘Control’.</li></ul><figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//image_1708609224.png"></figure>The customers who were initially impressed by the Gantt Chart view of scheduled orders on workstations later realize that the sense of control and precision conveyed by the chart was an illusion, as the constantly changing schedules make it difficult to adhere to the planned timelines.The frequently changing ETAs takes ownership of on-time performance away from the production teams. The scheduler is made the scapegoat. “We did what was best according to the scheduling software…. Sales team should be content with the new date as it is the best possible date given the circumstances…….” is one of the most common excuses.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s4_1708609311.png"></figure>A typical final state of scheduler implementationWhat happens when a schedule is disrupted due to inherent and forced variabilities?A few scheduling software’s make it easier to get back on track; provided there is hard coupling between the scheduling software and the legacy ERP on which the final production orders are created or in case the scheduling software doubles up as a manufacturing execution system. In such scenarios, for some time, given the high expenditure and management focus, the on-ground team will try to keep the scheduler updated by making entries on it post the event has happened. Lag of 1-3 days is usually noticed. But since a Murphy cannot be predicted, they soon realise that a dedicated team is required to keep the scheduler updated with the ground-level happenings.It transforms from being a guiding lighthouse to a lagging shadow. It's like having to manually enter your latitude and longitude every time you want to know your position on Google Maps.What is the benefit of forcefully keeping the scheduler updated? The realization dawns upon eventually, more so when master and transaction data must be continually updated, and then finally, in many cases, the scheduler is reduced to a transaction recording system, while excel spreadsheets take over as the primary tool for scheduling.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s6_1708609369.png"></figure>&nbsp;<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s7_1708609416.png"></figure>The way aheadAn elegant solution has to accept the above realities. Let us understand the implications of the above:<ul><li>If we have to acknowledge the presence of uncertainty and variability, it becomes crucial to recognize that the only aspect that requires protection is the final due date committed to the customer. The schedule of start and end dates on individual work centres is not of great significance</li><li>The above implies that we need to leave aside protective capacity while quoting due dates</li><li>Since constraints control the output of the system, we need to focus on considering the scheduling needs of these work centres to ensure the overall plant is well levelled in terms of demand and capacity.</li></ul>Using protective capacity to quote dates implies that the capacity may get wasted in the execution if the actual variability is less than what has been considered. So the way out is a 3 engine approach.&nbsp;Engine 1 - PlanningRather than accepting a customer-requested delivery date (CRDD), planning should actually plot the order on the key CCRs and check the feasibility of managing delivery on or before the CRDD. If not feasible, the customer should be informed about the possible due date based on the order load on relevant CCRs and a protective buffer time. The buffer time safeguards the order from Murphies and provides enough time for batching/sequence optimisation at critical work centres. In the case of Make to Stock scenarios in the legacy ERP where the WIP is not tagged to an order VectorFlow’s Planning Engine is able to dynamically allocate the WIP while keeping the load on downstream resources balanced and quotes the best possible due date for each order. This due date is the outer boundary which should not be crossed in execution. The batching/sequencing needs to happen in such a way that this date is never crossed. This enables a culture of an On-time delivery promise which is sacrosanct. A release date is derived to define the planned start date of an order on the first work centre. Releasing orders as per the release date prevents unwanted queueing on the shop floor.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//sr1_1708609542.png"></figure>Engine 2 - ExecutionDuring execution, the arrival of raw materials, packaging materials and other bought- out components may not follow the exact plan. Some might be received early, and some might be delayed. VectorFlow’s Execution Engine first creates an unconstrained sequence of orders on the few key CCRs assuming all inputs are available. It then generates the list of the preferred inputs required for executing the orders. Many times there are alternate inputs which can be used in place of the exact input defined in the BOM. The planner filters the orders based on input availability. This revised order list is input to the sequencer engine to generate the final execution sequence. An intelligent algorithm ensures the most optimal sequence/batch while ensuring an apt percentage of the protective buffer time is left intact for the complete execution in the remaining work centres. Each order has a revised estimated completion date which is earlier or the same as the original delivery due date. A colour priority system ensures if an order is delayed, it gets expedited at all remaining work centres to meet the due date. The sales team is made aware of the latest readiness date of the order in case the order is getting read much earlier than the promised due date.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//sr2_1708609644.png"></figure>Engine 3 – Pull based Dynamic Release ManagementA typical order can get executed via multiple routes available within the plant. From time to time, the order load of released orders on certain routes can increase if the rate of output at the key CCRs drop while fresh input is being released as per the calculated release dates. Similarly, order load on certain routes can go down also if there are large amounts of rejections/rate of output at the key CCRs increases. To avoid starvation and over queueing on the routes, VectorFlow’s Pull based Dynamic Release Management Engine keeps a tab on the released load at each and every route and suggests early/late order releases depending on the status of the released load as compared to a threshold. The threshold is decided such that key CCRs will not experience starvation / over-queueing. This dynamic release control ensures WIP on the shop floor is maintained at a healthy level which key CCRs get utilised properly.<figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//sr3_1708609713.png"></figure><figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s9_1708609729.png"></figure>The only input from the Planning Engine to the Execution Engine is the committed due dates. Execution Engine run handles finite scheduling / sequencing / batching in critical work centres based on a rule of remaining duration to the committed due dates. In all other work centres, instead of a schedule, people get a sequence of orders that the work centres should follow to ensure due date adherence.Visibility and Control in the 3 engine approach:In this new way of working, instead of a Gannt view, a future load chart on each key work centre will depict the cumulative pending order load in a horizon. Planners can take a call on whether to accept an urgency or plan preventive maintenance based on the utilisation of that work centre in that horizon. Lower priority orders can be parked for urgent orders /preventive maintenance.The above 3 engine approach also requires paradigm changes in decision-making both in Sales and Operations. They are as follows:<ul><li>Acceptance of the fact that a detailed schedule does not give control. What is required is a pending load in front of any work centre. This gives much better control. If you want to understand where you are in a specific road journey and the likely time of reaching the destination, what you need is queuing information at key nodes and not the precise schedule of every vehicle, along with your vehicle at every node on the road.</li><li>Due dates need to be committed perpetually to an incoming order as and when the order arrives. The date should be subordinated to during the execution engine run. The pending order bank should not be re-cast as the typical monthly planning process. The committed due date of an order cannot change. The monthly re-casting leads to desynchronization and loss of capacity in many plants.</li><li>Forcing a new customer due date within a packed schedule of previous orders should not be allowed. If that is a regular occurrence and there is a need to serve the urgent orders, then a separate configuration of capacities should be done accordingly to avoid conflicts with running orders.</li><li>Material release schedules based on pull signals of WIP should never be violated for want of local efficiency improvement at a non-constraint work centre.</li></ul>Impact on implementation<ul><li>Since constraining work centres will always be fewer than the complete manufacturing set-up, the master data management will require far lesser efforts.</li><li>The scheduling in Execution Engine is localized, and based on the available load, it is much more likely to be closer to reality.</li><li>The sales team and customers are committed to only one Due Date, which doesn’t change and planning subordinates to deliver the order on or before that due date.</li></ul><figure class="image"><img src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//s10_1708609957.png"></figure>&nbsp;&nbsp;

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