Smart supply chain planning: part 4

APS tools

Technology has always driven the evolution of

manufacturing/distribution systems.

Chris Macquet

Introduction

Most know that it has been IT that has driven the evolution of ERP-type transactions systems, good at recording transactions and analysing history. New technologies, such as the internet, have enabled many companies to gain competitive advantage in the market place.

Very few know that the same evolution has been taking place in supply chain planning systems, so it makes sense to chart both as they have evolved and progressed over time.

Currently at Generation 4, the most modern APS tools can now solve any optimisation and scheduling ‘puzzle’, whether it has been in production, logistics or workforce environments, whether it has been in strategic optimisation or in detailed scheduling. You still do require, however, business analysts and model builders to solve each ‘puzzle’.

In the future, new, Generation 5 ‘easy-to-use’ APS software will allow educated users to ‘do it all’. E-learning will get you up to speed, with APS tools being available ‘on demand’ via the internet.

How important is planning?

Planning is, by definition, more important than measurement and control. Not only should it logically come first, it also sets up your business operations, optimises your resources, satisfies your customers and determines your profitability.

Hence it makes sense to spend more time and money on getting your planning right than on your accounting and/or tracking system. If you don’t have the right materials, equipment, personnel or other resources, if you don’t have the capacity, you cannot produce nor transport.

Given all the things you need to balance, good planning is hard. If you need to consider all the constraints in your supply chain, measure intangibles such as customer and employee satisfaction, and find that you can’t work it out on a planning board or Excel spreadsheet, then you probably need an advanced planning and scheduling (APS) tool.

Does an APS tool need to fit your business?

Each and every company is unique, in its people, its products, and the way it does business. For a planning tool to be successful, it must provide a 100% fit to your requirements. Otherwise, your planners and schedulers will immediately go back to their own tried and tested ways.

As Eli Goldratt, of Theory of Constraints fame, puts it “The PLAN or SCHEDULE is the nerve centre for all IT systems for a manufacturing (and/or distribution) company”. Hence an effective APS tool enhances the effectiveness of all the other IT systems you may have.

A good planning system is also the heart and hub of your supply chain, with most of your operations depending on it. Hence attaining 100% fit to your business is doubly important.

An APS tool must be flexible and adaptable as you grow or the market changes, enabling you to find better ways of adding value to your business and/or to your customers over time.

Do you need to plan more than one resource?

Your APS tool obviously needs to look at all resources that are constraints in your supply chain – materials, production capacities, transport, skilled operators and other personnel.

For example, transport fleets cannot be planned nor scheduled without taking into consideration all the above, plus government or union regulations.

The latest technology APS tools not only enable you to consider all such factors, but it enables you to buy one tool that can address all your planning needs.

How often do you need to plan?

Traditionally, management accountants analysed what happened last month to advise management what to do next. Well, those days are over. They can now use optimisation, planning and scheduling tools to constantly review and ‘optimise’ the current position, ensuring they move constantly to a better operational and profitable position.

Traditional APS tools require someone to hit the ‘optimise’ or ‘schedule’ button whenever actual outputs or performances have deviated significantly enough from plan to warrant it. A few APS tools allow one to program specific time intervals to do this, irrespective of relevance.

Real-time optimisation and scheduling?

Modern APS tools now do this automatically, based on the rules required or provided by your business, and a modern solving engine designed to do just this.

If your production or transportation environment or resources are constantly moving and changing, then you need a ‘real-time’ planning, optimizing and scheduling tool to keep you on track in making money and keeping customers happy.

For example, DHL guarantees express deliveries of millions of parcels around Europe and Asia. From the moment a client places a request for a pick-up, the clock starts ticking. The client is not interested if his usual DHL man has gone past a point of no return (cannot backtrack on his planned route) or not, he just wants his parcel delivered in, say, 12 or 24 hours.

So, DHL has in place real-time GPS feedback on all its drivers, knowing what has been delivered, what has been picked up at any point in time. If a DHL depot simply cannot re-route any of its drivers to do this pickup, it can look at who is available from other depots, and choose another driver who will have least impact on overall efficiency and customer service, and allocate and schedule this new pickup into that driver’s route in real-time.

Multi-user, multi-company planning?

No planner is an island. They all work together across the extended supply chain, from supplier’s supplier to customer’s customer. All collaborating, working together, on the understanding that it is their supply chain competing against their opposition’s supply chain.

And in many cases, like the Australian mining supply chains, you can have several stakeholders all very interested in the supply chain schedule. From mining companies, jealously protecting details of their shipments and customers, to rail operators, to port authorities, to port terminal operators, to ship operators, all are vitally interested in detailed schedules.

So, you need to create ‘glass houses’ or ‘lead boxes’, security environments where all data is held, optimised and/or scheduled according to agreed rules and procedures. Gantt Charts and other presentation views are then presented to all such that each party can see only their own details, and the rest all ‘greyed’ out.

How far and deep do you need to plan?

Your APS tool must also be capable of addressing every level of planning from strategic and tactical optimization to detailed scheduling, ensuring that profitability and customer service are in sync.

It also needs to be scaleable, capable of growing, handling more than one site or situation. The DHL example above with 200 depots across Europe illustrates this point.

Who is in control?

Planners and schedulers need to be in control, they need to define the rules and decision criteria as they are the ones making the planning and scheduling decisions. If the APS tool does not give them 100% fit, and is not better than what they used before, it quickly gets rejected.

The tools need to be highly visual in both developing the solution and in daily production. Interaction needs to be fast and intuitive. The traditional magical ‘black box’ approach is now history!

How do you get 100% fit?

You need to have a process that incorporates all the rules and knowledge of the business. And this is a re-iterative process, constantly working to ensure you have every rule that can be feasibly incorporated. Only then do you need to run ‘optimisation’ solves to ensure that you are moving toward more profitable positions.

Traditionally, many APS vendors have put the optimiser or scheduler (‘black box’) in first before anyone really knows whether or not it actually reflects the way you run your business. In such cases, it has been difficult to explain the behaviour of the ‘black box’ as it responds to changes.

Multi-solve capabilities?

The most difficult optimisation and scheduling challenge I have come across in manufacturing has been in aluminium smelters, casting houses and rolling mills. It is about 2-3 times more difficult than hot steel mills since one has to find both the best combination of both ‘optimised’ product mix and ‘best’ schedules in one solve. In hot steel scheduling, you need to produce specified grades of steel out of specified grades of coal and ore, whilst managing the volatility of raw materials and processes as these deviate from product specification during the process.

In aluminium, you need to do this whilst simultaneously considering different product mixes and outcomes in optimising profits, as each mix will have different routes or schedules. So, you need to solve for both product mix optimisation and ‘best’ schedules in one pass.

Therefore any APS tool developed in this environment is likely to solve the ‘best formula’ and ‘best schedule’ dilemma that many process industries have – metals, food, dairy, sawmills, petroleum, paper and pulp, packaging, textiles, and so on.

Solve for carbon footprints?

TNT Logistics intend to use a 4th Gen. APS tool to incorporate weighted ‘carbon footprints’ into any financially orientated solve, to ensure they are considering environmental issues and other stakeholders (besides shareholders) in coming to any ‘best possible’ decision.

Speed of implementation? High ROI?

In a recent large European packaging company (owned by Graham Hart, NZ entrepreneur), the development of a new S&OP project was quoted and implemented in just 80 days, against the proposed 2,000 days effort using conventional APS tools.

In the future, this would be speeded up if an industry-specific template for packaging had been available, cutting down design and implementation time even further.

One package, many solutions?

The modern 4th Generation APS tool is capable of being applied to all sorts of optimisation, planning and scheduling opportunities relatively quickly. Other than mentioned above, other examples include:

• handling air traffic congestion, scheduling of customs posts according to incoming passenger profiles / volumes, and other aviation planning activities;

• public transport, ensuring timetables are kept to, even employee satisfaction;

• dynamic workforce optimisation such as security and police work where unexpected events and associated risks need to be managed according to predetermined parameters;

• health care where planning is crucial in determining both performance quality and financial success;

• media and entertainment which operate under high-pressure timetables and deadlines, yet still need to deal with the unexpected ‘news’ items;

• co-ordinating sales promotional campaign planning with supply chain planning to determine the profitability of each promotion, its impact on existing products and the current supply chain which may have constraints raw materials, production capacity, storage, channel distribution, logistics.

And so on. Literally, any ‘puzzle’ that can be optimised and/or scheduled can now be solved. And without any customised coding!

Don’t take my word for it, the proof of the pudding is always in the eating! Look at the results, not the promises.

Conclusions

For all those who want 100% fit to their particular ‘puzzle’, who want a fast and focused ROI in any production, logistics and workforce (or combined) environment, modern 4th generation APS tools now make this possible, all from one ‘100% package’ solution and support.

Tomorrow (5th generation), these tools will be almost as easy to use and as common place as Excel spreadsheets. Yes, we are about to enter into a new era of opportunity and any person with the right skills and determination to e-learn and use such tools will be the ‘optimisation king/queen’ in their company, and well worth their weight in gold!

Chris Macquet is a qualified accountant and marketer who has been implementing supply chain planning solutions for some 40 years in the southern hemisphere. In planning and IT capacities, he has worked for Unilever, Hewlett Packard, SAP, Deloitte Consulting, AspenTech, APS Technologies, and is now Director of Quintiq, Australia and New Zealand.

Excerpted from MHD Supply Chain Solutions, March/April 2008,pp.48-51.

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