Production Management
JIT and Production Management
Traditional manufacturers produce a batch of goods, and then sell them. To produce the goods, they order and store stockpiles of raw materials so that they will have enough on hand when they need to produce. After they produce the goods, they store them in a warehouse and deliver them to customers when ordered.
“Just In Time” (JIT) production and management philosophies are a major component of Lean production methodologies which is centered around preserving value with less work by reducing waste. JIT views the warehousing of stockpiles of materials and the warehousing of finished goods as waste. In a perfect JIT system, the raw materials arrive at the exact moment they are needed, and the finished goods ship to the customer at the exact moment they are completed. There is no need to pay to store excess supplies or finished goods. Of course, a perfect system only exists on paper, and so JIT is something that is always being implemented, but never considered to be a finished task. It is part of the concept of continuous improvement.
Producing only enough to meet customer demand (Under-capacity scheduling) is the opposite mentality for many managers who have been trained to measure and maximize machine use. Being market oriented in today’s business environment means that equipment maximization is less important from a competitive point of view than the ability to respond quickly and effectively to changing market needs. A combination of low lead times, zero inventories and equipment maximization is impossible so JIT companies are prepared to trade equipment maximization for the other two potential competitive advantages.
To implement JIT into your business, you will need a thorough understanding of your supply chain, your delivery times, and your production times. You will need to be flexible and responsive in your supply and delivery systems. If you can’t get your supplies right when you need them, then it cause a bottleneck in your production system to have to wait for them to arrive. If your customers can’t get your products when they need them, then you will lose sales . For some aspects of JIT, concepts such as delegation and employee buy-in are crucial for success; without first addressing those issues JIT cannot be implemented. JIT can be a huge contributor to reducing your costs of production, but only if you have the capability to manage it properly.
Production Systems
Production is essentially about adding value to a set of raw materials. Think of your materials as the raw inputs that go into your “production machine” and come out as finished products and services. Along the way, their activities must be managed, just as every other business activity must be managed, in order to give you adequate control over them. Manufacturing companies provide the most obvious examples, but all businesses need production systems. Even a pure service business such as an accounting firm, for example, must manage resources such as their clients’ books, and the accountants’ time.
Production Schedules
Schedules are the primary organizational tools for your production systems. They detail your plans for achieving production targets and deadlines. Layout will vary greatly, depending on your needs, but the basic concept will remain the same. In fact, you may find that the basic concept is applicable to a whole variety of scheduling situations.
Many people are reluctant to design schedules for fear of finding them too difficult to follow. They believe that schedules are too restrictive and don't allow for the random emergencies that regularly occur in business. I disagree. Schedules are not written in stone. You're the boss, not your schedule, so you can always make changes if you really need to. So why bother with a schedule if it can be changed? Why not simply make it up as you go along? The difference between having a schedule and winging it is control. There is all the difference in the world between the conscious decision to alter a schedule and the knee-jerk reactive management style of most business owners. Without a schedule you are reactive, with a schedule you are proactive. It's that simple. Schedules give you a measure of control unattainable without them.
Schedule design will vary according to your needs. A manufacturer, producing large quantities of identical products, will obviously have different scheduling needs from an architectural firm, designing one-of-a-kind custom structures. Even so, both must work to deadlines.
Macro-Schedules
Your macro production schedule is your general or master production schedule. This is the schedule that organizes the “big picture.” Typically, this would be a yearly schedule, but it could be longer or shorter depending on your needs.
You can estimate your production needs by reviewing your budget. Your production department will need to keep pace with your anticipated sales.
It's an overly simplified example of an equally simple concept to be sure, but the variables from business to business are extremely broad. You'll need to adapt it to your specific needs. Despite the simplicity of the concept, many businesses have no such schedule.
| Month | Output | Notes |
|---|---|---|
| January | 2000 | Effective use of logistics |
| February | 3500 | Produce qualified leads |
| March | 3500 | Effective product promotion |
| April | 7000 | Hire 3 temps |
If your business falls in this category, it’s time to change all that. If it doesn't, now is the time to re-evaluate your production schedules to make sure they function as well as they should.
Micro-Schedules
Micro production schedules are your specific production schedules. These are the schedules that control the specific activities that take place in your production department on a daily or weekly basis.
They identify exactly what work must be done and by when, in order to achieve the specific goals documented in your macro-schedules.
Micro production schedules are a significant component of your production systems. Your systems identify how production takes place but your schedules identify when production takes place.
In order to determine your scheduling requirements, begin by identifying the components of your production systems that should be organized on a timeline. If you run a doctor's office, for example, you need organized schedules for your patients as well as working schedules for your employees. You may also need schedules for tracking blood testing, x-ray development, and so forth.
Examples of Production Micro Schedules include…
- Staffing schedules — These organize who works when. A bakery, for example might need to schedule shifts for bakers, packers, cleaners, drivers and so forth.
- Purchasing schedules — These organize when new supplies should be purchased. They work in conjunction with your purchasing system.
- Manufacturing Schedules — These organize the specific manufacturing work that must be completed by your production systems in order to achieve the deadlines set in your macro-schedule. Depending on the complexity of the process, this could include the setting of detailed benchmark dates as well as interim completion dates. There are many different types of schedules. Many micro-schedules can be designed very simply using a system of weekly or daily time blocks. Others may require highly sophisticated models. Your production systems will help you to identify your specific needs. Once you have identified them, you can experiment until you find a scheduling format that works for you.
Don't be afraid to borrow ideas from others either. Scheduling ideas can be found everywhere and unlike some aspects of your business, can be very multi-functional. You may find that the method used to organize the swimming schedule at your local pool, for example, could be re-configured to schedule your latest project. The point is there is never only one way to do things. Just because your competitors do things one way, it doesn't mean it is the only way (or even the best way), so always keep your eyes open for a better way.
Below is an example of a micro-schedule for the general production pace of a manufacturing company. One could easily get more detailed with schedules organizing each day's production activities.
- The first row monitors the number of orders to be filled on a weekly basis.
- The second row identifies the actual number of products that need to be produced.
- And the third row tracks the weekly inventory levels.
Once again this simple example may or may not reflect your particular needs, but the overall concept is still valid.
As with all of your business development work, if possible, maintain your production schedules in electronic form. This will offer you the greatest flexibility and control.
| Time | Week 1 | Week 2 | Week 3 | Week 4 | Total |
|---|---|---|---|---|---|
| Orders Due | Order 1) 15 Order 2) 23 Order 3) 38 Order 4) 20 Total = 96 | Order 1) 55 Order 2) 12 Order 3) 34 Total = 101 | Order 1) 10 Order 2) 27 Order 3) 39 Order 4) 26 Total = 90 | Order 1) 15 Order 2) 23 Order 3) 38 Order 4) 20 Total = 96 | Total = 383 |
| Produced | 100 | 100 | 100 | 94 | 394 |
| Inventory | 14 | 13 | 11 | 15 | 15 |
Design your Production Schedule Forms as you develop each of your Production Systems below.
Specify Your Production Systems
Just as you first did in “Management,” you will now make a list of your production systems. If you find that you have already addressed many of your production systems in your previous work, that's great, but you should still take the time here to update them and fill in any gaps that may exist.
Begin by reviewing your Production Flow Chart. Next, consider how you might break your entire production system into a list of smaller, interconnected systems. Following is a list of sample production systems to help you get started. We will go over these systems in more detail shortly, but this tends to be a fairly business-specific process, so treat it more as a guide than as a complete list.
If yours is purely a service business, you may find some of the following examples to be less applicable to your situation, especially if you don't have a physical inventory. This doesn't mean that you have no inventory, however. It simply means that the nature of your inventory is different. For example, your inventory may consist of intellectual property. It may seem funny to think of it that way, but it should help to give you a better understanding of your production process.
Following is a list of the Production systems we'll be designing shortly. There will likely be others that are important for your business and a few that are not completely applicable, but this should get you thinking in the right direction.
Sample systems list for Production
- Inventory Management System — You may also have designed an inventory system in “Finance,” but you may not currently have a mechanism in place to physically make it happen. In other words, is it clear where things are stored, how they are stored, and who puts them there?
- Materials Maintenance System — Your business may have materials that are in need of ongoing maintenance. A plant nursery, for example, would need systems for maintaining their inventory of plants until they are purchased.
- Receiving System — You may receive goods or raw materials as part of your production system.
- Purchasing System — You may have designed a purchasing system in “Finance,” but you may not currently have systems for identifying purchase needs, gathering quotes, or placing your orders.
- Packaging System — You designed the “what” for your packaging in Research and Development. Here in Production you'll design the “how.”
- Manufacturing Systems — These will be your central production systems. Here you will organize the making of your products or the implementing of your services.
- Quality Control Systems — These systems will ensure that your production outputs are up to a minimum standard of quality.
Production Flowchart
Review the Relationship Diagram you designed for your business in "Management," focusing specifically on the working relationships involved in production. How do these positions work together to produce your products or services To answer this question, design a flowchart that represents your productions process as a whole. A giant system, if you will, representing the way your company creates value for your customers. As you go through the rest of this section, you will use this flowchart as a basis for identifying and designing your specific production subsystems.
Draw your Production Flowchart.