Effectively Balancing Load & Capacity Results in 95% On-time Delivery Performance
Recently, business has picked up for many manufacturers, proposing the challenge for OEM’s to make sure they are working with suppliers that will reliably deliver their requirements for continued growth in business. The OEM needs be sure that its key suppliers can balance the dynamic load of customers’ orders with the mostly static capacity of their factory operations. If this task is not completed effectively, the delivery performance to the supplier’s customers can suffer or they can end up with too much capacity and a lack of machine utilization. Many suppliers do a rough cut capacity analysis on a macro-basis and make judgments on what business to accept or refuse, and what lead time to promise. If suppliers have bottlenecks in their operations, they often discover them too late after the orders flow through, making it hard to react and resulting in missed deliveries. Some suppliers fly blindly, accepting all orders that come through without knowing whether or not they can manage to deliver them.
Acme Industries’ Beyond Precision best practice for balancing load and capacity is to have a scheduling system with the capability to analyze the balance on a micro-basis. This analysis involves the comparison of the actual load of orders with the capacity available at each work center to find any potential problems so they can be solved in advance. The capability to surface data showing imbalances must be coupled with the ability of a supplier’s operations team to react to the data in a flexible and responsive way. Prompt action may call for transferring work to alternate work centers, varying the amount of overtime worked, exploring the possibility of temporary outsourcing, and/or discussing delivery issues well in advance of the shipment due date.
There are times when an OEM needs to be sure that their suppliers can handle a spike in demand or a forecasted growth in their business. When Acme Industries receives such a request, the load/capacity analysis is completed internally and then can be shared with the customer if requested. An example of this from a customer of Acme can be seen in the accompanying chart.
Acme Industries’ customers benefit from these Beyond Precision best practices. As a result, Acme has a total average delivery performance of 95% to its customers over the last twelve months, in spite of the company’s backlog increasing by 35%.