Managing Production Schedules

Companies that receive a significant portion of their customer commitments in the form of forecast transactions (also referred to as Production Schedules), and Shipping Authorizations (also referred to as Just-In-Time (JIT) transactions), instead of in the form of traditional purchase orders, have several significant and unusual challenges managing these types of customer commitments. Note these transactions can be received via traditional EDI software (in the form of '830' transactions or '862' transactions), or received from their customers (also referred to as Trading Partners) directly via their web sites.

Almost all ERP and EDI software products do not adequately help to manage these types of customer commitments well due to the unique characteristics of these two types of transactions. As a result, most companies struggle responding to the constantly changing demands they receive from their customers, and are always on "defense" when dealing with these Trading Partners.  

TRG's Production Schedule Manager provides an excellent solution for managing these types of customer commitments. Effective use of this product allows companies to be on "offense" when dealing with their Trading Partners. 

A sample of the key challenges companies experience managing Production Schedule transactions include:

1) The number of Production Schedule transactions that need to be processed each week is significant. Production Schedule transactions are received, typically each week, for each part number purchased by each Trading Partner for each of their shipping locations. These transactions generally included planned weekly requirements for an extended future time frame, typically a 6 or 12 month forecast time frame. As an example of this transaction volume, 12 months of Production Schedule transactions required for 10 part numbers, provided to 3 shipping locations, will result in 1560 transactions received in each batch for a single Trading Partner. 

2) The frequency of receiving these batches of Production Schedule transactions is challenging. Most Trading Partners provide these transactions in weekly batches. Some Trading Partners provide multiple batches per week, and a few Trading Partners actually can provide multiple batches for the same part numbers in the same day. Some Trading Partners provide 1-2 batches per month.

3) The time frames required for the complete processing of these Production Schedule transactions are challenging. Most Trading Partners provide a batch of transactions weekly, many times on Mondays. These transactions must be completely processed by Friday of the same week. They normally impact the production and purchasing schedules beyond the current week.

The time frames required for the processing of Shipping Authorization transactions are even more challenging. These transactions are generally received on Mondays, and impact the planned shipping schedules for the current week.

4) Trading Partners do not use a standard way of authorizing shipments. Some Trading Partners will provide explicit Shipping Authorization transactions (862's). Other Trading Partners will classify the Production Schedule transactions (830's) to identify various levels of authorization. As an example, some Trading Partners will classify their 830 transactions by using "FAB" to identify the authorization to manufacture the required part number requirements, by using "RAW" to identify the authorization to purchase the raw materials required to manufacture the required part number requirements, and by using "PLAN" to identify forecast only requirement information. Other Trading Partners will classify a portion of their 830 transactions as "Firm" which authorize their shipments. Some other Trading Partners will negotiate a global rule to authorize shipments, such as authorizing the shipment of all forecasted requirements requested within a specified time frame, generally identified in weeks  (example - authorizing shipments for all requirements forecasted within the next 4 weeks).

5) Traditional planning tools such as MRP and MPS are not helpful managing these types of transactions. When these tools are utilized, they can easily generate an unmanageable amount of MRP and/or MPS planning exceptions because of the amount and frequency of changes they received for the Production Schedule transactions. As a result, the actual production planning process is typically done outside, typically manually, of the formal ERP software.

Additionally the management of Shipping Authorization transactions is also performed manually because most ERP software do not support the processing of these types of transactions.

Note the volumes of 830 and 862 transactions received makes these manual efforts very time consuming, very inefficient, and very ineffective.

6) Trading Partners do not provide "clean" transactions. Many transactions need to be manually "cleaned" up before they can be processed by the ERP software.

Additionally Trading Partners routinely do not follow the Business Rules they have agreed. Using typical ERP and/or EDI software does not allows companies to effectively monitor Trading Partner requirements relative to their agreed upon Business Rules. 

As an example of "unclean" transactions, Trading Partners are slow to update their Production Schedule transactions for recent shipments. Typically manual efforts are required to prevent duplicating shipments due to the Trading Partners not reducing their Production Schedule requirements for shipments that are in-transit or for shipments that they have recently received.

7) Typical methods of managing these transactions results in poor levels of customer service. It is not unusual to consume 1-2 days to just manually edit and enter these transactions into the ERP software, and then to consume an additional 1-2 days using the ERP software to determine what new requirements can be met, and what new requirements cannot be met. 

In many instances, it is not practical to be in a position to notify the Trading Partners of issues related to their new requirements until Thursday or Friday for transactions received on Monday. This timing is too late for good levels of customer service. The Trading Partner will be providing a complete new batch of transactions on the very next Monday, which causes the whole hectic management process to be repeated each week. This issue contributes to companies constantly being on the "defensive" when dealing with their Trading Partners. 

8) Developing financial forecasts are challenging because, in most cases, there are significant variances between the requirements the Trading Partners forecast, and the requirements the very same Trading Partners authorize for shipment. 

In fact, Trading Partners have incentives to inflate their forecasted requirements in order to negotiate the most favorable price, and conflicting incentives to delay the authorizations for shipments, such as waiting to the last possible day to commit to shipments to keep their committed inventory levels as low as possible. This issue makes it very difficult to forecast sales even for the current month, which put these companies on the "defensive" when dealing with their bank.