Back to basics – Material Planning

When it comes to ordering the materials in an industrial environment – I had always looked at it from a very pragmatic and matter-of-fact standpoint. One must think of it in terms of taking care of its own household – ensure that you have enough supplies to get you through the week and through a busy day, keep the kids happy and be prepared in case the butcher shuts off his business; but don’t overdo it – you don’t want to throw away all the content of your fridge.

Still, easier said than done. Let us take a look at the most common material planner types:

The Squirrel. This guy is always afraid winter will come unexpectedly – so he stuffs his burrow with everything he finds out there in the woods. Need a safety stock for two weeks? The squirrel will have it for six months! Do you need say 1000 parts/week from any given material? The squirrel will bring in 1500/week – EVERY week. You know, just in case winter comes. R&D will need a new component (strictly 1 piece) in two weeks’ time, to test a new product? This guy has it since last year on stock – when he first heard about the project. And he usually has 10 pieces available, all dusty and rusty and pretty much useless – but with a good rinse-off, they should be good as new! (Not his fault there was a drawing change in the meanwhile).The warehouse is always too small for him, forklift drivers always sigh when they have to physically count the parts he manages and a typical squirrel has at least one heart attack per every delayed truck – although production still hasn’t consumed the materials he ordered last quarter.

The Bee. Beware of this lady! She works hard to provide materials to her hive – and she will resort to absolutely nothing to prevent you to spill her precious honey! You are only allowed to consume what the BOM says, she simply cannot and will not tolerate scrap, for her waste does not exist, repairs should never happen and if production used more than needed – it will only be after she used her last sting that she will let you touch her safety stocks!

The Bear. This guy has usually no idea where and how he can balance supply – as he is an absolute omnivorous. He never seems to get it right – he is either puffy and has everything he needs (and more) – or he wakes up after a long sleep, having absolutely nothing on stock – and running desperate to find something (anything) he can eat. For him everything is useful, there is no order too big to bring it  home, no fish too small to be neglected. Still, do not undermine him – when you would think he’s at a loss – he will release a battle cry that would make even the bravest supplier give in and send out materials.

The Lion. This guy is the absolute king. The suppliers need to surrender, bow down, fear and offer absolute and irrevocable submission. The lion accepts no excuses, he is never wrong (and even if he does make a mistake, it is clearly not his fault); his directions should always be followed, his words are worth carving in stone – he has absolute rights over his supplier/subjects – and if anyone dares undermine his power he will blow them to pieces with his mighty call!

And last (but not least) The butterfly. This innocent little thing is the most cheerful and easy going creature out there. Bright, smiling, always happy, innocent and colourful – the butterfly is always dancing around, flying from one flower to another, finding here and there new supplies, making friends with everyone, trying not to upset anyone… oh, what a beautiful sight, what a quaint little creature, what a quiet presence. Most of the times the butterfly doesn’t know where the materials come or when it has to arrive, has no idea about transit times, locations and volume, knows not what is actually in charge of and has little idea of how to conduct business… still seems to know little detail about the personal life of the suppliers – and is befriended on F/b by all of them!

Stereotype aside – there are a number of clear responsibilities that fall under the competence of the material planners – and the way they conduct their accounts have a significant impact both on the overall inventory performance and on the productivity as well – as missing component or over inventory are both unsound for operations.

Although one might believe the material planner job is fairly easy (and I have heard it a million times – what’s so difficult? You just send orders to suppliers and they need to send out material), the fact is that the mission is delicate and must be carried in a profoundly responsible and professional manner to be successful. Here are the most important points that the material planner needs to manage:

Analyse production demand. The focal point of the material planner – and sadly one of the most neglected – is the analysis of the production demand in terms of request versus stock. Purely mathematic you would look at the number of materials and the specific qty/item that is requested to carry out a production plan. Whatever is missing – you must bring in. Easy enough, isn’t it? Still – there are a series of significant steps a planner needs to make to be sure of the efficiency of the analysis:

  • First and foremost – the analysis is never ever performed for the current production. If the day before (or even worse – the same day) a certain item is planned to be manufactured one would check the material requirement, then the planning is already doomed to fail. Trial in error does not exist at this stage – and though issues will always arise (such as inventory discrepancies or defect material or a Mighty Power that has chewed away all the warehouse) a good material planner will always plan his materials at least a few days ahead (or a week or a month – depending obviously on lead time).
  • Determine the ghosts in your inventory – the materials that always seem to be there and are never actually but an ectoplasmic presence. May it be a small and insecure screw or a very big and expensive PCB – there is always (at least) one nasty item, that has the bad habit of taking a day out and completely missing. A good material planner knows this happens – and will call the Warehouse asking to count that ghost.
  • Make sure you communicate with the production planner. Maybe he has some secret plans to pop out just to make your life miserable, or simply he still needs some fine adjustments to do, or some client needs something on the very last minute, or… In theory there should be made a clear difference between the day production planners launch their work and the day material planners launch orders, but often that does not happen. So if you really want to be sure you ordered all the materials – do yourself a favour, ask a simple question.

Purchase order issue. Or firm request. Or whatever your organisation calls it – this is the point where your job is becoming mathematical. You had analysed your demand – and you are sure of what you need to order and you send it out to your suppliers. As funny as it may seem, I had seen so many errors at this stage – that I cannot get tired of mentioning – do not lose your credibility in front of your suppliers by making stupid mistakes. What kind of mistakes? Well of all kind – wrong requested date, wrong quantity, wrong e-mail address of the recipient, wrong currency, wrong material requested… you see all of this is just… wrong. Do yourself a favour, do the organisation a favour and check the order before sending it out. If it’s a .pdf file, or an e-mail, or an EDI transmitted message – it is important that you sent out the correct data.

Forecast is essential. Just as important it is for your organisation – it is important for your supplier. They need to plan in advance, they need visibility, they have a production to run, a supply chain to manage – and it all comes from you – their client. So be very meticulous when you are preparing and sending out forecast – because wrong forecast (or big fluctuations) have just as much influence on your suppliers as they have on your organisation. If there are noticeable deviations from the usual numbers – spend some time and investigate. Your clients might have made a mistake, or it’s your MRP that simply decided to be smart. In either case – do not just throw out numbers. Take your time, and make sure you provide the accurate set of information. It will make the difference between a headache and a smooth process.

Smooth Transport* is key. In material planning – you can never be too accurate in terms of transportation. Save yourself the problems – and always get the right information from your suppliers – size, volume, weight, opening times, loading specific info (from the back, lateral, crane etc.) – save everything and whenever you have a new transport order you already have the details. Book trucks timely, make sure you have contacts of the dispatcher, make sure you allow enough transit time (avoid tight transit times – special transport are one thing, but never assume you can use two drivers on a lorry and it will have a high impact).

Supplier Management – I left it as to the end, but it is actually essential. Question is: what on earth does managing suppliers really mean? In many cases it can convey complex definitions, but sometimes it just implies listening to a complaint or grief. It can mean that you have to hear a list of nonsense yawning. It can mean you need to comfort and calm your suppliers. But it mainly means the following:

·         Act as a representative between your company and the supplier. Either way you want to put it – Purchasing has really little to do on day-to-day basis with the suppliers. It is actually the material planner in charge. You are the actual spokesman of the company – and every time your supplier will think of the company will think of you and say ‘Oh, bee-zee wee-zee company? I know – it’s where Best Material Planner works! Great guy! Nice company!’

·         Provider of data. Yes – that it is. Your supplier is the one that provides the material, but you are definitely the one who provides the data. There is an ever circular and dependent function. You give the right order – you get the right material. Simple as that

·         Be their production manager. Well, not literally, but almost. You are in charge with the supplier performance, you want to get the right quantity at the right time – well then better get involved. I am not telling you that you have to be involved in every little step of the supplier production, but the more you know about their processes, the better.

·         Stick to the carrot and stick rule, but remember – you will get a lot more using the carrot. Carrots are nice, carrots are healthy, carrots are desirable. You want to avoid the stick – but do use it when it’s necessary. Calling an issue anything less than an issue will not help anyone.

Is there anything left out? Well of course it is – many other things. But these are the most important, would you not agree?

*I will obviously dedicate a whole article to transport managemnt.

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blogdanmiron

I am a professional in the field of Supply Chain and Logistics - with +14 years of experience in different environments. I had worked in the industrial field - mainly Automotive but also Consumer Goods and Agricultural Machinery

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