Why Production Leveling? Learn key 4 aspects of Leveling. Get the tools to effectively manage the leveling process, including strategic Sales & Operations Plan (S&OP), Master Production Schedule (MPS), process analyses tools like OBC (Yamazumi) Chart, Machine Balance etc. Do you use SAP system in your organization? An expanded version of this module contains a detailed description of transactions and applications of the SAP’s basic functionalities (not customized!) for supporting leveling, both in MPS and S&OP.

1. © Lean & Mean Consulting. All rights reserved. 2015© Lean & Mean Consulting. All rights reserved. 2016
05/ 16
Production Leveling
And Creating Continuous Flow
OPTIONAL: How SAP System supports Leveling in
MPS and S&OP
World-Class Standards & Best Practices of Operational Excellence

2. 2
Agenda
1. Introduction: Customer relationship. Situation today.
2. Characteristics of unlevelled production
3. Why do we need leveling?
4. 4 aspects of production leveling:
 Leveling of volume
 Leveling of mix
 Leveling of manpower
 Leveling of flow (withdrawals, line feeding)
5. Transmitting leveled demand to production lines
6. S&OP: Sales & Operations Plan
7. MPS: Master Production Scheduling

3. 3
Agenda
Tools & transactions to support leveling in SAP system
1. Introduction: SAP functions to support production leveling
2. Long-term planning of S&OP: SAP transaction MC94
3. Operational & Tactical planning of MPS: SAP transaction MC94
4. Role & meaning of MRP parameters for lean-ruled planning standards
5. Types of planning approaches in MPS
6. Exercises & simulations using operative SAP system
7. Open questions & discussion
8. Summary & Conclusions

4. 4
Production leveling
What does it mean?
Production leveling is the method by which we reduce as
much as possible the demand
variability to optimize the production
resources needed
Leveling is a task which aims to repeat an identical
process during several consecutive periods

5. 5
 As a world-class benchmark in automotive industry „leveling” means:
Production leveling
What does it mean?
Maintain steady production volumes with the same line
balancing
Producing every day (or on regular basis) the same part
numbers
Regular and sequential withdrawals (Sequencer)
Maintain steady plan of needs for components

6. 6
Characteristics of
Unleveled
Production

7. 7
(1) Production resources…
Equipment is specified to meet the peak demand
Manpower retained to achieve peak demand
Are 30% underutilized for 90% of the time
Manpower productivity is NOT under control

8. 8
Why do we need leveling?

9. 9
Why is leveling necessary?
To reduce or minimize costs (MUDA)
To maximize utilization of the resources
To absorb system instability
To reduce stocks / inventory

10. 10
Four aspects of production
leveling

11. 11
What should we consider when leveling
production?
The leveling of volume
The leveling of mix
The leveling of manpower
The leveling of withdrawals and flows
There are 4 aspects to production leveling:

12. 12
Leveling of volume
Week Mo Tu We Th Fr
Total quantity required in period
Number of production days in period
= Quantity to be produced
per day

13. 13
Leveling of mix (1)
Using a monthly schedule
Product Quantity Weeks
1 2 3 4
A
B
C
1,000
600
400
Monthly production schedule:
Green balls are made
in the fourth week of
the schedule during
last four days…

14. 14
Leveling of mix (1)
The notion of production pace or Takt-time (TT)
Product Daily
6.00 noon 14.00
A
B
C
50
30
20
Task:
Calculate production pace (takt-time) for the whole family ABC and for each product separately:
T/T = ... min
Time available is 8h =
480 min
T/T = … min
T/T = … min
T/T = … min
Quantity

15. 15
Leveling of manpower (1)
Work content
Work content
WC = 15 min
1
2
3 4
5
6
Work content
WC = 10 min
1
2
3
4
Work content
WC = 20 min
1
2
3
4
5 6
7
8
9

16. 16
Leveling of the flow (1)
The Sequencer
Production „Sequencer”:
Withdrawal kanbans are
spread evenly over the
shift for each variant
Product Shift
6.00 14.00
A
B
C
50
30
20
Shift broken into 10-min
slots (the pitch)
The Sequencer is used to transmit
the leveled demand to production
line through frequent and regular
withdrawals
The number of kanbans in
any column cannot exceed
the line capacity (work
load) for that period of
time
Quantity

17. 17
How to level?

18. 18
Sales & Operations Planning: S&OP (1)
Medium-term projecting
January February March April May June
No leveling….
Volumes
…

19. 19
Sales & Operations Planning: S&OP (2)
Medium-term vision
S&OP
M T W T F
Volumes
W1 W2 W3 W4 W5
W1 – Week 1
Days of the week
Goal: to produce every day the same mix of
products of the same volumes
January February March April May June

20. 20
Sales & Operations Planning: S&OP (3)
Example of a yearly customer forecast
I II III IV V VI VII VIII IX X XI XII months
Volumes
100
640 480 750 410 560 710 880 980 630 420 440 750
500
1000

21. 21
Sales & Operations Planning: S&OP (4)
Managing different production takt-times
I II III IV V VI VII VIII IX X XI XII months
Takt 1
Volumes
Takt 2
Takt 3
Takt 1: (example) number of operators = 3
PPH = 0,95 Output expected = 23 / per shift  460 / per month
Takt 2: (example) number of operators = 4
PPH = 1,00 Output expected = 32 / per shift  640 / per month
Takt 3
Takt 2
Takt 1 Takt 1
Takt 3: (example) number of operators = 5
PPH = 0,93 Output expected = 37 / per shift  740 / per month
Takt 2 Takt 2

22. 22
Master Production Schedule: MPS (1)
Leveling mix & volume
CC C C C
BBBBB
W1
AAAAA
W5W4W3W2
M
ccccc
B BBBB
A A A AA
T W T F
ZOOM
Decided production
A
A
A
A
A
B
BB
B
B
C
C
C
C
C
W1 W2 W3 W5W4
A real customer demand…
leveling

23. 23
Leveling of Production in 4 aspects
Leveling of Supplies
Production leveling
Objectives
Objective: Constant level of production,
and NOT constant level of stocks!
Stock
BOP
Filter
Our plant
Supplier Customer

24. 24
Leveling
0
50
100
150
200
250
1 2 3 4
Kwartał
Volumes
Planned production
Shipment
End stock
Strategy for Leveling
 In practice of our plant functioning, in order to achieve expected level of
effectiveness our resources should be leveled over the whole year.
 But … The customer demand is never leveled nor balanced!
Quarter 1 2 3 4
Start stock 20 40 40 10
Planned production 50 100 150 200
Available for shipping 70 90 90 60
Shipment 30 80 160 200
End stock 40 40 10 20
The chart presents the follwoing principle :
„If production is leveled, and sales is not, the
stock works as a leveling buffer.”

25. 25
 „Variability” – is defined as a difference between
maximum and minimum value of the demand
 It is calculated by taking into account at least 20 items in the data
 It is expressed in %
Demand variability
(Max – min) / 2
Average demand
Demand Variability =
 Exercise:
 Calculate the demand variability for the case of S&OP levelling (p. 69)

26. 26
Tools & transactions to support
leveling in SAP system
1. Introduction: SAP functions to support production
leveling

27. 27
Model of resource planning
Functionality of SAP in production leveling
Strategic planning
Mid term plan
Sales and operation plan
Master production schedule
Material requirement
Planning
Business Plan
CCP – Critical capacity
Plan
Production activity control,
execution and control of
operations, shop floor scheduling
S&OP
MPS
MRP
PAC
RP – Resource Plan
RCCP – Rough Cut
Capacity Plan
CRP – Capacity
requirements Plan
Input / Output control
Informationaboutpriorities
OperationManagementExecution
Managementofresources
Forecastandmanagementofdemand
DEMAND SUPPLY

28. 28
S&OP MPS MRP
Definition Sales & Operation Planning Master Production Schedule Material Requirement Planning
Frequency Monthly Weekly Weekly
Horizon 18 months (Customizable) 15 weeks (Customizable) 12 months
Time Bucket Monthly Weekly Daily
Product aggregation  Vehicle family for Sales forecast
 S&OP family for Production
MPS family -
Scope  Finished goods (mandatory):
Series
Pre-series
 Semi-finished goods (optional)
 Components (optional)
 Finished goods (mandatory):
Series
Pre-series
 Semi-finished goods (optional)
 Components (optional)
ALL
Inputs  Sales forecast
 Last year sales forecast
 Last month S&OP validated
 Last week MPS validated
 Actual customer demand
 Actual production plan
 Workcenter capacity
 Supplier capacity
 Inventory policy
 SO&P demand forecast
 Actual customer demand
 Last week MPS validated
 Actual Production Plan
 Workcenter capacity
 Supplier capacity
 Inventory policy set during SO&P
 Actual sales orders
 Arbitrated production plan (IR)
 Stock level
 MRP parameters:
Offset parameters
Rounding parameters
…
Outputs  Long-term production plan
 Capacity (investment)
 Headcount / OT
 Sourcing forecast
 Inventory policy
 Sales forecast for Budget
 Medium-term Production plan
(Independent requirement IR)
 Procurement plan
 Inventory plan
 Production orders
 Supplier schedule lines / PO
Functionality of SAP in production leveling

29. 29
1. Set up of parameters before the initialization of S&OP – SM31 table T991
2. Creation of product group – MC84, MC86, MC62
3. Arbitration of long term sales and production – MC94 table ZSOP
4. Analysis of plant capacity – CM38
5. Analysis of supplier’ capacity - MCEA, MCEB, MCEC
Sales and Operation Plan (SOP) in SAP
Master production schedule (MPS) in SAP
1. Set up of parameters before the initialization of MPS – SM31 table T986
2. Arbitration of short term sales and production– MC94 table ZMPS
3. Analysis of plant capacity– CM01
Functionality of SAP in production leveling

30. 30© Lean & Mean Consulting. All rights reserved. 2016