Why Production Planning in the Process Industry Consistently Fails

by Kristina Pelzel

Surely you know the myth of Sisyphus from the Odyssey epic by Homer. For duping and mocking Hades, God of the Underworld, Sisyphus was punished by being forced to roll an immense boulder up a steep hill. This is a task he must complete over and over again, since before he reaches the top, the boulder slips from his hands and rolls back down. Because of this story, similar activities, which are in vain while being very laborious, are referred to as “Sisyphean challenges”. Production planners in the process industry are probably very accustomed to this term. Let us take a look why the process industry knows its Sisyphean line of action.

It is very likely that the process industry values planning more than most other industry sectors. This is due to multiple challenges, which planners have to deal with on a daily basis. Some of these challenges include (but are not limited to):

  • High demand fluctuations
  • Frequent product changes
  • Low flexibility regarding selection and adaption of production capacities
  • Physically-constrained lot size targets
  • High variability within the supply chain processes
  • Certification of production steps (e.g. pharma industry)
  • Legal regulations (e.g. energetic specifications, load traceability)
  • High set-up and cleaning costs

To sum it up: Highly determined processes meet high demand volatility, which means enormous cost pressure for the companies within the process industry. Because of this, optimal planning is not only “nice to have”, but a necessity in order to be competitive.

Keeping all that in mind, it may come as a surprise that most companies in the process industry apply a production planning concept that is far from optimal. In fact, it is most likely that most plans are going to fail in the moment of realization. Planners must feel like Sisyphus, not knowing why they are being punished.

The myth of precise planning

The reason: pseudo accuracy. Usually, production planning starts with determining production quantities and production sequences of finished products. This is followed by a multi-level explosion of BOMs and working plans. The result: Accurately planned process steps to-the-minute. But this is just a calculated pseudo-accuracy which has nothing to do with reality. If you do not consider the truly relevant factors, then the following experience will be your daily companion: Today’s plan for tomorrow is only valid until tomorrow.

One of the important factors that must be incorporated into the production plan from the very beginning is material availability. Since today’s supply chains are globally aligned and thus replenishment times can amount to several weeks, procurement processes need to be started as early as possible. The longer the procurement process takes, the more probable is the possibility that something goes wrong. If you calculate the time of demand for a certain raw material using fixed processing times, predetermined lot sizes and rigid replenishment times then you will deceive yourself with an accurate availability date. But there are so many factors in this calculation with varying degrees of variability, so relying on these calculations is not very rational. And in the end, there is no point in heating a pot on the stove, when you do not have the ingredients for the meal.

This leads us to the second important factor which is production capacity. If you have all your needed raw materials on hand, but no free production capacities on the determined date, then the outcome is the same: you have to reschedule, which will probably result in a bad service level.

To avoid working with non-existing raw materials and non-feasible plans regarding production capacities, the process industry needs to take a whole different approach on planning granularity.

Planning with buckets

There is one way out of this dilemma: Simultaneous master production scheduling. This means that at the very beginning of the production planning process, the feasibility according to the capacities as well as material availability is considered – simultaneously. Here you might ask: How does this help with the accuracy problem? The main difference between both concepts is that planning is done in time intervals, so called buckets. This means that the generated plan is more rough, but also more robust. You can be sure that the buckets are actually feasible in reality and the following process of detailed planning of individual production sequences can be considered trivial.

While production planners in the process industry would certainly just be happy with a really feasible plan, using simultaneous master production scheduling, they also have several other options:

  • Automatic planning of pre-production
  • Evenly distributed capacity utilization
  • Use of alternative resources
  • Priority consideration

In the end, production planners can work with lower stock levels while achieving a higher customer service level. The supply chain is more robust and reliable, from the customer order to the procurement of raw materials.

Conclusion

Maybe some supply chain professionals in the process industry have already adjusted to the constant failures in production planning (which keeps us wondering how Sisyphus is feeling right now…). Once they realize that there might be a different planning world, where a plan works the way it was supposed to, they will never turn back to rolling boulders up a hill.



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About the author

  • Kristina Pelzel

    I´m a procurement and inventory optimization problem solver. With over 18 years of experience in the intelligent decision making software industry, my passion is to consult interested parties throughout the entire sales process.

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