Resource Planning
If demand is beautifully smooth and steady, managing capacity and resource will not be a challenge…
Whether you are in manufacturing or a service industry, on the shop floor or in an office, demand has a habit of fluctuating – sometimes avoidably and sometimes not.
Either way, ensuring you have the right level and type of resource, in the right place at the right time, can be a major challenge. If not managed well, this can result in poor customer service or excessive cost. On an individual level, the result can be stress and low morale, as staff feel powerless to achieve their objectives and become inured to failure.
Excessive demand fluctuation may affect an entire business or an individual department; the scale may be different but many of the principles will be the same. In terms of the process of planning, there are many solutions and systems available, but the most important step is getting the thinking right: what forecast information do we have, what planning decisions do we need to make, what resources need to be managed etc.
The resource common to all businesses is people. With this as the main focus, here are a few nuggets from best practice and my own experience:
1. Does the demand need to be so volatile?
It seems somewhat facile to say it, but the best way to deal with volatile demand is to make it less volatile! It may not always be an option, but taking away the problem has to be the best solution and, therefore, the first consideration.
So, how might you influence demand? The solution must involve changing processes or behaviour within the customer. To influence this requires building close relationships and selling the benefits that will accrue for the customer: supplier and customer (and ideally the extended supply chain) can then co-operate to create the most efficient overall process with the best overall throughput. This should mean cost savings across the supply chain (and may mean negotiating how the financial benefit is shared).
For example, demand fluctuation at the end user can often be amplified by successive steps in the chain: each successive step, or tier in the supply chain, takes the demand from the previous step and, due to its own local logic, repackages the demand in larger and less frequent batches, to the next upstream supplier. This is common in many supply chains. The supplier often finds itself landed with big spikes of demand which are expedited almost immediately… Solution: visibility of actual end-user demand throughout the supply chain so that Supply need only match actual demand.
Internal customers should be easier to influence (corporate politics notwithstanding), but the principle is still to optimise the overall process, or value stream, irrespective of which departments or divisions the process crosses.
Another example: your sales team spends the first four days of the week in the field gathering leads but waits until they are in the office on Friday before processing them. As a consequence, a weekly spike of workload cascades through customer service, planning, production, despatch, shipping etc., all of whom struggle to achieve their turn-around targets. Solution: field sales process their leads on a continuous, or more frequent, basis.
2. Demand visibility
It is difficult to prepare for something that you cannot see. So it is reasonable for those in operations to request a demand forecast which provides them with the detail they need.
On the other hand, it can be difficult for Sales to provide good forecast information consistently, for a number of reasons. Revenue forecasts are generally prepared for budgeting and performance target purposes. This is often treated as a negotiation rather than an “honest best estimate” and is generally not in a sufficiently detailed format to drive resource planning. The task of producing regular, appropriately detailed forecast information may not do much for the Sales team’s bonuses.
There must, of course, be a pragmatic balance between the effort of creating forecasts and the benefits that they confer and the responsibility for operating a workable planning process is pan-departmental. A system must be devised which can marry together forecast, resource and performance data, ideally on a continual basis. Some further observations are as follows:
- Sales forecast information is essential to support medium term and tactical resource planning throughout the organisation – providing the best view of future demand is a key business function;
- Tactical planning, such as daily staff deployment, overtime and lead time calculations, requires a system to provide real-time load and capacity information;
- While Sales and Marketing do not have a crystal ball, they are still the best window on future sales demand that the organisation has.
3. Capacity and Productivity
Forecasting the future may be tricky, but knowing your own capacity shouldn’t hold any mystery, in theory. To manage the capacity side of the equation, we need standard process time data, and standard resource capacity data, in a format that allows for changes in on-going productivity and mix. Designing an effective process is likely to rely on some IT development but this need not be a major project.
Having detailed capacity information for every step of every process is not necessary for this purpose. The picture can be simplified by finding the rate determining (constraint) resource for each process and planning the flow of work through that. Resourcing other processes, which feed or follow on from this process, can then be managed more simply.
A well-developed process will allow you to:
- Monitor performance vs. standards continuously to see productivity trends and forecast accuracy;
- Plan medium and long term resource requirements;
- Use real-time demand and resource information to drive tactical planning decisions and / or current lead time calculation.
From the “coal face perspective”, it may be difficult to provide a system-driven productivity metric which is relevant enough to drive performance. For shop floor performance management, it is often more successful to use a simplified, manually-driven visual performance board. This should track performance on short intervals (typically hourly) against target, at the point of work. Combine this with a suitable programme of training, support and leadership and things should be looking good. If you use a secondary, simplified productivity metric, though, this still needs to be reconciled with the planning system to “close the loop”.
4. Flexing Capacity
This is usually the chief output of the planning process. Medium and long term demand trends can be managed by recruitment of permanent staff or major infrastructural projects etc. The more common challenge is coping with short term capacity and might be tackled by overtime, temporary staff hire or shift pattern changes. Some considerations:
- Overtime (and overwork) can be expensive;
- If you do not have established, documented, standard processes in place, including for the recruitment process itself, temporary staff hire can be even more expensive!
- The better the standard operating procedures (SOPs), the shorter will be the training lead time and fewer will be the quality issues;
- Processes and job functions may need to be redesigned (deskilled) to allow a variable workforce to be productive and for workplace productivity measures to remain relevant and transparent;
- Good relationships with temporary staff agencies may be key; having a pool of workers who are pre-inducted and, if possible, pre-trained can be very valuable;
- Direct relationships with casual labour available on a seasonal basis, possibly incentivised with a starting bonus, may also be an option.
5. Outsourcing
There is often an assumption that keeping everything in-house is always the right option and so outsourcing is treated as a last resort. While this might be true for specific cases (e.g. where sensitive IP is involved), outsourcing to the right partner can be a good option where:
- you become capacity-constrained periodically, on a seasonal basis or due to large projects; reserve capacity with a subcontractor in advance;
- increasing capacity to cope with intermittent demand spikes requires significant capital expenditure (which may then divert management attention into feeding the asset to improve utilisation);
- your constrained resource does not represent a strategic need or a core competence. For instance, if your principal activity is designing, marketing and selling a certain product, but you are outgrowing your warehouse, should this force you to spend months focusing on planning and executing a relocation to new premises? Or could you partner with a third party logistics provider and get on with growing the business?
Some more considerations:
- Any such subcontractor or service provider will become a strategic partner, so it is vital to select an organisation that is capable of, and committed to, supporting your business in the long term;
- While you may have outsourced activities to the strategic partner, managing the relationship will still require time and attention.
Resource management, and planning in general, is a fundamental part of any business and finding the best solution is time well spent. This is hard to achieve without a capacity management system which does the maths to balance demand against capacity and presents the results in a clear and useful format.
As ever, applying established best practice methods such as Lean Management can eliminate many of the problems and simplify the planning process. Whatever the current stage of your organisation, however, creating an effective planning process can often be achieved relatively quickly and remove a whole lot of stress from your business.
To contact Mark Chapple directly, or book a free one-hour consultation, please contact mark.chapple@emcltd.co.uk or call 01273 945984.
Read more in this series on operational management…