Question
Tilda Limited TildaLimitedisafoodmanufacturerandmajorsupplierofpure basmatiricetotheUKgrocery,wholesaleandfoodservicesectors.ThericeissourcedfromthefoothillsoftheHimalayasandundergoesstringentqualityandDNAverificationtestsacrossitsentiresupplychaintoensureonly100percentpurebasmatiriceissuppliedtoitscustomersandconsum-ers.Thefirmhassuccessfullygrownitsbusinessthroughdevelopingnewproductsandop-tionsforconsumersincludingmicrowavablesteamedriceandarangeofworldfoodinspiredrecipepacks.Thesechanges havehelpedthecompanytogrowsignificantly;however,asaresult,therehasbeenanincreaseinpressureonthestabilityofitsmanufacturingschedules. Increaseinscheduling challenges Historically,customerordershadbeenreceivedagainstanagreedleadtimeof7daysforstandardfoodserviceproductsoragainstascheduleforexport-specificitems.Thistraditionalwayofworking,supportedbyfinishedgoodsinventorylevelsof14-21days,supportedthegenerationofmanufacturingscheduleswitha14-dayhorizon.Thefirmpredominantlyoperatedthroughamake-to-stock(MTS)processasmostproductswereclassedashighvolumewithlowdemandvariability.Forlongerleadtimeandlower-volumeitems,suchasexport,thefirmemployedamake-to-order(MTO)policy Poweredby CSCamScanner 58Chapter2Puttingtheend-customerfirst. withfewornofinishedgoodsinventoriesbeingheld.Entryintothesupermarketsectorwithdifferentlogisticsneeds,packsizesandpromotionalrequirementsnotonlyincreasedthenumberofSKUSbutalsocompressed leadtimes.Anincreaseincustomerdemandvariationplacedpressureonoperationsintermsoffluctuatinginventoriesandlowerschedulestability.Theshorteningofleadtimes,expandedproductofferingandthevariabilityofdemandforcedoperationsmanagementtoreconsidertheprincipleofatwo-weekwindowformanufacturingandtheirMTO/MTSproductclassification. Respondingtoscheduleinstability InordertoconsiderpossiblechangestotheschedulingproceduresTilda Limiteddevel-opedathoroughunderstandingof(1) thedecisionsandcontrolsystemsthatwereusedtotransferandproducecustomerorders;and(2)variabilityofcustomerdemand.Theanaly-sishighlightedthatthemanagementofchangeoverswouldhavetobeimproved(thoughleanmanufacturingtechniques)andthatcustomerdemandwouldhavetobesegmentedfurther.Oneofthemostsignificant impacts ofworkingwithmajorsupermarketswastheincreaseinpromotional activity.Ananalysisofone ofTilda'smainMTSproductshighlightedtheimpactthatpromotionalactivityhadonthedemand(seeFigure2.5a,wherethedottedredlinerepresentsthelevelofvariationcausedbypromotionswhilethefullredline showsaveragedemand).Removingpromotionsfromthedemandprofiledemonstrated thattheMTSclassifiedproductwasrelativelystable(seeFigure2.5b).Theproductionplanningmanager , havingidentifiedtheimpactofpromotionalitemsonschedulestability,workedwithsalesandmarketingtoimprovethemanagement
TildaLimited
TildaLimitedisafoodmanufacturerandmajorsupplierofpure basmatiricetotheUKgrocery,wholesaleandfoodservicesectors.ThericeissourcedfromthefoothillsoftheHimalayasandundergoesstringentqualityandDNAverificationtestsacrossitsentiresupplychaintoensureonly100percentpurebasmatiriceissuppliedtoitscustomersandconsum-ers.Thefirmhassuccessfullygrownitsbusinessthroughdevelopingnewproductsandop-tionsforconsumersincludingmicrowavablesteamedriceandarangeofworldfoodinspiredrecipepacks.Thesechanges havehelpedthecompanytogrowsignificantly;however,asaresult,therehasbeenanincreaseinpressureonthestabilityofitsmanufacturingschedules.
Increaseinschedulingchallenges
Historically,customerordershadbeenreceivedagainstanagreedleadtimeof7daysforstandardfoodserviceproductsoragainstascheduleforexport-specificitems.Thistraditionalwayofworking,supportedbyfinishedgoodsinventorylevelsof14-21days,supportedthegenerationofmanufacturingscheduleswitha14-dayhorizon.Thefirmpredominantlyoperatedthroughamake-to-stock(MTS)processasmostproductswereclassedashighvolumewithlowdemandvariability.Forlongerleadtimeandlower-volumeitems,suchasexport,thefirmemployedamake-to-order(MTO)policy
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58Chapter2Puttingtheend-customerfirst.
withfewornofinishedgoodsinventoriesbeingheld.Entryintothesupermarketsectorwithdifferentlogisticsneeds,packsizesandpromotionalrequirementsnotonlyincreasedthenumberofSKUSbutalsocompressed leadtimes.Anincreaseincustomerdemandvariationplacedpressureonoperationsintermsoffluctuatinginventoriesandlowerschedulestability.Theshorteningofleadtimes,expandedproductofferingandthevariabilityofdemandforcedoperationsmanagementtoreconsidertheprincipleofatwo-weekwindowformanufacturingandtheirMTO/MTSproductclassification.
Respondingtoscheduleinstability
InordertoconsiderpossiblechangestotheschedulingproceduresTilda Limiteddevel-opedathoroughunderstandingof(1) thedecisionsandcontrolsystemsthatwereusedtotransferandproducecustomerorders;and(2)variabilityofcustomerdemand.Theanaly-sishighlightedthatthemanagementofchangeoverswouldhavetobeimproved(thoughleanmanufacturingtechniques)andthatcustomerdemandwouldhavetobesegmentedfurther.Oneofthemostsignificant impacts ofworkingwithmajorsupermarketswastheincreaseinpromotional activity.Ananalysisofone ofTilda'smainMTSproductshighlightedtheimpactthatpromotionalactivityhadonthedemand(seeFigure2.5a,wherethedottedredlinerepresentsthelevelofvariationcausedbypromotionswhilethefullredline showsaveragedemand).Removingpromotionsfromthedemandprofiledemonstrated thattheMTSclassifiedproductwasrelativelystable(seeFigure2.5b).Theproductionplanningmanager,havingidentifiedtheimpactofpromotionalitemsonschedulestability,workedwithsalesandmarketingtoimprovethemanagement ofpromotionsanditsassociatedleadtimes.ThisresultedinaclassificationchangetoanMTOstatusforproductssubjecttopromotions,whichinturnledtothenormaldemanditembeingmanagedunderanMTSprocesswhilepromotionswereplannedthroughMTO.
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Figure2.5aDemandcomparisonshowingimpactofpromotionsondemand
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Figure2.5bDemandcomparisonshowingimpactofpromotionsondemandvariability-continued
(Source:Garn.WandAitken,J.referenceisGarn,W.andAitken,J.,2015.'Agilefactorialproductionforasinglemanufacturinglinewithmultipleproducts',EuropeanJournalofOperational Research,245(3),pp.754-766)
Managingvariability
SegmentingproductsintermsofdemandprofileandleadtimeallowedtheplanningandcontroldepartmentsatTildatoplaninventoryreplenishment(MTSitems)withincreasedaccuracy.SeparatingoutMTSdemandfromMTOpromotionalordersgavemanagementanenhancedpictureoftheunderlyingproductdemand.Thisunder-standingallowed theoperationsteamtomoveforwardandreviewhowtheyusedtheplanninghorizonthathadhistoricallybeenset attwoweeks.
Withmostsupermarketcustomersrequiringleadtimesoflessthanaweek(withtheexception ofpromotionalorderswhichweresignificantlylonger)itwasbecom-ingfutiletoproduceschedulestwoweeksinadvance.Itwasthereforedecidedthatthe schedulinghorizonwouldbereducedfromtwoweekstothreedays.Rather than planninganunstableschedule,whichwouldalterascustomersplacedordersandin-ventorylevelsfluctuated,theplanningandmanufacturingteamsdecidedthatathree-dayrollingplanwouldbeimplemented.Thisnewwayofworking,supportedbyanincreasedfocusandresourcesforchangeovers,providedsufficienttimeforpreparingingredientsandpackaging,sterilisingtheequipment,alteringmanninglevels,manu-facturingproductanddispatchingontime.
Conclusion
Thesechangessupportedtheintroductionofastablebutflexibleproductionschedule.Understandingcustomerdemandandaligningschedulingprocedures andprocessessup-portedTilda'soperationsteaminmeetingmarketneedsandshareholderrequirements.
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60Chapter2Puttingtheend-customerfirst
Questions
1WhatarethelikelyeffectsofthechangestoTilda'sschedulinghorizononits
suppliers?
2Increasingdemandvarlatlonandproductvarietyisanongoingchallengeformostbusinessestomanage.WhatotherstepscouldTildataketobufferproductionagains!
thesegrowingissues?
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Cost Accounting A Managerial Emphasis
Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham
7th Canadian Edition
