ABCD Self Assessment Checklist

A formal Sales and Operations Planning process normally consists of a series of meetings, finishing with a board level meeting at which key long term decisions are taken and the current progress against the Business Plan is reviewed.  The review has to cover at least 15 months so must be at a family level (dividing the product range into less than 20 families of products) and in monthly time periods.  A spreadsheet is often used to produce the sales and operations plan.

The Sales and Operations Plan must have sufficient detail to be able to check that the critical resources (i.e. any resource that could limit the ability of the company to take on business) support the sales forecast. The Sales and Operations Plan should be able to be used as the principle technique to evaluate the company's current and future expected financial performance. (more details of the Sales and Operations Planning process).

Each year a company will produce a financial business plan and a budget. The business plan typically covers 3 or more year and views the company’s profitability based on its strategic position and intentions. It is clearly vital to ensure that this plan is fully supported by the operational capabilities of the company, and does not overstate the company’s ability to sell or ability to produce.

Class “A” companies will prepare the budgetary numbers direct from the Sales and Operations plan, hence ensuring integration with the monthly review process. The financial performance will be predicted from the plan and gap analysis used to adjust the plan in the event of a shortfall. Operational performance will therefore be judged against the sales and operations plan and not financial output.

Class “A” companies work as a team because all functions work to a common set of numbers. Sales and marketing departments are working to sales forecasts or targets that are consistent with current production plans and confidently use the common database to make delivery commitments to customers. The finance department uses the common database for costing, cash flow projections and preparing all financial information. Planning produce a schedule that is realistic and achievable. Manufacturing follow the daily schedule reporting any deviations or anticipated deviations from this plan.

The basic fundamentals for class “A” planning is that there is a single database that controls all planning processes for materials and which controls capacity planning of people and equipment for the factory. This would be provided by an ERP/MRP II system that conforms to the standard laid down in "MRP II - the standard system". All routing and/or process times are stored on the common database and used for capacity planning. The common database is the master source of bill of material information. If the company has a quality system accreditation such as ISO 9000, the process information and bill of material information with audited change procedures must be that held on the planning system.

The capacity and material planning system should run a minimum of daily. Technically, this can mean either that the planning system recalculates everything daily (regeneration), or calculates only those products affected by the changes made (net change) daily and regeneration weekly. Daily planning periods and updates are essential to be able to respond rapidly to changes and to be able to deliver on the day required rather than the week.

The system should calculate on the basis of no more than daily time intervals, allowing lead times to be set in days.

6a. Accurate stock records are fundamental to the calculation of MRP, and to the calculation of stock and work in progress. 100 % accuracy is achieved when the actual count of part numbers by location is exactly equal to the quantities recorded on the computer for those part numbers and locations.

Where the method of counting gives some uncertainty (e.g. weigh counted parts or volume measurement), an agreed tolerance may be allowed on the count.

Stock record accuracy is normally established through continuous auditing of stock in each location so that all stock records are checked at least 4 times per year.   Enter the stock record accuracy percentage below.  If you do not know the accuracy you should check a sample of stock records.  A guess is better than nothing.

6b. Bills of material are considered 100 % accurate when each Bill of Material checked is correct in respect of:

• Complete - everything consumed in the manufacture of the part is on the Bill of Material unless inexpensive, readily available and not required for safety or quality reasons.
• Part Number - the correct, unique, part numbers of all constituents.
• Description – meaningful.
• Quantity per – the correct amount or a reasonable estimate when the quantity used can vary.
• Unit of Measure – agrees with the quantity per.
• Other data such as yields are correct

Bill of material accuracy is established though a regular check of a sample of Bills of Materials each month, verified by the function responsible for the accuracy of the Bills of Materials when necessary, typically the technical or development department.   Enter the percentage bill of material accuracy below.  If you do not know the accuracy you should check a sample of bills against the material actually being used.  A guess is better than nothing.

6c. Routings are considered 100 % accurate, when each routing or process instruction is correct in respect of operation number, operation description and work centre(s).

Set-up time (standard minutes or hours) and run time per piece (standard minutes or hours) should be included at each step where relevant and should be consistent. Accuracy of standards is not necessary for capacity planning as the historical output achieved (demonstrated capacity) is compared with the required output using the same standards.

Information about work centres in terms of queue and move times must be reviewed, and be reasonable for each work centre.

Enter the routing accuracy percentage below.  If you do not know the accuracy you should check a sample of routings.  A guess is better than nothing.

For guidance:

A key feature of the Master Production schedule, typically the daily production schedule of the sales item, is that all due dates on all Master Schedule items should be realistic and achievable. Any due date in the past, for instance, cannot be achieved and so will send incorrect messages about product availability. Due dates in the past will also result in incorrect plans for all related and dependent material. The start dates of orders that are not yet released should also be in the future.

The master production schedule quantity should agree with the sales and operations plan (SOP) by family by month within an agreed tolerance.

There should not be any material plans for any materials, components, sub-assemblies or ingredients with requirements in the past.

There should not be any purchase orders or works orders with a release date or due date in the past.

All the action messages generated by the material planning system should be actioned every day. There should not be any re-schedule messages which cannot be actioned or resolved.

Rough cut capacity planning (RCCP) should be used each month to check that critical resources are in place to meet the sales and operations plan.

Work centres should have been set up for capacity planning purposes. Each work centre, whether a machine, or group of machines, a skill, or groups of people or an assembly line, should have a measured demonstrated capacity.

Each work centre should be regularly checked to ensure the planned capacity is the same as the demonstrated capacity, within an agreed tolerance (e.g. within 20% of the demonstrated capacity measured in standard hours on a week by week basis and within 5% cumulatively), unless an approved action plan exists to alter the demonstrated capacity.

The demonstrated capacity should be monitored for all work centres over a time period of a sufficient number of weeks to smooth out normal fluctuations.

10a. Customer service - for Make to Stock companies the principle customer service measure is the percentage of orders received where stock is available at the time of receipt of the order, one out of stock item is normally only counted once in the time period under consideration and out of stock items not ordered are not counted. For other companies the measure is the percentage on time in full (OTIF) delivery of complete orders to customers on the promised date. Re-scheduled dates agreed with the customer in advance are allowed for this measure.  Enter the percentage achieved below.  If you do not know your customer service you should check a sample week.  A guess is better than nothing.

10b. Work orders completed on time (into stock) both for master schedule items and other parts. Re-scheduled dates agreed between planning and operations in advance are allowed.   Enter the percentage works orders completed on time below.  If you do not know the on time completion you should check a sample period.  A guess is better than nothing.

10c. Purchase orders are on time only if the purchased parts are booked into stock, or available for use (if stock is stored at the point of use) on current date shown on the purchase order or schedule.  Re-scheduled dates agreed with the supplier in advance are allowed.  Enter the on time percentage below.  If you do not know the on time percentage you should check over a sample period.  A guess is better than nothing.

 For guidance:

11a. A company should operate some formal system of sales forecasting whether this is forecasting the actual end item sold to the customer, a group or family of products, the capacity that is required, or some mixture of capacity and materials. The forecast should be in units of production not value so that it can be used to drive the planning system through the master scheduling process. The forecast should be updated monthly (or more frequently). The revised forecast should be subject to a formal review process, as part of the Sales and Operations Planning process.

The sales forecast should always be produced by the sales or marketing departments as these departments have the best visibility of the market. The forecast accuracy should be measured monthly by the department responsible for forecasting, with a view to correcting significant deviations. Typically forecast accuracy is the actual orders received compared to the sales that were forecast at the cumulative lead time.

11b. As orders are received they should be subject to a formal demand management process as follows:

• If any part of the order was forecast, the promise date for the forecasted part of the order should be based on the “available to promise” (ATP) date shown on the planning system for the product (or family of products when forecasting at the family level).
• If the order was not forecast (i.e. is "abnormal demand"), a promise date should be given that will not effect forecast orders with reference to the planning department. Thus abnormal demand is often given a lead time of the cumulative lead time for the product unless there is product or parts in excess of forecasted orders in the form of safety stock.
• The forecast should be reduced at the time of receipt of the order (at worst daily) by the quantity ordered leaving a residual or unconsumed forecast.

The unconsumed part of forecast should be reviewed at least monthly.

There should be a formal planning process for new product introduction (NPI). Material and capacity requirements for new products should be planned in the same way as material and capacity for existing products as soon as the new product developments starts.

Whenever changes to products are made, then there should be a formal process, with suitable documentation, to update the planning data in a timely manner, ideally before the next MRP run.

A class “A” company should continuously be seeking to reduce lead times by reducing queues, waste, etc. and by reducing batch sizes. All of these activities will lead to a reduction in inventory.

There should be a specific programme in place, with various task teams examining and implementing reduction processes such as set-up time reduction, the introduction of kanbans, reduction in materials handling and flow, reduction in queues, and reduction in batch sizes.

The various teams should be coordinated by the Manufacturing Director or Manufacturing Manager. Lead time reduction should be backed up by charts or graphs, with a commitment to continue to reduce them. The reduced lead times will be reflected in the part master information on the planning system.

Crucial to the development of the concepts of Business Excellence is a programme of comprehensive education and training designed to get everyone to understand best practice in planning and control and World Class Manufacturing techniques and, by applying the appropriate techniques, achieve continuous improvement in business performance.

There should have been an initial process where the long term vision of the company was developed [Company II] and this vision communicated by managers to the employees of the company.

There should be an induction programme in Business Excellence and World Class Manufacturing techniques for new employees and anyone asked to take on different duties.

There should also have been training in the relevant parts of the software for all users.

Records for attendees should indicate that at least 80% of employees were involved in a formal process of education and training.  Education and training should continue throughout all employment.

The improved information provided by the planning system enables a class “A” company to form partnerships with suppliers and so gain further competitive advantages.  All key suppliers of repetitively used material should have a vendor schedule to communicate requirements and allow the vendor to anticipate requirements.

Company is working to increase the proportion of suppliers who are qualified to deliver their product directly onto the production line (without goods-in inspection) and reduce the total number of suppliers.

Many companies have started kanban arrangements with suppliers and have some companies managing their inventory but these must be supported by vendor schedules to give forward visibility.

Partnership should include an active programme of helping suppliers to improve quality and shorten lead times.

If a key supplier is unaware of Business Excellence techniques, there should be an active process for educating them in the same Business Excellence principles as you use.  A Class “A” company needs good suppliers.

In the same way as your company should be working closely with your suppliers, so your company should be working closely with customers in development of new products, in sharing information on forecasts, promotions etc.  Where there are distribution centres involved, you should be making use of techniques such as Distribution Resource Planning in order to determine the true need date and need quantity for your customers.

A class “A” company will monitor that it is improving customer service through shorter lead times, improved quality and deliveries being made on the day and/or time that the customer needs the product.

Customer service should be measured at least monthly against the date that the customer required the product, and against the date that the customer was promised the product and reported monthly. On time means on the day specified or, where appropriate, the time slot specified on the order.

The Class “A” company uses an integrated set of performance measures which are designed to measure and monitor the business processes used by the company as distinct from the results achieved by those processes.  In other words the performance measures, or key performance indicators, measure the causes not the effects.  In addition, the performance measures are selected so that they will assist the company to achieve its business goals.

A Class “A” company will continuously monitor itself against the competition to determine its success in maintaining its competitive position. It will benchmark itself on certain key criteria, and determine how it is improving. Those criteria include customer service levels [perhaps through a customer service survey], lead times, data accuracy etc.

A Class “A” company recognises that there is a need to encourage a culture of continuous improvement of all its processes so that the whole company works consistently to the same set of goals.

Do you Make for Stock?,  Make to order?,  Configure or assemble to order?,  Engineer to order?

I strongly recommend you print both these pages and make a note to re-assess your performance next year.

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