The answer is yes. Integrating production and logistics enables you to increase your delivery performance, reduce transport costs, and improve the utilization of your production resources. So why are manufacturers still suffering from disjointed decision-making in these areas? This is better explained with an example. Let me walk you through the planning challenges faced by an animal feed manufacturer and how you can overcome similar planning puzzles in your operations.
Why planning animal feed is not simple
The quality of compound feed plays a vital role in the process of ensuring meat quality for consumers along the entire livestock and agricultural supply chain. Nutritional needs of farm animals have to be well understood by animal feed manufacturers. This can be achieved through natural forage and fodder, or by supplementing nutrients in concentrated form. These are produced as meal, pellets or crumbles. Feed manufacturers buy raw ingredients and blend them in the feed mill according to the specifications of animal nutritionists.
Animal feed manufacturers need to align their processes with the daily practices of the farmer especially feeding schedules. High delivery reliability and short lead times are expected from animal feed manufacturers. When a farmer runs out of feed for his livestock, immediate replenishment is needed. Animal feed manufacturers have to be able to quickly change the plan to meet expectations.
However, when large manufacturers receive more than 500 orders per day, several complexities add to the challenge of creating an optimal production and transportation plan.
Unfortunately, it is still common practice in the animal feed industry as well as other industries to plan production and logistics processes independent of each other. Consequently, planners have reduced visibility throughout the supply chain and limited understanding of the consequences of their planning decisions. For a make-to-order process, it’s critical to have transparency and traceability from order acceptance to order delivery.
The industry’s complex supply chain
Feed manufacturers usually have different production plants spread over several countries. In some they produce beef cattle feed, in others poultry or pig feed. Finished products are often delivered by trucks. In order to be efficient, routes need to take into account distances and diverse rules for example, not every type of truck can reach every customer; and some trucks have different compartments and can transport 8-12 different products.
There are also options to consider such as whether the manufacturer should use its own trucks or outsource transport for a specific trip. If a delivery is far away, outsourcing can save costs because the truck does not need to return to the plant. Outsourcing also gives the manufacturer extra capacity during peak hours.
Next, there’s production, which starts with grinding and dosing raw materials to a grain. The second step is to press the grain into pellets or crumbs on a pelletizer line. While some plants may have pelletizer lines, these are often specialized and can’t process every product.
Cleaning between products to avoid contamination is another constraint. When dividing orders and producing a different product one after the other, planners need to develop plans that help to minimize cleaning time.
Demand varies throughout the week. At the beginning of a week, there may not be many orders, but manufactures are still required to produce at full capacity. Why? So that they’re able to fulfill large orders that come in later in the week. As a result, decisions need to be made about what products should be produced on stock, how to assign stock silos, what is the replenishment quantity and what are desired stock levels.
In a warehouse, extra space equals extra storage capacity. In a stock silo, extra space does not equal added storage capacity. To accommodate a different product, feed manufacturers have to empty and often clean the stock silo each time.
Keeping up delivery performance
The challenge for planners is to decide what products should be kept on stock and when the stock should be produced. Strong collaboration is required between production and transport planners to determine when a truck needs to be available. If a truck is running late, production must stop as there is no room to stock the product. And what happens to production lines then? The lines have to be utilized efficiently based on the orders. But although producing between 100 to 200 hours per week, manufacturers often have just enough stock for one day. Adding up the number of trucks available, the number of delivery locations and a number of loading streets, the number of possible scenarios increases rapidly.
As production and transport are linked to each other, it is not possible to make a transport plan without taking into account production or vice versa. A transport plan that looks great, can often be infeasible because it is not possible or very inefficient to produce in this sequence. To ensure short lead times planners need to have an integrated planning for both production and transport.
An integrated planning of production and logistics is essential when it comes to increasing delivery performance and making customers happy.
Combining logistics and production
The agility of a supply chain can make or break a business. Depending solely on human planners is not feasible because of the number of factors (trucks available, delivery locations, loading streets, different orders) as well as the occurrence of last-minute disruptions. In order to look at these thousands, even millions of possibilities as well as their consequences, planners need the support of intelligent planning technology – algorithms that support the generation of a new plan with one click on the ‘optimize’ button.
More manufacturers are relying on the right software solution to create an optimized plan based on trade-offs between the following factors:
- Delivery to customers within the right time windows
- Make-to-order versus make-to-stock production
- Stock levels and stock replenishment quantities
- Changeovers and contamination cleaning in production
With the right software solution, your planners have the ability to modify optimization parameters allowing them to respond to unexpected situations and adapt to changing processes. Responsiveness is key to success as changes made in the production plan can be quickly adapted in the logistics plan and vice versa. Your planners will also be able to see the impact of these changes on your key KPIs allowing you to make better decisions. The right software solution should be designed to give you full control and visibility, key capabilities a sub-standard solution fails to offer.