What Products Should Be Campaign Manufactured?
Every marketer dreams of a manufacturing facility that is without any constraint. If marketing people had their way, they will expect all the products available "On Demand" whenever customer places order. However real life manufacturing does not work on such utopian considerations. Every manufacturing facility in the world, howsoever sophisticated it may be, has some constraints. Hence not all products can be made manufactured "On Demand". By extension few products have to be manufactured in Campaigns. By Campaign, I mean, manufacturing them at set frequency (Example - Once every quarter at scheduled date). Forecasted demand between campaigns is aggregated and campaign quantity decided accordingly. Campaign manufacturing is common practice across all types of manufacturing - Discrete, Repetitive and even Process manufacturing. This is because every technical asset has some sort of limitation and cannot manufacture everything "On Demand".
On the other hand, even if technical assets of company are capable, economic considerations does not allow all products to made available flexibly at all times. For example, if manufacturing facility requires a long set up time during each changeover of product then even though technically it is possible to start manufacturing every time customer places an order but practically multiple set ups will reduce manufacturing capacity to such an extent that overall profitability will come down to unacceptable levels. This brings me to the topic of this blog - "What Products Should Be Campaign Manufactured?" and by corollary what products should be made freely available to marketing "On Demand". Before we answer these questions, let us list down factors which affects this decision making.
This is prime factor that warrants Campaign Manufacturing. Let me give some common examples.
a) In Steel manufacturing rolling mill operations are mandatory. Rolling technology puts constraint such that narrower sections have to be rolled first, followed by medium width sections and then only high width sections. Even if you have big order from customer for high width section, you cannot escape narrow and medium width sections before jumping on to high width rolling.
b) In paint industry or for that matter any operation that require dealing with paints, a particular sequence has to be followed for colors. First light colors are taken up and gradually the operation move towards darker colors.
Research and development in recent years have lifted many of the manufacturing constraints but still almost 30% of all manufacturing facilities still get paralyzed by constraints similar to mentioned above. These factors predominantly decides what products to be Campaign manufactured.
Forecastibility of Products
Assume for the time being that there are no manufacturing constraints. Second factor that decides products for Campaign manufacturing is "Forecastibility". Few products in portfolio are very easy to forecast and few are very difficult to guess. There is obvious danger in manufacturing hard to forecast products in Campaigns. Either we will manufacture less than actual demand or we will manufacture more than required quantity. Consequently we will end up with either stock out or excess inventory. Both the outcomes are unpleasant so only easy to forecast products are good choice for Campaign manufacturing.
Some products in portfolio are very profitable and some are not. Objective is to encourage sales of profitable products and discourage sales of low profit making products. One of the way to encourage sales is to make products available "On Demand". These high profit products should get preference in manufacturing. They should not be manufactured in Campaigns. On the contrary, there is business case to manufacture low profit making products in campaigns and marketing should manage customer demand to fall in line with campaigns.
Manufacturing Productivity Constraints
Some products in portfolio require high set up times. Taking multiple manufacturing runs for these products will reduce available capacity. This will bring down the productivity numbers. Production Managers will always prefer long manufacturing runs for these products and thereby recommend to manufacture them in campaigns. On the other hand products that require lesser set up times can be made available "On Demand"
However real life is more complex than factors mentioned above. Biggest challenge is faced at the intersection of these factors. For example, what should be decision if product is highly profitable but require long set up time? Should it be campaign manufactured? There are no easy answers to such questions. It is balancing task between multiple objective. My experience of last 15 years in supply chain planning suggest that these decisions are normally taken arbitrarily. Generally person responsible takes myopic view and just consider one factor and takes a call. My recommendation is to follow differentiated supply strategy for your product portfolio. At the beginning of the year, take all these factors into considerations and decide on Campaign manufactured products. You may chose to make high set up time product available on demand instead of campaigning since it is profitable. However make sure that you have estimated number of set ups and taken its impact on productivity into account. Generally technology limitations are hard to overcome in yearly planning but if this factor is limiting supply chain from achieving its goal then you can consider investment in technology to lift this problem. Other factors are more operational and should be managed through consultation between marketing, production and finance by agreeing upon numbers at the beginning of the year. In some cases marketing should prevail over production and in few cases it should be vice versa with Finance calculating bottom line impact of all decisions. Best practice is to categorize the products at the beginning of the year and then review the campaign product portfolio every quarter by validating assumptions made at the beginning of the year. Once product is decided as Campaign manufactured, marketing should try to influence customer demand to fall along campaigns. Strategic safety stock can also be considered for few campaigned products.
As always this problem is also solved through Team Work between various functional streams.