Optimal Production Scheduling: real or marketing hyperbole?
Do you think using a real, mathematical optimizer to schedule your production is overkill? Has your ERP vendor told you that using a custom optimization algorithm would be like cracking a nut with a sledgehammer?
For very complex manufacturing operations, if you are not using REAL optimization for production scheduling, then you are leaving money on the table. Just ask our customers!
In settings with multiple product variations, complex setups and changeovers, where companies are having a hard time to meet customer demand with their current capacity, optimal production scheduling is not only beneficial, but it can also be a source of competitive advantage. And that’s not hyperbole!
Companies like to compute the return on investment (ROI) to evaluate the profitability of a new investment. The higher the ROI, the more profitable the investment. The ROI is calculated as:
If the ROI is greater than the company’s cost of capital, then the investment is considered beneficial. Generally, an ROI of 30% or more would be very attractive.
Now, consider Customer “A”, for example. They are a global leader in the production of automobile seating solutions, with over 200 production plants worldwide. By deploying a production scheduling tool that uses a custom mathematical model to optimize the production schedules of certain seating components, they have achieved a reduction of 12 to 18 hours in monthly overtime. With a normal crew of about 20 people per shift, that is an average of 500 person-hours of savings per month. With a yearly subscription license of about $15,000 per plant, the annual savings results in a ROI of 700%!
Or, consider Customer “B”, a leading producer of wheat flour. By using an optimal production scheduling algorithm to create better wheat blends at their flour mills, they can achieve savings of about $700,000 per year at each mill. For an annual license subscription of $15,000 per mill, they achieve an ROI of 133%.
Or Customer “C” for that matter. A global crude oil refining operation that charters a fleet of ships to transport refined products from production facilities to collection points across the globe, from which these products will then be distributed to numerous retailers (gas stations, stores, etc.) by truck and rail. By implementing an optimal ship scheduling system, they estimate they will save about $2 dollars per barrel delivered. For an initial investment of $500,000 in the new system, and an annual license fee of $15,000, the ROI they can achieve will be over 1,000%!
In all of these cases, prior to implementation of an optimization system, the customer was already using some other production scheduling approach, be it an ERP module, off-the-shelf software, or a complex spreadsheet model honed over the years by very experienced schedulers.
So, ask yourself, “Can I really optimize my production schedules?” Or is this all just hype. You decide.