Agricultural Chemicals Corporation: Management at your agricultural chemicals co

Question

Agricultural Chemicals Corporation: Management at your agricultural chemicals corporation has been dissatisfied with production planning. Production plans are created using best guesses of demand for each product, which are based on how much of each product has been ordered in the past. If a customer places an unexpected order or requests a change to an existing order after it has been placed, there is no way to adjust production plans. The company may have to tell customers it can’t fill their orders, or it may run up extra costs maintaining additional inventory to prevent stock-outs.

At the end of each month, orders are totaled and manually keyed into the company’s production planning system. Data from the past month’s production and inventory systems are manually entered into the firm’s order management system. Analysts from the sales department and from the production department analyze the data from their respective systems to determine what the sales targets and production targets should be for the next month. These estimates are usually different. The analysts then get together at a high-level planning meeting to revise the production and sales targets to take into account senior management’s goals for market share, revenues, and profits. The outcome of the meeting is a finalized production master schedule.

The entire production planning process takes 17 business days to complete. Nine of these days are required to enter and validate the data. The remaining days are spent developing and reconciling the production and sales targets and finalizing the production master schedule.

Please help! Be specific in how to improve the process. (example: can't just say be more agile)

Question:   

a.      Discuss the changes that could be made to make the process more efficient.

b . Explain how information systems could support those changes.

Explanation / Answer

Production Planning is the process of aligning demand with manufacturing capacity to create production and procurement schedules for finished products and component materials.

The answer for Q. a:

In the above case the planning at the very beginning stage is done incorrectly as there is 'Guesses' used based on the past demand which is usually incorrect, instead a method has to be adopted based on the seasonal crops that would be grown and based on the actual demand received during that period of the year estimates are needed to be made.

Example: Around 50% corn planting in the US begins in April and continues through June and harvest commences in October and finishes by the end of November. It would be wise to start a production plan for agricultural chemicals for a corn crop by the end of February and start receiving orders in March so that by the time cultivation starts during April the company is in line to cater the orders.

A similar analysis can be done on other crops as well as the timing of the year for cultivation and harvest rather than just making random guesses.

The second issue that is bothering in the Production planning is the data about the past orders totalled and updated manually in the system which consumes almost 9 days in only validating and entering data. this ideally be done in the 3rd week of the month so that the data for the next month is ready during the first week of next month. In order to speed up the process Information systems need to be used, one such tool is SAP PP.

Answer to Q.b

SAP PP is an important module of SAP. It tracks and makes a record of the manufacturing process flows, for example, the planned and actual costs. Also, goods movements from the conversion of raw material to semi-finished goods.

It is fully integrated with the other SAP modules: SD, MM, QM, FICO & PM. Using such a system in place where Information systems could be used to reduce considerable amount of time can actually hasten up the process of production planning in line with all other critical departments in the company and can provide the best customer satisfaction.

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