Business Planning and Improvement
A variety of tools and techniques evolved during inflationary times to improve productivity and maximize profits. These include material requirements planning integrated with capacity requirements planning (MRP-II), advanced planning and scheduling (APS), activity-based costing (ABC) and total quality management (TQM). All of these techniques address business problems created by limited capacities. MRP-II and APS tools are designed to maximize the utilization of existing capacity through improved coordination of individual production and procurement activities, without necessarily improving efficiencies or yields. ABC and TQM are essentially diagnostic tools for identifying the root-causes of inefficiencies and defects, and enable management to monitor the effectiveness of corrective actions. Used together, these tools allow management to wring maximum productivity from its existing capital investment, before additional long-term capacity investments are considered.
In a period characterized by stable or falling prices, fewer new long-term capacity investments will be considered. Instead, gradual disinvestment of existing capacity may occur. Before disinvestment, there will be little or no real benefit from using capacity requirements planning, APS, ABC or TQM tools except to improve the coordination and efficiencies of a smaller labor force. But even in so far as labor utilization is concerned, greater business benefits will accrue from short- to medium-term adjustments to the number of resources employed, rather than continuous long-term improvement of labor efficiencies.
Materials management is likely to remain a top priority, for reasons demonstrated earlier. After clearing excess stock, suppliers will be under intense pressure to keep inventories to an absolute minimum, since their value will remain the same or depreciate relative to cash in the event of a deflation. Expanded use of discrete (order-based) master scheduling (MPS), material requirements planning (MRP), manufacturing execution (MES) and warehouse management (WMS) tools can be expected in order to properly schedule and manage materials in small quantities, on a JIT basis. Continued deployment of quality assurance and control tools for the purpose of improving finished product yields and minimizing waste can also be expected.
In a period characterized by stable or falling prices, fewer new long-term capacity investments will be considered. Instead, gradual disinvestment of existing capacity may occur. Before disinvestment, there will be little or no real benefit from using capacity requirements planning, APS, ABC or TQM tools except to improve the coordination and efficiencies of a smaller labor force. But even in so far as labor utilization is concerned, greater business benefits will accrue from short- to medium-term adjustments to the number of resources employed, rather than continuous long-term improvement of labor efficiencies.
Materials management is likely to remain a top priority, for reasons demonstrated earlier. After clearing excess stock, suppliers will be under intense pressure to keep inventories to an absolute minimum, since their value will remain the same or depreciate relative to cash in the event of a deflation. Expanded use of discrete (order-based) master scheduling (MPS), material requirements planning (MRP), manufacturing execution (MES) and warehouse management (WMS) tools can be expected in order to properly schedule and manage materials in small quantities, on a JIT basis. Continued deployment of quality assurance and control tools for the purpose of improving finished product yields and minimizing waste can also be expected.
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