age that she was limited only by her imagination even at a time when the glass ceiling was more like concrete. Their love and encouragement has been the wind under her wings. Carol would especially like to thank Chad Smith for an incredible experience and continued partnership—far beyond any that could ever have been imagined. Chad has opened all our eyes to the deeper truth of a new world of planning. The process of writing three books together has been an incredible journey and truly has been an honor and the highlight of a very long career.
The Current Planning Challenge
The Objective and History of Planning
First, what do we mean by “plan” or the action of “planning,” and who are the people involved? Let’s start with some definitions from the fourteenth edition of the American Production and Inventory Control Society (APICS) Dictionary:
Plan: a predetermined course of action over a specified period of time that represents a projected response to an anticipated environment to accomplish a specific set of adaptive objectives. (p. 126)
Planning: The process of setting goals for the organization and choosing various ways to use the organization’s resources to achieve the goals. (p. 127)
Planner: 1) The person normally responsible for managing inventory levels, schedules, and availability of selected items, either manufactured or purchased. 2) In an MRP system, the person responsible for reviewing and acting on order release, action, and exception messages from the system. (p. 102)
Thus the reason we plan is to orchestrate, coordinate, and synchronize an organization’s assets to a purpose, most often to sell an item or service. What do we make? When do we make it? What do we buy? When do we buy it? What do we deliver? When do we deliver it? What do we move? Where do we move it? The more complex the products, services, and supply chain scenarios, the more apparent the need for effective orchestration, coordination, and synchronization. What then should we use as tools in order to accomplish this objective?
To truly understand the state of planning today, it is necessary to discuss the history behind the conventional approach. Where did it come from? What did it replace?
Today most midrange and large manufacturing enterprises throughout the world use a planning method and tool called material requirements planning (MRP). This method and tool was conceived in the 1950s with the increasing availability, promise, and power of computers. Computers allowed for rapid and complex calculations about what and how much was needed to be bought and made given a specific demand input. The nature of that demand input will be of particular importance later in this book. Industry was plagued with shortages, mismatched inventory, lack of proper priorities, and a need for matched sets of parts. Practitioners were hopeful that the mathematical precision that was now possible with computers would solve these problems.
By 1965 the modern acronym “MRP” was in existence. The year 1972 saw the incorporation of capacity reconciliation into MRP called closed-loop MRP. In 1975, Joe Orlicky wrote the first book on MRP and this started a whole new software industry. Manufacturing planning and control systems continued to evolve with the development of master scheduling, modular bill of materials, planning bill of materials, and production planning in an attempt to connect the business plan to the operational plan in a meaningful way. The overall planning process was defined by a linear series of planning processes that were disaggregated into detailed plans (Figure 1-1).
FIGURE 1-1 1970s linear planning process
Ollie Wight wrote a thought leadership article in 1979 about his vision to incorporate accounting into MRP to enable better information for managers.1 In 1981 he followed up the article with a book.2 This transformed MRP into manufacturing resources planning (MRP II). The APICS Dictionary defines MRP II as:
A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.
The capabilities and input requirements of MRP II forced planning processes to evolve from the previous linear processes into departmentalized business planning processes. In 1984 Richard (Dick) Ling began developing a process to integrate the various functions of a business to provide a more effective process for developing the master schedule input for MRP II. In 1988, Dick and Walter Goddard wrote a groundbreaking book introducing this concept called sales and operations planning (S&OP).3 At that time S&OP was defined as:
The process with which we bring together all the plans for the business (customers, sales, marketing, development, manufacturing, sourcing and financial) into an integrated set of plans. It is done at least once a month and is reviewed by senior management at an aggregate (product family) level. The process must reconcile all supply, demand and new product planning at both the detail and aggregate level and over a horizon sufficient to develop and reconcile financially the Annual Business Plan. A typical Sales and Operations plan will therefore project at least 18 months into the future. It may be longer in order to adequately plan new product launch, long lead time material planning and manufacturing capacity planning.
Figure 1-2 describes this new integrated schema connecting sales and operations planning with the planning and scheduling of resources. By 1990, as client server architecture became available and made it possible for data to be accessible to the desktop for analysis, MRP II evolved into enterprise resources planning (ERP). ERP is defined by the APICS Dictionary as:
FIGURE 1-2 1980s MRPII planning schema with sales and operations planning
[The] framework for organizing, defining and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage. An ERP system provides extensive databanks of information including master file records, repositories of cost and sales, financial detail, analysis of product and customer hierarchies and historic and current transactional data.
The promise of ERP was the ability to promote visibility across an enterprise in order to make faster and better business decisions to leverage business assets.
