You need to meet customer demands, but you also have to plan your production properly to make sure you’re working profitably. This is a tall task, and luckily, people in your shoes have already tried many approaches to solving this problem.
At Veryable, as we steer businesses toward rapid response to demand by using on-demand labor, we get to see what’s working and what’s not working for these companies today. We want to share two common methodologies for planning production to get the most out of your facility.
In this article, you’ll learn the differences between production leveling and agile manufacturing and how to decide which one is right for you.
Agile manufacturing is an approach to manufacturing that emphasizes meeting the customer’s demands as quickly as possible. Teams organize to make rapid iteration possible, and the focus is on enabling a bottom-up response to the customer. That means teams are flexible, empowered to make relevant decisions, and augmented with tools that enable them to share knowledge and raise concerns rapidly.
Agile manufacturing’s origins lie in the agile project management methodology, which was developed by a software team so that they could iterate faster and avoid the slower, high-risk waterfall approach. They accomplished this by working on smaller teams in parallel, rather than siloing and setting rigid boundaries around roles and departments. In the years since they created the methodology, it has become a standard in the software development industry.
When agile thinking is applied to manufacturing, you get agile manufacturing. This is the synthesis of agile project management and knowledge formed from the years of fine work manufacturers have done in wrangling their operations under a fine level of control.
This approach gives more power to the shop floor and operations leaders to influence the output of their facility through innovation. It also allows operations leaders to take greater control of their capacity on a day-to-day level, which is important for meeting today’s ever-changing demands amidst supply chain volatility.
The following table shows four points for comparing production leveling and agile manufacturing. The rest of this article will be spent unpacking each point so that you can form a clear picture of which production planning methodology is right for you.
Production leveling gives you the ability to respond gradually to changes in demand. Gradually increasing your production output over the course of months is the aim of this method, so that you can maintain a smooth flow using a fixed capacity.
This worked for companies when the norm was telling customers “this is our lead time” without any kickback, but the expectation among consumers today is that they will get what they want quickly, or they will find someone else who can do it.
Agile manufacturing addresses the modern demands of consumers by emphasizing the speed of response to their demands, rather than emphasizing a predictable pace of production based on a fixed capacity.
In agile manufacturing, your company organizes its teams to create the ability for rapid iterations and bottoms-up decision making. Combined with the means to flex capacity, this approach gives you the ability to ramp production up or down and quickly switch what you’re producing based on what the customer wants.
With production leveling, you control costs by maintaining a fixed capacity and using production scheduling as your lever. The thinking goes that if you can plan ahead for production and smooth it out, you can better anticipate your costs and smooth out the demand to match it.
However, the drawbacks to this approach appear when demand doesn’t come in as planned. Then you’re left with a higher cost per unit, and you still have the payroll you would have needed for the higher demand you forecast.
With agile manufacturing and flexible capacity from on-demand labor, you can quickly respond to demand by adding capacity in proportion to demand. This way your costs are tied directly to output, and you’re only paying more when you’re making more.
The drawbacks of agile manufacturing are that you will need to implement flexible capacity, which is a new concept for many people. However, once you get up and running with your on-demand labor solution, you can quickly see results.
Production leveling has a high potential of producing excess inventory. Demand coming in lower than planned will mean you’ve produced more than you need, by which point you’ve already added the extra capacity to continue ramping up production because you smoothed out your demand. The longer horizons of production leveling mean you’re more likely to end up with excess inventory.
Agile manufacturing, on the other hand, emphasizes responding to customer demand, rather than trying to plan far ahead of it. With agile manufacturing, the chances of you producing more than you need are minimal. If you’re always responding to what the customer signals as demand you’ll be safeguarded from excess inventory (except in the case of the bullwhip effect).
Production leveling is a longstanding approach to manufacturing, due to the emphasis Lean methodology places on heijunka (another word for production leveling). It has seen widespread adoption among manufacturing companies over the years.
Agile manufacturing is a relatively new idea, so it has not seen the same level of widespread adoption. However, some have hailed it as the “evolution of Lean,” and at Veryable we’ve seen the undeniable benefits of this approach in businesses of all sizes.
If you want to meet customer demands and beat your competition through differentiating on speed, then agile manufacturing is right for you.
If you prefer a “slow and steady” approach, then production leveling will suit your style better. Just be prepared to make it clear to your customers that they will have to wait longer than they might be accustomed to for your product. If you can guarantee that it’s worth the wait, then this will make sense. If you are producing a commodity or something that’s more valuable the sooner your customer can get it, then you will lose some customers to faster competitors.
Veryable suggests agile manufacturing because it prioritizes the customer and meets demand in real time, rather than rigidly adhering to a plan with a horizon of months or years.
To get the most out of agile manufacturing, you will need to be able to flex your capacity so that you can truly respond to customer demands as they change. There’s no better way to do this than with on-demand labor. You can build a labor pool of workers available on demand, so that you have to rely less on full-time employees and can control the costs of your production by keeping labor costs tied to output.
To reap the rewards of delighting your customers, start your agile manufacturing journey by reading how on-demand labor enables flexibility and agility.
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