Balancing Demand and Supply in Complex Manufacturing Operations: Tactical-Level Planning Processes

By balancing medium-term demand and supply, tactical planning enables manufacturing firms to realize strategic, long-term business objectives. However, such balancing in engineer-to-order (ETO) and configured-to-order (CTO) operations, due to the constant pressure of substantial complexity (e.g., volatility, uncertainty, and ambiguity), induces frequent swings between over- and undercapacity and thus considerable financial losses. Manufacturers respond to such complexity by using planning processes that address the business’s needs and risks at various medium-term horizons, ranging from 3 months to 3 years. Because the importance of decision-making increases exponentially as the horizon shrinks, understanding the interaction between complexity and demand-supply balancing requires extending findings reported in the literature on operations and supply chain planning and control. Therefore, this thesis addresses complexity’s impact on planning medium-term demand-supply balancing on three horizons: the strategic– tactical interface, the tactical level, and the tactical–operational interface.To explore complexity’s impact on demand–supply balancing in planning processes, the thesis draws on five studies, the first two of which addressed customer order fulfillment in ETO operations. Whereas Study I, an in-depth single-case study, examined relevant tactical-level decisions, planning activities, and their interface with the complexity affecting demand–supply balancing at the strategic–tactical interface, Study II, an in-depth multiple-case study, revealed the cross-functional mechanisms of integration affecting those decisions and activities and their impact on complexity. Next, Study III, also an in-depth multiple-case study, investigated areas of uncertainty, information-processing needs (IPNs), and information-processing mechanisms (IPMs) within sales and operations planning in ETO operations. By contrast, Studies IV and V addressed material delivery schedules (MDSs) in CTO operations; whereas Study IV, another in-depth multiple-case study, identified complexity interactions causing MDS instability at the tactical–operational interface, Study V, a case study, quantitatively explained how several factors affect MDS instability.Compiling six papers based on those five studies, the thesis contributes to theory and practice by extending knowledge about relationships between complexity and demand–supply balancing within a medium-term horizon. Its theoretical contributions, in building upon and supporting the limited knowledge on tactical planning in complex manufacturing operations, consist of a detailed tactical-level planning framework, identifying IPNs generated by uncertainty, pinpointing causal and moderating factors of MDS instability, and balancing complexity-reducing and complexity-absorbing strategies, cross-functional integrative mechanisms, IPMs, and dimensions of planning process quality. Meanwhile, its practical contributions consist of concise yet holistic descriptions of relationships between complexity in context and in demand– supply balancing. Manufacturers can readily capitalize on those descriptions to develop and implement context-appropriate tactical-level planning processes that enable efficient, informed, and effective decision-making

Tactical planning in engineer-to-order environments

Tactical planning is implemented to balance customer demand and supply capacity within a medium-term and to avoid under- and overcapacity. In engineer-to-order (ETO) environments, under- and overcapacity lead firms to incur substantial costs that can easily wipe out profit margins. ETO-oriented markets like the construction and capital goods sectors are massive in terms of investments and have considerable impact on the gross domestic product (GDP) of nations. This makes demand-supply (DS) balancing highly important in ETO contexts.The purpose of the thesis is to expand the knowledge about how tactical planning contributes to balancing customer demand and supply capacity in ETO settings. This purpose departed from accepting that – based on extent literature – such knowledge about tactical planning is rather generic and fragmented, which calls for further research. The results in the thesis are presented from literature studies, two single case studies and a multiple case study. Since DS balancing in principle means dealing with the complexity stemming from demand and supply, the thesis results focus on how tactical planning manages such complexity in ETO environments.A single case study, focusing on tactical-level planning activities, together with a multiple case study, focusing on cross-functional integration, address how informal tactical-level planning processes contribute to DS balancing. Including a single case study, focusing on S&OP as a formal tactical-level planning process, the three studies form the empirical base of a framework that responds to the purpose of the thesis. The framework considers complexity, which is represented by two dimensions including detail and uncertainty.The thesis contributes to practical aspects by providing guidance to tactical-level planners in ETO environments concerning the areas of improvement to consider when configuring and upgrading the planning process to manage complexity. The theoretical contribution of the thesis is concerned with the developed framework that describes the relation between tactical planning, DS balancing, cross-functional integration and complexity in ETO settings

Managing complexity through integrative tactical planning in engineer-to-order environments: insights from four case studies

Fulfilling customer orders in engineer-to-order (ETO) settings entails customization and, thus, greater complexity: detail and uncertainty. Tactical planning aims at demand–supply (DS) balancing by ensuring cross-functional integration (CFI), which incorporates coordination as one dimension. This study uses a case study approach to identify the key coordination mechanisms applied in the customer order fulfilment processes (COFPs) to mitigate the negative impact of complexity on DS balancing in four ETO-oriented settings. Within-case analyses identify the applied mechanisms, and a cross-case analysis elaborates on how they influence the detail and uncertainty in decision-making and problem-solving activities. Findings suggest a positive effect of formalized activity sequences, balanced team compositions, effective task designs and supportive information systems (ISs); and a positive (but contingent) effect of the other mechanisms. Future research may address other CFI dimensions (collaboration), statistically test the findings, or qualitatively deepen the understanding of the forms and impacts of individual mechanisms

A Tactical Demand-Supply Planning Framework to manage ‎‎Complexity in Engineer-to-Order Environments: Insights from an in-‎‎depth ‎case study

The challenging demand-supply balancing in engineer-to-order (ETO) environments\ua0is often attributed to complexity. This study expands the understanding of managing\ua0complexity to obtain demand-supply balancing, focusing on the tactical planning\ua0logic of the order fulfilment process. An in-depth single case study was conducted\ua0and data describing the order fulfilment process at a construction company were\ua0collected and analysed. Findings suggest a tactical-level planning process framework,\ua0incorporating nine key decisions and three crucial activities, and their potential\ua0complexity-reducing and complexity-absorbing impact. The study contributes to the\ua0theoretical discussion of complexity in management practices, linking demandsupply\ua0balancing as a performance measure. The findings guide practitioners in ETO\ua0settings on anticipating potential medium-term consequences of key decisions on\ua0capacity. This emphasises the need of proper IT support to apply knowledge\ua0generated from previous projects and conduct comprehensive and robust scenariobased\ua0analyses

Informationssystem för att hantera designriktlinjer för tillverkning : en fallstudie på Volvo Car Group

Automotive industry is currently characterized by very fierce competition in which an automaker has no choice but to run at the highest speed to survive. Challenges are too many, but design as a function is in the center due to its tight connection to time to market and competitive advantage capabilities such as production flexibility, speed, cost and quality. Design requirements, standards and guidelines represent an essential part of these product- and process-oriented design capabilities. Design guidelines for manufacturing (DGM) have very limited discussion in literature concerning associated terminology and characteristics. As a result, it is not obvious that the available information systems are designed to support the management workflows of DGM related to a rather technically complex context similar to automotive industry. As such, this thesis is dedicated to first build a solid ground represented by a clear definition for DGM and detailed criteria for how these guidelines live up to the proper level of design support. Then, what information systems have to offer in terms of functionalities and characteristics to enable effective management and continuous improvement of supportive DGM is investigated. Organizational enablers required to assure high quality of DGM using information systems are identified. The study is conducted at Volvo Car Manufacturing Engineering department. The results show that DGM systems should enable effective knowledge management process by enabling knowledge creation, knowledge transfer and storage, and knowledge use and application. That is basically represented by key functionalities, characteristics and organizational enablers in which users are enabled to communicate each other as they create, assure the quality of, share, change, tag, filter, cluster and structure individual and multiple DGM. The main driver for how DGM user-interface functionalities should be oriented is related to how the layout patterns and options are perceived as common by the majority of target users.DGM, Information Systems, Design Engineer, Knowledge Management & Automotiv

Exploring factors causing and amplifying ‎delivery schedule instability: An OEM ‎perspective from the ‎automotive industry

Purpose The purpose is to explore how OEMs generate instabilities in material delivery schedules ‎within automotive supply chains. ‎ Design A multiple case study of three automotive OEMs were conducted to collect qualitative and ‎quantitative data as to explore factors causing and amplifying schedule instability measured ‎by inaccuracy and nervousness. The quantitative data includes two-year delivery schedule ‎history, and the qualitative data includes the OEMs’ manufacturing planning and control ‎processes and policies.‎ Findings From literature and cross-case analysis, the study generates a framework of causing and ‎amplifying variables. Four factors (take rate, transport lead times, unit loads, and pick-up ‎frequency) were proposed to have common and significant impact on schedule instability. ‎Take-rate and transport lead time amplify schedule inaccuracies, and pick-up frequency ‎amplifies schedule inaccuracy for items with low take-rates.‎ Research implications The quantitative study analyses the amplifying effect of a few selected factors at one of ‎the OEMs. Future studies may address additional factors including causes like production ‎disturbances and may validate the findings at more OEMs.‎ Practical implications Understanding the amplifying effect at an item level guides the instability dampening ‎policy making at OEMs to, for instance, establish clusters of components with sensitivity ‎profiles‎.‎ Original The study compliments previous frameworks with refined and additional factors, exploring ‎empirically rich data about how OEMs, an understudied perspective, propagate schedule ‎instability, an area dominated by simulation studies.

Untangling the complexity generating material delivery “schedule instability”: insights from automotive OEMs

Purpose: Changes frequently made to material delivery schedules (MDSs) accumulate upstream in the supply chain (SC), causing a bullwhip effect. This article seeks to elucidate how dynamic complexity generates MDS instability at OEMs in the automotive industry. Design/methodology/approach: An exploratory multiple-case study methodology involved in-depth semistructured interviews with informants at three automotive original equipment manufacturers (OEMs). Findings: Dynamic complexity destabilizes MDSs primarily via internal horizontal interactions between product and process complexities and demand and SC complexities. A network of complexity interactions causes and moderates such instability through complexity absorption and generation and complexity importation and exportation. Research limitations/implications: The multiple-case study contributes to empirical knowledge about the dynamics of MDS instability. Deductive research to validate the identified relationships remains for Future research. Practical implications: In revealing antecedents of complexity’s effect on MDS instability, the findings imply the need to develop strategies, programs, and policies dedicated to improving capacity scalability, supplier flexibility, and the flexibility of material order fulfillment. Originality/value: Building on complexity literature, the authors operationalize complexity transfer and develop a framework for analyzing dynamic complexity in SCs, focusing on complexity interactions. The identification and categorization of interactions provide a granular view of the dynamic complexity that generates MDS instability. The identified and proposed importance of readiness of the SC to absorb complexity challenges the literature focus on external factors for explaining complexity outcomes. The results can be used to operationalize such dynamic interactions by introducing new variables and networks of relationships. Moreover, the work showcases how a complexity perspective could be used to discern the root causes of a complex phenomenon driven by non-linear relationships

Managing the dynamic needs of engineering resources through sales and operations planning

This paper explores the uncertainty related to medium-term engineering needs considering sales and operations planning (S&OP). The areas of uncertainty and how they are addressed by S&OP are investigated in an engineer-to-order setting. Uncertainties stem from customer orders and critical competences and are minimized through integrating engineering resource planning into S&OP sub-processes and organization, and through explicating methodologies using IT tools that also support scenario planning. To improve the effect of S&OP, measuring short- and long-term performance is recommended, and aligning S&OP with the bidding and organization development processes is important. Future research may replicate this study using multiple cases

Cross-functional integration in the order fulfillment process: Exploring mechanisms in engineer-to-order environments

PurposeTo understand how cross-functional integration (CFI) increases input data quality and enhances information processing efficiency in Engineer-to-Order (ETO) environments.MethodologyThe empirical study focuses on the order acceptance phase of the order fulfilment process in two ETO-oriented companies. A literature review and a multi-case study were conducted. The within-case analysis identifies mechanisms and explores how they are used and needed in the unique contexts. The cross-case analysis addresses related similarities and differences.FindingsIntegrative coordination mechanisms relevant for the activities of problem-solving and decision-making rationalization are centralization, formalization, and information systems. Actor integrators are particularly relevant for the activities of decision-making rationalization, while cross-functional teams and task design are relevant for the activities of problem solving. Integrative coordination mechanisms increase input data quality and enhance information processing efficiency through reducing uncertainty related to, and through balancing intensities of: demand and supply.Research implicationsThe findings operationalize the CFI concept from a coordination perspective, and propose process-specific interpretations of CFI related to order fulfilment in ETO environment.Practical implicationsThe findings provide guidelines for how CFI may help to increase the effectiveness and efficiency of the information processing of tactical planning in an ETO environment.OriginalCFI research is limitedly addressed in dynamic environments like ETO where new product development contributions are needed for each incoming order

Sales and operations execution: An explorative study on potential effects

Purpose Sales and operations planning have a long history in practice and has been researched extensively. It has been proposed that this tactical concept needs to be aligned with a more operational, short-term concept, hence the purpose of this paper is to investigate how sales and operations execution (S&OE) can enhance the performance of a supply chain by analyzing contingency factors regarding design and use. Methodology A multiple-case study approach investigates the potential outcome of implementing a S&OE process in various contexts. Empirical data from several firms in various industries are analyzed according to common and unique factors affecting the potential result. Findings This study identifies critical design for an S&OE process to have a positive outcome in different contexts. Furthermore, relevant data is identified, as well as actors essential for successful usage. Finally, we present, by using knowledge management theory, the importance of integrating S&OE in the planning hierarchy and how the S&OE practice leads to results. Research implications This study details the understanding of how sales and operations execution affects the supply chain performance, given different contextual aspects. Practical implications This study shows the potential impact of implementing S&OE for different types of businesses, as well as giving guiding principles for its design. Original/value S&OE as a concept is today merely described as white papers and consultancy reports. To our best knowledge, this is the first academic study that explores the sales and execution phenomenon in a real-world context. Keywords: Sales and operations execution, Sales and operations planning, Supply chain execution, Case study, Contingency theory, Knowledge management theory