Advanced Planning Systems as an Enabler of

Lean Manufacturing
March 24, 1999

Jeffrey K. Liker
Principal and Senior Lean Consultant
Optiprise, Inc.
Karl Burr
Vice President
i2 Technologies

Problem
Manufacturing companies throughout the world in many industries are
adopting lean manufacturing methods, a fundamental shift from traditional
mass production. The original model for lean manufacturing is the Toyota
Production System. Toyota runs their system with remarkably little information
technology and relies heavily on simple, visual, manual signals to manage
scheduling and material flow such as kanban cards and strategic buffer
stocks i.e. market places. Yet, in American companies, while lean systems
are being implemented on the shopfloor, in parallel information technology
departments are implementing new information technologies for enterprise
integration and shopfloor control. Thus, the question arises: In what ways can
appropriately applied information technology significantly enhance the
performance of lean systems? In other words, how can we bring together
these parallel activities so they work in concert to drive value?
In this paper we focus in particular on Advanced Planning and Scheduling
(APS) for shopfloor production as an enabler of lean manufacturing.
Advanced Planning and Scheduling systems begin with a representation or
mathematical model that mirrors the actual supply and manufacturing system.
The model can be used to optimize selected parameters of the system as a
whole and can be updated almost instantly as conditions change and new
data is generated. The forerunners to modern APS, like MRP and Finite
Forward Scheduling packages, were used to schedule push systems and
generate schedules down to the level of individual machines and staffing
requirements. This has changed. Modern Advanced Planning and Scheduling
Systems are more sophisticated, simulating pull systems by projecting
consumption by customers. By contrast, lean manufacturing emphasizes that
operations should be directly tied together through pull systems driven by
customer demand.
Our focus on shopfloor advanced planning systems tackles head on the role
of these computerized planning systems in lean manufacturing, as the
shopfloor is the place where lean manufacturing most strongly advocates pull
systems. An analysis of the total supply chain is beyond the scope of this
particular white paper.

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We will argue that while APS has traditionally supported scheduling of

traditional manufacturing, it can also be used in a somewhat different way to
substantially enhance pull systems. Moreover, we will argue that in most
factories the conditions are such that a blend of lean and scheduled systems
makes the most sense for optimal performance. As an example, many plants
these days are moving toward build-to-order manufacturing. Dell is one of the
best known, but many other companies are following suit. Furniture is
another example, but even automotive companies are starting to envision
making cars to real customer orders. With a large number of end products
and products actually delivered based on real customer orders one would
need a warehouse the size of a small city to keep a few of each kind of end
product in safety stock. The mass customization solution is generally to use
combinations of standard parts to make a large variety of end products, and
do the assembly that differentiates products at the latest possible stage in the
process. Some components are very commonly used in a large proportion of
orders so these can be kept in a parts supermarket and replenished based on
kanban. Other components are more particular and their demand fluctuates
widely so a scheduled system is needed based on forecasts which are
updated with customer orders in real time as they come in. This seems to be
an ideal scenario for appropriate mixes of pull and scheduled systems.
We will begin with a general overview of lean manufacturing concepts
focusing on information and material flow. We will then discuss the role of
APS as an enabler of a pure lean manufacturing system. We will then
describe a number of different scenarios in which APS might be introduced,
pure scheduling, pure lean, and mixed models, and consider the potential
value of APS in these different models. Finally, we will consider what this
means for implementing APS to support lean manufacturing.

What is Lean Manufacturing?

Lean manufacturing is a philosophy which seeks to shorten the lead time from
customer order to manufacture and delivery of product by eliminating waste.
Waste is anything that does not add value to the product from the customers
perspective. Taiichi Ohno is often given credit for creating the first lean
manufacturing system at Toyota, now called the Toyota Production System
(TPS). Just as Henry Fords system was built on many innovations
developed by other people, Ohno learned from wherever he could find good
ideas. Ohno faced a crisis and had to develop a better way since Toyota
after World War II had little cash, little space, and was trying to create a car
company from the ground up to serve a small and diverse customer base in
Japan only. Thus, he needed to develop a highly efficient manufacturing
system that was flexible enough for small lot production and to make material
flow quickly through the system, so Toyota could get paid fast and pay its
suppliers fast.

19951998 i2 Technologies, Inc.

Taiichi Ohno realized that material sitting in inventory was wasteno valueadded activity was being performed on it. In fact, Henry Ford had written
about that very idea. And Ohno attacked waste with a vengeance
eliminating warehouses and creating flow of materials whenever possible. For
example, having a set of machines on one side of the plant that built to
inventory which was then moved to the other side of the plant and fed into
another set of machines led to extra handling and material waiting to be
processed. So Ohno would move the machines together into a product layout
(for example, a manufacturing cell) and material would flow. In the process
he discovered that quality improvedsince defects coming from the
preceding process were immediately detected by the succeeding process
before a lot of defects had time to be made. He also found that it was better
to stop and fix defects than to let them build up to be repaired laterthe basis
for the now famous Andon system. Inspection and repair were waste.
Up to this point there is no contradiction with APS as it is applied in traditional
systems. APS seek to optimize total systems and it is up to the analyst and
client to specify the scheduling strategies and optimization goals. If the
objective is to get material to flow through the system very quickly, subject to
real world constraints, APS can create a plan which if followed will maximize
throughput and minimize inventory. Thus the goals of lean manufacturing and
APS can be congruent.
However, lean is more than a set of goals. It is a system of tools, beliefs, and
methodologies. One of Taiichi Ohnos breakthroughs was the recognition that
scheduling individual machines led to piles of inventory. In principle if
operation A and operation B are sequential processes, and each makes just
what is scheduled exactly when it is scheduled, and the schedule is a good
one, material can flow through the plant with little buildup of inventory. But
Ohno observed from experience that focusing on planning individual
operations with the goal of product coming together where it is needed and
when it is needed, leads to waste. In fact, individual operations are decoupled
from their immediate customers and build what they expect the next operation
will need, which is generally different from what the next operation really
needs. This is because schedules always change and schedules are never
perfectly followed in the very dynamic environments of manufacturing plants.
Thus, inventory builds up between operations and we are back where we
startedpush production.

19951998 i2 Technologies, Inc.

Ohnos breakthrough was the concept of a pull system. If operation A,

instead of making assumptions about what operation B needs hour by hour
during the day, actually looks at what operation B needs and builds that, we
should be able to minimize inventory buildup. Even if operation B deviates
from the planned production as long as operation A follows the lead of B and
changes what it builds accordingly the system is synchronized. Back in 1948,
Ohno began setting up pull systems where downstream operations withdrew
product from upstream processes and upstream process replaced what was
taken away.. By 1949 he eliminated most intermediate warehouses and tied
plants together within Toyota. In 1953 one of his breakthroughs was
implementing a supermarket system to pull product from upstream
operations to downstream operations. The supermarket system was based in
part on observations of American supermarkets. On the store shelf small
amounts of product are neatly and visually arranged and customers take what
they want. In response to what the customer takes away, the stock clerk
replenishes what is missing from the shelf. Ohno developed a similar system
in a Toyota machine shop. He kept the complete lineup of parts coming from
the upstream operations in bins on racks and attached cards (kanban) to
each bin. When the consuming operation (B) took away a box of parts he put
the kanban in a mailbox which was sent back to the producing machine A
which signaled A to make more to replenish the supermarket. A was then
building, with some lag time, what B was consumingthey were tied together
using this very simple method. Some parts, for example chassis, are large
and it does not make sense to have cards for each rack of 5 such parts, so
these parts are brought to the line based on another signala call signal.
The call signal can be as simple as pushing a button which triggers a light
indicating a call to bring another rack of 5 chassis.
TPS is a very customer-focused system. The idea behind the pull system is
to make just what the customer wants, as close as possible to when they
want it. The customer withdraws from the supermarket and upstream
operations replenish what the customer takes away. What then should
capacity and staffing plans look like? They should be sized to build at the
speed at which the customer is withdrawing product. That pace is referred to
as the takt timethe German word for meter or pace. Operations working
faster than the takt time have to build to inventory which is waste. Operations
running slower will not be able to keep up so they will shut down the customer
or have to run extra hours and also build up inventory.

19951998 i2 Technologies, Inc.

While building to customer demand is the ideal, Ohno learned that, when
operating with little inventory, if a downstream operation suddenly withdraws a
lot of one product it could overwhelm the capability of the upstream operation
to replenish what was taken away from the supermarket, unless there was a
very large amount of inventory in the supermarket. To minimize the amount
of inventory held in the supermarket the consuming operation needs to
withdraw at a stable, leveled pace. So TPS argues that a condition for using
pull and keeping inventory down is to build at a stable, levelized pace. This
means that instead of building exactly in the sequence the customer
consumes product, actual customer demand plus forecasted demand should
be spread over some time horizon and manufacturing should build to that
leveled demand. Thus, even in the Toyota Production System there is a
place for a schedule and for forecasted demand.
In sum, central tenets of lean manufacturing include:

Takt time and Continuous FlowAll operations should ideally build at the
pace of customer demand. Continuous flow is the ideal, building one
piece at a time, which tends to minimize waste, with all operations
building to takt time. With a pure one piece flow only the first operation in
the continuous flow needs to be scheduled and all other operations follow
sequentially. Takt time is the pacemaker for the continuous flow.

Pull systems should be used when continuous flow is not feasible. In this
case a small buffer (supermarket) is set up between operations and the
feeder operation replenishes what is taken away by the downstream
operation. Ideally, only the final operation (beginning of final continuous
flow) is scheduled and then all upstream processes build to replenish
what has been consumed by their immediate customer.

Production leveling--While ideally the lean system would build only what
the customer needs exactly as they need it, in reality customer demand is
not level. In a multi-product environment, an uneven demand (e.g., a
sudden surge in demand for one of the products) makes it difficult to
service that demand unless there is a large inventory of all end products.
This surge in demand is particularly disruptive for upstream suppliers (i.e.,
the bull whip effect). Lean manufacturing deals with this through
heijunka, i.e., leveling demand by creating an inventory buffer and
replenishing that buffer using a leveled schedule.

19951998 i2 Technologies, Inc.

APS as an enabler to lean: Taking it to the next level

Lean manufacturing has been operating very effectively at Toyota using
primarily manual systems. Taiichi Ohno found that simplicity in manufacturing
was a virtue. A part of that simplicity was to use visual systems wherever
possible. Thus, the signals used to trigger more production were cards or
kanban. They could be color coded, they traveled with the material so it was
apparent if a kanban was missing, and operators and material handlers had to
do something deliberate and manual to order parts. Kanban gave operators
control over the scheduling process. By sending back a kanban they were
literally sending an order to schedule capacity for the parts represented on the
kanban. As vehicles became more complex ultimately thousands of parts all
have cards attached to them. It is now common to have hundreds of
components coming just to the final assembly operation. Yet, Toyota is able
to handle that complexity adding only an automatic card sorter to sort out
cards coming back from suppliers. The cards now have bar codes on them
so that the card reader automatically updates a database by indicating that a
transaction has occurred and accounts payable and receivable can be
updated by computer.
The reason the card system is manageable is that the card systems represent
a large number of pull loops that are reasonably autonomous. So if the
injection molding department making instrument panel housings the operators
need only worry about the cards associated with the instrument panels and
the raw materials to be used for the I.P.s.
Most information systems used in manufacturing, e.g., MRP systems, are
based on a push system. Todays manufacturing applications in the APS
class are more sophisticated than MRP systems. These applications
concurrently take into account capacity and material constraints, calculate
dynamic lead times and are based on an accurate model of the production
system. So how can APS add value to a company that is implementing lean
manufacturing? In the next section we discuss how APS can provide the
planning engine while simple visual mechanisms are used for execution.

Planning in Support of Stable, Lean Systems

While the MRP systems of yesteryear were intended to be execution systems,
modern APS are designed as decision aids. They can help make decisions at
a variety of levels of granularitymacro capacity planning for the entire plant,
schedules for departments, and schedules for individual machines. If the
conditions are such that a manual kanban system can be effective and the
lean systems are stable, why would we want to replace a simple, powerful
visual system like kanban with schedules of individual machines? The
answer is that we probably do not. In this case, it makes more sense to use
the kanban system, be it manual or electronic signals, to execute and let APS
do what it does bestplan.

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What needs to be planned? The entire value stream needs to be planned,

even in a lean manufacturing system. Someone decided how many parts
should be in a bin, how many bins of product to put in the marketplace, how
many kanban to issue, etc. In other words, these are all buffers which should
be dynamically sized based on a global, optimal plan. The takt time is based
on a customer demand which has not happened yetit is in the future. Thus,
someone developed a forecast. Someone figured out how to take that
forecasted takt time and create a level schedule for final assembly. While it is
possible to do much of this manually, the computer does them faster. And in
some case, such as developing an optimal plan, it is not feasible to do all the
iterations required manually.
Let us consider each of the main features of synchronous material flow in lean
and how they can be enabled by APS:
Takt Time and Balanced OperationsThe design of a lean operation starts
with the takt time. What is the customer demand rate? Then ideally all
operations are designed to be balanced to the takt time. For manual
operations work elements are assigned to individual operators to load them
up to the takt time. Machines may be dedicated to a product family and their
cycle times matched to the takt time.
There are at least two conditions in which a takt time analysis is not
straightforward and can be aided by APS. First, if the takt time changes over
time new calculations are needed to rebalance the system. As long as the
takt time can be predicted accurately and smoothed over a time period, the
manual calculations can easily be performed. (This of course assumes there
is a good forecasting method in place for computing the takt time, which itself
can be non-trivial.) But when the customer demand rate changes, there are a
myriad of calculations necessary to identify the optimal rates for the entire
product flow. When there are many different product lines all with changing
takt times, a lot of manual effort is necessary. In fact, in our experience, once
the takt time calculation has been done to design the operation it is the
unusual company that computes changes in takt time and rebalances the
operation on a regular basis. Toyota, in fact, does this monthly but they are
an example of an unusual company. With an APS system the computer
model can automatically be re-optimized with different takt times and the
implications for rebalancing computed.

19951998 i2 Technologies, Inc.

Second, takt time calculations are straightforward when there is a dedicated

product line with variation on that product which have the same routing and
work content and all machines are dedicated to that product and run in the
same amount of available time. Takt time is the time available to operate in a
period divided by the customer demand for that period. So, for example, we
might find that the takt time for a component is one piece coming off the line
every 60 seconds and design to that one number. But what happens when
we have multiple products produced on the same final assembly line and
these products have different customer demand rates and go through
different operations? And what happens when we can not or do not run all
operations the same amount of time per day? Some operations may run 3
shifts, others 2 shifts, some with breaks, and others automatically without
breaks. While in principle we would like a continuous flow with dedicated
machines running the same amount of time and a product going through the
same process, this is often not practically feasible. Then we may find we
have different takt times for different products and even for different stages of
the process.
For example, let us say a part that includes plastic components is provided to
the customer at a rate of 2400 per day. The final assembly operation runs
one shift for 7 hours. Thus the takt time would be 11.25 seconds of
available time per piece and the operation would be set up for that. But a
plastic injection molding machine is slower than final assembly and runs 24
hours a day for a total of 23 hours of operating time (with one hour of
preventative maintenance). For the molding machine the takt time would be
34.5 seconds. So a little complexity has been added with just two operations
that run for different amounts of available time. Things start to really get
interesting if those injection molding machines are also being used to support
other products and the available time is a variablethat is it depends on the
allocation of machine time across products.
The point is not that these complexities represent an insurmountable barrier
to planning for lean manufacturing. Obviously Toyota has found ways to
make this work under a variety of circumstances. But the implications of
balancing to takt time for a process of any complexity is time consuming and
not always straightforward. And when there are many different products and
processes in the plant, it is quite possible that no one will take the time to
optimize and update these rates on a regular basis and identify their
implications for capacity planning, staffing, and the balancing of the operation.
This is in fact what APS systems are especially good at as they include a
model of the entire system and can optimally balance the entire system.

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Pull SystemsFor a process of any complexity there are many decisions

that have to be made to design a pull system. The basic concept is simple
enough. When you cannot build exactly to customer orders one piece at a
time you build the smallest lot sizes feasible and deliver those based on
signals from your immediate downstream customer that they need more. For
automotive parts this typically means building to a supermarketa small
inventory store between you and your immediate customer. The store
contains all the items the immediate customer, the consuming operation,
might want. As they withdraw from the store they send kanban back to
replenish what has been taken away.
The key decisions to make in this case are the pack size, how many to put in
a container, the marketplace size, how many kanban to put in the system, and
the frequency of the replenishment cycle by material handling. You can make
blanket assumptions, such as I want to have two hour inventory lineside and
at least 2 hours minimum and 4 hours maximum in the store, but this may be
more than needed for some products and less than is needed for others. The
reason for this can be seen in the formula for the number of kanban in the
system:

Kanban Quantity (Max.)

K = D (P + C)/ Q + SS
Where:
D = Demand (Consumption Rate in units per time period, like Takt Time)
P = Production Time per batch (order to replenishment)
C = Conveyance Time per batch (order to replenishment)

LEAD
TIME

Q = Quantity per Kanban

SS = Safety stock.

Typically there is one kanban per container and the container size is then the
size of the order quantity. Thus, adding a kanban means adding an additional
container of parts, that is, work-in-process, in the system. We can see from
this equation that:

The greater the takt time the greater the number of kanban. Takt time will
vary across different end products which will require different parts. For
example, if manual mirrors represent 30% of automobiles and 70% are

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10

automatic, there are different takt times for manual and automatic mirrors
and there should be more kanban for the automatic mirrors.

The greater the lead time the greater the number of kanban. Note that
the lead time, which is the time required to replenish the marketplace
when a kanban has been sent back, includes production time and
conveyance time. Both of these will vary across components and thus
different number of kanban are needed depending on lead time.

Capacities of containers also vary depending on the size of the part.

In addition to all the above, typically the minimum quantity in the

marketplace takes into account how much safety stock is needed. The
safety stock depends on how much variability there is in customer
demand, manufacturing, and supplied component lead timethat is, how
reliable the processes are. This also varies across different products and
manufacturing processes.

The point here is that including the number of containers of product needed
for two hours of production is a highly simplistic decision rule. And once
made it is not likely to be adjusted often, except for periodically when perhaps
someone says, we are doing well, so lets see if we can get down to 1.5
hours. A better approach is to use data to optimally derive the appropriate
reorder point and number of kanban and update these calculations on a
regular basis. This is something APS is very good at maintaining a plan
instead of recreating and re-assembling the data each time. And APS can
look more broadly than between a feeder operation and the consuming
operation to consider stability in supply through the value chain to identify
appropriate marketplace sizes and kanban quantities.
As an actual example, in an automotive axle plant there were many
processes needed to make a wide variety of rear wheel drive axles for many
different light trucks. Ultimately there are well over 100 combinations of axles
produced in this plant on multiple assembly lines. The plant machines ring
gears and pinion gears which must ultimately mate. The ring gears alone go
through ten major processes prior to assembly. Between each process there
is a large inventory buffer of up to 60 hours worth of inventory. Material has
traditionally been moved on large pallets by forklift between each operation.
Material can spend weeks in the system. The plant is in the early stages of
moving to lean manufacturing and is switching over from the pallets to carts
on wheels that hold smaller quantities of material. The vision is to use these
carts as a kanban system, paint a certain number of squares on the floor, and
only build enough to replenish marketplaces of carts. Each stage in the
production process makes multiple types of gears. Some are dedicated to
one size but there are multiple gear ratios while other machines are used for
all sizes and gear ratios.

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11

The lean manufacturing support group in the plant is not sure how to size the
marketplace. They are not aware of what calculations are necessary. While
they could get a formula like we presented and calculate the appropriate
quantities they would have to do this for each stage in the process and for
each product meaning dozens of such calculations. Once these calculations
were made they are not apt to recalculate these quantities as conditions
change, something APS can easily do. APS also can help them analyze and
determine where they could get the most leverage in improving the system
using gaming techniques or what-if scenario development , e.g., where to
focus efforts on creating continuous flow or reducing changeover times.
An illustration of the value of APS for planning purposes can be seen by
walking through Figures 1-3. Figure 1 shows an empty kanban board with
hooks for hanging kanban. Each column is set up for kanban for that part.
Shown in parentheses are the maximum number of kanban that have been
allocated and thus the maximum number of containers of parts in the system
at any point in time. A material handler will pick up cards from the consuming
operation which represent containers of parts that have are being used in
production and bring them to the producing operation. The material handler
will fill the board by placing the Kanban on available hooks from the bottom
up. The Green zone indicates no rush to make these parts. Cards in the
yellow zone are higher priority and cards in the red zone mean the
downstream operation may be starved for parts unless you build these right
away. For example, in Figure 1 there are 2 hooks in the red zone for Part A
so someone decided two bins is the minimum reorder quantity.

F ig u r e 1 :E x a m p le K a n b a n S e q u e n c e B o a r d
P a r t A (1 0 )

P a r t B (7 )

P a r t C (2 1 )

Red

. .

Y e llo w

.. . .

. . .

G re e n

.. . .

. . .

...
. .. .
. .. .
. .. ..
. ....

N O T E : T h is e m p ty k a n b a n b o a r d h a s h o o k s f o r h a n g in g k a n b a n . E a c h c o lu m n is s e t u p f o r k a n b a n f o r th a t
p a r t. S h o w n in p a re n th e s e s a re th e m a x im u m n u m b e r o f k a n b a n th a t h a v e b e e n a llo c a te d . T h e b o a rd is
f ille d a s th e d o w n s tr e a m o p e r a tio n c o n su m e s th e p r o d u c t m a d e a n d k a n b a n a re re tu r n e d f o r m o r e
p ro d u c tio n . K a n b a n a re p la c e d o n a v a ila b le h o o k s fr o m th e b o tto m u p . T h e G re e n z o n e in d ic a te s n o r u s h to
m a k e th e s e p a rts . C a r d s in th e y e llo w z o n e a r e h ig h e r p r io r ity a n d c a r d s in th e re d z o n e m e a n th e
d o w n s tre a m o p e r a tio n m a y b e s ta rv e d f o r p a r ts u n le s s y o u b u ild th e se r ig h t a w a y .

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Figure 2: Planning the kanban system

The Kanban system for the execution process ...
Part A (10)

Part B (7)

Red

. .

Yellow

....

Green

....

Part C (21)

...
. . . .. .. .. ..
. . . .. .. .. .. ..
Part currently running
Part ready for next set-up

Figure 2 shows a board loaded with kanban that have been coming back from
the consuming operation (e.g., assembly). In this case we have color coded
the Part A segment of the board with green indicating the cards for Part A are
almost into the red zone and production should be set up to make those parts
next. By contrast, there are only two cards back for Part C out of a total
possible 21 cards so there is plenty of Part C in the supermarket and that is
the lowest priority for production. It should be clear that this simple manual
system is literally the schedule.
Figure 3 illustrates that when conditions change, e.g., customer demand rates
(volume or mix or both) change or perhaps there are problems with parts or
machines which require more safety stock for some parts, cards should be
added or subtracted from circulation. In this case conditions changed and the
APS systems calculated cards should be reallocated. For example, four more
kanban should be added for Part A to increase the maximum WIP of Part A.
These will be allocated by adding two hooks to the green zone and one each
to the yellow and red zones. APS recommended the change in kanban and
can also recommended how to allocate the kanban (e.g., what should be the
minimum trigger point). The board and cards can be a very powerful, visual
control system which is loaded manuallybut the optimized planning for this
can be done by computer almost instantly.

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Figure 3: APS Can Enhance The Kanban System

APS for planning ...
Part A (10) Part B (7) Part C (21)
Red
Yellow
Green

. .
.
.. . . . . .
.. . . . . .

.. .
.. ..
.. ..
.. ..
.... ..

and for re-planning

Part A (14) Part B (8) Part C (16)

Red
Key: Red dots=kanban hooks added to board
Gray dots=kanban hooks taken away

Yellow
Green

. .. ..
. .. . . . . .
.... .. . . .

.. .
.. .
.. ...
.. .
.... ...

Production LevelingIt is not accurate to say Toyota does not schedule its
system but uses pure pull. Nor does Toyota build exactly what the customer
wants when we want it. In its pure form this would mean building exactly to
customer demand without consolidating orders in any way. In practice this
would mean orders would be very uneven with respect to mix and volume.
Orders are to a degree random and random means at times you will get a
sudden rash of red vehicle orders or a rash of vehicles with manual mirrors. If
the assembly plant built directly to these orders they might quickly use of their
red paint supplies and manual mirror supplies in the marketplace. They would
then send an urgent message to the supplier to ship more, which may well
outstrip the small amount of inventory in the marketplace of the supplier. That
supplier will soon run out of unique components for the manual mirror from
their suppliers.
In fact, the ripple effect through the supply chain gets amplified at each stage
backward in the processreferred to as the bull whip effect. With a small
flick of the wrist at the handle end, a bull whip creates a large movement with
great destructive force at the end of the whip. Many studies using
mathematical modeling or simulation have demonstrated how small deviations
from the production schedule in the final assembly plant can lead to very large
amounts of inventory held by upstream suppliers to protect themselves from
the amplified impact on them.

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It has long been recognized by Toyota that a lean system with little inventory
depends on having a level schedule:
The smoothing of production is the most important condition for production by
Kanban and for minimizing idle time in regard to manpower, equipment, and
work-in-process. Production smoothing is the cornerstone of the Toyota
Production System. (Toyota Production System by Yasuhiro Monden, 1998)
Toyota represents TPS as a house and often draws it with production
smoothing, referred to as heijunka, as the foundation. Why would heijunka be
so critical? Because the entire production process and supply chain have
been finely balanced to takt time which assumes a certain mix of product.
When all the marketplaces and kanban quantities are sized to this takt time, a
wild swing in demand for a particular product cannot be handled by the
kanban. Recall that with kanban each stage of the process, e.g., the mirror
plant, only needs to know what has been taken away from their marketplace
to schedule production. They look and replenish what is taken away. A
sudden surge in demand, like a rash of orders for manual mirrors, will quickly
empty out the marketplace and overwhelm the ability of the production
operation to replenish it. Besides there are not enough kanban cards to place
on all the containers of material needed to fill a very large order.
While there has been a lot of discussion in the bull whip effect literature on
using current and accurate information to mitigate its effects, Toyotas solution
is to level production at each stage of the process and develop stable
manufacturing processes that can build to the leveled schedule. The
assembly plant uses a leveling algorithm to take the demand (actual orders +
forecast) and create a levelized sequence to spread out all variations of
product across the day so the producers of components for that product see a
level stream of orders coming to them. As a general rule they assume the
suppliers should plan for fluctuations of +/- 10% deviations from the levelized
schedule in a given day. Toyota commits to keeping their schedule within
those parameters and goes to extremes to build the mix and volume of
product committed to by the end of the day.
Suppliers also have a responsibility to keep their schedules level so their
suppliers do not see dramatic fluctuations in demand. Most suppliers do not
build directly to a truck, but generally have a finished goods marketplace as
well as a safety stock of product as a buffer to changes in their customers
demand. They then can build at a levelized pace to replenish the marketplace
and the safety stock (if needed).

19951998 i2 Technologies, Inc.

15

A tool often used by Toyotas component suppliers to level their production is

a heijunka box, which is also called a load-leveling box. It is used to level the
production schedule for the final assembly or production operation in each
supplier plant. Figure 4 shows a load-leveling box. The figure shown only
goes out from 8:00am to 10:30am but generally would cover the entire day. In
this case we have slots every 15 minutes of the day. This time interval, 15
minutes, is called the pitch, and is the frequency with which a material handler
will come to the box, take whatever card or cards are in that time slot, and
then withdraw the product type and amount on the card and bring it to the
finished goods area. The box is loaded by material planning following rules to
levelize production of the four products shown over the day. The box can be
loaded with kanban or may be loaded with shipping labels that go right on the
boxes which are brought to shipping.

Fig. 4: Load Leveling (Heijunka) Box

Part 8:00 8:15 8:30 8:45 9:00 9:15 9:30 9:45 10:00 10:15 10:30

The box is used for scheduling production of multiple end products coming off one line. Material
handlers pick up the cards (kanban or a shipping label) in the verticle slots at the times indicated
across the top. The cards are sorted into the slots to level (spread out) the building of product types
and set the pace of production. The box above ends at 10:30 but would normally cover the work day.
A card is picked up every 15 minutes and delivered to manufacturing.

19951998 i2 Technologies, Inc.

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Figure 5 shows a load-leveling box along with a store and assembly

processa typical arrangement in a supplier plant. The material handler
withdraws product from the store every 15 minutes to bring to shipping in this
case based on the cards taken from the box. The assembly process is
replenishing the store based on some kind of production signal. They might
look at the store to see when product has gotten down to the red line or
perhaps when the material handler picks up product he or she takes a color
coded golf ball and rolls it down a chute in sequence to assembly so they
know what to build next. The results is a leveled pace of assembly and
leveled withdrawals of different products. Kanban can then be used to pull
materials to assembly from earlier stages of production as assembly
consumes the materials.

Figure 5: Level Schedule: Heijunka Withdrawal Box

Heijunka box used for levelized kanban withdrawal.
Assemble to replenish store.
Heijunka Box
Assembly
Process

Production
Signal

Withdrawal
Kanban

Part 8:00 8:15 8:30 8:45 9:00 9:15 9:30 9:45 10:00 10:15 10:30

Part #
KJ-467

To Shipping
Dock
Pull Parts
to
Assembly

Gravity fed
Store

Stop Producing
Must Replenish

When the process is stable and the operators and material handlers have the
discipline to execute it as planned it is a thing of beauty in its simplicity. The
level-loading box becomes the pacemakerthe heart beat of the system. So
why would we want to add information technology to such a simple and visual
system? Again, if the system is stable enough with a small number of end
products and the heijunka box can work then it is a great execution system
and need not be replaced by IT. But there are a number of reasons why APS
behind the scenes can add greatly to heijunka:

19951998 i2 Technologies, Inc.

17

"

Planning and loading the boxLike kanban, there is a lot of planning

that goes into heijunka. The pitch and kanban quantities need to be
calculated and the actual way of loading the box must be worked out.
Typically a set of rules are generated to load the box. Production control
is generally responsible for loading the box based on these rules. When
there are a number of products and the mix of demand does not exactly
match a multiple of the number of time slots available, it is not a trivial
task to figure out how to level-load the box. Moreover, often a number of
constraints must be considered simultaneously to load the box, such as
leveling out the product mix as well as optimizing what goes on a truck
load based on multiple customers. And if there is a sudden demand for
certain products how should they be loaded in? Moreover, when there
are multiple heijunka boxes to load it can be an onerous task to figure out
the loadings of each box first thing in the morning. APS can be of great
value by specifying how to optimally load the box while simultaneously
considering multiple constraints.

"

Dealing with unlevel demandToyota emphasizes that a condition for

using pull systems with suppliers is building a level production system.
This means you need to have a very good forecast or a bank of orders
and then level that over a period of time. Toyota has been very fortunate
in the stable growth of its business and also limits the options in
customers order, through option packages (particularly outside Japan) to
simplify scheduling. As long as there is a relatively stable demand and
the supplier is building in steady state, the heijunka system leads to a
smooth and stable production flow. But there are many things that can
lead to instability and unlevel demand swings. One example is a sudden
surge in demand for aftermarket parts. As another example, if there is a
supply problem with another supplier which prevents building certain
models those will get removed from the schedule and other models will be
pulled ahead. This can lead to a sudden surge in demand to a supplier.
If a supplier is really running lean with little inventory then it will not take
long to affect the supplier, and the suppliers supplier. In that case, it may
be necessary to change the way the heijunka box is loaded. APS can
suggest what to do next in these cases as well as trigger plans to
accelerate ordering of needed raw materials.

When is Pull not Enough?

Toyota has worked hard to create the conditions needed to support pull
systems with very little inventory between producing operations and
consuming operations. We already discussed the importance of developing a
leveled schedule and building faithfully to that schedule. And Toyota and their
suppliers are legendary for the degree of stability of their operations through
diligent preventative maintenance.

19951998 i2 Technologies, Inc.

18

One of the pioneers in the United States in promoting JIT systems and
1
explaining how they operate is Robert Hall. He lists a number of conditions
that make pure pull systems very difficult to implement effectively:
1. Despite stable demand, the assembly of the final product cannot be
executed in a level enough fashion to provide steady demand for
upstream operations. This can happen when the assembly plant is not
stable or when the product inherently takes different amounts of time with
every unit (e.g., there is testing involved that takes different amounts of
time per unit).
2. Some operations must be started in advance of pull signals. This
happens when operations require special, lengthy, or difficult setups
which cannot be simplified or significantly shortened and must be
scheduled in advance.
3. The product is made in so many options, and the demand for each option
is so small or unstable that it is impractical to carry buffer stocks for all
parts everywhere in the process. This is the case of mass
customization and is found in industries like furniture where each order is
customized and assembly builds only complete orders regardless of the
mix within it.
4. The high defect level causes too many interruptions to permit continuous
flow, and the state of the technology is such that the defect level cannot
be reduced significantly.
5. Products must be produced as integrated batches throughout the process
for reasons of quality control or certification. An example of this is
pharmaceuticals.
When any of these conditions or a combination of them apply, it will probably
be necessary to schedule in addition to pull. There is no reason why it is
necessary to choose one or anothermixed models are quite possible. For
example, a schedule can be developed for purposes of having material and
people available but then some type of visual signal can actually be sent from
downstream operations to start production.

Robert Hall, Zero Inventories (Homewood, Il: Dow-Jones Irwin, 1983).

19951998 i2 Technologies, Inc.

19

Models of APS and Lean Manufacturing

It should be clear that many manufacturing operations are quite complex and
careful planning is needed to determine the best mix of information
technology and manual processes appropriate for a particular operation.
Figure 7 provides a summary of a number of different models or scenarios for
APS use. At the one extreme is a pure scheduling environment which would
be needed if all operations had the characteristics that Hall predicted would
prevent the use of pull systems. At the other extreme is a factory that has all
the conditions needed to support pull and has implemented pull systems wall
to wall in the plant and with suppliers. The large majority of plants fall
between these extremeseither they are working toward a pure lean
system with complete pull systems or they have conditions that support pull in
some areas but not in others thus are headed toward a mixed pull and
scheduling system.
For plants that have no prospects of effectively deploying pull systems and
need a pure scheduling environment, APS can be used to develop a global
optimal schedule and dynamically size buffers as conditions change. This is
the most common application of APS to date and the systems can almost
always find opportunities for substantial reductions in WIP and improvements
in throughput for the facility.
In pure lean plants we believe there is still a significant role for APS as
planning systems, leaving execution to manual systems. Even in this case
some plants are using electronic kanban to signal the need for replenishment
to replace physical cards.
In the transition to lean, there is still an important role for APS to schedule the
operations not yet converted to pull systems. It generally takes years to
convert a plant of any size and complexity so the plant can get years of
benefit from using APS to schedule at first and then to be used for planning
purposes to support pull systems.. In many ways the most promising
application of APS is for mixed models that have combinations of scheduled
operations and pull systems. It takes forethought to realize the plant needs a
combination of methods and one size does not always fit all. With careful
forethought we believe plants can get the best of all worlds and achieve the
highest level of performance through combinations of pull and scheduled
systems. As we mentioned there are a variety of scenarios in which pull
systems may not be enough by themselves, including in companies pursuing
a mass customization strategy and in plants where there are share resources
with complex routings. These seem to be ideal scenarios for appropriate
mixes of pull and scheduled systems.

19951998 i2 Technologies, Inc.

20

Implementing APS to Support Lean

Figure 6 summarizes the use of APS as a planning system to enable a lean
execution system. Not only does APS enable planning which then sets up
what can be a simple, visual execution system for running the shop, but the
plan can be updated as the day goes on and conditions change, and the plan
can be visible to everyone throughout the supply chain. So for example, if the
level-loading formula changes at the first-tier supplier, upstream suppliers can
see the new demands that will be placed on them and long-lead time items
that require scheduling can be scheduled appropriately. The two loops are
interconnected to illustrate that what happens on the shopfloor during
execution should feed data into APS so plans can be updated.

Figure 6: Advanced Planning to Support Lean Execution

Lean Execution
Systems

Advanced Planning
System for Lean
Part

Demand Planning
Levelized Sequence
Kanban Quantities
Supermarket Sizes
Visibility through
supply chain

8:00

8:15

8:30

8:45

9:00 9:15

9:30

9:45

10:00 10:15 10:30

Load-leveling systems
Mixed-model production
Continuous flow processing
Pull systems
lean supply chain
management

To effectively implement APS to support lean there needs to be a fit between

the planning and execution system. This means that the APS implementer
needs to understand the material control execution system so the APS is
appropriately designed to support it. If the system involves a load-leveling
box the APS should be designed to provide clear instructions on loading the
box which means the APS must consider how the box is designed. Ideally,
the APS would have user-friendly output that is as visual as the manual lean
systems. For example, in an ideal user interface the instructions for loading
the box generated by computer might actually look like the box.

19951998 i2 Technologies, Inc.

21

Most manufacturing plants, even in progressive companies, are in a transition

to lean manufacturing. For example, they may have plans for continuous flow
assembly cells, but they are not fully implemented. They may have plans for
pulling material from feeder manufacturing processes to the assembly cells
but they are still at the stage of scheduling production. There may be efforts
to improve preventative maintenance, but downtime is still a problem. In
these cases APS cannot be set up solely to support the future lean system
this would waste the capability of the system. Instead, it should be used to
improve the scheduling needed during the transition to lean. Through
carefully adjusting the optimization models it is possible to use APS to help
guide the plant through the lean transition. For example, the model can
reveal where the bottlenecks are to achieving flow and therefore help
prioritize the lean initiatives. It may show clearly that reducing setup time at a
certain machine is a prerequisite for sending level pull signals back to raw
material suppliers, as well as quantify the benefits of doing this. This
information can be a powerful tool both for prioritizing lean initiatives, as well
as for providing ammunition to persuade skeptics who are challenging the
lean systems.
As we described, the most promising systems are those which use mixed
models of pull and lean systems. This requires a whole new way of thinking.
Traditional scheduling experts simply assumed the entire plant would be
scheduled using the computer system. Lean thinkers often just assume the
entire plant will use pull systems and scheduling is not needed, except to set
up a leveled schedule for final assembly. Mixed models require an
understanding of both sets of methods, and thinking across paradigms, to
identify what the conditions are and the best solutions in different parts of the
operation.
What this means is that those with APS expertise have to work as a team with
the lean manufacturing experts to design, implement, and improve upon the
planning and execution systems in concert. The days of the APS expert
collecting a little data, running the model in a back room, setting it up to
schedule the system based on present day assumptions, and leaving are
overif they were ever effective. In lean terms the APS expert must go to the
GEMBAto where the product is madestudy the process and the lean
plans, and work with the lean experts design and implement a compatible
system.

19951998 i2 Technologies, Inc.

22

Model
Pure Optimal
Scheduling

What is it?
Optimally plan
and schedule all
work centers and
operations. Each
operation builds
to the schedule.

Benefits
Demand-driven system
will develop globally
optimal plans.

Limitations
Assumes all operations
and plants in the supply
chain execute the
schedule. Lack of a
response to unplanned
deviations might cause
inventory buildups.
However, APS can act as
a fast decision aid in case
of such events.

Hybrid Pull and

Optimal
Scheduling
Environment

Combine pull and

scheduling as
appropriate.

The best method for the

particular circumstances.

Transition to Lean

Lean phased in to
product lines.
Scheduled
operations that
have not yet
transitioned to pull
systems and
modeling to help
prioritize lean
initiatives.
Leveled schedule
for final assembly
and then pull from
all upstream
operations (with
supermarket
buffers).

Use the best scheduling

methods for each part of
the plant based on their
evolution.

If not managed right the

scheduled systems might
discourage the movement
to lean, i.e., become
dependent on the
schedule.

Operations are coupled

with their downstream
customers. Highly
visual and can lead to
controlled inventory with
continual reduction of
inventory. Helps build to
real customer demand.

If assumptions for pull do

not hold (e.g., unstable
demand or processes),
the system can fail.
Leveling not always
feasible, e.g., continued
emergence of the build-toorder customer model.

Pure Lean

Operations leadership
might not pursue the most
aggressive and
comprehensive path for a
full lean transformation.

Figure 7: APS as a planning system to enable a lean execution system

Where Appropriate?
Non-level customer demand
(>10% fluctuation from planned
schedule)
Many products that require shared
resources
Optimized sequence of special,
lengthy setups required.
Low product yield (e.g., complex
paint colors)
Highly customized products with
small demand for each option (i.e.,
mass customization).
Some products or phases of the
manufacturing process have the
characteristics appropriate for optimal
scheduling (see above) and others
have the characteristics that support
lean manufacturing.
Any plant that has not yet fully
implemented continuous flow and pull
systems but is heading in that direction.

Relatively predictable demand.

Stable customer schedule.
Moderate product variety.
Moderate customization.
Stable process.
Feasible to arrange equipment into
product lines without major new
capital equipment purchases.

Role of APS
Develop global optimal schedule
and dynamically size buffers.
Provide advanced warning and
visibility to problems.
Provide direct link to
procurement outside 4 walls of
the plant.
Provide customer and release
due date visibility throughout the
process.

Mixture of roles in scheduling

and lean.
What-if scenario development
for continuous improvement
initiatives.

Schedule operations not yet

changed.
Prioritize lean initiatives.
What-if scenario development
for lean transition initiatives .
Support parts of the plant where
lean is implemented as described
below.

Calculate kanban quantities.

Calculate min/max levels
Develop leveled schedule
Early warning if unexpected
events will overload system
Decision aid in case of
unexpected events.
Overall master planning.