Written by: Jonasz Staszek on August 8, 2021
All planning managers have dealt with that question at least once: Do I really get the most of my assets? Or perhaps we could sell more if we had more capacity? There are three common symptoms of inefficient resource planning. In this post, I will discuss each of them. Look out for them in your own operations!
1. Conflicts between planning managers
Conflicts between managers are the critical indicator of siloed mentality.
Investopedia defines the siloed mentality as “reluctance to share information with employees of different divisions in the same company”.
In order to combat the complexity, the planning processes are divided into stages. This is a case for large and complex organizations in particular. With time, a separate team emerges to deal with each of the stages separately.
A natural consequence of such an approach is that the (senior) managers of these planning teams compete with each other. In turn, this hinders the flow of information between planners.
Planners who lack complete information about their planning context will seek to improve resource utilization (or any other metric) within their own realm. But their efforts may bring the opposite result if the entire context is not taken under consideration.
Much has been said about the detrimental effect of silo mentality on corporate health. In short – we all agree that it is something every company should avoid.
I recently saw an example of inefficient resource planning. Two planners met to coordinate their plans. One of them was in charge of scheduling machines to a job, while the other needed to find a suitable operator. Since the planning challenge was large, the usual practice was to first come up with a plan for machines and then complete it with a schedule of operators. The first of the planners constructed his schedule, striving at maximizing the utilization of machines. But then the second one came, complaining that some jobs were planned in such a way that he needs to hire two more operators – just to cover the peaks in demand.
This takes us to the second of the symptoms:
2. Excessive use of external resources
If you find yourself in frequent and unanticipated need of hiring external resources, especially for jobs that are critical to your business, you might be in trouble.
Researchers from the University of Aalto list six factors to consider when dealing with external resources. One of them – relating to strategic thought – is: How are external resources being utilized?
External resources – if used wisely – can bring loads of competitive advantage to your company. They can supplement your company’s strategic advantages, allowing you to focus on critical activities.
On the other hand, once you start outsourcing your key business to externals, you need to be certain that you have good reasons to do so. Otherwise, you could lose all the competitive edge.
If you hire external resources (too) frequently, this could be due to:
- selling more capacity than available,
- the inability of operating divisions to stick to the production plan.
The former is sometimes justified. For example, companies frequently resort to external resources to cover seasonal peaks in demand.
The latter – although inevitable – should be avoided. If it happens frequently, it means that the plan did not consider all the requirements of the organization, including the limitations of the resources. Hence it was never a good plan. This is a clear sign of inefficient resource scheduling.
3. Local planning tools
Most small and medium-sized companies use Excel (or other spreadsheets) to develop their resource planning solutions. They are easy to develop and can meet business requirements. On the other hand, they don’t scale easily and firms outgrow them just like a toddler grows out of rompers.
When spreadsheet-based solutions reach their limits, many companies develop resource planning solutions in-house. Such approaches usually conserve the existing processes and don’t allow for any optimization.
It is critical to ensure that the planners have the technology they need to make the best decision every time. If your company has grown out of childhood and still relies on Excel, you know you miss some of the opportunities.
Modern decision support tools come in many shapes and flavors. They can accommodate numerous decision contexts. Read my previous post to learn more about the three paradigms of decision support systems.
Stay tuned for future posts about AI in planning!