Manufacturing is all About the Order
The immutable truth – running a successful business depends on securing and fulfilling orders. Securing orders boosts sales volume and market share, while delivering goods and services profitably drives earnings.
Sales orders tend to be attribute-based, while manufacturing orders tend to be Bill of Materials (BOM) based. The key to profitable growth is making real-time decisions that increase both sales volume and profitability based on variability in both planning and execution.
In a typical organization, the Manufacturing Execution System (MES) manages manufacturing orders, the planning system (SIOP) handles sales orders, and the scheduling system (APS) optimizes trade-offs between manufacturing and sales.
Attribute-Based Orders vs. BOM-Based Production
Let’s use an example of an automotive manufacturer that sells vehicles that include multiple configuration options. The sales order comes in attribute-based, like a customer in California ordering a blue sedan with a leather interior and a premium sound system. Meanwhile, the manufacturing and assembly systems are MBOM-based: they see the order as thousands of assemblies, subassemblies, and parts rather than a combination of major/minor feature codes as seen by sales.
The problem arises when a supplier shipment of premium sound systems is delayed. The BOM-based production cannot proceed as planned, yet the sales order has already promised the customer delivery in 30 days.
Therefore, an execution issue can impact the production within a BOM. The Manufacturing Bill of Materials differs from the Planning Bill of Materials, which is used in sales and attribute-based planning. As a result, traditional systems lack a workflow for planning to respond to changes in execution or vice versa.
These types of disconnects can idle production lines, which can cost millions of dollars per day due to lost output. In addition, it also affects the manufacturer’s promise to the customer, damaging trust and brand reputation. The ripple effect often forces manufacturers into costly measures such as expedited freight, overtime, excess safety stock, or extended order lead times.
Why Traditional Systems Fall Short
Traditionally, sales, planning, and manufacturing would scramble separately: sales might push delivery dates, production might stall, and scheduling would juggle resources inefficiently.
Without a common data model operating in real time across planning, scheduling, and execution, organizations often struggle when sales order commitments and manufacturing realities diverge. Disconnected workflow and related systems force teams to work in silos, slow responsiveness, and increase the risk of missed deadlines, excess costs, and dissatisfied customers.
A common data model can be deployed, which transforms sales attributes directly into an MBOM or vice versa. Thus, the system can immediately recognize constraints, reallocate available components, adjust production sequences, and enable the sales team to deliver within the order lead times.
The Value of a Common Data Model
Manufacturers that use a common data model across these Industry 4.0 systems can have their demand planning generate forecast orders, which become sales/firm orders and subsequently planned/scheduled orders. The MES creates manufacturing orders, and the scheduling system then optimizes the dependencies between sales and manufacturing orders.
This integrated approach means that execution issues no longer derail plans. Instead, the system dynamically aligns planning with real-time execution, minimizing delays and maximizing profitability.
Here are the benefits:
- Shorter order lead time
- Ability to scale mass customization without sacrificing efficiency
- More accurate forecasting and demand responsiveness
- Higher margins
The conclusion of a common data model is as follows: sales, MES, and scheduling systems are aligned, companies can respond to execution issues in real time, optimize trade-offs, and maintain both customer satisfaction and profitability.
When manufacturers close this planning and execution gap, they will be able to adapt faster to supply chain disruptions and support the rising demand for customer personalization.
Are you ready to close the gap?