- Industry: Manufacturing
- Product(s): Custom Development, @RISK
- Application: Long-Range Capacity Planning
When global direct sales giant Amway prepared to get even bigger, their Industrial Engineering team called on Palisade to create a strategic tool based on @RISK to improve a crucial aspect of their business – long-range capacity planning for their extensive manufacturing operations.
When you can satisfy a customer's curiosity in a single meeting, you've gained a fan, a believer and a person who is going to ask you to come to the decision-making table more often.Phil Miclea, Senior Principal Engineer, Amway
A Complex and Rapidly Growing Company
With more than $10 billion in annual sales from products in such diverse categories as nutrition, beauty and home care, Amway is one of the top 30 private companies in the U.S. To call the company’s operations vast and complex would be a serious understatement. Amway manufactures more than 450 different products in 18 different plants in the U.S., China, Vietnam and India and sells them in more than 100 different countries. What’s more, with its vertically integrated supply chain, Amway also grows the crops used in some of its cosmetics and nutrition products on organic farms and makes many of the bottles and cartons its products are sold in. It all adds up to tens of thousands of components and routing steps at hundreds of work centers, each with their own capacity requirements. Management requires efficient planning, and the ability to make decisions on complex scenarios quickly and with confidence.
For the Industrial Engineering (IE) team at Amway, the people charged with providing future capacity risk evaluation and analysis for the company’s work centers, improving these capabilities became even more crucial with $335 million in capacity expansions on the horizon. When capacity is perceived to be running out, or new product lines are introduced, it is the IE team’s job to analyze the situation and determine the impact of various “what-if” type scenarios on existing or new work centers, such as:
What if we...
- Run through breaks and lunches?
- Move products between lines?
- Increase/decrease our run sizes?
- Move to a longer/shorter workweek?
- Modify the lengths of shifts?
To answer questions like these in the past, the team would gather information and data, come up with a “spot” utilization figure, run a variety of different scenarios using traditional modeling tools and select the resulting combinations that presented the information in the best context. But that process could be unwieldy and time consuming, with results that were difficult to manage and sometimes less than satisfactory.
Two of Amway’s top capacity experts, Senior Principal Engineer Phil Miclea and Senior Engineer Amy Hedgecock, explained the process and its challenges in an article in information and communications technology industry magazine ISE:
“Obtaining all the necessary information requires gathering data from multiple departments across the corporation (planning, forecasting, new product development, manufacturing, engineering, etc.), a data collection process that can take weeks or months, leading to further inaccuracy,” because, as they say, “These numbers are relevant today, but may not be as accurate tomorrow.”
Custom Developing a Better Way
In 2014, faced with a planned expansion that eventually added five new manufacturing sites in 2015, the IE team “wanted to find a better way,” one that combined flexibility with accuracy and speed to allow them to make decisions quickly. They wanted a solution that required less time for data collection, thereby providing more time for critical analysis. So they partnered with Palisade and its Custom Development team to try and find that “better way.” The result is a custom application that Amway calls the Long Range Capacity Planning (LRCP) tool, and its direct byproduct is “Scenario Thinking Made Easy,” to quote the title of the ISE article.
Working in close collaboration with the IE team, and ever mindful of their simulation goals, the Palisade Custom Development team designed a new interface and customized Amway’s Excel-based models, using @RISK in the background to power the analyses. Using Monte Carlo simulation, @RISK is perfectly suited to calculating the thousands of “what-if” scenarios necessary to truly account for the myriad uncertainties faced by Amway’s manufacturing teams.
Simple, adaptable and flexible, the new application is easy to update and produces intuitive graphic reports. Reports provide probabilistic predictions of various outcomes occurring if decision-makers make operational changes. Most importantly, the LRCP tool generates results rapidly, so they can be quickly and easily interpreted. This means that capacity decisions can now be made within the confines of a 30-60-minute meeting – an efficiency that was never possible before the @RISK LRCP solution.
A Bright Future
The LRCP tool was completed and tested by May of 2016, and users across the company soon began to receive training on how to use it. Plant managers and capacity experts alike can now enter changes to variables such as demand, output rates, new products and run sizes in real time for a selected plant and then configure and simultaneously run up to 20 different “what-if” scenarios individually or in combination and see the results almost instantly. These results can be studied on their own or displayed alongside existing baseline scenarios for comparison.
Amway’s new tool has already proven its worth across the company, from both the Plastics and Liquids departments, where it was used to determine the feasibility of shift reductions, to the Nutritional Products plant, where it clearly showed the need for new capacity for a series of new products.
Miclea and Hedgecock, meanwhile, expect the demand for the LRCP tool to increase. As Miclea summed up, “When you can satisfy a customer’s curiosity in a single meeting, you’ve gained a fan, a believer and a person who is going to ask you to come to the decision-making table more often.”