TRAP
Avoid Analysis Paralysis
It’s easy to slip into “analysis paralysis” at this point if you try to
determine the perfect leveling point. There are a few factors at
work here that make a perfect selection virtually impossible.
First, as they say about mutual funds, “Past performance is not a
guarantee of future performance.” We are basing future plans on
past results, but they will not be the same. Second, the law of
large numbers means that the more data points are observed, the
less influence any one point has on the overall total. When look-
ing at yearly totals for production volumes, a random spike here
and there has less effect on the overall average. In laymen’s
terms this simply means looking at a large enough sample, so the
“noise” in the data is filtered out. Third, the information you’re
analyzing may be flawed. It may not show the actual demand, but
rather, the orders that are generated internally by an MRP system
to fulfill “demand.” These order quantities are influenced by many
factors, and the quantities do not necessarily reflect true demand.
Finally, as you’ll see below, when you attempt to level the entire
product mix, there will have to be some slight adjustments made
to achieve an effective balance. Our tip is to select a level volume
for each item that seems to be correct and get started on leveling
the process. We guarantee that you’ll need to make adjustments
no matter how carefully you do the analysis!
Chapter 7. Leveling: Be More Like the Tortoise Than the Hare 153
TIP
Identify the Multiple for the Level Pattern
The best pattern is based off of a multiple of two. This provides
a consistent pattern of daily, every other day, every fourth day,
and at most every sixth day. If the volume of an item is such that
the daily demand times six is still too low to be practical, you
either need to reduce setup times or shift the item to the “other”
category until setup times are reduced. In our example, the pat-
tern of every other day was established for the items that had
roughly one-half the demand of the every day items, and the
every four-day items had roughly one-fourth the demand of the
daily items.
