A Guide to Modeling Production Changeovers in Supply Chain Network Design

When you’re building a supply chain network design planning model, either operational or strategic, details matter. It’s critical to look at all aspects of your network when determining the key decisions to include in your model. One often overlooked option with a potentially significant upside is explicitly modeling significant production changeovers.

With ever-changing market demands, shifts in customer preferences, and seasonal variations it is important to know how these drivers may affect your production decisions. Efficiency and cost optimization also play a crucial role, with a focus on reducing downtime, optimizing resource utilization, and improving inventory management. These drivers vary by industry and market dynamic, and effective changeover management is essential for successful supply chain manufacturing operations.


When is the Right Time to Include Production Changeovers?

Switching from manufacturing one product to another can be a complex process and can require major investments of both time and resources – and those investments can vary greatly depending on the product mix during a given time period. Modeling changeovers can improve the quality of your plan by enabling better decisions about the use of production assets and the tradeoffs with other costs in your supply chain.

When you model changeovers explicitly, you get an optimization model that supports trade-off decisions that sometimes lead to longer runs with inventory pre-builds – which reduces the frequency of the need for changeovers – or production plans that more efficiently group products, like putting those with minimal setup time and costs on the same line.  The output of the model should point to the optimal mix of production costs, inventory costs and transportation costs that balance production changeovers, inventory carrying costs and transportation costs.

There are a range of techniques that exist to model changeovers in optimization planning models, so it’s important to identify which one is most appropriate for your business needs. If you’re developing a long-term strategic network design model, for instance, or if you’re working on a line that’s set up for short, consistent changeovers across product mixes, you can probably use a relatively simple approach that approximates the lost production time by using an efficiency factor.

However, for those businesses with a complex set of changeovers to consider, or a horizon that includes time periods in the near term, Profit Point has found that it is better to implement a more accurate method that sequences the product families produced on a line so that all changeover options can be evaluated by the model.


Finding the Production Changeover Plan That’s Right for You

Being prepared to find that the best solution for your business may not necessarily require an all-or-nothing approach. Often modelling the key business cost drivers is enough to make the right decisions for your business. For example, it may be best to group products into larger families so that you only model changeovers that occur when transitioning between larger families of products. Similarly, you may decide to only model the changeovers for the first few time periods, which are generally the ones closest to the execution horizon and thus may require a more accurate level of planning.

Regardless of your ultimate goal, make sure to consider these three components when creating your production changeover model:

  1. Historical Data & Performance Metrics – Analyze historical production data to identify patterns and trends in demand, changeover times, and resource utilization.
  2. Cross-Functional Training & Development – Collaborate with production operators, engineers, and other relevant teams to gather insights and input on current changeover practices.
  3. Technology & Automation – Test and optimize changeover scenarios before implementing them on the production floor to minimize the risk of disruptions.

For many large manufacturers, production changeover costs are a significant cost driver to their overall supply chain network costs.  Therefore, it is essential that these costs are accurately captured in any supply chain network design exercise, to properly understand the tradeoffs between more changeovers, long production runs, inventory holding and transportation costs. We encourage you to explore different ways to properly include these costs in your tradeoffs when designing your supply chain network.

Deciding to include changeovers in your model will typically increase the solution time, but it is often worthwhile, since you end up with a plan that better reflects the trade-offs in your production environment and is ultimately more executable. And since every supply chain problem requires a unique solution, it can be helpful to engage with a team of supply chain experts who can deliver on all three keys to success: people, process, and technology.

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