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Operative Design

After the tactical Rhythm Wheel design has been completed, we have to take one step ahead towards execution in the operative design phase. In execution, order quantities rarely match the planned quantities.

This is an inevitable fact, because all possible demand and supply exceptions over time cannot be predicted perfectly. Usually, the demanded quantities within one cycle are not always the same, but follow some unpredictable pattern. The demand for some products might be quite stable and well predictable, while the demand for other products is not. When production follows customer demand, the production quantities have to be adapted in every Rhythm Wheel cycle. This allows a flexible reaction to the occurred demand. But with production quantities fluctuating, the production of one complete Rhythm Wheel cycle will take a different amount of time. Hence, in execution, the cycle length will fluctuate.

In periods with higher demand, larger lot-sizes will lead to longer cycles. In periods with lower demand, smaller lot-sizes will lead to shorter cycles. Usually, as demand becomes more variable, the Rhythm Wheel cycle length may start to fluctuate more than desired. This is when one very important lean paradigm comes into play: Variability should be buffered in inventories, not on production assets. Big variations in demand should be buffered in inventories, enabling stable capacity utilization and a smooth flow of products throughout the supply chain. Should the nervousness of production quantities, instead of being buffered in inventories, be passed on into the supply chain, the phenomenon of demand amplification, also known as the Bullwhip or Forrester Effect, could create enormous harm to the entire supply chain.

The idea of this approach is to allow a certain degree of variability of the cycle length and production quantities. The Rhythm Wheel cycle length is kept within particular upper and lower boundaries enabling the leveling of production quantities. If demand is by far higher than expected, a certain part of it will be produced in the next cycle. If demand is much lower than expected, the asset can be kept idle for some time and maintenance work, for example, can be performed until the demand has risen again.

Choosing an upper and lower cycle length boundary guarantees that production volumes are neither too large nor too small. Certain deviations from the optimal production quantity are allowed, but it is made sure that those deviations do not get out of control. In order to stay within the set cycle length boundaries, factoring is applied to prevent the cycle from becoming neither too long nor too short.

Choosing the right cycle length boundaries for the Rhythm Wheel is not a trivial task. The upper and lower boundaries should not be too far apart, because too much variability would disrupt the regular Rhythm Wheel schedule. On the other hand, cycle boundaries should allow for a certain degree of flexibility in order to react to demand and supply variations. The optimal design of cycle length boundaries depends, amongst the product portfolio, also on the supply chain strategy.

If constant resource utilization is crucial for operating the supply chain efficiently at low cost, then only a small deviation from the designed cycle length should be allowed, meaning upper and lower cycle boundaries would be very close to each other. Variability is then almost completely buffered in inventories. If low inventory levels are more important than constant capacity utilization, then the boundaries should be set further apart. With the Rhythm Wheel concept, both leveled capacity utilization and low inventory levels can be achieved.