Cummins Inc Case

mminSynchronized Planning at Cummins, Inc

Situation:

Cummins is a worldwide leader company that designs, manufactures and distributes engines in more than 160 countries. To accompany its rapid growth, face increasing competition and quickly adjust to market changes, the company has developed several different planning procedures, each serving a different purpose:

Procedure | Frequency | Purpose | Issue |

Simulation | Once per year | Projection of demand for the next 5 years. | Constrained forecast. |

Aggregated Product Plan (APP) | 10-year product plan | Define “where the business would like to go. | Abstract: very few people in the company deal with this process. |

Annual Operating Plan (AOP) | May to September | “Top-down” budget dictated by senior management. Basis for the plant’s incentive system. | Can fix target higher than plants’ projections. |

Distributor Annual Operating Plan (DAOP | July to September | “Bottom-up” process which allows for management expectations and measures adherence to forecasts on company policies. | Had rendered Cummin’s internal plant calculations for productions less useful and potentially causing inventory problems. |

Synchronized Planning | Monthly rolling process | Integrates all the functions in the company to use only one set of numbers for planning. Encourages cross-departmental communication. | Difficulties to keep DAOP if this procedure is used. |

Problem:

Even if everything is working well so far, Cummins needs to streamline its planning procedures and develop processes that are consistent all over the world.

Analysis:

So far, Cummins is using 5 different planning procedures, it is too much if the company wants to be more efficient. The best solution is to provide the stakeholders a common set of numbers, so everyone work in the same direction. Indeed, it seems that using different tools can sometimes go against the interests of the company, such as when the DAOP causes inventories problem or when the...