Chapter 11 Planning Production Activity Advanced Organizer

Chapter 11 Planning Production Activity

Advanced Organizer

Chapter Objectives • Describe position of engineer in the production process • Describe considerations in planning manufacturing facilities • Be able to use production planning tools • Recognize different methods for production planning and control

Engineers in Production Activity • Plant Manager – Engineering design – Maintenance – Utilities, Security • Production Manager – – Production Planning Routing Scheduling Dispatching & Follow-up • Quality Manager – Quality Control – Inspection • Industrial Eng. Manager – Methods – Time Study – Standards • • General Superintendent Director of Purchasing Finance Manager Ind. Relations Manager

Future Demands on Manufacturing Engineers • An environment of exploding scope (Product Complexity, Global Manuf. , Social & Eco. changes) Multiple roles (Op. Integrator, Manuf. Strategist) • • Advanced tools (Computer hardware, • database, CAD/CAM, Decision Support Systems) Changed work emphasis (Team<>Individual, Human<>Technical, Outside<>Inside Services)

Planning Manufacturing Facilities • • Area selection Community selection Site selection Common errors

Area Selection • • • Location of markets Location of materials Transportation facilities (Hwy, Rail, Air, Port) Labor supply (Supply, Skill, Wage, Union) Location of other plants and warehouses

Community Selection • • • Managerial preferences Community facilities Community attitudes Community, government and taxation Financial inducements

Site Selection • • • Size of site Topography Utilities Waste Disposal Transportation facilities Land costs, Zoning, Expansion

Common Errors in Facility Location Analysis • • • Labor cost miscalculations Inadequate labor reservoir Lack of distribution outlets Underestimated importance of taxes Purchasing unsuitable building http: //www. census. gov

Objectives of Plant Layout Planning • • • Minimize materials-handling costs Reduce congestion of personnel & material Increase safety of personnel Increase labor efficiency Improve morale Facilitate communication and coordination Provide operations flexibility Increase quality of working life Fung shui

Plant Layout Alternatives • Product layout • Process layout • Group Technology

Product Layout • Line Balancing • Materials Handling

Process (Functional) Layout

Group Technology (Cellular) Layout

Quantitative Tools in Production Planning • Inventory control • Break-even charts • Learning curves

Inventory Control Basic Economic Ordering Quantity Model Quantity Let I = Carrying cost R = Annual demand S = Ordering cost Q Time

Inventory Control • Basic Economic Ordering Quantity Model Break-even charts $ Total Annual Cost Carrying Cost = I(Q/2) Ordering Cost = S(R/Q) EOQ Order Quantity Q

Inventory Control Backlog Inventory Model Quantity Q Time

Inventory Control Production Inventory Model Quantity Q Time

Inventory Control Inventory with Safety Stock Model Quantity Q Time

Problems with EOQ Analysis • Lean Manufacturing considers inventory a waste • Just-In-Time requires lot size of 1 Key: Reducing ordering (setup) costs

Break-even Analysis: Fixed Costs and Variable Costs • Fixed Costs: constant, independent of the output or activity level. – – Property taxes, insurance Management and administrative salaries License fees, and interest costs on borrowed capital Rental or lease • Variable Costs: Proportional to the output or activity level. – Direct labor cost – Direct materials

Break-even Analysis • Total Variable Cost = Unit Variable Cost * Quantity TVC = VC * Q • Total Cost = Fixed Cost + Total Variable Cost TC = FC + VC * Q • Total Revenue = Unit Selling Price * Quantity TR = SP * Q where TVC = Total variable cost VC = Variable cost per unit Q = Production/Selling quantity FC = fixed costs TR = Total Revenue SP = Selling price per unit

Break-even Analysis • Break-even point: the output level at which total revenue is equal to total cost. SP * BEP = FC + VC * BEP = FC / (SP - VC) where BEP = breakeven point FC = fixed costs SP = selling price per unit VC = variable cost per unit • Applications of Break-even Analysis: – Determining minimum production quantity – Forecast production profit / loss

Break-even Analysis Total Revenue $ Profit Total Costs Variable Costs Fixed Costs Loss Break-even Point Production Quantity

Break-even Analysis $ Total Revenue Total Costs Maximum Profit Break-even Point Production Quantity

Learning Curves: Production time reduces by a constant rate as production quantity doubles Let Y 1 = Time to perform the 1 st unit Yn = Time to perform the nth unit b = Constant based on learning curve rate k% n = Number of completed units

Learning Curves Linear Regression is used to estimate –b and Y 1 when Multiple (m) data points are available

Learning Curves Cumulative production time from N 1 to N 2:

Learning Curve Example

Learning Curve Example n 1 2 3 4 5 6 7 8 9 10 Example 2 -9 Cost n using Yn. Estimating Yn 11 5. 47 9. 60 Learning Curve 8. 16 7. 42 6. 94 6. 58 6. 31 6. 08 5. 90 5. 73 5. 59 12 13 14 15 16 17 18 19 20 5. 36 5. 26 5. 17 5. 09 5. 01 4. 94 4. 87 4. 81 4. 76

Learning Curve Example 2 -9 Cost Estimating using Learning Curve Normal Scale Log-Log Scale

Production Planning & Control • Planning, Coordination, Control • Concerns: production quantity, costs, quality, due dates, efficiency • Irregularities: machine break down, scrapped parts, late arrival, rush orders, design changes • Idle resources <> Idle inventory

Steps in Production Planning • • • Identify the goals (inventory level) Process planning (routing) Loading Scheduling Dispatching (execution) Production control

Materials Requirements Planning (MRP) Main Features: • Planning tool geared specifically to assembly operations. • MRP was created to tackle the problem of 'dependent demand'; determining how many of a particular component is required knowing the number of finished products. • It allows each manufacturing unit to tell its supplier what parts it requires and when it requires them. The supplier may be the upstream process within the plant or an outside supplier.

Materials Requirements Planning (MRP) • Master Production Schedule (MPS): mix of known demand, forecasts and product to be made for finished stock. • Exploding: Using the Bill of Materials (BOM), MRP determines how many, of what components, are needed for each item (part, sub assembly, final assembly, finished product) of manufacture. – BOM’s are characterized by the number of levels involved, following the structure of assemblies and sub assemblies. – The first level is represented by the MPS and is 'exploded' down to final assembly. • Netting: any stock on hand is subtracted from the gross requirement • Offsetting: determines when manufacturing should start so that the finished items are available when required. – “Lead time” has to be assumed for the operation.

Materials Requirements Planning (MRP) Major assumptions with MRP schedule: • There is sufficient capacity available. For this reason MRP is sometimes called infinite capacity scheduling. • The lead times are known, or can be estimated, in advance. • the date the order is required can be used as the starting date from which to develop the schedule.

Manufacturing Resource Planning (MRP II) • Feedback: feedback from the shop floor on how the work has progressed, to all levels of the schedule so that the next run can be updated on a regular basis. Resource Scheduling: scheduling capability of the resources • • Batching Rules – 'Lot for Lot' means batches that match the orders. – Economic Batch Quantity (EBQ) is calculated to minimize the cost through balancing the set up cost against the cost of stock. – 'Part Period Cover' means making batches whose size cover a fixed period of demand. • Software Extensions – Rough Cut Capacity Planning (RCCP), an initial attempt to match the order load to the capacity available, – Sales Order Processing – Cost accounting • Data Accuracy

Enterprise Resource Planning (ERP) • ERP is a way to integrate the data and processes of an organization into one single system. • Ideal ERP System – Manufacturing: engineering, capacity, workflow management, quality control, bills of material, manufacturing process, etc. – Financials: Accounts payable, accounts receivable, fixed assets, general ledger and cash management, etc. – Human Resources: Benefits, training, payroll, time and attendance, etc – Supply Chain Management: Inventory, supply chain planning, supplier scheduling, claim processing, order entry, purchasing, etc. – Projects: Costing, billing, activity management, time and expense, etc. – Customer Relationship Management: sales and marketing, service, commissions, customer contact, calls center support, etc. – Data Warehouse

Enterprise Resource Planning (ERP) Advantages of ERP Systems • A totally integrated system • The ability to streamline different processes and workflows • The ability to easily share data across various departments in an organization • Improved efficiency and productivity levels • Better tracking and forecasting • Lower costs • Improved customer service

Enterprise Resource Planning (ERP) Disadvantages of ERP Systems • Success does depend on skills and the experience of the workforce to quickly adapt to the new system • Customization in many situations is limited • The need to reengineer business processes • ERP systems can be cost prohibitive to install and run • Technical support can be shoddy • ERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future

Production Planning & Control Systems • Synchronized manufacturing (OPT) – looks for bottlenecks

Toyota Production System Just-in-Time • "Just-in-Time" means making only "what is needed, when it is needed, and in the amount needed. " • Supplying "what is needed, when it is needed, and in the amount needed" according to this production plan can eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity. Kanban System • In the TPS, a unique production control method called the "kanban system" plays an important role. • The kanban system has also been called the "Supermarket method" because the idea behind it was borrowed from supermarkets.

JIT Kanban System Actual Parts W Withdrawal Kanban P Production-ordering Kanban Preceding Station Store Succeeding Station

JIT Kanban System Preceding Station P Store Succeeding Station

JIT Kanban System Preceding Station P Store Succeeding Station

JIT Kanban System W Preceding Station Store P Succeeding Station

JIT Kanban System W Preceding Station Store P Succeeding Station

JIT Kanban System Preceding Station P Store W Succeeding Station

Toyota Production System http: //www. toyota. co. jp/en/vision/production_system/just. html

Lean Manufacturing • Lean means "manufacturing without waste. " • Waste ("muda" in Japanese) has many forms. Material, time, idle equipment, and inventory are examples. Most waste is invisible. Nor is elimination easy. • Lean Manufacturing improves material handling, inventory, quality, scheduling, personnel and customer satisfaction.

Lean Manufacturing Core Disciplines • Cellular Manufacturing • Pull Scheduling (Kanban) • Six Sigma/Total Quality Management • Rapid Setup • Team Development Tools • Value Stream Mapping and Process Mapping are two valuable tools that can help eliminate waste and streamline work. • Group Technology can sort out workflow in complex product mixes.

Flexible Manufacturing Systems (FMS) Basic categories: • Stand-alone machine • Flexible manufacturing cell (FMC) – > one machine + pallet changing equipment • Flexible manufacturing system (FMS) – workstations + mat’ls handling sys. + comp. control • Fully automated factory (FAF)

Flexible Manufacturing Systems (FMS) Benefits: • • • Greater productivity Improved quality Increased reliability of production Reduced batch size & lead-time Increased % of time spent on machine tools