Post on 27-Nov-2014
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PRODUCTION MANAGEMENT - IV
“the process of producing a specification or chart of the manufacturing operations to be performed by different functions and workstations over a particular time period.
Production scheduling takes account of factors such as the availability of plant and materials, customer delivery requirements, and maintenance schedules”
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PRODUCTION PLANNING
PRODUCTION PLANNING HORIZONS
Master Production Scheduling
Production Planning and Control Systems
Pond DrainingSystems
Aggregate Planning
PullSystems
Focusing onBottlenecks
Long-Range Capacity PlanningLong-Range
(years)
Medium-Range(6-18 months)
Short-Range(weeks)
Very-Short-Range(hours - days)
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PushSystems
PRODUCTION PLANNING: UNITS OF MEASURE
Master Production Scheduling
Production Planning and Control Systems
Pond DrainingSystems
Aggregate Planning
PushSystems
PullSystems
Focusing onBottlenecks
Long-Range Capacity PlanningEntire
Product Line
ProductFamily
SpecificProduct Model
Labor, Materials,Machines
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AGGREGATE PLANNING
Importance Fully load facilities and minimize overloading
and underloading Make sure enough capacity available to
satisfy expected demand Plan for the orderly and systematic change of
production capacity to meet the peaks and valleys of expected customer demand
Get the most output for the amount of resources available
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Inputs
A forecast of aggregate demand covering the selected planning horizon (6-18 months)
The alternative means available to adjust short- to medium-term capacity.
The current status of the system in terms of workforce level, inventory level and production rate
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Outputs
A production plan: aggregate decisions for each period in the planning horizon about workforce level inventory level production rate
Projected costs if the production plan was implemented
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Medium-Term Capacity Adjustments
Workforce level Hire or layoff full-time workers Hire or layoff part-time workers Hire or layoff contract workers
Utilization of the work force Overtime Idle time (undertime) Reduce hours worked
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Medium-Term Capacity Adjustments
Inventory level Finished goods inventory Backorders(products are supplied after a
period of waiting time./lost sales
Subcontract
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Aggregate planning Strategies
Inventory carrying through constant work force
Sub contractingVariable workforceVariable working hoursPromotional activitiesBack ordering
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Inventory carrying through constant work force
MeritsStable workforce
Better quality products
Job security
Avoids hiring &firing costs
DemeritsInventory carrying cost
Difficulty in finding stable workforce
Not suitable for perishable goods.
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Sub contracting
MeritsSuitable for peak demand
DemeritsControl becomes difficult
Sub contractor s becomes competitors.
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Variable workforce
MeritsMatch between demand & production
DemeritsCost of hiring
Training cost & quality
Job insecurity
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Variable working hours
MeritsStable work force
Cost of inventory
DemeritsNot able to meet large demand
Over time wages are higher
Idle time for employees
Employee stress
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Back ordering
MeritsInventory cost
Suitable for low demand
DemeritsCustomer waiting time
Dissatisfaction
Loss of sales
Loss of good will
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Aggregate Plans for Services
For standardized services, aggregate planning may be simpler than in systems that produce products
For customized services, there may be difficulty in specifying the nature and
extent of services to be performed for each customer customer may be an integral part of the production
system
Absence of finished-goods inventories as a buffer between system capacity and customer demand
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Master Production Scheduling (MPS)
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Objectives of MPS
Determine the quantity and timing of completion of end items over a short-range planning horizon.
Schedule end items (finished goods and parts shipped as end items) to be completed promptly and when promised to the customer.
Avoid overloading or underloading the production facility so that production capacity is efficiently utilized and low production costs result.
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The rules for scheduling
No Change+/- 5%
Change
+/- 10%
Change
+/- 20%
Change
+/- 20%
ChangeFrozen
Firm
FullOpen
1-2 weeks
2-4weeks
4-6weeks
6+ weeks
Time Fences
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Time Fences
The rules for scheduling: Do not change orders in the frozen zone Do not exceed the agreed on percentage
changes when modifying orders in the other zones
Try to level load as much as possible Do not exceed the capacity of the system
when promising orders. If an order must be pulled into level load, pull
it into the earliest possible week without missing the promise.
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Developing an MPS
Using input information Customer orders (end items quantity, due
dates) Forecasts (end items quantity, due dates) Inventory status (balances, planned receipts) Production capacity (output rates, planned
downtime)Schedulers place orders in the
earliest available open slot of the MPS
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Developing an MPS
Schedulers must: estimate the total demand for products from
all sources assign orders to production slots make delivery promises to customers, and make the detailed calculations for the MPS
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Example: Master Production Scheduling
Arizona Instruments produces bar code scanners for consumers and other manufacturers on a produce-to-stock basis.
The production planner is developing an MPS for scanners for the next 6 weeks.
The minimum lot size is 1,500 scanners, and the safety stock level is 400 scanners. There are currently 1,120 scanners in inventory. The estimates of demand for scanners in the next 6 weeks are shown on the next slide.
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Example: Master Production Scheduling
Demand Estimates
CUSTOMERS
BRANCH WAREHOUSES
MARKET RESEARCH
PRODUCTION RESEARCH
500
200
0
10
1
0
50
300
1000
0
0
500
400
2 3 4
200
000
300500
0100
700
65
1000
200
WEEK
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Example: Master Production Scheduling
Computations
CUSTOMERS
BRANCH WAREHOUSES
MARKET RESEARCH
PRODUCTION RESEARCH
500
200
0
10
1
0
50
300
1000
0
0
500
400
2 3 4
200
000
300500
0100
700
65
1000
200
WEEK
TOTAL DEMAND
BEGINNING INVENTORY
REQUIRED PRODUCTION
ENDING INVENTORY
710
1120
0
410 560
1500
410
1350
1160
1500
900
560
700
1250950460
4601160
150015000
1010 1200
950
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Example: Master Production Scheduling
MPS for Bar Code Scanners
SCANNER PRODUCTION 0 1500 1500 150015000
1 2 3 4 65
WEEK
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Types of Production-Planningand Control Systems
Pond-Draining SystemsPush SystemsPull SystemsFocusing on Bottlenecks
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Pond-Draining Systems
Emphasis on holding inventories (reservoirs) of materials to support production
Little information passes through the system
As the level of inventory is drawn down, orders are placed with the supplying operation to replenish inventory
May lead to excessive inventories and is rather inflexible in its ability to respond to customer needs
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Push Systems
Use information about customers, suppliers, and production to manage material flows
Flows of materials are planned and controlled by a series of production schedules that state when batches of each particular item should come out of each stage of production
Can result in great reductions of raw-materials inventories and in greater workers and process utilization than pond-draining systems
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Pull Systems
Look only at the next stage of production and determine what is needed there, and produce only that
Raw materials and parts are pulled from the back of the system toward the front where they become finished goods
Raw-material and in-process inventories approach zero
Successful implementation requires much preparation
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Focusing on Bottlenecks
Bottleneck Operations
Impede production because they have less capacity than upstream or downstream stages
Work arrives faster than it can be completed
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Material Requirements Planning
Master ProductionScheduling (MPS)Master ProductionScheduling (MPS)
Material RequirementsPlanning (MRP)
Material RequirementsPlanning (MRP)
Capacity RequirementsPlanning (CRP)
Capacity RequirementsPlanning (CRP)
AggregatePlanning
AggregatePlanning
ResourceRequirements
Planning
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Materials Requirements Planning
Computer based system
Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS
Nets against current orders and inventories to develop production and purchased material ordering schedules
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Objectives of MRP
Improve customer service
Reduce inventory investment
Improve plant operating efficiency
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Order ChangesOrder
Order ChangesOrder
PlanningReport PlanningReport
Elements of MRP
MRPSystem
Planned OrderSchedule
Planned OrderSchedule
InventoryTransaction Data
InventoryTransaction Data
Bill of Materials File
Bill of Materials File
MasterProductionSchedule
MasterProductionSchedule
InventoryStatus FileInventoryStatus File
Service-PartsOrders andForecasts
Service-PartsOrders andForecasts
Performance Performance
ExceptionReports
ExceptionReports
Inputs Outputs
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MRP Computer Program
Begins with number of end items needed
Add service parts not included in MPS
Explode MPS into gross requirements by consulting Bill of Materials file
Modify gross requirements to get net requirements:
Net Requirements = Gross Requirements+ Allocated Inventory
+ Safety Stock- Inventory On
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Outputs of MRP
Planned order schedule - quantity of material to be ordered in each time period
Changes to planned orders - modifications to previous planned orders
Secondary outputs: Exception reports (late orders) Performance reports(delivery promises/stockout
incidents) Planning reports(reports used for future inventory)
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Example: MRP Schedule
LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped.
MOPEDMOPED
ENGINEASSEMBLY
ENGINEASSEMBLY
MOTORMOTOR CARBURETOR(2)
CARBURETOR(2)
GASTANKGASTANK
WHEELASSEMBLY
(2)
WHEELASSEMBLY
(2)
HUB ASSEMBLY
HUB ASSEMBLY TIRETIRE
FRAMEFRAME
Level 0
Level 1
Level 2
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Example: MRP Schedule
Bill of MaterialParent Component Level
Compon.Code Code Code Description Req’d
442 0 #442 Moped
442 EA 1 Engine Assem. 1GT 1 Gas Tank 1WA 1 Wheel Assem. 2F 1 Frame 1
EA M 2 Motor1C 2 Carburetor 2
WA HA 2 Hub Assem.1T 2 Tire 1
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Lot-Sizing in MRP
Lot-size is the quantity ordered/produced at one time
Large lots are preferred because: Changeovers cost less and capacity greater Annual cost of purchase orders less Price breaks and transportation breaks can be utilized
Small lots are preferred because: Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order
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The best method, resulting in least cost,depends on cost and demand patterns.
Lot-Sizing Methods
Economic Order Quantity (EOQ) does not consider quantity discounts does not always provide the most economical
approach with lumpy demandLot-for-Lot (LFL)
accommodates lumpy demandPeriod Order Quantity (POQ)
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Example: Lot-Sizing Decision
The net requirements for a material from an MRP schedule are:
It costs $400 to change over the machines for this material in the affected work center. It costs $0.40 per unit when one unit of this material must be carried in inventory from one week to the next.
Identify the lot-sizing method that results in the least carrying and changeover costs for the 8-week schedule.
NET REQUIREMENTS 1000
1
0 1300
2 3 4
800 1200
65
01300
7
WEEK
800
8
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Example: Lot-Sizing Decision
Lot-for-Lot Method
Carrying Cost = 0($.40) = $0
Changeover Cost = 6($400) = $2,400Total = $2,400
NET REQUIREMENTS
BEGINNING INVENTORY
PRODUCTION LOTS
ENDING INVENTORY
1000
0
1000
0
1
0
0
0
0
0
1300
1300
0
2 3 4
800
000
00
13001200800 0
0
1200
65
01300
00
7
WEEK
800
0
800
0
8
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Example: Lot-Sizing Decision
Economic Order Quantity (EOQ) Method
S = $400.00D = [(Net Req. for 8 wks)/8 weeks)](50
weeks/year)
= (6400/8)(50) = 40,000
C = ($0.40 per week)(50 weeks/year)
= $20.00
2DS 2(40,000)(400)EOQ = = = 1265
C 20
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Example: Lot-Sizing Decision
Economic Order Quantity (EOQ) Method
Carrying Cost = 4855($.40) = $1,942Changeover Cost = 6($400) = $2,400
Total = $4,342
NET REQUIREMENTS
BEGINNING INVENTORY
PRODUCTION LOTS
ENDING INVENTORY
1000
0
1265
265
1
265
0
265
0
230
1265
1300
265
2 3 4
800
725760695
695230
126512651265 0
725
1200
65
01300
725760
7
WEEK
1265
1190
800
725
8
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Example: Lot-Sizing Decision
Period Order Quantity (POQ) Method
POQ = (# Weeks/year)/(# Orders/year)
= 50/(D/EOQ)
= 50/(40,000/1,265)
= 1.58 or 2 weeks
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Example: Lot-Sizing Decision
Period Order Quantity (POQ) Method
Carrying Cost = 2900($.40) = $1,160Changeover Cost = 4($400) = $1,600
Total = $2,760
NET REQUIREMENTS
BEGINNING INVENTORY
PRODUCTION LOTS
ENDING INVENTORY
1000
0
1000
0
1
0
0
0
0
800
2100
1300
0
2 3 4
800
013000
0800
025000 800
800
1200
65
01300
01300
7
WEEK
0
0
800
800
8
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Example: Lot-Sizing Decision
SummaryCarrying Chg.Ovr. Total
Method Cost Cost Cost
LFL 0 2,4002,400
EOQ 1,9422,4004,342
POQ 1,1601,6002,760
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Issues in MRP
Lot-Sizing Useful at lower levels but may drive excess
inventory when applied at higher levelsNet Change versus Regenerative MRP
Net change may generate too many action notices
Regenerative more costly to run but appears to be easier to manage
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Issues in MRP
Safety Stock Use depends on uncertainty of demand.....
more uncertain the greater the need for safety stock
Assemble-to-Order Firms MPS and MRP treated separately from Final
Assembly Schedule(FAS) Use Modular Bill of Material
KIRUBA DANIEL J
KIRUBA DANIEL. JLecturer, MBA dept.,Sri Venkateswara Institute of
Information Technology & Management,Ettimadai, Coimbatorejkirubadaniel@gmail.com
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