Industrial Facilities Design (7 th Term, Batch 2009) 28/3/2012 11 lectur # 31 & 32.
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Transcript of Industrial Facilities Design (7 th Term, Batch 2009) 28/3/2012 11 lectur # 31 & 32.
Industrial Facilities Design(7th Term, Batch 2009)
28/3/201228/3/2012 11lectur # 31 & 32lectur # 31 & 32
Lecture Outline Production + Planning Common of Objectives Of P Planning P Planning (Classification) Aggregate P Planning Capacity Decision Hierarchy Aggregate Planning Process Methods of Influencing Demand & Supply APP Variables Strategies for Adjusting Capacity Aggregate P Planning Example
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Production
Production is a function in which raw
materials or human efforts (inputs) are
transformed into finished good or
services (outputs)
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Planning
An organizational process of creating and maintaining a plan;
Or
The psychological process of thinking about the activities required to create a desired goal on some scale
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Slide 11.Slide 11.55
Common objectives of Common objectives of production planning...production planning...MINIMIZE:MINIMIZE:cost, inventory levels, changes in work cost, inventory levels, changes in work force levels, use of overtime, use of force levels, use of overtime, use of subcontracting, changes in production subcontracting, changes in production rates, plant/personnel idle timerates, plant/personnel idle time
MAXIMIZE:MAXIMIZE:profits, customer serviceprofits, customer service
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Slide 11.Slide 11.66
Production PlanningProduction Planning
Long Range Planning Strategic planning (1-5 years)
Medium Range PlanningEmployment, output, and inventory levels (2-
18 months)
Short Range PlanningJob scheduling, machine loading, and job
sequencing (0-2 months)
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Slide 11.Slide 11.77
Aggregate production Aggregate production planningplanning
is medium-term capacity is medium-term capacity planning over a two to eighteen planning over a two to eighteen month planning horizon. It month planning horizon. It involves determining the lowest-involves determining the lowest-cost method of providing the cost method of providing the adjustable capacity for meeting adjustable capacity for meeting
production requirementsproduction requirements..28/3/201228/3/2012 lectur # 31 & 32lectur # 31 & 32
Slide 11.Slide 11.88
Capacity Decisions Capacity Decisions HierarchyHierarchy
LinkagesLinkagesFacilitiesFacilitiesPlanningPlanning
AggregateAggregatePlanningPlanning
SchedulingScheduling
Time FrameTime Frame Facilities PlanningFacilities PlanningAggregate PlanningAggregate Planning
SchedulingSchedulingTimeTime
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Slide 11.Slide 11.99
Aggregation Aggregation refers to the idea refers to the idea of focusing on overall capacity, of focusing on overall capacity, rather than individual products rather than individual products or services.or services.Aggregation is done according to:
ProductsLaborTime
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Slide 11.Slide 11.1010
Aggregate production Aggregate production planning involves managing...planning involves managing... Work force levelsWork force levels - the number of
workers required for production. Production ratesProduction rates - the number of units
produced per time period. Inventory levelsInventory levels - the balance of unused
units carried forward from the previous period.
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Aggregate Planning ProcessAggregate Planning Process
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Slide 11.Slide 11.1212
Methods of Influencing Methods of Influencing DemandDemand
Price Incentives Reservations Backlogs Complementary Products or Services Advertising/promotion
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Slide 11.Slide 11.1313
Methods of Influencing Methods of Influencing SupplySupply
Hiring/firing workers Overtime/slack time Part time/temporary labor Subcontracting Cooperative arrangements Inventories
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Slide 11.Slide 11.1414
Aggregate Production Aggregate Production Planning Variable CostsPlanning Variable Costs
Hiring/firing costs Overtime/slack time costs Part time/temporary labor costs Subcontracting costs Cooperative arrangements costs Inventory carrying costs Backorder or stock out costs
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Strategies for Adjusting Capacity
Level production Producing at a constant rate
and using inventory to absorb fluctuations in demand
Chase demand Hiring and firing workers to
match demand Peak demand
Maintaining resources for high-demand levels
Overtime and under-time Increasing or decreasing
working hours Subcontracting
Let outside companies complete the work
Part-time workers Hiring part time workers to
complete the work Backordering
Providing the service or product at a later time period
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Level Production
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DemandDemand
Un
its
Un
its
TimeTime
ProductionProduction
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Chase Demand
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DemandDemand
Un
its
Un
its
TimeTime
ProductionProduction
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Level Production Strategy
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Level production
= 100,000 pounds(50,000 + 120,000 + 150,000 + 80,000)
4
SpringSpring 80,00080,000 100,000100,000 20,00020,000SummerSummer 50,00050,000 100,000100,000 70,00070,000FallFall 120,000120,000 100,000100,000 50,00050,000WinterWinter 150,000150,000 100,000100,000 00
400,000400,000 140,000140,000Cost of Level Production Strategy
(400,000 X $2.00) + (140,00 X $.50) = $870,000
SALESSALES PRODUCTIONPRODUCTIONQUARTERQUARTER FORECASTFORECAST PLANPLAN INVENTORYINVENTORY
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Chase Demand Strategy
13-13-1919
SpringSpring 80,00080,000 80,00080,000 8080 00 2020SummerSummer 50,00050,000 50,00050,000 5050 00 3030FallFall 120,000120,000 120,000120,000 120120 7070 00WinterWinter 150,000150,000 150,000150,000 150150 3030 00
100100 5050
SALESSALES PRODUCTIONPRODUCTION WORKERSWORKERS WORKERSWORKERS WORKERSWORKERSQUARTERQUARTER FORECASTFORECAST PLANPLAN NEEDEDNEEDED HIREDHIRED FIREDFIRED
Cost of Chase Demand StrategyCost of Chase Demand Strategy
(400,000 X $2.00) + (100 x $100) + (50 x $500) = $835,000 (400,000 X $2.00) + (100 x $100) + (50 x $500) = $835,000
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Mixed Strategy
Combination of Level Production and Chase Demand strategies
Examples of management policiesno more than x% of the workforce can be
laid off in one quarterinventory levels cannot exceed x dollars
Many industries may simply shut down manufacturing during the low demand season and schedule employee vacations during that time
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A small manufacturing company with 200 employees produces A small manufacturing company with 200 employees produces umbrellas. The company produces the following three product lines: umbrellas. The company produces the following three product lines: 1) the Executive Line, 2) the Durable Line and 3) the Compact line, 1) the Executive Line, 2) the Durable Line and 3) the Compact line, as shown in the below as shown in the below
Executive Executive LineLine
Durable Durable LineLine
Compact Compact LineLine
Aggregate Planning Example
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0
2000
4000
6000
8000
10000
J a n Fe b Ma r Apr Ma y J un
45005500
7000
10000
8000
6000
Number of working days:Number of working days:
Jan: Jan: 2222Feb:Feb: 1919Mar:Mar: 2121Apr:Apr: 2121May:May: 2222Jun:Jun: 2020
Aggregate Planning Example: Demand for Executive Umbrellas
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Aggregate Planning Example: Cost Information for Executive Umbrellas
Materials $5.00 /unitHolding costs $1.00 /unit/monthMarginal cost of stockout $1.25 /unit/monthHiring & training cost $200.00 /workerLayoff costs $250.00 /workerLabor hours required 0.15 hrs/unit
Straight time labor cost $8.00 /hrBeginning inventory 250 unitsProductive hours 7.25 hrs/worker/dayPaid straight hours 8 hrs/dayBeginning # of workers 7 workers
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Aggregate Planning Example: Determining Straight Labor Costs and Output for Executive Umbrellas
Jan Feb Mar Apr May JunDays/mo 22 19 21 21 22 20Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145Units/worker 1063.33 918.33 1015 1015 1063.33 966.67$/worker $1,408 1,216 1,344 1,344 1,408 1,280
JanuaryJanuary159.5 159.5 = 22 [days/month] * 7.25 [productive hrs/worker]= 22 [days/month] * 7.25 [productive hrs/worker]1063.33 1063.33 = 159.5 [hrs/worker/month] / .15 [hrs/unit]= 159.5 [hrs/worker/month] / .15 [hrs/unit]$1,408 $1,408 = 8 [$/hr] * 8 [paid hrs/day] * 22 [days/month]= 8 [$/hr] * 8 [paid hrs/day] * 22 [days/month]
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Aggregate Planning Example: Determining Straight Labor Costs and Output for Executive Umbrellas
Aggregate Planning ProblemJan Feb Mar Apr May Jun
Days/month 22 19 21 21 22 20Hrs/worker/month 160 138 152 152 160 145Units/worker 1,063 918 1,015 1,015 1,063 967Labor cost/worker $1,408.00 $1,216.00 $1,344.00 $1,344.00 $1,408.00 $1,280.00
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• 4,500 units is the demand in January (any 4,500 units is the demand in January (any combination of firm orders and forecast combination of firm orders and forecast
• 250 is the starting inventory position250 is the starting inventory position
• 4,250 = 4,500 – 2504,250 = 4,500 – 250
• 3.997 = 4,250 / 1,063.333.997 = 4,250 / 1,063.33
• 7 = workforce level at the beginning of 7 = workforce level at the beginning of JanuaryJanuary
• 3 = 7 – 4 = workers fired3 = 7 – 4 = workers fired
• 4 = workforce level at end of January4 = workforce level at end of January
• 0 = ending inventory level0 = ending inventory level
JanDays/mo 22Hrs/worker/mo 159.5Units/worker 1,063.33$/worker $1,408
JanDemand 4,500Beg. inv. 250Net req. 4,250Req. workers 3.997HiredFired 3Workforce 4Ending inventory 0
Aggregate Planning ExampleChase Strategy for Executive Umbrellas
• Objective: Adjust workforce level so as to Objective: Adjust workforce level so as to eliminate the need to carry inventory from eliminate the need to carry inventory from period to period period to period
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Aggregate Planning ExampleChase Strategy for Executive Umbrellas
Chase StrategyJan Feb Mar Apr May Jun
Demand 4,500 5,500 7,000 10,000 8,000 6,000Beginning inventory 250 0 0 0 0 0Net requirements 4,250 5,500 7,000 10,000 8,000 6,000Beginning # of workers 7 4 6 7 10 8Required workers 4 6 7 10 8 6Workforce adjustment -3 2 1 3 -2 -1Production quantity 4,250 5,500 7,000 10,000 8,000 6,000Ending inventory 0 0 0 0 0 0
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Aggregate Planning ExampleChase Strategy for Executive Umbrellas
January costs: $21,250.00 = 4,250 [units] * $5 [$/unit]January costs: $21,250.00 = 4,250 [units] * $5 [$/unit]$ 5,627.59 = 3.997 [workers] * 1,408 [$/worker]$ 5,627.59 = 3.997 [workers] * 1,408 [$/worker]$ 750.00 = 3 [workers fired] * 250 [$/worker fired]$ 750.00 = 3 [workers fired] * 250 [$/worker fired]
Chase Strategy CostsJan Feb Mar Apr May Jun
Material cost $21,250.00 $27,500.00 $35,000.00 $50,000.00 $40,000.00 $30,000.00 $203,750.00Labor cost $5,628.00 $7,283.00 $9,269.00 $13,242.00 $10,594.00 $7,945.00 $53,961.00Hiring cost $0.00 $400.00 $200.00 $600.00 $0.00 $0.00 $1,200.00Firing cost $750.00 $0.00 $0.00 $0.00 $500.00 $250.00 $1,500.00Inventory holding cost $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00Inventory stockout cost $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
TOTAL: $260,411.00
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Aggregate Planning ExampleLevel Strategy for Executive Umbrellas
JanDemand 4,500Beg. inv. 250Net req. 4,250Workers 6Production 6,380Ending inventory 2,130Surplus 2,130Shortage
• Objective: Adjust inventory Objective: Adjust inventory level so as to eliminate the level so as to eliminate the need to hire or fire workers need to hire or fire workers from period to period from period to period
• Assume that January is started Assume that January is started with 6 employees with 6 employees
• 6,380 = 6 [employees] * 6,380 = 6 [employees] * 1,063.33 1,063.33 [units/worker][units/worker]
• 2,130 = 6,380 – 4,250 (surplus) 2,130 = 6,380 – 4,250 (surplus)
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Aggregate Planning ExampleLevel Strategy for Executive Umbrellas
Level Capacity StrategyJan Feb Mar Apr May Jun
Demand 4,500 5,500 7,000 10,000 8,000 6,000Beginning inventory 250 2,130 2,140 1,230 -2,680 -4,300Net requirements 4,250 3,370 4,860 8,770 10,680 10,300Beginning # of workers 6 6 6 6 6 6Required workers 4 4 5 9 10 11Workforce adjustment 0 0 0 0 0 0Production quantity 6,380 5,510 6,090 6,090 6,380 5,800Ending inventory 2,130 2,140 1,230 -2,680 -4,300 -4,500
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Aggregate Planning ExampleLevel Strategy for Executive Umbrellas
January costs: $8,448 = 6 [workers] * $1,408 [$/worker]January costs: $8,448 = 6 [workers] * $1,408 [$/worker]$ 31,900 = 6,380 [units] * $5 [$/unit]$ 31,900 = 6,380 [units] * $5 [$/unit]$ 2,130 = 2,130 [surplus units] * $1 [$/unit held/month]$ 2,130 = 2,130 [surplus units] * $1 [$/unit held/month]
Level Capacity Strategy CostsJan Feb Mar Apr May Jun Total
Material cost $31,900.00 $27,550.00 $30,450.00 $30,450.00 $31,900.00 $29,000.00 $181,250.00Labor cost $8,448.00 $7,296.00 $8,064.00 $8,064.00 $8,448.00 $7,680.00 $48,000.00Hiring cost $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00Firing cost $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00Inventory holding cost $2,130.00 $2,140.00 $1,230.00 $0.00 $0.00 $0.00 $5,500.00Inventory stockout cost $0.00 $0.00 $0.00 $3,350.00 $5,375.00 $5,625.00 $14,350.00
TOTAL: $249,100.00
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Aggregate Planning ExampleWhich Plan is Cheaper?
Level CapacityLevel Capacity ChaseChase
$249,100.00 $260,411.00
Clearly, the level capacity plan is cheaper over Clearly, the level capacity plan is cheaper over the selected time horizonthe selected time horizon
Note: Be cautious in using the chase strategy as many Note: Be cautious in using the chase strategy as many intangibles, such as employee loyalty and commitment intangibles, such as employee loyalty and commitment to the organization are adversely affectedto the organization are adversely affected
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