INTEGRATION OF ECONOMIC PRODUCTION QUANTITY WITH...

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INTEGRATION OF ECONOMIC PRODUCTION QUANTITY WITH DEFECTIVE ITEMS FOR MULTI-PRODUCT IN MULTI-PERIOD GEETHAMPARI A/P SUBAMANIAM UNIVERSITI TEKNOLOGI MALAYSIA

Transcript of INTEGRATION OF ECONOMIC PRODUCTION QUANTITY WITH...

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INTEGRATION OF ECONOMIC PRODUCTION QUANTITY WITH

DEFECTIVE ITEMS FOR MULTI-PRODUCT IN MULTI-PERIOD

GEETHAMPARI A/P SUBAMANIAM

UNIVERSITI TEKNOLOGI MALAYSIA

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INTEGRATION OF ECONOMIC PRODUCTION QUANTITY WITH

DEFECTIVE ITEMS FOR MULTI-PRODUCT IN MULTI-PERIOD

GEETHAMPARI A/P SUBAMANIAM

A thesis submitted in fulfilment o f the

requirements for the award o f the degree of

M aster o f Science (Mathematics)

Faculty o f Science

Universiti Teknologi Malaysia

OCTOBER 2017

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To m y b e lo v e d fa m ily fo r th e ir n e v e r e rg m ip p o r t ancbare

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ABSTRACT

Manufacturers often face material losses during the process o f any specific

production assemblies which are usually unpredictable. However, the attrition

percentage can normally be obtained. In order to make sure that the demand is met

despite attrition, the production needs to be planned wisely. Inefficient production

planning can lead to the consumption o f capital resources that can otherwise be put

into better use elsewhere in the company. In this study, an inventory model that takes

attrition into consideration with no shortage allowed is developed. An Economic

Production Quantity with Attrition (EPQA) model is used to obtain the optimal

production run size and the optimal production cycle. Then, an aggregate planning

model for five periods o f time is developed taking the optimal production run size

obtained as the demand. This model will help the decision making process by

determining the production quantity o f products, use o f overtime labor, number of

workers to be hired or fired and the amount o f inventory to be held in stock each

period so that the demand is met and the annual total cost o f operations is kept to the

minimum. This new production policy can thus scientifically address the attrition

problem, assist in decision making, help in resource planning and optimize the

production process. For future study, the attrition could be included as an inherent

parameter in material or inventory planning to make sure that required materials are

sufficient to satisfy demands even when attritions exist.

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ABSTRAK

Pengilang sering menghadapi kekisiran ketara semasa proses mana-mana

pemasangan pengeluaran tertentu dimana kebiasannya adalah tidak dapat

diramalkan. W alau bagaimanapun, peratusan keciciran selalunya boleh diperolehi.

Dalam usaha untuk memastikan bahawa permintaan bahan dipenuhi walaupun

keciciran berlaku, pengeluaran perlu dirancang dengan bijak. Perancangan

pengeluaran yang tidak cekap boleh membawa kepada penggunaan sumber modal

yang sepatutnya lagi baik digunakan oleh bahagian lain dalam syarikat. Dalam kajian

ini, model inventori yang mengambil kira keciciran tanpa membenarkan sebarang

kekurangan telah dibangunkan. Satu model Pengeluaran Kuantiti Ekonomi dengan

keciciran (EPQA) digunakan untuk mendapatkan saiz pengeluaran optimum dan

kitaran pengeluaran yang optimum. Kemudian, satu model perancangan agregat

untuk lima tempoh masa dibangunkan mengambil saiz pengeluaran optimum yang

diperolehi sebagai permintaan. Model ini membantu proses membuat keputusan

dengan menentukan kuantiti pengeluaran produk, penggunaan tenaga buruh lebih

masa, bilangan pekerja yang diambil dan dipecat dan jum lah inventori yang akan

disimpan dalam stok untuk setiap tempoh masa supaya permintaan dipenuhi dan

jum lah kos operasi tahunan ditetapkan pada tahap mininum. Dasar pengeluaran

baharu ini boleh menangani masalah keciciran secara saintifik, membantu dalam

membuat keputusan, membantu dalam perancangan sumber dan mengoptimumkan

proses pengeluaran. Untuk kajian akan datang, keciciran boleh dipertimbangkan

sebagai parameter yang ada dalam perancangan bahan atau inventori untuk

memastikan bahan-bahan yang mencukupi untuk memenuhi permintaan walaupun

keciciran wujud.

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TABLE OF CONTENTS

CHAPTER TITLE PAGE

DECLARATION ii

DEDICATION iv

ACKNOWLEDGEMENT v

ABSTRACT vi

ABSTRAK vii

TABLE OF CONTENTS viii

LIST OF TABLES xiii

LIST OF FIGURES xv

LIST OF SYMBOLS xvii

LIST OF APPENDICES xviii

1 INTRODUCTION 1

1.1 Overview 1

1.2 M otivation 3

1.3 Inventory Accuracy 4

1.4 Attirition 5

1.5 Background Research 6

1.6 Problem Statement 10

1.7 Research Question 10

1.8 Research Obejctive 11

1.9 Scope o f the Research 12

1.10 Significance o f the Research 12

1.11 Organization o f Thesis 12

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2 LITERATURE REVIEW 14

2.1 Introduction 14

2.2 Optimization in Production Planning 15

2.3 M anufacturing Types 15

2.3.1 Just in Time (JIT) 15

2.3.2 Continous Production 16

2.4 Inventory M anagement 16

2.4.1 EPQ & APP in Inventory M anagement 17

2.5 Birth o f EPQ 17

2.5.1 Tradiotional EPQ 17

2.5.2 Modern EPQ 18

2.5.3 Production Lead Time and Setup Cost in EPQ 18

2.5.4 Imprefect Process in EPQ 19

2.5.5 EPQ Model Formulation 21

2.5.5.1 Example o f EPQ Model Application 24

2.6 Aggregate Production Planning (APP) 26

2.6.1 Chacteristics o f APP 27

2.6.2 APP Strategies 28

2.6.2.1 Level Strategy 28

2.6.2.2 Chase Strategy 29

2.6.3 Related Studies in APP 29

2.6.3.1 Uncertainity in APP 30

2.6.3.2 Integartion o f APP in Real Situation 33

2.6.3.3 Mathematic M ethod in APP 33

2.7 LINGO 15.0 36

2.8 Discussion 39

2.9 Summary 40

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3 RESEARCH METHODOLOGY 41

3.1 Introduction 41

3.2 Overall Research Plan 41

3.3 Research Design & Procedure 45

3.3.1 Step1: Framing the Questions 46

3.3.2 Step2: Finding Research Gap 46

3.3.3 Step3: Data Collection 47

3.3.4 Step4: Data Analysis 48

3.3.5 Step5: Build EPQA and APP model 48

3.3.6 Step6: Running & Testing Model 49

3.3.7 Step7: Interpreting the Results 49

3.3.8 Step 8: Sensitivity Analysis 49

3.4 Theoretical Framework 49

3.5 Summary 52

4 EPQA MODEL DEVELOPMENT AND SOLUTION 53

ANALYSIS

4.1 Introduction 53

4.2 Problem Description 53

4.3 Mathematical Model Formulation 55

4.3.1 Notation 55

4.3.2 Assumption 56

4.3.3 Modelling with Attirition and Shortage N ot 56

Allowed

4.4 Model Implementation and Numerical Analysis 60

4.5 Conclusion 70

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6 CONCLUSION AND RECOMMENDATION 108

6.0 Overview 108

6.1 Summary 108

6.2 Conclusion 110

6.3 Recommendation for Future Research 111

REFERENCES

Appendices A - L

112

119

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LIST OF FIGURES

FIGURE NO. TITLE PAGE

1.1 Flowchart o f Problem Formulation 9

2.1 Operation Planning Hierarchy (Chinguwa, 2013) 31

2.2 Example o f LINGO 15.0 Interface 37

2.3 Example o f LINGO 15.0 Solver Status Box 38

2.4 Example o f LINGO 15.0 Solution Report 39

3.1 Operational Framework o f Research 50

3.2 Theoretical Framework o f Research 51

4.1 Behaviour O f Inventory Level Over Time 57

5.1 Solver Status W indow: Scenario 1 83

5.2 Solver Status W indow: Scenario 2 87

5.3 Solver Status W indow: Scenario 3 90

5.4 Solver Status W indow: Scenario 4 94

5.5 Solver Status W indow: Scenario 5 98

5.6 Solver Status W indow: Scenario 6 102

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LIST OF SYMBOLS

p t - D aily rep len ishm ent or p roduction rate at p roduct i /; - D aily dem and rate at p roduct iI t - A nnual dem and in un its

m - N um ber o f annual orders or p roduction runst - T ransit tim e in years for rep len ishm en t order

P - P roduction cost

C - Setup cost/ / - H old ing cost pe r un it for p roduct iT C ( m ) - T otal annual cost for m p roduction runs pe r year

Q - L o t size for p roduct iN - N um ber o f annual opera ting days

ik - P roduction rate

x - inven to ry level

- w o

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LIST OF APPENDICES

APPENDIX TITLE PAGE

A LINGO Model : Scenario 1 119

B LINGO Solution Report : Scenario 1 123

C LINGO Model : Scenario 2 128

D LINGO Solution Report : Scenario 2 132

E LINGO Model : Scenario 3 137

F LINGO Solution Report : Scenario 3 141

G LINGO Model : Scenario 4 146

H LINGO Solution Report : Scenario 4 150

I LINGO Model : Scenario 5 157

J LINGO Solution Report: Scenario 5 161

K LINGO M odel: Scenario 6 167

L LINGO Solution Report: Scenario 6 172

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CHAPTER 1

INTRODUCTION

1.1 Overview

P roduction p lannin gin m anufacturing is the p lanning for sm ooth an d

optim um production an the com pany .It utilizes m anufactuain g r e tu u r c e s , lei^lerial

avallabliity and pir(^(^^ctiancap^i^cityto s^^^^ecu^oc^n^^rsPi^^n^v^ct^finpla^nn^g S a

p lan for Utture prroUuc^^^^n Quantit^y o f m anu fac tu n n g sot^a^^cene^c^^d are

de tem tn idd an d ^anan^nd. A n fo d k rtio n p ia n n S n g ls m a d rp c r io d ira l ly fo r if specific

time cabled horizon To d ev ek )p an efficien iproS^t^ct^c^n planinn, the producCirn

p lanner is reqtta^^d to w urk c k )se ly w tlh i^ le s depgrtm ed l. A criiifalU adaor

proS^t^ct^c^n planning it thaccuraee ertimaCiok oflh^i^c^cs<C^i^^la^f^^^i^>'r ofvnallab le

resouccs.s A pronuction )p^^;anr also con idaersm ateria i ^^f^ila^ii:^ty , re ro u rc es

avallabliity and f;tCuae ngm and .

Economic P toUu ^ ^ nQucrLti(y (EP fa^^^^^it^^y fwinely ^^^(^^^ron^t^ct^c^n

plannmgpractice b c f f u f u f its simplicity. Basic EPQ applis swhendem and o fhe

produce ss r rn s ia n C o u e a th e yenarn there is fixed cosf ^tar^a^e0 ena ca cfuoduct

producey regardass o f the n g m n ero fu n it fro n u ced (H su , 2014.) There se ak o a

holding c o t t rar acch unstoredin s torage.Recenttyreseasah f k b r t s h a v a e ee n

m a^^ to extend f te b a c i c E P Q by a^e^a^iit^e assumpCirns so it^a.tt^llg model

conforms maaeslosety to real worCdpronlgms. ehere are twa maj(Sf gfcirnrlftafn

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the c la s r i f a lE P Q m n d eThese a ie l) the quality o fou tpu iis o f perfect; qual^y and

2) the pronuction rc te iip re d e tg m tm n i a n d dxa d iv a a v a nee .

A ggregate production plannoig AEE) m odel is a production p lannin g

activity. An A PP for the p ro d u c rin n p ro c r sis no rn ianydone in ad v an ceo f 2 to 18

m onths to cVne a n idea tthe m a n a g g m e n i ns to w h a C q u c y tity s f a ra ir ric i s t o be

o rdered an d w h e n A ro n u c ish o u k i be runucecHo o rd er to mnimize t hie Coil \ coet

o f the p ro n u c tio n o v erth a t priod.

The conepptof APP is to tranplctethe fo recas ted n em a n d an n producCion

c a p a c ity to fattne m aunC ccC eaingpkfor a family ofp ro u u s e ^ E P greatiy redcon d

the a m o e d to e ita iu os e (t c iu a iu g p la n n iru sp sf an d r i e o th e au q u e n c d t) f re v if in g

the plan(B aykasopCu , 2001 i The com m on AE objective! aae mtgsnilomg coet,

m toim titog inventoeylevel, m intm iiinn c h a f e s m fo rce ivvy 1, m tgim tem f o se

o f overtim e i m inmtizind ua e os Quontracting , m icgniiog ch an g e s in p ro d u u t in n

rat^^i m oim t^rag nnm O er n g m a ch in e ^ s u p s an d m axim iiuro s r°fiti i Thn ch sea rch

neve io p m en tin A P P involves the conriOeraCio n ngmu4kQjective uinction , m ulti

p ro n u ctim u lt4period im u itinem and an d m ultiaeety sCark.

Both E PQ a d AEP m ot® ! tovolve different tm plem eniatiod to

m anufacCuriae .Firstly, E PQ prov(de tofoemation on 1o t rio e th a tn e e d toQe run

b a s e i o n O sm ay productron rc te se ttip r s s a an d V ie c n to c y c o fin the ohae r i a n d,

S e c o n d ^ , dEPP d e te ^ e e lf cm ourfi oUnfaCuo^ti toventoey an d worirforcp veveC to

m e e i dgm an U aequnem entv e n e r a r l a n n in g UoriBomandSf a n g u p o a ia n i i f d u i in

Qoth APP an d E PQ

Attrition is throw o u ip ro ceseo f raw m atealp luua ig g m au n C cc te iin g p ro ee ss .

The throw o u io f raw m aterip 1 fo r m anuccured p ro tu c ts o ru unpacdia1tadSs. The

am oun i of raw 1X1111111 which hae Oea n ss ss i n s t suffieienl for n iu fp ro d e e tio n

Qatch thu s t o e f la n a aa afuu(fed to o e d e a th s a e m a c e r ia lo r s to e k m o a e to h n s ^ e there

is no stopoe r fo ip a o d u c tio n .H ow eych i feisiiC oa lieade tohiah iaL veuto eQ^a^^isae

the attrition q u an tity ise n o rc d lcaa b le.

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1.2 Motivation

D em andp lann ing an d esoentory control a re ilm osi im portan i operafio n

activities m m anufacturm g an d afuu irs m a n g o em e n t a l fts b h i t t ^ g ^ d e ^ n n d d a ta ,

inventory aging s ^^^,inoentorn anelysir Or ee c h lo ia tfun u s e d to cusiify tn e o r d e r

quantity and raCeis f irc ir iu p ro d u c t i in p ta n n iEuonom ic p roductionq loaity is

im portan iQ ecaur e h u id n i g to s u c u c d e lv fn to rn ii po stly aul( i n kUugl(Ow stock

can a lc u fs to rk c ts , io si aalee, an d som e c a se s p ronuctionp1anshyC dow n.

E PQ ss d e s id n ed to h e id in v fn to ry m a n eg o rm a0 l1 aec th e lt i S1i am cu n C o f

Coventory. EPQ) m o d e i h as Oeen e x ten d ed U u cy n s td e riu g t f e efffcS pa feccierfect

p roduction p rc e s s^ P o r te u s , 1886 )Praciically, imp^^^^ci qnaiity itsm scan be

so m e tm te sro w o rk e n e n O repairA E P can be avaluaO ln aid m p la n n iu g n c a d k e tio n

andw orkforce levese fp r a fsm p e n y b e c a u sn rU v in e s e m a ^ u o feU so rn iy o m an d

U uctuationsbysm oatha ldn w orkforce an d p ru d u c tio levels.

Inventory d^^icfurae y m a p c c u r due Co sh o rtag e o f m ateclas, Cmpenoect

production p r c e ^ ^ da la e ipu t/cu ipu t arrsrsn ira n s fe tio n e r ra e s ,c u fC e f t)u u t errors

and u n rfu o rte d sfra.p I t addition i attrition w here m cteria l are s^ian^^^ded during

production p rocess ,a lso affecte ivoenfory a f e u r e f ^ h is will c a u se gnm ediaie

phe^^^c^a i th o r n o eio com plete the pryduct^m perfeci proC ucC ionproee susually

happens Q ecaur e ofm achdie en-tst: This situation ss often uravoiUaQle w hen

m a c h in s tun a t hiuh ppee dThus, the p lanne d quantitys n o t i^^l^ivoe d and

production te u s to u se m are materiaChatshouCdQe c o n tn m e d anthis a lso tends

to to c re a re production se tu p cfTt. sfhntuation fu s ts e s t im dianncr- p u rc h a re r

difficulty to bring m m aterlisl on time cte to extra m aterlas neeO e cOrl:^^r than

eepectecCo m ake u d f a r ie s ip r o d u f t ie dm som e c u fg m a ia n e e i(P c o d u e tio n p la m le r

tends to p r jrc t for buffer s to ck , Qut this resultto higher inventory on production

floor. An invenfoey moO el Co de tsrm lne ogliPndot size which takee info

consCderafioiattritions ra tfn e lp s th u la n n e c to OcciO fo n t io u m Q e f o iworkers and

inventory lev e to ex ec u te tO p f ta if-

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The influence o f d s m a n d iAEP is significart. B asically d em an d ss a

guideline foe e planneto m eeing cusfom e r requO•emenC.uynenmaCer1a i s 0s ; 1 aoe

for the d em an d t n e Ccfttipition will have impacC on the ag g reg c te pruducCron

planndig don aaariierand th e re is uonCinousneed to rvvia ih e p lan a g c m n a s e o on

cu rrenC m cteria lv va1labiliey.TU ilw lll e-niually f cu^ ^ ^ ^ cr se rv iee lev e l.

1.3 Inventory Accuracy

Som e m aqufactnrm p pdcnts h a to n a eorm aipoiicy e i r r e d n r tin g a n d reducing

inventory u r e d in tu b e a sa m b lic s Chet muaC bw rrw orP ed o f aeradped i ids detailed

investigation in require d t u deCenmnontpCQution o f the scraniatttru io n ra te ta Che

inventory a l a c f P l • a e ie s .T h e m n r e e o m p i f x o f (ha su b e se e m b ly to 0 e re w u rk e d , the

m ore difficult 1; is Co i ^cCs i^ the noire e tm a le r ie Is f f r s p p e d o r u e e d aa rep tacem en t.

Som e CQnaasemO1ics are o o fo m p ie d tCietUifficult to detem cine w ine co m p o n en t

is sc rap p ed . W h e n t h e e i m p o n e n t g e irw rrw o rU e d ie veey dem otex, routine stock

ar^j^^^e^^^in^edo to b o d o n e o r th e w h o ic parC noede in p f ae ra p p e U o ffin t i e sy stem

with an y sevcanable ^em donen^ii p lacad b o ek on Osceee. Tlae accn ro eo o f

reportd ig secf] ,i^ i i ]^^^^n^a a i^^cfl^r^l^;t a r r a o e c o n fo m fo r in n e n to rp control.

O pera tion ! o o o d le m a Q tie relucfao t to a s s is t m fm drovcng se^ ;s» reoorting

since tu s h a p p ro v em cn tt ultim atelg m a y o ie re ase CPc lcrcp/aCtrillqn vatUo in

sy stem reoorting. With tUis ci1uoiions tdere is q •equfh t p n y s ic a lv a c ia n e e and

production will have P>reakdown/ oe m a lp r ic i iu d p iy to iPuqroU uction> M aterial

p lanndig s en p n rtan t an d crilicai if attrition ia d si the n o a r to octual

p lannm glo riod .

A nother is tn e in iv d e o to ru eonlcoi cs Clif IcoU o fp ro e o s c o n fro io n sc rap s .

P o o r ctc v o e n ^ n reposting e f i f c a p c a v h e n e m ujor effects o n th e in v c n to ry occuracy .

O ne w a y ie fo ioo lr n 1 w h e re th c i f r e p i r geing p la e e d o o d Ccea ii^^ l t f r ru o ro c e sse d .

The question is “W hat is the efficient way to do this?” The way it was done may be

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conscdered f te ic ie n C o n th e p la n tlB n t wi w as o^^cda^^sept twere w ere s u m e o 1 h f r scrap

lots which w ere o o C d e f r a r e d a n d w ereh id U o n for c (^^^i^^tn(^(^r^o^. t e e n the b e s t

sy stem will n o t Qe able Co gioe a fe u ra te iu v o n to ry da ta w han Chers e Siuman

toter^ier^^i^^^.

Inventory a c fu ra e y is im p o r ic u f fo rA P P as it will calculcte tSe m a teria l

n e e d e d n a s e o on O m a n t^s a r a b o v e foceooai to n s u r e cro d u n l in ran w ithout an y

m ateria l brcrUcwwiuuppiy; A good iy a te m /fo u ld iue1u<:ls thc aftrilrupOp rcte

with d em an d io aU e id sy s te m fo to m u p to C o lm a te r ia lu e e Of d fo r th e p ro /d . :tion

1.4 Attrition

Attrition refers to the stoic Ci n s u W e n ^ a l^ r ia iH e w t ort C n r i s la t t (during

production p reen s s.suhloss o f th e a^ul^ii^al tu s u a l ln h u d n m s w hen aO em asn tne h as

pIcO up errors iO r whe n tU eiu^^en tnea a ro d n w n .P ru n n p rw ff ld o drnQf^iuy Ceased on

sy stem O a ta o n m a tc r ia lq u a y tiIy . sitU e agstem s h o e s A e quan ivn la evcslable the

m o n e lw lllp ro c e e d to p ro d u k W , and pruqucC ionw illp frP orm m atcrio lkaring a t r u b

s to re r Co a llecuC em ateriais e n m m a to a to r f ( to corn e f r ta m p (a n u e q peoductr. O nce

production in fomp1eCedsCnose m ateriols will O e re tu m e d le s ir irb s au d ruounC

p ro cese on^liem ^^tfi^i^^ ’ Ql lnnr•fotmed. T n e q u a n tltu during-Dotm! m a u o o a d e

the same with the required quantity in the system. This situation creates “attrition” .

Iu this study, a ttr iC io n n a p p n n sm o s jly ft^asmr^lOCif^ii ( a r ts such as re ris to rs

and c a p e s i i to n w r r ic e f a u r fU tcUpliis^s^^i"^^^ on nexf o^oditftioauid p roduct

p ro d u ced e s y e e c v tiy E la n n e rs fa c e difficilCy to eduu la th ers Is rm reourted cfirition,

or attrition reporte d C snoC duno far ceWaiu oe r i d o f lime no thaC lhe dota ir ou t o f

date . M anufacturin g r^omnonypiaeCiise to s c ra f aoatciie k w ^ k c y t o f u a use the

inventory d a lu is a c c n r a le a ud c lert th e u la no e r t c n suchose aOose m a teria i in short

supp ly mimecllctely.

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1.5 Background of Research

E PQ m ode lO et^rm ase istli^e^n tity aco m p a n n s n c u ld p ro d u ce o io r d e r to

m inim lie the to lal p roduction sosE Q P ^ s d ev e io p ed Oy T a f t i n ^ , 8fs an

ex tension o E co n o m ic OrUe r QuantityEOQ) (Tali, 1918. Its fu n d a m e n ta lls th a t

the quantity o f p ro q u e t oheulb be munufaeCuced W ( in g l e u r mulliplc Unatoh

e n su re to ta l co staru m in im lied The costtocludes letae) co s tr fo a m a e n io e and

inventory hoCdergrosl. T h u s’to tal co s t o f E P Q v c 1 u s ih o u lU e a m p r ir f o fe a c h co s t a t

its m inim um v a tu . .This is ach ievedby dfUerentlatSig au d Uuc^^ g m to im g m fo s th e

equationof the Cola Io n s !

A few s tu d le rh av e b e e n d o n e to ad d res s t h r E P m o d e l with rewook.One

w ay is Co ncorp^c^^iitcihe effect o fdu fcc tioc itescio c lasslce E P Q m ode l(PorCeous ,

1988)). Thea edeecvCive ^^^me eQoreworOud to the som e eyeleThe authocfound

thaC optm ia 1 (mith rew orkis sm aller tha n e ia rslc E E Q anclthe sm elle r t d dot

slzey the sm elle r he dueectioe rate Aw optim al resu if is a ch lev ed fo r finite

production m u d e lrm d e r effecf o l tfw t)rking lmpcofef1 qo a lity itecd syefective

items are rew orked au dsepatred H ayak an d Oalome? 12201). A doite production

m o d e lh a d b e e n dfdek)oe<nith consC d era fio n o P ran d o m defective rutCt iecan ping

and rew ookm uof repairab le dfective item s au d b o c k ik g g in b bChiu (2003) .

A nother s tu d y allowed the sim uilanoousaeC em tm ation o fp roductio iso include

rew ork lot a n d O a tsh i i r eB CBuseher and WUidner2CIW7general, defectivc ite ict is

the p roduc t w h lsh re q u tre a rew ord o re c ru y o f f l fu n ak le t o r r w orkw O ercbyaCtrition

is the p roees tw 0 ic U ro n u c d the dueectioe ItemThuSithis r e s e a rs h w ill oonsld e r

attrition rate Sr th e iv d e k to c y m u d e i to ena u r e p r o d u f e d p r o n Q Ct oble to m e e t

cusfom e rd e m a n d.

APP w as rp-sC (^<^;ae^^^ed iron im portan t a^rU s is a t f p p e a riwdthe mM

1950s . Holte^ al. (1955) fi-sC discussed t^e s trnc tu rf o s th f o rob lem und im u o ed

quadratic o nsl aporoach.aid i; a s tudy o f H o lte al. (1958)) co n cen tra te d o n the

com pulationa Ic^i^^ct o & m ode 1 w here e roftw a m as uaedio obtaW reouitb.he

com pulationa 1 supc ct lsp ro d u c tie n p lc n k l0c c0m dine d w tth f io e o f o fm o det which

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calcu la te ! t i e am osnC to be n ro d u ced , remuS-uS n u m b o r o f w oofer, mcCerlal to be

p lace o rd e r In simolo w ard ’ a l l th e fsfont^^i^ion^eouirfd^o ran apoodubUiuy.

found th a t the m a n a p e n w ere g o in g i fo w one fru i^ .rto therw ith uncerta in

fo recas t! o fO-aquelriem^nn fluctuaterfor multiple p roducts an (huge i^i^c^ii^l^iou s

b e tw ee n v o e rteu ' e an d dCic time

Initially, A PP w as ^o^’ie d O y q u a k ra ticp ro g rsm m iiL o te r it w ar remmdeCed

so thaCltoear progrom m ikl:CLPp techniqor can beapp lied to to io e tn e oopa'lecA

standarULP m ode l ^d^^o^(^^^d forthrPE . Is the begoiW g Uuctuations within

d e m a n d is rx p e c te d o be slow er sothe im p re c ia e n o tu re sd ld n d n s il ic a n tly affecC

the LE re tu its . L u t e r o np re a l situ a (so fo rc e d conrCOeratiese for d em an d

ductuaiions. S tochastic prrgrom m m gCSP) w as u a e d k s o h e the praquction

p roblem s . H owvve r, S g oes s o t m m sO 'ea lrq k a t io laccurateicos the

a p p r o a r h d t ) e s n otr^^t^vide a u y c o n Uo>idt to variability onsolutions with dUUereni

s c e n a ris (Sr^dj^ct i 211PC.

R eg re srio n an riy s u se d o n m anagers’ past performance to develop decision

nules for ag p rag a Cf nlannirm as Sitroduee d O o w m a n 11 ‘98^.)Bowm an’s work

h ad krc im pac k n operatione m a n a g e m e nt, partlcniariu tnUacilil totelligence .He

deveioped ^w o^^^ i^^i^ ti^^ ie i.o i^^ for s ^ e o fw orkaoree t^( unofd f r fo u p ro d u c tio n

ra te ; and te a ted do th his m e td e lJo n e(1 9 6 7 ) co n v erted t i e HMMS

(Holt,Modigliani,Muth and Simon’s work) m ode l Olio a 2-Mtmension r c id o n re

su rfaceand u a e d e aea rch deoisron ncclf to said thu t^<^ i( io r^ iC 1888T hese are

m a th em a tic sap p ro asn to n e an ovcvIcus s t i i ty dfPLI:CBaykasogl^ 2001) lifted

various stud is t o d f f i i s ia th e early ye ars

• Trial a n d e r ro r m e t i s d (Noqc1995)

• S e a r s h d e c i i lo o l e (Taubes;t1988)

• M anagem ent’s coefficients method (B ow m a^ 1956)

• P ro d u c tio n tw au h ik g h e u ris tic wOng 1995)

• T ransposition m e th o d (1kwma^ 1958))

• G oalp rog rom m ik gS aQ ucano ti1985 )

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• S im u la tio n m o d els taO:io, 1998))

The oblective o f a n E E S m o n b e gin, d ual or muitiple Or natureIa a sWgle

objective m odel; the m lnm iK ation o f t e to tal cos function is u sua lly theobjective .

This g enera lly fonsisCt o f d ro d u f i io n c o s t , in v e r to rn fD s t, enu rtog e em s t a n d co s t o f

ch an g e sinl^or^oi'^^i^eI. In-kQ jectve m odeis ,tU e m inim ctatiokf to ta l cos C instill

the m ain objective; and the sitneroO jectide M itherm axim ization o fa e rv ie e ^^’ el,

m inim ization o f c h a n o e r io ta o rk fo rc e levkp m toim tratirn o f ’ r^rl^ltliil^y o f Cola 1

cos! . A m ulti-objective p lan is a com bination o fthe single c lj ^ i l ’aewith two or

m ore ofche otnees

U n d e rg e n e ra lconditions - com panlc swill likely face yuctuaCWn dem aasi

APP neeU to find w ays to m m sniu eCd e a e la te d c os tview ofvaria tion m d em au d

and sa ls s O y dqt'usknp prodefWi ra te s , wookfore e veve le a nd Uivontory levels

(C anel'2213). The i^d^^^^^i^encs carried ogCusW ra variety o f operatio n r e e e a r c h

meChocS. There c a hos Cof meChodr u ae it tn s o lv e p ru S ln QuC A PP ^tlll r^^g^^Or a

p roblem . The d em au d qc^(^^r^fWn^ oionO jfect the p1ann irgqu1 e i r u e f f e f i on Che

inventory level A high invenfory lvde l le a d s -sigh a g u ig o u td c ivvento ry istPie rc is

no extra dem andio absorbihe producCIs as^ci1^^ rl plannW g foaseakituatioai neeU s

to iw cludefincctsokttirition . P h r r ic a lsh o r la o u a n o c fd io n e x p e c te ir andp lannor-

face difficulty on eppediiik g o n the x en t anavoi o f CSe m ate riIdentifyiog t e

p roblem W earlysCatternill prevenC the isou flom h a p p e n irg in lu C u rfT h e p roccs s

o f identifying is sh o w n sn -O y -s te p to Figure I . .

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MOTIVATION

Imperfect p ro ductianp rocersU ippens SUc equipment em crond snot beauccOe ddcra-g productionproecsAttirition is one ofthe imprefe-:U o < iCitfWon riroe nUich cauiahe producedqcantity is n o toroduced as pcrr>(u n n fn b y c n e p la n n f t, The s iCnotloncause consum ptiano OrawmutepioiaensTmed en rlier thaneeyl kwCdpldnnerieu do order more rowm aterin ialyVvonen whicT cesudr WWuan etai ioss u Cfhe eampo nta On some circuQsCanen, th ep lo n n erien do ^oi^abdffer stock whlah rcsulfsin nloher invoutory holding cos tanproducflon floos. TheroaoremdtWk onrPQA m oO e1ondm rogcoring it with APP mode ifo e n a d te p lunnfctodeeide o n io ts iz c ic im oeu/MSrcc stequOrednre necescary

J \ lEXISTING WOIRK IN BOTH .APP AND EPQ

EPQ APPThe eftecC o f imprfect proecs s i n E P leaS^s to proqucflan odeiU^ct \^e proqudi RecenC modiOeafia n clone on Q Q mo lead to optsna 1 proqucflon nwont ity solution in shortage is a ^ e t . But the solution doc s notsolve the problem ir overoU

The advm lng o odfE-Q m^dc 1M odvo nee productionplonnik g o n g vines cct idoa to Qos^^g^ment:0orrets^i^^cf^r^i^i^n^g in situotiononironuctiondem on nwSUch chonge s ^ u cuxfopeaCen m oteriolshu cta duriug producaioupraeeL Thus- frequenf revise wproqucfia n plannaiu i i r c pu(Led.

LIMAA'IOO

Existing wvenfory m onagem esrstem do not co^s^c^er^^i^ion rate . ModUicotion ofEPQ moOe1with incius1vuf attrition rate .Two importanf m odet involve is pronuctionp1dnnik-SUot areAPP and EPQ useroot linked together.

DESIRED SOLUTION

The ro leo f demon t ofpooducC is tcigoorik g a ilth f UTp cos t on tT e iyqustLy. The

motecla lanaCnbiiity w lie n c u rc th f orodufiianruns rmooabac ThT rcs eurrOe<fpTr

propose s o mutgemoClcoimode^mfieoe optim alproductianquantifymc1nsive of

ottrition ond b are t o n th e ss lk iio n (CCan retooree requO'edto execute tT e

productionwith shortage uoO ailowe d

Figure L I F lo w ch arto f P rob lem Form ulation

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1.6 Problem Statement

F or a p ro d u c tio n fo ra n s m c )o th in- o m e k u fa c ik c C tg fo m n a n u n e f d a t o h ave a

p ro p er proqucC ionplannin g .H o w e y e r , if Cs difficnit Io u Uos production w h e n tT e

d em an d is detem cm istlc Attriti^^ thaf h a p o e n s cpcog production odds Co tUe

fluctuation o f th e demanCSin lrr< < “ e ad deO cvtiveprodueIy the attrition r a t e i s n o t

c o n s c d e re d in tT e drodufiionwSacog, 1S(1s m oy e o u re im m ediaphysical sh o rtao e

o f the raw m ste ria l an p d rodu fiiou m a y ds> m tenm pied an d resu lts Os Onanc lai loss to

the co m p ary . In o rd e r to uvereu m s Chls jiro^leisti this rcs eoowtscderr an

Ecoa^c^mk Proqucfio n Q u a n t i tn wltd s i t c ^ wn ^ l Cp A ) m o d c l TiKtatemtOristle

d em an d e s s u m p tio n o n d ita k in g into a c c out t tii^ o itritionoate dm ing thasickn du

with s h o r ta g e d o t p^ilo^^dn fiodcag the optm ta 1 proqucfio nvevel. k ro m th o coiutlon,

the APP m o d e l will then ua eto d e tem ttn e th e re too reesseq u lred to m e e t the

producticu leve.; In this work! the E P Q A a u d E E U m u d eo ill be in teg ra ted

1.7 Research Questinn

The p rob lem stu teurc n t r a i r c a a e v e r s l re s e a rc h enallebgea . T hese

challenge s ’will O e o d d rcas eit by v^i^ccdMio^onswfcs to Chofollow ing

qurstions:

1. W hat arethe roles o f dem and Or proqucfio n n la n n ln g o n d w h e t sa tU e im p e c t if

physlca l s^^s^ i^ai^es Uar^rfen

i. W hat will be the Q a n a e t to d ro d u f i io n w n en atfrlti(sk U uppcns in

u n ex p ec te d m an n e r?

ii. How to p rev en t a p ro d u c tio n ro o U o m intcnciption?

ii . W h a tis thesolution to optimize rdLishd g o o d r rs^t^er^l^an vavingextra b u ffec s fo r le in p ro d u c tio n doo r?

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2. How can APP rcwir effec tive lyund es im perC ectsituation?

i. W hat is the p ro q u c tio n q u a n ti ty for ea c h ncoducS u ivsn th a t the

production ons t.iw oeu to r j ic o sWorker’s cost, hiotog and iPrOigcosC

and the f n rSvcr i f w saiti tn th e d lanning oeeiod

ii. How to e n c o re tT f d rodu ftion nclormcnimum to ta lp ro d u c tio n ooef?

iii W h a tis the q u ao o sf o s th e b o th m o d e lm tc g re ted?

3. W h a tis the im n aftw h eu d ro d u cC c,owtirker’s cost, inventory v a rie d

i. W hat is the a l io w a b le io c re a rf od^ts to minim ize Cota 1 proqucfio o cos t?

ii. How to ensuraihe varies o liro n u c tio n co sfs does ioo cm paccnum bec o f quantity to b e p ro q u c ie d

1.8 Research Objective

The prwocipa 1 o b jc c tid e o ftU is c trd n it to deve lo p oltsr;ic in tegration o f

APP an d E P Q A fo a mu-producC W m ultiperiod to req u e e tha p ap ^ ^ tw e^ n ^ sg tin g

literature and pracClc a l ippolementotiobheTspecific cOJectives o f the s tu d y h a v e

b e e n identified e r Plows:

1. To anaierT the d em au d b e h c v io r cr t1t1(JUd ofps^r^^^t^^lsU ortag1U atoccurs due to a ttr i tio n ra te .

2. To netem ttncihe optim al lot sizewith attrition a n d n o s d o r t a g c is ollowed usW g ^I’ Qr^^mo^^ 1

3. To de tem tine tT e o c t im a ld ro d u fti-cm d re io u ree lu v e l u sing AEP m o d e l undecE PQ d d em an d essu m p tie n.

4. To investigate tT e eide cit idnange s o n thoosCof p a ram c te rs

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1.9 Scope of Che Research

The scop e o f tTc o trd n i i f o c u r o d an tiie estcgratirnPQrA andA PP. This

s tudy o lll ars^c^mesituation o fn o shosSao eallow ed- deteQninisCicdem and au d

imperfecC iS0cesL The p1anntnunorino n w i l l d e em tm th T h e investigafion wilQe

m oidly on how to enoure u o incrtT ge e v c s i t n o u d h Co sifw afio n o f imp erfect

p roduction proemss Avlthout rev liing Che y ro d k e tiin d lanntng d u e t o m ateria l

sh o rtag e .

1.10 Significance ofthe Research

E P Q A is a m o d e ld e v f lo y e o w ith o o e u e th c m tm p e rfe fC procetekkO A vn as

attrition. The m o d e l is m aiolyCo t^Ct^^^n^g^imioi lot s i e o fp ro d u a tio n witd knoAvn

attrition quantity followed b y AEP ^ o d e l t o dn d m d n u fa e tu rm g ^ 00^ 0 ^ 1

in tegration o f E P Q A an d A P P b e u e f i t s t h e p r o d u e C i a n p l a n n e r e e m o f ad v an ee

plannW g iteae d o n t h o ini; a ice iricv ts iv e o f aCtritoorithe r^^c^i^tred m anuC sfturiog

re so u rces

1.11 Organization of Thesis

C h ap te r f to tro d u ce r t i e re a e a rc h d iicip linel whicUEEQ anUAPP for mdltii

produce W m ultiperiod. if a lto io d u d e s d itc u ts io u r sT t i e p r o b l a m nafWnyound,

p roblem s ts tem en t- r e s c a rc h o b jfc t iv c r , ri^cfn^O^eau^ as w c lla s 0 ^0 0 111 COrelr

C hap tec2 provides anexie^^^A^^ literscTre reoioAv o f t U c stn d y acea. teWidve

back g ro u n d w o ck o n the re se a rc h <tipciolidf it also d ia eu ssed (Ci c e to a d d itiu n to the

c h o ^ ^ ^ P Q u ^ (^ d ^ i.e. ru h a v io ro f d em au d an d fECUmodel

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C haptec 3 d isc u se s the p roced u re in conduccsn the r e a e a r c h w 0 l f h Cn d u de

assum pfiou s 10^,011 e a r c h d e g u a n d p ro u d u re au idperationa li^i^m^’wt i k.

Chaptec4 p r e s e n t s t T d e v e io p m e n tf the EPO m odelw ith attrition and no shor tao e

allow ed. She m odeln ives the c fo rio m iaroduction quantity a n ise to ta l production

cost.

Chaptece p r e s e n t s t T W eveiopm enof AEP M ode l u n d e r E P . n e m a n . The m ode 1

is sovved usik g L IN G 0 15. Cbhe solution p reseits num be r o w orkers requa-e(t the

optim al productionquantiC y and re so u rc e ! le se i Pr ^^^llsao tT es^^m unti reg u isem en t

for e a c h periodT he sensivvity aualys its ca tT T dou t to tcod the elTec tof various

production i t s t o r th e number o f required w orker’s. The r e a / o n is Co (did the

m inim um aliow able s la n g e t o f c o t i on whicU redenfr ch an o eon num be r o f

worker’s.

In the dnal chaptel- a s u m m a rp f the entire rcieasccd done before confludinn with

the researchjcrntogs. W addition , a ^swec^c^Q^u^^^na^^onnr^e aitoforwarded foc

future r e l f a rc h e s.

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Bertsimas, Dimtris, & Thiele, Aurelie. (2006). Robust and data-driven optimization: Modern decision-making under uncertainty. INFORMS tutorials in operations research: models, methods, and applications for innovative decision making, 137.

Billington, Peter J. (1987). The classic economic production quantity model with setup cost as a function o f capital expenditure*. Decision Sciences, 18(1), 25-42.

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