Master Production Schedule - ie.eng.chula.ac.thoran/classes/PROMIS_resource/handout/... · Master...

Motivation Systems Aggre. S&OP MPS

.

......

Master Production Schedule

Oran Kittithreerapronchai1

1Department of Industrial Engineering, Chulalongkorn UniversityBangkok 10330 THAILAND

last updated: May 15, 2013

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Outline

...1 Motivation for course

...2 Manufacturing Systems

...3 Aggregate Planning and S&OP

...4 Master Production Schedule

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US Auto & Steel Industry

Steel IndustryMedieval iron ̸= steel, labor intensive → armoryIndustrial Revolution: high grade ore, blast furnace → railwayWW II-Current: many scrap, mini-mill → vehicleAltenative: aluminum, plastic, carbon-tube

Auto IndustryBefore Model T: experimental (gas, electric, stream)Ford Model T: vertical integrated

Any customer can have a carpainted any colour that he wants so long as it is black

Henry Ford, 1923

After Ford Model T: safety (volvo), JIT & qualityOil Embargo-Current: fuel efficiency & environment

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US Other manufacturing

Textile: non-perishable by skilled workers & globally (RM, M/C, FG)1st world: near market & fashionable city, sweat shop3st world: low cost + outsourcing → quota (TAW → THA → VET)

Food & Pharmaceutical: batch, long shelf life, curving for new thingsHome: fresh, local → economy of scale (tomato)National: ’blockbuster’ + ads +R&D → safety & quality (consistency)Global: ’syrup model’ (coke, lay) → reverse (slow coke)

Pulp/Paper: process, pollutedBefore internet: growing demand, capital intensive, max utilizationAfter internet: over capacity, efficiency & quality

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Lessons from the past

Change is everywhere and ever increasing, so does competitionMarket must response to customer demandPower shifts to retailersQuality and safety are important (failures, regulations)Relationship shifts among plant-vendors-supplier

merge (new market, reduce overhead, ’right’ portfolio, quick expansion)contract manufacturer (reduce risk, core competition)

.

......Effective response → Better integration & communication → Right computersystems

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Computational levels/history

Period Concept System Purpose1950-1690 Necessary evil,

paper dragonElectronic accountingmachine

Speed accounting andpaper processing

1960-1970 General purposesupport

MIS, Informationfactory

Speed general reportingrequirement

1970-1980 Customizedmanagementcontrol

Decision supportsystem, executivesupport

Improve and customizedecision making

1985-2000 Strategicresource,competitiveadvantage

Strategic system Promote survival andprosperity of organization

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Evaluation of ERP

source: www.arhum.com

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http://www.arhun.com/evolution-of-erp-enterprise-resource-planning/


Why a company implement computer system?

Fear & Believe: legacy system (Y2K), customer mandate (Nike, RFID–DoD& WalMart)Standardize & Platform: standard process (international), merge &acquisitionAccuracy & Efficiency & Control: operation (relay → PLC), consolidatedata (reports– accounting), eliminate tedious task (payroll– HR)Visibility & Integration: communication (Satellite–WalMart), data visibility(Boon-Tha-Worn)Process improvement: economy of scale, paperless office, reduce inventory(VMI)

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ERP’s impact on a plants

source: AMR Research Report 2000

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Problems of adopting IT in plants

There are complex data types: e.g. vectors, matrices, pictureAnalysis is important: data mining is not well-defined → MS ExcelEach industry/factory is unique: e.g., BOM VS formula, pharmaceuticalVS chemical,Quality is not black & white: i.e., diff grade for diff customerThere are many possible processes: e.g., test → more tests,Shop floor scheduling is dynamic: i.e., bottleneck

adapted from: Ake et al. Information Technology for Manufacturing

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Failed ERP projects

Hershey: a classical IT/IS failureEffects: delayed shipments → 12% sale decline & 29% inventory costRoot causes: high expectation, multiple IT vendors, project scheduling

FoxMeyer Drug: a classical ERP failureEffects: late order, incorrect & lost shipments → $15 million loseRoot causes: high expectation, project management scheduling

Nike: a shoes giant stumbledEffects: failed order system → $80-100 million lose salesRoot causes: high customization, no testing plan

Whirlpool: ERP stumble (Hershey II)Effects: failure in full scale system & delay shipments → ordering mistakeRoot causes: high expectation, communication

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Inventory position

..

ETO

.

MTO

.

ATO

.MTS

.Engineering

.Procurement

.Fabrication

.Assembly

.Delivery

source: Adopted from Smith, S. 1989.

Engineer to Order (ETO): work with the customer to design and then make the productMake to Order (MTO): make the customer’s product from raw mat’Assemble to Order (ATO): combine a number of preassembled modules to meetcustomer’s specificationsMake to Stock (MTS): serve customers from finished goods inventory

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Production process

source: Chase & Jacabs. 2010. Operation and Supply Chain Management.

Project: product remains in a fixed locationWork center: similar equipment or functions are grouped togetherManufacturing Cell: dedicated area where similar products are producedAssemble line: processes are arranged according to the progressive stepsContinuous process: assembly line only the flow is continuous

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Macro view of manufacturing

..

Mac

hine

s

.M

ans

.En

ergy

.

Mon

ey

.

Info

rmat

ion

.

Resources

.

Material

.

Material

. + added value.

material flow

.

resource flow

.Manufacturing

organization

source: Cecelja. 2000. Manufacturing Information & Data Systems.

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System structure

Hierarchical: decision in upper-level → constraint in lower-levelFeedback: systematic correctionMan-Machine interface: ∃/ exceptions → including man’Single’ database & Integration: maintaining data integrity and accuracyTransparency: understanding logic and algorithm behind systemSpecific response time: designing for improvement

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Planning relationship

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Decision horizon

..• Forecasting• Manpower• Distribution

.• Purchasing• Scheduling• Maintenance• Inventory

.• Facility• Sale channels• Service• Objective

.

Intermediate

.

Short-term

.

Long-term

.

Decision horizon

.

Issues

source: Nahmias, S. 2001.

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Closed-Looped Production Planning

..MPS.Demand Mgt. .

PO

.

S. Forecasting

. RCCP.

Agg.Planning

.

L. Forecasting

.

RRP

.

MRP

.

BOM

.

Inventory

.

CRP

.

Job Shop

.

Purchasing

.

Long-Term Plan

.

Intermediate Plan

source: Smith, S. 1989.

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Aggregate Planning

What: planning for family of productIdea: smoothing demands & key resources (workers, # machine)Occurred: beginning of fiscal year (unit: month of sale)Cost: production, product change, training, inventory, backorderInput: long-term forecasting + key resources, policy (overtime, subcontract,backlog, machine capacity)Output: production plan, capacity, inventory

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SkyCell: Aggregate planning

SkyCell, a European cell phone manufacturer, and its customers, service providers, come up withmonthly forecast (in thousand cell phone) as follow:

Month Demand Month Demand Month DemandJan. 1000 May 1500 Sep. 1100Feb. 1100 Jun 1600 Oct. 800Mar. 1000 Jul 1600 Nov. 1400Apr. 1200 Aug 900 Dec. 1700

The manufacturing process is govern by numbers of assembly worker, totally 1250 workers. Eachworker can assemble each cell phone every 10 minute. The plant operate 20 days a month, 8hours a day and paid $20 per hour and 1.5 time wage for any overtime (maximum 20 hour perworker-month). Total raw materials cost $20, outsource at costs $60 per and inventory cost is$3 per unit-month. SkyCell has inventory of 50,000 units in Jan and like to have the same levelof inventory.

source: Chopra, S. & Meindl 2010. pp. 243

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Trial & Error 1: No Inventory

1 2 3 4 5 6Demand 1000 1100 1000 1200 1500 1600RT prod. 950 1100 1000 1200 1200 1200OT prod. 150 150Outsource 150 250Inventory 50 0 0 0 0 0 0

7 8 9 10 11 12Demand 1600 900 1100 800 1400 1700RT prod. 1200 900 1100 800 1200 1200OT prod. 150 150 150Outsource 250 50 400Inventory 0 0 0 0 0 50

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Trial & Error 2: Constant Workforce

1 2 3 4 5 6Demand 1000 1100 1000 1200 1500 1600RT prod. 1200 1200 1200 1200 1200 1200OT prod. 42 42 42 42 42 42OutsourceInventory 50 292 434 676 718 460 102

7 8 9 10 11 12Demand 1600 900 1100 800 1400 1700RT prod. 1200 1200 1200 1200 1200 1150OT prod. 42Outsource 256Inventory 0 300 400 800 600 50

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Optimal

1 2 3 4 5 6Demand 1000 1100 1000 1200 1500 1600RT prod. 950 1200 1200 1200 1200 1200OT prod. 50 150 150 150 150OutsourceInventory 50 0 150 500 650 500 250

7 8 9 10 11 12Demand 1600 900 1100 800 1400 1700RT prod. 1200 900 1100 1200 1200 1200OT prod. 150 50 150 150OutsourceInventory 0 0 0 450 400 50

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SkyCell: AnalysisPre-solve analysis

Capacity Reg_time: 1250× 160× 60/10 = 1,200,000 units/ monthCapacity over_time: 1250× 20× 60/10 = 150,000 units/ monthAverage Demands: ≈ 1,242,000 unit/monthInventory VS Overtime VS Outsource: minimize outsourceInventory: $20 + $20

6 + $3× t = $ 23.33 + 3tOvertime: $20 + $20

6 × 1.5 = $25Outsource: $40

Cost ComparisonNo Inv. Const Prod Optimal

Material 276,000 292,880 298,000RT Labor 43,500 47,833 45,833OT Labor 3,750 1,470 5,750Inventory 150 14,496 8,850Outsouce 66,000 15,360 0Total 389,400 372,039 358,433

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Sales and Operations Planning (S&OP)

What: manage supply or demand to smooth production given predictablevariabilityIdea: seasonal consumer demand, but fixed plant capacityManaging supply: capacity (flexible workforce & machine, subcontracting),investing (common component)Managing demand: shift or manipulate demand (using price) or promotion;may result to

Market growth:Forward buying:Stealing market share: depending on competitors

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Master Production Schedule (MPS)

What: planning for finish good (end-item Planning)Idea: rough plan for produce or stock, time, capacityOccurred: beginning of each quarter (unit: week of sale)Output: time, production quantity

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Linkage between Aggre. and MPS

source:Jacob. et al 2011.

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Which item should we do its MPS?

Customer oriented: focus on FG & sub. assembly → smoothing production& communicating with customerResources: consist of small & manageable (# → times)Structure: have BOMCapacity: address key capacity of factory (WD)

Role and Responsibility of MPS?Planning: create/maintain MPSProduction: verify MPS, check capacityPurchasing: ensure & track inventory receivingWarehouse/ Store: ensure quantity & quality of inventory

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Key components in MPS

Production constraints: lead time, siteDemands: same time scale

Sale forecast: (MTS), e.g., forecast & prod. forecastCustomer order: (MTO), e.g., actual demandSafety stock:Seasonal build: SongKran, X-mas (QAD)

Inventory: on-hand VS on-order, received all?Planning BOM:Ordering policy: how to lump order together

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Bill of Material (BOM)

What: qty of components needed for FGtotal demand = independents demand + dependent demands

Warning: low-level code → time to run in MRP

BOM TerminologyLow-Level Code: lowest level that a component is assembledSummarized BOMs: BOM listed total quantity of componentsIndented BOMs: BOM listed order of componentsModular BOMs: BOM listed group of componentsPhantom assembly: sub-assembly that sometime availablePoint of use: material at specific location in production

source:Jacob. etal 2011.

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Example of Bill of Material


Summarized BOM Extended BOMLevel Item No. Quantity Unit Level Item No. Quantity Unit1 M 1 each 1 M 1 each.2 P 1 each .2 P 1 each.2 N 2 each .3 R 1 each.3 R 3 each .4 S 1 each.3 Q 2 each .2 N 2 each.4 S 3 each .3 Q 1 each

.4 S 1 each

.3 R 1 each

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Regular BOM

source:Smith, S. B. 1989.

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Modular BOM/ Multilevel BOM


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Time Fence


Demand Time Fence (DTF): changing order is very expensiveProduction Time Fence (PTF): changing order is annoyingTime Horizon: forecasting time period

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SkyCell: Time Fence (DTF & PTF)

...

x356LT: 2

.pad35LT: 1

.cpu356LT: 4

.ca356LT: 2

.

x351LT: 1

.pad35LT: 1

.cpu351LT: 3

.ca351LT: 2

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Popular lot Sizing RulesExcluding Costs (QAD):

Lot-for-Lot (LFL): order = demand in each periodPeriod Order Quantity (POQ): order = total demand in fixed periods; LFL=? POQ(t=?)Fixed Order Quantity (FOQ): order = fixed quantity follow condition, e.g,min, max, multipleOne Time Only (OTO): order one unit and one time

Including Costs: handling cost & ordering costEconomic Order Quantity (EOQ): FOQ @ handling + orderingWagner-Whitin: Optimal of handling + orderingPart Period Balancing (PPB): order = total demand in period @ handling≈ orderingSilver-Meal/least period cost: total demand in period @ min(handling+ordering

period )

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Example: Comparing lot sizing rule

Consider this net requirement:

week 1 2 3 4 5 6 7 8 9 10 11 12item A 40 15 35 50 30 60 35 80 15

If, the handling cost is $1 per week and ordering cost is $100 per order, comparethe released order and total cost of the following lot sizing rule: LFL, POQ, FOQ,EOQ, W-W, PPB, S-M/LPC

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EOQ: Q =√

2 (100) (30)1

= 77.45 ≈ 77

1 2 3 4 5 6 7 8 9 10 11 12LFL 40 15 35 50 30 60 35 80 15POQt=2 55 85 30 85 80 15POQt=3 55 115 175 15POQt=4 90 140 130FOQq=55 55 55 55 55 55 55 55FOQq=80 80 80 80 80 80EOQq=77 55 55 55 55 55 55 55

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Example: Lot sizing rules

Part Period Balancing:week handling ordering total total

week net req. holding cost cost cost units1 40 0 0 100 100 402 15 1 15 100 115 553 0 2 15+0 100 115 554 35 3 15+105 100 220 90

week handling ordering total totalweek net req. holding cost cost cost units5 50 0 0 100 100 506 30 1 0+30 100 130 807 0 2 30+0 100 130 808 60 3 30+180 100 310 140

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Example: Lot sizing rules

Least Period Cost/ Silver-Meal

week handling ordering total total periodweek net req. holding cost cost cost units cost1 40 0 0 100 100 40 1002 15 1 15 100 115 55 57.53 0 2 15+0 100 115 55 38.34 35 3 15+105 100 220 90 55.0

week handling ordering total total periodweek net req. holding cost cost cost units cost4 35 0 0 100 100 35 1005 50 1 50 100 150 85 756 30 2 50+60 100 210 115 707 0 3 110+0 100 210 115 52.58 60 4 110+240 100 450 170 90

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1 2 3 4 5 6 7 8 9 10 11 12Demand 40 15 35 50 30 60 35 80 15PPB 90 80 95 95LPC 55 115 95 95W-W 55 115 95 95

handling cost ordering cost total costLFL 0 900 900POQt=2 600 100 700POQt=3 320 400 720FOQq=80 500 535 1035EOQ 430 500 930PPB 210 400 615LPC/S-M 190 400 590W-W 190 400 590

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MPS TerminologyRequirement Related

Gross requirements:total requirements (MRP term)Net requirements: requirements after calculating scheduled receipt (MRPterm)

Inventory Related:Planned order release: releasing period of an order (back scheduling ofplanned order due)Planned order due: received period of an orderScheduled receipts: actual delivery period of an orderOn-Hand inventory/ Projected available: WIP that should have if nothingwrongAvailable to promise (ATP): available qty. for other additional customersAvailable to located: qty. less than orders


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SkyCell: Firmed order & BOM

inventory (1000 unit)item no. on-hand on-order safety policyx351 140 150t=3 30 POQt=3

x356 110 180t=3 0 POQt=4

280t=6

1 2 3 4 5 6 7 8 9 10x351 forecast 50 30 80 20 70 50 80 40 100 70(MTS) order 70x356 forecast 70 80 50 50 100 110 60 90 150 80(MTS/MTO) order 40 60 50 30/60 20/40 10/20 10

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SkyCell: x351 week 01-09


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Summary:

IT in Manuf Sys: challenge, induced by change, MRP → ERP, but ∃ manyERP failed casesUnderstand business: inventory position, production nature → planning &usage of infoAggr.Planing: long term machine & labor planning forMaster Production Schedule: FG & sub.assem planning

BOM low-level code, modular BOMTime fence: DTF (assembly) → PTF (MTS)Lot sizing: FOQ (cheap), POQ (freq), LFL (expensive)Available to Promise depend on inventory positionMPS tabular: simple calculation

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