Planning Production Activities

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Planning Production Activity

Preview

Planning Manufacturing Facilities

Quantitative Tools in Production Planning

Production Planning and Control

Flexible Manufacturing Systems

Prof.Dr.B.G.etiner


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Prof.Dr.B.G.etiner

Plant Location: 7 Basic Steps in locating andbuilding every new plant

1. Establish the need for a new plant2. Determine best geographical area based on needs

3. Establish the requirements

4. Screen many communities

5. Pinpoint few communities for detailed study

6. Select the best location

7. Build the plant


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Prof.Dr.B.G.etiner

Plant Location

Some of the factors affecting choice of region

* Transportation (highway, rail, air, water)* Labor (supply, skill level, local wages, and attitudes)

* Geographical location (raw materials, customers etc)

* Utilities (supply and cost of water, electricity etc)* Business Climate (taxes, pollution controls, community

* Comfortableness (Climate, educational facilities etc)

* Plant Sites (land cost etc)


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Prof.Dr.B.G.etiner

Plant Location

Most important factors for plant location will vary withindustry

* For producing the bricks, plant has to be close to raw material

* Aluminum production needs cheap electricity

* High-technology electronic firms have tended to clustertogether with technical professionals and educational institutions

* Clothing manufacturers look for lower labor-cost areas


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Prof.Dr.B.G.etiner

Plant Design

Nature of plant and its arrangement on the site

Multistory plants: Conserve land area, permit useof gravity flow, and cheaper to heat

Singlestory plants: More flexible, permit lighterfoundations.


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Prof.Dr.B.G.etiner

Plant Layout

Try to achieve most effective arrangement of physicalfacilities and personnel for making a product.

Product Layout: Machines and personnel are arrangedalong the production line so minimum travel is obtainebetween processing steps

Process Layout: All machines or activity of a particulartype are located together. Useful for job-shopenvironment


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Prof.Dr.B.G.etiner

Plant Layout

Try to achieve most effective arrangement of physicalfacilities and personnel for making a product.

Fixed-position Layout: Product remains stationary.(for example; shipbuilding or mass construction)

Group Technology: A set of products requiring similarprocessing equipment is identified, and a small groupof the machines needed to make this set of similarproducts is placed together.


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Plant Layout

Prof.Dr.B.G.etiner

Receivin

g

Shippin

gPlanning Milling Grinding Drill Inspection

Press

1 2 3 4 5

Product A

I II III IV V

Product B

Drill Turning Milling Painting InspectionPress


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Plant Layout

Prof.Dr.B.G.etiner

Receivin

g

Shippin

g

2

13

4

5I

II

III

IV

V

Turning Planning Grinding

MillingDrill

Press

Painting

Inspection

Product BProduct A


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Weighted Factor Analysis

Prof.Dr.B.G.etiner


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Prof.Dr.B.G.etiner

Economic Order Quantity (EOQ) to Inventory

Break-Even Charts

Learning Curves


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Prof.Dr.B.G.etiner

Inventory

Production

Production Problem

Inventory Level


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Prof.Dr.B.G.etiner


Consider an inventory item for which annualrequirement is Runits. Storing each unit of the item

in inventory will cost Idollars per year.

Each batch involves a order/setup cost ofS dollars.

EOQ=

I

RS2


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Prof.Dr.B.G.etiner

Economic Order Quantity (EOQ) to Inventorya) If it costs $2 per unit to store an item for one year,$40 setup cost every time you produce a lot, and youuse 1000 units per year, how many lots of what size

should be produced each yearb) What is the answer if order setup cost is reduced to $10?

EOQ=I

RS2

lots5200/10002002

40.1000.2a)

EOQ=I

RS2

1002

10.1000.2b) EOQ is decreased

(more flexible)


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Prof.Dr.B.G.etiner


Cost(Dollars)

Order Quantity (Q)

Annual Total Cost

Annual Ordering Cost

AnnualI

nvento

ry

HoldingCo

st

oductTotal CRQ

RS

QIC Pr.)(

2

Q is batch quantity


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Prof.Dr.B.G.etiner

Problem with Economic Order Quantity

Why does the setup cost have to be so high?

It doesnt need to be.

Solution isa) designing dies and tools to switch to new batchb) including simple cards (kanban) in each small lot


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Prof.Dr.B.G.etiner

Break-Even Charts

Break-even analysis divides costs into fixed and

variable components to estimate the productionlevels for profitable operation.


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Prof.Dr.B.G.etiner

Break-Even ChartsA plant may produce and sell U units of product up to a capacity of2000 units. Fixed costs F1 of $100,000 must be paid in any case. The

selling price is assumed a constant S=$250, regardless of volume, so

that total revenue R=UxS. The unit variable cost V1 is assumed to

be constant $150. Each unit sold makes a contribution C1 of

C1=S-V1=$250-$150=$100

The break-even point BE1 is the production level U where total costs

TC equals to total revenue R:

R=UxS=TC1=F1+UxV1 BE1=U= = =1000 unitF1

S-V1

$100,000

$250-$150


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Break-Even Charts (Automation)More efficient production F1=$180,000 and V2=$100 BE2=1200

400 800 1200 1600 2000

Units Sold (U)

500

400

300

200

100

BE Point

Thousandsofdollars

Produ

ctionCapac

ity

TotalR

even

ue

TotalCo

st

TC1

Profit

BE After Automation


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Break-Even Charts (Automation)

Total Cost in Automation=F2+UxV2=$180,000+2000x100=$380,000

Total Cost Before=F1+UxV1=$100,000+2000x150=$400,000

Maximum Profit Before=Total Revenue-Total Cost=$500,000-$400,000

$100,000

Total Revenue=UxS=2000x250=$500,000

Maximum Profit in Automation=Total Revenue-Total Cost=$500,000-$380,000

$120,000

In case of using maximum capacity,it is better to automate in this example

Prof.Dr.B.G.etiner

l d A


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Learning Curves With Learning Curve Rate %90If the first unit takes 1000 labor hoursSecond will take 900,

Fourth will take 810,Eight will take 729

Prof.Dr.B.G.etiner

Planning Production Activities

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