Chapter 11
Planning Production Activity
Advanced Organizer
Managing Engineering and Technology
Management Functions
Planning
Decision Making
Organizing
Leading
Controlling
Managing Technology
Personal Technology
Research
Time Management
Design
Ethics
Production
Career
Quality
Marketing
Project Management
Chapter Objectives
• Describe position of engineer in the
production process
• Describe considerations in planning
manufacturing facilities
• Be able to use production planning tools
• Recognize different methods for production
planning and control
Engineers in Production Activity
• Plant Manager
– Engineering design
– Maintenance
– Utilities, Security
• Production Manager
–
–
–
–
Production Planning
Routing
Scheduling
Dispatching & Follow-up
• Quality Manager
– Quality Control
– Inspection
• Industrial Eng. Manager
– Methods
– Time Study
– Standards
•
•
•
•
General Superintendent
Director of Purchasing
Finance Manager
Ind. Relations Manager
Future Demands on
Manufacturing Engineers
• An environment of exploding scope
(Product Complexity, Global Manuf., Social & Eco.
changes)
Multiple roles (Op. Integrator, Manuf. Strategist)
•
• Advanced tools (Computer hardware,
•
database, CAD/CAM, Decision Support Systems)
Changed work emphasis (Team<>Individual,
Human<>Technical, Outside<>Inside Services)
Planning Manufacturing Facilities
•
•
•
•
Area selection
Community selection
Site selection
Common errors
Area Selection
•
•
•
•
•
Location of markets
Location of materials
Transportation facilities (Hwy, Rail, Air, Port)
Labor supply (Supply, Skill, Wage, Union)
Location of other plants and warehouses
Community Selection
•
•
•
•
•
Managerial preferences
Community facilities
Community attitudes
Community, government and taxation
Financial inducements
Site Selection
•
•
•
•
•
•
Size of site
Topography
Utilities
Waste Disposal
Transportation facilities
Land costs, Zoning, Expansion
Common Errors
in Facility Location Analysis
•
•
•
•
•
Labor cost miscalculations
Inadequate labor reservoir
Lack of distribution outlets
Underestimated importance of taxes
Purchasing unsuitable building
http://www.census.gov
Objectives of
Plant Layout Planning
•
•
•
•
•
•
•
•
•
Minimize materials-handling costs
Reduce congestion of personnel & material
Increase safety of personnel
Increase labor efficiency
Improve morale
Facilitate communication and coordination
Provide operations flexibility
Increase quality of working life
Fung shui
Plant Layout Alternatives
• Product layout
• Process layout
• Group Technology
Product Layout
• Line Balancing
• Materials Handling
Process (Functional) Layout
Group Technology (Cellular) Layout
Quantitative Tools in
Production Planning
• Inventory control
• Break-even charts
• Learning curves
Inventory Control
Basic Economic Ordering Quantity Model
Quantity
Let I = Carrying cost
R = Annual demand
S = Ordering cost
Q
Q
R
CT  I( )  S( )
2
Q
 CT
I
RS
 0  ( )( 2 )
Q
2
Q
2RS
EOQ 
I
Time
Inventory Control
• Basic
Break-even
charts
Economic
Ordering Quantity Model
$
Total Annual Cost
Carrying Cost
= I(Q/2)
Ordering Cost
= S(R/Q)
EOQ
Order Quantity Q
Inventory Control
Backlog Inventory Model
Quantity
Q
Time
Inventory Control
Production Inventory Model
Quantity
Q
Time
Inventory Control
Inventory with Safety Stock Model
Quantity
Q
Time
Problems with EOQ Analysis
• Lean Manufacturing considers inventory a waste
• Just-In-Time requires lot size of 1
Key: Reducing ordering (setup) costs
Break-even Analysis:
Fixed Costs and Variable Costs
• Fixed Costs: constant, independent of the output
or activity level.
–
–
–
–
Property taxes, insurance
Management and administrative salaries
License fees, and interest costs on borrowed capital
Rental or lease
• Variable Costs: Proportional to the output or
activity level.
– Direct labor cost
– Direct materials
Break-even Analysis
• Total Variable Cost = Unit Variable Cost * Quantity
TVC = VC * Q
• Total Cost = Fixed Cost + Total Variable Cost
TC = FC + VC * Q
• Total Revenue = Unit Selling Price * Quantity
TR = SP * Q
where
TVC = Total variable cost
VC = Variable cost per unit
Q = Production/Selling quantity
FC = fixed costs
TR = Total Revenue
SP = Selling price per unit
Break-even Analysis
• Break-even point: the output level at which total revenue
is equal to total cost.
SP * BEP = FC + VC * BEP
BEP = FC / (SP - VC)
where
BEP = breakeven point
FC = fixed costs
SP = selling price per unit
VC = variable cost per unit
• Applications of Break-even Analysis:
– Determining minimum production quantity
– Forecast production profit / loss
Break-even Analysis
Total Revenue
$
Profit
Total Costs
Variable Costs
Fixed Costs
Loss
Break-even Point
Production Quantity
Break-even Analysis
$
Total Revenue
Total Costs
Maximum
Profit
Break-even Point
Production Quantity
Learning Curves
Learning Curves: Production time reduces by a
constant rate as production quantity doubles
Let Y1 = Time to perform the 1st unit
Yn = Time to perform the nth unit
b = Constant based on learning curve rate k%
n = Number of completed units
Yn  Y1 n
b
log(k%) ln( k%)
b 

log 2
ln 2
ln Yn  ln Y1  (b) ln( n)
Learning Curves
Linear Regression is used to estimate –b and Y1
when Multiple (m) data points are available
m [ln( n)  ln Yn ]  [ ln( n)](  ln Yn )
b 
m [ln( n)]2  [ ln( n)]2
 ln Yn
 ln( n)
ln Y1 
 ( b)
m
m
Learning Curves
Cumulative production time from N1 to N2:
n2

Y1
1 1b
1 1b
n2  2   n1  2 
Yn 

(1  b)
n n1

Learning Curve Example
ln % ln( 0.85)
b 

 0.2345
ln 2
ln 2
Y16  Y1  (16)b  Y1  (16)0.2345  5.0
Y1  5.0 /(16)0.2345  9.6
Yn  Y1  nb  (9.6)  n0.2345
Learning Curve Example
8.16
7.42
6.94
6.58
6.31
6.08
5.90
5.73
5.59
12
13
14
15
16
17
18
19
20
5.36
5.26
5.17
5.09
5.01
4.94
4.87
4.81
4.76
8.00
TN
n
1
2
3
4
5
6
7
8
9
10
YnExample
 Y1  nb2-9
 (9Cost
.6)  n0.2345
n
Yusing
YnEstimating
n
12.00
11 Curve
5.47
9.60
Learning
10.00
6.00
4.00
2.00
0.00
1
3
5
7
9
11
N
13
15
17
19
Learning Curve Example
10.00
YnExample
 Y1  nb2-9
 (9Cost
.6)  n0.2345
Estimating using
Learning Curve
10.00
8.00
6.00
4.00
2.00
1.00
1
0.00
1
3
5
7
9
11
Normal Scale
13
15
17
10
19
Log-Log Scale
100
Production Planning & Control
• Planning, Coordination, Control
• Concerns: production quantity, costs,
quality, due dates, efficiency
• Irregularities: machine break down,
scrapped parts, late arrival, rush orders,
design changes
• Idle resources <> Idle inventory
Steps in Production Planning
•
•
•
•
•
•
Identify the goals (inventory level)
Process planning (routing)
Loading
Scheduling
Dispatching (execution)
Production control
Materials Requirements Planning
(MRP)
Main Features:
• Planning tool geared specifically to assembly
operations.
• MRP was created to tackle the problem of
'dependent demand'; determining how many of a
particular component is required knowing the
number of finished products.
• It allows each manufacturing unit to tell its supplier
what parts it requires and when it requires them.
The supplier may be the upstream process within
the plant or an outside supplier.
Materials Requirements Planning
(MRP)
• Master Production Schedule (MPS): mix of known demand,
forecasts and product to be made for finished stock.
• Exploding: Using the Bill of Materials (BOM), MRP determines
how many, of what components, are needed for each item (part,
sub assembly, final assembly, finished product) of manufacture.
– BOM’s are characterized by the number of levels involved, following
the structure of assemblies and sub assemblies.
– The first level is represented by the MPS and is 'exploded' down to
final assembly.
• Netting: any stock on hand is subtracted from the gross
requirement
• Offsetting: determines when manufacturing should start so that
the finished items are available when required.
– “Lead time” has to be assumed for the operation.
Materials Requirements Planning
(MRP)
Major assumptions with MRP schedule:
• There is sufficient capacity available. For this reason
MRP is sometimes called infinite capacity scheduling.
• The lead times are known, or can be estimated, in
advance.
• the date the order is required can be used as the starting
date from which to develop the schedule.
Manufacturing Resource Planning
(MRP II)
• Feedback: feedback from the shop floor on how the work has
progressed, to all levels of the schedule so that the next run can be
updated on a regular basis.
• Resource Scheduling: scheduling capability of the resources
• Batching Rules
– 'Lot for Lot' means batches that match the orders.
– Economic Batch Quantity (EBQ) is calculated to minimize the cost
through balancing the set up cost against the cost of stock.
– 'Part Period Cover' means making batches whose size cover a fixed
period of demand.
• Software Extensions
– Rough Cut Capacity Planning (RCCP), an initial attempt to match the
order load to the capacity available,
– Sales Order Processing
– Cost accounting
• Data Accuracy
Enterprise Resource Planning
(ERP)
• ERP is a way to integrate the data and processes of an organization
into one single system.
• Ideal ERP System
– Manufacturing: engineering, capacity, workflow management,
quality control, bills of material, manufacturing process, etc.
– Financials: Accounts payable, accounts receivable, fixed assets,
general ledger and cash management, etc.
– Human Resources: Benefits, training, payroll, time and attendance,
etc
– Supply Chain Management: Inventory, supply chain planning,
supplier scheduling, claim processing, order entry, purchasing, etc.
– Projects: Costing, billing, activity management, time and expense,
etc.
– Customer Relationship Management: sales and marketing,
service, commissions, customer contact, calls center support, etc.
– Data Warehouse
Enterprise Resource Planning
(ERP)
Advantages of ERP Systems
• A totally integrated system
• The ability to streamline different processes and workflows
• The ability to easily share data across various
departments in an organization
• Improved efficiency and productivity levels
• Better tracking and forecasting
• Lower costs
• Improved customer service
Enterprise Resource Planning
(ERP)
Disadvantages of ERP Systems
• Success does depend on skills and the experience of the
workforce to quickly adapt to the new system
• Customization in many situations is limited
• The need to reengineer business processes
• ERP systems can be cost prohibitive to install and run
• Technical support can be shoddy
• ERP's may be too rigid for specific organizations that are
either new or want to move in a new direction in the near
future
Production Planning
& Control Systems
• Synchronized manufacturing (OPT)
– looks for bottlenecks
Toyota Production System
Just-in-Time
• "Just-in-Time" means making only "what is needed, when
it is needed, and in the amount needed."
• Supplying "what is needed, when it is needed, and in the
amount needed" according to this production plan can
eliminate waste, inconsistencies, and unreasonable
requirements, resulting in improved productivity.
Kanban System
• In the TPS, a unique production control method called the
"kanban system" plays an important role.
• The kanban system has also been called the
"Supermarket method" because the idea behind it was
borrowed from supermarkets.
JIT Kanban System
Actual Parts
W Withdrawal Kanban
P Production-ordering Kanban
Preceding
Station
Store
Succeeding
Station
JIT Kanban System
Preceding
Station
P
Store
Succeeding
Station
JIT Kanban System
Preceding
Station
P
Store
Succeeding
Station
JIT Kanban System
W
Preceding
Station
Store
P
Succeeding
Station
JIT Kanban System
W
Preceding
Station
Store
P
Succeeding
Station
JIT Kanban System
Preceding
Station
P
Store
W
Succeeding
Station
Toyota Production System
http://www.toyota.co.jp/en/vision/production_system/just.html
Lean Manufacturing
• Lean means "manufacturing without waste."
• Waste ("muda" in Japanese) has many forms. Material,
time, idle equipment, and inventory are examples. Most
waste is invisible. Nor is elimination easy.
• Lean Manufacturing improves material handling, inventory,
quality, scheduling, personnel and customer satisfaction.
Lean Manufacturing
Core Disciplines
• Cellular Manufacturing
• Pull Scheduling (Kanban)
• Six Sigma/Total Quality Management
• Rapid Setup
• Team Development
Tools
• Value Stream Mapping and Process Mapping are two
valuable tools that can help eliminate waste and streamline
work.
• Group Technology can sort out workflow in complex product
mixes.
Flexible Manufacturing Systems
(FMS)
Basic categories:
• Stand-alone machine
• Flexible manufacturing cell (FMC)
– > one machine + pallet changing equipment
• Flexible manufacturing system (FMS)
– workstations + mat’ls handling sys. + comp. control
• Fully automated factory (FAF)
Flexible Manufacturing Systems
(FMS)
Benefits:
•
•
•
•
•
Greater productivity
Improved quality
Increased reliability of production
Reduced batch size & lead-time
Increased % of time spent on machine tools