KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 1: Introduction to production and control
Chapter contents:
1. Purpose of production planning and control
2. Types of production
3. Production philosophy
4. Activities of production planning and control
5. Advantages of production control
6.Characteristics of modern manufacturing
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Purpose of production planning and control
Production function is that part of an organization, which is concerned with the
transformation of a range of inputs into the required outputs (products) having the requisite
quality level.
Production is defined as “the step-by-step conversion of one form of material into another
form through chemical or mechanical process to create or enhance the utility of the product
to the user.” Thus production is a value addition process. At each stage of processing, there
will be value addition.
2
Production planning and control can be defined as the process of planning the production
in advance, setting the exact route of each item, fixing the starting and finishing dates for
each item, to give production orders to shops and to follow up the progress of products
according to orders. The principle of production planning and control lies in the statement
‘First Plan Your Work and then Work on Your Plan’. Main functions of production planning
and control includes planning, routing, scheduling, dispatching and follow-up.
The objective of the production management is ‘to produce goods services of right quality
and quantity at the right time and right manufacturing cost’.
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2. Types of production
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5
3. Production philosophy
What is it means? The answer of this question has been looked by many researchers, but
didn’t found any satisfactory definition of production philosophy.
The committee on Foundation of Manufacturing defines the production philosophy, which
says that, principles and theories must provide guidance in decision making and operations,
they must be action oriented, and their application should leads to improvement of
performance.
In manufacturing, great gains in performance have been realized by new production
philosophy, which leads to “lean production”. This new production philosophy is
amalgamation of partial approaches as JIT (Just in Time), TQM (Total Quality Management),
time-based competition and concurrent engineering, TPM (Total production Maintenance)…
6
JIT (Just In Time) aims to the elimination of wait times.
TQM (Total Quality Management) aims at the elimination of errors and related rework.
Time based management aims to the reduce cycle times.
Concurrent engineering is a work methodology based on the parallelization of tasks (i.e.
performing tasks concurrently).
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4. Activities of production planning and control
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•Planning: Production planning may be defined as the technique of foreseeing
every step in a long series of separate operations, each step to be taken at the
right time and in the right place and each operation to be performed in maximum
efficiency
•Routing: Under this, the operations, their path and sequence are established. To
perform these operations the proper class of machines and personnel required are
also worked out. The main aim of routing is to determine the best and cheapest
sequence of operations and to ensure that this sequence is strictly followed.
•Scheduling: It means working out of time that should be required to perform each
operation and also the time necessary to perform the entire series as routed,
making allowances for all factors concerned. It mainly concerns with time element
and priorities of a job.
•Loading: The next step is the execution of the schedule plan as per the route
chalked out it includes the assignment of the work to the operators at their
machines or work places. So loading determines who will do the work as routing
determines where and scheduling determines when it shall be done.
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•Dispatching: Dispatching involves issue of production orders for starting the
operations.
•Follow up: Every production program involves determination of the progress of
work, removing bottlenecks in the flow of work and ensuring that the productive
operations are taking place in accordance with the plans.
•Inspection: This is mainly to ensure the quality of goods. It can be required as
effective agency of production control.
•Corrective measures: Corrective action may involve any of those activities of
adjusting the route, rescheduling of work changing the workloads, repairs and
maintenance of machinery or equipment, control over inventories of the cause of
deviation is the poor performance of the employees.
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5. Advantages of production control
Production activity control concern execution of material plan.
•Ensure a smooth flow of all production processes
•Ensure production cost savings.
•Control wastage of resources.
•It maintains standard of quality.
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6.Characteristics of modern manufacturing
•Substitution of hand work by machines
•Automation of the factory
•Integration of computers into the production process
•Integration of information and communication techniques enables globalization.
•New production techniques by penetration of nano- and bio-technologies and
application of new materials.
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7.Complementary: Techniques scheduling
Theory of constraints scheduling: to identify bottlenecks (or constraints) and
maximize their efficiency.
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Gantt Charts: provides graphic for sequencing work on machines and monitoring its
progress
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PERT diagram: helps managers identify the optimal sequencing of activities, the
expected time for project completion, and the best use of resources within a complex
project.
15
Questions
1- What do you mean by production?
2-Define Production Planning and Control and list the objective of PPC.
3-What are the activities of planning and control?
4- List the types of production system
5-The correct sequence of operations in production planning and control is
Routing-Scheduling-Dispatching-Follow up
Scheduling-Routing- Dispatching-Follow up
Dispatching-Routing-Scheduling- Follow up
Routing-Scheduling-Follow up-Dispatching
6-Which of the following is true for ‘Routing’?
It is flow of work in the plant
Route sheets include list of machine tools that are to be followed
It depends upon material handling facilities
All of the above
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7-Dispatching authorizes the start of production operations by
i-Release of material and components from stores to first process
ii-Release of material from process to process
iii-Issue of drawings instruction sheets
Which of the following is (are) true?
Only i
Only ii
i & ii
i , ii & iii
8-Master schedule is prepared for
Single product continuous production
Multi product batch production
Assembly product continuous production
Single product batch production
9-Gantt chart is mostly used for
Routing
Scheduling
Follow up
Inspection and quality control
17
10-What is Scheduling?
11-List out types of scheduling techniques.
12- Ordering of raw material is based on :
-A.Sales forecast
B.Marketing forecast
18
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
Chapter 2: Framework of production planning and control
Chapter contents:
1. Problems of production function and role of the manager
2. Strategies for production planning and control
1
1. Problems of production and role of manager
The problems faced by production manager are as follows:
1. Problem of plant location
Before the production process is determined, the production manager has to decide the
place at which he has to set-up his factory. He has to choose the best locality in order to
economize the cost of production. In order to select the best locality, he has to weigh the
pros and cons of various factors, such as nearness to raw materials, transportation, store,
banking and other related facilities.
2. Problem of plant layout
It implies arrangement of plant, machineries, equipments, and furniture in such a way that
it occupies minimum space in the factory. This minimize not only the space but also
facilitates easy movement of materials, men and finished goods. In addition to the layout of
building, production manager has to solve other problems such as lighting, ventilation, airconditioning, sanitation, noise control, etc
2
3. Problem of product designing
The selection of the design of the product is another problem faced by production manager.
Any change in the design of the product will affect the design of the plant and its layout which
will prove costly and complex for the enterprise. So, the design problem should be considered
in advance.
4. Problem of material and production control
One of the problems faced by production manager is to ensure ready availability of
materials to ensure continuity in production. With a view to take advantage of reduced cost
of material and to avoid excess losses and wastages, various techniques of material control,
such as deciding Economic Order Quantity (EOQ), level setting, ABC analysis, perpetual stock
taking system must be decided.
Production planning and control techniques are essential to keep up promised delivery date.
The production manager must also decide the production capacity. He has to plan the
flexible schedules, work load of men and machines and assess the flow of production from
machine to machine.
3
5. Problem of quality
Customer satisfaction, to a greater extent, depends upon the quality of the products. The
quality of goods must fulfill the norm set by ISI and ISO series. The production manager
must consider product inspection and statistical quality control techniques to ensure
quality of goods.
6. Problem of personnel
By far this is the most serious problem faced by production manager. If demand of the
workers is not fulfilled, they can resort to strikes and lockouts. Labour unrest will lead to
inefficiency and consequently loss of output, both in terms of quantity and quality.
7. Problem of cost of production
The selling price depends upon the cost of production. If the cost of production is high,
selling price will also be high. Consumers may find it difficult to buy costlier products. On the
other hand, if the competitor’s price is less, his sales will increase. Thus, the production
manager is in a dilemma as to what price he has to charge for the goods.
4
8. Problem of environment
The functioning of a factory is affected by various economic and non-economic
environmental factors, such as social, cultural, political, technological, natural, and
historical. The production manager has to take into account all these factors so that the
adverse effects may be solved by taking suitable measures.
5
2. Strategies for production planning and control
In the past, production was based on the number of orders received and the finance
available with the organization. But, in recent time, production function is affected by many
environmental factors, such as economic, social, legal and such other factors. Besides,
there environmental factors — the global market, foreign technology, foreign capital also
influence production function. It is in this context, that strategic management has become
useful to operations management.
6
Operation strategies involve the following elements:
(a) Goal of the organisation
1. Profit earning
2. Survival
3. Growth
4. Producing a targeted quantity of output
5. Attaining a targeted share of market
6. Compete successfully with others.
(b) Reducing the cost of production: In order to attain the above objectives, the cost of
production should be minimised.
(c) Decide method of production: With a view to take benefit of economies of large-scale
production one has to decide between manual or mechanical production and the relative
advantages and disadvantages arising therefrom.
(d) Quality of product: The quality should be consistent with the expected quality of costumers.
It should neither be too superior nor too inferior.
(e) Delivery date: In order to win the confidence of customers the goods should be delivered on
the promised delivery date.
7
Questions
1. What are the basic problems faced by the production manager ?
2. List techniques that aid to resolve the problem of raw material control.
3. List three methods used to limit quality control problem.
4. In the past, production was based on the number of orders received and the finance
available with the organization. But, in recent time, production function is affected by many
environmental factors, such as economic, social, legal and such other factors. Besides, there
environmental factors — the global market, foreign technology, foreign capital also influence
production function.
Mention the strategic objectives of production planning and control (management).
8
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 3: Master Production Scheduling (MPS)
Chapter contents:
1. Aggregate Planning
2. Master Production Schedule (MPS)
3. Demand Management
4. Forecasting
5. Exercises
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Aggregate Planning
There are three types of plans in production:
Process Planning: determines the specific technologies and
procedures required to produce a product.
Long range plan
(annually(
Strategic Capacity Planning: determines the long-term capabilities
production system. (facility size, equipments procurement) of
Aggregate Planning: indicates production output levels for major
product lines rather than specific products. The demand on facilities
and available capacities are specified in aggregate quantities.
Intermediate range plan
(6 to 18 months(
Master Production Schedule: gives the details of production plan
from the aggregate plan and converts this plan into specific material
and specifies the timing and size of production quantities for each
product in the product families.
Short range plan
(days or weeks (
2
Order scheduling: orders planning of jobs to specific machines,
production lines, or work centers.
Production planning in the intermediate range is termed as aggregate planning. The
time horizon may vary from 6 months to 18 moths. The physical facilities during this
range of period can be assumed to be fixed.
The demand on facilities and available capacities are specified in aggregate quantities.
The total expected demand is specified by sum of the individual demands of all the
variants of the product.
Examples:
1. An automobile firm’s demand /capacity may be specified as say 1000 vehicles per year.
This is the sum all the types of vehicles.
2. Paint manufacturer may specify his capacity as 10,000 liters per annum. Here this
demand is the total demand for all the colors of paint.
3
Methods or techniques used for aggregate planning:
When the demand or forecast for the products is either more or less than the available
capacity of the plant, the following techniques may be used:
•Hiring or lay off of employees
•Over time or under time
•Use of temporary employees
•Subcontracting
•Carrying inventory
•Discounts in price
•Advertising or Sales Promotion
•…
4
2. Master Production Schedule (MPS)
Master production schedule gives the details of production plan from the aggregate
plan and converts this plan into specific material and capacity requirements.
Functions:
1. To translate aggregate plans into specific end items.
2. To evaluate alternative schedules.
3. To generate material requirement.
4. To generate capacity requirements.
The master production schedule expresses how much of each item is wanted and when it is
wanted. The MPS is developed from forecasts and firm customer orders for end items,
safety stock requirements, and internal orders.
MPS can be worked out in 3 steps.
1. Determine the gross requirements of end items.
2. Determine the net requirements of the items.
Net requirement = Gross requirement – inventory on hand
3. Group the net requirements into planned orders to be released.
5
6
7
3. Demand Management
The purpose of demand management is to coordinate and control all the sources of demand
so the productive system can be used efficiently and the product delivered on time. There are
two basic sources of demand:
Dependent demand means that demand for the item is directly related to demand for
something else,
Independent demand does not concern the internal flow of materials, but it results from the
demand in consumer market
8
4. Forecasting
Forecasting is an estimate of future demand. Methods of Demand forecasting:
Qualitative techniques: The first uses qualitative data (expert opinion, for example) and
information about special events of the kind already mentioned, and may or may not take
the past into consideration. Examples: Delphi Method, Market research, Panel consensus,
Historical analogy.
Time series analysis and projection: The second, on the other hand, focuses entirely on
patterns and pattern changes, and thus relies entirely on historical data. Examples: Simple
moving average, Weighted moving average, exponential smoothing, regression analysis, Box
Jenkins technique, Shiskin time series, trend projection.
Causal models: The third uses highly refined and specific information about relationships
between system elements, and is powerful enough to take special events formally into
account. As with time series analysis and projection techniques, the past is important to
causal models. Examples: Regression models, econometric models, input/output models…
9
Figure: Six Typical Demand Patterns
10
5. Exercises
Exercise 1: Moving Average method (forecasting)
The formula for simple moving average is
Ft 
At 1  At  2  At 3  ...  At  n
n
Where
Ft  Forecast for the coming period
n  Number of periods to be averaged
At 1 Actual occurrence in the past period
At 2 , At 3 , and At n Actual occurrences two periods ago, three periods ago,
and so on up to n periods ago in the past period
11
Here are the demands for a product for the past three weeks.
Week
Demand
1
400
2
380
3
411
4
?
5
?
a. Make a forecast for this week using a simple three-week moving average.
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b. If the actual demand of products in week 4 is 415, what is the forecast for week 5?
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Exercise 2: Weighted Moving Average method (forecasting)
The formula for weighted moving average is
Ft  w1 At 1  w2 At  2  ...  wn At  n
Where
Ft  Forecast for the coming period
n  Number of periods to be averaged
At 1 Actual occurrence in the past period
At 2 , and At n 
Actual occurrences two periods ago, and so on up to n
periods ago in the past period
w1  Weight to be given to the actual occurrence for the period t-1
w2  Weight to be given to the actual occurrence for the period t-2
wn  Weight to be given to the actual occurrence for the period t-n
w
13
i
1
Here are the demands for a product for the past four months.
Month
Demand
1
100
2
90
3
105
4
95
5
?
The forecast is derived by using 40% of the actual sales for the most recent month, 30% of
two months ago, 20% of three months ago, and 10% of four months ago.
a. Make a forecast using a weighted moving average for month 5.
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b. If the actual demand of products in month 5 is 110, find the forecast for month 6.
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14
Exercise 3: Exponential Smoothing method (forecasting)
The equation for a single exponential smoothing forecast is simply
Ft  Ft 1   ( At 1  Ft 1 )
Where
Ft  The exponentially smoothed forecast for period t
Ft 1  The exponentially smoothed forecast made for the prior period
At 1 The actual occurrence in the prior period
  The desired response rate, or smoothing constant
15
A demand had been forecast for last week at 22000 products and only 21000 products were
actually demanded.
a. What would the forecast be for this week using exponential smoothing with α=0.10?
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b. supposing, with the forecast made in (a), this week’s demand actually turns out to be 22500.
What would the new forecast for the next week?
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16
Exercise 4: Linear Regression method (forecasting)
A firm’s sales for a product line during the 12 quarters of the past 3 years were as flows:
Quarter
Sales
Quarter
Sales
Quarter
Sales
1
600
7
2600
13
?
2
1550
8
2900
14
?
3
1500
9
3800
15
?
4
1500
10
4500
16
?
5
2400
11
4000
6
3100
12
4900
The firm wants to forecast each quarter of the fourth year, that is, quarters 13, 14, 15 and, 16
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18
Exercise 5: Aggregate Production Planning Using Pure Strategies
The Good and Rich Candy Company makes a variety of candies in three factories worldwide. Its
line of chocolate candies exhibits a highly seasonal demand pattern, with peaks during the
winter months (for the holiday season) and valleys during the summer months (when chocolate
tends to melt and customers are watching their weight).
Question: Given the following costs and quarterly sales forecasts, determine whether a level
production or chase demand production strategy would more economically meet the demand
for chocolate candies.
Solution:
Quarter
Sales Forecast
Spring
80,000
Summer
50,000
Fall
120,000
Winter
150,000
For the level production strategy, we first need to calculate average quarterly demand
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This becomes our planned production for each quarter. Since each worker can produce 1,000
pounds a quarter, 100 workers will be needed each quarter to meet the production
requirements of 100,000 pounds. Production in excess of demand is stored in inventory, where
it remains until it is used to meet demand in a later period. Demand in excess of production is
met by using inventory from the previous quarter. The production plan and resulting inventory
costs are given in flowing tables.
Beg workforce
100
Beg inv.
0
Firing cost
$500
Units/worker
1000
Inv. cost
$0.50
Hiring cost
$100
Quarter
Demand
Production
Inventory
Spring
80,000
....................
....................
Summer
50,000
....................
....................
Fall
120,000
....................
....................
Winter
150,000
....................
....................
Total
400,000
....................
....................
Cost of level production strategy: $ ....................
20
For the chase demand strategy, production each quarter matches demand. To accomplish this,
workers are hired and fired at a cost of $100 for each one hired and $500 for each one fired.
Since each worker can produce 1,000 pounds per quarter, we divide the quarterly sales
forecast by 1,000 to determine the required workforce size each quarter. We begin with 100
workers and hire and fire as needed. The production plan and resulting hiring and firing costs
are given in flowing tables.
Beg workforce
100
Beg inv.
0
Firing cost
$500
Units/worker
1000
Inv. cost
$0.50
Hiring cost
$100
Quarter
Demand
Production Workers needed
Workers fired
Spring
80,000
80,000
....................
....................
Summer
50,000
50,000
....................
....................
Fall
120,000
120,000
....................
....................
Winter
150,000
150,000
....................
....................
Total
400,000
400,000
....................
....................
Cost of chase demand strategy: $ ....................
Comparison of costs and Conclusion:……………………………………………………………………………………
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Exercise 6: Master Production Schedule
Prepare a schedule for the following situation. The forecast for each period is 70 units. The
starting inventory is zero. The MPS rule is to schedule production if the projected inventory on
hand is negative. The production lot size is 100 units. The following table show scommitted
orders.
Period
Customer order
1
80
2
50
3
30
4
10
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23
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 4: Capacity Requirements Planning (CRP)
Chapter contents:
1. Capacity management
2. Long-term and short-term capacity planning
3. Measuring capacity
4. Exercises
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Capacity management
Design of the production system involves planning for the inputs, conversion process and
outputs of production operation. The effective management of capacity is the most important
responsibility of production management. The objective of capacity management (i.e.,
planning and control of capacity) is to match the level of operations to the level of demand.
Capacity planning is to be carried out keeping in mind future growth and expansion plans,
market trends, sales forecasting, etc. It is a simple task to plan the capacity in case of stable
demand. But in practice the demand will be seldom stable. The fluctuation of demand creates
problems regarding the procurement of resources to meet the customer demand.
2
2. Long-term and short-term capacity planning
Long-term capacity adjustments include:
1. New equipment: investments in additional machines, more productive machines, or new
types of machines to match future changes in product design.
2. New plants: construction of new plants or purchase of existing plants from other
companies.
3. Plant closings: closing plants not needed in the future.
Plant capacity can be adjusted in the short term and in the long term.
Short-term capacity adjustments include :
1. Inventories: Stock of finished goods during slack periods to meet the demand during
peak period.
2. Backlog: During peak periods, the willing customers are requested to wait and their
orders are fulfilled after a peak demand period.
3. Employment level (hiring or firing): Hire additional employees during peak demand
period and layoff employees as demand decreases.
4. Employee training: Develop multi-skilled employees through training so that they can be
rotated among different jobs. The multi-skilling helps as an alternative to hiring employees.
5. Subcontracting: During peak periods, hire the capacity of other firms temporarily to
make the component parts or products.
6. Process design: Change job contents by redesigning the job.
3
3. Measuring capacity
Capacity often refers to an upper limit on the rate of output. The following table provides
some examples of commonly used measures of capacity.
4
oDesign capacity is the maximum rate of output achieved under ideal conditions.
oEffective capacity is always less than design capacity owing to realities of changing product
mix, the need for periodic maintenance of equipment, lunch breaks, coffee breaks, problems
in scheduling and balancing operations, and similar circumstances.
oActual output cannot exceed effective capacity and is often less because of machine
breakdowns, absenteeism, shortages of materials, and quality problems, as well as factors
that are outside the control of the operations managers.
These different measures of capacity are useful in defining two measures of system
effectiveness: efficiency and utilization. Efficiency is the ratio of actual output to effective
capacity. Capacity utilization is the ratio of actual output to design capacity.
Both measures are expressed as percentages.
5
An important aspect of capacity requirements planning is the conversion of quantity
requirements into labor and machine requirements. One accomplishes this by multiplying
each period’s quantity requirements by standard labor and/or machine requirements per
unit.
For instance, if 100 units of product A are scheduled in the fabrication department, and ach
unit has a labor standard time of 2 hours and a machine standard time of 1.5 hours, then 100
units of A convert into these capacity requirements:
Labor:
100 units x 2 hours/unit = 200 labor hours
Machine:
100 units x 1.5 hours/unit =150 machine hours
One can then compare these capacity requirements with available department capacity to
determine the extent to which this product utilizes capacity. For example, if the department
has 200 labor hours and 200 machine hours available, labor utilization will be 100 percent
because all of the labor capacity will be required by this product. However, machine capacity
will be underutilized.
Underutilization may mean that unused capacity can be used for other jobs; overutilization
indicates that available capacity is insufficient to handle requirements. To compensate,
production may have to be rescheduled or overtime may be needed.
6
4. Exercises
Exercise 1:
A department works one 8-hour shift, 250 days a year, and has these figures for usage of a
machine that is currently being considered:
How many machines would be needed to handle the required volume?
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7
Exercise 2:
A copy center in an office building prepares bound reports for two clients. The center makes
multiple copies (the lot size) of each report. The processing time to run, collate, and bind each
copy depends on, among other factors, the number of pages. The center operates 250 days
per year, with one 8-hour shift. Management believes that a capacity cushion of 15 percent
(beyond the allowance built into time standards) is best. It currently has three copy machines.
Based on the following table of information, Determine how many machines are needed at
the copy center?
Item
Annual demand forecast (copies)
Client X
Client Y
2,000
6,000
Standard processing time (hour/copy)
0.5
0.7
Average lot size (copies per report)
20
30
0.25
0.40
Standard setup time (hours)
Capacity
requirement
=
Processing hours required for year’s demand
Hours available from a single capacity unit (such as an employee or
machine) per year, after deducting desired cushion
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8
Exercise 3:
Capacity requirements planning. Given the following production schedule in units and the
production standards for labor and machine time for this product, determine the labor and
machine capacity requirements for each week. Then compute the percent utilization of labor
and machines in each week if labor capacity is 200 hours per week and machine capacity is
250 hours per week
9
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10
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 5: Materials Requirements Planning (MRP)
Chapter contents:
1. Materials Requirements Planning (MRP)
2. Materials Requirements Planning II (MRPII)
3. Problems
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. MRP overview
“Materials Requirement Planning (MRP) is a technique for determining the quantity
and timing for the acquisition of dependent demand items needed to satisfy master
production schedule requirements.” Thus, MRP is designed to answer three questions:
What is needed? How much is needed? and When is it needed?
Objectives of MRP:
*Inventory reduction.
*Reduction in the manufacturing and delivery lead times.
*Increases the efficiency of production system.
2
1. MRP II overview
MRP was developed as a way
for manufacturing companies to
calculate more precisely what
materials were needed to
produce a product, and when
and how much of those
materials
were needed. Manufacturing
resources planning (MRP II)
evolved from MRP in the 1980s
because
manufacturers
recognized additional needs.
MRP II did not replace or
improve MRP.
Rather, it expanded the scope of
materials planning to include
capacity requirements planning,
and to involve other functional
areas of the organization such
as marketing and finance in the
3
planning
process.
One of the most important features of MRP II is its ability to aid managers in capacity
planning. Capacity requirements planning is the process of determining short-range
capacity requirements. The necessary inputs include planned-order releases for MRP, the
current shop load, routing information, and job times.
4
MRP Example
5
6
7
8
3. Problems
Problem 1 )solved)
A firm that produces wood shutters and bookcases has received two orders for shutters: one
for 100 shutters and one for 150 shutters. The 100-unit order is due for delivery at the start of
week 4 of the current schedule, and the 150-unit order is due for delivery at the start of week
8. Each shutter consists of two frames and four slatted wood sections. The wood sections are
made by the firm, and fabrication takes one week. The frames are ordered, and lead time is
two weeks. Assembly of the shutters requires one week. There is a scheduled receipt of 70
wood sections in (i.e., at the beginning of) week 1.
Determine the size and timing of planned order releases necessary to meet delivery
requirements under each of these conditions:
1. Lot-for-lot ordering (i.e., planned-order release equal to net requirements).
2. Lot-size ordering with a lot size of 320 units for frames and 70 units for wood sections
Solution
Develop a master schedule
Week number
Quantity
9
1
2
3
4
100
5
6
7
8
150
10
11
Problem 2
12
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13
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 6: Inventory control
Chapter contents:
1. Definition and objectives of inventory control
2. Effective inventory control
3. Economic Order Quantity (EOQ)
4. Exercises
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Definition and objectives of inventory control
An inventory is a stock or store of goods. Firms typically stock hundreds or even thousands
of items in inventory, ranging from small things such as pencils, paper clips, screws, nuts,
and bolts to large items such as machines, trucks, construction equipment, and airplanes.
The different kinds of inventories include the following:
Raw materials and purchased parts.
Partially completed goods, called work-in-process (WIP).
Finished-goods inventories (manufacturing firms) or merchandise (retail stores).
Tools and supplies.
Maintenance and repairs (MRO) inventory.
Goods-in-transit to warehouses, distributors, or customers (pipeline inventory).
Objectives of Inventory Control: Inventory management has two main concerns. One is the
level of customer service, that is, to have the right goods, in sufficient quantities, in the right
place, at the right time. The other is the costs of ordering and carrying inventories.
The overall objective of inventory management is to achieve satisfactory levels of customer
service while keeping inventory costs within reasonable bounds.
2
2. Effective inventory control
Management has two basic functions concerning inventory. One is to establish a system to
keep track of items in inventory, and the other is to make decisions about how much and
when to order. To be effective, management must have the following:
1. A system to keep track of the inventory on hand and on order.
2. A reliable forecast of demand that includes an indication of possible forecast error.
3. Knowledge of lead times and lead time variability.
4. Reasonable estimates of inventory holding costs, ordering costs, and shortage costs.
5. A classification system for inventory items (ABC approach).
3
Demand Forecasts and Lead-Time Information
Inventories are used to satisfy demand requirements, so it is essential to have reliable
estimates of the amount and timing of demand. Similarly, it is essential to know how long it
will take for orders to be delivered. In addition, managers need to know the extent to
which demand and lead time (the time between submitting an order and receiving it)
might vary.
Inventory Costs
Four basic costs are associated with inventories: purchase, holding, transaction (ordering),
and shortage costs.
Purchase cost is the amount paid to a vendor or supplier to buy the inventory. It is
typically the largest of all inventory costs.
Holding, or carrying, costs relate to physically having items in storage. Costs include
interest, insurance, taxes (in some states), depreciation, obsolescence, deterioration,
spoilage, pilferage, breakage, tracking, picking, and warehousing costs (heat, light, rent,
security).
4
Ordering costs are the costs of ordering and receiving inventory. They are the costs that
vary with the actual placement of an order. Besides shipping costs, they include determining
how much is needed, preparing invoices, inspecting goods upon arrival for quality and
quantity, and moving the goods to temporary storage. Ordering costs are generally expressed
as a fixed dollar amount per order, regardless of order size.
When a firm produces its own inventory instead of ordering it from a supplier, machine
setup costs (e.g., preparing equipment for the job by adjusting the machine, changing
cutting tools) are analogous to ordering costs; that is, they are expressed as a fixed charge
per production run, regardless of the size of the run.
Shortage costs result when demand exceeds the supply of inventory on hand. These costs
can include the opportunity cost of not making a sale, loss of customer goodwill, late
charges, backorder costs, and similar costs. Furthermore, if the shortage occurs in an item
carried for internal use (e.g., to supply an assembly line), the cost of lost production or
downtime is considered a shortage cost. Such costs can easily run into hundreds of dollars a
minute or more. Shortage costs are sometimes difficult to measure, and they may be
subjectively estimated.
5
3. Economic Order Quantity (EOQ)
The question of how much to order can be determined by using an economic order quantity
(EOQ) model. EOQ models identify the optimal order quantity by minimizing the sum of
certain annual costs that vary with order size and order frequency.
6
Figure: The inventory cycle: profile of inventory level over time
The optimal order quantity, Q0 , can be obtained using calculus.
The length of an order cycle (i.e., the time between orders) is
7
4. Exercises
Questions:
1. What are the primary reasons for holding inventory?
2. What are the requirements for effective inventory management?
3. Briefly describe each of the costs associated with inventory.
4. Explain briefly how a higher carrying cost can result in a decrease in inventory.
5. What is safety stock, and what is its purpose?
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8
Exercise1
A local distributor for a national tire company expects to sell approximately 9,600 steel-belted
radial tires of a certain size and tread design next year. Annual carrying cost is $16 per tire,
and ordering cost is $75. The distributor operates 288 days a year.
a. What is the EOQ?
b. How many times per year does the store reorder?
c. What is the length of an order cycle?
d. What is the total annual cost if the EOQ quantity is ordered?
D=9 600 tires per year; H= $16 per unit per year; S= $75
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9
Exercise 2
Piddling Manufacturing assembles security monitors. It purchases 3,600 black-and-white
cathode ray tubes a year at $65 each. Ordering costs are $31, and annual carrying costs are 20
percent of the purchase price. Compute the optimal quantity and the total annual cost of
ordering and carrying the inventory.
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10
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 7: Production Scheduling
Chapter contents:
1. Scheduling objectives
2. Forward scheduling and Back scheduling
3. Priority rules (sequencing)
4. Solved problem
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Scheduling objectives
Scheduling Establishing the timing of the use of equipment, facilities, and human activities
in an organization.
Generally, the objectives of scheduling are to achieve trade-offs among conflicting goals,
which include efficient utilization of staff, equipment, and facilities, and minimization of
customer waiting time, inventories, and process times
2
2. Forward scheduling and Back scheduling
There are two general approaches to scheduling: forward scheduling and backward
scheduling.
Forward scheduling means scheduling ahead from a point in time; backward scheduling
means scheduling backward from a due date. Forward scheduling is used if the issue is
“How long will it take to complete this job?”
Backward scheduling would be used if the issue is “When is the latest the job can be started
and still be completed by the due date?”
Forward scheduling enables the scheduler to determine the earliest possible completion
time for each job and, thus, the amount of lateness or the amount of slack can be
determined. That information can be combined with information from other jobs in setting
up a schedule for all current jobs.
3
Job-shop scheduling: Scheduling for low-volume systems with many variations in
requirements.
Loading: The assignment of jobs to processing centers.
Gantt chart: Chart used as visual aid for loading and scheduling purposes.
4
3. Priority rules (sequencing)
Priority rules: Simple heuristics used to select the order in which jobs will be processed
5
4. Solved Problem
Processing times (including setup times) and due dates for six jobs waiting to be processed at a
work center are given in the following table. Determine the sequence of jobs, the average flow
time, average tardiness, and average number of jobs at the work center, for each of these
rules:
a. FCFS
b. SPT
c. EDD
d. CR
6
7
8
9
10
11
12
13
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 8: Theory Of Constraint (TOC)
Chapter contents:
1. Definition of TOC
2. Bottleneck and non- bottleneck operation
3. The Five-Step Focusing Process
4. Drum-buffer-rope (DBR) scheduling
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Definition of TOC
A constraint is something that limits the performance of a process or system in achieving its
goals.
Traditional management has emphasized maximizing output of every operation. In contrast
to that approach, the theory of constraints has as its goal maximizing flow through the
entire system, which it does by emphasizing balancing the flow through the various
operations.
2
2. Bottleneck and non- bottleneck operation
A bottleneck operation is an operation in a sequence of operations whose capacity is lower
than the capacities of other operations in the sequence. As a consequence, the capacity of
the bottleneck operation limits the system capacity; the capacity of the system is reduced to
the capacity of the bottleneck operation. The figure illustrates this concept: Four operations
generate work that must then be processed by a fifth operation. The four operations each
have a capacity of 10 units per hour, for a total capacity of 40 units per hour. However, the
fifth operation can only process 30 units per hour. Consequently, the output of the system
will only be 30 units per hour. If the other operations operate at capacity, a line of units
waiting to be processed by the bottleneck operation will build up at the rate of 10 per hour.
3
Here is another example. The following diagram illustrates a three-step process, with
capacities of each step shown. However, the middle process, because its capacity is lower
than that of the others, constrains the system to its capacity of 10 units per hour. Hence it
is a bottleneck. In order to increase the capacity of the entire process, it would be
necessary to increase the capacity of this bottleneck operation. Note, though, that the
potential for increasing the capacity of the process is only 5 units, to 15 units per hour.
Beyond that, operation 3’s capacity would limit process capacity to 15 units/hour.
4
3. The Five-Step Focusing Process
There is a five-step procedure to improve the performance of the bottleneck operation:
1. Determine what is constraining the operation.
2. Exploit the constraint (i.e., make sure the constraining resource is used to its maximum).
3. Subordinate everything to the constraint (i.e., focus on the constraint).
4. Determine how to overcome (eliminate) the constraint.
5. Repeat the process for the next highest constraint.
5
4. Drum-buffer-rope (DBR) scheduling
Drum Buffer Rope (DBR) is a planning and scheduling solution derived from the theory of
constraint. The “drum” is the schedule; it sets the pace of production. The goal is to schedule to
make maximum use of bottleneck resources. The “buffer” refers to potentially constraining
resources outside of the bottleneck. The role of the buffer is to keep a small amount of inventory
ahead of the bottleneck operation to minimize the risk of having it be idle. The “rope” represents
the synchronizing of the sequence of operations to ensure effective use of the bottleneck
operations.
The drum-buffer-rope approach provides a basis for developing a schedule that achieves
maximum output and shorter lead times while avoiding carrying excess inventory.
6
KINGDOM OF SAUDI ARABIA
Technical and Vocational Training Corporation
COLLEGE OF TECHNOLOGY AT DAMMAM
DEPARTMENT OF MECHANICAL- PRODUCTION
Chapter 9: Just-In-Time and Lean Manufacturing
Chapter contents:
1. Definitions
2. The Toyota Approach
3. The Five-Step Focusing Process
4. The 5 S’s
5. Continuous improvement
1
‫المـمـــلـكـة الـعـربـيـة الـسـعـوديـة‬
‫المؤسسة العامة للتدريب التقني والمهني‬
‫الكلية التقنية بالدمام‬
‫ إنتاج‬- ‫قسم التقنية الميكانيكية‬
1. Definitions
A lean operation is a flexible system of operation that uses considerably fewer resources
(i.e., activities, people, inventory, and floor space) than a traditional system. Moreover, lean
systems tend to achieve greater productivity, lower costs, shorter cycle times, and higher
quality than non lean systems.
Just-in-Time
“Product just what is needed, when it is needed, only in
the quantity needed”
Lean systems are sometimes referred to as just-in-time (JIT) systems owing to their highly
coordinated activities and delivery of goods that occur just as they are needed. The lean
approach was pioneered by Toyota’s founder, Taiichi Ohno, and Shigeo Shingo as a much
faster and less costly way of producing automobiles. Following its success, today the lean
approach is being applied in a wide range of manufacturing and service operations.
Lean manufacturing or lean production, often "lean”
“The elimination of waste within a manufacturing system”.
2
3
2. The Toyota Approach
Many of the methods that are common to lean operations were developed as part of
Japanese car maker Toyota’s approach to manufacturing.
• Muda: Waste and inefficiency. Waste and inefficiency can be minimized by using the
following tactics.
• Pull system: Replacing material or parts based on demand; produce only what is
needed.
• Kanban: A manual system used for controlling the movement of parts and
materials that responds to signals of the need (i.e., demand) for delivery of parts or
materials.
• Heijunka: Variations in production volume lead to waste. The workload must be
leveled; volume and variety must be averaged to achieve a steady flow of work.
• Kaizen: Continuous improvement of the system. There is always room for
improvement.
• Jidoka: Quality at the source. A machine automatically stops when it detects a
bad part. A worker then stops the line. Also known as autonomation.
4
3. Seven forms of waste
In the lean philosophy, there are seven wastes:
5
4. The 5 S’s
Much of Lean manufacturing is applying “common sense” to manufacturing environments.
In implementing Lean, 5 S’s are frequently used to assist in the organization of
manufacturing. The 5 S’s are from Japanesse and are:
•Seiri (sort, necessary items)
•Seiton (set-in-order, efficient placement)
•Seison (sweep, cleanliness)
•Seiketsu (standardize, cont. improvement)
•Shitsuke (sustain, discipline) These concepts are illustrated in Figure
6
7
5. Continuous improvement
PDCA (plan–do–check–act or plan–do–check–adjust) is an iterative four-step management
method used in business for the control and continuous improvement of processes and
products.
Plan – the change
Do – implement the change
Check – monitor and review the change
Act – revise and plan how to use the learning
8