1 Chapter 11 Planning Production Activity. 2 Advanced Organizer

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Chapter 11

Planning Production Activity

2

D ecision Mak ing

P lanning

O rganizing

Leading

C ontro lling

Managem ent Functions

R esearch

D esign

Production

Q uality

Marketing

Project Managem ent

Managing Technology

Tim e Managem ent

E thics

C areer

Personal Technology

Managing Engineering and Technology

Advanced Organizer

3

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

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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

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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)

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Planning Manufacturing Facilities

• Area selection

• Community selection

• Site selection

• Common errors

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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

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Community Selection

• Managerial preferences

• Community facilities

• Community attitudes

• Community, government and taxation

• Financial inducements

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Site Selection

• Size of site

• Topography

• Utilities

• Waste Disposal

• Transportation facilities

• Land costs, Zoning, Expansion

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Common Errorsin Facility Location Analysis

• Labor cost miscalculations

• Inadequate labor reservoir

• Lack of distribution outlets

• Underestimated importance of taxes

• Purchasing unsuitable building

http://www.census.gov

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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

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Plant Layout Alternatives

• Product layout

• Process layout

• Group Technology

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Product Layout

•Line Balancing•Materials Handling

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Process (Functional) Layout

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Group Technology (Cellular) Layout

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Quantitative Tools in Production Planning

• Inventory control

• Break-even charts

• Learning curves

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Inventory ControlBasic Economic Ordering Quantity Model

Quantity

Time

Q

)Q

R(S)

2

Q(ICT

I

RS2EOQ

Let I = Carrying costR = Annual demandS = Ordering cost )

Q

RS()

2

I(0

Q

C2

T

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• Break-even charts

Order Quantity Q

$

Carrying Cost= I(Q/2)

EOQ

Ordering Cost= S(R/Q)

Total Annual Cost

Inventory ControlBasic Economic Ordering Quantity Model

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Inventory Control Backlog Inventory Model

Quantity

Time

Q

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Inventory Control Production Inventory Model

Quantity

Time

Q

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Inventory Control Inventory with Safety Stock Model

Quantity

Time

Q

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• Lean Manufacturing considers inventory a waste• Just-In-Time requires lot size of 1

Key: Reducing ordering (setup) costs

Problems with EOQ Analysis

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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

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Break-even Analysis

• Total Variable Cost = Unit Variable Cost * QuantityTVC = VC * Q

• Total Cost = Fixed Cost + Total Variable CostTC = FC + VC * Q

• Total Revenue = Unit Selling Price * QuantityTR = SP * Q

where TVC = Total variable costVC = Variable cost per unitQ = Production/Selling quantityFC = fixed costsTR = Total RevenueSP = Selling price per unit

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Break-even Analysis

• Break-even point: the output level at which total revenue is equal to total cost.

SP * BEP = FC + VC * BEPBEP = FC / (SP - VC)

where BEP = breakeven pointFC = fixed costsSP = selling price per unitVC = variable cost per unit

• Applications of Break-even Analysis:– Determining minimum production quantity– Forecast production profit / loss

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Break-even Analysis

Production Quantity

$

Break-even Point

Fixed Costs

Variable Costs

Total Costs

Total Revenue

Loss

Profit

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Break-even Analysis

Break-even Point

$

Production Quantity

Total CostsTotal Revenue

MaximumProfit

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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 unitb = Constant based on learning curve rate k%n = Number of completed units

b1n nYY )nln()b(YlnYln 1n

2ln

%)kln(

2log

%)klog(b

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Learning Curves

22nn

)]nln([)]n[ln(m

)Yln)](nln([]Yln)n[ln(mb

m

)nln()b(

m

YlnYln n

1

Linear Regression is used to estimate –b and Y1 when Multiple (m) data points are available

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Learning Curves

Cumulative production time from N1 to N2:

b1

21

1b1

21

21

n

nnn nn

)b1(

YY

2

1

31

0.5)16(Y)16(YY 2345.01

b116

2345.02ln

)85.0ln(

2ln

%lnb

Learning Curve Example

6.9)16/(0.5Y 2345.01

2345.0b1n n)6.9(nYY

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Example 2-9 Cost Estimating using Learning Curve

n Yn

1 9.60

2 8.16

3 7.42

4 6.94

5 6.58

6 6.31

7 6.08

8 5.90

9 5.73

10 5.59

2345.0b1n n)6.9(nYY

n Yn

11 5.47

12 5.36

13 5.26

14 5.17

15 5.09

16 5.01

17 4.94

18 4.87

19 4.81

20 4.76

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1 3 5 7 9 11 13 15 17 19

N

TN

Learning Curve Example

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Example 2-9 Cost Estimating using Learning Curve

1.00

10.00

1 10 1000.00

2.00

4.00

6.00

8.00

10.00

1 3 5 7 9 11 13 15 17 19

Normal Scale Log-Log Scale

2345.0b1n n)6.9(nYY

Learning Curve Example

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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

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Steps in Production Planning

• Identify the goals (inventory level)

• Process planning (routing)

• Loading

• Scheduling

• Dispatching (execution)

• Production control

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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.

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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.

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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.

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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

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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

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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

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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

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Production Planning & Control Systems

• Synchronized manufacturing (OPT)– looks for bottlenecks

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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.

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JIT Kanban System

StorePreceding Station

Succeeding

Station

Actual Parts

PProduction-ordering Kanban

W Withdrawal Kanban

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JIT Kanban System

StorePreceding Station

Succeeding

StationP

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JIT Kanban System

StorePreceding Station

Succeeding

StationP

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JIT Kanban System

StorePreceding Station

P

Succeeding

Station

W

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JIT Kanban System

StorePreceding Station

P

Succeeding

Station

W

50

JIT Kanban System

StorePreceding Station

PSucceedin

gStationW

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Toyota Production System

http://www.toyota.co.jp/en/vision/production_system/just.html

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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.

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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.

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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)

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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