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Planning Production Activity
Preview
Planning Manufacturing Facilities
Quantitative Tools in Production Planning
Production Planning and Control
Flexible Manufacturing Systems
Assoc.Prof.Dr.B.G.Çetiner
Planning Production Activity
Planning Manufacturing Facilities
Assoc.Prof.Dr.B.G.Çetiner
Plant Location: 7 Basic Steps in locating and building every new plant
1. Establish the need for a new plant
2. 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
Planning Production Activity
Planning Manufacturing Facilities
Assoc.Prof.Dr.B.G.Çetiner
Plant LocationSome 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)
Planning Production Activity
Planning Manufacturing Facilities
Assoc.Prof.Dr.B.G.Çetiner
Plant LocationMost important factors for plant location will vary with industry
* For producing the bricks, plant has to be close to raw material
* Aluminum production needs cheap electricity
* High-technology electronic firms have tended to cluster together with technical professionals and educational institutions
* Clothing manufacturers look for lower labor-cost areas
Planning Production Activity
Planning Manufacturing Facilities
Assoc.Prof.Dr.B.G.Çetiner
Plant DesignNature of plant and its arrangement on the site
Multistory plants: Conserve land area, permit use of gravity flow, and cheaper to heat
Singlestory plants: More flexible, permit lighter foundations.
Planning Production Activity
Planning Manufacturing Facilities
Assoc.Prof.Dr.B.G.Çetiner
Plant LayoutTry to achieve most effective arrangement of physicalfacilities and personnel for making a product.
Product Layout: Machines and personnel are arranged along the production line so minimum travel is obtained between processing steps
Process Layout: All machines or activity of a particular type are located together. Useful for job-shop environment
Planning Production Activity
Planning Manufacturing Facilities
Assoc.Prof.Dr.B.G.Çetiner
Plant LayoutTry 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 similar processing equipment is identified, and a small group of the machines needed to make this set of similar products is placed together.
Planning Production Activity
Plant Layout
Assoc.Prof.Dr.B.G.Çetiner
Rec
eivi
ng
Shi
ppin
g
Planning Milling Grinding Drill Inspection Press
1 2 3 4 5
Product A
I II III IV V
Product B
Drill Turning Milling Painting Inspection Press
Planning Production Activity
Plant Layout
Assoc.Prof.Dr.B.G.Çetiner
Rec
eivi
ng
Shi
ppin
g
2
13
4
5I
II
IIIIV
V
Turning PlanningGrinding
MillingDrill
Press
Painting
Inspection
Product BProduct A
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Economic Order Quantity (EOQ) to Inventory
Break-Even Charts
Learning Curves
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Inventory
Production
Production Problem
Inventory Level
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Economic Order Quantity (EOQ) to Inventory
Consider an inventory item for which annual requirement is R units. Storing each unit of the item in inventory will cost I dollars per year.
Each batch involves a setup cost of S dollars.
EOQ=
I
RS2
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
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 you use 1000 units per year, how many lots of what size should be produced each yearb) What is the answer if setup cost is reduced to $10?
EOQ=I
RS2lots5200/1000200
2
40.1000.2a)
EOQ=I
RS2100
2
10.1000.2b) EOQ is decreased
(more flexible)
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Economic Order Quantity (EOQ) to Inventory
Cos
t (D
olla
rs)
Order Quantity (Q)
Annual Total Cost
Annual Ordering Cost
Annual Inventory
Holding Cost
)(2 Q
RS
QICT
Q is batch quantity
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Problem with Economic Order Quantity
Why does the setup cost have to be so high?
It doesn’t need to be. Solution is a) designing dies and tools to switch to new batch b) including simple cards (kanban) in each small lot
Planning Production Activity
Quantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Break-Even Charts
Break-even analysis divides costs into fixed and variable components to estimate the production levels for profitable operation.
Planning Production ActivityQuantitative Tools in Production Planning
Assoc.Prof.Dr.B.G.Çetiner
Break-Even ChartsA plant may produce and sell U units of product up to a capacity of 2000 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 unitsF1
S-V1
$100,000
$250-$150
Planning Production ActivityQuantitative Tools in Production Planning
Break-Even Charts
R=UxS=TC1=F1+UxV1 BE1=U= = =1000 unitsF1
S-V1
$100,000
$250-$150
400 800 1200 1600 2000 Units Sold (U)
500
400
300
200
100
BE Point
Tho
usan
ds o
f do
llars
Pro
duct
ion
Cap
acity
Total Revenue
Total Cost
TC1
Loss
Profit
Planning Production ActivityQuantitative Tools in Production Planning
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
Tho
usan
ds o
f do
llars
Pro
duct
ion
Cap
acity
Total Revenue
Total Cost
TC1
Profit
BE After Automation
Planning Production ActivityQuantitative Tools in Production Planning
Break-Even Charts (Automation)
Total Cost in Automation=F2+UxV2=$180,000+2000x100=$380,000Total 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
Assoc.Prof.Dr.B.G.Çetiner
Planning Production ActivityQuantitative Tools in Production Planning
Learning Curves
Labo
r ho
urs
per
unit
Y
1000
500
300
1001 10 100 1000
Number of units produced n
With Learning Curve Rate %90If the first unit takes 1000 labor hoursSecond will take 900,Fourth will take 810,Eight will take 729
Assoc.Prof.Dr.B.G.Çetiner