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Chapter 11 Planning Production Activity

Chapter 11 Planning Production Activity. Advanced Organizer. Chapter Objectives. Describe position of engineer in the production process Describe considerations in planning manufacturing facilities Be able to use production planning tools

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Chapter 11 Planning Production Activity

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  1. Chapter 11 Planning Production Activity

  2. 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

  4. Engineers in Production Activity • Industrial Eng. Manager • Methods • Time Study • Standards • General Superintendent • Director of Purchasing • Finance Manager • Ind. Relations Manager • Plant Manager • Engineering design • Maintenance • Utilities, Security • Production Manager • Production Planning • Routing • Scheduling • Dispatching & Follow-up • Quality Manager • Quality Control • Inspection

  5. 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)

  6. Planning Manufacturing Facilities • Area selection • Community selection • Site selection • Common errors

  7. 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

  8. Community Selection • Managerial preferences • Community facilities • Community attitudes • Community, government and taxation • Financial inducements

  9. Site Selection • Size of site • Topography • Utilities • Waste Disposal • Transportation facilities • Land costs, Zoning, Expansion

  10. 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

  11. 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

  12. Plant Layout Alternatives • Product layout • Process layout • Group Technology

  13. Product Layout • Line Balancing • Materials Handling

  14. Process (Functional) Layout

  15. Group Technology (Cellular) Layout

  16. Quantitative Tools in Production Planning • Inventory control • Break-even charts • Learning curves

  17. Quantity Time Inventory ControlBasic Economic Ordering Quantity Model Let I = Carrying cost R = Annual demand S = Ordering cost Q

  18. $ Order Quantity Q Inventory ControlBasic Economic Ordering Quantity Model • Break-even charts Total Annual Cost Carrying Cost = I(Q/2) Ordering Cost = S(R/Q) EOQ

  19. Quantity Q Time Inventory Control Backlog Inventory Model

  20. Quantity Time Inventory Control Production Inventory Model Q

  21. Quantity Q Time Inventory Control Inventory with Safety Stock Model

  22. Problems with EOQ Analysis • Lean Manufacturing considers inventory a waste • Just-In-Time requires lot size of 1 Key: Reducing ordering (setup) costs

  23. 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

  24. 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

  25. 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

  26. Break-even Analysis Total Revenue $ Total Costs Profit Variable Costs Fixed Costs Loss Production Quantity Break-even Point

  27. $ Production Quantity Break-even Analysis Total Revenue Total Costs Maximum Profit Break-even Point

  28. 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

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

  30. Learning Curves Cumulative production time from N1 to N2:

  31. Learning Curve Example

  32. Learning Curve Example Example 2-9 Cost Estimating using Learning Curve

  33. Learning Curve Example Example 2-9 Cost Estimating using Learning Curve Log-Log Scale Normal Scale

  34. 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

  35. Steps in Production Planning • Identify the goals (inventory level) • Process planning (routing) • Loading • Scheduling • Dispatching (execution) • Production control

  36. 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.

  37. 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.

  38. 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.

  39. 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

  40. 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

  41. 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

  42. 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

  43. Production Planning & Control Systems • Synchronized manufacturing (OPT) • looks for bottlenecks

  44. 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.

  45. Actual Parts W Withdrawal Kanban P Production-ordering Kanban JIT Kanban System Preceding Station Store Succeeding Station

  46. JIT Kanban System Preceding Station Store Succeeding Station P

  47. P JIT Kanban System Preceding Station Store Succeeding Station

  48. JIT Kanban System W Preceding Station Store Succeeding Station P

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