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IE 5551 - Production Planning and Inventory Control Saif Benjaafar Industrial & Systems Engineering University of Minnesota. Course Objectives. Introduction to methods for managing production, inventory, and distribution systems

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slide1

IE 5551 - Production Planning and Inventory Control

Saif Benjaafar

Industrial & Systems Engineering

University of Minnesota

slide2

Course Objectives

  • Introduction to methods for managing production, inventory, and distribution systems
  • Topics covered include demand forecasting, capacity planning, production planning and scheduling, production and inventory control, and supply chain coordination
  • Use of quantitative models and analytical tools for supporting decisions in each of the above areas
slide3

Course Objectives (Continued…)

  • Special emphasis will be given to the link between operational issues and strategic objectives
  • Implications of various emerging technologies, business practices, and government regulations
slide4

Prerequisites

  • An introductory course in probability and statistics
  • An introductory course in linear programming
  • Knowledge of Microsoft Excel & Microsoft Solver
slide5

Texts

  • Factory Physics by Wallace Hopp and Mark Spearman
  • The Goal by EliyahuGoldratt
  • Lean Thinking by James Womack and Daniel Jones
slide6

Lecture Topics

  • Week 1 Introduction to Production Planning and Inventory Control
  • Week 2 Inventory Control – Deterministic Demand
  • Week 3 Inventory Control – Stochastic Demand
  • Week 4 Inventory Control – Stochastic Demand
  • Week 5 Inventory Control – Stochastic Demand
  • Week 6 Inventory Control – Time Varying Demand
slide7

Lecture Topics (Continued…)

  • Week 7Inventory Control – Multiple Echelons
  • Week 8 Demand Forecasting
  • Week 9 Demand Forecasting
  • Week 10 Production Planning and Scheduling
  • Week 11 Production Planning and Scheduling
  • Week 12 Managing Manufacturing Operations
  • Week 13 Managing Manufacturing Operations
  • Week 14 Managing Manufacturing Operations
  • Week 15 Project Presentations
slide8

Group Projects

  • Teams of 2 or 3
  • Type of project
    • Problem solving
    • Case study
    • Reviews
  • Outcome
    • A proposal
    • Oral presentation
    • Written report
slide9

Problem Solving

  • A mathematical model
  • A computer model
  • Data collection and statistical analysis
slide10

Case Studies

Focus on one company and document:

  • managerial practice
  • use of a technology
  • decision making processes
slide11

Reviews

  • An industry
  • An emerging technology
  • A managerial practice
  • Academic research
slide12

Example Industries

  • Electronics
  • Automotive
  • Food
  • Clothing
  • Medical devices
  • Energy
slide13

Example Technologies

  • RFID
  • Wireless communication and mobile computing
  • Online procurement portals
  • Social media
slide14

Example Practices

  • Outsourcing
  • Vendor managed inventory (VMI)
  • Delayed product differentiation
  • Collaborative forecasting, planning, & replenishment

(CFPR)

  • Third & fourth party logistics (3/4PL)
  • Green/sustainable supply chains
slide15

This Year’s Theme

  • Energy efficient and sustainable supply chains
    • Energy consumption
    • Carbon footprint
    • Closed loop supply chains
    • Alternative sourcing, materials, processing
slide16

Production/Manufacturing

Production/manufacturing is the process of converting raw materials or semi-finished products into finished products that have value in the market place. This process involves the contribution of labor, equipment, energy, and information.

slide17

The Production System

Production

System

Raw materials

Finished products

Energy

Labor

Scrap

Equipment

Waste

Information

slide18

Inventory

Inventory is both an input and output of the production process. Inventory can be in the form of raw materials, semi-finished, and finished products.

slide19

The Inventory System

Supply source

Demand source

Inventory

slide20

Distribution

and sales

Suppliers

Fabrication

Assembly

Raw materials

Component parts

inventory

Finished goods inventory

The Production-Inventory System

slide21

The Supply Chain

Assembly/

Manufacturing

1st tier suppliers

Distribution

centers

2nd tier suppliers

Retailers

slide22

Supply Chain Management

Supply Chain Management (SCM) is the set of functions concerned with the effective utilization of limited resources that may reside with one or more independent firms and the management of material, information, and financial flows within and between these firms, so as to satisfy customer demands and create profits for all firms.

slide23

Production Planning and Inventory Control

Production planning and inventory control is the subset of SCM functions that focus on managing production operations and inventory throughout the supply chain.

examples of decisions1
Examples of Decisions
  • What should we produce, how much, and when (forecasting)?
  • How much can we produce (capacity planning)?
  • How much do we have and how much do we need (inventory management)?
  • When should we produce (production planning and scheduling)?
slide26

A Hierarchy of Decisions

Sales &

Marketing

Long term

forecasting

Transportation

& Distribution

Capacity

Planning

Warehousing &

order fulfillment

Network design

& facility location

Inventory

Management

Production

Planning

Production

Scheduling

slide28

Examples of Performance Measures

  • Cost (are products being created at minimum or acceptable cost?)
  • Quality (what are the specifications of the products? What percentages of shipped products meet specification?)
  • Variety (how many types of products are - or can be – simultaneously produced?)
  • Service (how long does it take to fulfill a customer order? how often are quoted lead times met?)
slide29

Examples of Performance Measures (continued…)

  • Flexibility (how quickly can existing resources be reconfigured to produce new products?)
  • Worker satisfaction (are workers and managers throughout the supply chain happy and motivated?)
  • Safety (are work environments safe for workers and the surrounding community?)
  • Environmental impact (how environmentally friendly are the supply chain processes and the products?)
the bottom line
The Bottom Line

In the long run, the supply chain must be profitable by delivering value to the end customer and to do so over the long run.

classification of the production process1
Classification of the Production Process
  • Production quantity
      • Mass production
      • Batch production
      • Job shop production
classification of the production process2
Classification of the Production Process
  • Production quantity
      • Mass production
      • Batch production
      • Job shop production
  • Product variety
classification of the production process3
Classification of the Production Process
  • Production quantity
      • Mass production
      • Batch production
      • Job shop production
  • Product variety
      • Single product or product line
      • Family of similar products
      • One-of-a-kind products
mass production systems1
Mass Production Systems
  • Low product variety
  • High production volumes
  • Specialized labor
  • Dedicated equipment
  • High reconfiguration costs
  • Make-to-stock production
batch production systems1
Batch Production Systems
  • Medium product variety
  • Products are made in larger lots
  • products are made to stock
  • Programmable/reconfigurable equipment
  • Significant setup costs
job shops1
Job Shops
  • High product variety
  • Products are made in small lots
  • Products are made to order
  • Flexible equipment and labor
  • Small setups
classification of production systems continued1
Classification of Production Systems (continued…)
  • Order fulfillment
      • Make-to-stock systems (MTS)
      • Make-to-order systems (MTO)
      • Hybrid MTO/MTS
classification of production systems continued2
Classification of Production Systems (continued…)
  • Order fulfillment
      • Make-to-stock systems (MTS)
      • Make-to-order systems (MTO)
      • Hybrid MTO/MTS
  • Resource configuration
classification of production systems continued3
Classification of Production Systems (continued…)
  • Order fulfillment
      • Make-to-stock systems (MTS)
      • Make-to-order systems (MTO)
      • Hybrid MTO/MTS
  • Resource configuration
      • Product layout
      • Process layout
      • Cellular layout
      • Fixed position layout
classification of production systems continued5
Classification of Production Systems (continued…)
  • Inputs/outputs
      • Discrete production systems (discrete inputs and outputs - cars, computers, machine tools, etc)
      • Continuous production systems (continuous inputs and outputs - chemicals, textiles, food processing, pharmaceuticals)
      • Hybrid systems (Discrete inputs/continuous outputs or continuous inputs/discrete outputs - steel, plastics, recycling)
process capabilities business strategy
Process capabilities & business strategy
  • Example product attributes: price, quality, variety, service, demand uncertainty
  • Example process attributes: cost, quality, flexibility, lead time
slide48
A firm must choose a business strategy - attribute values for its portfolio of products - that differentiates it from the competition.
  • A firm must choose process capabilities, attribute values for its process, that support its business strategy.
slide49
A business strategy can be driven by market opportunities or by a competitive advantage in process capabilities.
  • In both cases, there must be a fit between process capability and business strategy.
slide50

Matching Process Choice with Product Strategy Choice

Area of strategic fit

Process flexibility

Low High

Low High

Product variety

slide51

Matching Process Choice with Product Strategy Choice (Continued…)

Lead time

Area of strategic fit

High Low

Low High

Demand uncertainty

the evolution of process capabilities
The Evolution of Process Capabilities
  • Volume (1920/30/40’s)
  • Cost (1950/60’s)
  • Quality (1970/80’s)
  • Time (1980/1990’s)
  • Flexibility (1990/2000’s)
  • Mass customization (2000’s & beyond)
other emerging trends
Other Emerging Trends
  • Resiliency
  • Sustainability (and stewardship)
assignment
Assignment
  • Read Chapters 0, 1 & 2 of text book (Factory Physics)
  • Read paper 1 from the reading list