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| Date post: | 12-May-2015 |
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Introduction
• Management’s desire to be more competitive and to increase profits through manufacturing is evident. Customer responsiveness, increase output, lower manufacturing costs, better quality, short cycle times, bottleneck control and operational predictability, among many other opportunity areas, are hot management issues. Improvement in these areas offers enormous potential in profit improvement and competitive advantage for the overwhelming majority of manufactures.
Production process• To achieve the above mention objectives, production
scheduling is eminent. What is production Scheduling; it is the management and allocation of resources, events and processes to create goods and services. A business adjusts its production schedule based on the availability of resources, client orders and efficiencies. The goal of production scheduling is to balance client needs with available resources while operating in the most cost-efficient manner.
• P.S requires a strong focus on the availability of the resources of a business. Resources include the raw materials used to create goods, the availability of machines and the availability of workers
• P.S is a method for the effective planning of all resources of a manufacturing company which addresses operational planning in units, financial planning in currency, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.
• This is not exclusively a software function, but a marriage of people skills, dedication to data base accuracy, and computer resources. It is a total company management concept for using human resources more productively.
Importance of P.S1. P. S is all about tracking all resources and to find
constraints or resource outages that will affect different volume levels of production; this is called CAPACITY PLANNING. Once a scheduler identifies resource constraints, he adds additional supplies, machines and personnel to ensure production goals are met.
2. P.S review client orders based on the time frame requested, client importance and available production capacity. They work closely with sales and marketing to meet customer expectations and maximize sales.
3. P.S includes giving orders to the production department about the volume of goods produced, scheduling personnel, the order of production processing and due dates. Production scheduling also arranges necessary down time for routine maintenance and cleaning.
4. P.S attempts to maximize personnel through job rotation, effective break schedules, cross-training and teamwork opportunities. A balance between work processes, training and group activities creates a more productive workforce.
5. Typically, P.S create plans that account for potential problems, such as resource outages, machine failure and employment shortages, so personnel and management know what action to take when facing an unexpected glitch in production.
6. Most companies with large-scale production use powerful software for scheduling, which must account for complex multiple constraints and varied information levels. Popular software includes AMS Real Time Projects, Artemis 7, Cando, Delmia 5, D-Opt, Hydra, Microsoft Project, Primavera and Prochain. Many software packages are tailored to specific industries and can be modified for individual business needs.
•
CAPACITY PLANNING
A. Importance of Capacity Planning• “Capacity” refers to an upper limit or ceiling on the
load that an operating unit can handle • Basic questions in capacity planning
What kind of capacity is needed? How much is needed? When is it needed?
• relates to their potential impact on the ability of the organization to meet future demands for products and services
• relationship between capacity and operating costs • the initial cost involved• long-term commitment of resources
CAPACITY PLANNING
B. Defining and Measuring Capacity• Refers to an upper limit on the rate of output • In selecting a measure of capacity, it is important to
choose one that does not require updating.• Where only one product or service is involved, the
capacity of the productive unit may be expressed in terms of that item relationship between capacity and operating costs
• When multiple products or services are involved, capacity is stated in terms of each product or to use a measure of capacity that refers to availability of inputs
Measures of Capacity
Business Inputs Outputs
Auto manufacturing Labor hours, machine hours Number of cars per shift
Steel mill Furnace size Tons of steel per day
Oil refinery Refinery size Gallons of fuel per day
FarmingNumber of acres, number of cows
Bushels of grain per acre per year, gallons of milk per day
RestaurantNumber of tables, seating capacity
Number of meals served per day
Theater Number of seatsNumber of tickets sold per performance
Retail sales Square feet of floor space Revenue generated per day
Example in Computing Efficiency and UtilizationGiven the information below, compute the efficiency and the utilization of the vehicle repair department:
Design Capacity = 50 trucks per day
Effective Capacity
= 40 trucks per day
Actual Output = 36 units per day
Efficiency = Actual OutputEffective Capacity
= 36 per units per day
40 units per day
= 90%
Utilization
= Actual OutputDesign Capacity
= 36 per units per day
50 units per day
= 72%
C. Factors that determine effective capacity
CAPACITY PLANNING
B. Defining and Measuring Capacity• Definitions of Capacity
Design capacity – the maximum output that can possibly be attained
Effective capacity – the maximum possible output given a product mix, scheduling difficulties, machine maintenance, quality factors, and so on.
Actual output – the rate of output actually achieved
• Measures of System Effectiveness Efficiency – the ratio of actual output to effective capacity Utilization – the ratio of actual output to design capacity
CAPACITY PLANNING
D. Determining Capacity Requirements• Long-Term Considerations
Relates to overall level of capacity Determined by forecasting demand over a time horizon
and then converting those forecasts into capacity requirements (Demand Patterns)
Some possible demand patterns
Growth
Decline
Cyclical
CAPACITY PLANNING
D. Determining Capacity Requirements• Long-Term Considerations
Relates to overall level of capacity Determined by forecasting demand over a time horizon
and then converting those forecasts into capacity requirements (Demand Patterns)
Complex demand patterns (trends and cycles) When trends are identified:
How long the trend might persist Slope of the trend
When cycles are identified: The approximate length of the cycles The amplitude of the cycles
CAPACITY PLANNING
D. Determining Capacity Requirements• Short-Term Considerations
Relates to probable variations to capacity requirements Concerned with:
Seasonal Fluctuations in Demand
Example of seasonal demand patterns
Period Items
Year Beer sales, toy sales, airline traffic, clothing, vacations, tourism, power usage, gasoline consumption, sports and recreation, education
Month Welfare and social security checks, bank transactions
Week Retail sales, restaurant meals, automobile traffic, automotive rentals, hotel registrations
Day Telephone calls, power usage, automobile traffic, public transportation, classroom utilization, retail sales, restaurant meals
CAPACITY PLANNING
D. Determining Capacity Requirements• Short-Term Considerations
Relates to probable variations to capacity requirements Concerned with:
Seasonal Fluctuations in Demand Random Fluctuations in Demand Irregular Fluctuations in Demand
CAPACITY PLANNINGE. Developing Capacity Alternatives
• General Considerations Conduct a reasonable search for possible alternatives Consider doing nothing Take care not to overlook nonquantitative factors
• Specific Considerations Design flexibility into systems
Provision for future expansion Layout of equipment Location Equipment selection Production planning Scheduling Inventory Policies Product cycle
CAPACITY PLANNINGE. Developing Capacity Alternatives
• Specific Considerations Take a “big picture” approach to capacity changes Prepare to deal with capacity “chunks” Attempt to smooth out capacity requirements
Trace the source of the unevenness of the demand Possible solutions:
Allowances can be made in planning and scheduling activities and inventories
Identify products or services that have complementary demand patterns
Use of overtime work Subcontract some of the work Draw down finished goods inventories during periods
of high demand and replenish them during periods of slow demand
CAPACITY PLANNINGE. Developing Capacity Alternatives
• Specific Considerations Indentify the optimal operating level
CAPACITY PLANNINGF. Evaluating Capacity Alternatives
• Quantitative AspectReflects the following economic considerations
Will an alternative be economically feasible? How much will it cost? How soon can we have it? What will operating and maintenance costs be? What will its useful life be? Will it be compatible with present personnel and present
operations?
• Qualitative Aspect Public opinion Personal preferences of managers
CAPACITY PLANNINGF. Evaluating Capacity Alternatives
• Quantitative AspectTechniques useful in evaluating capacity alternatives from
an economic standpoint: Cost-volume analysis Financial analysis Decision theory Waiting-line analysis
Example for Calculating Processing Requirements
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:
Working one 8-hour shift, 250 days a year provides an annual capacity of 8 x 250 = 2,000 hours per year. We can see that three of these machines would be needed to handle the required volume:
5,800 hours2,000 hours/machine
Product Annual Demand
Standard Processing
Time per Unit (hr.)
Processing Time Needed
(hr.)
# 1 400 5.0 2,000
#2 300 8.0 2,400
#3 700 2.0 1,400
5800
= 2.90 machines
CAPACITY PLANNING
CAPACITY PLANNING
F. Evaluating Capacity Alternatives• Quantitative Aspect
Techniques useful in evaluating capacity alternatives from an economic standpoint:
Cost-volume analysisThe assumptions are:
One product is involved. Everything produced can be sold The variable cost per unit is the same regardless
of the volume. Fixed costs do not change with volume changes,
or they are step changes. The revenue per unit is the same regardless of
volume.
CAPACITY PLANNINGF. Evaluating Capacity Alternatives
• Quantitative AspectTechniques useful in evaluating capacity alternatives
from an economic standpoint: Cost-volume analysis
Cost-Volume Symbols
FC = Fixed Cost
VC = Variable cost per unit
TC = Total Cost
TR = Total Revenue
R = Revenue per unit
Q = Quantity or volume of output
QBEP = Break-Even Quantity
SP = Specified Profit
CAPACITY PLANNINGF. Evaluating Capacity Alternatives
Cost-volume analysisCost-Volume
Formulas
TC = FC + (VC x Q)
TR = R x Q
P = TR – TCP = (R X Q) – [FC + (VC X
Q)]
Volume = SP + FC R - VC
QBEP = FC R - VC
Example for Cost-Volume AnalysisThe owner of Old-Fashioned Berry Pies, S. Simon, is contemplating adding a new line of pies, which will require leasing new equipment for a monthly payment of N6,000. Variable cost would be N2.00 per pie, and pies would retail for N7.00 each.a) How many pies must be sold in order to break even?b) What would the profit (loss) be if 1,000 pies are made and sold in a
month?c) How many pies must be sold to realize a profit of N4,000?
Solution for the Cost-Volume Analysis ProblemGiven:
a)
b) For Q = 1,000,
c) P = $ 4,000; solve for Q in the preceding equation
FC = N6,000VC = N2 per
pieR = N7 per
pie
QBEP = FCR - VC
= N6,000N7 - N2
=N1,200
pies/month
P = (R X Q) – [FC + (VC X Q)]
(N7 X 1,000) – [N6,000 + (N2 X 1,000)]
P =
P = (N1,000)
P = (R X Q) – [FC + (VC X Q)] N4,00
0= N7Q – (N6,000 + N2Q)
N5Q = N10,000
Q =2,000 pies
Example for Capacity Alternatives that Involve Step Costs
A manager has the option of purchasing one, two, or three machines. Fixed costs and potential volumes are as follows
Variable cost is N10 per unit, and revenue is N40 per unit.a) Determine the break-even point for each rangeb) If projected annual demand is between 580 and 660 units, how many
machines should the manager purchase?
Number of Machines
Total Annual Fixed Costs
Standard Processing
Time per Unit (hr.)
1 N9,600 0 to 300
2 15,000 301 to 600
3 20,000 601 to 900
Solution for the Problem on Capacity Alternatives that Involve Step Costs
a) Computer the break-even point for each range using the formula
For one machine
For two machines
For three machines
b) The manager should choose two machines only.
QBEP = FCR - VC
= N9,600N40/unit - N10/unit
= 320 units
= =
=
500 units
=666.67 units
QBEP
QBEPN15,000
N40/unit - N10/unit
QBEPN20,000
N40/unit - N10/unit
CAPACITY PLANNING
F. Evaluating Capacity Alternatives• Quantitative Aspect
Techniques useful in evaluating capacity alternatives from an economic standpoint:
Financial analysis Cash Flow
- refers to the difference between the cash received from sales and other sources and the cash outflow for labor, materials, overhead, and taxes.
Present Value
- expresses in current value the sum of all future cash flows of an investment proposal
CAPACITY PLANNING
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