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PRODUCTION MANAGEMENT - IV

“the process of producing a specification or chart of the manufacturing operations to be performed by different functions and workstations over a particular time period.

Production scheduling takes account of factors such as the availability of plant and materials, customer delivery requirements, and maintenance schedules”

KIRUBA DANIEL J

PRODUCTION PLANNING

PRODUCTION PLANNING HORIZONS

Master Production Scheduling

Production Planning and Control Systems

Pond DrainingSystems

Aggregate Planning

PullSystems

Focusing onBottlenecks

Long-Range Capacity PlanningLong-Range

(years)

Medium-Range(6-18 months)

Short-Range(weeks)

Very-Short-Range(hours - days)

KIRUBA DANIEL J

PushSystems

PRODUCTION PLANNING: UNITS OF MEASURE

Master Production Scheduling

Production Planning and Control Systems

Pond DrainingSystems

Aggregate Planning

PushSystems

PullSystems

Focusing onBottlenecks

Long-Range Capacity PlanningEntire

Product Line

ProductFamily

SpecificProduct Model

Labor, Materials,Machines

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AGGREGATE PLANNING

Importance Fully load facilities and minimize overloading

and underloading Make sure enough capacity available to

satisfy expected demand Plan for the orderly and systematic change of

production capacity to meet the peaks and valleys of expected customer demand

Get the most output for the amount of resources available

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Inputs

A forecast of aggregate demand covering the selected planning horizon (6-18 months)

The alternative means available to adjust short- to medium-term capacity.

The current status of the system in terms of workforce level, inventory level and production rate

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Outputs

A production plan: aggregate decisions for each period in the planning horizon about workforce level inventory level production rate

Projected costs if the production plan was implemented

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Medium-Term Capacity Adjustments

Workforce level Hire or layoff full-time workers Hire or layoff part-time workers Hire or layoff contract workers

Utilization of the work force Overtime Idle time (undertime) Reduce hours worked

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Medium-Term Capacity Adjustments

Inventory level Finished goods inventory Backorders(products are supplied after a

period of waiting time./lost sales

Subcontract

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Aggregate planning Strategies

Inventory carrying through constant work force

Sub contractingVariable workforceVariable working hoursPromotional activitiesBack ordering

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Inventory carrying through constant work force

MeritsStable workforce

Better quality products

Job security

Avoids hiring &firing costs

DemeritsInventory carrying cost

Difficulty in finding stable workforce

Not suitable for perishable goods.

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Sub contracting

MeritsSuitable for peak demand

DemeritsControl becomes difficult

Sub contractor s becomes competitors.

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Variable workforce

MeritsMatch between demand & production

DemeritsCost of hiring

Training cost & quality

Job insecurity

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Variable working hours

MeritsStable work force

Cost of inventory

DemeritsNot able to meet large demand

Over time wages are higher

Idle time for employees

Employee stress

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Back ordering

MeritsInventory cost

Suitable for low demand

DemeritsCustomer waiting time

Dissatisfaction

Loss of sales

Loss of good will

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Aggregate Plans for Services

For standardized services, aggregate planning may be simpler than in systems that produce products

For customized services, there may be difficulty in specifying the nature and

extent of services to be performed for each customer customer may be an integral part of the production

system

Absence of finished-goods inventories as a buffer between system capacity and customer demand

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Master Production Scheduling (MPS)

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Objectives of MPS

Determine the quantity and timing of completion of end items over a short-range planning horizon.

Schedule end items (finished goods and parts shipped as end items) to be completed promptly and when promised to the customer.

Avoid overloading or underloading the production facility so that production capacity is efficiently utilized and low production costs result.

KIRUBA DANIEL J

The rules for scheduling

No Change+/- 5%

Change

+/- 10%

Change

+/- 20%

Change

+/- 20%

ChangeFrozen

Firm

FullOpen

1-2 weeks

2-4weeks

4-6weeks

6+ weeks

Time Fences

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Time Fences

The rules for scheduling: Do not change orders in the frozen zone Do not exceed the agreed on percentage

changes when modifying orders in the other zones

Try to level load as much as possible Do not exceed the capacity of the system

when promising orders. If an order must be pulled into level load, pull

it into the earliest possible week without missing the promise.

KIRUBA DANIEL J

Developing an MPS

Using input information Customer orders (end items quantity, due

dates) Forecasts (end items quantity, due dates) Inventory status (balances, planned receipts) Production capacity (output rates, planned

downtime)Schedulers place orders in the

earliest available open slot of the MPS

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Developing an MPS

Schedulers must: estimate the total demand for products from

all sources assign orders to production slots make delivery promises to customers, and make the detailed calculations for the MPS

KIRUBA DANIEL J

Example: Master Production Scheduling

Arizona Instruments produces bar code scanners for consumers and other manufacturers on a produce-to-stock basis.

The production planner is developing an MPS for scanners for the next 6 weeks.

The minimum lot size is 1,500 scanners, and the safety stock level is 400 scanners. There are currently 1,120 scanners in inventory. The estimates of demand for scanners in the next 6 weeks are shown on the next slide.

KIRUBA DANIEL J

Example: Master Production Scheduling

Demand Estimates

CUSTOMERS

BRANCH WAREHOUSES

MARKET RESEARCH

PRODUCTION RESEARCH

500

200

0

10

1

0

50

300

1000

0

0

500

400

2 3 4

200

000

300500

0100

700

65

1000

200

WEEK

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Example: Master Production Scheduling

Computations

CUSTOMERS

BRANCH WAREHOUSES

MARKET RESEARCH

PRODUCTION RESEARCH

500

200

0

10

1

0

50

300

1000

0

0

500

400

2 3 4

200

000

300500

0100

700

65

1000

200

WEEK

TOTAL DEMAND

BEGINNING INVENTORY

REQUIRED PRODUCTION

ENDING INVENTORY

710

1120

0

410 560

1500

410

1350

1160

1500

900

560

700

1250950460

4601160

150015000

1010 1200

950

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Example: Master Production Scheduling

MPS for Bar Code Scanners

SCANNER PRODUCTION 0 1500 1500 150015000

1 2 3 4 65

WEEK

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Types of Production-Planningand Control Systems

Pond-Draining SystemsPush SystemsPull SystemsFocusing on Bottlenecks

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Pond-Draining Systems

Emphasis on holding inventories (reservoirs) of materials to support production

Little information passes through the system

As the level of inventory is drawn down, orders are placed with the supplying operation to replenish inventory

May lead to excessive inventories and is rather inflexible in its ability to respond to customer needs

KIRUBA DANIEL J

Push Systems

Use information about customers, suppliers, and production to manage material flows

Flows of materials are planned and controlled by a series of production schedules that state when batches of each particular item should come out of each stage of production

Can result in great reductions of raw-materials inventories and in greater workers and process utilization than pond-draining systems

KIRUBA DANIEL J

Pull Systems

Look only at the next stage of production and determine what is needed there, and produce only that

Raw materials and parts are pulled from the back of the system toward the front where they become finished goods

Raw-material and in-process inventories approach zero

Successful implementation requires much preparation

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Focusing on Bottlenecks

Bottleneck Operations

Impede production because they have less capacity than upstream or downstream stages

Work arrives faster than it can be completed

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Material Requirements Planning

Master ProductionScheduling (MPS)Master ProductionScheduling (MPS)

Material RequirementsPlanning (MRP)

Material RequirementsPlanning (MRP)

Capacity RequirementsPlanning (CRP)

Capacity RequirementsPlanning (CRP)

AggregatePlanning

AggregatePlanning

ResourceRequirements

Planning

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Materials Requirements Planning

Computer based system

Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS

Nets against current orders and inventories to develop production and purchased material ordering schedules

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Objectives of MRP

Improve customer service

Reduce inventory investment

Improve plant operating efficiency

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Order ChangesOrder

Order ChangesOrder

PlanningReport PlanningReport

Elements of MRP

MRPSystem

Planned OrderSchedule

Planned OrderSchedule

InventoryTransaction Data

InventoryTransaction Data

Bill of Materials File

Bill of Materials File

MasterProductionSchedule

MasterProductionSchedule

InventoryStatus FileInventoryStatus File

Service-PartsOrders andForecasts

Service-PartsOrders andForecasts

Performance Performance

ExceptionReports

ExceptionReports

Inputs Outputs

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MRP Computer Program

Begins with number of end items needed

Add service parts not included in MPS

Explode MPS into gross requirements by consulting Bill of Materials file

Modify gross requirements to get net requirements:

Net Requirements = Gross Requirements+ Allocated Inventory

+ Safety Stock- Inventory On

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Outputs of MRP

Planned order schedule - quantity of material to be ordered in each time period

Changes to planned orders - modifications to previous planned orders

Secondary outputs: Exception reports (late orders) Performance reports(delivery promises/stockout

incidents) Planning reports(reports used for future inventory)

KIRUBA DANIEL J

Example: MRP Schedule

LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped.

MOPEDMOPED

ENGINEASSEMBLY

ENGINEASSEMBLY

MOTORMOTOR CARBURETOR(2)

CARBURETOR(2)

GASTANKGASTANK

WHEELASSEMBLY

(2)

WHEELASSEMBLY

(2)

HUB ASSEMBLY

HUB ASSEMBLY TIRETIRE

FRAMEFRAME

Level 0

Level 1

Level 2

KIRUBA DANIEL J

Example: MRP Schedule

Bill of MaterialParent Component Level

Compon.Code Code Code Description Req’d

442 0 #442 Moped

442 EA 1 Engine Assem. 1GT 1 Gas Tank 1WA 1 Wheel Assem. 2F 1 Frame 1

EA M 2 Motor1C 2 Carburetor 2

WA HA 2 Hub Assem.1T 2 Tire 1

KIRUBA DANIEL J

Lot-Sizing in MRP

Lot-size is the quantity ordered/produced at one time

Large lots are preferred because: Changeovers cost less and capacity greater Annual cost of purchase orders less Price breaks and transportation breaks can be utilized

Small lots are preferred because: Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order

KIRUBA DANIEL J

The best method, resulting in least cost,depends on cost and demand patterns.

Lot-Sizing Methods

Economic Order Quantity (EOQ) does not consider quantity discounts does not always provide the most economical

approach with lumpy demandLot-for-Lot (LFL)

accommodates lumpy demandPeriod Order Quantity (POQ)

KIRUBA DANIEL J

Example: Lot-Sizing Decision

The net requirements for a material from an MRP schedule are:

It costs $400 to change over the machines for this material in the affected work center. It costs $0.40 per unit when one unit of this material must be carried in inventory from one week to the next.

Identify the lot-sizing method that results in the least carrying and changeover costs for the 8-week schedule.

NET REQUIREMENTS 1000

1

0 1300

2 3 4

800 1200

65

01300

7

WEEK

800

8

KIRUBA DANIEL J

Example: Lot-Sizing Decision

Lot-for-Lot Method

Carrying Cost = 0($.40) = $0

Changeover Cost = 6($400) = $2,400Total = $2,400

NET REQUIREMENTS

BEGINNING INVENTORY

PRODUCTION LOTS

ENDING INVENTORY

1000

0

1000

0

1

0

0

0

0

0

1300

1300

0

2 3 4

800

000

00

13001200800 0

0

1200

65

01300

00

7

WEEK

800

0

800

0

8

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Example: Lot-Sizing Decision

Economic Order Quantity (EOQ) Method

S = $400.00D = [(Net Req. for 8 wks)/8 weeks)](50

weeks/year)

= (6400/8)(50) = 40,000

C = ($0.40 per week)(50 weeks/year)

= $20.00

2DS 2(40,000)(400)EOQ = = = 1265

C 20

KIRUBA DANIEL J

Example: Lot-Sizing Decision

Economic Order Quantity (EOQ) Method

Carrying Cost = 4855($.40) = $1,942Changeover Cost = 6($400) = $2,400

Total = $4,342

NET REQUIREMENTS

BEGINNING INVENTORY

PRODUCTION LOTS

ENDING INVENTORY

1000

0

1265

265

1

265

0

265

0

230

1265

1300

265

2 3 4

800

725760695

695230

126512651265 0

725

1200

65

01300

725760

7

WEEK

1265

1190

800

725

8

KIRUBA DANIEL J

Example: Lot-Sizing Decision

Period Order Quantity (POQ) Method

POQ = (# Weeks/year)/(# Orders/year)

= 50/(D/EOQ)

= 50/(40,000/1,265)

= 1.58 or 2 weeks

KIRUBA DANIEL J

Example: Lot-Sizing Decision

Period Order Quantity (POQ) Method

Carrying Cost = 2900($.40) = $1,160Changeover Cost = 4($400) = $1,600

Total = $2,760

NET REQUIREMENTS

BEGINNING INVENTORY

PRODUCTION LOTS

ENDING INVENTORY

1000

0

1000

0

1

0

0

0

0

800

2100

1300

0

2 3 4

800

013000

0800

025000 800

800

1200

65

01300

01300

7

WEEK

0

0

800

800

8

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Example: Lot-Sizing Decision

SummaryCarrying Chg.Ovr. Total

Method Cost Cost Cost

LFL 0 2,4002,400

EOQ 1,9422,4004,342

POQ 1,1601,6002,760

KIRUBA DANIEL J

Issues in MRP

Lot-Sizing Useful at lower levels but may drive excess

inventory when applied at higher levelsNet Change versus Regenerative MRP

Net change may generate too many action notices

Regenerative more costly to run but appears to be easier to manage

KIRUBA DANIEL J

Issues in MRP

Safety Stock Use depends on uncertainty of demand.....

more uncertain the greater the need for safety stock

Assemble-to-Order Firms MPS and MRP treated separately from Final

Assembly Schedule(FAS) Use Modular Bill of Material

KIRUBA DANIEL J

KIRUBA DANIEL. JLecturer, MBA dept.,Sri Venkateswara Institute of

Information Technology & Management,Ettimadai, Coimbatorejkirubadaniel@gmail.com

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