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The Production System
Defnition:The set of resources and procedures
involved in converting raw material intoproducts and delivering them tocustomers
Production and delivery of products are
central to the rm Functions have value only if they enhance
the ability to do this protably
1
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Value-AddedValue-Added-Process-Process
The difference between the cost of inputsand the value or price of outputs.
Inputs Land Labor Capital
Transformation/Conversion
process
Outputs Goods Services
Control
Feedbac
FeedbacFeedbac
!alue added
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"roduction and Inventor# Control$Introduction(4)
%i&h"rofitabilit#
Low
Costs
Low 'nit
Costs
%i&h
Throu&hput
Less
!ariabilit#
%i&h
'tili(ation
Low
Inventor#
)ualit#
"roduct
%i&h
Sales
*an#
products
Fast
+esponse
*ore
!ariabilit#
%i&h
Inventor#
Low
'tili(ation
Short
C#cle Times
%i&h Customer
Service
"roduction Ob,ectives
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Production Activityand Information Flows
-
Fabrication
Plant
Assembly
Plant
Distribution
Center
Retailer
Forecasting
Strategic Planning
Aggregate Production
Planning
Disaggregation
Production Scheduling
Shop Floor Control
Administrative Functions
(Purchasing, Payroll,
Finance, Accounting
!ar"eting
Product Design
Process Planning
!anu#acturing Support
(Facilities Planning,
$ool !anagement,
%uality Control,
!aintenance
a Product Flow b Decision Hierarchy c Support Functions
Ra& !aterial
Customer
Finished
Products
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haracteristics of services
Intangibility
Inseparability
Perishability Variability
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erence e weenphysical goods and
servicesPhysical goods ServicesTan&ible intan&ible
%omo&eneous hetero&eneous
"roduction and distribution areseparated from consumption
"roduction distribution andconsumption are simultaneousprocesses
thin& n activit# or process
processed in factor# produced in the bu#er$seller interaction
Customers do not participate in theproduction process
Customers participate in production
Can be ept in stoc Cannot be ept in stoc
Transfer of ownership 0o transfer of ownership
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METHODS OF PRODUCTION
The methods of production can be ofthe following types#
$% Intermittent or interruptedproduction
a% &ob Production
b% 'atch Production
(% )ass and process production
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JOB PRODUCTION
In this type of production* every +ob
is di"erent from the other in terms oftype* cost* e"orts* consumption ofmaterials or specications%
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This is used when one item at a time
is produced% ,amples include#
'ridge building
./ce bloc0s
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ADVANTAGES
1eaching the target customer2sre3uirements
Special training to labor
'est suitable for pull system of demand
DISADVANTAGES
Time ta0ing
4arge scale economies cannot bereali5ed
ostliest
!ivision of labor is not possible
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BATCH PRODUCTION
All the products manufactured under a
batch are similar in terms of type* cost*e"orts* consumption of materials orspecications%
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This is when the same product is made fora while* then production is switched toanother product% They will return to theproduction of the rst product again lateron%
Examples include:
'a0ers
lothing manufacturers
Pharmaceuticals
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ADVANTAGES
cost of product design per unit is low,conomies of production
Flow of materials can be continuous
Automation and mechani5ation
DISADVANTAGES
Varying customer demands
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MASS PRODUCTION
This is also called 6ow production% The
production can be underta0en on largeand speciali5ed machines and processes%
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This is when goods are mass made
continuously on a production line%
,amples include#
ars
7ardware
,lectric 4amp
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ADVANTAGES
)echani5ation and division of labour4arge 8 scale economies
)inimum material handling costs
DISADVANTAGES
Special care
Idle machinery may result in wastageof resources
'ottle nec0s
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Process Type
.ne principal raw materialtransformed in to several products atdi"erent stages of operations
,ample-Petroleum rening*heavychemicals
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Product !evelopment
)ar0et 1esearch
!esign a prototype
Production of Prototype !esign wor0 for product
!evelopment 9or0
Production ,valuation
34
P d ti S t
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Production System!ecision 7ierarchy
Inputs Process Outputs Length ofPlanning
Horizon
'ong Range conomic Forecasts Financial Choices
StrategicPlanning
)perating Facilities Product 'ine (Families $echnologies
*ears
Processing $echnologies+##iciency !achine Schedules
AggregateProduction
Planning
Production 'evel or"#orce 'evel
Family -nventories
!onths
Production 'evels or"#orce 'evels Current -nventory Status Changeover $imes and Costs -tem Forecasts
Disaggregation !aster Production Schedule(!PS . Final Assembly by item
-tem -nventories
ee"s
/ill o# !aterials Process Plans
ProductionScheduling
0ob Priorities )rder Releases !achine Schedules
Days.Shi#t
'abor Status !achine Status 0ob Priorities )rder Releases !achine Schedules
Shop FloorControl
!achine Priorities 0ob Status 'abor Reporting !aterial 1andling $as"s 'oad+Prices+2nload Authori3ation
Real $ime !inutes
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Products* Processes* and4ayouts
33
!a"e.to.stoc"
standardi3ed
commodities
Continuous
process industries
repetitive m#g
Product 'ayout
Assemble.to.order
modular
1ybrid, F!S,
CA!, C-!Cellular 'ayout
0ob.Shop(-ntermittent Process 'ayout
ngineer.to.order
one.o#."ind
Special Pro4ect Fi5ed Position
PRODUCSPRODUCS PROC!SS!SPROC!SS!S L"#OUSL"#OUS
!a"e.to.order custom
lo& volume,lo& volume,
lo& varietylo& variety
lo& volume,lo& volume,
high varietyhigh variety
lo& volume,lo& volume,
medium varietymedium variety
high volume,high volume,
lo& varietylo& variety
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4ayout :oals
;se space e/ciently ,/cient personnel movement
)aimum e3uipment utili5ation
onvenient < safe wor0 environment
Simplify repair < maintenance
Smooth 6ow of wor0
35
T pes of Production
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Types of ProductionSystems
36
$here are #our basic types o# productionsystems6
78 Process
98 Product
:8 Cellular
;8 Fi5ed positions
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Fied Position 4ayout
3-
$he product or pro4ect remainsstationary, and &or"ers, materials, and
e
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Process 4ayout
37
Similar processes (or processes &ith similar needsare located together
/y grouping similar processes utili3ation o# resources
is improved
Customers, products, patients move through theprocesses according to their needs
Di##erent products = di##erent needs = di##erent routes
Comple5 #lo& pattern in the operation
!$a%ples&
Supermar"ets, hospitals
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Process 4ayouts
Process Layout products travel
to dedicated process centers
Milling
Assembly
& Test rinding
!rilling Plating
7$38
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Product 4ayout
39
Sometimes called line layout, #lo& line or assemblyline
Parts #ollo& a speci#ied route the se
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Product 4ayout
7$32
"a#
materials
or customer
$inished
itemStation
%
Station
%Station
Station
Station
4
Station
4
Material
and'or
labor
Station
Material
and'or
labor
Material
and'or
labor
Material
and'or
labor
Used for Repetitive or Continuous Processing
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ellular 4ayouts
machines are grouped into a cell that can processitems that have similar processing reroup technology &hich involvesgrouping items &ith similar design or manu#acturing
characteristics into part #amiliesCould be considered as mini product layouts
Can improve and simpli#y a #unctional+processlayout
Fle5ibleDuplicates some resources
7$54
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Part families
"art families with similarit#in shape
"art families with similarit#
in manufacturin& process
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.riginal Process 4ayout
C" ' Raw %aterials
"sse%(ly
)
*
+
,
-
. /
0
1
)2
))
)*
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ellular 4ayout
+
.
1
"sse%(ly
)*
,
0 )2
-
/
))
)*
" ' C
Raw %aterials
Cell ) Cell * Cell +
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9or0ers Inventory
Storage space )aterial
handling Aisles Scheduling
4ayout decision :oal
Advantage
Limited sills Low in$process hi&h
finished &oods Small Fi:ed path ;conve#or< 0arrow Line balancin& ;=asier< In$line '$t#pe
=>uali(e wor at eachstation =fficienc#
Process
omparison o* Productomparison o* Product
and Process Layoutsand Process Layouts
%i&h sills %i&h in$process low
finished &oods Lar&e !ariable path ;forlift< ?ide @#namic ;*ore difficult< Functional
*inimi(e materialhandlin& cost Fle:ibilit#
Product
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Product Volume and Variety
5-
ProductProduct
'ayouts'ayouts
Fi5edFi5ed
PositionPosition'ayouts'ayouts !i5ed 'ayouts!i5ed 'ayouts Process 'ayoutsProcess 'ayouts
3uantity
4u%(er of Different Products
CellularCellular
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Product Flow ontrol
57
'atch Processing 5Process Layout6 From a couple to several thousands identical parts
A batch #or each di##erent part type
!ove together through the production system
!ay split #or material handling or to reduce processingtime
!$a%ples are clothing, #urniture production
Repetiti7e or Flow processing 5Product Layout6
Continuous chemicals, #oods, pharmaceuticals
Discrete car, re#rigerator production
Setup osts A"ect The
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Setup osts A"ect The'atch Si5e
ost and time to set up productionfacilities to manufacture a specicproduct a"ect the batch si5e%
9hen changeover time =setup time>and cost are large* the si5e of batchis 0ept large%
4arge batch si5es result in highinventory cost%
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Production hoices
59
8a9e:to:stoc9 ?umber o# units o# each product are "ept on hand at all times %uic" delivery to customers upon receipt o# an order
hen delivery response time is a "ey competitive #actor
'imited number o# products manu#actured repeatedly
An idea &hat customers &ill &ant Allo&s to schedule production in advance
8a9e:to:order
)nly produce items a#ter they have been ordered
Production system must respond
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Planning
Static Vs% !ynamic
,nvironments )odels used for production planning areeither static or dynamic
Static onstant through time
Assume same plan acceptable in each periodfor the foreseeable future
Dynamic ,plicitly consider changes in demand and
resource availability to determine what shouldbe done through time over a planning hori5on 1e3uire stochastic data 1e3uire great e"ort to build and solve
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The 1ole of Inventory
Inventory consists of physical items movingthrough the production system
.riginates with shipment of raw material andparts from the supplier
,nds with delivery of the nished products tothe customer
osts of storing inventory accounts for asubstantial proportion of manufacturing cost
.ften (?@ or more .ptimal level of inventory
Allows production operations to continue smoothly
A common control measure is Inento!y
T"!noe! 64
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Inventory Turnover
$he ratio o# annual cost o# goods sold toaverage inventory investment8
-t indicates ho& many times a year theinventory is sold8
1igher the ratio, the better, because it impliesmore e##icient use o# resources8
1igher the pro#it margin and longer themanu#acturing lead time, the lo&er theinventory turns8
5ample6 Supermar"ets (lo& pro#it marginshave a #airly high turnover rate
61
I ! i i d
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Inventory !enitions and!ecisions
Batc# o! o!$e! %i&e' ( 'atch si5e is the number of units released to the
shop 6oor to be produced
Reo!$e! )oint' !
Species the timing for placing a new order Inento!y Po%ition
Inventory Position = Inventory On Hand + On Order Backorders
Unit% on o!$e! 7ave been ordered but not yet arrived
Bac*o!$e!% Items promised to customers but not yet shipped
ew units are shipped out to cancel bac0orders63
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Types of Inventory Ra+ Mate!ia,%
,ssential to the production process .ften 0ept in large 3uantities on site
Fini%#e$ Goo$% ompleted products awaiting shipment to customers
-o!*.in.P!oce%% /-IP0 'atches of semi nished products currently in
production 'atches of parts from time of release until nished
goods status
Pi)e,ine :oods in transit between facilities 1aw materials being delivered to the plant Finished goods being shipped to warehouse or
customer 65
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Types of Inventory
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&ustication of Inventory
6-
-nventory &ill al&ays e5ist Competitive pressure to supply common products
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.rdering osts
68
A #i5ed ordering cost can be associated &ith eachreplenishment &hen parts are ordered #rom suppliers
-denti#ying the need to order
5ecute the order
Prepare the paper&or" Place the order
Delivery cost #i5ed component
Receiving inspection
$ransportation to place o# use
Storage
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Setup osts
69
For parts produced in.house, &e must6
Chec" status o# ra& material
Possibly place an order
Create route sheets &ith instructions #or each stage o#
the production process
Store routing data in a database
Chec" routing data #or compatibility &ith shop status
and engineering changes
!a"e routing instructions &ith ra& material Deliver to production &or"ers
!achine set up
Inventory arrying osts
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Inventory arrying osts
62
Carrying inventory incurs a variety o# costs Space heated and cooled
!ove inventory occasionally because it bloc"s access
to other goods
Construct and maintain in#ormation system to trac"location
Pay ta5es based on value
-nsurance costs
Some &ill be lost, damaged, or perished Cost o# capital invested in inventory
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-4
Shortage Costs
hen customer demands an out o# stoc" item !ay decide to &ait #or delivery . bac"orders
!ay cancel the order lost sales
!ay loo" else&here ne5t time lost customer
!ay pay e5pedite chargesithin the plant, i# material is unavailable to start
production
or" center may lac" &or"
Schedule may have to be modi#ied
Completion o# products may be delayed
Result in late deliveries or lost sales
I f ti Fl f V i
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Information Flow for VariousProduction Systems
-1
I I
Order !ntry
Raw
8aterialI
a; 8aterials Re"4'"46
IProcessor
-n#ormation Flo&
!aterial Flo&Finite Capacity
-nventory /u##er
-n#inite Capacity
-nventory /u##er
1ANBAN cont!o,
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1ANBAN cont!o,
1an2an cont!o, uses the levels of bu"erinventories in the system to regulate production%9hen a bu"er reaches its preset maimum level*the upstream machine is told to stop producing
that part type% This is often implemented bycirculating cards* the kanbans* between a machineand the downstream bu"er%
The machine must have a card before it can start
an operation% It can then pic0 raw materials out ofits upstream =or input> bu"er* perform theoperation* attach the card to the nished part* andput it in the downstream =or output> bu"er%
-3
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1ANBAN cont!o,
Kanban control ensures thatparts are not made ecept inresponse to a demand%
The analogy is to a supermar0et#.nly the goods that have been
sold are restoc0ed on theshelves%
-5
I f ti Fl f V i
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Information Flow for VariousProduction Systems
-6
I
Li%it on
otalIn7entory
Raw
8aterialI
c; Constant ?or9:In:Process 5CO4?IP6
Raw
8aterial
d; Hy(rid CO4?IP:>"4'"4
IProcessor
-n#ormation Flo&
!aterial Flo&Finite Capacity
-nventory /u##er
-n#inite Capacity
-nventory /u##er
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CON-IP Cont!o,
.9IP stands for Constant Work-In-Process.
a control strategy that limits the totalnumber of parts allowed into the system at
the same time% .nce the parts are released* they areprocessed as 3uic0ly as possible until they llup the last bu"er as nished goods%
.nce the consumer removes a part from thenished goods inventory* the rst machine inthe chain is authori5ed to load another part%
--
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CON-IP Cont!o,
4i0e 1ANBAN* the CONWIPsystem onlyresponds to actual demands* so it is still aCCpullDD type system%
'ut unli0e 0anban* the bu"ers for alldownstream machines are empty* eceptnished goods* which is full%
This occurs because any part released to
the system will move to nished goods%ew parts will not be released if thenished goods bu"er is full%
-7
Inventory is eeded
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Inventory is eededto Support Production
1ecent years claim a goal ofzero inventory 'ut some is necessary to meet needs ,conomically practical to maintain some 9IP to
facilitate production scheduling Variability in processing time and +ob arrival rates
Inventory should not be used to coverproblems
9asteful practice all too common Prevents the system from improving !efects not detected until later
4ean companies .perate with reliable processes* 3uic0
changeovers* low inventories* small space* lowscrap and rewor0* closer communication
-8
4arge Inventories Imply 4ong
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4arge Inventories Imply 4ongThroughput Times
T#!o"3#o"t time /man"4act"!in35ea$ Time0The span of time from when the part enters a
system until it leaves
5itt,e6% 5a+ I = X T 1elates average throughput time =T> to the
level of average inventory =I> and theproduction rate =E> for any stationary process
Stationa!y )!oce%% Probability of being in a particular state is
independent of time
-9
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To reduce throughput time
,liminate unnecessary* non-value addedoperations#
1educe waiting time
1educe transfer time 1educe 3uality inspection time
Increase process rates
1educe batch si5e
-2
it ' l i
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apacity 'alancing
74
) * + , -Flow In Flow Out
Desire to have same number o# units produced ineach &or" center
Capacity is measured by number o# units that canbe made per time period
$otal production is limited by the &or"station &iththe smallest capacity (bottlenec" station
5cess capacity reduces cycle time
Th f t i t =T.>
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Theory of onstraints =T.>
A management philosophydeveloped by !r% ,liyahu :oldratt%
T#e 3oa, o4 a f!m i% to ma*emoney7
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!r ,liyahu :oldratt wrote
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!r% ,liyahu :oldratt wrotemany boo0s including#
The :oal# A Process of .ngoingImprovement =sold more than Bmillion copies>
ItDs ot 4uc0 =how to apply T. incon6ict resolution and mar0eting>
ritical hain =how to apply T. in
pro+ect management>
Go,$!att6% R",e% o4 P!o$"ction34$76
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Sc#e$",in3
Do not 2a,ance ca)acity 2a,ance t#e8o+
T#e ,ee, "ti,i&ation o4 a non2ott,enec*!e%o"!ce i% not $ete!mine$ 2y it% o+n)otentia, 2"t 2y %ome ot#e! con%t!aintin t#e %y%tem
An #o"! ,o%t at a 2ott,enec* i% an #o"!,o%t 4o! t#e enti!e %y%tem
An #o"! %ae$ at a non2ott,enec* i% a
mi!a3e
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ustomer-!ened Value
The technical performance or qualityof a product is no longer the primarydeterminant of customer value
ustomers evaluate other value factorsGsuch as# .n-time !elivery After Sale Service 'usiness epertise 4ow price for high 3uality
Value is what the customer wants andhow much would be paid for it
,liminate non-value-added operations t#e c"%tome! +i,, not )ay 4o! non.a,"e.
a$$e$ o)e!ation% 7-
)odels to Study Production
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)odels to Study ProductionSystems
Testing new ideas on full-scale systems isepensive* time consuming* comple* andunnecessary
Instead* we build models to visuali5e and
eamine aspects of a system )odels allow us to learn about the system and
test various system designs
For instance* P!o$"ction Sy%tem Mo$e,% allowus to test the impact of )!o$"ction ),annin3an$ inento!y cont!o, decisions so that 9rong decisions can be avoided
!istruptions of the real process can be avoided
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!enition of a )odel
A model is a simplied* articialrepresentation of reality
onstructed to facilitate o"-line
study of real ob+ect or system Flow diagrams
Philosophical =conceptual>
Small-scale prototype
)athematical
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9ays to study asystem
Systems and )odels
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A Systems Perspective
Production system represents a 0ey aspect of therm
)ust maintain global view of the entire supplychain from materials through product delivery
M"%t inte3!ate an$ coo)e!ate +it# ma!*etin3')"!c#a%in3' 9"a,ity a%%"!ance' acco"ntin3'$e%i3n en3inee!in3' an$ man"4act"!in3
Instability of the production system may occur# )isuse of mar0eting =demand> information
)isunderstanding of the relationship among safetystoc0* inventory* and production
'ad production decisions
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BA ;; Co"!%e To)ic%
!emand Forecasting
4ong-1ange apacity Planning
Aggregate Production Planning
Inventory )anagement
)aterial 1e3uirements Planning
Scheduling and Se3uencing
84
Forecastin&
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"roduction and Inventor# Control$
Introduction(+)
Forecastin&
A Ob,ectiveB predict demand *or productionplanning purposes,
A Laws of Forecastin&B
, Forecasts are always wrong!
%, Forecasts always change!
, The further into the future, the less reliable
the forecast will be!
A Forecastin& ToolsB
Qualitative- @elphi nalo&ies
Quantitative- Causal and time series models
"l i
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"roduction and Inventor# Control$
Introduction(+%)
&&re&ate "lannin&
A Ob,ectiveB generate a long.term production plan
that establishes a rough product mi/0 anticipates
bottlenec1s0 and is consistent #ith capacity and
#or1*orce plans,
A IssuesBAggregationBproduct families and time periods
must be set appropriatel# for the environment.
CoordinationB" is the lin between the hi&h
level functions of forecastin&/capacit# plannin&
and intermediate level functions of *+"
inventor# control and schedulin&.
Anticipating ExecutionB" is virtuall# alwa#s
Capacit#/Facilit# "lannin&
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"roduction and Inventor# Control$
Introduction(+)
Capacit#/Facilit# "lannin&
A 2o# much and #hat 1ind o* physical e3uipment is
needed to support production goals
A IssuesB
Basic Capacity CalculationsBstand$alone capacitiesand con&estion effects ;e.&. blocin&