3Chapter ObjectivesDescribe position of engineer in the production processDescribe considerations in planning manufacturing facilitiesBe able to use production planning toolsRecognize different methods for production planning and control
4Engineers in Production Activity Industrial Eng. ManagerMethodsTime StudyStandardsGeneral SuperintendentDirector of PurchasingFinance ManagerInd. Relations ManagerPlant ManagerEngineering designMaintenanceUtilities, SecurityProduction ManagerProduction PlanningRoutingSchedulingDispatching & Follow-upQuality ManagerQuality ControlInspection
5Future 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)
6Planning Manufacturing Facilities Area selectionCommunity selectionSite selectionCommon errors
7Area 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
8Community Selection Managerial preferences Community facilities Community attitudesCommunity, government and taxationFinancial inducements
9Site Selection Size of site Topography Utilities Waste Disposal Transportation facilitiesLand costs, Zoning, Expansion
10Common Errors in Facility Location Analysis Labor cost miscalculationsInadequate labor reservoirLack of distribution outletsUnderestimated importance of taxesPurchasing unsuitable building
11Objectives of Plant Layout Planning Minimize materials-handling costsReduce congestion of personnel & materialIncrease safety of personnelIncrease labor efficiencyImprove moraleFacilitate communication and coordinationProvide operations flexibilityIncrease quality of working lifeFung shui
16Quantitative Tools in Production Planning Inventory controlBreak-even chartsLearning curves
17Inventory Control Basic Economic Ordering Quantity Model Let I = Carrying costR = Annual demandS = Ordering costQTime
18Inventory Control Basic Economic Ordering Quantity Model Break-even charts$Total Annual CostCarrying Cost= I(Q/2)Ordering Cost= S(R/Q)Order Quantity QEOQ
19Inventory Control Backlog Inventory Model QuantityQTime
20Inventory Control Production Inventory Model QuantityQTime
21Inventory Control Inventory with Safety Stock Model QuantityQTime
22Problems with EOQ Analysis Lean Manufacturing considers inventory a wasteJust-In-Time requires lot size of 1Key: Reducing ordering (setup) costs
23Break-even Analysis: Fixed Costs and Variable Costs Fixed Costs: constant, independent of the output or activity level.Property taxes, insuranceManagement and administrative salariesLicense fees, and interest costs on borrowed capitalRental or leaseVariable Costs: Proportional to the output or activity level.Direct labor costDirect materials
24Break-even AnalysisTotal Variable Cost = Unit Variable Cost * QuantityTVC = VC * QTotal Cost = Fixed Cost + Total Variable CostTC = FC + VC * QTotal Revenue = Unit Selling Price * QuantityTR = SP * Qwhere TVC = Total variable costVC = Variable cost per unitQ = Production/Selling quantityFC = fixed costsTR = Total RevenueSP = Selling price per unit
25Break-even AnalysisBreak-even point: the output level at which total revenue is equal to total cost.SP * BEP = FC + VC * BEPBEP = FC / (SP - VC)where BEP = breakeven pointFC = fixed costsSP = selling price per unitVC = variable cost per unitApplications of Break-even Analysis:Determining minimum production quantityForecast production profit / loss
26Break-even Analysis $ Production Quantity Total Revenue Total Costs ProfitVariable CostsFixed CostsLossBreak-even PointProduction Quantity
27Break-even Analysis $ Production Quantity Total Revenue Total Costs MaximumProfitProduction QuantityBreak-even Point
28Learning CurvesLearning Curves: Production time reduces by a constant rate as production quantity doublesLet Y1 = Time to perform the 1st unitYn = Time to perform the nth unitb = Constant based on learning curve rate k%n = Number of completed units
29Learning CurvesLinear Regression is used to estimate –b and Y1 when Multiple (m) data points are available
30Learning CurvesCumulative production time from N1 to N2:
32Learning Curve Example Example 2-9 Cost Estimating usingLearning CurvenYn19.6028.1637.4246.9456.5866.3176.0885.9095.73105.59nYn115.47125.36135.26145.17155.09165.01174.94184.87194.81204.76
33Learning Curve Example Example 2-9 Cost Estimating usingLearning CurveNormal ScaleLog-Log Scale
34Production Planning & Control Planning, Coordination, ControlConcerns: production quantity, costs, quality, due dates, efficiencyIrregularities: machine break down, scrapped parts, late arrival, rush orders, design changesIdle resources <> Idle inventory
35Steps in Production Planning Identify the goals (inventory level)Process planning (routing)LoadingSchedulingDispatching (execution)Production control
36Materials 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.
37Materials 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 requirementOffsetting: determines when manufacturing should start so that the finished items are available when required.“Lead time” has to be assumed for the operation.
38Materials 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.
39Manufacturing 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 resourcesBatching 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 ExtensionsRough Cut Capacity Planning (RCCP), an initial attempt to match the order load to the capacity available,Sales Order ProcessingCost accountingData Accuracy
40Enterprise Resource Planning (ERP) ERP is a way to integrate the data and processes of an organization into one single system.Ideal ERP SystemManufacturing: 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, etcSupply 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
41Enterprise Resource Planning (ERP) Advantages of ERP SystemsA totally integrated systemThe ability to streamline different processes and workflowsThe ability to easily share data across various departments in an organizationImproved efficiency and productivity levelsBetter tracking and forecastingLower costsImproved customer service
42Enterprise Resource Planning (ERP) Disadvantages of ERP SystemsSuccess does depend on skills and the experience of the workforce to quickly adapt to the new systemCustomization in many situations is limitedThe need to reengineer business processesERP systems can be cost prohibitive to install and runTechnical support can be shoddyERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future
43Production Planning & Control Systems Synchronized manufacturing (OPT)looks for bottlenecks
44Toyota 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 SystemIn 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.
45JIT Kanban System Actual Parts W Withdrawal Kanban P Production-ordering KanbanPreceding StationStoreSucceedingStation
52Lean Manufacturing Lean means "manufacturing without waste." Waste ("muda" in Japanese) has many forms. Material, time, idle equipment, and inventory are examples. Most waste is invisible. Nor is elimination easy.Lean Manufacturing improves material handling, inventory, quality, scheduling, personnel and customer satisfaction.
53Lean Manufacturing Core Disciplines Cellular Manufacturing Pull Scheduling (Kanban)Six Sigma/Total Quality ManagementRapid SetupTeam DevelopmentToolsValue Stream Mapping and Process Mapping are two valuable tools that can help eliminate waste and streamline work.Group Technology can sort out workflow in complex product mixes.
54Flexible Manufacturing Systems (FMS) Basic categories:Stand-alone machineFlexible manufacturing cell (FMC)> one machine + pallet changing equipmentFlexible manufacturing system (FMS)workstations + mat’ls handling sys. + comp. controlFully automated factory (FAF)
55Flexible Manufacturing Systems (FMS) Benefits:Greater productivityImproved qualityIncreased reliability of productionReduced batch size & lead-timeIncreased % of time spent on machine tools