1. Chapter 11 Planning Production Activity

2. Advanced Organizer

3. Chapter Objectives
Describe position of engineer in the production process
Describe considerations in planning manufacturing facilities
Be able to use production planning tools
Recognize different methods for production planning and control

4. Engineers in Production Activity
Industrial Eng. Manager
Methods
Time Study
Standards
General Superintendent
Director of Purchasing
Finance Manager
Ind. Relations Manager
Plant Manager
Engineering design
Maintenance
Utilities, Security
Production Manager
Production Planning
Routing
Scheduling
Dispatching & Follow-up
Quality Manager
Quality Control
Inspection

5. Future 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)

6. Planning Manufacturing Facilities
Area selection
Community selection
Site selection
Common errors

7. Area 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

8. Community Selection Managerial preferences Community facilities
Community attitudes
Community, government and taxation
Financial inducements

9. Site Selection Size of site Topography Utilities Waste Disposal
Transportation facilities
Land costs, Zoning, Expansion

10. Common Errors in Facility Location Analysis
Labor cost miscalculations
Inadequate labor reservoir
Lack of distribution outlets
Underestimated importance of taxes
Purchasing unsuitable building

11. Objectives of Plant Layout Planning
Minimize materials-handling costs
Reduce congestion of personnel & material
Increase safety of personnel
Increase labor efficiency
Improve morale
Facilitate communication and coordination
Provide operations flexibility
Increase quality of working life
Fung shui

12. Plant Layout Alternatives
Product layout
Process layout
Group Technology

13. Product Layout
Line Balancing
Materials Handling

14. Process (Functional) Layout

15. Group Technology (Cellular) Layout

16. Quantitative Tools in Production Planning
Inventory control
Break-even charts
Learning curves

17. Inventory Control Basic Economic Ordering Quantity Model
Let I = Carrying cost
R = Annual demand
S = Ordering cost Q
Time

18. Inventory Control Basic Economic Ordering Quantity Model
Break-even charts $
Total Annual Cost
Carrying Cost
= I(Q/2)
Ordering Cost
= S(R/Q)
Order Quantity Q
EOQ

19. Inventory Control Backlog Inventory Model
Quantity Q
Time

20. Inventory Control Production Inventory Model
Quantity Q
Time

21. Inventory Control Inventory with Safety Stock Model
Quantity Q
Time

22. Problems with EOQ Analysis
Lean Manufacturing considers inventory a waste
Just-In-Time requires lot size of 1
Key: Reducing ordering (setup) costs

23. Break-even Analysis: Fixed Costs and Variable Costs
Fixed Costs: constant, independent of the output or activity level.
Property taxes, insurance
Management and administrative salaries
License fees, and interest costs on borrowed capital
Rental or lease
Variable Costs: Proportional to the output or activity level.
Direct labor cost
Direct materials

24. Break-even Analysis
Total Variable Cost = Unit Variable Cost * Quantity
TVC = VC * Q
Total Cost = Fixed Cost + Total Variable Cost
TC = FC + VC * Q
Total Revenue = Unit Selling Price * Quantity
TR = SP * Q
where TVC = Total variable cost
VC = Variable cost per unit
Q = Production/Selling quantity
FC = fixed costs
TR = Total Revenue
SP = Selling price per unit

25. Break-even Analysis
Break-even point: the output level at which total revenue is equal to total cost.
SP * BEP = FC + VC * BEP
BEP = FC / (SP - VC)
where BEP = breakeven point
FC = fixed costs
SP = selling price per unit
VC = variable cost per unit
Applications of Break-even Analysis:
Determining minimum production quantity
Forecast production profit / loss

26. Break-even Analysis $ Production Quantity Total Revenue Total Costs
Profit
Variable Costs
Fixed Costs
Loss
Break-even Point
Production Quantity

27. Break-even Analysis $ Production Quantity Total Revenue Total Costs
Maximum
Profit
Production Quantity
Break-even Point

28. Learning Curves
Learning Curves: Production time reduces by a constant rate as production quantity doubles
Let Y1 = Time to perform the 1st unit
Yn = Time to perform the nth unit
b = Constant based on learning curve rate k%
n = Number of completed units

29. Learning Curves
Linear Regression is used to estimate –b and Y1 when Multiple (m) data points are available

30. Learning Curves
Cumulative production time from N1 to N2:

31. Learning Curve Example

32. Learning Curve Example
Example 2-9 Cost Estimating using
Learning Curve n Yn 1
9.60 2
8.16 3
7.42 4
6.94 5
6.58 6
6.31 7
6.08 8
5.90 9
5.73 10
5.59 n Yn 11
5.47 12
5.36 13
5.26 14
5.17 15
5.09 16
5.01 17
4.94 18
4.87 19
4.81 20
4.76

33. Learning Curve Example
Example 2-9 Cost Estimating using
Learning Curve
Normal Scale
Log-Log Scale

34. Production Planning & Control
Planning, Coordination, Control
Concerns: production quantity, costs, quality, due dates, efficiency
Irregularities: machine break down, scrapped parts, late arrival, rush orders, design changes
Idle resources <> Idle inventory

35. Steps in Production Planning
Identify the goals (inventory level)
Process planning (routing)
Loading
Scheduling
Dispatching (execution)
Production control

36. Materials 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.

37. Materials 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 requirement
Offsetting: determines when manufacturing should start so that the finished items are available when required.
“Lead time” has to be assumed for the operation.

38. Materials 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.

39. Manufacturing 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 resources
Batching 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 Extensions
Rough Cut Capacity Planning (RCCP), an initial attempt to match the order load to the capacity available,
Sales Order Processing
Cost accounting
Data Accuracy

40. Enterprise Resource Planning (ERP)
ERP is a way to integrate the data and processes of an organization into one single system.
Ideal ERP System
Manufacturing: 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, etc
Supply 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

41. Enterprise Resource Planning (ERP)
Advantages of ERP Systems
A totally integrated system
The ability to streamline different processes and workflows
The ability to easily share data across various departments in an organization
Improved efficiency and productivity levels
Better tracking and forecasting
Lower costs
Improved customer service

42. Enterprise Resource Planning (ERP)
Disadvantages of ERP Systems
Success does depend on skills and the experience of the workforce to quickly adapt to the new system
Customization in many situations is limited
The need to reengineer business processes
ERP systems can be cost prohibitive to install and run
Technical support can be shoddy
ERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future

43. Production Planning & Control Systems
Synchronized manufacturing (OPT)
looks for bottlenecks

44. Toyota 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 System
In 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.

45. JIT Kanban System Actual Parts W Withdrawal Kanban P
Production-ordering Kanban
Preceding Station
Store
Succeeding
Station

46. JIT Kanban System
Preceding Station
Store
Succeeding
Station P

47. JIT Kanban System
Preceding Station
Store
Succeeding
Station P

48. JIT Kanban System W
Preceding Station
Store
Succeeding
Station P

49. JIT Kanban System W
Preceding Station
Store
Succeeding
Station P

50. JIT Kanban System
Preceding Station
Store P
Succeeding
Station W

51. Toyota Production System

52. Lean 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.

53. Lean Manufacturing Core Disciplines Cellular Manufacturing
Pull Scheduling (Kanban)
Six Sigma/Total Quality Management
Rapid Setup
Team Development
Tools
Value 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.

54. Flexible Manufacturing Systems (FMS)
Basic categories:
Stand-alone machine
Flexible manufacturing cell (FMC)
> one machine + pallet changing equipment
Flexible manufacturing system (FMS)
workstations + mat’ls handling sys. + comp. control
Fully automated factory (FAF)

55. Flexible Manufacturing Systems (FMS)
Benefits:
Greater productivity
Improved quality
Increased reliability of production
Reduced batch size & lead-time
Increased % of time spent on machine tools