PRODUCTION MANAGEMENT - IV
LOGO
PRODUCTION PLANNING
“the process of producing a specification or chart of 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 availability of of plant and materials, customer delivery requirements, and maintenance schedules”
PRODUCTION PLANNING HORIZONS Long-Range Capacity Planning
Long-Range (years)
Aggregate Planning
Medium-Range (6-18 months)
Master Production Scheduling
Short-Range (weeks)
Production Planning and Control Systems
Very-Short-Range (hours - days)
Pond Draining Systems
Push Systems
Pull Systems
Focusing on Bottlenecks
PRODUCTION PLANNING: UNITS OF MEASURE
Long-Range Capacity Planning
Entire Product Line
Aggregate Planning
Product Family
Master Production Scheduling
Specific Product Model
Production Planning and Control Systems
Labor, Materials, Machines
Pond Draining Systems
Push Systems
Pull Systems
Focusing on Bottlenecks
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
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 capacity.. The current status of the system in terms of workforce level, inventory level and production rate
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
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
Medium-Term Capacity Adjustments
Inventory level Finished goods inventory Backorders(products are supplied after a period of waiting time./lost sales Subcontract
Aggregate planning Strategies Inventory carrying through constant work force Sub contracting Variable workforce Variable working hours Promotional activities Back ordering
Inventory carrying through constant work force
Merits ●
Stable workforce
●
Better quality products
●
Job security
●
Avoids hiring &firing costs
Demerits ●
Inventory carrying cost
●
Difficulty Difficul ty in finding stable workforce
●
Not suitable for perishable goods.
Sub contracting
Merits ●
Suitable for peak demand
Demerits ●
Control becomes difficu difficult lt
●
Sub contractor s becomes competitors.
Variable workforce Merits ●
Match between demand & production
Demerits ●
Cost of hiring
●
Training cost & quality
●
Job insecurity
Variable working hours Merits ●
Stable work force
●
Cost of inventory
Demerits ●
Not able to meet large demand
●
Over time wages are higher
●
Idle time for employees
●
Employee stress
Back ordering Merits ●
Inventory cost
●
Suitable for low demand
Demerits ●
Customer waiting time
●
Dissatisfaction
●
Loss of sales
●
Loss of good will
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
Master Production Scheduling (MPS)
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. customer.
Avoid overloading overloading or underloading the production facility so that production capacity is efficiently utilized and low production costs result.
Time Fences l
The rules for scheduling
1-2 weeks
2-4 weeks +/- 5%
+/- 10%
+/- 20%
Change
Change
Change
No Change
Frozen
4-6 weeks
6+ weeks
Firm Full Open
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.
Developing an MPS Using input information Customer orders (end items quantity, due dates) Forecasts (end items quantity, due dates) Inventory Inventor y status (balances, planned receipts) Production capacity (output rates, planned downtime) Schedulers place orders in the earliest available open slot of the MPS
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
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 safety stock level is 400 400 scanners. There are currently 1,120 1,120 scanners in inventory inventory.. The estimates of demand for scanners in the next 6 weeks are shown on the next slide.
Example: Master Production Scheduling
Demand Estimates
WEEK 1
CUSTOMERS
2
3
500 1000 500
4 200
5
6
700 1000
BRANCH WAREHOUSES 200 300 400 500 300 200 MARKET RESEARCH
0
50
0
0
10
0
PRODUCTION RESEARCH 10
0
0
0
0
0
Example: Master Production Scheduling
MPS for Bar Code Scanners
WEEK 1
SCANNER PRODUCTION 0
2
3
1500 1500
4 0
5
6
1500 1500
Types of Production-Planning and Control Systems Pond-Draining Systems Push Systems Pull Systems Focusing on Bottlenecks
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
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
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 Raw-mate rial and in-process inventories approach zero
Successful implementation requires much preparation
Focusing on Bottlenecks Bottleneck Operations Impede production because they have less capacity than upstream or downstream stages
Work arrives faster than it i t can be completed c ompleted
Material Requirements Planning Aggregate Planning Master Production Scheduling (MPS) Resource Requirements Planning
Material Requirements Planning (MRP) Capacity Requirements Planning (CRP)
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
Objectives of MRP Improve customer service Reduce inventory investment Improve plant operating efficiency
Elements of MRP Inputs
Outputs
Service-Parts Orders and Forecasts
Inventory Transaction Data Order Changes Order Planned Order Schedule
Inventory Status File Master Production Schedule Bill of Materials File
MRP System
Planning Report Performance Exception Reports
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
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)
Example: MRP Schedule LocoMopeds is a manufacturer of offroad mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped. Level 0
Level 1
Level 2
MOPED
ENGINE ASSEMBLY
MOTOR
GAS TANK
CARBURETOR (2)
WHEEL ASSEMBLY (2)
HUB ASSEMBLY
FRAME
TIRE
Example: MRP Schedule Bill of Material ParentC Parent Component Level
Compon.
Code
Description
Code
Code
442
0
#442 Moped
442
EA
1
GT
1
WA
1
Wheel Assem.
F
1
Frame
EA
M
2
C
2
Carburetor
2
HA
2
1
2
Tire
WA T
Req’d
Engine Assem. 1
Gas Tank 1 2
1 M ot o r
Hub Assem. 1
1
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
Lot-Sizing Methods Economic Order Quantity (EOQ) does not consider quantity discounts does not always provide the most economical approach with lumpy demand Lot-for-Lot (LFL) accommodates lumpy demand Period Order Quantity (POQ) The best method, resulting in least cost, depends on cost and demand patterns.
Example: Lot-Sizing Decision The net requirements for a material from an MRP schedule are: WEEK 1 2 3 4 5 6 7 8 NET REQUIREMENTS 1000 0 1300 800 12001300 0 800
It costs $400 to change over the machines for this material mater ial in the affected work center center.. It costs $0.40 per unit when one unit of this material must be carried in inventory from one week to the next. Identify the lot-sizing method that results in the t he least carrying and changeover costs for the 8-week schedule.
Example: Lot-Sizing Decision Lot-for-Lot Method WEEK
1 NET REQUIREMENTS 1000 BEGINNING INVENTORY 0 PRODUCTION LOTS 1000 ENDING INVENTORY 0
Carrying Cost
2 3 4 5 6 0 1300 800 12001300 0 0 0 0 0 0 1300 800 12001300 0 0 0 0 0
= 0($.40) = $0
Changeover Cost = 6($400) = $2,400 Total = $2,400
7 8 0 800 0 0 0 800 0 0
Example: Lot-Sizing Decision Economic Order Quantity (EOQ) Method S = $400.00 D = [(Net Req. for 8 wks)/8 weeks)](50 weeks/year) = (6400/8)(50) = 40,000 C = ($0.40 per week)(50 weeks/year) = $20.00 2DS EOQ = = C
2(40,000)(400) 20
=
1265
Example: Lot-Sizing Decision Economic Order Quantity (EOQ) Method WEEK
1 2 3 4 5 6 7 8 NET REQUIREMENTS 1000 0 1300 800 12001300 0 800 BEGINNING INVENTORY 0 265 265 230 695 760 725 725 PRODUCTION LOTS 1265 0 1265126512651265 0 1265 ENDING INVENTORY 265 265 230 695 760 725 725 1190
Carrying Cost = 4855($.40) = $1,942 Changeover Cost = 6($400) = $2,400 Total = $4,342 $ 4,342
Example: Lot-Sizing Decision Period Order Quantity (POQ) Method POQ = (# Weeks/year)/(# Weeks/year)/(# Orders/year)
= 50/(D/EOQ)
= 50/(40,000/1,265)
= 1.58 or 2 weeks
Example: Lot-Sizing Decision Period Order Quantity (POQ) Method WEEK
1 NET REQUIREMENTS 1000 BEGINNING INVENTORY 0 PRODUCTION LOTS 1000 ENDING INVENTORY 0
2 3 4 5 6 7 0 1300 800 12001300 0 0 0 800 0 1300 0 0 2100 0 2500 0 800 0 800 0 1300 0 800
Carrying Cost = 2900($.40) = $1,160 Changeover Cost = 4($400) = $1,600 Total = $2,760
8 800 800 0 0
Example: Lot-Sizing Decision Summary CarryingChg.Ovr.
Total
Method
Cost
Cost
Cost
0
2,400
2,400
EOQ
1,942
2,400
4,342
POQ
1,160
1,600
2,760
LFL
Issues in MRP Lot-Sizing Useful at lower levels but may drive excess inventory when applied at higher levels Net Change versus Regenerative MRP Net change may generate too many action notices Regenerative more costly to run but appears to be easier to manage
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 Lecturer, MBA dept., Sri Venkateswara Institute of Information Technology & Management, Ettimadai, Coimbatore
[email protected]
Thank You !
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