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Lecture 4 - Production Planning System (Continued). After studying this chapter you will be able to understand: Production planning hierarchy, aggregate planning, why aggregate planning is necessary, inputs, outputs, medium-term capacity adjustments, approaches, pure strategies for the informal approach,...
Lecture 4 Production Planning System (Continued) Books • Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming College, Emeritus, Stephen N. Chapman, Ph.D., CFPIM, North Carolina State University, Lloyd M. Clive, P.E., CFPIM, Fleming College • Operations Management for Competitive Advantage, 11th Edition, by Chase, Jacobs, and Aquilano, 2005, N.Y.: McGrawHill/Irwin Objectives • • • • Production planning hierarchy Inventory cost Type of inventory Production settings Production Planning Hierarchy LongRange Capacity Planning Aggregate Planning Master Production Scheduling Production Planning and Control Systems Pond Draining Systems Push Systems Pull Systems Focusing on Bottlenecks Production Planning Horizons LongRange Capacity Planning LongRange (years) Aggregate Planning MediumRange (618 months) Master Production Scheduling ShortRange (weeks) Production Planning and Control Systems VeryShortRange (hours days) Pond Draining Systems Push Systems Pull Systems Focusing on Bottlenecks Production Planning: Units of Measure LongRange 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 Why Aggregate Planning Is Necessary • • • • 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 (618 months) The alternative means available to adjust short to mediumterm capacity, to what extent each alternative could impact capacity and the related costs 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 MediumTerm Capacity Adjustments • • • Workforce level – Hire or layoff fulltime workers – Hire or layoff parttime workers – Hire or layoff contract workers Utilization of the work force – Overtime – Idle time (undertime) – Reduce hours worked . . more Setup Costs l For • • • • • • • • parts produced in-house, we must: Check status of raw material Possibly place an order Create route sheets with instructions for each stage of the production process Store routing data in a database Check routing data for compatibility with shop status and engineering changes Make routing instructions with raw material Deliver to production workers Machine set up 30 Inventory Carrying Costs l Carrying • • • • • • • inventory incurs a variety of costs Space heated and cooled Move inventory occasionally because it blocks access to other goods Construct and maintain information system to track location Pay taxes based on value Insurance costs Some will be lost, damaged, or perished Cost of capital invested in inventory 31 Shortage Costs l When • • • • customer demands an out of stock item May decide to wait for delivery - backorders May cancel the order – lost sales May look elsewhere next time – lost customer May pay expedite charges l Within the plant, if material is unavailable to start production • • • • Work center may lack work Schedule may have to be modified Completion of products may be delayed Result in late deliveries or lost sales 32 Information Flow for Various Production Systems Order Entry I I Raw Material I a Materials Requirements Planning (MRP) Raw Material b Just-In-Time (KANBAN) I Processor Infinite Capacity Inventory Buffer Finite Capacity Inventory Buffer Material Flow 33 Information Flow KANBAN control • • Kanban control uses the levels of buffer inventories in the system to regulate production. When a buffer reaches its preset maximum level, the upstream machine is told to stop producing that part type. This is often implemented by circulating cards, the kanbans, between a machine and the downstream buffer. The machine must have a card before it can start an operation. It can then pick raw materials out of its upstream (or input) buffer, perform the operation, attach the card to the finished part, and put it in the downstream (or output) buffer. 34 KANBAN control • • Kanban control ensures that parts are not made except in response to a demand. The analogy is to a supermarket: Only the goods that have been sold are restocked on the shelves 35 Information Flow for Various Production Systems Limit on Total Inventory I Raw Material I c Constant Work-In-Process (CONWIP) Raw Material d Hybrid CONWIP-KANBAN I Processor Infinite Capacity Inventory Buffer Finite Capacity Inventory Buffer Material Flow 36 Information Flow CONWIP Control • • • • CONWIP stands for Constant WorkInProcess a control strategy that limits the total number of parts allowed into the system at the same time. Once the parts are released, they are processed as quickly as possible until they fill up the last buffer as finished goods. Once the consumer removes a part from the finished goods inventory, the first machine in the chain is authorized to load another part 37 CONWIP Control • • • Like KANBAN, the CONWIP system only responds to actual demands, so it is still a ``pull'' type system But unlike kanban, the buffers for all downstream machines are empty, except finished goods, which is full. This occurs because any part released to the system will move to finished goods. New parts will not be released if the finished goods buffer is full. 38 Inventory is Needed to Support Production • • • Recent years claim a goal of zero inventory – But some is necessary to meet needs – Economically practical to maintain some WIP to facilitate production scheduling – Variability in processing time and job arrival rates Inventory should not be used to cover problems – Wasteful practice all too common – Prevents the system from improving – Defects not detected until later Lean companies 39 – Operate with reliable processes, quick Large Inventories Imply Long Throughput Times • • • Throughout time (manufacturing Lead Time) – The span of time from when the part enters a system until it leaves Little’s Law I = X · T – Relates average throughput time (T) to the level of average inventory (I) and the production rate (X) for any stationary process Stationary process – Probability of being in a particular state is independent of time 40 To reduce throughput time Eliminate unnecessary, nonvalue added operations: – – – – – Reduce waiting time Reduce transfer time Reduce quality inspection time Increase process rates Reduce batch size 41 Capacity Balancing Flow In l l l l Flow Out Desire to have same number of units produced in each work center Capacity is measured by number of units that can be made per time period Total production is limited by the workstation with the smallest capacity (bottleneck station) Excess capacity reduces cycle time Theory of Constraints (TOC) A management philosophy developed by Dr. Eliyahu Goldratt The goal of a firm is to make money End of Lecture 4 ... quantities of material and parts are purchased l We may store inventory in periods of low demand and consume them in periods of large demand to smooth production rate (seasonal demand) l Speculation... Total Inventory I Raw Material I c Constant Work-In-Process (CONWIP) Raw Material d Hybrid CONWIP-KANBAN I Processor Infinite Capacity Inventory Buffer Finite Capacity Inventory Buffer Material. .. Entry I I Raw Material I a Materials Requirements Planning (MRP) Raw Material b Just-In-Time (KANBAN) I Processor Infinite Capacity Inventory Buffer Finite Capacity Inventory Buffer Material Flow