Production SLIDES 1 17

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BITS PilaniPilani Campus

BITS PilaniDr. Monica Sharma

Department of Mechanical Engineering


Production Planning and Control (ET ZC412)

BITS Pilani, Pilani Campus

Slides Adopted and Modified from the Course Text Book –Russel R.S. and Taylor, B.W., “Operations Management Along the Supply Chain”, 6th Edition, Wiley Student Edition, 2009.

Lecture-1: Introduction


WeekNo.

Topic Learning Objectives Reference to Textbook

1. Introduction to Operations Management

Operation management (), Operation management in service, Decision making in an organization.

Chapter 1

2. Operational Decision – Making Tools:Decision Analysis

Operations strategy, Decision Analysis S1

3. Quality Management Evolution of quality management, tools for solving quality problems, six sigma, cost of quality and quality awards and certifications.

Chapter 2

4. Product Design Purpose, Life cycle and evaluation of product, New product development.

Chapter 4

5. Service Design Service Economy, Characteristics, Design Process, Tools for Service Design, Waiting Line Analysis

Chapter 5

6. Processes and Technology Planning, design and technologies of process, Processes in the service sector, Analysing a process.

Chapter 6

7. Capacity and Facilities Planning Measures of performance, Process capacity, Productivity, Capacity planning, Changing capacity over time. Layout for types of process, process, product, hybrid, fixed-position and specialized layouts.

Chapter 7

8. Operational Decision-Making Tools: Facility Location Models

Introduction, Selecting the geographic region, Costing alternative locations, Scoring models, Geometric models, Locating multiple facilities, Location of facilities on networks

S7

9 Review Session ET ZC412 Production Planning and Control


10. Human Resources & OperationalDecision –Making Tools: WorkMeasurement

The Changing Nature of HumanResource Management, ContemporaryTrends in Human ResourceManagement, Employee Compensation,Job Design, Job Analysis, WorkMeasurement

Chapter 8, S8

11. Supply Chain Management Strategy andDesign

The Management of Supply Chains,Information Technology: A SupplyChain Enabler, Supply Chain Integration

Chapter 10

12. Global Supply Chain Procurement andDistribution

Global Supply Chain Procurement andDistribution, E-Procurement,Transportation, The Global SupplyChain

Chapter 11

13. Forecasting Forecasting in , Judgmental, casual and projective forecasting, Measures of forecasting.

Chapter 12

14. Sales and Operations Planning Strategies for Adjusting Capacity, Strategies for Managing Demand, Quantitative Techniques for Aggregate Planning, Aggregate Planning for Services

Chapter 14

15. Resource Planning Materials Requirement Planning, CRP, Sizing in MRP Systems, MRP Outputs

Chapter 15

16. Lean Systems Basic Elements of Lean Production Benefits of Lean Production Implementing Lean Production Lean Services

Chapter 16

17. Scheduling Master schedule, Short-term schedules, Control of schedules.

Chapter 17

18. ReviewSessionET ZC412 Production Planning and Control


INTRODUCTION TO OPERATIONS AND COMPETITIVENESS

Chapter-1

ET ZC412 Production Planning and Control

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Introduction

Operations management designs and operates productive system – systems for getting work doneFood you eat, car you drive are provided to you by people in operationsOperations is defined as a transformation processRequirements and feedback from customers are used to adjust factors in transformation process



Operations as a Transformation Process

Feedback

INPUT MaterialMachinesLaborManagementCapital

OUTPUT GoodsServices

TRANSFORMATIONPROCESS

RequirementsET ZC412 Production Planning and Control


Examples for Transformation

Input Output

Educational Institute

Facilities Teachers Students Energy

Service

Industry

Raw materialMachineryPeopleEnergy

Finished Product and

ServiceET ZC412 Production Planning and Control


Transformation Processes

Physical (manufacturing)Locational (transportation/

warehouse)Exchange (retail)Physiological (health care)Psychological (entertainment)Informational (communications)



Some more examples?????

• Car Assembly Plant

• Airline

• University

• Retail Shop



Evolution of Operations and Supply Chain Management

• Craft production– process of handcrafting products or services for individual

customers• Division of labor

– dividing a job into a series of small tasks each performed by a different worker

• Interchangeable parts– standardization of parts initially as replacement parts;

enabled mass production


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Evolution of Operations and Supply Chain Management (cont.)

• Scientific management– systematic analysis of work methods

• Mass production– high-volume production of a standardized product for a

mass market

• Lean production– adaptation of mass production that prizes quality and

flexibility



Evolution of Operations and Supply Chain Management• Supply chain management

– management of the flow of information, products, and services across a network of customers, enterprises, and supply chain partners



Globalization and Competitiveness

• Why “go global”?– favorable cost– access to international markets– response to changes in demand– reliable sources of supply– latest trends and technologies

• Increased globalization– results from the Internet and falling trade barriers



Productivity

Become more efficientDownsizeExpandRetrench Achieve breakthroughs

Productivity =OutputInput

Productivity improves when firms:



Operations strategy


Strategy Formulation

1. Define a primary task2. Assess core

competencies3. Determine order

winners & order qualifiers4. Positioning the firm


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Purpose / mission???

• University

• Bank

• Manufacturer

• Television network



Core competency??

• Operations Management Decisions

• Focus of any organization



Operations Strategy at Wal-Mart


Provide value for our customers

Low prices, everyday

Low inventory levels

Linked communications between stores

Short flow times

Fast transportation system

Cross-docking Focused locationsEDI/satellites

Wal-Mart

Mission

Competitive Priority

Operations Strategy

Operations Structure

Enabling Process and Technologies


Product-Process Matrix

Volu

me

LowLow High

High

Projects

BatchProduction

MassProduction

ContinuousProduction

Standardization



Service-Process Matrix



The Changing Corporation20TH CENTURY 21ST CENTURY

CHARACTERISTIC CORPORATION CORPORATION

Style Structures FlexibleSource of strength Stability ChangeResources Physical assets InformationProducts Mass production Mass customizationReach Domestic GlobalFinancials Quarterly Real-timeInventories Months HoursStrategy Top-down Bottom-upLeadership Dogmatic InspirationalJob expectations Security Personal growthImprovements Incremental RevolutionaryQuality Affordable best No compromiseET ZC412 Production Planning and Control

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Supplement - 1

Decision Analysis


Decision Analysis

A set of quantitative decision-making techniques for decisionsituations where uncertainty exists



Decision Making

States of natureEvents that may occur in the futureDecision maker is uncertain which state of nature will occurDecision maker has no control over the states of nature

TypesCertaintyUncertainty

Risk



Southern Textile Company


STATES OF NATURE

Good Foreign Poor ForeignDECISION Competitive Conditions Competitive Conditions

Expand $ 800,000 $ 500,000Maintain status quo 1,300,000 -150,000Sell now 320,000 320,000


Southern Textile CompanySTATES OF NATURE



Example S2.1

Maximax Solution

Expand: $800,000Status quo: 1,300,000 MaximumSell: 320,000

Decision: Maintain status quo






Example S2.1

Maximin Solution

Expand: $500,000 MaximumStatus quo: -150,000Sell: 320,000

Decision: Expand


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Example S2.1

Equal Likelihood Criteria

Two states of nature each weighted 0.50

Expand: $800,000(0.5) + 500,000(0.5) = $650,000 Maximum

Status quo: 1,300,000(0.5) -150,000(0.5) = 575,000

Sell: 320,000(0.5) + 320,000(0.5) = 320,000

Decision: Expand



Decision Making with Probabilities

Risk involves assigning probabilities to states of nature

Expected value is a weighted average of decision outcomes in which each future state of nature is assigned a probability of occurrence



Expected Value


EV (x) = p(xi)xi

n

i =1

wherexi = outcome i

p(xi) = probability of outcome i


Southern Textile Decision Tree

0.40

0.60

Warehouse(-$600,000)

Sell land

Marketgrowth

0.70

Marketgrowth

0.80

0.20

Sell land

2

1

3

4

5

6

7

Expand(-$800,000)

Purchase Land(-$200,000)

Expand(-$800,000)

0.60

0.40No market

growth$225,000

Market growth$2,000,000

$3,000,000

$700,000

$2,300,000

$1,000,000

$210,000

No marketgrowth

No marketgrowth

0.30

No marketgrowth (3 years,

$0 payoff)

Marketgrowth (3 years,

$0 payoff)

Example S2.3ET ZC412 Production Planning and Control


Decision Tree Solution

6

7

2

1

3

4

5

Expand(-$800,000)

Purchase Land(-$200,000)

$1,160,000

$1,360,000 $790,000

$1,390,000

$1,740,000

$2,540,000Expand

(-$800,000)

Warehouse(-$600,000)

0.60

0.40No market

growth$225,000

Market growth$2,000,000

$3,000,000

$700,000

$2,300,000

$1,000,000

$210,000

Marketgrowth

Marketgrowth

No marketgrowth

No marketgrowthSell land

Sell land

0.80

0.40

0.70

0.30

No marketgrowth (3 years,

$0 payoff)

Marketgrowth (3 years,

$0 payoff)

$1,290,000

0.20

0.60

Example S2.3ET ZC412 Production Planning and Control


THANK YOU


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Slides Adopted and Modified from the Course Text Book –Russel R.S. and Taylor, B.W., “Operations Management Along the Supply Chain”, 6th Edition, Wiley Student Edition, 2009.

Lecture-1: Introduction


QUALITY MANAGEMENTChapter 2


BITS Pilani, Pilani CampusET ZC412 Production Planning and Control

Lecture Outline

• What Is Quality?• Evolution of Quality

Management• Quality Tools• TQM and QMS• Focus of Quality

Management—Customers• Role of Employees in Quality

Improvement

• Quality in Service Companies• Six Sigma• Cost of Quality• Effect of Quality Management

on Productivity• Quality Awards• ISO 9000


What Is Quality:Customer’s Perspective

Fitness for usehow well product or service does what it is supposed to

Quality of designdesigning quality characteristics into a product or service

A Mercedes and a Ford are equally “fit for use,” but with different design dimensions.


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Dimensions of Quality:Manufactured Products

Performance basic operating characteristics of a product; how well a car handles or its gas mileage

Features “extra” items added to basic features, such as a stereo CD or a leather interior in a car

Reliabilityprobability that a product will operate properly within an expected time frame; that is, a TV will work without repair for about seven years



Dimensions of Quality:Manufactured Products (cont.)

Conformancedegree to which a product meets pre–established standards

Durabilityhow long product lasts before replacement; with care, L.L.Bean boots may last a lifetime

Serviceabilityease of getting repairs, speed of repairs, courtesy and competence of repair person



Dimensions of Quality:Manufactured Products (cont.)

Aestheticshow a product looks, feels, sounds, smells, or tastes

Safety assurance that customer will not suffer injury or harm from a product; an especially important consideration for automobiles

Perceptionssubjective perceptions based on brand name, advertising, and like



Dimensions of Quality:Services

Time and timelinesshow long must a customer wait for service, and is it completed on time?is an overnight package delivered overnight?

Completeness:is everything customer asked for provided?is a mail order from a catalogue company complete when delivered?



Dimensions of Quality:Service (cont.)

Courtesy:how are customers treated by employees?are catalogue phone operators nice and are their voices pleasant?

Consistencyis same level of service provided to each customer each time?is your newspaper delivered on time every morning?



Dimensions of Quality:Service (cont.)

Accessibility and conveniencehow easy is it to obtain service?does service representative answer you calls quickly?

Accuracyis service performed right every time?is your bank or credit card statement correct every month?

Responsivenesshow well does company react to unusual situations?how well is a telephone operator able to respond to a customer’s questions?


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What Is Quality:Producer’s Perspective

Quality of conformancemaking sure product or service is produced according to design

if new tires do not conform to specifications, they wobbleif a hotel room is not clean when a guest checks in, hotel is not functioning according to specifications of its design



Meaning of Quality



What Is Quality:A Final Perspective

Customer’s and producer’s perspectives depend on each otherProducer’s perspective:

production process and COSTCustomer’s perspective:

fitness for use and PRICE Customer’s view must dominate



From the consumer’s (e.g., student or parent) perspective, quality is probably determined by whether the college education provides the job opportunity expected and whether the graduate perceives he or she has acquired an anticipated level of knowledge that will enable the graduate to perform the job effectively. From the producer’s (e.g., university) perspective, quality is how effectively it is able to deliver knowledge (i.e., required courses) and provide the quality of life experience expected by the student.



The education achieved by the student provides the job opportunities expected and a level of knowledge that enables the graduate effectively to perform the job achieved.Quality circles could be developed within administrative and operational units and academic departments. Circles might include both faculty or administrators and classified employees. The normal quality circle stages of training, problem identification, analysis, solution, and presentation could be followed.



Quality-assurance costs include the cost of hiring the best faculty, administrators, andsupport personnel, the cost of designing and redesigning courses and curriculum to meet changing needs, the cost of providing a good physical and mental environment (i.e., housing, food, entertainment, security, etc.), the cost of modern technical teaching equipment, the cost of information systems, and the cost of assessing alumni satisfaction with their education. Costs of poor quality include students who fail or drop out, reduced funding from the state or private donors, and fewer enrollments.


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Evolution of Quality Management: Quality Gurus

• Walter Shewart– In 1920s, developed control charts– Introduced term “quality assurance”

• W. Edwards Deming– Developed courses during World War II to teach statistical quality-

control techniques to engineers and executives of companies that were military suppliers

– After war, began teaching statistical quality control to Japanese companies

• Joseph M. Juran– Followed Deming to Japan in 1954– Focused on strategic quality planning – Quality improvement achieved by focusing on projects to solve

problems and securing breakthrough solutions



Evolution of Quality Management: Quality Gurus (cont.)

Armand V. FeigenbaumIn 1951, introduced concepts of total quality control and continuous quality improvement

Philip Crosby In 1979, emphasized that costs of poor quality far outweigh cost of preventing poor qualityIn 1984, defined absolutes of quality management—conformance to requirements, prevention, and “zero defects”

Kaoru IshikawaPromoted use of quality circlesDeveloped “fishbone” diagram Emphasized importance of internal customer



Deming Wheel: PDCA Cycle



Quality Tools

• Process Flow Chart• Cause-and-Effect Diagram• Check Sheet• Pareto Analysis

• Histogram• Scatter Diagram• Statistical Process

Control Chart



Flow Chart



Cause-and-Effect Diagram

• Cause-and-effect diagram (“fishbone” diagram)– chart showing different categories of problem causes

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Cause-and-Effect Matrix

• Cause-and-effect matrix– grid used to prioritize causes of quality problems


Check Sheets and Histograms



NUMBER OFCAUSE DEFECTS PERCENTAGE

Poor design 80 64 %Wrong part dimensions 16 13Defective parts 12 10Incorrect machine calibration 7 6Operator errors 4 3Defective material 3 2Surface abrasions 3 2

125 100 %

Pareto Analysis



Perc

ent f

rom

eac

h ca

use

Causes of poor quality

0

10

20

30

40

50

60

70(64)

(13)(10)

(6)(3) (2) (2)

Pareto Chart



Scatter Diagram


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Control Chart



TQM and QMS

• Total Quality Management (TQM)– customer-oriented, leadership, strategic planning,

employee responsibility, continuous improvement, cooperation, statistical methods, and training and education

• Quality Management System (QMS)– system to achieve customer satisfaction that

complements other company systems



Focus of Quality Management—Customers

• TQM and QMSs– serve to achieve customer satisfaction

• Partnering– a relationship between a company and its supplier

based on mutual quality standards• Measuring customer satisfaction

– important component of any QMS– customer surveys, telephone interviews



Role of Employees in Quality Improvement

• Participative problem solving– employees involved in

quality-management– every employee has

undergone extensive training to provide quality service to Disney’s guests

• Kaizen– involves everyone in process

of continuous improvement



Quality Circles and QITs

• Quality circle– group of workers and

supervisors from same area who address quality problems

• Process/Quality improvement teams (QITs)– focus attention on business

processes rather than separate company functions

PresentationImplementation

Monitoring

SolutionProblem results

Problem Analysis

Cause and effectData collection

and analysis

Problem IdentificationList alternatives

ConsensusBrainstorming

TrainingGroup processesData collection

Problem analysis

Organization8-10 members

Same areaSupervisor/moderator



Quality in Services

• Service defects are not always easy to measure because service output is not usually a tangible item

• Services tend to be labor intensive• Services and manufacturing companies have

similar inputs but different processes and outputs


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Quality Attributes in Services

• Principles of TQM apply equally well to services and manufacturing

• Timeliness– how quickly a service is

provided?• Benchmark

– “best” level of quality achievement in one company that other companies seek to achieve

“quickest, friendliest, most accurate service

available.”


Cost of Quality

• Cost of Achieving Good Quality– Prevention costs

• costs incurred during product design– Appraisal costs

• costs of measuring, testing, and analyzing• Cost of Poor Quality

– Internal failure costs• include scrap, rework, process failure, downtime, and price

reductions– External failure costs

• include complaints, returns, warranty claims, liability, and lost sales



Prevention Costs

• Quality planning costs– costs of developing and

implementing quality management program

• Product-design costs– costs of designing products

with quality characteristics• Process costs

– costs expended to make sure productive process conforms to quality specifications

• Training costs– costs of developing and

putting on quality training programs for employees and management

• Information costs– costs of acquiring and

maintaining data related to quality, and development and analysis of reports on quality performance



Appraisal Costs

• Inspection and testing– costs of testing and inspecting materials, parts, and product at various

stages and at end of process• Test equipment costs

– costs of maintaining equipment used in testing quality characteristics of products

• Operator costs– costs of time spent by operators to gather data for testing product

quality, to make equipment adjustments to maintain quality, and to stop work to assess quality



Internal Failure Costs

• Scrap costs– costs of poor-quality products

that must be discarded, including labor, material, and indirect costs

• Rework costs– costs of fixing defective

products to conform to quality specifications

• Process failure costs– costs of determining why

production process is producing poor-quality products

• Process downtime costs– costs of shutting down

productive process to fix problem

• Price-downgrading costs– costs of discounting poor-

quality products—that is, selling products as “seconds”



External Failure Costs

• Customer complaint costs– costs of investigating and

satisfactorily responding to a customer complaint resulting from a poor-quality product

• Product return costs– costs of handling and

replacing poor-quality products returned by customer

• Warranty claims costs– costs of complying with

product warranties

• Product liability costs– litigation costs resulting from

product liability and customer injury

• Lost sales costs– costs incurred because

customers are dissatisfied with poor-quality products and do not make additional purchases


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Measuring and Reporting Quality Costs

• Index numbers– ratios that measure quality costs against a base value– labor index

• ratio of quality cost to labor hours– cost index

• ratio of quality cost to manufacturing cost– sales index

• ratio of quality cost to sales– production index

• ratio of quality cost to units of final product



Quality–Cost Relationship

• Cost of quality– difference between price of nonconformance and

conformance– cost of doing things wrong

• 20 to 35% of revenues

– cost of doing things right• 3 to 4% of revenues



Effect of Quality Management on Productivity

• Productivity– ratio of output to input

• Quality impact on productivity– fewer defects increase output, and quality improvement

reduces inputs• Yield

– a measure of productivity

Yield=(total input)(% good units) + (total input)(1-%good units)(% reworked)

or

Y=(I)(%G)+(I)(1-%G)(%R)ET ZC412 Production Planning and Control


Computing Product Cost per Unit

YRKIK rd ))(())((

Product Cost

where:Kd = direct manufacturing cost per unitI = inputKr = rework cost per unitR = reworked unitsY = yield



Computing Product Yield for Multistage Processes

Y = (I)(%g1)(%g2) … (%gn)

where:I = input of items to the production process that will result in finished productsgi = good-quality, work-in-process products at stage i



Quality–Productivity Ratio

QPR– productivity index that includes productivity and quality

costs

QPR =(good-quality units)

(input) (processing cost) + (reworked units) (rework cost)(100)


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THANK YOU


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DECISION MAKING



Southern Textile Company

STATES OF NATURE





Decision Making with Probabilities: Example

STATES OF NATURE



p(good) = 0.70 p(poor) = 0.30EV(expand): $800,000(0.7) + 500,000(0.3) = $710,000EV(status quo): 1,300,000(0.7) -150,000(0.3) = 865,000 MaximumEV(sell): 320,000(0.7) + 320,000(0.3) = 320,000

Decision: Status quo



Expected Value of Perfect Information

• EVPI– maximum value of perfect information to the

decision maker– maximum amount that would be paid to gain

information that would result in a decision better than the one made without perfect information


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EVPI Example

Good conditions will exist 70% of the timechoose maintain status quo with payoff of $1,300,000

Poor conditions will exist 30% of the timechoose expand with payoff of $500,000

Expected value given perfect information= $1,300,000 (0.70) + 500,000 (0.30)= $1,060,000

Recall that expected value without perfect information was $865,000 (maintain status quo)

EVPI= $1,060,000 - 865,000 = $195,000



• CPP Builders, a real estate development firm is considering several alternative development projects, which are shown in table below. The financial success of these projects depends on the interest rate movement in the next five years. The various development projects and their five-year financial return in (Rs. Millions) given that interest rates will decline, remain stable or increase are shown in the table below:

Determine the best investment using the following decision criteria• Hurwicz Criterion ( = 0.3)• CPP builders have hired an economist to assign a probability to each direction interest rates

may take over the next five years. The economist has determined that there is a 0.50 probability that interest rates will decline, a 0.40 probability that rates will remain stable, and a 0.10 probability that rates will increase. Using these values, determine the best project.

• Determine the expected value of perfect information.

Alternatives Interest ratesDecline Stable Increase

Office building 0.5 1.7 4.5Parking lot 1.5 1.9 2.4Warehouse 1.7 1.4 1.0Shopping mall 0.7 2.4 3.6

Condominiums 3.2 1.5 0.6



• What kind of errors might be there in a State Roadways Company?



What kind of errors might be there in a State Roadways Company?

• Lack of available buses to cover all routes• Lack of available drivers to cover all routes• Lack of maintenance personnel to service buses.• Unsafe or defective transmissions on buses• Lack of customer accommodations (i.e. bike racks, priority seating for

elderly) on buses.• Lack of handicapped facilities (i.e. wheelchair loading ramps) on buses.• Lack of routes available for rural areas outside the metropolitan area• Poorly developed time schedules for buses that do not take local driving

conditions (i.e. traffic congestion, weather) into account.• Defective equipment on buses (i.e. speaker systems that are too loud or

too soft for passenger comfort.)• Customer service issues (i.e. bus drivers who are surly; “tour guide”

drivers who feel obliged to keep up a running dialogue instead of concentrating on driving the bus, etc.)



Possible causes of car not starting



Example of product yield


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From the consumer’s (e.g., student or parent) perspective, quality is probably determined by whether the college education provides the job opportunity expected and whether the graduate perceives he or she has acquired an anticipated level of knowledge that will enable the graduate to perform the job effectively. From the producer’s (e.g., university) perspective, quality is how effectively it is able to deliver knowledge (i.e., required courses) and provide the quality of life experience expected by the student.



The education achieved by the student provides the job opportunities expected and a level of knowledge that enables the graduate effectively to perform the job achieved.Quality circles could be developed within administrative and operational units and academic departments. Circles might include both faculty or administrators and classified employees. The normal quality circle stages of training, problem identification, analysis, solution, and presentation could be followed.



Quality-assurance costs include the cost of hiring the best faculty, administrators, andsupport personnel, the cost of designing and redesigning courses and curriculum to meet changing needs, the cost of providing a good physical and mental environment (i.e., housing, food, entertainment, security, etc.), the cost of modern technical teaching equipment, the cost of information systems, and the cost of assessing alumni satisfaction with their education. Costs of poor quality include students who fail or drop out, reduced funding from the state or private donors, and fewer enrollments.



Lecture Outline

• Design Process• Concurrent Design• Technology in Design• Design Reviews• Design for Environment• Design for Robustness• Quality Function Deployment



Design Process

• Effective design can provide a competitive edge– matches product or service characteristics with customer

requirements– ensures that customer requirements are met in the

simplest and least costly manner– reduces time required to design a new product or service– minimizes revisions necessary to make a design workable



Design Process (cont.)

• Product design– defines appearance of product– sets standards for performance– specifies which materials are to be used– determines dimensions and tolerances


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Idea Generation

• Company’s own R&D department

• Customer complaints or suggestions

• Marketing research• Suppliers

• Salespersons in the field

• Factory workers• New technological

developments• Competitors



Idea Generation (cont.)

Perceptual MapsVisual comparison of customer perceptions

BenchmarkingComparing product/process against best-in-class

Reverse engineeringDismantling competitor’s product to improve your own product



Perceptual Map of Breakfast Cereals



Feasibility Study

• Market analysis• Economic analysis• Technical/strategic analyses• Performance specifications



Rapid Prototyping

• testing and revising a preliminary design model

• Build a prototype– form design– functional design– production design

• Test prototype• Revise design• Retest


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Form and Functional Design

• Form Design– how product will

look?

• Functional Design– how product will

perform?• reliability• maintainability• usability



Computing Reliability

0.90 0.90 0.90 x 0.90 = 0.81

Components in series



Computing Reliability (cont.)

0.95 + 0.90(1-0.95) = 0.995

Components in parallel

0.95

0.90R2

R1



System Reliability

0.92

0.90

0.98 0.98

0.92+(1-0.92)(0.90)=0.990.98 0.98

0.98 x 0.99 x 0.98 = 0.951




SA = MTBFMTBF + MTTR

System Availability (SA)

where:MTBF = mean time between failures MTTR = mean time to repair


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PROVIDER MTBF (HR) MTTR (HR)A 60 4.0B 36 2.0C 24 1.0

SAA = 60 / (60 + 4) = .9375 or 94%SAB = 36 / (36 + 2) = .9473 or 95%SAC = 24 / (24 + 1) = .96 or 96%

System Availability (cont.)




Usability

• Ease of use of a product or service– ease of learning– ease of use– ease of remembering how to use– frequency and severity of errors– user satisfaction with experience



Production Design

How the product will be madeSimplification

• reducing number of parts, assemblies, or options in a productStandardization

• using commonly available and interchangeable parts

Modular Design• combining standardized building blocks, or modules, to create

unique finished productsDesign for Manufacture (DFM)

• Designing a product so that it can be produced easily and economically



(b) Revised design

One-piece base & elimination of fasteners

(c) Final design

Design for push-and-snap assembly

(a) Original design

Assembly using common fasteners

Source: Adapted from G. Boothroyd and P. Dewhurst, “Product Design…. Key to

Successful Robotic Assembly.” Assembly Engineering (September 1986), pp. 90-93.

Design Simplification



Final Design and Process Plans

• Final design– detailed drawings and

specifications for new product or service

• Process plans– workable instructions

• necessary equipment and tooling

• component sourcing recommendations

• job descriptions and procedures

• computer programs for automated machines


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Design Team



Concurrent Design

• A new approach to design that involves simultaneous design of products and processes by design teams

• Improves quality of early design decisions

• Involves suppliers• Incorporates production

process• Uses a price-minus system• Scheduling and

management can be complex as tasks are done in parallel

• Uses technology to aid design



THANK YOU


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Lecture Outline

• Design Process• Concurrent Design• Technology in Design• Design Reviews• Design for Environment• Design for Robustness• Quality Function Deployment



Design Process

• Effective design can provide a competitive edge– matches product or service characteristics with customer

requirements– ensures that customer requirements are met in the

simplest and least costly manner– reduces time required to design a new product or service– minimizes revisions necessary to make a design workable




• Product design– defines appearance of product– sets standards for performance– specifies which materials are to be used– determines dimensions and tolerances



Concurrent Design

• A new approach to design that involves simultaneous design of products and processes by design teams

• Improves quality of early design decisions

• Involves suppliers• Incorporates production

process• Uses a price-minus system• Scheduling and

management can be complex as tasks are done in parallel

• Uses technology to aid design


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Technology in Design

• Computer Aided Design (CAD)– assists in creation, modification, and analysis of a design– computer-aided engineering (CAE)

• tests and analyzes designs on computer screen

– computer-aided manufacturing (CAD/CAM)• ultimate design-to-manufacture connection

– product life cycle management (PLM)• managing entire lifecycle of a product

– collaborative product design (CPD)



Collaborative Product Design (CPD)• A software system for collaborative design and development

among trading partners• With PML, manages product data, sets up project workspaces,

and follows life cycle of the product• Accelerates product development, helps to resolve product

launch issues, and improves quality of design• Designers can

– conduct virtual review sessions– test “what if” scenarios– assign and track design issues– communicate with multiple tiers of suppliers– create, store, and manage project documents



Design Review

• Review designs to prevent failures and ensure value– Failure mode and effects analysis (FMEA)

• a systematic method of analyzing product failures

– Fault tree analysis (FTA)• a visual method for analyzing interrelationships among failures

– Value analysis (VA)• helps eliminate unnecessary features and functions



FMEA for Potato ChipsFailureMode

Cause of Failure

Effect ofFailure

CorrectiveAction

Stale low moisture contentexpired shelf lifepoor packaging

tastes badwon’t crunchthrown outlost sales

add moisturecure longerbetter package sealshorter shelf life

Broken too thintoo brittlerough handlingrough usepoor packaging

can’t dippoor displayinjures mouthchockingperceived as oldlost sales

change recipechange processchange packaging

Too Salty outdated receiptprocess not in controluneven distribution of salt

eat lessdrink morehealth hazardlost sales

experiment with recipeexperiment with processintroduce low salt version


Fault tree analysis (FTA)



Value analysis (VA)

• Can we do without it?• Does it do more than is required?• Does it cost more than it is worth?• Can something else do a better job?• Can it be made by

– a less costly method?– with less costly tooling?– with less costly material?

• Can it be made cheaper, better, or faster by someone else?


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Value analysis (VA) (cont.)

• Updated versions also include:– Is it recyclable or biodegradable?– Is the process sustainable?– Will it use more energy than it is worth?– Does the item or its by-product harm the

environment?



Design for Environment andExtended Producer Responsibility

• Design for environment– designing a product from material that can be recycled – design from recycled material– design for ease of repair– minimize packaging– minimize material and energy used during manufacture, consumption

and disposal• Extended producer responsibility

– holds companies responsible for their product even after its useful life



Design for Environment



Quality FunctionDeployment (QFD)

• Translates voice of customer into technical design requirements

• Displays requirements in matrix diagrams– first matrix called “house of quality”– series of connected houses



House of Quality

Trade-off matrix

Design characteristics

Customer requirements

Target values

Relationship matrix

Competitive assessment

Impo

rtanc

e

1 2

3

4

5

6



Outline the process of building the house of quality. What departments and functions within the company are generally involved in each step of the process.

• In the QFD development process, a set of matrices is used to relate the voice of the customer to a product’s technical requirements, component requirements, process control plans, and manufacturing operations. The first matrix, called the House of Quality, provides the basis for the QFD concept.


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• Building the House of Quality consists of six basic steps:• Identify customer requirements.• Identify technical requirements.• Relate the customer requirements to the technical

requirements.• Conduct an evaluation of competing products or services• Evaluate technical requirements and develop targets.• Determine which technical requirements to deploy in the

remainder of the production/delivery process.



• The first House of Quality in the QFD process provides marketing with an important tool to understand customer needs and gives top management strategic direction. Three other “houses of quality” are used to deploy the voice of the customer to (in a manufacturing setting) component parts characteristics, process plans, and quality control. The second house applies to subsystems and components. At this stage, target values representing the best values for fit, function, and appearance are determined. In manufacturing, most of the QFD activities represented by the first two houses of quality are performed by product development and engineering functions.



Competitive Assessment of Customer Requirements


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Competitive AssessmentCustomer Requirements 1 2 3 4 5Presses quickly 9 B A XRemoves wrinkles 8 AB XDoesn’t stick to fabric 6 X BAProvides enough steam 8 AB XDoesn’t spot fabric 6 X ABDoesn’t scorch fabric 9 A XBHeats quickly 6 X B AAutomatic shut-off 3 ABXQuick cool-down 3 X A BDoesn’t break when dropped 5 AB XDoesn’t burn when touched 5 AB XNot too heavy 8 X A B


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Customer RequirementsPresses quickly - - + + + -Removes wrinkles + + + + +Doesn’t stick to fabric - + + + +Provides enough steam + + + +Doesn’t spot fabric + - - -Doesn’t scorch fabric + + + - +Heats quickly - - + -Automatic shut-off +Quick cool-down - - + +Doesn’t break when dropped + + + +Doesn’t burn when touched + + + +Not too heavy + - - - + -

Irons

w

ell

Easy

and

sa

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use

From Customer Requirementsto Design Characteristics



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Tradeoff Matrix



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Units of measure ft-lb lb in. cm ty ea mm oz/s sec sec Y/N Y/N

Iron A 3 1.4 8x4 2 SS 27 15 0.5 45 500 N Y

Iron B 4 1.2 8x4 1 MG 27 15 0.3 35 350 N Y

Our Iron (X) 2 1.7 9x5 4 T 35 15 0.7 50 600 N Y

Estimated impact 3 4 4 4 5 4 3 2 5 5 3 0

Estimated cost 3 3 3 3 4 3 3 3 4 4 5 2

Targets 1.2 8x5 3 SS 30 30 500

Design changes * * * * * * *

Obj

ectiv

e m

easu

res

Targeted Changes in Design


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5


SS = SilverstoneMG = MirorrglideT = Titanium

CompletedHouse of Quality



A Series of Connected QFD Houses

Cust

omer

re

quir

emen

ts

House of quality

Product characteristics

A-1

Prod

uct

char

acte

ristic

s

Parts deployment

Part characteristics

A-2

Part

char

acte

ristic

s

Process planning

Process characteristics

A-3

Proc

ess

char

acte

ristic

s

Operating requirements

Operations

A-4



Benefits of QFD

Promotes better understanding of customer demandsPromotes better understanding of design interactionsInvolves manufacturing in design processProvides documentation of design process



• Differentiate between a service and a manufacturing organization. What are the implications of these differences for quality assurance? Again how do the service standards differ from manufacturing specifications? How are they similar?



• Customer needs and performance standards are difficult to quantify in services.

• The production of services often requires a high degree of customization.

• The output of many services is intangible, unlike manufactured goods.

• Services are produced and consumed simultaneously.• Customers must often be involved and present during

the performance of the service process.• Services are more labor intensive, where manufacturing

is more capital intensive.• Many service organizations handle large numbers of

transactions.



• Performance standards in service organizations are equally as important as specifications in manufacturing firms. Services must also “meet or exceed customer expectations.” Customer needs are often more difficult to identify and quantify in services, because individual customers are different and bring their own wants and needs into the definition of what is good or excellent quality. They demand a higher degree of customization, rather than standardization, which is common specification in manufacturing.


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Service DesignChapter 5


Characteristics of Services

• Services– acts, deeds, or performances

• Goods– tangible objects

• Facilitating services– accompany almost all purchases of goods

• Facilitating goods– accompany almost all service purchases



Characteristicsof Services (cont.)

• Services are intangible• Service output is variable• Services have higher customer

contact• Services are perishable

• Service inseparable from delivery

• Services tend to be decentralized and dispersed

• Services are consumed more often than products

• Services can be easily emulated



Service Design Process


Service Design Process (cont.)

• Service concept– purpose of a service; it defines target market and

customer experience• Service package

– mixture of physical items, sensual benefits, and psychological benefits

• Service specifications– performance specifications– design specifications – delivery specifications



Service Process Matrix

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7


Tools for Service Design

• Service blueprinting– line of influence– line of interaction– line of visibility– line of support

• Front-office/Back-office activities

• Servicescapes– space and function– ambient conditions– signs, symbols, and

artifacts

• Quantitative techniques



Service Blueprinting



Service Blueprinting (Con’t)



Elements ofWaiting Line Analysis• Operating characteristics

– average values for characteristics that describe performance of waiting line system

• Queue– a single waiting line

• Waiting line system– consists of arrivals, servers, and waiting line structure

• Calling population– source of customers; infinite or finite




Elements ofWaiting Line Analysis (cont.)• Arrival rate ( )

– frequency at which customers arrive at a waiting line according to a probability distribution, usually Poisson

• Service time ( )– time required to serve a customer, usually described by negative

exponential distribution• Service rate must be shorter than arrival rate ( < )• Queue discipline

– order in which customers are served• Infinite queue

– can be of any length; length of a finite queue is limited


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Elements ofWaiting Line Analysis (cont.)

• Channels– number of parallel servers

for servicing customers• Phases

– number of servers in sequence a customer must go through



Operating Characteristics

• Operating characteristics are assumed to approach a steady state



Traditional Cost Relationships

• as service improves, cost increases



Psychology of Waiting

• Disney– costumed

characters– mobile vendors– accurate wait times– special passes

• Waiting rooms– magazines and

newspapers– televisions

• Bank of America– mirrors

• Supermarkets– magazines– “impulse

purchases”



Psychology of Waiting (cont.)

• Preferential treatment– Grocery stores: express lanes for customers with few

purchases– Airlines/Car rental agencies: special cards available to

frequent-users or for an additional fee– Phone retailers: route calls to more or less experienced

salespeople based on customer’s sales history• Critical service providers

– services of police department, fire department, etc.– waiting is unacceptable; cost is not important



Waiting Line Models

• Single-server model– simplest, most basic waiting line structure

• Frequent variations (all with Poisson arrival rate)– exponential service times– general (unknown) distribution of service times– constant service times– exponential service times with finite queue– exponential service times with finite calling

population


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Basic Single-Server Model

• Assumptions– Poisson arrival rate– exponential service times– first-come, first-served

queue discipline– infinite queue length– infinite calling population

• Computations– = mean arrival rate– = mean service rate– n = number of

customers in line



Basic Single-Server Model (cont.)• probability that no customers are in

queuing system

• probability of n customers in queuing system

• average number of customers in queuing system

• average number of customers in waiting line

( )P0 = 1 –

( ) ( )( )Pn = P0 = 1 –n n

L =

Lq =2

)



Basic Single-Server Model (cont.)• average time customer spends in

queuing system

• average time customer spends waiting in line

• probability that server is busy and a customer has to wait (utilization factor)

• probability that server is idle and customer can be served

1 LW = =

)Wq =

=

I = 1 –

= 1 – = P0



Basic Single-Server Model Example



Basic Single-Server Model Example (cont.)



Service Improvement Analysis

• waiting time (8 min.) is too long– hire assistant for cashier?

• increased service rate

– hire another cashier?• reduced arrival rate

• Is improved service worth the cost?


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10


• All trucks travelling on NH 8 are required to stop at a weigh station. Trucks arrive at the weigh station at a rate of 120 per eight-hour day (Poisson distributed) and the station can weigh on the average 140 trucks per day (Poisson distributed)

– Determine the average number of trucks waiting, the average time spent at the weigh station by each truck, and the average waiting time before being weighted for each truck.

– If the truck drivers find out they must remain at the weigh station longer than 15 minutes on the average, they will start taking a different route or travelling at night, thus depriving the state of taxes. The state of Rajasthan estimates it loses as $10000 in taxes per year for each extra minute (over 15) that the trucks must remain at the weigh station. A new set of scales would have the same service capacity at the present set of scales, and it is assumed that the arriving trucks would line up equally behind the two set of scales. It would cost $50000 per year to operate the new scales. Should the state install the new set of scales?

– Suppose arriving truck drivers look to see how many trucks are waiting to be weighted at the weigh station. If they see four or more trucks in line they will pass by the station and risk being caught and ticketed. What is the probability that a truck will pass by the station?



Basic Multiple-Server Model

• single waiting line and service facility with several independent servers in parallel

• same assumptions as single-server model• s >

– s = number of servers– servers must be able to serve customers faster than they

arrive



Basic Multiple-Server Model (cont.)


Basic Multiple-Server Model (cont.)

• probability that customer must wait

( )1 s s

s! sPw = P0

)s

(s – 1)! (s )2L = P0 +

LW =

Lq = L –

1 LqWq = W – =

=s



Basic Multiple-Server Model Example



Basic Multiple-Server Model Example (cont.)


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11











Basic Multiple-Server Model Example (cont.)• To cut wait time, add another service

representative– now, s = 4

• Therefore:



THANK YOU


3/22/2012

1







PROCESSES AND TECHNOLOGY

Chapter 6



Lecture Outline

• Process Planning• Process Analysis• Process Innovation• Technology Decisions



Process Planning

• Process Planning is aimed at design of most efficient method of manufacturing a product or delivering a service.

• It is concerned with detailed description of operations needed to manufacture a product of deliver a service and the relationship between them.



Factors affecting process design

• Pattern of demand• Capital intensity• Process flexibility• Vertical integration• Customer involvement• Product quality


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2


Make Or

Buy????



Make or Buy Decisions

• WHY????– Capacity not free – Demand is variable– Cheaper to buy– R & D costs– No experience or expertise



Make or Buy Decisions

• Costs• Capacity• Quality• Speed• Reliability• Expertise



Process Planning

• Process– a group of related tasks with specific inputs and outputs

• Process design– what tasks need to be done and how they are coordinated among

functions, people, and organizations• Process strategy

– an organization’s overall approach for physically producing goods and services

• Process planning– converts designs into workable instructions for manufacture or

delivery



Process Strategy

• Vertical integration– extent to which firm will produce inputs and control outputs of each

stage of production process• Capital intensity

– mix of capital (i.e., equipment, automation) and labor resources used in production process

• Process flexibility– ease with which resources can be adjusted in response to changes in

demand, technology, products or services, and resource availability• Customer involvement

– role of customer in production process



Outsourcing

• Cost• Capacity• Quality

• Speed• Reliability• Expertise


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3


Process Selection

• Projects– one-of-a-kind production of a product to customer order

• Batch production– processes many different jobs at the same time in groups or batches

• Mass production– produces large volumes of a standard product for a mass market

• Continuous production– used for very-high volume commodity products



Sourcing Continuum



Product-Process Matrix

Source: Adapted from Robert Hayes and Steven Wheelwright, Restoring the Competitive Edge Competing through Manufacturing (New York, John Wiley & Sons, 1984), p. 209.



PROJECT BATCH

Types of Processes

Type of product

Unique Made-to-order

(customized)

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York:McGraw-Hill, 2001), p. 210

Type of customer

One-at-a-time

Few individualcustomers

MASS

Made-to-stock

(standardized )

Massmarket

CONT.

Commodity

Massmarket

Product demand Infrequent Fluctuates Stable Very stable



PROJECT BATCH

Types of Processes (cont.)

Demand volume

Very lowLow to

medium


No. of different products

Infinite variety Many, varied

MASS

High

Few

CONT.

Very high

Very few

Production system

Long-term project

Discrete, job shops

Repetitive, assembly

lines

Continuous, process

industries



PROJECT BATCH


Equipment

VariedGeneral-purpose


Primary type of work

Specialized contracts Fabrication

MASS

Special-purpose

Assembly

CONT.

Highly automated

Mixing, treating, refining

Worker skillsExperts, crafts-

persons

Wide range of skills

Limited range of skills

Equipment monitors


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4


PROJECT BATCH


Advantages

Custom work, latest technology

Flexibility, quality


Dis-advantages

Non-repetitive, small customer base,

expensive

Costly, slow,difficult to

manage

MASS

Efficiency,speed,

low cost

Capitalinvestment;

lack ofresponsiveness

CONT.

Highly efficient, large capacity,ease of control

Difficult to change,far-reaching errors,

limited variety

ExamplesConstruction, shipbuilding,

spacecraft

Machine shops,print shops,

bakeries, education

Automobiles,televisions,computers,

fast food

Paint, chemicals, foodstuffs



Process Selection with Break-Even Analysis

• examines cost trade-offs associated with demand volume• Cost

– Fixed costs• constant regardless of the number of units produced

– Variable costs• vary with the volume of units produced

• Revenue– price at which an item is sold

• Total revenue– is price times volume sold

• Profit– difference between total revenue and total cost



Crossover Charts

Fixed costs

Variable costs

$

High volume, low varietyProcess C

Fixed costs

Variable costs$

RepetitiveProcess B

Fixed costs

Variable costs$

Low volume, high varietyProcess A

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

V1(2,857) V2 (6,666)

400,000 300,000 200,000

Volume

$



Process Selection with Break-Even Analysis (cont.)


Total cost = fixed cost + total variable costTC = cf + vcv

Total revenue = volume x priceTR = vp

Profit = total revenue - total costZ = TR – TC = vp - (cf + vcv)


Solving for Break-Even Point (Volume)

TR = TCvp = cf + vcv

vp - vcv = cf

v(p - cv) = cf

v =cf

p - cv

Process Selection with Break-Even Analysis (cont.)



Break-Even Analysis: Example

Fixed cost = cf = $2,000Variable cost = cv = $5 per raft

Price = p = $10 per raft

Break-even point is

v = = = 400 raftscf

p - cv

200010 - 5


3/22/2012

5


Break-Even Analysis: Graph

Total cost line

Total revenue

line

Break-even point400 Units

$3,000 —

$2,000 —

$1,000 —

Dollars



Process Plans

• Set of documents that detail manufacturing and service delivery specifications– assembly charts– operations sheets– quality-control check-sheets



Process Selection


Below or equal to 4,000, choose AAbove or equal to 4,000, choose B

$2,000 + $5v = $10,000 + $3v$2v = $8,000

v = 4,000 rafts

Process A Process B




Process Analysis

• systematic examination of all aspects of process to improve operation

3/22/2012

6


Part name Crevice ToolPart No. 52074Usage Hand-VacAssembly No. 520

Oper. No. Description Dept. Machine/Tools Time

10 Pour in plastic bits 041 Injection molding 2 min

20 Insert mold 041 #076 2 min

30 Check settings 041 113, 67, 650 20 min& start machine

40 Collect parts & lay flat 051 Plastics finishing 10 min

50 Remove & clean mold 042 Parts washer 15 min

60 Break off rough edges 051 Plastics finishing 10 min

An Operations Sheet for a Plastic Part



Process Analysis

• systematic examination of all aspects of process to improve operation

• Building a flowchart– Determine objectives– Define process boundaries– Define units of flow– Choose type of chart– Observe process and collect data– Map out process– Validate chart



Process Flowcharts

• look at manufacture of product or delivery of service from broad perspective

• Incorporate– nonproductive activities (inspection,

transportation, delay, storage)– productive activities (operations)



Process Chart



Operations

Inspection

TransportationDelay

Storage

Process Flowchart Symbols



Process Flowchartof Apple Processing


3/22/2012

7


S. No Description of eventD

Time (mins)

Dist.(m)

Remark

1. Move to bank from home X 10 5002. Collect the computer loan application

form from the teller X 2

3. Fill up the form X 34. Attach necessary documents like

quotation, product brochure etc. along with the form

X 1

5. Wait to meet the manager (Sit on bench) X 206. Call comes, enter the Manger’s room X 0.5 17. Discuss the loan issue with the manager

and submit the loan form X 5

8. Move back to reception X 1 59. Wait for the processing of loan

application X 30

11. Call comes, collect the sanctioned form from the manager X 1.5

12 Move to the cashier X 2 513. Collect the money from cashier X 114. Count the money X 515. Move back to home X 10 500



Operations Count Total Time (mins)

Total Distance (metres)

4 3

4 22 1100

2 1

D 1 5

Data Summery:



Simple Value Chain Flowchart



Process Innovation

Breakthrough Improvement

Continuous improvement refines the breakthrough

Continuous improvement activities peak; time to reengineer process

Total redesign of a process for

breakthrough improvements



StrategicDirectives

Goals for Process Performance

Pilot Studyof New Design

DetailedProcess Map

High - levelProcess map

GoalsMet?

InnovativeIdeas Design

Principles

ModelValidation

CustomerRequirements

KeyPerformance

Measures

Full Scale Implementation

Baseline DataBenchmark

Data

No Yes

Process Innovation


3/22/2012

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High-Level Process Map



Principles for Redesigning Processes

• Remove waste, simplify, and consolidate similar activities• Link processes to create value• Let the swiftest and most capable enterprise execute the

process• Flex process for any time, any place, any way• Capture information digitally at the source and propagate

it through process



Principles for Redesigning Processes (cont.)

• Provide visibility through fresher and richer information about process status

• Fit process with sensors and feedback loops that can prompt action

• Add analytic capabilities to process• Connect, collect, and create knowledge around process

through all who touch it• Personalize process with preferences and habits of

participants



Techniques for Generating Innovative Ideas

• Vary the entry point to a problem– in trying to untangle fishing lines, it’s best to start from the

fish, not the poles• Draw analogies

– a previous solution to an old problem might work• Change your perspective

– think like a customer– bring in persons who have no knowledge of process



Techniques for Generating Innovative Ideas (cont.)

• Try inverse brainstorming– what would increase cost– what would displease the customer

• Chain forward as far as possible– if I solve this problem, what is the next problem

• Use attribute brainstorming– how would this process operate if. . .

• our workers were mobile and flexible• there were no monetary constraints• we had perfect knowledge



Technology Decisions

• Financial justification of technology– Purchase cost– Operating Costs– Annual Savings– Revenue Enhancement– Replacement Analysis– Risk and Uncertainty– Piecemeal Analysis


3/22/2012

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THANK YOU


3/22/2012

1







CAPACITY AND FACILITIESChapter 7



Capacity Decisions

• Capacity: The maximum capability to produce

• Rated/ designed capacity is theoretical• effective capacity includes efficiency and

utilization



Capacity

• Maximum amount that can be produced within a specified time.

• Maximum throughput/hr; max’m output /week; airplane: seats; hospital: number of beds; so on……

• Capacity=time available in year/ time to make one unit

= N*H*S*60*D/M units a year



How do you measure the capacity for the following: i ) A steel plant, ii) University?


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2


How do you measure the capacity for the following: i ) A steel plant, ii) University?

• A steel plants capacity is measured by “tons of steel produced”

• A University capacity is measured by “total intake of students”



Capacity

• Designed capacity• Effective capacity• Efficiency: Actual output/ effective capacity• Utilization: Actual output/ designed capacity• Example:…….



A piece of equipment is designed to work for one 8-hour shift a day, 5 days a week. When working, the machine can produce 100 units per hour, but 10% of its time is needed for maintenance and setup. During one particular week, breakdowns, defective output and other problems meant that the machine could only produce 3000 units. What measures can be found from these data?



No. of units per hour = 100No. of days per week = 5No of hours per shift = 8Actual output = 3000

Total time available = 8 * 5 = 40 hoursDesigned capacity = 100 * 40 = 4000 unit

Maintenance and setup time = 10% of total time = 4 hoursRemaining time available = 40 – 4 = 36 hoursEffective capacity = 36*100 = 3600 unitsEfficiency = Actual output / effective capacity = 3000 / 3600 * 100 = 83.3%Utilization = Actual output / design capacity = 3000 / 4000 * 100 = 75%



• A bottling hall has three distinct parts: Three bottling machines each with a maximum throughput of 200 litres a minute, and average maintenance of one hour a day; Three labelling machines each with a maximum throughput of 6000 bottles an hour, and planned stoppages averaging 60 minutes a day; A packing area with a maximum throughput of 20,000 cases a day. The hall is set to fill litre bottles and put them in cases of 20 bottles during a 8-hour working day.

• What is the designed capacity of the hall?• What is the effective capacity of the hall?• If the bottling hall works at its effective capacity, what is the

utilization of each operation?• If the line develops a fault which reduces output to 70,000 bottles,

what is the efficiency of the operation?



Capacity Planning

• Capacity planning ensures that available capacity is matched to forecast demand over long, medium and short terms.


3/22/2012

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Capacity Planning

Establishes overall level of productive resourcesAffects lead time responsiveness, cost & competitivenessDetermines when and how much to increase capacity



Capacity Decisions

• Capacity utilization– percent of available time spend working

• Capacity efficiency– how well a machine or worker performs compared

to a standard output level• Capacity load

– standard hours of work assigned to a facility• Capacity load percent

– ratio of load to capacity



Managing Demand

• Demand exceeds capacity• Curtail demand by raising prices, scheduling longer

lead time• Long term solution is to increase capacity• Keep spare in stock

• Capacity exceeds demand• Stimulate market• Product changes

• Adjusting to seasonal demands• Produce products with complementary demand

patterns


Tactics for Matching Capacity to Demand

1. Making staffing changes2. Adjusting equipment

• Purchasing additional machinery• Selling or leasing out existing equipment

3. Improving processes to increase throughput4. Redesigning products to facilitate more

throughput5. Adding process flexibility to meet changing

product preferences6. Closing facilities


Capacity

• Maximum capability to produce• Capacity planning

– establishes overall level of productive resources for a firm

• 3 basic strategies for timing of capacity expansion in relation to steady growth in demand (lead, lag, and average)



Capacity Expansion Strategies


3/22/2012

4


Adjusting Capacity to Meet Demand

1. Producing at a constant rate and using inventory to absorb fluctuations in demand (level production)

2. Hiring and firing workers to match demand (chase demand)

3. Maintaining resources for high demand levels4. Increase or decrease working hours (overtime and

undertime)5. Subcontracting work to other firms6. Using part-time workers7. Providing the service or product at a later time period

(backordering)



Adjusting Demand to Meet Capacity

1. Vary the price2. Change the marketing effort3. Offer incentives (free samples/ discounts)4. Make changes in related products (substitution is

possible)5. Keep spare output6. Vary lead time (make customer wait for products in

short supply)7. Use reservations/ appointments/ booking



Capacity (cont.)

• Capacity increase depends on– volume and certainty of anticipated demand– strategic objectives– costs of expansion and operation

• Best operating level– % of capacity utilization that minimizes unit costs

• Capacity cushion– % of capacity held in reserve for unexpected occurrences



Economies of Scale

• it costs less per unit to produce high levels of output– fixed costs can be spread over a larger number of units– production or operating costs do not increase linearly with

output levels– quantity discounts are available for material purchases– operating efficiency increases as workers gain experience



Best Operating Level

• Percent of capacity that minimizes the average unit cost.

• Capacity Cushion: percentage of capacity kept in reserve unexpected occurrences.


Best Operating Level for a Hotel


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Economies of scale occur when high levels of output cost less per unit to produce. This occurs when fixed costs can be spread over a larger number of units, construction costs do not increase linearly with output levels, quantity discounts are available for material purchases, and production efficiency increases as workers gain experience. Mass production and continuous production typically exhibit strong economies of scale. Economies of scale do not continue indefinitely. Above a certain level of output, diseconomies of scale take over. Overtaxed machines and material handling equipment tend to break down, service time slows, quality suffers requiring more rework, labor costs increase with overtime, and coordination and management activities become difficult. In addition, if customer preferences suddenly change, high volume production can leave a firm with unusable inventory and excess capacity. Diseconomies of scale occurred when AOL increased its subscriber base exponentially and many customers were denied access. ET ZC412 Production Planning and Control


Diseconomies of Scale

• Distribution

• Bureaucracy

• Confusion

• Vulnerability


THANK YOU


3/22/2012

1







FACILITIES LAYOUTChapter 7



Machine Objectives of Facility Layout

• Minimize material-handling costs• Utilize space efficiently• Utilize labor efficiently• Eliminate bottlenecks• Facilitate communication and

interaction• Reduce manufacturing cycle time• Reduce customer service time• Eliminate wasted or redundant

movement• Increase capacity

• Facilitate entry, exit, and placement of material, products, and people

• Incorporate safety and security measures

• Promote product and service quality

• Encourage proper maintenance activities

• Provide a visual control of activities• Provide flexibility to adapt to

changing conditions

Arrangement of areas within a facility to:



BASIC LAYOUTS

• Process layouts– group similar activities together according to process or function

they perform• Product layouts

– arrange activities in line according to sequence of operations for a particular product or service

• Fixed-position layouts– are used for projects in which product cannot be moved



A product layout is a sequential arrangement of machines (usually in a line) used to mass produce standardized products for a stable high-volume market. The equipment is special purpose, the workers have limited skills, work-in-process inventory is low, and material moves along a fixed path (like a conveyor). Product layouts are known for their efficiency.

In contrast, a process layout is a functional grouping of machines (usually known as a job shop) used to produce batches of varied products with fluctuating demand and low volume. The equipment is general purpose, the workers have more versatile skills, work-in-process inventory is high, and material moves along a variable path (e.g., with a forklift). Process layouts are known for their flexibility.


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Manufacturing Process Layout



A Product Layout

In

Out



Fixed-Position Layouts


Typical of projects in which product produced is too fragile, bulky, or heavy to moveEquipment, workers, materials, other resources brought to the siteLow equipment utilizationHighly skilled laborTypically low fixed costOften high variable costs


Designing Process Layouts

Goal: minimize material handling costsBlock Diagramming

minimize nonadjacent loads use when quantitative data is available

Relationship Diagrammingbased on location preference between areasuse when quantitative data is not available



Block Diagramming

• Unit load– quantity in which material

is normally moved

• Nonadjacent load– distance farther than the

next block


STEPScreate load summary chartcalculate composite (two way) movementsdevelop trial layouts minimizing number of nonadjacent loads


Block Diagramming: Example

Department 1 2 3 4 5

Load Summary Chart

FROM/TO DEPARTMENT

1 — 100 502 — 200 503 60 — 40 504 100 — 605 50 —

1 2 3

4 5


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Block Diagramming: Example (cont.)

2 3 200 loads2 4 150 loads1 3 110 loads1 2 100 loads4 5 60 loads3 5 50 loads2 5 50 loads3 4 40 loads1 4 0 loads1 5 0 loads

1 2 3

4 5

100 200

150 50 50

60

40

110

Grid 1

Nonadjacent Loads:110+40=150

1 2

3

4

5

100

200

150

50

50 6040110

Grid 2

Nonadjacent Loads:0



Block Diagramming: Example



Relationship Diagramming

• Schematic diagram that uses weighted lines to denote location preference

• Muther’s grid– format for displaying manager preferences for department locations



Relationship Diagramming: Example

Production

Offices

Stockroom

Shipping and receiving

Locker room

Toolroom

A A

AO

O

OO

O

U

UU

U

EX

I

A Absolutely necessaryE Especially importantI ImportantO OkayU UnimportantX Undesirable


Relationship Diagrams: Example (cont.)

(a) Relationship diagram of original layout

Key: AEIOUX

Offices

Stockroom

Locker room

Toolroom


Production


(b) Relationship diagram of revised layout

Offices

Stockroom

Locker room

Toolroom


Production Key: AEIOUX

Relationship Diagrams: Example (cont.)

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Designing Service Layouts

• Must be both attractive and functional• Types

– Free flow layouts• encourage browsing, increase impulse purchasing, are flexible

and visually appealing– Grid layouts

• encourage customer familiarity, are low cost, easy to clean and secure, and good for repeat customers

– Loop and Spine layouts• both increase customer sightlines and exposure to products,

while encouraging customer to circulate through the entire store



Types of Store Layouts



Designing Product Layouts

• Objective– Balance the assembly line

• Line balancing– tries to equalize the amount of work at each workstation

• Precedence requirements– physical restrictions on the order in which operations are

performed• Cycle time

– maximum amount of time a product is allowed to spend at each workstation



Line Balancing: Example

WORK ELEMENT PRECEDENCE TIME (MIN)

A Press out sheet of fruit — 0.1B Cut into strips A 0.2C Outline fun shapes A 0.4D Roll up and package B, C 0.3

0.1

0.2

0.4

0.3D

B

C

A


Cycle Time Example

Cd = production time available

desired units of output

Cd = (8 hours x 60 minutes / hour)

(120 units)

Cd = = 4 minutes480120


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Flow Time vs Cycle Time

• Cycle time = max time spent at any station • Flow time = time to complete all stations

1 2 34 minutes 4 minutes 4 minutes

Flow time = 4 + 4 + 4 = 12 minutesCycle time = max (4, 4, 4) = 4 minutes



Efficiency of Line and Balance Delay

i

i = 1ti

nCaE =

i

i = 1ti

CdN =

Efficiency Minimum number of workstations

whereti = completion time for element ij = number of work elements

n = actual number of workstationsCa = actual cycle timeCd = desired cycle time

• Balance delay

• total idle time of line

• calculated as (1 -efficiency)



Line Balancing Procedure

1. Draw and label a precedence diagram2. Calculate desired cycle time required for line3. Calculate theoretical minimum number of workstations4. Group elements into workstations, recognizing cycle time and

precedence constraints5. Calculate efficiency of line6. Determine if theoretical minimum number of workstations or

an acceptable efficiency level has been reached. If not, go back to step 4.



Line Balancing: Example



0.1

0.2

0.4

0.3D

B

C

A



Line Balancing: Example (cont.)



Cd = = = 0.4 minute40 hours x 60 minutes / hour

6,000 units24006000

N = = = 2.5 3 workstations1.00.4

0.1 + 0.2 + 0.3 + 0.40.4




Cd = 0.4N = 2.5

REMAINING REMAININGWORKSTATION ELEMENT TIME ELEMENTS

1 A 0.3 B, CB 0.1 C, D

2 C 0.0 D3 D 0.1 none

0.1

0.2

0.4

0.3D

B

C

A


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6


A, B C D

Work station 1

Work station 2

Work station 3

0.3 minute

0.4 minute

0.3 minute

Cd = 0.4N = 2.5

E = = = 0.833 = 83.3%0.1 + 0.2 + 0.3 + 0.4

3(0.4)1.01.2





Hybrid Layouts

• Cellular layouts– group dissimilar machines into work centers (called cells) that process

families of parts with similar shapes or processing requirements• Production flow analysis (PFA)

– reorders part routing matrices to identify families of parts with similar processing requirements

• Flexible manufacturing system– automated machining and material handling systems which can

produce an enormous variety of items• Mixed-model assembly line

– processes more than one product model in one line



Cellular Layouts

1. Identify families of parts with similar flow paths2. Group machines into cells based on part families3. Arrange cells so material movement is minimized4. Locate large shared machines at point of use



Parts Families

A family of similar parts

A family of related grocery items



Original Process Layout

CA B Raw materials

Assembly

1

2

3

4

5

6 7

8

9

10

11

12


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Part Routing Matrix

MachinesParts 1 2 3 4 5 6 7 8 9 10 11 12

A x x x x xB x x x xC x x xD x x x x xE x x xF x x xG x x x xH x x x

Figure 5.8ET ZC412 Production Planning and Control


Revised Cellular Layout

3

6

9

Assembly

12

4

8 10

5

7

11

12

A B CRaw materials

Cell 1 Cell 2 Cell 3



Reordered Routing Matrix

MachinesParts 1 2 4 8 10 3 6 9 5 7 11 12

A x x x x xD x x x x xF x x xC x x xG x x x xB x x x xH x x xE x x x




Advantages and Disadvantages of Cellular Layouts

• Advantages– Reduced material handling

and transit time– Reduced setup time– Reduced work-in- process

inventory– Better use of human

resources– Easier to control– Easier to automate

• Disadvantages– Inadequate part families– Poorly balanced cells– Expanded training and

scheduling of workers– Increased capital

investment



Flexible Manufacturing Systems (FMS)

• FMS consists of numerous programmable machine tools connected by an automated material handling system and controlled by a common computer network

• FMS combines flexibility with efficiency• FMS layouts differ based on

– variety of parts that the system can process– size of parts processed– average processing time required for part completion


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Mixed Model Assembly Lines

Produce multiple models in any order on one assembly lineIssues in mixed model lines

Line balancingU-shaped linesFlexible workforceModel sequencing



Balancing U-Shaped Lines

A B C

D E

Precedence diagram:

Cycle time = 12 min

A,B C,D E

(a) Balanced for a straight line

9 min 12 min 3 min

Efficiency = = = .6666 = 66.7 %2436

243(12)

12 min 12 min

C,D

A,B

E

(b) Balanced for a U-shaped line

Efficiency = = = 100 %2424

242(12)



THANK YOU


3/22/2012

1







FACILITY LOCATION MODELSChapter 7 Supp.



Lecture Outline

• Types of Facilities• Site Selection: Where to Locate• Location Analysis Techniques



Types of Facilities

• Heavy-manufacturing facilities– large, require a lot of space, and are expensive

• Light-industry facilities– smaller, cleaner plants and usually less costly

• Retail and service facilities– smallest and least costly



Factors in Heavy Manufacturing Location

Construction costsLand costsRaw material and finished goods shipment modesProximity to raw materialsUtilitiesMeans of waste disposalLabor availability


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Factors in Light Industry Location

• Land costs• Transportation costs• Proximity to markets

– depending on delivery requirements including frequency of delivery required by customer



Factors in Retail Location

Proximity to customersLocation is everything



Site Selection: Where to Locate

• Infrequent but important– being “in the right place at the

right time”• Must consider other factors,

especially financial considerations• Location decisions made more often

for service operations than manufacturing facilities

• Location criteria for service– access to customers

• Location criteria for manufacturing facility– nature of labor force– labor costs– proximity to suppliers and

markets– distribution and transportation

costs– energy availability and cost– community infrastructure– quality of life in community – government regulations and

taxes



Global Location Factors

Government stabilityGovernment regulationsPolitical and economic systemsEconomic stability and growthExchange ratesCultureClimateExport/import regulations, duties and tariffs

Raw material availability Number and proximity of suppliersTransportation and distribution systemLabor cost and educationAvailable technologyCommercial travelTechnical expertiseCross-border trade regulationsGroup trade agreements



Location Incentives

Tax creditsRelaxed government regulationJob trainingInfrastructure improvementMoney



Geographic InformationSystems (GIS)• Computerized system for storing, managing, creating, analyzing,

integrating, and digitally displaying geographic, i.e., spatial, data• Specifically used for site selection• enables users to integrate large quantities of information about

potential sites and analyze these data with many different, powerful analytical tools


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3


GIS Diagram



Location Analysis Techniques


Location factor rating

Center-of-gravity

Load-distance


Location Factor Rating


Identify important factorsWeight factors (0.00 - 1.00)Subjectively score each factor (0 - 100)Sum weighted scores


Location Factor Rating: Example

Labor pool and climateProximity to suppliersWage ratesCommunity environmentProximity to customersShipping modesAir service

LOCATION FACTOR

.30

.20

.15

.15

.10

.05

.05

WEIGHT

801006075658550

Site 1

65919580909265

Site 2

90757280956590

Site 3

SCORES (0 TO 100)

Weighted Score for “Labor pool and climate” for Site 1 = (0.30)(80) = 24



Location Factor Rating: Example(cont.)

24.0020.009.0011.256.504.252.5077.50

Site 1

19.5018.2014.2512.009.004.603.2580.80

Site 2

27.0015.0010.8012.009.503.254.5082.05

Site 3

WEIGHTED SCORES

Site 3 has the highest factor rating



Center-of-Gravity Technique

Locate facility at center of movement in geographic area Based on weight and distance traveled; establishes grid-map of areaIdentify coordinates and weights shipped for each location


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4


Grid-Map Coordinates

where,x, y = coordinates of new facility at

center of gravityxi, yi = coordinates of existing facility i

Wi = annual weight shipped from facility i

nWi

i = 1

xiWii = 1

n

x = nWi

i = 1

yiWii = 1

n

y =

x1 x2 x3 x

y2

y

y1

y3

1 (x1, y1), W1

2 (x2, y2), W2

3 (x3, y3), W3



Center-of-Gravity Technique: Example


A B C Dx 200 100 250 500y 200 500 600 300Wt 75 105 135 60

y

700

500

600

400

300

200

100

0 x700500 600400300200100

A

B

C

D

(135)

(105)

(75)

(60)

Miles

Mile

s


Center-of-Gravity Technique: Example (cont.)


x = = = 238nWi

i = 1

xiWii = 1

n

nWi

i = 1

yiWii = 1

n

y = = = 444(200)(75) + (500)(105) + (600)(135) + (300)(60)

75 + 105 + 135 + 60

(200)(75) + (100)(105) + (250)(135) + (500)(60)75 + 105 + 135 + 60


Center-of-Gravity Technique: Example (cont.)


A B C Dx 200 100 250 500y 200 500 600 300Wt 75 105 135 60

y

700

500

600

400

300

200

100

0 x700500 600400300200100

A

B

C

D

(135)

(105)

(75)

(60)

Miles

Mile

s Center of gravity (238, 444)


Load-Distance Technique

• Compute (Load x Distance) for each site• Choose site with lowest (Load x Distance)• Distance can be actual or straight-line



Load-Distance Calculations

li di

i = 1

nLD =

LD = load-distance valueli = load expressed as a weight, number of trips or units

being shipped from proposed site and location idi = distance between proposed site and location i

di = (xi - x)2 + (yi - y)2

(x,y) = coordinates of proposed site(xi , yi) = coordinates of existing facility

where,

where,


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5


Load-Distance: Example

Potential SitesSite X Y1 360 1802 420 4503 250 400

SuppliersA B C D

X 200 100 250 500Y 200 500 600 300Wt 75 105 135 60

Compute distance from each site to each supplier

= (200-360)2 + (200-180)2dA = (xA - x1)2 + (yA - y1)2Site 1 = 161.2

= (100-360)2 + (500-180)2dB = (xB - x1)2 + (yB - y1)2 = 412.3

dC = 434.2 dD = 184.4



Load-Distance: Example (cont.)

Site 2 dA = 333 dC = 226.7dB = 323.9 dD = 170

Site 3 dA = 206.2 dC = 200dB = 180.3 dD = 269.3

Compute load-distance

i = 1

nli diLD =

Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063

Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789

Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*

* Choose site 3ET ZC412 Production Planning and Control


• A manufacturer of a certain industrial component is interested in locating a new facility in a target market and would like to know the most appropriate place in the target market. There are four supply points: A, B, C and D in the locality that will provide key inputs to the new facility, which are located at the following coordinates: (125, 550), (350, 400), (450, 125) and (700, 300) respectively. Similarly, the annual supply from these four points to the proposed facility is 200, 450, 175 and 150 respectively. – Show them in a two dimensional grid and identify the location based on the

centre of gravity method. – Unfortunately, the location identified from the above method is not feasible.

Hence to locate the new facility, the manufacturer has identified four possible alternative locations: 1, 2, 3, and 4. The coordinates for them are (300, 500), (200, 500), (500, 350) and (400, 200) respectively. Represent the whole in a two-dimensional grid and identify the best location for the proposed new facility using a suitable location decision method. Make necessary assumptions and highlight the same



THANK YOU


3/22/2012

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HUMAN RESOURCESChapter 8Chapter 8



Human Resources and Quality Management

• Employees play important role in quality management

• Malcolm Baldrige National Quality Award winners have a pervasive human resource focus

• Employee training and education are recognized as necessary long-term investments

• Employees have power to make decisions that will improve quality and customer service

• Strategic goals for quality and customer satisfaction require teamwork and group participation



Employee Motivation

• Motivation–willingness to work hard because that effort satisfies an employee need

• Improving Motivation–positive reinforcement and feedback

–effective organization and discipline

–fair treatment of people–satisfaction of employee needs–setting of work-related goals

• Improving Motivation (cont.)–design of jobs to fit employee–work responsibility–empowerment–restructuring of jobs when necessary

–rewards based on company as well as individual performance

–achievement of company goals



Evolution of Theories of Employee Motivation

Self-actualization

EsteemSocial

Safety/SecurityPhysiological (financial)

Abraham Maslow’s Pyramid of Human

Needs

Douglas McGregor’sTheory X and Theory Y

•Theory X Employee• Dislikes work• Must be coerced• Shirks responsibility• Little ambition• Security top motivator

•Theory Y Employee• Work is natural• Self-directed• Controlled• Accepts responsibility• Makes good decisions

Frederick Herzberg’sHygiene/Motivation

Theories

•Hygiene Factors• Company policies• Supervision• Working conditions• Interpersonal relations• Salary, status, security

•Motivation Factors• Achievement• Recognition• Job interest• Responsibility• Growth• Advancement


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Contemporary Trends in Human Resources Management• Job training

– extensive and varied– two of Deming’s 14 points

refer to employee education and training

• Cross Training– an employee learns more

than one job• Job rotation

– horizontal movement between two or more jobs according to a plan

• Empowerment– giving employees authority to

make decisions• Teams

– group of employees work on problems in their immediate work area



• Job enrichment– vertical enlargement

• allows employees control over their work

– horizontal enlargement• an employee is assigned a

complete unit of work with defined start and end

• Flexible time– part of a daily work schedule

in which employees can choose time of arrival and departure

• Alternative workplace– nontraditional work location

• Telecommuting– employees work electronically

from a location they choose• Temporary and part-time

employees– mostly in fast-food and

restaurant chains, retail companies, package delivery services, and financial firms

Contemporary Trends in Human Resources Management



Employee Compensation

• Types of pay– hourly wage

• the longer someone works, the more s/he is paid– individual incentive or piece rate

• employees are paid for the number of units they produce during the workday

– straight salary• common form of payment for management

– commissions• usually applied to sales and salespeople



Employee Compensation (cont.)

• Gainsharing– an incentive plan joins employees in a common

effort to achieve company goals in which they share in the gains

• Profit sharing– sets aside a portion of profits for employees at

year’s end



Managing Diversity in Workplace

• Workforce has become more diverse– 4 out of every 10 people entering workforce during the decade

from 1998 to 2008 will be members of minority groups– In 2000 U.S. Census showed that some minorities, primarily

Hispanic and Asian, are becoming majorities• Companies must develop a strategic approach to managing

diversity



Affirmative Actions vs. Managing Diversity

• Affirmative action– an outgrowth of laws and

regulations– government initiated and

mandated– contains goals and timetables

designed to increase level of participation by women and minorities to attain parity levels in a company’s workforce

– not directly concerned with increasing company success or increasing profits

• Managing diversity– process of creating a work

environment in which all employees can contribute to their full potential in order to achieve a company’s goals

– voluntary in nature, not mandated

– seeks to improve internal communications and interpersonal relationships, resolve conflict, and increase product quality, productivity, and efficiency


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Diversity Management Programs

• Education• Awareness• Communication• Fairness• Commitment



Global Diversity Issues

• Cultural, language, geography– significant barriers to managing a globally diverse workforce

• E-mails, faxes, Internet, phones, air travel– make managing a global workforce possible but not necessarily

effective• How to deal with diversity?

– identify critical cultural elements– learn informal rules of communication– use a third party who is better able to bridge cultural gap– become culturally aware and learn foreign language– teach employees cultural norm of organization



Attributes of Good Job Design

• An appropriate degree of repetitiveness

• An appropriate degree of attention and mental absorption

• Some employee responsibility for decisions and discretion

• Employee control over their own job

• Goals and achievement feedback• A perceived contribution to a

useful product or service• Opportunities for personal

relationships and friendships• Some influence over the way

work is carried out in groups• Use of skills



Factors in Job Design

• Task analysis– how tasks fit together to form a job

• Worker analysis– determining worker capabilities and responsibilities for a job

• Environment analysis– physical characteristics and location of a job

• Ergonomics– fitting task to person in a work environment

• Technology and automation– broadened scope of job design



Elements of Job Design



Job Analysis

• Method Analysis (work methods)– Study methods used in the work included in the

job to see how it should be done– Primary tools are a variety of charts that illustrate

in different ways how a job or work process is done


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Process Flowchart Symbols

Operation:An activity directly contributing to product or service

Storage:Store of the product or service

Inspection:Examining the product or service for completeness, irregularities, or quality

Transportation:Moving the product or service from one location to another

Delay:Process having to wait



Process Flowchart



– 1

– 2

– 3

– 4

– 5

– 6

– 7

– 8

– 9

Key in customer dataon card

Feed data card in

Position customer for photo

Take picture

Inspect card & trim edges

Idle

Idle

Idle

Idle

Photo/card processed

Accept card

Begin photo process

2.6

0.4

1.0

0.6

3.4

1.2

Job Photo-Id Cards Date 10/14Time Time(min) Operator (min) Photo Machine

Worker-Machine

Chart



Worker-Machine Chart: Summary

Summary

Operator Time % Photo Machine Time %

Work 5.8 63 4.8 52

Idle 3.4 37 4.4 48

Total 9.2 min 100% 9.2 Min 100%



Motion Study

Used to ensure efficiency of motion in a jobUsed to ensure efficiency of motion in a jobFrank & Lillian Frank & Lillian GilbrethGilbrethFind one “best way” to do taskFind one “best way” to do taskUse videotape to study motionsUse videotape to study motions



General Guidelines for Motion Study

Efficient Use Of Human BodyEfficient Use Of Human BodyWorkWork

simplified, rhythmic and symmetricsimplified, rhythmic and symmetricHand/arm motionsHand/arm motions

coordinated and simultaneouscoordinated and simultaneousEmploy full extent of physical capabilitiesEmploy full extent of physical capabilitiesConserve energyConserve energy

use machines, minimize distances, use momentumuse machines, minimize distances, use momentumTasksTasks

simple, minimal eye contact and muscular effort, no unnecessary simple, minimal eye contact and muscular effort, no unnecessary motions, delays or idlenessmotions, delays or idleness


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General Guidelines for Motion Study

Efficient Arrangement of WorkplaceEfficient Arrangement of WorkplaceTools, material, equipment Tools, material, equipment -- designated, easily accessible designated, easily accessible locationlocationComfortable and healthy seating and work areaComfortable and healthy seating and work area

Efficient Use of EquipmentEfficient Use of EquipmentEquipment and mechanized tools enhance worker Equipment and mechanized tools enhance worker abilitiesabilitiesUse footUse foot--operated equipment to relieve hand/arm stressoperated equipment to relieve hand/arm stressConstruct and arrange equipment to fit worker useConstruct and arrange equipment to fit worker use



Learning Curves

• Illustrates improvement rate of workers as a job is repeated

• Processing time per unit decreases by a constant percentage each time output doubles

Units produced

Proc

essi

ng ti

me

per u

nit



Learning Curves (cont.)

tn = t1nb

Time required for the nth unit =

where:tn = time required for nth unit producedt1 = time required for first unit producedn = cumulative number of units produced

b = where r is the learning curve percentage(decimal coefficient)

lnln 2

r



Learning Curve Effect

Contract to produce 36 computers.t1 = 18 hours, learning rate = 80%What is time for 9th, 18th, 36th units?

t9 = (18)(9)ln(0.8)/ln 2 = (18)(9)-0.322

= (18)/(9)0.322 = (18)(0.493) = 8.874hrst18 = (18)(18)ln(0.8)/ln 2 = (18)(0.394) = 7.092hrst36 = (18)(36)ln(0.8)/ln 2 = (18)(0.315) = 5.674hrs



Learning Curve for Mass Production Job

Standard time

End of improvement

Units produced

Proc

essi

ng ti

me p

er u

nit



Learning Curves (cont.)

• Advantages– planning labor– planning budget– determining

scheduling requirements

• Limitations– product modifications

negate learning curve effect– improvement can derive

from sources besides learning

– industry-derived learning curve rates may be inappropriate


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WORK MEASUREMENT

Chapter 8 Supplement



Lecture Outline

Time StudiesWork Sampling



Work Measurement

Determining how long it takes to do a jobGrowing importance in service sector

Services tend to be labor-intensiveService jobs are often repetitive

Time studiesStandard time

is time required by an average worker to perform a job onceIncentive piece-rate wage system based on time study



Stopwatch Time Study Basic Steps

1. Establish standard job method2. Break down job into elements3. Study job4. Rate worker’s performance (RF)5. Compute average time (t)



Stopwatch Time Study Basic Steps (cont.)

6. Compute normal time

7. Compute standard time


Normal Cycle Time = NT = Nt

Normal Time = (Elemental average) x (rating factor)

Nt = (t )(RF)

ST = (NT)(1 + AF)Standard Time = (normal cycle time) x (1 + allowance factor)


Performing a Time StudyTime Study Observation Sheet

Identification of operation Sandwich Assembly Date 5/17

Operator Approval ObserverSmith Jones Russell

Cycles Summary

1 2 3 4 5 6 7 8 9 10 t NtRFt

Place ham, cheese, and lettuce on bread

1

2

3

4

Grasp and lay out bread slices

Spread mayonnaiseon both slices

Place top on sandwich,Slice, and stack

t

t

t

tR

R

R

R

.11 .44 .79 1.13 1.47 1.83 2.21 2.60 2.98 3.37

.04 .05 .05 .04 .06 .05 .06 .06 .07 .05 .53 .053 1.05 .056

.04 .38 .72 1.05 1.40 1.76 2.13 2.50 2.89 3.29

.07 .06 .07 .08 .08 .08.07 .07 .10 .09 .77 .077 .0771.00

.11.12 .14 .12 .12.13.13.13 .14 .14 1.28 1.28 1.10 .141

.93.23 .55 1.25 1.60 1.96 2.34 2.72 3.12 3.51

.12.10 .08 .09 .12 .10.11 .11 .10.10 1.03 1.03 1.10 .113

.33 .67 1.01 1.34 1.71 2.07 2.44 2.82 3.24 3.61


3/22/2012

7


Performing a Time Study (cont.)

Normal time = (Elemental average)(rating factor)Nt = ( t )(RF) = (0.053)(1.05) = 0.056

Normal Cycle Time = NT = Nt = 0.387

ST = (NT) (1 + AF) = (0.387)(1+0.15) = 0.445 min

Average element time = t = = = 0.053 t10

0.5310



Performing a Time Study (cont.)

How many sandwiches can be made in 2 hours?

= 269.7 or 270 sandwiches120 min0.445 min/sandwich





Number of Cycles

To determine sample size:

n =zseT

2

where

z = number of standard deviations from the mean in a normal distribution reflecting a level of statistical confidence

T = average job cycle time from the sample time studye = degree of error from true mean of distribution

s = = sample standard deviation from sample time study

(xi - x)2

n - 1



Number of Cycles: Example

• Average cycle time = 0.361• Computed standard deviation = 0.03• Company wants to be 95% confident that computed

time is within 5% of true average time

n = = = 10.61 or 11zseT

2(1.96)(0.03)

(0.05)(0.361)

2


3/22/2012

8


Developing Time Standards without a Time Study

• Elemental standard time files– predetermined job element

times• Predetermined motion times

– predetermined times for basic micro-motions

• Time measurement units– TMUs = 0.0006 minute– 100,000 TMU = 1 hour

• Advantages – worker cooperation

unnecessary– workplace uninterrupted– performance ratings

unnecessary– consistent

• Disadvantages – ignores job context– may not reflect skills and

abilities of local workers



Work Sampling

• Determines the proportion of time a worker spends on activities

• Primary uses of work sampling are to determine– ratio delay

• percentage of time a worker or machine is delayed or idle– analyze jobs that have non-repetitive tasks

• Cheaper, easier approach to work measurement



MTM Table for MOVE



Steps of Work Sampling

1. Define job activities2. Determine number of observations in work sample

n = p(1 - p) ze

2

where

n = sample size (number of sample observations)z = number of standard deviations from mean for desired

level of confidencee = degree of allowable error in sample estimatep = proportion of time spent on a work activity estimated prior

to calculating work sample



Steps of Work Sampling (cont.)

3. Determine length of sampling period4. Conduct work sampling study; record

observations5. Periodically re-compute number of

observations



Work Sampling: Example

What percent of time is spent looking up information? Current estimate is p = 30%Estimate within +/- 2%, with 95% confidence

After 280 observations, p = 38%

n = p(1 - p) = (0.3)(0.7) = 2016.84 or 2017ze

21.960.02

2

n = p(1 - p) = (0.38)(0.62) = 2263ze

21.960.02

2


3/22/2012

9


THANK YOU


3/22/2012

1







SUPPLY CHAIN MANAGEMENT STRATEGY AND DESIGN

Chapter 10



Supply Chains

All facilities, functions, and activities associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flowsAn integrated group of processes to “source,” “make,” and “deliver” products



Supply Chain IllustrationET ZC412 Production Planning and Control


Supply Chain for

Denim Jeans


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2


Supply Chain for Denim Jeans (cont.)



Supply Chain Processes



Supply Chain for Service Providers

• More difficult than manufacturing• Does not focus on the flow of physical goods• Focuses on human resources and support services• More compact and less extended



Value Chains

• Value chain– every step from raw materials to the eventual end user– ultimate goal is delivery of maximum value to the end user

• Supply chain– activities that get raw materials and subassemblies into manufacturing

operation– ultimate goal is same as that of value chain

• Demand chain– increase value for any part or all of chain

• Terms are used interchangeably• Value

– creation of value for customer is important aspect of supply chain management



Supply Chain Management (SCM)

• Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs

• Keys to effective SCM– information– communication– cooperation– trust



Supply ChainUncertainty and Inventory

• One goal in SCM:– respond to uncertainty in

customer demand without creating costly excess inventory

• Negative effects of uncertainty– lateness– incomplete orders

• Inventory– insurance against supply

chain uncertainty

• Factors that contribute to uncertainty– inaccurate demand

forecasting– long variable lead times– late deliveries– incomplete shipments– product changes– batch ordering – price fluctuations and

discounts– inflated orders


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3


Bullwhip EffectOccurs when slight demand variability is magnified as information moves

back upstream


Risk Pooling

• Risks are aggregated to reduce the impact of individual risks– Combine inventories from multiple locations into

one– Reduce parts and product variability, thereby

reducing the number of product components– Create flexible capacity



Information Technology:A Supply Chain Enabler

• Information links all aspects of supply chain• E-business

– replacement of physical business processes with electronic ones• Electronic data interchange (EDI)

– a computer-to-computer exchange of business documents• Bar code and point-of-sale

– data creates an instantaneous computer record of a sale



Information Technology:A Supply Chain Enabler (cont.)

• Radio frequency identification (RFID)– technology can send product data from an item to a reader via radio

waves• Internet

– allows companies to communicate with suppliers, customers, shippers and other businesses around the world instantaneously

• Build-to-order (BTO)– direct-sell-to-customers model via the Internet; extensive

communication with suppliers and customer



Supply Chain Enablers



RFID Capabilities


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4


RFID Capabilities (cont.)



Supply Chain Integration

• Information sharing among supply chain members– Reduced bullwhip effect– Early problem detection– Faster response– Builds trust and confidence

• Collaborative planning, forecasting, replenishment, and design– Reduced bullwhip effect– Lower costs (material, logistics, operating, etc.)– Higher capacity utilization– Improved customer service levels



Supply Chain Integration (cont.)

• Coordinated workflow, production and operations, procurement– Production efficiencies– Fast response– Improved service– Quicker to market

• Adopt new business models and technologies– Penetration of new markets– Creation of new products– Improved efficiency– Mass customization



Collaborative Planning, Forecasting,and Replenishment (CPFR)

• Process for two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand

• Parties electronically exchange– past sales trends– point-of-sale data– on-hand inventory– scheduled promotions– forecasts



Supply Chain Management(SCM) Software

• Enterprise resource planning (ERP)– software that integrates the components of a

company by sharing and organizing information and data



Key Performance Indicators

• Metrics used to measure supply chain performance– Inventory turnover

– Total value (at cost) of inventory

– Days of supply

– Fill rate: fraction of orders filled by a distribution center within a specific time period

inventory of valueaggregate Averagesold goods ofCost turnsInventory

) item e(unit valu) itemfor inventory (averageinventory of valueaggregate Average ii

days) sold)/(365 goods of(Cost inventory of valueaggregate Average supply of Days


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5


Computing KeyPerformance Indicators




Process Control and SCOR

• Process Control– not only for manufacturing operations– can be used in any processes of supply chain

• Supply Chain Operations Reference (SCOR)– a cross industry supply chain diagnostic tool maintained by the

Supply Chain Council



SCOR



SCOR (cont.)



GLOBAL SUPPLY CHAIN PROCUREMENT AND DISTRIBUTION

Chapter 11


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6


Lecture Outline

• Procurement• E-Procurement• Distribution• Transportation• The Global Supply Chain



Procurement

• The purchase of goods and services from suppliers• Cross enterprise teams

– coordinate processes between a company and its supplier• On-demand (direct-response) delivery

– requires the supplier to deliver goods when demanded by the customer

• Continuous replenishment – supplying orders in a short period of time according to a

predetermined schedule



Outsourcing

• Sourcing– selection of suppliers

• Outsourcing– purchase of goods and services from an outside supplier

• Core competencies– what a company does best

• Single sourcing– a company purchases goods and services from only a few (or

one) suppliers



Categories of Goods and Services...



E-Procurement

• Direct purchase from suppliers over the Internet, by using software packages or through e-marketplaces, e-hubs, and trading exchanges

• Can streamline and speed up the purchase order and transaction process



E-Procurement (cont.)

• What can companies buy over the Internet?– Manufacturing inputs

the raw materials and components that go directly into the production process of the product

– Operating inputs maintenance, repair, and operation goods and services


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7


E-Procurement (cont.)

• E-marketplaces (e-hubs) – Websites where companies and suppliers conduct

business-to-business activities

• Reverse auction– process used by e-marketplaces for buyers to

purchase items; company posts orders on the internet for suppliers to bid on



Distribution

Encompasses all channels, processes, and functions, including warehousing and transportation, that a product passes on its way to final customerOrder fulfillment

process of ensuring on-time delivery of an orderLogistics

transportation and distribution of goods and servicesDriving force today is speedParticularly important for Internet dot-coms



Distribution Centers (DC)and Warehousing

• DCs are some of the largest business facilities in the United States

• Trend is for more frequent orders in smaller quantities

• Flow-through facilities and automated material handling

• Postponement– final assembly and product configuration may be

done at the DC



Warehouse Management Systems

• Highly automated system that runs day-to-day operations of a DC

• Controls item putaway, picking, packing, and shipping• Features

– transportation management– order management– yard management– labor management– warehouse optimization



A WMS



Vendor-Managed Inventory

• Manufacturers generate orders, not distributors or retailers

• Stocking information is accessed using EDI• A first step towards supply chain collaboration• Increased speed, reduced errors, and

improved service


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8


Collaborative Logistics and Distribution Outsourcing

• Collaborative planning, forecasting, and replenishment create greater economies of scale

• Internet-based exchange of data and information• Significant decrease in inventory levels and costs and

more efficient logistics• Companies focus on core competencies



Transportation

• Rail– low-value, high-density, bulk

products, raw materials, intermodal containers

– not as economical for small loads, slower, less flexible than trucking

• Trucking– main mode of freight transport

in U.S.– small loads, point-to-point

service, flexible– More reliable, less damage than

rails; more expensive than rails for long distance


Transportation (cont.)

•Air– most expensive and fastest, mode of

freight transport– lightweight, small packages <500 lbs– high-value, perishable and critical goods– less theft

•Package Delivery– small packages– fast and reliable– increased with e-Business– primary shipping mode for Internet

companies


Transportation (cont.)

•Water– low-cost shipping mode– primary means of international shipping– U.S. waterways– slowest shipping mode

• Intermodal– combines several modes of shipping-truck,

water and rail– key component is containers

•Pipeline– transport oil and products in liquid form– high capital cost, economical use– long life and low operating cost


Global Supply Chain

• International trade barriers have fallen• New trade agreements• To compete globally requires an effective

supply chain• Information technology is an “enabler” of

global trade



Obstacles to Global Chain Transactions

• Increased documentation for invoices, cargo insurance, letters of credit, ocean bills of lading or air waybills, and inspections

• Ever changing regulations that vary from country to country that govern the import and export of goods

• Trade groups, tariffs, duties, and landing costs• Limited shipping modes• Differences in communication technology and availability


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9


Obstacles to Global Chain Transactions (cont.)

• Different business practices as well as language barriers• Government codes and reporting requirements that vary from country

to country• Numerous players, including forwarding agents, custom house brokers,

financial institutions, insurance providers, multiple transportation carriers, and government agencies

• Since 9/11, numerous security regulations and requirements



Duties and Tariffs

Proliferation of trade agreementsNations form trading groups

no tariffs or duties within groupcharge uniform tariffs to nonmembers

Member nations have a competitive advantage within the groupTrade specialists

include freight forwarders, customs house brokers, export packers, and export management and trading companies



Landed Cost

• Total cost of producing, storing, and transporting a product to the site of consumption or another port

• Value added tax (VAT)– an indirect tax assessed on the increase in value of a good at any

stage of production process from raw material to final product• Clicker shock

– occurs when an ordered is placed with a company that does not have the capability to calculate landed cost



Web-based International Trade Logistic Systems

• International trade logistics web-based software systems reduce obstacles to global trade– convert language and currency – provide information on tariffs, duties, and customs processes– attach appropriate weights, measurements, and unit prices to

individual products ordered over the Web– incorporate transportation costs and conversion rates– calculate shipping costs online while a company enters an order – track global shipments



Effects of 9/11 on Global Chains

• Increase security measures– added time to supply chain schedules– Increased supply chain costs

• 24 hours rules for “risk screening”– extended documentation– extend time by 3-4 days

• Inventory levels have increased 5%• Other costs include:

– new people, technologies, equipment, surveillance, communication, and security systems, and training necessary for screening at airports and seaports around the world



THANK YOU


3/22/2012

1







FORECASTINGChapter 12



Lecture Outline

• Strategic Role of Forecasting in Supply Chain Management

• Components of Forecasting Demand• Time Series Methods• Forecast Accuracy• Time Series Forecasting Using Excel• Regression Methods



Forecasting• Predicting the future• Qualitative forecast methods

– subjective• Quantitative forecast methods

– based on mathematical formulas



Forecasting and Supply Chain Management• Accurate forecasting determines how much inventory a company must

keep at various points along its supply chain• Continuous replenishment

– supplier and customer share continuously updated data– typically managed by the supplier– reduces inventory for the company– speeds customer delivery

• Variations of continuous replenishment– quick response– JIT (just-in-time)– VMI (vendor-managed inventory)– stockless inventory


3/22/2012

2


Forecasting

• Quality Management– Accurately forecasting customer demand is a key

to providing good quality service

• Strategic Planning– Successful strategic planning requires accurate

forecasts of future products and markets



Types of Forecasting Methods

• Depend on– time frame– demand behavior– causes of behavior



Time Frame

• Indicates how far into the future is forecast– Short- to mid-range forecast

• typically encompasses the immediate future• daily up to two years

– Long-range forecast• usually encompasses a period of time longer than two

years



Demand Behavior

• Trend– a gradual, long-term up or down movement of demand

• Random variations– movements in demand that do not follow a pattern

• Cycle– an up-and-down repetitive movement in demand

• Seasonal pattern– an up-and-down repetitive movement in demand occurring

periodically



Time(a) Trend

Time(d) Trend with seasonal pattern

Time(c) Seasonal pattern

Time(b) Cycle

Dem

and

Dem

and

Dem

and

Dem

and

Random movement

Forms of Forecast Movement



Forecasting Methods

• Time series– statistical techniques that use historical demand data

to predict future demand

• Regression methods– attempt to develop a mathematical relationship

between demand and factors that cause its behavior

• Qualitative– use management judgment, expertise, and opinion to

predict future demand


3/22/2012

3


Qualitative Methods

• Management, marketing, purchasing, and engineering are sources for internal qualitative forecasts

• Delphi method– involves soliciting forecasts about technological

advances from experts



Forecasting Process

6. Check forecast accuracy with one or more measures

4. Select a forecast model that seems appropriate for data

5. Develop/compute forecast for period of historical data

8a. Forecast over planning horizon

9. Adjust forecast based on additional qualitative information and insight

10. Monitor results and measure forecast accuracy

8b. Select new forecast model or adjust parameters of existing model

7.Is accuracy of

forecast acceptable?

1. Identify the purpose of forecast

3. Plot data and identify patterns

2. Collect historical data

No

Yes



Time Series

• Assume that what has occurred in the past will continue to occur in the future

• Relate the forecast to only one factor - time• Include

– moving average– exponential smoothing– linear trend line



Moving Average

• Naive forecast– demand in current period is used as next period’s forecast

• Simple moving average– uses average demand for a fixed sequence of periods– stable demand with no pronounced behavioral patterns

• Weighted moving average– weights are assigned to most recent data



Moving Average:Naïve Approach

Jan 120Feb 90Mar 100Apr 75May 110June 50July 75Aug 130Sept 110Oct 90

ORDERSMONTH PER MONTH

-120

90100

75110

5075

130110

90Nov -

FORECAST



Simple Moving Average

MAn =

n

i = 1Di

nwhere

n = number of periods in the moving average

Di = demand in period i


3/22/2012

4


3-month Simple Moving Average



5-month Simple Moving Average



Smoothing Effects

150 –

125 –

100 –

75 –

50 –

25 –

0 – | | | | | | | | | | |Jan Feb Mar Apr May June July Aug Sept Oct Nov

Actual

Ord

ers

Month

5-month

3-month



Weighted Moving Average

WMAn = i = 1

Wi Di

where

Wi = the weight for period i, between 0 and 100 percent

Wi = 1.00

Adjusts moving average method to more closely reflect data fluctuations

n



Weighted Moving Average Example

MONTH WEIGHT DATA

August 17% 130September 33% 110October 50% 90

WMA3 = 3

i = 1Wi Di

= (0.50)(90) + (0.33)(110) + (0.17)(130)

= 103.4 orders

November Forecast



Exponential Smoothing

Averaging method Weights most recent data more stronglyReacts more to recent changesWidely used, accurate method


3/22/2012

5


Ft +1 = Dt + (1 - )Ftwhere:

Ft +1 = forecast for next period

Dt = actual demand for present periodFt = previously determined forecast for present period

= weighting factor, smoothing constant

Exponential Smoothing (cont.)



Effect of Smoothing Constant

0.0 1.0If = 0.20, then Ft +1 = 0.20 Dt + 0.80 Ft

If = 0, then Ft +1 = 0 Dt + 1 Ft = FtForecast does not reflect recent data

If = 1, then Ft +1 = 1 Dt + 0 Ft = DtForecast based only on most recent data



F2 = D1 + (1 - )F1

= (0.30)(37) + (0.70)(37)= 37

F3 = D2 + (1 - )F2

= (0.30)(40) + (0.70)(37)= 37.9

F13 = D12 + (1 - )F12

= (0.30)(54) + (0.70)(50.84)= 51.79

Exponential Smoothing ( =0.30)

PERIOD MONTH DEMAND

1 Jan 372 Feb 403 Mar 414 Apr 375 May 456 Jun 507 Jul 438 Aug 479 Sep 56

10 Oct 5211 Nov 5512 Dec 54



FORECAST, Ft + 1

PERIOD MONTH DEMAND ( = 0.3) ( = 0.5)

1 Jan 37 – –2 Feb 40 37.00 37.003 Mar 41 37.90 38.504 Apr 37 38.83 39.755 May 45 38.28 38.376 Jun 50 40.29 41.687 Jul 43 43.20 45.848 Aug 47 43.14 44.429 Sep 56 44.30 45.71

10 Oct 52 47.81 50.8511 Nov 55 49.06 51.4212 Dec 54 50.84 53.2113 Jan – 51.79 53.61




70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 – | | | | | | | | | | | | |1 2 3 4 5 6 7 8 9 10 11 12 13

Actual

Ord

ers

Month


= 0.50

= 0.30



AFt +1 = Ft +1 + Tt +1where

T = an exponentially smoothed trend factor

Tt +1 = (Ft +1 - Ft) + (1 - ) Ttwhere

Tt = the last period trend factor= a smoothing constant for trend

Adjusted Exponential Smoothing


3/22/2012

6


Adjusted Exponential Smoothing =0.30)

PERIOD MONTH DEMAND

1 Jan 372 Feb 403 Mar 414 Apr 375 May 456 Jun 507 Jul 438 Aug 479 Sep 56

10 Oct 5211 Nov 5512 Dec 54

T3 = (F3 - F2) + (1 - ) T2

= (0.30)(38.5 - 37.0) + (0.70)(0)= 0.45

AF3 = F3 + T3 = 38.5 + 0.45= 38.95

T13 = (F13 - F12) + (1 - ) T12

= (0.30)(53.61 - 53.21) + (0.70)(1.77)= 1.36

AF13 = F13 + T13 = 53.61 + 1.36 = 54.97



Adjusted Exponential Smoothing: Example

FORECAST TREND ADJUSTEDPERIOD MONTH DEMAND Ft +1 Tt +1 FORECAST AFt +1

1 Jan 37 37.00 – –2 Feb 40 37.00 0.00 37.003 Mar 41 38.50 0.45 38.954 Apr 37 39.75 0.69 40.445 May 45 38.37 0.07 38.446 Jun 50 38.37 0.07 38.447 Jul 43 45.84 1.97 47.828 Aug 47 44.42 0.95 45.379 Sep 56 45.71 1.05 46.76

10 Oct 52 50.85 2.28 58.1311 Nov 55 51.42 1.76 53.1912 Dec 54 53.21 1.77 54.9813 Jan – 53.61 1.36 54.96



Adjusted Exponential Smoothing Forecasts

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 – | | | | | | | | | | | | |1 2 3 4 5 6 7 8 9 10 11 12 13

Actual

Dem

and

Period

Forecast ( = 0.50)

Adjusted forecast ( = 0.30)



y = a + bx

wherea = interceptb = slope of the linex = time periody = forecast for demand for period x

Linear Trend Line


b =

a = y - b x

wheren = number of periods

x = = mean of the x values

y = = mean of the y values

xy - nxyx2 - nx2

xny

n


Least Squares Examplex(PERIOD) y(DEMAND) xy x2

1 73 37 12 40 80 43 41 123 94 37 148 165 45 225 256 50 300 367 43 301 498 47 376 649 56 504 81

10 52 520 10011 55 605 12112 54 648 144

78 557 3867 650



x = = 6.5

y = = 46.42

b = = =1.72

a = y - bx= 46.42 - (1.72)(6.5) = 35.2

3867 - (12)(6.5)(46.42)650 - 12(6.5)2

xy - nxyx2 - nx2

781255712

Least Squares Example (cont.)


3/22/2012

7


Linear trend line y = 35.2 + 1.72xForecast for period 13 y = 35.2 + 1.72(13) = 57.56 units

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –

| | | | | | | | | | | | |1 2 3 4 5 6 7 8 9 10 11 12 13

Actual

Dem

and

Period

Linear trend line



Seasonal Adjustments

Repetitive increase/ decrease in demandUse seasonal factor to adjust forecast

Seasonal factor = Si =Di

D



Seasonal Adjustment (cont.)

2002 12.6 8.6 6.3 17.5 45.02003 14.1 10.3 7.5 18.2 50.12004 15.3 10.6 8.1 19.6 53.6Total 42.0 29.5 21.9 55.3 148.7

DEMAND (1000’S PER QUARTER)YEAR 1 2 3 4 Total

S1 = = = 0.28 D1

D42.0

148.7

S2 = = = 0.20 D2

D29.5

148.7S4 = = = 0.37

D4

D55.3

148.7

S3 = = = 0.15 D3

D21.9

148.7



Seasonal Adjustment (cont.)


SF1 = (S1) (F5) = (0.28)(58.17) = 16.28 SF2 = (S2) (F5) = (0.20)(58.17) = 11.63SF3 = (S3) (F5) = (0.15)(58.17) = 8.73SF4 = (S4) (F5) = (0.37)(58.17) = 21.53

y = 40.97 + 4.30x = 40.97 + 4.30(4) = 58.17

For 2005


Forecast Accuracy

• Forecast error– difference between forecast and actual demand– MAD

• mean absolute deviation– MAPD

• mean absolute percent deviation– Cumulative error– Average error or bias



Mean Absolute Deviation (MAD)


wheret = period number

Dt = demand in period tFt = forecast for period tn = total number of periods

= absolute value

Dt - FtnMAD =

3/22/2012

8


MAD Example

1 37 37.00 – –2 40 37.00 3.00 3.003 41 37.90 3.10 3.104 37 38.83 -1.83 1.835 45 38.28 6.72 6.726 50 40.29 9.69 9.697 43 43.20 -0.20 0.208 47 43.14 3.86 3.869 56 44.30 11.70 11.70

10 52 47.81 4.19 4.1911 55 49.06 5.94 5.9412 54 50.84 3.15 3.15

557 49.31 53.39

PERIOD DEMAND, Dt Ft ( =0.3) (Dt - Ft) |Dt - Ft|

Dt - FtnMAD =

=

= 4.85

53.3911



Other Accuracy Measures

Mean absolute percent deviation (MAPD)

MAPD =|Dt - Ft|

Dt

Cumulative error

E = et

Average error

E =et

n



Comparison of Forecasts

FORECAST MAD MAPD E (E)

Exponential smoothing ( = 0.30) 4.85 9.6% 49.31 4.48Exponential smoothing ( = 0.50) 4.04 8.5% 33.21 3.02Adjusted exponential smoothing 3.81 7.5% 21.14 1.92

( = 0.50, = 0.30)Linear trend line 2.29 4.9% – –



Forecast Control

• Tracking signal– monitors the forecast to see if it is biased high or

low

– 1 MAD 0.8 – Control limits of 2 to 5 MADs are used most

frequently

Tracking signal = =(Dt - Ft)MAD

EMAD



Tracking Signal Values

1 37 37.00 – – –2 40 37.00 3.00 3.00 3.003 41 37.90 3.10 6.10 3.054 37 38.83 -1.83 4.27 2.645 45 38.28 6.72 10.99 3.666 50 40.29 9.69 20.68 4.877 43 43.20 -0.20 20.48 4.098 47 43.14 3.86 24.34 4.069 56 44.30 11.70 36.04 5.01

10 52 47.81 4.19 40.23 4.9211 55 49.06 5.94 46.17 5.0212 54 50.84 3.15 49.32 4.85

DEMAND FORECAST, ERROR E =PERIOD Dt Ft Dt - Ft (Dt - Ft) MAD

TS3 = = 2.006.103.05

Tracking signal for period 3

–1.002.001.623.004.255.016.007.198.189.2010.17

TRACKINGSIGNAL



Tracking Signal Plot

3 –

2 –

1 –

0 –

-1 –

-2 –

-3 –

| | | | | | | | | | | | |0 1 2 3 4 5 6 7 8 9 10 11 12

Trac

king

sign

al (M

AD)

Period

Exponential smoothing ( = 0.30)

Linear trend line


3/22/2012

9


Statistical Control Charts


=(Dt - Ft)2

n - 1

Using we can calculate statistical control limits for the forecast errorControl limits are typically set at 3


Statistical Control Charts

Erro

rs

18.39 –

12.24 –

6.12 –

0 –

-6.12 –

-12.24 –

-18.39 –

| | | | | | | | | | | | |0 1 2 3 4 5 6 7 8 9 10 11 12

Period

UCL = +3

LCL = -3



Regression Methods

• Linear regression– a mathematical technique that relates a

dependent variable to an independent variable in the form of a linear equation

• Correlation– a measure of the strength of the relationship

between independent and dependent variables



Linear Regression


y = a + bx a = y - b x

b =

wherea = interceptb = slope of the line

x = = mean of the x data

y = = mean of the y data

xy - nxyx2 - nx2

xn

yn


Linear Regression Example

x y(WINS) (ATTENDANCE) xy x2

4 36.3 145.2 166 40.1 240.6 366 41.2 247.2 368 53.0 424.0 646 44.0 264.0 367 45.6 319.2 495 39.0 195.0 257 47.5 332.5 49

49 346.7 2167.7 311



Linear Regression Example (cont.)

x = = 6.125

y = = 43.36

b =

=

= 4.06

a = y - bx= 43.36 - (4.06)(6.125)= 18.46

498346.9

8

xy - nxy2

x2 - nx2

(2,167.7) - (8)(6.125)(43.36)(311) - (8)(6.125)2


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| | | | | | | | | | |0 1 2 3 4 5 6 7 8 9 10

60,000 –

50,000 –

40,000 –

30,000 –

20,000 –

10,000 –

Linear regression line, y = 18.46 + 4.06x

Wins, x

Atte

ndan

ce, y

Linear Regression Example (cont.)

y = 18.46 + 4.06x y = 18.46 + 4.06(7)= 46.88, or 46,880

Regression equation Attendance forecast for 7 wins



Correlation and Coefficient of Determination

Correlation, rMeasure of strength of relationshipVaries between -1.00 and +1.00

Coefficient of determination, r2

Percentage of variation in dependent variable resulting from changes in the independent variable



Computing Correlation

n xy - x y

[n x2 - ( x)2] [n y2 - ( y)2]r =

Coefficient of determination r2 = (0.947)2 = 0.897

r =(8)(2,167.7) - (49)(346.9)

[(8)(311) - (49)2] [(8)(15,224.7) - (346.9)2]

r = 0.947



THANK YOU


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1. The monthly demand for units manufactured by the Acme Rocket Company has been as follows:

a. Use the exponential smoothing method to forecast the number of units for June-January. The initial forecast for May was 105 units and = 0.2.

b. Calculate the absolute percentage error for each month from June through December and also the MAD of forecast error as of the end of December.

c. Calculate the tracking signal at the end of December. What can you say about the performance of the forecasting method?

Month UnitsMay 100June 80July 110August 115September 105October 110November 125December 120



• Caramel Ltd produces chocolates. It is working at full capacity and is hardly keeping up with demand - the management believes it could increase orders by 10 % without changing the price. The current capacity

on the single shift per day basis is 100,000 chocolates per week. It sells to wholesalers at a price of 60p per chocolate and the current cost structure per chocolate is as follows: Materials 22p, Direct labour 10p while fixed overheads Rs. 15,000 per week. Caramel Ltd is evaluating two options to increase capacity:– Option A By working overtime, it could increase output by 10 % with only Rs.

1,000 per week rise in fixed costs. However, the average direct labour cost for the whole production amount would rise to 11p per chocolate.

– Option B The sales director proposed moving to a two-shift basis. This would double capacity with only a Rs. 2,000 per week increase in fixed costs, but shift allowances would mean direct labour per chocolate would rise by 20%. The extra output produced would reduce material cost by 2p per chocolate. An across the board price cut of 10 % is being proposed which would increase sales by 40 %.

– Calculate the original break-even point, time to break-even and profits made, before any changes to the firm’s strategy have been made.

• Assess the two options for increasing capacity and make a fully justified recommendation.


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AGGREGATE SALES AND OPERATIONS PLANNING

Chapter 14



Sales and Operations Planning

• Determines the resource capacity needed to meet demand over an intermediate time horizon– Aggregate refers to sales and operations planning for

product lines or families– Sales and Operations planning (S&OP) matches supply and

demand• Objectives

– Establish a company wide game plan for allocating resources

– Develop an economic strategy for meeting demand



Sales and Operations Planning Process



Meeting Demand Strategies

• Adjusting capacity– Resources necessary to meet demand are acquired and

maintained over the time horizon of the plan– Minor variations in demand are handled with overtime or

under-time

• Managing demand– Proactive demand management


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Strategies for Adjusting Capacity

• Level production– Producing at a constant rate

and using inventory to absorb fluctuations in demand

• Chase demand– Hiring and firing workers to

match demand• Peak demand

– Maintaining resources for high-demand levels

• Overtime and under-time– Increasing or decreasing

working hours• Subcontracting

– Let outside companies complete the work

• Part-time workers– Hiring part time workers to

complete the work• Backordering

– Providing the service or product at a later time period



Level Production

Demand

Uni

ts

Time

Production



Chase Demand

Demand

Uni

ts

Time

Production



Strategies for Managing Demand

• Shifting demand into other time periods– Incentives– Sales promotions– Advertising campaigns

• Offering products or services with counter-cyclical demand patterns

• Partnering with suppliers to reduce information distortion along the supply chain



Quantitative Techniques For AP

• Pure Strategies• Mixed Strategies• Linear Programming• Transportation Method• Other Quantitative

Techniques



Pure Strategies

Hiring cost = $100 per workerFiring cost = $500 per worker

Inventory carrying cost = $0.50 pound per quarterRegular production cost per pound = $2.00

Production per employee = 1,000 pounds per quarterBeginning work force = 100 workers

QUARTER SALES FORECAST (LB)

Spring 80,000Summer 50,000Fall 120,000Winter 150,000

Example:


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Level Production Strategy

Level production

= 100,000 pounds(50,000 + 120,000 + 150,000 + 80,000)

4

Spring 80,000 100,000 20,000Summer 50,000 100,000 70,000Fall 120,000 100,000 50,000Winter 150,000 100,000 0

400,000 140,000Cost of Level Production Strategy(400,000 X $2.00) + (140,00 X $.50) = $870,000

SALES PRODUCTIONQUARTER FORECAST PLAN INVENTORY



Chase Demand Strategy

Spring 80,000 80,000 80 0 20Summer 50,000 50,000 50 0 30Fall 120,000 120,000 120 70 0Winter 150,000 150,000 150 30 0

100 50

SALES PRODUCTION WORKERS WORKERS WORKERSQUARTER FORECAST PLAN NEEDED HIRED FIRED

Cost of Chase Demand Strategy(400,000 X $2.00) + (100 x $100) + (50 x $500) = $835,000



Mixed Strategy

• Combination of Level Production and Chase Demand strategies

• Examples of management policies– no more than x% of the workforce can be laid off in one

quarter– inventory levels cannot exceed x dollars

• Many industries may simply shut down manufacturing during the low demand season and schedule employee vacations during that time



General Linear Programming (LP) Model

• LP gives an optimal solution, but demand and costs must be linear

• Let– Wt = workforce size for period t– Pt =units produced in period t– It =units in inventory at the end of period t– Ft =number of workers fired for period t– Ht = number of workers hired for period t



LP MODELMinimize Z = $100 (H1 + H2 + H3 + H4)

+ $500 (F1 + F2 + F3 + F4)+ $0.50 (I1 + I2 + I3 + I4)+ $2 (P1 + P2 + P3 + P4)

Subject toP1 - I1 = 80,000 (1)

Demand I1 + P2 - I2 = 50,000 (2)constraints I2 + P3 - I3 = 120,000 (3)

I3 + P4 - I4 = 150,000 (4)Production 1000 W1 = P1 (5)constraints 1000 W2 = P2 (6)

1000 W3 = P3 (7)1000 W4 = P4 (8)

100 + H1 - F1 = W1 (9)Work force W1 + H2 - F2 = W2 (10)constraints W2 + H3 - F3 = W3 (11)

W3 + H4 - F4 = W4 (12)



Transportation Method

1 900 1000 100 5002 1500 1200 150 5003 1600 1300 200 5004 3000 1300 200 500

Regular production cost per unit $20Overtime production cost per unit $25Subcontracting cost per unit $28Inventory holding cost per unit per period $3Beginning inventory 300 units

EXPECTED REGULAR OVERTIME SUBCONTRACTQUARTER DEMAND CAPACITY CAPACITY CAPACITY


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Transportation TableauUnused

PERIOD OF PRODUCTION 1 2 3 4 Capacity Capacity

Beginning 0 3 6 9

Inventory 300 — — — 300

Regular 600 300 100 — 1000

Overtime 100 100

Subcontract 500

Regular 1200 — — 1200

Overtime 150 150

Subcontract 250 250 500

Regular 1300 — 1300

Overtime 200 — 200

Subcontract 500 500

Regular 1300 1300

Overtime 200 200

Subcontract 500 500

Demand 900 1500 1600 3000 250

1

2

3

4

PERIOD OF USE

20 23 26 29

25 28 31 34

28 31 34 37

20 23 26

25 28 31

28 31 34

20 23

25 28

28 31

20

25

28



Burruss’ Production Plan

1 900 1000 100 0 5002 1500 1200 150 250 6003 1600 1300 200 500 10004 3000 1300 200 500 0

Total 7000 4800 650 1250 2100

REGULAR SUB- ENDINGPERIOD DEMAND PRODUCTION OVERTIME CONTRACT INVENTORY



Hierarchical Nature of Planning

• Disaggregation: process of breaking an aggregate plan into more detailed plans

Items

Product lines or families

Individual products

Components

Manufacturing operations

Resource Level

Plants

Individual machines

Critical work centers

Production Planning

Capacity Planning

Resource requirements

plan

Rough-cut capacity

plan

Capacity requirements plan

Input/ output control

Sales and Operations

Plan

Master production schedule

Material requirements

plan

Shop floor schedule

All work centers


Collaborative Planning

• Sharing information and synchronizing production across supply chain

• Part of CPFR (collaborative planning, forecasting, and replenishment)– involves selecting products to be jointly managed,

creating a single forecast of customer demand, and synchronizing production across supply chain



Available-to-Promise (ATP)

• Quantity of items that can be promised to customer• Difference between planned production and customer orders

already received

• Capable-to-promise– quantity of items that can be produced and made available at a later

date

AT in period 1 = (On-hand quantity + MPS in period 1) –(CO until the next period of planned production)

ATP in period n = (MPS in period n) –(CO until the next period of planned production)



ATP: Example


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ATP: Example (cont.)



ATP: Example (cont.)

ATP in April = (10+100) – 70 = 40ATP in May = 100 – 110 = -10ATP in June = 100 – 50 = 50

= 30= 0

Take excess units from April



Aggregate Planning for Services1. Most services cannot be inventoried2. Demand for services is difficult to predict3. Capacity is also difficult to predict4. Service capacity must be provided at the

appropriate place and time5. Labor is usually the most constraining

resource for services



M/s ABC Publishing company publishes textbooks for the college students. The demand for college textbooks is high during the beginning of each semester and then falls down during the semester. The unavailability of books can cause a professor to change the textbook, but the cost of storing books and their rapid obsolescence must also be considered. The demand table and cost factors are shown below, use the transportation method to design an aggregate production plan for ABC that will economically meet demand. What is the cost of the production plan?

Quarter Demand forecast

February – April 5000 May – July 10000

August – October 30000November-January 25000

Regular capacity per quarter: 10000 booksOvertime capacity per quarter: 5000 booksSubcontracting capacity per quarter: 10000 booksRegular production cost: Rs. 20 per bookOvertime wages: Rs. 30 per bookSubcontracting cost: Rs. 35 per bookHolding cost: Rs. 2.00 per book



Quarter Options 1 2 3 4 Capacity Final Capacity

1 Reg. Production 5000 20 22 5000 24 26 10000 0

Overtime 30 32 5000 34 36 5000 0

Subcontracting 35 37 39 41 10000

2 Reg. Production 10000 20 22 24 10000 0

Overtime 30 5000 32 34 5000 0

Subcontracting 35 37 39 10000

3 Reg. Production 10000 20 22 10000 0

Overtime 5000 30 32 5000 0

Subcontracting 35 37 10000

4 Reg. Production 10000 20 10000 0

Overtime 5000 30 5000 0


Demand Forecast 5000 10000 300002000015000100005000

250001500010000

End Demand 0 0 0 0ET ZC412 Production Planning and Control


Quarter 1 2 3 4

Reg. Production 10000 10000 10000 10000

Overtime 5000 5000 5000 5000


Total cost = 5000 * 20 + 10000 * 20 + 5000 * 24 + 5000 * 34 + 5000 * 32 + 10000 * 20 + 5000 * 30 + 10000 * 20 + 5000 * 30 + 10000 * 35 = Rs. 1800000


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M/s ABC Publishing company publishes textbooks for the college students. The demand for college textbooks is high during the beginning of each semester and then falls down during the semester. The unavailability of books can cause a professor to change the textbook, but the cost of storing books and their rapid obsolescence must also be considered. The demand table and cost factors are shown below, use the transportation method to design an aggregate production plan for ABC that will economically meet demand. What is the cost of the production plan?

Quarter Demand forecast

February – April 5000 May – July 10000

August – October 30000November-January 25000

Regular capacity per quarter: 10000 booksOvertime capacity per quarter: 5000 booksSubcontracting capacity per quarter: 10000 booksRegular production cost: Rs. 20 per bookOvertime wages: Rs. 30 per bookSubcontracting cost: Rs. 35 per bookHolding cost: Rs. 2.00 per book


Quarter Options 1 2 3 4 Capacity Final Capacity

1 Reg. Production 5000 20 22 5000 24 26 10000 0

Overtime 30 32 5000 34 36 5000 0

Subcontracting 35 37 39 41 10000

2 Reg. Production 10000 20 22 24 10000 0

Overtime 30 5000 32 34 5000 0


3 Reg. Production 10000 20 22 10000 0

Overtime 5000 30 32 5000 0


4 Reg. Production 10000 20 10000 0

Overtime 5000 30 5000 0


Demand Forecast 5000 10000 300002000015000100005000

250001500010000

End Demand 0 0 0 0ET ZC412 Production Planning and Control

Quarter 1 2 3 4

Reg. Production 10000 10000 10000 10000

Overtime 5000 5000 5000 5000


Total cost = 5000 * 20 + 10000 * 20 + 5000 * 24 + 5000 * 34 + 5000 * 32 + 10000 * 20 + 5000 * 30 + 10000 * 20 + 5000 * 30 + 10000 * 35 = Rs. 1800000



RESOURCE PLANNING SYSTEM

Chapter 15

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Resource Planning for Manufacturing


Material RequirementsPlanning (MRP)• Computerized inventory control and

production planning system• When to use MRP?

– Dependent demand items– Discrete demand items– Complex products– Job shop production– Assemble-to-order environments


Demand Characteristics

1 2 3 4 5Week

400 –

300 –

200 –

100 –No.

of t

able

s

Continuous demand

M T W Th F M T W Th F

400 –

300 –

200 –

100 –No.

of t

able

s

Discrete demand

Independent demand

100 tables

Dependent demand

100 x 1 = 100 tabletops

100 x 4 = 400 table legs


Material Requirements Planning

Materialrequirements

planning

Planned order

releases

Work orders

Purchase orders

Rescheduling notices

Itemmaster

file

Productstructure

file

Master production

schedule


MRP Inputs and Outputs

• Inputs– Master production

schedule– Product structure file– Item master file

• Outputs– Planned order releases

• Work orders• Purchase orders• Rescheduling notices


Master Production Schedule

• Drives MRP process with a schedule of finished products

• Quantities represent production not demand• Quantities may consist of a combination of customer

orders and demand forecasts• Quantities represent what needs to be produced, not

what can be produced• Quantities represent end items that may or may not

be finished products

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Master Production Schedule (cont.)

PERIODMPS ITEM 1 2 3 4 5

Pencil Case 125 125 125 125 125Clipboard 85 95 120 100 100Lapboard 75 120 47 20 17Lapdesk 0 50 0 50 0


Product Structure File


Product Structure

Top clip (1) Bottom clip (1)

Pivot (1) Spring (1)

Rivets (2)Finished clipboard Pressboard (1)

Clipboard


Product Structure Tree

Clipboard Level 0

Level 1

Level 2Spring (1)

Bottom Clip (1)Top Clip (1)

Pivot (1)

Rivets (2)

Clip Ass’y (1)

Pressboard (1)


Multilevel Indented BOM

0 - - - - Clipboard ea 1- 1 - - - Clip Assembly ea 1- - 2 - - Top Clip ea 1- - 2 - - Bottom Clip ea 1- - 2 - - Pivot ea 1- - 2 - - Spring ea 1- 1 - - - Rivet ea 2- 1 - - - Press Board ea 1

LEVEL ITEM UNIT OF MEASURE QUANTITY


Specialized BOMs

• Phantom bills– Transient subassemblies– Never stocked– Immediately consumed in next stage

• K-bills– Group small, loose parts under pseudo-item number– Reduces paperwork, processing time, and file space

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Specialized BOMs (cont.)

• Modular bills– Product assembled from major subassemblies and

customer options– Modular bill kept for each major subassembly– Simplifies forecasting and planning– X10 automobile example

• 3 x 8 x 3 x 8 x 4 = 2,304 configurations• 3 + 8 + 3 + 8 + 4 = 26 modular bills


4-Cylinder (.40) Bright red (.10) Leather (.20) Grey (.10) Sports coupe (.20)

6-Cylinder (.50) White linen (.10) Tweed (.40) Light blue (.10) Two-door (.20)

8-Cylinder (.10) Sulphur yellow (.10) Plush (.40) Rose (.10) Four-door (.30)

Neon orange (.10) Off-white (.20) Station wagon (.30)

Metallic blue (.10) Cool green (.10)

Emerald green (.10) Black (.20)

Jet black (.20) Brown (.10)

Champagne (.20) B/W checked (.10)

X10Automobile

Engines Exterior color Interior Interior color Body(1 of 3) (1 of 8) (1 of 3) (1 of 8) (1 of 4)

Modular BOMs


Time-phased Bills

Forward scheduling: start at today‘s date and schedule forward to determine the earliest date the job can be finished. If each item takes one period to complete, the clipboards can be finished in three periods

Backward scheduling: start at the due date and schedule backwards to determine when to begin work. If an order for clipboards is due by period three, we should start production now

an assembly chart shown against a time scale


MRP Processes

• Exploding the bill of material

• Netting out inventory• Lot sizing• Time-phasing

requirements

• Netting– process of subtracting on-

hand quantities and scheduled receipts from gross requirements to produce net requirements

• Lot sizing– determining the quantities in

which items are usually made or purchased


MRP: Example

Master Production Schedule

1 2 3 4 5

Clipboard 85 95 120 100 100Lapdesk 0 60 0 60 0

Item Master File

CLIPBOARD LAPDESK PRESSBOARDOn hand 25 20 150On order 175 (Period 1) 0 0(sch receipt)LLC 0 0 1Lot size L4L Mult 50 Min 100Lead time 1 1 1


MRP: Example (cont.)Product Structure Record

Clipboard

Lapdesk

Pressboard(2)

Trim(3’)

Beanbag(1)

Glue(4 oz)

Level 0

Level 0

Pressboard(1)

Clip Ass’y(1)

Rivets(2) Level 1

Level 1

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ITEM: CLIPBOARD LLC: 0 PERIOD

LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100Scheduled Receipts 175Projected on Hand 25Net RequirementsPlanned Order ReceiptsPlanned Order Releases

MRP: Example (cont.)




LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100Scheduled Receipts 175Projected on Hand 25 115Net Requirements 0Planned Order ReceiptsPlanned Order Releases

(25 + 175) = 200 units available(200 - 85) = 115 on hand at the end of Period 1



LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100Scheduled Receipts 175Projected on Hand 25 115 20Net Requirements 0 0Planned Order ReceiptsPlanned Order Releases

115 units available(115 - 85) = 20 on hand at the end of Period 2




LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100Scheduled Receipts 175Projected on Hand 25 115 20 0Net Requirements 0 0 100Planned Order Receipts 100Planned Order Releases 100

20 units available(20 - 120) = -100 — 100 additional Clipboards are requiredOrder must be placed in Period 2 to be received in Period 3




LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100Scheduled Receipts 175Projected on Hand 25 115 20 0 0 0Net Requirements 0 0 100 100 100Planned Order Receipts 100 100 100Planned Order Releases 100 100 100

Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases



ITEM: LAPDESK LLC: 0 PERIOD

LOT SIZE: MULT 50 LT: 1 1 2 3 4 5

Gross Requirements 0 60 0 60 0Scheduled ReceiptsProjected on Hand 20 20 10 10 0 0Net Requirements 0 40 50Planned Order Receipts 50 50Planned Order Releases 50 50

Following the same logic, the Lapdesk MRP matrix is completed as shown


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6


ITEM: PRESSBOARD LLC: 0 PERIODLOT SIZE: MIN 100 LT: 1 1 2 3 4 5Gross RequirementsScheduled ReceiptsProjected on Hand 150Net RequirementsPlanned Order ReceiptsPlanned Order Releases

ITEM: CLIPBOARD LLC: 0 PERIODLOT SIZE: L4L LT: 1 1 2 3 4 5

Planned Order Releases 100 100 100ITEM: LAPDESK LLC: 0 PERIODLOT SIZE: MULT 50 LT: 1 1 2 3 4 5

Planned Order Releases 50 50



Planned Order Report

PERIOD

ITEM 1 2 3 4 5

Clipboard 100 100 100Lapdesk 50 50Pressboard 100 150 100



A production schedule requires 45 units of a product to be available in week 12 of a cycle, 60 units in week 13 and 40 units in week 16. There are currently 10 units of the product in stock, but the company always keeps 5 units in reserve to cover emergency orders. Each unit of the product takes two weeks to assemble from 2 units of part B and 3 units of part C. Each unit of part B is made in one week from 1 unit of material D and 3 units of material E. Part C is assembled in two weeks from 2 units of component F. Lead times for D, E and F are one, two and three weeks respectively. Current stocks are 50 units of B, 100 of C, 40 of D, 150 of E and 100 of F. The company keeps minimum stocks of 20 units of D, 100 of E and 50 of F. The minimum order size for E is 300 units, while F can only be ordered in discrete batches of 100 units. An order placed with a subcontractor for 100 units of C is expected to arrive in week 8. Develop a timetable of activities for the company.


Lot Sizing in MRP Systems

• Lot-for-lot ordering policy• Fixed-size lot ordering policy

– Minimum order quantities– Maximum order quantities– Multiple order quantities– Economic order quantity– Periodic order quantity


Advanced Lot Sizing Rules: L4L

Total cost of L4L = (4 X $60) + (0 X $1) = $240


Advanced Lot Sizing Rules: EOQ

2(30)(60 601

E O Q minimum order quantity

Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220

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Advanced Lot Sizing Rules: POQ

/ 60 /30 2POQ Q d periods worth of requirements

Total cost of POQ = (2 X $60) + [(20 + 40) X $1] = $180


Capacity Requirements Planning (CRP)

• Creates a load profile• Identifies under-loads and over-loads• Inputs

– Planned order releases– Routing file– Open orders file


CRP

MRP plannedorder

releases

Routingfile

Capacityrequirements

planning

Openorders

file

Load profile foreach process


Calculating Capacity

• Maximum capability to produce• Rated Capacity

– Theoretical output that could be attained if a process were operating at full speed without interruption, exceptions, or downtime

• Effective Capacity– Takes into account the efficiency with which a particular product or

customer can be processed and the utilization of the scheduled hours or work

Effective Daily Capacity = (no. of machines or workers) x (hours per shift) x (no. of shifts) x (utilization) x ( efficiency)


Calculating Capacity (cont.)

• Utilization– Percent of available time spent working

• Efficiency– How well a machine or worker performs compared to a standard

output level• Load

– Standard hours of work assigned to a facility• Load Percent

– Ratio of load to capacity

Load Percent = x 100%load

capacity


Load Profiles

• graphical comparison of load versus capacity• Leveling underloaded conditions:

– Acquire more work– Pull work ahead that is scheduled for later time

periods– Reduce normal capacity

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Reducing Over-load Conditions

1. Eliminating unnecessary requirements2. Rerouting jobs to alternative machines, workers, or

work centers3. Splitting lots between two or more machines4. Increasing normal capacity5. Subcontracting6. Increasing efficiency of the operation7. Pushing work back to later time periods8. Revising master schedule


Initial Load Profile

Hour

s of c

apac

ity

1 2 3 4 5 6Time (weeks)

Normalcapacity

120 –110 –100 –

90 –80 –70 –60 –50 –40 –30 –20 –10 –

0 –


Adjusted Load Profile

Hour

s of c

apac

ity

1 2 3 4 5 6Time (weeks)

Normalcapacity

120 –110 –100 –

90 –80 –70 –60 –50 –40 –30 –20 –10 –

0 –

Pull ahead Push back

Push backOvertime

Work an extra

shift


Relaxing MRP Assumptions

• Material is not always the most constraining resource• Lead times can vary• Not every transaction needs to be recorded• Shop floor may require a more sophisticated

scheduling system• Scheduling in advance may not be appropriate for

on-demand production.

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A production schedule requires 45 units of a product to be available in week 12 of a cycle, 60 units in week 13 and 40 units in week 16. There are currently 10 units of the product in stock, but the company always keeps 5 units in reserve to cover emergency orders. Each unit of the product takes two weeks to assemble from 2 units of part B and 3 units of part C. Each unit of part B is made in one week from 1 unit of material D and 3 units of material E. Part C is assembled in two weeks from 2 units of component F. Lead times for D, E and F are one, two and three weeks respectively. Current stocks are 50 units of B, 100 of C, 40 of D, 150 of E and 100 of F. The company keeps minimum stocks of 20 units of D, 100 of E and 50 of F. The minimum order size for E is 300 units, while F can only be ordered in discrete batches of 100 units. An order placed with a subcontractor for 100 units of C is expected to arrive in week 8. Develop a timetable of activities for the company.



Week --Description

|

6 7 8 9 10 11 12 13 14 15 16

Gross requirements 45 60 40Opening stock 10 10 10 10 10 10 10 5 5 5 5Net Requirement 40 60 40Start assembly 40 60 40Scheduled receipts 40 60 40

- 6 7 8 9 10 11 12 13 14 15 16

Gross requirements 80 120 80Opening stock 50 50 50 50 50Net Requirement 30 120 80Start making 30 120 80Scheduled receipts 30 120 80

Week --Description

|

6 7 8 9 10 11 12 13 14 15 16

Gross requirements 120 180 120Opening stock 100 100 100 200 200 80Net Requirement 100 120Start making 100 120Scheduled receipts 100 100 120

Level 0: Product A

Level 1: Part B

Level 1: Part C

Step 2



Week --Description

|

6 7 8 9 10 11 12 13 14 15 16

Gross requirements 30 120 80Opening stock 40 40 40 40 20 20 20 20 20 20 20Net Requirement 10 120 80Place order 10 120 80Scheduled receipts 10 120 80

Week --Description

|

6 7 8 9 10 11 12 13 14 15 16

Gross requirements 90 360 240Opening stock 150 150 150 150 360 300 300 300 360 360 360Net Requirement 40 100 40Place order 300 300 300Scheduled receipts 300 300 300

Week --Description

|

6 7 8 9 10 11 12 13 14 15 16

Gross requirements 200 240Opening stock 100 100 100 100 100 100 100 60 60 60 60Net Requirement 150 190Place order 200 200Scheduled receipts 200 200

Level 2: Components F

Level 2: Material E

Level 2: Material D

Step 3: Prepare timetable of eventsET ZC412 Production Planning and Control


LEAN PRODUCTIONChapter 16


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Lecture Outline

• Basic Elements of Lean Production• Benefits of Lean Production• Implementing Lean Production• Lean Services



Lean Production

• Doing more with less inventory, fewer workers, less space

• Just-in-time (JIT)– smoothing the flow of material to arrive just as it is needed– “JIT” and “Lean Production” are used interchangeably

• Muda– waste, anything other than that which adds value to the

product or service



Waste in Operations



Waste in Operations (cont.)



Waste in Operations (cont.)



Basic Elements

1. Flexible resources2. Cellular layouts3. Pull production system4. Kanban production control5. Small lot production6. Quick setups7. Uniform production levels8. Total productive maintenance9. Supplier networks


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Flexible Resources

• Multifunctional workers– perform more than one job– general-purpose machines perform several basic functions

• Cycle time– time required for the worker to complete one pass

through the operations assigned• Takt time

– paces production to customer demand



Cellular Layouts

• Manufacturing cells– comprised of dissimilar machines brought

together to manufacture a family of parts

• Cycle time is adjusted to match takt time by changing worker paths



Cells with Worker Routes



Worker Routes Lengthen as Volume Decreases



Pull System

• Material is pulled through the system when needed• Reversal of traditional push system where material is

pushed according to a schedule• Forces cooperation• Prevent over and underproduction• While push systems rely on a predetermined

schedule, pull systems rely on customer requests



Differentiate between a Pull and a Push Production System

• In a push system, a schedule is prepared in advance for a series of workstations and each workstation “pushes” the work they have completed to the next station.

• With the pull system, workers go back to previous stations and take only those parts or materials they need and can process immediately.


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Origin of Kanban

a) Two-bin inventory system b) Kanban inventory system

Reorder card

Bin 1

Bin 2

Q - R

Kanban

RR

Q = order quantityR = reorder point - demand during lead time



In the two-bin system, two bins are maintained for each item. The first (and usually larger bin) contains the order quantity minus the reorder point; the second bin contains the reorder

point quantity. At the bottom of the first bin is an order card that describes the item and specifies the supplier and the quantity that is to be ordered. When the first bin is empty, the card is removed and sent to the purchasing department to order a new supply of the item. While the order is being filled, the quantity in the second bin is used. If everything goes as planned, when the second bin is empty, the new order will arrive and both bins will be filled again. The kanban system eliminates the first bin, places the order card, or kanban, at the top of the second bin, and continually orders enough inventory to fill the second bin. As the system progresses, a full bin of material arrives just as the current bin is being emptied.



Determining Number of Kanbans

where

N = number of kanbans or containersd = average demand over some time periodL = lead time to replenish an orderS = safety stockC = container size

No. of Kanbans =average demand during lead time + safety stock

container size

N =dL + S

C



Determining Number of Kanbans: Example

d = 150 bottles per hourL = 30 minutes = 0.5 hoursS = 0.10(150 x 0.5) = 7.5C = 25 bottles

Round up to 4 (to allow some slack) or down to 3 (to force improvement)

N = =

= = 3.3 kanbans or containers

dL + SC

(150 x 0.5) + 7.525

75 + 7.525



• An assembly station is asked to process 100 circuit boards per hour. It takes 20 minutes to receive the necessary components from the previous workstation. Completed circuit boards are placed in a rack that will hold 10 boards. The rack must be full before it is sent to the next workstation. If the factory uses a safety factor of 10%, how many kanbans are needed for the circuit board assembly process?

• Referring to above, how many kanbans would be needed in each case?– Demand is increased to 200 circuit boards per hour.– The lead time for components is increased to 30 minutes– The rack size is halved– The safety factor is increased to 20%



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Quick Setups

• Internal setup– Can be performed only when

a process is stopped

• External setup– Can be performed in advance

• SMED Principles– Separate internal setup

from external setup– Convert internal setup to

external setup– Streamline all aspects of

setup– Perform setup activities in

parallel or eliminate them entirely



SMED stands for single minute exchange of dies. Its objective is to reduce setup time to under 10 minutes (hence the name single digit). The ideal achievement would be push-button setups or eliminating the need for setup altogether.

The principles of SMED are:• 1. separate internal setup from external setup; find out which

setup activities can be performed in advance, and which must be performed at the machine while it is idle,

• 2. convert internal setup to external setup; perform as many preparatory tasks as you can while the machine is otherwise occupied,

• 3. streamline all aspects of setup; use time and motion studies to improve the setup process,

• 4. perform setup activities in parallel or eliminate them altogether; explore the need for setups; have teams of workers perform setups; practice setup procedures.



THANK YOU


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SCHEDULINGChapter 17


What is Scheduling?

• Last stage of planning before production occurs

• Specifies when labor, equipment, facilities are needed to produce a product or provide a service



Scheduled Operations

• Process Industry– Linear programming– EOQ with non-instantaneous

replenishment• Mass Production

– Assembly line balancing• Project

– Project -scheduling techniques (PERT, CPM)

• Batch Production– Aggregate planning– Master scheduling– Material requirements

planning (MRP)– Capacity requirements

planning (CRP)



Difficulties of Job Shop Scheduling

Variety of jobs (customers) processedDistinctive routing and processing requirements of each job/customerNumber of different orders in the facility at any one timeCompetition for common resources


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This Variety Necessitates

Planning for the production of each job as it arrivesScheduling its use of limited resourcesMonitoring its progress through the system



Objectives in Scheduling

• Meet customer due dates• Minimize job lateness• Minimize response time• Minimize completion time• Minimize time in the system

• Minimize overtime• Maximize machine or

labor utilization• Minimize idle time• Minimize work-in-

process inventory



Shop Floor Control

• Loading– Check availability of material, machines and labor

• Sequencing– Release work orders to shop and issue dispatch lists for

individual machines

• Monitoring– Maintain progress reports on each job until it is

complete



Loading

• Process of assigning work to limited resources• Perform work on most efficient resources• Use assignment method of linear

programming to determine allocation



1. Perform row reductions by subtracting minimum value in each row from all other row values

2. Perform column reductions by subtracting minimum value in each column from all other column values

3. Result is an opportunity cost matrix by crossing out all zeros in matrix using minimum number of horizontal & vertical lines

Assignment Method



Assignment Method

4. If number of lines equals number of rows in matrix, optimum solution has been found. Make assignments where zeros appear. Otherwise modify matrix by subtracting minimum uncrossed value from all uncrossed values & adding it to all cells where two lines intersect. All other values in matrix remain unchanged.

5. Repeat steps 3 & 4 until optimum solution reached


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Assignment Method: Example

Row reduction Column reduction Cover all zeros5 0 1 5 3 0 1 4 3 0 1 44 0 2 4 2 0 2 3 2 0 2 32 1 0 1 0 1 0 0 0 1 0 05 1 0 6 3 1 0 5 3 1 0 5

Number lines number of rows so modify matrix

Initial PROJECTMatrix 1 2 3 4Bryan 10 5 6 10Kari 6 2 4 6Noah 7 6 5 6Chris 9 5 4 10



Assignment Method: Example (cont.)Modify matrix Cover all zeros1 0 1 2 1 0 1 20 0 2 1 0 0 2 10 3 2 0 0 3 2 01 1 0 3 1 1 0 3

Number of lines = number of rows so at optimal solution

1 2 3 4Bryan 1 0 1 2Kari 0 0 2 1Noah 0 3 2 0Chris 1 1 0 3

PROJECT1 2 3 4

Bryan 10 5 6 10Kari 6 2 4 6Noah 7 6 5 6Chris 9 5 4 10

PROJECT

Project Cost = (5 + 6 + 6 + 4) X $100 = $2,100




Sequencing

Prioritize jobs assigned to a resourceIf no order specified use first-come first-served (FCFS)Many other sequencing rules existEach attempts to achieve to an objective


Sequencing Rules

FCFS - first-come, first-servedLCFS - last come, first servedDDATE - earliest due dateCUSTPR - highest customer prioritySETUP - similar required setupsSLACK - smallest slackCR - critical ratioSPT - shortest processing timeLPT - longest processing time


Critical Ratio Rule

CR considers both time and work remaining

CR = =

If CR > 1, job ahead of scheduleIf CR < 1, job behind scheduleIf CR = 1, job on schedule

time remaining due date - today’s datework remaining remaining processing time

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Sequencing Jobs Through One Process

• Flowtime (completion time) – Time for a job to flow through the system

• Makespan– Time for a group of jobs to be completed

• Tardiness– Difference between a late job’s due date

and its completion time


Simple Sequencing Rules

PROCESSING DUEJOB TIME DATE

A 5 10B 10 15C 2 5D 8 12E 6 8


Simple Sequencing Rules: FCFS

A 0 5 5 10 0B 5 10 15 15 0C 15 2 17 5 12D 17 8 25 12 13E 25 6 31 8 23

FCFS START PROCESSING COMPLETION DUESEQUENCE TIME TIME TIME DATE TARDINESS


Simple Sequencing Rules: DDATE

C 0 2 2 5 0E 2 6 8 8 0A 8 5 13 10 3D 13 8 21 12 9B 21 10 31 15 16

DDATE START PROCESSING COMPLETION DUESEQUENCE TIME TIME TIME DATE TARDINESS


A(10-0) – 5 = 5B(15-0) - 10 = 5C(5-0) – 2 = 3D(12-0) – 8 = 4E(8-0) – 6 = 2

Simple Sequencing Rules: SLACK

E 0 6 6 8 0C 6 2 8 5 3D 8 8 16 12 4A 16 5 21 10 11B 21 10 31 15 16

SLACK START PROCESSING COMPLETION DUESEQUENCE TIME TIME TIME DATE TARDINESS


A(10)/5 = 2.00B(15)/10 = 1.50C (5)/2 = 2.50D(12)/8 = 1.50E (8)/6 = 1.33

Simple Sequencing Rules: CR

E 0 6 6 8 0D 6 8 14 12 2B 14 10 24 15 9A 24 5 29 10 19C 29 2 31 5 26

CR START PROCESSING COMPLETION DUESEQUENCE TIME TIME TIME DATE TARDINESS

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Simple Sequencing Rules: SPT

C 0 2 2 5 0A 2 5 7 10 0E 7 6 13 8 5D 13 8 21 12 9B 21 10 31 15 16

SPT START PROCESSING COMPLETION DUESEQUENCE TIME TIME TIME DATE TARDINESS


Simple Sequencing Rules: Summary

FCFS 18.60 9.6 3 23DDATE 15.00 5.6 3 16SLACK 16.40 6.8 4 16CR 20.80 11.2 4 26SPT 14.80 6.0 3 16

AVERAGE AVERAGE NO. OF MAXIMUMRULE COMPLETION TIME TARDINESS JOBS TARDY TARDINESS





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Sequencing Jobs Through Two Serial Process

Johnson’s Rule1. List time required to process each job at each

machine. Set up a one-dimensional matrix to represent desired sequence with # of slots equal to # of jobs.

2. Select smallest processing time at either machine. If that time is on machine 1, put the job as near to beginning of sequence as possible.

3. If smallest time occurs on machine 2, put the job as near to the end of the sequence as possible.

4. Remove job from list.5. Repeat steps 2-4 until all slots in matrix are filled

and all jobs are sequenced.


Johnson’s Rule

JOB PROCESS 1 PROCESS 2A 6 8B 11 6C 7 3D 9 7E 5 10

CE A BD


Johnson’s Rule (cont.)

A B CDE

E A D B C Process 1(sanding)

5 11 20 31 38

E A D B C Process 2(painting)

5 15 23 30 37 41

Idle time

Completion time = 41Idle time = 5+1+1+3=10



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Sequencing Jobs Through Many Machines/Processes

Facility is dynamic, new jobs addedDevelop global sequencing rules

First-in-system, first-served (FISFS)Work-in-next-queue (WINQ)Fewest # remaining operations (NOPN)Slack per remaining operation (S/OPN)Remaining work (RWK)

Study system via simulation


Guidelines for Selecting a Sequencing Rule

1. SPT most useful when shop is highly congested2. Use SLACK for periods of normal activity3. Use DDATE when only small tardiness values can

be tolerated4. Use LPT if subcontracting is anticipated5. Use FCFS when operating at low-capacity levels6. Do not use SPT to sequence jobs that have to be

assembled with other jobs at a later date


Monitoring

• Work package– Shop paperwork that travels with a job

• Gantt Chart– Shows both planned and completed activities

against a time scale• Input/Output Control

– Monitors the input and output from each work center


1 2 3 4 5 6 8 9 10 11 12 Days

1

2

3

Today’s Date

Job 32B

Job 23C

Job 11C Job 12A

Faci

lity

Key: Planned activityCompleted activity

Behind schedule

Ahead of schedule

On schedule

Gantt Chart


Employee Scheduling

• Labor is very flexible resource

• Scheduling workforce is complicated, repetitive task

• Assignment method can be used

• Heuristics are commonly used


Employee Scheduling Heuristic

1. Let N = no. of workers availableDi = demand for workers on day iX = day workingO = day off

2. Assign the first N - D1 workers day 1 off. Assign the next N - D2 workers day 2 off. Continue in a similar manner until all days are have been scheduled

3. If number of workdays for full time employee < 5, assign remaining workdays so consecutive days off are possible

4. Assign any remaining work to part-time employees5. If consecutive days off are desired, consider switching schedules

among days with the same demand requirements

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DAY OF WEEK M T W TH F SA SUMIN NO. OF

WORKERS REQUIRED 3 3 4 3 4 5 3

TaylorSmithSimpsonAllenDickerson

Employee Scheduling


DAY OF WEEK M T W TH F SA SUMIN NO. OF


Taylor O X X O X X XSmith O X X O X X XSimpson X O X X O X XAllen X O X X X X ODickerson X X O X X X O

Completed schedule satisfies requirements but has no consecutive days off

Employee Scheduling (cont.)


Employee Scheduling (cont.)DAY OF WEEK M T W TH F SA SUMIN NO. OF


Taylor O O X X X X XSmith O O X X X X XSimpson X X O O X X XAllen X X X O X X ODickerson X X X X O X O

Revised schedule satisfies requirements with consecutive days off for most employees


Automated Scheduling Systems

• Staff Scheduling• Schedule Bidding • Schedule Optimization


• The following tasks must be performed on an assembly line in the sequence and time for each task are specified as follows:

– Draw the precedence diagram– What is the theoretical minimum number of stations required to meet a forecast demand of 400 units per 8-

hour day?– Use the longest-task-time rule and balance the line in the minimum number of stations to produce 400 units

per day– What is the efficiency of the assembly line

Task Task time (Seconds)

Tasks that must precede

A 50 -B 40 -C 20 AD 45 CE 20 CF 25 DG 10 EH 35 B,F,G


• Mike Morales is the supervisor of the Legal Copy-Express, which provides copy services for downtown Los Angeles law firms. Five customers submitted their orders at the beginning of the week. Specific scheduling data are as follows:

– All orders require the use of the only colour copy machine available; Morales must decide on the processing sequence for the five orders. The evaluation criterion is minimum flow time, average number of jobs in the system, and average job lateness. Three rules can be used –earliest due date, shortest processing time and first-come first-served. Use these three rules to set the sequence of the jobs, and evaluate the rules according to the above-mentioned criteria.

Job(In order of arrival)

Processing time (Days) Due date (Days hence)

A 3 5

B 4 6

C 2 7

D 6 9

E 1 2

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Write to me at

• [email protected]



Thank You

3/22/2012

1







• The following tasks must be performed on an assembly line in the sequence and time for each task are specified as follows:

– Draw the precedence diagram– What is the theoretical minimum number of stations required to meet a forecast demand of 400 units per 8-

hour day?– Use the longest-task-time rule and balance the line in the minimum number of stations to produce 400 units

per day– What is the efficiency of the assembly line

Task Task time (Seconds)

Tasks that must precede

A 50 -B 40 -C 20 AD 45 CE 20 CF 25 DG 10 EH 35 B,F,G


• Mike Morales is the supervisor of the Legal Copy-Express, which provides copy services for downtown Los Angeles law firms. Five customers submitted their orders at the beginning of the week. Specific scheduling data are as follows:

– All orders require the use of the only colour copy machine available; Morales must decide on the processing sequence for the five orders. The evaluation criterion is minimum flow time, average number of jobs in the system, and average job lateness. Three rules can be used –earliest due date, shortest processing time and first-come first-served. Use these three rules to set the sequence of the jobs, and evaluate the rules according to the above-mentioned criteria.

Job(In order of arrival)

Processing time (Days) Due date (Days hence)

A 3 5

B 4 6

C 2 7

D 6 9

E 1 2


1. A bottling hall has three distinct parts: • Two bottling machines each with a maximum throughput of 100

litres a minute, and average maintenance of one hour a day; • Three labelling machines each with a maximum throughput of 3000

bottles an hour, and planned stoppages averaging 30 minutes a day; • A packing area with a maximum throughput of 10,000 cases a day. • The hall is set to fill litre bottles and put them in cases of 12 bottles

during a 12-hour working day.a. What is the designed capacity of the hall?b. What is the effective capacity of the hall?c. If the bottling hall works at its effective capacity, what is the

utilization of each operation?d. If the line develops a fault which reduces output to 70,000 bottles,

what is the efficiency of the operation?



2. Identify some reasons for diseconomies of scale occurring in an organization of your choice. Explain each reason.

[4M]• Economies of scale do not continue indefinitely. Above a

certain level of output, diseconomies of scale take over. Overtaxed machines and material handling equipment tend to break down, service time slows, quality suffers requiring more rework, labor costs increase with overtime, and coordination and management activities become difficult. In addition, if customer preferences suddenly change, high volume production can leave a firm with unusable inventory and excess capacity. Factors like Distribution, Bureaucracy, Confusion and Vulnerability cause this to escalate.


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• A simple process consists of six areas of equal size to be fitted into a rectangular building. Data collected from process charts and observation gives the following table of expected movements between areas. Draw a block diagram of a good layout for the process in a 3 X 2 matrix.


FromA B C D E F

A -- 30 10 0 12 0

B 0 -- 10 40 5 0

C 0 5 -- 60 0 20

D 0 10 15 -- 0 10

E 60 20 0 0 -- 10

F 0 0 30 5 10 --


6 (c) How are reliability and maintainability related? [6M]• Reliability is the probability that a given part or product will

perform its intended function for a specified length of time under normal conditions of use. Maintainability refers to the ease and/or cost with which a product is maintained or repaired. Maintainability and reliability are closely related. For example, if a product is cheap to manufacture and priced so low that customers throw it away when it fails (such as calculators, telephones, and watches), maintainability may be a moot issue. Similarly, if a product is so reliable that it rarely breaks down, then ease of repair many not be important. On the other hand, it may be less costly to make a product easy to maintain than to increase its reliability. And for some products, both reliability and maintainability are very important (e.g., office machines, computers).



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