Вы находитесь на странице: 1из 41

Ir.

Haery Sihombing/IP
Sihombing/IP
Pensyarah Fakulti Kejuruteraan Pembuatan
Universiti Teknologi Malaysia Melaka

1 Manufacturing
Supply Chain
Management
Inventory
Control/Mgmt
Requirements
Strategy Planning

Plant Push/Pull
Layout Systems
Manufacturing Management
Manufacturing Factory Flow
Flexibility Dynamics

Shop Floor
Quality
Control
Control
Welcome to DMFD 3513 Course: Aggregate
Planning
Production
Scheduling

MANUFACTURING MANAGEMENT

MANAGEMENT MANAGEMENT
„ Technique, practice or science of managing or Some writers, teachers and practitioners assert that
controlling; the skillful use of resources and time; the the previous view is rather outmoded and that
specific treatment of a disease or disorder.
management needs to focus more on leadership skills,
„ Function that organizes the execution of today’
today’s
business. e.g., establishing vision and goals, communicating the
„ The process of getting activities completed efficiently vision and goals, and guiding others to accomplish
and effectively with and through other people. them. They also assert that leadership must be more
facilitative, participative and empowering in how
Traditionally, the term "management" refers to the set of
visions and goals are established and carried out.
activities, and often the group of people, involved in four
general functions, including planning, organizing, leading
Some people assert that this really isn't a change in
and coordinating activities. (Note that the four functions the management functions, rather it's re-
re-emphasizing
recur throughout the organization and are highly certain aspects of management.
integrated.)
MANAGEMENT MANAGEMENT
Management functions: Management roles:

‰ Planning The people who ¾ Interpersonal roles Figurehead, Leader, Liaison


‰ Organizing administer a
company, create ¾ Informational roles: Monitor, Disseminator,
‰ Staffing Spokesperson
policies, and provide
‰ Directing
the support necessary
‰ Coordinating to implement the ¾ Decisional roles Entrepreneur, Disturbance
‰ Reporting
handler, Resource allocator,
allocator, Negotiator
owners' business
‰ Budgeting objectives..

What Is Management? What is Management? (cont.)

„ Management „ Management (cont.)


„ the process of coordinating work activities so „ Efficiency- getting the most output from the
that they are completed efficiently and least amount of inputs
„ “doing things right”
right”
effectively with and through other people „ concerned with means
„ elements of definition „ Effectiveness - completing activities so that
„ Process - represents ongoing functions or organizational goals are attained
„ “doing the right things”
things”
primary activities engaged in by managers
„ concerned with ends
„ Coordinating - distinguishes a managerial
position from a non-
non-managerial one
Efficiency and Effectiveness in
Management
Who Are Managers?
Efficiency (Means) Effectiveness (Ends)
„ Manager
Resource Goal „ someone who works with and through other
Usage Attainment people by coordinating their work activities in
order to accomplish organizational goals
Low Waste High Attainment „ changing nature of organizations and work
has blurred the clear lines of distinction
between managers and non-non-managerial
Management Strives For:
employees
Low resource waste (high efficiency)
High goal attainment (high effectiveness)

UNIVERSAL NEED FOR MANAGEMENT


INDUSTRIAL REVOLUTION
The major inventions of the Industrial Revolution –
American - British and European –

the Industrial Revolution defined was the widespread


replacement of manual labor by new inventions
or machinery.
Industrial Revolution, widespread replacement of manual labor by
machines that began in Britain in the 18th century and is still
continuing in some parts of the world. The Industrial Revolution
was the result of many fundamental, interrelated changes that
transformed agricultural economies into industrial ones. The most
most
1-11
immediate changes were in the nature of production: what was
produced, as well as where and how.
INDUSTRIAL REVOLUTION INDUSTRIAL REVOLUTION
„ 1712 - Newcomen 1733 – Flying Shuttle,
Steam Engine and Automation of Textile
the Industrial Making & The Industrial
Revolution
Revolution
In 1733, John Kay invented the flying shuttle, an improvement
improvement to
looms that enabled weavers to weave faster. By using a flying
In 1712, Thomas Newcomen together with John Calley built their shuttle, a single weaver could produce a wide piece of cloth. The
The
first steam engine on top of a water filled mine shaft and used it original shuttle contained a bobbin on to which the weft (weaving
(weaving
to pump water out of the mine. The Newcomen steam engine was term for the crossways yarn) yarn was wound. It was normally
the predecessor to the Watt steam engine and it was one of the pushed from one side of the warp (weaving term for the the series
most interesting pieces of technology developed during the 1700's.
1700's. of yarns that extended lengthways in a loom) to the other side by
by
The invention of engines, the first being steam engines, was very
very hand. Before the flying shuttle wide looms needed two or more
important to the industrial revolution. weavers to throw the shuttle.

INDUSTRIAL REVOLUTION INDUSTRIAL REVOLUTION


1764 - Increased
Yarn & Thread
1769 - James Watt's
Production During Improved Steam
Industrial Revolution Engine Powers the
Industrial Revolution
In 1764, a British carpenter and weaver named James
Hargreaves invented an improved spinning jenny, a hand-
hand- James Watt was sent a Newcomen steam engine to repair that led
powered multiple spinning machine that was the first machine to him to invented improvements for steam engines. Steam engines
improve upon the spinning wheel by making it possible to spin were now true reciprocating engine and not atmospheric engines.
more than one ball of yarn or thread.{p]
thread.{p] Spinner machines like Watt added a crank and flywheel to his engine so that it could
the spinning wheel and the spinning jenny made the threads and provide rotary motion. Watt's steam engine machine was four
yarns used by weavers in their looms. As weaving looms became times more powerful than those engines based on Thomas
faster, inventors had to find ways for spinners to keep up. Newcomen's steam engine design
INDUSTRIAL REVOLUTION INDUSTRIAL REVOLUTION

1769 - Spinning 1779 -


Frame or Water Spinning Mule
Frame Increased
Variety in
Threads &
Richard Arkwright patented the spinning frame or water that
could produce stronger threads for yarns. The first models were Yarns
powered by waterwheels so the device came to be first known as
the water frame. It was the first powered, automatic, and In 1779, Samuel Crompton invented the spinning mule that
continuous textile machine and enabled the move away from combined the moving carriage of the spinning jenny with the
small home manufacturing towards factory production of textiles. rollers of the water frame. The spinning mule gave the spinner
The water frame was also the first machine that could spin cotton
cotton great control over the weaving process. Spinners could now make
threads. many different types of yarn. Finer cloths could now be made.

INDUSTRIAL REVOLUTION INDUSTRIAL REVOLUTION


¾ IMPACT RESULTED (POSITIVE)
1785 - Power
„ The social changes brought about by the Industrial
Loom's Effect Revolution were significant.
on the Women „ As economic activities in many communities moved from
of the agriculture to manufacturing, production shifted from its
Industrial traditional locations in the home and the small workshop to
factories.
Revolution
„ Large portions of the population relocated from the
countryside to the towns and cities where manufacturing
The power loom was a steam-
steam-powered, mechanically-
mechanically-operated centers were found.
version of a regular loom. A loom is a device that combined „ The overall amount of goods and services produced
threads to make cloth. When the power loom became efficient, expanded dramatically, and the proportion of capital
women replaced most men as weavers in the textile factories invested per worker grew.
INDUSTRIAL REVOLUTION INDUSTRIAL REVOLUTION
¾ IMPACT RESULTED (POSITIVE) ¾ IMPACT RESULTED (NEGATIVE)
„ There have been costs, however.
„ New groups of investors, businesspeople, and managers took „ In some cases, the lower classes of society have suffered
financial risks and reaped great rewards. economically.
„ In the long run the Industrial Revolution has brought „ Industrialization has brought factory pollutants and greater
economic improvement for most people in industrialized land use, which have harmed the natural environment.
societies.
„ In particular, the application of machinery and science to
„ Many enjoy greater prosperity and improved health, agriculture has led to greater land use and, therefore,
especially those in the middle and the upper classes of extensive loss of habitat for animals and plants.
society.
„ In addition, drastic population growth following
industrialization has contributed to the decline of natural
habitats and resources. These factors, in turn, have caused
many species to become extinct or endangered.

Changes in Industry Changes in Industry


„ Continuous-
Continuous-Process Manufacturing „ The American System
An important American development was continuous- by the mid-19th century American manufacturers shaped
process manufacturing. In continuous-process a set of techniques later known as the American system of
manufacturing, large quantities of the same product, such production.
as cigarettes or canned food, are made in a nonstop „ This system involved using special-purpose machines to
operation. The process runs continuously, except for produce large quantities of similar, sometimes
interchangeable, parts that would then be assembled into
repairs to or maintenance of the machinery used. a finished product.
Continuous-Process Manufacturing „ The American system extended the idea of division of
In the late 18th century, inventor Oliver Evans of Delaware created a remarkable water- labor from workers to specialized machines. Instead of a
powered flour mill. In Evans’s mill, machinery elevated the grain to the top of the mill and worker making a small part of a finished product, a
then moved it mechanically through various processing steps, eventually producing flour at machine made the part, speeding the process and allowing
the bottom of the mill. The process greatly reduced the need for manual labor and cut
milling costs dramatically. Mills modeled after Evans’s were built along the Delaware and
manufacturers to produce goods more quickly.
Brandywine rivers and Chesapeake Bay, and by the time of the American Revolution „ This method also enabled goods of much more uniform
(1775-1783) they were arguably the most productive in the world. Similar milling quality than those made by hand labor.
technology was also used to grind snuff and other tobacco products in the same region.
Changes in Industry Changes in Industry
„ The Second Industrial Revolution „ FORDIANISM
As American manufacturing „ It was in the automobile industry that continuous-
continuous-process
technology spread to new industries methods and the American system combined to greatest
effect.
1. The first had come on a wave of new inventions in iron „ In 1903 American industrialist Henry Ford founded the
making, in textiles, in the centrally powered factory, Ford Motor Company.
and in new ways of organizing business and work.
„ His production innovation was the moving assembly line
2. In the latter 19th century, a second wave of technical which brought together many mass-
mass-produced parts to
and organizational advances carried industrial society create automobiles.
to new levels. While Great Britain had been the
birthplace of the first revolution, the second occurred „ Ford’
Ford’s moving assembly line gave the world the fullest
most powerfully in the United States. expression yet of the Second Industrial Revolution, and
his production triumphs in the second decade of the 20th
century signaled the crest of the new industrial age.

Changes in Industry
„ Organization and Work-
Work-Taylorism
„ Just as important as advances in manufacturing
technology was a wave of changes in how business was INDUSTRIAL PROGRESS
structured and work was organized.
&
„ Engineers studied and modified production, seeking the
most efficient ways to lay out a factory, move materials, ISSUES
route jobs, and control work through precise scheduling.
„ Industrial engineer Frederick Taylor and his followers
sought both efficiency and contented workers. They
believed that they could achieve those results through
precise measurement and analysis of each aspect of a
job.
Faster Growth and More Good Jobs
Once an economy reaches the middle income level of development, service industries become a
Stages of Economic Development more important source of job growth than manufacturing

Features
Pre-
Pre- Use of Standard
dominant human Unit of of living
Society Game activity labor social life
life measure Structure Technology

Pre-
Pre- Against Agriculture Raw Extended Sub-
Sub- Routine Simple hand
Industrial Nature Mining muscle household
household sistence Traditional tools
power Authoritative

Industrial Against Goods Machine Individual


Individual Quantity Bureaucratic Machines
fabricated production tending of goods Hierarchical
nature

Post-
Post- Among Services Artistic Community Quality of Inter-
Inter- Information
industrial Persons Creative life in terms dependent
Intellectual
Intellectual of health, Global
education,
recreation

Percent Service Employment for


Trends in U.S. Employment by Sector Selected Industrialized Nations

90
Country 1980 1987 1993 1999
80
Proportation of total

70
employement

60 United States 67.1 71.0 74.3 80.4


Service Canada 67.2 70.8 74.8 73.9
50
40 Japan 54.5 58.8 59.9 72.4
30 Manufacturing France 56.9 63.6 66.4 70.8
20 Israel 63.3 66.0 68.0 70.7
10 Italy 48.7 57.7 60.2 61.1
Agriculture
0 China 13.1 17.8 21.2
21.2 26.4
50

80

10

40

70

00
18

18

19

19

19

20

Year
Faster Growth and More Good Jobs Percent of U.S. Labor Force by
Once an economy reaches the middle income level of development, service industries become a
more important source of job growth than manufacturing
Industry
80

Percent of U.S. Labor Force


70
60
50
40
30
20
10
0
1929 1948 1969 1977 1984 1999
„ Services
Year „ Manufacturing
„ Mining & Agriculture
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and
July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S.
Economy,” Scientific American, 244,3 (1981): 31-39.

Percent of U.S. Gross Domestic SUMMARY


Product by Industry Manufacturing History
80 What can we learn from history?
70
Percent of GDP

60
„ First Industrial Revolution (mid-
(mid-1700’
1700’s)
50 „ Steam Engine
40 „ Mass production
30
„ Vertical Integration
20
10 „ Interchangeable parts (and workers)
0 „ Services „ Economies of Scale
1948 1959 1967 1977 1987 1999 „ Manufacturing
Year „ Mining & Agriculture
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli
Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific
American, 244,3 (1981): 31-39.
SUMMARY SUMMARY
Manufacturing History Manufacturing History
„ Henry Ford: Emphasis on speed of production
„ Second Industrial Revolution (Late 1800’
1800’s)
„ Turn of the century (early 1900’
1900’s)
„ Transport and Communications Infrastructure
„ Assembly-
Assembly-line production
„ Allowed for creation of mass markets
„ Fast labor times
„ Mass Retailers (Sears)
„ Repetitive, standardized processes
„ Horizontal and Vertical Integration
„ Speed of output impacts cost per unit
„ Carnegie: Rail, Steel, Mining
„ High volume production

SCIENTIFIC MANAGEMENT Evolution of Scientific Management

„ Frederick W. Taylor (late 1800’


1800’s/early 1900’
1900’s) „ We will first consider the basic
„ Measured workers speed manufacturing management principles
„ Emphasized the best way to perform tasks developed between the 1950’
1950’s and
„ Mathematical models 1970’
1970’s that formed the basis for modern
„ Worker incentives manufacturing management
„ Accounting principles „ These principles are fundamental to both
„ Management planning systems modern U.S. and Japanese
manufacturing management systems
and focus on managing inventory,
supply, and production flow in factories
PRODUCTIVITY MEASUREMENTY Productivity Calculations

Units produced Labor Productivity


Productivity =
Input used
Units produced
Productivity =
; Measure of process improvement Labor-
Labor-hours used
; Represents output relative to input
1,000
; Only through productivity increases = = 4 units/labor
units/labor--hour
can our standard of living improve 250

Measuring
Multi-Factor Productivity
Product Yield & Productivity
„ Yield is a measure of productivity.

Yield = (total input)(% good units) + (total


Output
Productivity = input)(1-% good units)(% reworked)
Labor + Material + Energy
@
+ Capital + Miscellaneous
Y = (I)(%G) + (I)(1-%G)(%R)
Where
; Also known as total factor productivity I = planned no. units of product started
in the production process
; Output and inputs are often expressed %G = % of good units produced
in dollars %R = % of defective units that are successfully
reworked
„ Improved quality increases product yield.
Measuring Measuring
Product Yield & Productivity (cont’
(cont’d) Product Yield & Productivity (cont’
(cont’d)
„ Product cost = (direct manufacturing cost per unit) „ For a production process with n stages, the
(input) + (rework cost per unit) yield, y (without reworking), is,
(reworked units)
yield
Y = (I)(%g1)(%g2)…..(%gn)
@ Product cost = (Kd)(I) + (Kr)(R)
Y
where where
Kd = direct manufacturing cost per unit I = input of items to the production process
I = input that will result in finished products
Kr = rework cost per unit
gi = good-
good-quality, work-
work-in-
in-progress products at
R = reworked units
Y = yield stage i

Computing Product Yield Computing Product Cost per Unit


Computing Product Cost per Unit Computing Product Yield for A
(cont’
(cont’d) Multistage Process

Computing
The Quality-Productivity Ratio The Quality-
Quality-Productivity Ratio (QPR)

„ The quality-
quality-productivity ratio (QPR)
is a productivity index that includes
productivity and quality costs.

QPR = good-
good-quality units (100)
(input)(processing cost) + (defective units)(rework cost)
Key Variables for Improved Labor Skills
Labor Productivity
About half of the 17-
17-year-
year-olds in the US cannot
correctly answer questions of this type
; Basic education appropriate for the
labor force
; Diet of the labor force
; Social overhead that makes labor
available
; Maintaining and enhancing skills in the
midst of rapidly changing technology
and knowledge
Figure 1.8

THE END
„ Ir. Haery Sihombing (IP)
Pensyarah Fakulti Kejuruteraan Pembuatan
Universiti Teknologi Malaysia Melaka INVENTORY CONTROL
2 „ What purpose does inventory serve?
„ It provides capacity to instantaneously meet
downstream demands and requirements
„ It provides a buffer between successive
operations stages
„ It insulates against future uncertainties
„ Uncertainties in supply
„ Uncertainties in demand
„ Uncertainties in capacity

Inventory Control „ Uncertainties in material value

INVENTORY CONTROL Inventory Control Decisions


„ What motivates firms to hold inventory? „ What decisions are involved in inventory
„ Economic Motive control?
„ Economies of scale „ How should I track inventory?
„ Speculative Motive „ Continuously versus periodically
„ Future values of raw materials „ When do I place an order?
„ Transaction Motive „ Reorder point
„ Precautionary Motive „ How much should I order when I place an
„ Uncertainty in supply, demand, and operations order?
„ Order quantity
ECONOMIC ORDER QUANTITY ECONOMIC ORDER QUANTITY
„ The oldest known mathematical „ Modeling Assumptions:
inventory model „ Instantaneous production*
„ Illustrates insights regarding economic „ Immediate delivery*
tradeoffs in production „ Deterministic demand
„ Addresses economic and transaction „ Constant demand rate
motives „ Constant setup cost for any production run
„ Uses extremely simple, often impractical or order placement
modeling assumptions „ Products can be analyzed separately
„ *Assumptions can be easily relaxed
„ It is, however, very robust to situations not
fitting the assumptions

EOQ Parameters and Decisions EOQ Properties


„ D = demand rate (units per unit time) „ Since demand is deterministic and occurs at a
„ c = Unit production/procurement cost, constant rate, we can always time orders so
over and above any fixed order cost we have zero inventory when a replenishment
„ A = Fixed order/setup cost arrives.
„ This constant and deterministic demand rate
„ h = holding cost per unit per unit time
leads to a system whose behavior does not
„h = ic, where i is an interest rate reflecting
cost of capital, warehousing, insurance, vary with time
obsolescence „ Inventory falls at constant linear rate
„ Q = Order quantity/Lot size „ Leads to optimality of a fixed order quantity/lot
size with each order/setup
EOQ Analysis EOQ Analysis
„ We would like to determine the order „ Inventory level follows a cyclical pattern
quantity, Q, that minimizes the average „ Minimizing the cost per unit time in any given cycle is
sufficient
cost incurred per unit time.
„ We therefore consider the costs incurred in a single cycle
„ Suppose we order a quantity Q and average them out over the cycle length, T = Q/D, to
„ Since delivery of Q units occurs get average cost per unit time
instantaneously, we begin with Q units
Q
„ Inventory is depleted at a constant rate of D I(t)
units per unit time
„ When Inventory hits zero, we again order Q
0 Q/D 2Q/D 3Q/D 4Q/D Time, t

EOQ Analysis EOQ Analysis


„ What costs do we incur in a cycle? „ In terms of the variables, Q and D, what is the
„ Fixed order cost, A area of the triangle?
„ Variable procurement cost, cQ
„ Area = (1/2)Q*Q/D = Q2/2D
„ Inventory cost in a cycle = hQ2/2D
„ Holding costs:
„ Since holding cost is applied per unit per unit
„ Total Cost in a Cycle:
time, we multiply h by the inventory level at „ A + CQ + hQ2/2D
each instant in time T and integrate over the cycle „ To get the average cost per unit time, we divide by
h ³ I (t )dt
„ Holding cost =
o the cycle length, T = Q/D:
„ Since the integral of the inventory level over a „ Y(Q) = AD/Q + cD + hQ/2
cycle is just the area of a triangle, we can simply „ Y(Q) = Annual order/setup + procurement +
determine this area holding cost if D is annual demand rate
EOQ Analysis EOQ Analysis

„ We would like to minimize Y(Q) over all „ Setting Y’(Q) = 0:


Q t 0. „ -AD/Q2 + h/2 = 0
2 AD h
„ We can show that Y(Q) is a convex
„ EOQ = Q* =
function „ The above gives a simple formula for
„ Thismeans that if we take the derivative minimizing average cost per unit time
and set it to zero, we will find the global „ The EOQ formula illustrates the tradeoff
minimum made between setup/order cost and holding
„ Showing convexity requires showing that cost
the 2nd derivative is always nonnegative „ As A increases, so does order quantity (we order
less often to incur less fixed costs)
„ First derivative of Y(Q):
„ As h increases, Q* decreases (we order more
„ Y’(Q) = -AD/Q2 + h/2 often to reduce overall holding costs)
„ Second derivative of Y(Q):

EOQ Properties LEAD TIMES


„ -AD/Q2 + h/2 = 0 implies hQ/2 = AD/Q „ Our EOQ analysis made an assumption that
„ Annual holding cost = Annual order/setup cost the entire order quantity is delivered
„ Note that there are D/Q cycles per year if D is immediately
annual demand rate „ We can easily extend this to incorporate a
„ Note that Y(Q) is very flat around Q* positive constant lead time,W.
„ We need only ensure that our order is timed so
Y(Q)
that the inventory level hits zero exactly when
the order arrives.
hQ/2 „ If W } T, then we should set our reorder point, R
= DW = QW /T, which equals both demand during
AD/Q
lead time and the fraction of the order quantity
Q* Q consumed during the lead time.
LEAD TIMES ECONOMIC PRODUCTION LOT
„ Suppose however, that the lead time, W, exceeds „ The next assumption we relax in the EOQ model is
the cycle length T. that of the delivery of the entire lot at the same time
„ If we use R = QW/T, we set our reorder point higher „ In a production environment, the lot is typically
than the order quantity, and we will never reach this delivered over a period of time at a rate equal to the
reorder point.
production rate, P.
„ We can still time the order receipt to coincide with a
zero inventory level in a future cycle. Suppose, for „ We must have P ˜ D (Why?)
example, W/T = 1.5. Then if we order when inventory „ If P = D, what does the inventory level look like?
level equals 0.5Q, the order will arrive in 1- 1-1/2 cycles, „ If P > D, we increase our inventory at a rate P – D.
when inventory level equals zero.
„ If P > D we cannot produce indefinitely (why not?)
„ As a rule, we consider the fractional remainder of W/T,
„ During the time we are not producing, inventory
i.e., W / T  «¬W / T »¼ , and multiply this by Q to get R.
decreases at a rate equal to D.

ECONOMIC PRODUCTION LOT ECONOMIC PRODUCTION LOT

„ The Figure illustrates the inventory level over „ From this we determine that H = (1 – D/P)Q.
time. „ We still have average annual procurement cost equal
to cD, and average annual setup cost equal to AD/Q.
„ We analyze this in the same way we analyzed
„ The average annual holding cost equals h multiplied
the EOQ. by the area of the triangle, divided by the cycle
„ Note that when we order Q, our inventory never reaches Q
„ We must determine H to find the maximum inventory level.
length, T.
„ Observe that: „ This gives: h(1/2)(1 – D/P)Q.
„ H = (P – D)T1; H = DT2; T1 + T2 = T= Q/D
„ The average annual cost then equals:
H
I(t) P-D -D „ Y(Q) = cD + AD/Q + (hQ/2)(1 – D/P)

0 T1 T2 Time, t
T = Q/D
ECONOMIC PRODUCTION LOT DYNAMIC DETERMINISTIC DEMAND

„ Suppose we let h’ = h(1 – D/P) and „ EOQ model assumes constant demand
rewrite the equation as: rate, often a dubious assumption
„ Y(Q) = cD + AD/Q + h’Q/2 „ If we want to deal with general
„ This is the exact same form of the cost dynamically changing demand, we must
equation we derived in the EOQ case, except focus on discrete-
discrete-time models
h’ replaces h. „ We allow demand to vary in daily,
2 AD h '
„ This implies that the Economic Production Lot weekly, or monthly buckets, or periods
*
size equals Q = „ This approach minimizes total costs over
„ Note that if P = f, h’ = h and we have the a finite planning horizon consisting of a
EOQ as a special case of the EPL. fixed number of periods

DYNAMIC DETERMINISTIC DEMAND DYNAMIC DETERMINISTIC DEMAND

„ The parameters of a dynamic lot sizing „ We wish to satisfy all demand until the
problem are: end of the time horizon at minimum
„ T, number of periods in the planning horizon total production and holding cost.
„ Dt, demand in period t. „ Some potential policies:
„ ct, variable production cost in period t.
„ Lot-
Lot-for-
for-lot
rule: Setup in every period and
„ At, setup cost in period t. produce the requirements for that period.
„ ht, holding cost per unit remaining at the end of a „ Maximum setup costs, minimum (zero) holding
period costs
„ It, inventory at the end of period t (a decision „ Is this likely to be an optimal policy?
variable). „ FixedOrder Quantity: Any time we produce
„ Qt, Lot size (production quantity in period t (a decision we produce the same amount, Q.
variable) „ Is this likely to be an optimal policy?
Dynamic Lot Sizing Comments Stochastic Inventory Models
„ What are the pros and cons of this modeling „ The real world does not behave
approach? deterministically
„ Pros:
„ Assumptions of deterministic models
„ Most production facilities plan in periodic fashion, i.e.,
daily, weekly monthly rarely hold in practice
„ Has the ability to handle varying demand „ Deterministic models usually fit best with
„ Computationally simple make-
make-to-
to-order systems
„ Cons: „ Make-
Make-to-
to-stock systems are typically
„ Assumes infinite capacity
„ Assumes all parameters are known with certainty
found in environments in which demand
„ Assumes products are independent is non-
non-deterministic (stochastic)
„ Assumes zero-
zero-inventory production property is optimal

Stochastic Inventory Models Single-Period Stochastic Model


„ Stochastic inventory models still must assume „ Newsboy or Christmas Tree Problem
some knowledge of the nature of demand „ Assumptions:
„ We typically assume that although demand is „ One planning period
„ Inventory remaining at the end of the period will
not known with certainty, we can effectively incur a disposal cost or retrieve a salvage value
characterize a probability distribution for „ All costs are linear in volume
demand „ No fixed order cost component (although the
model extends easily to include this)
„ Models for these systems require use of the
„ Penalty cost for unsatisfied demand
tools of probability and statistics
„ Known probability density function (pdf
(pdf)) or
„ We will next consider a few inventory models probability mass function (pmf
(pmf)) of demand
for handling stochastic demand
Single-Period Model Expected Single-Period Cost
„ Notation: „ The expected cost in a period is a
„ X = A random variable denoting single-
single-period function of the expected number of units
demand
short and the expected number of units
„ G(x) = cumulative distribution function (cdf
(cdf)) of
demand, i.e., G(x) = Prob{X d x}. remaining at the end of the period
„ g(x) = pdf of demand (g(x) = dG(x)/dx) „ Units short = max{X – Q, 0}
f f

„ co = Cost ($) per unit left over after demand occurs „ E[max{X – Q, 0}] = ³0 max{x  Q,0}g ( x )dx ³Q
( x  Q ) g ( x )dx

(overage cost) „ Units over = max{Q – X, 0}


f Q
„ cs = Cost ($) per unit of shortage (shortage cost) „ E[max{Q – X, 0}] = ³0 max{Q  x,0}g ( x )dx ³ 0
(Q  x ) g ( x )dx
„ Q = Production/order quantity – the decision „ Q f
Y (Q ) co ³ (Q  x ) g ( x )dx  cs ³ ( x  Q ) g ( x )dx
variable 0 Q

Minimizing Expected Cost Extending to Multiple Periods


„ The optimal order quantity is a function „ Consider a series of periods for which each period’
period’s demand is
a random variable
of the ratio of the shortage cost to the „ Inventory remaining at the end of a period can be used to
sum of the overage plus shortage cost satisfy demand in the following period
„ If all demand is backordered and period demands are
cdf, 0 d G(x) d 1
„ Note that for any valid cdf, independent and identically distributed (iid ), the critical fractile
(iid),
for any x continues to give the optimal beginning target inventory level
„ It is no longer the optimal order ‘quantity’
quantity’ since we may
„ For this to hold we require only that co have inventory remaining from a prior period
and cs t 0 „ Expected cost in a period is a function of the starting
inventory level
„ The ratio cs/(cs + co) is sometimes called „ With further analysis, we can develop similar equations for
the critical fractile shortages that result in lost sales (under iid demands)
Single-Period Example Single-Period Example (cont’d)
„ On consecutive Sundays, Mac, the owner of a „ What is the overage cost?
„ The price he paid less the salvage value, co = $0.15
local newsstand, purchases a number of copies
„ What is the shortage cost?
of The Computer Journal, a weekly magazine.
„ The opportunity cost of lost profit, cs = $0.75 - $025 =
He pays 25 cents for each copy and sells each $0.50
for 75 cents. He can return unsold copies to „ cs/(cs + co) = 0.5/(0.5 + 0.15) = 0.77
his supplier for a 10 cent recycling credit during „ G(Q*) = 0.77; Q* = G-1(0.77)
each week. „ We want Prob{X d Q*} = 0.77.
„ Mac has kept records of past demand and has „ For a normal distribution we consult a normal table (or use
Excel function normsinv(0.77)) to find that the corresponding z-
z-
found that weekly demand is normally value equals approx. 0.74
distributed with mean P = 11.73 and standard „ This implies that Q* = P + z0.77V, or Q* = 11.73 + (0.74)(4.74)
deviation V = 4.74. = 15.24, or approx. 15.
„ We could also use the function norminv(0.77, P, V)

Base-Stock Model Base-Stock Model


„ Assumptions „ Notation (cont’
(cont’d)
„ One-
One-for-
for-one ordering (order one each time a „ G(X) = cdf of demand during lead time (in years)
sale is made) „T = E[X] = mean demand during lead time
„ A fixed lead time exists for stock replenishment „ r = reorder point (in units)
„ Demands occur one at a time „ R = Base-
Base-stock level = r + 1 (in units)
„ Any unmet demand is backordered „ s = r - T, defined as the safety stock (expected
„ No fixed order cost (or negligible) amount on-
on-hand when a replenishment arrives)
„ Notation „ Our decision is how to set the value of R,
„L = replenishment lead time which uniquely determines r and s, in order to
„ X = random variable for demand during lead meet some service level
time
Base-Stock Model Base-Stock Model
„ Service level can be defined in several ways „ Suppose we have just placed an order,
„ For now we focus on the fill rate, i.e., the proportion of
demands met immediately from the shelf (equivalently
immediately following a demand
the probability that a demand is met from stock) „ The item ordered will satisfy the Rth future
„ Note that R = on-
on-hand inventory + inventory on-
on- demand, since we use either currently on-on-hand
order – Backorders or on-
on-order items to satisfy the current demand
„ If we have inventory on-
on-hand, each time on-
on-hand and all demand up to the Rth future demand
inventory decreases by one, on-
on-order increases by one,
„ Since our on-
on-hand + on-
on-order – backorders always =
and vice versa.
R
„ If we have backorders, each time backorders increase
by one, on-
on-order increases by one and vice-
vice-versa „ The item we just ordered will be able to satisfy
„ Backorders and on-
on-hand inventory cannot the Rth future demand if it is received before this
simultaneously be positive demand occurs

Base-Stock Model Continuous Review Model


„ This implies that the probability that this „ It is becoming increasingly common through
item can satisfy demand immediately information technologies to be able to track
equals the probability that the demand inventory position continuously
„ We define Inventory Position, IP, by the equation
during lead time is less than R, i.e., „ IP = on-
on-hand + on-
on-order – backorders
Prob{X < R} discrete distribution; „ Note that in systems with lead times we need
Prob{X d R} continuous distribution. to keep track of IP to make correct
fill-rate equals D, then we
„ If the desired fill- replenishment decisions
need only set G(R) = D „ Ignoring outstanding orders could resulting in high
accumulation of inventory
„ Ignoring backorders would overstate our ability to
fill future demand with outstanding orders
(Q, r) Model for Continuous
Continuous Review Model
Review
„ We make the following assumptions in „ Q determines our average cycle stock,
our model of a continuous review system which is inventory that is required to
under stochastic demand: keep total order costs low
„ The average demand rate is constant over
time „ r determines our safety stock, which is

„ Placing an order incurs a fixed cost, A the average amount on the shelf when a
„ We have a fixed lead time, L replenishment arrives
„ We can characterize the distribution of
Inventory Position

demand during lead time


„ We will use a (Q, r) policy: if inventory r
Q

position is at or below the reorder point, r, Inventory Level

we order a fixed quantity of Q units L Time

(Q, r) Model for Continuous (Q, r) Model for Continuous


Review Review
„ The figure shows the average behavior „ We first define some additional notation:
of this system „D = Expected annual demand
„X = random variable for demand during lead time
„ Given this average behavior, we can
„ T = E[X] = mean demand during lead time
characterize the expected costs using
„ G(X) = cdf of lead time demand
methods similar to the ones we used in
„ g(x) = pdf of lead time demand
our EOQ analysis Average Inventory Level

Q+s
„ c = production or purchase cost per item
„ h = annual holding cost per unit ($/unit per year)
„ b = cost per backorder ($/stockout)
s

„ s = safety stock, s = r - T
Q/D Time
(Q, r) Model for Continuous (Q, r) Model for Continuous
Review Review
„ We would like to minimize the total expected ordering, „ Determining expected annual backorder costs:
holding, and backorder costs per year
„ We incur a cost of $b for each backorder
„ Note that, on average, the inventory level falls from Q + s to
s in a cycle which has length T = Q/D „ We know that there are, on average, D/Q cycles
„ This implies an average inventory level equal to Q/2 + s
per year
(the area of the triangle of base Q/D plus a rectangle with „ If we can determine the expected number of
sides s and Q/D, divided by the cycle length, Q/D) backorders in a cycle, then we need only multiply
„ The expected annual holding cost then equals h(Q/2 + s), this by the average number of cycles per year to
or h(Q/2 + r - T) get the expected number of backorder per year
„ This cycle length implies an average of D/Q cycles per year „ We incur a backorder if the demand during lead
„ This results in an expected annual order cost of AD/Q time, X, exceeds the reorder point, r.
„ We have a bit of work to do to determine the expected „ The number of backorders in a cycle equals max{X
backorder cost per year – r, 0}

(Q, r) Model for Continuous (Q, r) Model for Continuous


Review Review
„ The expected number of backorders in a „ Expected annual costs for a (Q, r) system:
cycle then equals E[max{X – r, 0}] „ Y(Q, r) = (D/Q)A + h(Q/2 + r - T) +
„ This is similar to what we did for the single- single- (D/Q)bn(r)
period model „ We next take partial derivatives with respect
f
„ Let n(r) = E[max{X – r, 0}]³r =( x  r ) g ( x )dx to both Q and r and set them to zero
„ Expected number of backorders per year „ This results2 Din:
( A  bn( r )) h

then equals (D/Q)n(r) „ Q* =


„ G(r*) = 1 – hQ/bD
„ We can now formulate our expected
annual cost equation „ Note that the equation for Q* is a function of
r, and the equation for r* is a function of Q,
implying that we’
we’ll need one to get the other
(Q, r) Model for Continuous
(Q, r) Model Insights
Review
„ The following simple algorithm „ The equations resulting from the (Q, r)
converges to the optimal Q* and r*: model provide some interesting insights:
„ Step 0: Let r0 solve: G(r0) = 1 – h(EOQ)/bD „ The equation for Q, Q* =2 D( A  bn( r )) h is
„ Step 1: Let Qt = 2D( A  bn(r )) h the same as the EOQ equation, with an
t 1
and let rt solve: G(rt) = 1 – hQt/bD added term in the numerator
„ Step 2: If |Qt – Qt-1| < 1 and |rt – rt-1| < 1, „ This means that the order quantity is always
stop with Q* = Qt and r* = rt. higher under uncertainty
Otherwise, let t = t + 1 and go to „ Increasing order quantity increases the time
Step 1. between replenishments, which results in
less exposure to stockouts

(Q, r) Model With Service Levels (Q, r) Model With Service Levels
„ It is typically very difficult for a manager to „ We can reformulate our problem to minimize expected
inventory investment subject to a minimum required service
quantify with certainty the value of b, the cost level constraint
per stockout, due to loss of customer goodwill „ Our average inventory level was Q/2 + r - T, implying that
and its effects on future sales our average investment in inventory equals c(Q/2 + r - T)
„ We can characterize the fill rate as 1 – n(r)/Q
„ Note that the higher the value of b, the higher
„ This is 1 minus the proportion of demands backordered in
Q, and the higher the average service level a cycle, which gives the proportion of demands filled from
„ Rather than explicitly stating a value for b, we stock
can specify a minimum required service level, „ We also assume a maximum replenishment frequency, F (this
implies a minimum time between successive orders, or a
which is much easier to quantify intuitively maximum number of replenishments per year)
(Q, r) Model With Service Levels
„ Our problem now is:
„ Minimize c(Q/2 + r - T)
„ subject to: D/Q d F
1 – n(r)/Q t S, where S is the
minimum fill rate
„ Note that reducing Q reduces inventory
investment, so here we would like Q as small
as possible while meeting the constraints
„ This implies that we will set Q = D/F
„ Given this Q, we want the smallest r such that
n(r) d Q(1 – S), which will result when n(r) =
Q(1 – S).
„ Ir. Haery Sihombing (IP)
Pensyarah Fakulti Kejuruteraan Pembuatan MATERIAL REQUIREMENTS
Universiti Teknologi Malaysia Melaka
PLANNING
3 „ First widely available software
implementation of a manufacturing
planning system (IBM 1960’
1960’s)
„ APICS ‘MRP Crusade’
Crusade’ launched in 1972
„ Quickly became the manufacturing planning
paradigm in the U.S.
„ The problems of production planning were
all solved, right?
Material Requirements „ By 1989 total sales and support for MRP
systems exceeded $1 Billion
Planning (MRP)

MRP Systems MRP Overview


„ The inventory control mechanisms we studied to this „ MRP is known as a push system, since it plans
point are much better for single-
single-item planning production according to forecasts of future
demand and pushes out products accordingly
„ Many products manufacturers produce have a
complex bill- „ MRP planning is based on time buckets (or
bill-of-
of-materials (recipe of components)
periods)
„ Demand for components is dependent on end- end- „ Orders (current demand) and forecasts (future
product demand (which we’ we’ll call independent demand) for end-end-items drive the system
demand items) „ These requirements drive the need for
„ MRP systems encode the interdependence among subassemblies and components at lower levels
various end-
end-items and components of the bill-
bill-of-
of-materials (BOM)
MRP Overview MRP Overview
„ The end-
end-item demands are translated into „ MRP Procedure (cont’
(cont’d)
a Master Production Schedule (MPS) „ Time Phasing: Offset due dates of required items based
on lead times to determine order release times
„ MPS contains: „ BOM Explosion: Go down to the next level in the BOM
„ GrossRequirements and use the lot sizes at the higher level to determine
„ On-
On-Hand Inventory gross requirements
„ Scheduled Receipts „ Repeat for all levels in the BOM
„ MRP Procedure: „ Notes on Netting:
„ Netting: Subtract out on-
on-hand and scheduled „ We first use on-
on-hand inventory to satisfy gross
receipts from Gross Requirements requirements
„ Lot Sizing: Given net requirements, determine „ If on-
on-hand inventory is insufficient to meet some future
periods in which production will occur, and the demand and scheduled receipts are scheduled
corresponding lot sizes (often uses Wagner-
Wagner-Whitin following this future demand, it doesn’
doesn’t make sense to
lot sizing procedure) plan a new order, since an outstanding order exists

MRP Overview MRP Example


Part A

„ Notes on Netting (cont’


(cont’d) „ Consider the following BOM:
„ Instead of generating any new orders, we first attempt 100 (2) 200
to expedite currently scheduled receipts so they arrive „ And the table of req’
req’ts
earlier (we assume this is possible, if not, the schedule 300 400
will be infeasible and customers will require notification
of a delay)
„ When currently scheduled receipts are exhausted and Part A 1 2 3 4 5 6 7 8
netted out, we then have a set of net requirements that Gross Req’
Req’ts 15 20 50 10 30 30 30 30
we use as requirements for the lot sizing procedure. Sched.
Sched. Receipts 10 10 100

„ For now we’ Adj. SRs


we’ll assume one of two very simple lot
Proj.
Proj. On-
On-Hand 20
sizing rules:
Net Req’
Req’ts
„ Lot-
Lot-for-
for-lot
Planned Order Rec.
„ Fixed order period (FOP) Planned Order Rel.
Rel.
MRP Example MRP Example
„ We first see how far our on-
on-hand can take us, and whether
we’
we’ll have to adjust the scheduled receipts „ From period 6 on we have no on-on-hand
„ Since the first 3 periods demand equals 85, and the sum of or scheduled receipts, so the deficit
the on-
on-hand plus SRs until then is 40, we should adjust SRs becomes net requirements
by expediting the order receipt scheduled for period 4
„ We can then project on-on-hand inventory Part A 1 2 3 4 5 6 7 8
Part A 1 2 3 4 5 6 7 8 Gross Req’
Req’ts 15 20 50 10 30 30 30 30
Gross Req’
Req’ts 15 20 50 10 30 30 30 30 Sched.
Sched. Receipts 10 10 100
Sched.
Sched. Receipts 10 10 100 Adj. SRs 20 100
Adj. SRs 20 100 Proj.
Proj. On-
On-Hand 20 5 5 55 45 15 -15
Proj.
Proj. On-
On-Hand 20 5 5 55 45 15 -15 Net Req’
Req’ts 15 30 30
Net Req’
Req’ts Planned Order Rec.
Planned Order Rec. Planned Order Rel.
Rel.
Planned Order Rel.
Rel.

MRP Example MRP Example Part A

„ Suppose our lot-


lot-sizing rule is an FOP = 2 „ Next, we move down in the BOM to 100 (2) 200

„ Suppose producing Part A (given that all of its component 100:


components are available takes 2 periods „ Component 100 has 40 on-
on-hand, no 300 400

„ We then generate the planned order releases scheduled receipts and a 2 week lead time

Component 100 1 2 3 4 5 6 7 8
Part A 1 2 3 4 5 6 7 8
Gross Req’
Req’ts 90 60
Gross Req’
Req’ts 15 20 50 10 30 30 30 30
Sched.
Sched. Receipts
Sched.
Sched. Receipts 10 10 100
Adj. SRs
Adj. SRs 20 100
Proj.
Proj. On-
On-Hand 40 40 40 40 -50
Proj.
Proj. On-
On-Hand 20 5 5 55 45 15 -15
Net Req’
Req’ts 50 60
Net Req’
Req’ts 15 30 30
Planned Order Rec. 50 60
Planned Order Rec. 45 30
Planned Order Rel.
Rel. 50 60
Planned Order Rel.
Rel. 45 30
Lot Sizing Rules for MRP Lot Sizing Rules for MRP
„ We discussed three lot-
lot-sizing procedures: „ Part-
Part-Period Balancing Heuristic:
„ Lot-
Lot-for-
for-lot, FOP, and Wagner-
Wagner-Whitin „ Based on the observation that in the EOQ, the optimal
solution has order/setup costs equal to holding costs
„ Here we consider additional heuristic rules
„ Also satisfies Wagner-
Wagner-Whitin zero-
zero-inventory production
„ Fixed Order Quantity and EOQ property
„ Each time we order, we order a set amount „ We begin with a setup in the first period with net
„ We cannot directly apply the EOQ formula, since requirements, call this period i. We then consider the total
holding costs incurred if we satisfy demand for period i
we have no constant demand rate, D
only, periods i and i + 1, periods i, i + 1, i + 2, etc., until
„ One strategy is to use the average demand per holding costs exceed the setup cost.
period in place of D in the EOQ formula and use „ We next decide the number of periods for which we will
the result as the fixed order quantity produce based on which of these options results in holding
„ We schedule order receipts for periods in which we costs closest to setup cost.
project negative on-
on-hand inventory „ We then repeat this process. For example, if the past
decision was to produce for periods i, i + 1, …, i + k, we
repeat, beginning with a setup in period k + 1.

Lot-Sizing Rules Lot-Sizing Rules


„ Part-
Part-Period Balancing Example „ Part-
Part-Period Balancing Example (cont’
(cont’d)
„ Suppose our requirements for the next 9 periods are „ Our next setup is in period 6
„ (0, 15, 45, 0, 0, 25, 15, 20, 15)
„ Let A = $150, and let h = $2 per unit per period
Satisfy demand Setup Cost Part-
Part- Holding
„ Our first setup is in period 2: until:
6 $150 Periods
0 Cost
$0
7 $150 15 $30
8 $150 55 $110
Satisfy demand Setup Cost Part-
Part- Holding
until: Periods Cost 9 $150 100 $200
2 $150 0 $0
3 $150 45 $90 „ The setup in period 6 covers demand until
6 $150 145 $290 period 8
„ Since $90 is closer to $150, we use the setup in period
2 to satisfy demand for periods 2 and 3 (Q2 = 60)
More Lot-Sizing Rules More Lot-Sizing Rules
„ Least-
Least-Unit Cost Heuristic „ Silver Meal Heuristic
„ Do a setup in the first period necessary (call „ Do a setup in the first period necessary (call
this period i), then this period i), then
„ Work forward, period by period (as with PPB) „ Work forward, period by period (as with PPB)
and calculate the average cost incurred per unit and calculate the average cost incurred per
„ Stop at the first period in which the cost per unit period
increases, call this period i + k. „ Stop at the first period in which the cost per
„ The setup in period i covers demand from period period increases, call this period i + k.
i to period i + k – 1. „ The setup in period i covers demand from period
i to period i + k – 1.

Safety Stock and Safety Lead


MRP Problems
Times
„ MRP assumes data are deterministic „ MRP does not account for production capacity limits
„ Lead times are fixed (or their effects on lead times)
„ Demand requirements are certain „ Inflated safety lead times lead to high WIP levels
„ Lot size yields are 100% „ System nervousness: MRP is not robust to changes
„ This is clearly not the case in most production in customer requirements
environments „ Replanning the current schedule based on changes can
„ Safety stock inflates requirements to buffer against lead to infeasible schedules
demand uncertainties „ Frozen zones specify a number of periods in which the
schedule is fixed (cannot be changed)
„ Safety lead times inflate expected lead time to „ Can lead to problems with sales and marketing depts.
ensure supply availability at production stages „ Time fences are usually used, where the first X weeks are
„ Also inflate requirements based upon expected yield absolutely frozen, the next Y weeks can allow changes
„ If yield equals y, multiple requirements by 1/y with a possible customer financial penalties, and beyond X
+ Y weeks is open for any changes
„ Ir. Haery Sihombing (IP)
Pensyarah Fakulti Kejuruteraan Pembuatan MANUFACTURING RESOURCES
Universiti Teknologi Malaysia Melaka
PLANNING
4 „ As MRP became known for problems in
dealing with capacity and uncertainties, it
became apparent that enhancements were
necessary
„ Manufacturing Resources Planning (MRP II)
came about in response to these concerns
„ MRP II embeds planning and control
functions around the MRP functionality to
Pus and Pull System (MRP II) make it more responsive to these problems
MANUFACTURING RESOURCES PLANNING

MRP II Hierarchy MRP II


Forecasting
Long-range planning
„ Long-
Long-Range Planning
Resource
Aggr. Planning
Planning „ Forecasting: short-
short-term and long-
long-range
Rough-cut „ Feeds Demand Management function
Capacity Planning MPS
(Intermediate)
Intermediate range Bills of
planning Materials
MRP
„ Resource planning
Inventory
Capacity „ Long-
Long-term capacity requirements
Status
Requirements
Job Pool „ Feeds into Aggregate Planning
Planning
„ Aggregate planning
Job Release Routing „ Production, staffing, inventory, overtime levels
Short-term control Data
over long term
Job Dispatch
MRP II MRP II
„ Intermediate Planning „ MRP module performs the MRP functions we
„ Demand Management discussed earlier
„ Actual and anticipated orders „ Feedsthe job pool
„ ‘Available to promise’
promise’ (ATP) „ Job
release function (short-
(short-term control) decides
„ Compares committed production to available and planned how to allocate parts to jobs
production „ Capacity requirements planning (CRP)
„ Master Production Scheduling (MPS) „ More detailed check of production schedule output
„ With help of rough-
rough-cut capacity planning to create a from MRP
capacity-
capacity-feasible MPS „ Does not generate a capacity-
capacity-feasible plan; rather it
„ Rough-
Rough-Cut Capacity Planning shows the required resource commitments given
the MRP output
„ Quick check of critical (bottleneck) resources check
„ Helps user identify problem sources
capacity feasibility of potential MPS
„ Generates load profile for each processing center
„ Uses ‘Bill-
Bill-of-
of-Resources’
Resources’ for each item on the MPS (hours
required on critical resources)

MRP II Just-in-Time (JIT) Manufacturing


„ Short-
Short-term Control „ JIT in its broadest sense consists of a manufacturing
„ Shop floor control paradigm quite different from the MRP paradigm
„ JIT encompasses a variety of ideas and manufacturing
„ job dispatching (sequencing jobs)
principles and practices
„ input/output control (WIP level monitoring to
„ The origins of JIT are typically attributed to Toyota’
Toyota’s
determine whether job release rate is too fast or
manufacturing systems
slow)
„ The success of Japanese auto manufacturers in the 1970’
1970’s and
„ We will cover shop floor control in more 80’
80’s is largely attributed to JIT practices
detail towards the end of this course „ Deteriorating performance of U.S. and European firms led to a
desire to understand the source of the Japanese competitive
advantage and eventually resulted in implementation of JIT
(with varying success) at many U.S. firms
JIT Manufacturing JIT Manufacturing Enablers
„ JIT goals: The seven zeroes: „ JIT is often seen as synonymous with
„ Zero defects the Kanban ‘pull’
pull’ production system (we
„ Zero excess lot size
will look at this in more detail later)
„ Requires ‘smooth production’
production’ levels
„ Zero setups
„ Translate monthly output requirements into
„ Zero breakdowns
an hourly production rate
„ Zero handling „ Mixed model lines necessitate low setups for
„ Zero lead time this to work
„ Zero surging „ Dealing with variability: capacity buffers
„ Planbuffer capacity in each day for possible
„ Unachievable goals, but the point is clear disruptions

JIT Manufacturing Enablers JIT Manufacturing Enablers


„ Setup Reduction „ Cross training
„ U.S. manufacturers typically regarded setup „ U.S. traditionally held workers at one task
times as ‘given’
given’ constraints „ Japanese focused on enabling workers to
„ Japanese (Toyota) continuously strived to perform multiple tasks, which reduces
create new way to reduce setup times boredom, increases flexibility, and gives
„ Internalvs. external setups workers broader view
„ Make as much of setup external as possible „ Plant layout
„ Standardize product designs (commonality)
„ U-shaped cells became common for labor-
labor-
intensive lines to enable workers to move
quickly between stations
JIT Manufacturing Enablers JIT Manufacturing Enablers
„ Total Quality Management (TQM) „ TQM (cont’
(cont’d)
„ Probably the first elements of JIT to be „ Seven principles essential to quality practice:
adopted in the U.S. „ Statistical
Process Control (SPC)
„ Although much of this was initially rhetoric and „ Easy-
Easy-to-
to-seequality (charts, displays)
not practiced „ Compliance to specifications at all stations
„ JIT requires a low amount of rework to be „ Line stopping (empowers line workers)
effective „ Correcting own errors (as opposed to U.S. rework
„ To keep production levels smooth lines)
„ Again, a case of U.S. manufacturers often „ 100% inspection (if possible, usually with

taking rework as a necessary evil, while automation)


„ N = 2 approach: Inspect first and last job on line
Japanese manufacturers took a more
„ Continuous improvement
scientific ‘root-
root-cause’
cause’ approach „ Always strive to the zero-
zero-defect goal

Kanban Production System Kanban Schematic


„ Kanban is an alternative to MRP for controlling
production flow „ One–
One–card system (Fig. 4.5 in Text):
Completed parts with Outbound
Outbound
„ MRP pushes out production according to forecasts Stockpoint
cards enter outbound Stockpoint
stockpoint
„ Work releases are scheduled in advance
„ Kanban pulls production through the system based on
actual demand
„ Work releases authorized as downstream demand occurs
Production card
„ Kanban is loosely translated from Japanese as ‘card’
card’ authorizes start
When stock is
„ Kanban systems attach Kanban cards to jobs in the system; of work
removed, put
these cards are used to authorize production production
card in hold
„ Systems control WIP through number of cards – No working box
ahead of downstream stations
Workstation Standard Container Kanban Card Stockpoint
Problems of the Past Traditional Methods
„ We have now covered standard, „ Pros:
traditional inventory control methods, „ Take a scientific approach to management
MRP and MRP II, and JIT „ Sharpen managerial insight by characterizing critical
tradeoffs
„ Each of these systems has improved
„ Cons:
productivity relative to past practices
„ Traditional inventory models and methods optimize
„ Each system has brought about a new set costs under the model assumptions
of problems and challenges „ Model assumptions fail to hold in practice
„ Constant demand rate, fixed and known setup cost, infinite
„ We briefly consider why these different capacity, complete shortage backlogging
methods have been successful in some „ We often generate an optimal solution for the wrong problem
cases and failed miserably in other cases „ Models typically assume a single-
single-stage or product
„ Real production systems are much more complex

MRP Paradigm JIT Issues


„ Pros: „ Pros:
„ Perform extremely well in make-
make-to-
to-order systems with „ Emphasis on quality control and improvement, setup
little uncertainty and ample capacity reduction, WIP reduction, tight supplier relationships
„ Deterministic demand is not a poor assumption
„ Pull system responsive to state of the system
„ Efficiently encodes the relationships and
interdependencies of highly complex production systems „ Cons
„ Cons: „ Implementation is long term investment
„ MRP systems have been hugely successful in terms of „ Complete paradigm and attitude shift for workers
industry usage and sales „ Reliance on supplier relationships
„ Users have more often than not been less than pleased „ Requires continuous attention to detail
with the problems associated with MRP
„ Requires real management commitment, not rhetoric
„ MRP is based on a flawed model
„ Unlimited capacity, deterministic demand and lead times
Enterprise Resources Planning ERP Systems
„ ERP system sales and related consulting „ According to a 1997 Business Week article,
expenditures have skyrocketed over the past SAP’
SAP’s R/3 software can:
five years „ “act as a powerful network that can speed
„ SAP R/3 decision-
decision-making, slash costs, and give managers
„ Baan control over global empires at the click of a
„ Peoplesoft mouse”
mouse”
„ What are ERP systems and how are they „ Despite this hyperbole, ERP systems can at least

different from MRP and MRP II? do the first two things (speed decisions and slash
costs) if used correctly
„ ERP systems don’
don’t just target production „ This cost slashing, however, ironically comes at a
operations, but all operations of the firm steep price (SAP implementations typically cost in
„ A control system for the entire enterprise excess of $1 Million)

ERP Systems ERP Systems


„ enterprise-wide systems:
ERP systems integrate all enterprise- „ Not every user has been happy with ERP
„ Finance system implementation
„ Accounting
„ In October of 1999, Hershey’
Hershey’s transition to
„ Manufacturing
SAP ran into a system glitch and shut down
„ Human Resources
Hershey operations for a long period of time
„ Marketing & Sales
(note that October is the profitable
„ It provides consistency across the enterprise in terms of Halloween season for Hershey)
user interfaces, data, and vendor and customer relations
„ Many executives have complained that they
„ For example, when sales closes a deal and enters it in the
system, it automatically shows up as a order for production are not seeing the impact they expected
and increases the accounts receivable relative to the price they paid
ERP Problems From ERP to APS Systems
„ Disadvantages of ERP systems have been: „ ERP systems still at best only contain the basic MRP
„ Incompatibility with legacy systems II logic for planning and controlling production
„ Long and expensive implementation
„ More advanced production planning logic requires
„ Inflexibility to adapt to existing management practices
customized development within the ERP system
(difficult to customize)
„ Long payback period
„ Advanced Production and Scheduling (APS) systems
„ Lack of technological innovation
complement ERP systems by providing more
„ In a survey of Fortune 1000 firms that implemented ERP, sophisticated production planning and scheduling
44% reported spending 4 times as much as was spent on the logic
software on ERP related consulting „ Firms such as I2 Technologies and Manugistics have
„ Despite these drawbacks, SAP alone sold more than $3.2 enjoyed tremendous growth in the late 1990’
1990’s due to
Billion in software in 1997 their APS systems
„ Many companies do report significant productivity
improvement and inventory reduction due to ERP

What is the role of


APS Systems Capabilities
B2B e-Commerce?
„ Demand Planning – Sophisticated forecasting techniques to „ ERP systems integrate information across the enterprise
analyze customer buying patterns „ The key to effectively tapping into the power of ERP and APS
„ Supply Planning – Synchronizes operations of systems is to enable information sharing across enterprises
manufacturers, suppliers, and logistics service providers „ For the Supply Planning module of an APS system to have the
through information exchange. Provides better, more greatest impact, it must integrate up-
up-to-
to-date information from
accurate information for managing incoming materials manufacturer, supplier, and logistics service provider
„ For the Demand Planning module of an APS system to have the
„ Demand fulfillment – Provides more accurate estimates of greatest impact, it must integrate up-
up-to-
to-date information from
order fulfillment dates; manages order promising, provides customers and retailers
backlog management, and tracks order fulfillment „ The big challenge is to integrate information from various
„ APS’
APS’s have modules for managing pull systems and can systems and to interpret it so that it is meaningful to all of the
the
dynamically track WIP, throughput, and cycle times enterprises involved – this is the task of B2B eCommerce
system developers and information hubs
What is the role of What is the role of
B2B e-Commerce? B2B e-Commerce?
„ The more accurate, up-
up-to-
to-date information the firm „ eCommerce systems can decrease ordering costs by
has, the more effectively it can decreasing the time it takes to place an order and
„ Predict and respond to demand, removing manual order entry which leads to more
„ Predict material availability accurate order information
„ Predict more accurate order lead times „ eCommerce systems can lead to improved customer
service and satisfaction by providing instant (and more
„ Real-
Real-time information sharing between firms accurate) price quotes and due dates
decreases the amount of uncertainty in the system
„ eCommerce systems decrease the costs of shopping
„ B2B eCommerce service providers have the task of for vendors by providing more information at lower
receiving information from different sources and cost
interpreting that data so that it is useful to the „ Discussion: What additional potential does the Internet
participants provide for improving operations?

Вам также может понравиться