Session 11

Production Planning and Control

Lot sizing, Shop floor Scheduling
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D 0 8 5 4
Supply Chain : Manufacturing and Warehousing



Bina Nusantara University
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Lot Sizing, Shop Floor Schedule
Lot Sizing & Lean Manufacturing Strategy

Why Small Lots?
Small lot production (ideally one piece) is an
important component of many Lean Manufacturing
strategies. Lot size directly affects inventory and
scheduling. Other effects are less obvious but equally
important. Small lots reduce variability in the system
and smooth production. Small lots also enhance
quality in many ways.
Bina Nusantara University
3
The Lean Manufacturing literature gives little
guidance on lot sizing other than statements such as:
"the lot size should be one" or "lot sizing is irrelevant."
This series of papers examines the lot sizing problem in
Lean Manufacturing. It offers a rational alternative to
the slogans and edicts.
The effects of small lots differ somewhat between Make
To Order (MTO) and Make To Stock (MTS)
environments but they are important in either situation.

In MTO environments, the ability to make smaller lots economically
makes it practical to accept smaller orders. This can open new
market segments or eliminate middlemen from the logistics
chain.
One of our former clients restructured the entire vinyl siding
industry when they achieved reliable delivery of small lots directly
to retail outlets.
In an MTS environment, small lots translate directly to smaller
inventories. Inventory carrying costs are significant and are
discussed further below. In fast-changing fashion or technology
markets, obsolete inventory may make the difference between profit
and loss. Smaller lots often enable conversion from MTS to MTO.
Many factories that deliver to their customers in MTO operate
intermediate processes in MTS. The MTS discussion applies to
those intermediate and upstream operations.
Scheduling via Lot Sizing
Case: TJ International Parallam Product



Issues:
Press is bottleneck
12 hour changeover time to switch widths (12, 14, 16, 19)
Many products made from each width, but less 14/16 than
16/19
Currently try to run at least a week between changeovers
Seasonal demand: inventory build up in off-season

Problem: determine run sequence each month

Lathe/Clip Press Saw
Scheduling via Lot Sizing
Notation:







Problem: choose lot sizes for the month to meet
demand as efficiently as possible.
variable) (decision product for (parts) size lot
product for (hr) time setup
product of (parts/hr) rate production
product for (parts/hr) demand hourly
product for th) (parts/mon demand monthly
n utilizatio desired
hours/day days/month available hours
i x
i s
i p
i d
i D
u
H
i
i
i
i
i
=
=
=
=
=
=
= =
Cyclic Schedule
Approach: fix lot sizes for all products and compute
number of cycles that can be run in the month as:


If the horizon is short, N should be rounded down
to the nearest integer. Otherwise, a non-integer N
is ok since you will be rescheduling anyway.
Lot Sizes: The lot sizes will be:


These, of course, need to be rounded or ceilinged.
Problem: You dont necessarily want to make the
same number of runs of a low demand product as of
a high demand product.

=
i
i
i
i i
s
p D uH
N
N
D
x
i
i
=
spare capacity
setup/cycle
Non-Cyclic Schedules
Fundamental Issue: What is your objective?
Minimize Sum of Run Lengths? If we write out the
Lagrangian for the nonlinear optimization problem and
optimize assuming continuous lot sizes, we get

where

Problems:
Since we solved for lot sizes, we wind up with a non-integer number
of setups for the month. How do we allocate the setup time?
What order do we run the products in the non-cyclic schedule?
Conclusion: We should solve for the number of run cycles for each
product. But what objective do we use?
i i i i
p s d x =
( )
2
(
(

i
i i
i
i i i
p d u
p s d

MiniMax Schedule
Objective: minimize the maximum run length.
We are never too far away from changing over to
another product.
Perhaps a good surrogate for maximizing flexibility.

Notation: Let



produced is product each time length run
in run is product times of number the
i
p n
D
s
H i n
i i
i
i
i
= +
=
decision variable
MiniMax Schedule (cont.)
IP Formulation:

integer
all for 1
constraint minimax , all for ) (
constraint capacity
:
min
i
i
i i i i
i
i i
i
i i
n
i n
i T p n D s
p D uH s n
st
T
>
s +
s

Example
Data:
H = 22 days 18 hrs/day = 396 hrs
u = 0.9




Minimal Run Schedule:
Suppose the plant has a policy of never making less than 1500 so
their current lot sizes are 15000, 12000, 1500, 1500. This takes 19.2
days, close to the 22 days available, but it means that some product
wont be produced until pretty late in the month.
i 1 2 3 4
Di 15000 12000 500 250
pi 100 100 75 50
si 8 8 6 4
Di/pi 150 120 6.7 5
Total Prod Time
Req =281.67 hrs
Example (cont.)
Cyclic Schedule: The number of cycles per month is
N = (396 0.9 - 281.67)/26 = 2.87
yielding lot sizes of



But N = 2.87 means that the first two cycles in the
month use the above lot sizes while the last one uses
reduced lot sizes (87% of base).

i 1 2 3 4
x
i
5219 4175 174 87
Example (cont.)
MiniMax Schedule:
We can implement the above formulation as follows:
1. Start with n
i
= 1 for all i. Note that the product with max run length is
product 1 with a run of 158 hours.
2. Add setup for product 1, so n
1
= 2, and its max run length becomes
83 and now product 2 has the longest run length at 128 hours.
3. Add a setup for product 2, so n
2
= 2, and its max run length becomes
68 and now product 1 has longest run length at 83 hours.
4. Continue adding setups to product with longest run until we run out of
capacity. The optimal solution is:
i 1 2 3 4
ni 4 4 1 1
xi 3750 3000 500 250
Example (cont.)
Results: The schedule goes as follows:
1. We set up for the 4th product and get it out of the
way.
2. Likewise for the 3rd.
3. Now we run 3750 of product 1 and 3000 of product 2
in succession for 4 times.

The longest anyone would ever have to wait would
be for product 2 at the beginning of the month at 3.73
days. After that the longest wait would be 2.53 days.

Conclusion: Minimax schedule results in shorter wait for
product than either minimal run schedule or cyclic
schedule. And it is simple to compute.
TJ International Case
Non-Cyclic Scheduling?
Fewer runs of 12, 14
But long setups make running anything twice in the
month difficult.
Skip 12, 14 some months?
How to Handle Seasonality?
Could run high volume products in off-season (sure to
sell)
But running 12, 14 products would help skip setups
and increase capacity in peak season
Need to choose fractile of demand to stock in off-
season (75%?)
Scheduling in Pull Environments
Simple CONWIP Lines:
Simple sequence sufficient.
No setups EDD sequence.

CONWIP Lines with Shared Resources:
No setups EDD within lines.
Need to augment sequence at shared lines.
FISFO at shared resources.
Routing A
Routing B
Routing A
Routing B
FISFO
sequencing
Scheduling in Pull Environments (cont.)
CONWIP Lines with Setups:
Sequence still reasonable.
Must balance capacity loss with due date
requirements.
Exact solution impossible.
Heuristics starting with EDD and rearranging
sequence can work well.

More General Environments:
Many routings make simple sequence insufficient.
Backward scheduling due dates may be infeasible.
Forward scheduling may be suboptimal.

A Sequencing Example
Problem Description:
16 jobs
Each job takes 1 hour on single machine (bottleneck
resource)
4 hour setup to change families
Fixed due dates
Find feasible solution if possible
A Sequencing Example (cont.)
EDD Sequence:










Average Tardiness: 10.375
Job Due Completion
Number Family Date Time Lateness
1 1 5.00 5.00 0.00
2 1 6.00 6.00 0.00
3 1 10.00 7.00 -3.00
4 2 13.00 12.00 -1.00
5 1 15.00 17.00 2.00
6 2 15.00 22.00 7.00
7 1 22.00 27.00 5.00
8 2 22.00 32.00 10.00
9 1 23.00 37.00 14.00
10 3 29.00 42.00 13.00
11 2 30.00 47.00 17.00
12 2 31.00 48.00 17.00
13 3 32.00 53.00 21.00
14 3 32.00 54.00 22.00
15 3 33.00 55.00 22.00
16 3 40.00 56.00 16.00
Sequencing Example (cont.)
Greedy Approach:
Consider all pairwise interchanges
Choose one that reduces average tardiness by
maximum amount
Continue until no further improvement is possible
Sequencing Example (cont.)
First Interchange: Exchange jobs 4 and 5.










Average Tardiness: 5.0 (reduction of 5.375!)
Job Due Completion
Number Family Date Time Lateness
1 1 5.00 5.00 0.00
2 1 6.00 6.00 0.00
3 1 10.00 7.00 -3.00
5 1 15.00 8.00 -7.00
4 2 13.00 13.00 0.00
6 2 15.00 14.00 -1.00
7 1 22.00 19.00 -3.00
8 2 22.00 24.00 2.00
9 1 23.00 29.00 6.00
10 3 29.00 34.00 5.00
11 2 30.00 39.00 9.00
12 2 31.00 40.00 9.00
13 3 32.00 45.00 13.00
14 3 32.00 46.00 14.00
15 3 33.00 47.00 14.00
16 3 40.00 48.00 8.00
Sequencing Example (cont.)
Configuration After Greedy Search:











Average Tardiness: 0.5 (9.875 lower than EDD)
Job Due Completion
Number Family Date Time Lateness
1 1 5.00 5.00 0.00
2 1 6.00 6.00 0.00
3 1 10.00 7.00 -3.00
5 1 15.00 8.00 -7.00
4 2 13.00 13.00 0.00
6 2 15.00 14.00 -1.00
8 2 22.00 15.00 -7.00
7 1 22.00 20.00 -2.00
9 1 23.00 21.00 -2.00
11 2 30.00 26.00 -4.00
12 2 31.00 27.00 -4.00
10 3 29.00 32.00 3.00
13 3 32.00 33.00 1.00
14 3 32.00 34.00 2.00
15 3 33.00 35.00 2.00
16 3 40.00 36.00 -4.00
Sequencing Example (cont.)
A Better (Feasible) Sequence:











Average Tardiness: 0
Job Due Completion
Number Family Date Time Lateness
1 1 5.00 5.00 0.00
2 1 6.00 6.00 0.00
3 1 10.00 7.00 -3.00
5 1 15.00 8.00 -7.00
4 2 13.00 13.00 0.00
6 2 15.00 14.00 -1.00
8 2 22.00 15.00 -7.00
11 2 30.00 16.00 -14.00
12 2 31.00 17.00 -14.00
7 1 22.00 22.00 0.00
9 1 23.00 23.00 0.00
13 3 32.00 28.00 -4.00
10 3 29.00 29.00 0.00
16 3 40.00 30.00 -10.00
14 3 32.00 31.00 -1.00
15 3 33.00 32.00 -1.00
Diagnostic Scheduling
Goals:
Schedule at appropriate level of detail for environment.
Make use of realistic, obtainable data.
Accommodate intangibles in decision-support mode.
Approach:
Deterministic model.
Based on conveyor model.
Release as late as possible subject to due dates.
Provide diagnostics on infeasibilities.
Types of Infeasibility:
WIP (must move out due dates).
Capacity (can move due dates or increase capacity).
Scheduling Infeasibilities Example
Problem Description:
Capacity = 100/day
Minimum Practical Lead Time = 3 days
WIP in system with 1, 2, 3 days to go = 95, 90, 115
Scheduling Infeasibilities Example (cont.)










* WIP infeasibility
** capacity infeasibility
Days from Amount Cumulative Cumulative
Start Due Amount Due Capacity
1 90 90 95
2 100 190 185*
3 90 280 285
4 80 360 385
5 70 430 485
6 130 560 585
7 120 680 685
8 110 790 785**
9 110 900 885
10 110 1010 985
11 100 1110 1085
12 90 1200 1185
13 90 1290 1285
14 90 1380 1385
15 90 1470 1485
Cumulative Demand vs. Cumulative Capacity
0
200
400
600
800
1000
1200
1400
1600
0 2 4 6 8 10 12 14
Day from Start
U
i
n
t
s
Cum Due
Cum Capacity
Surplus
-30
-20
-10
0
10
20
30
40
50
60
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Days from Start
S
u
r
p
l
u
s

U
n
i
t
s
WI P
I nfeasibility
Capacity
I nfeasibility