Production Planning

Process Capability

"Refers to the ability of the process to produce parts that conform to (engineering) specifications. Process capability relates to the inherent variability of a process ..."

When moving average forecasts, as N increase the forecast

does not become more responsive

Reduce

Most important of 3 R's Purchasing's contact with suppliers of new 'green products' Water based cleaners Low VOC paints Lead free solder Contact with suppliers Returnable containers Lean operations (reduce waste)

Independent Demand

o Not related to demand for other assemblies or products, instead from outside sources o Generally forecasted demand

Relevant costs of EOQ

(annual cost of placing orders and annual cost of carrying inventory) As the order quantity increases, the average inventory and the cost of carrying inventory increases and the number of orders per year and the annual cost of placing orders decreases • Need to find the order quantity where: The cost of carrying inventory and the costs of ordering will be a minimum • EOQ: minimizes the total cost of carrying and ordering

Hierarchy of importance of 3R's

- Reduce, reuse, recycle

What are the advantages of WPP?

-Includes the input of many people -Includes many factors -Narrows the choice by eliminating lowest scores

Assumptions of EOQ

1) Demand if relatively constant and known 2) The item is purchases in lots or batches 3) Preparation costs and ordering costs are constant and known 4) Replacement occurs all at once

Manufacturing systems

1) Flow manufacturing, intermittent man and project man

Challenges with supply chains:

1) customers are never satisfied 2) supply chains are large 3) product life cycles are getting shorter 4) lots of data 5) narrow profit margins 6) increasing number of alternatives

Metric program:

1) establish company goals and objectives 2) define performmance, 3) state the measurement 4) set performance standards 5) educate the users 6) and apply consistently

• Manufacturing Lead Time (LT): What is it? What are the different parts that make up the lead time?

1. Queue: Time spent waiting before operation 2. Setup: Time to prepare the work center 3. Run: Time to make the product 4. Wait: Time spent after the operation 5. Move: Transit time between work centers

Facts about bottlenecks

1. Utilization of a non-bottleneck resource is not determined by its potential, but by another constraint in the system 2. Utilization of a non-bottleneck 100% of the time does not produce 100% utilization 3. The capacity of the system depends on the capacity of the bottleneck 4. Time saves at a non-bottleneck saves the system nothing 5. Capacity and priority must be considered together 6. Loads can and should be split 7. Focus should be on balancing the flow in the shop

Number of orders/yr

Annual demand/order quantity

What do you need to increase income with/a company's main objective?

Best customer service, low inventory investment, low distribution and production costs

What are the drivers for increase outsourcing?

Better, Faster, Cheaper

Scheduling techniques

Forward and backward

Flow man

High volume and standard products are repetitive or continuous. • Routings are fixed: Work centers arranged according to the routing • Dedicated to a limited range of products : Specifically, designed equipment • Use of mechanical transfer devices: Low WIP and throughput times • Capacity is fixed by the line • Production activity control: Plans the flow of work, Planned schedule of materials to the line and Implementation and control are relatively simple

Purpose of seasonal index

If high sales, seasonal index is greater than 1, if less it is less than 1: The purpose is you want to get a feel to see how seasonal you seasonality is! (Example: One month you have four and then another month you have 0.1) In the most extreme case you would have a seasonality of 1 each month and seasonality is low.

Low level coding

Lowest level on which a part resides on the bill of materials

Dependent Demand Approach

MRP

Conflicts and objectives in Traditional systems: Production

Ob: Low production cost, high-level production, and long production runs Implications: low customer service, few disruptions to production and high ininventories

Conflicts and objectives in Traditional systems: Finance

Ob: low investment and cost, fewer fixed costs, and low inventories Im: Low customer service, few disruptions to production, and low inventories.

Conflicts and objectives in Traditional systems: Marketing

Objective: high revenues, high product availability Implication: High customer service, many disruptions to production, and high inventories

Material Management is a balancing act between which considerations?

Priority (the demand for products) and capacity (the ability to make the products)

Differences between upper and lower specification limits

Process Capability compared the 6 sigma spread of a process with the specification limits LSL - lower specification limit -3 Standard deviations ! USL - upper specification limit +3 standard deviations ! specification doorway = USL - LSL ! The 6 sigma spread of the process should be smaller than the specification doorway -Customer determines these

Reuse

Purchasing's knowledge of internal needs Reuse of waste or packaging Sale of by-products

3R's

Reduce, Reuse, Recycle

Production activity control: Purpose and Goal

Responsible for executing the: o Master production schedule (MPS) o Materials Requirements Plan (MRP) • At the same time: o Make good use of labor, machines and materials o Minimize work-in-process inventory o Maintain customer service

When might u have to use one scheduing technique over another

The latest spart time or the earliest possible finish time, which is forward scheduling.

Recycle

The least effective of the 3 R's Suppliers are often a good source of disposal / refund Empty containers Regrind plastics

Process Capability

The process spread is not related to the product specification tolerance A process must be selected that can meet the specifications or defects will be produced Processes can produce defects in one of two ways, by having too big a spread or by a shift in the average

Order winners

Those characteristics that persuade customers to select a product or service -self driving car

o Why may you increase/decrease alpha? o Would you pick a high/low alpha if it's a sustained trend?

To get closer to the actual number High because you want to have a more responsive aggressive trend.

Gross requirements

Total of a component needed to meet requirements not taking any existing inventory into account.

Why the need to balance priority and capacity?

Trade offs between customer service and the cost of providing the service

Purpose of supply chain metrics:

Used to: communicate expectations, identify problems, direct action, motivate people , and must be timely

Direct Labor and Direct Material... Overhead...

Vary with volume does not vary by volume sold

Metric

a verifiable measure strategy customer --> strategy --metric<--operational <-- focus standard

Order qualifier

customer requirements for price, quality, , delivery, etc. (the minimal standards) -Radio in car

Supply chain measures

customer service, cost, transportation and inventory

Forward scheduling

danger of not being late is not high (earliest completion date) • Start when the order is received • May finish early • Used to determine the earliest completion date • Determine promise dates

Net requirements

actual amount of a component needed to meet required after existing requirements taken into account.

EOQ

minimizes the total costs of carrying and ordering

Average inventory

order quantity.2

Exploding

process of multiplying requirements by usage to get BOM requirements

Hybrid Production Plan

use a combination of some chase and some level

Tolerance

"Allowable departure from a nominal value established by design engineers that is deemed acceptable for the functioning of the good or service over its life cycle." -Tolerance is inherent to the process -nominal value Desired value

• Why is it important to consider environmental responsibility when purchasing goods and services?

First-hand knowledge of price trends for waste products Contact with salespeople and suppliers Familiarity with a company's own needs Knowledge of legislation covering the transportion and handling of dangerous goods

What is the difference between fixed and variable costs?

Fixed costs do not change and variable costs do

What is seasonal index used for?

For each season, can compute a seasonal index: • Seasonal index: period average demand/average demand for all periods • Index can be used as a multiplier for future seasons • Deseasonalized demand= actual seasonal demand/ seasonal index

Different levels within the planning hierarchy?

Strategic business plan Production Plan Master Production Schedule Material Requirements Plan Production Activity Control and Purchasing

Weighted Point Plan

Supplier selection Factors: things that must be considered as part of what we will be buying Weights: The relative importance of each of the factors Rating: How well each supplier compares on each factor Ranking: The weight times the rating

Basic production plan strategy:Level

establish average demand level and set production rate to that level o Often used when resources difficult or very expensive to change

outsourcing

having suppliers provide goods and services that were previously provided internally -availability of educated offshore workforce -Internet communications -Company move to core compentencies "stick to the knitting"

PAC:

implementation and control phase of production planning and control system. Planning horizon—very short from a day to month. Level of detail is high because concerned with individual part.

Bottlenecks:

o Calculation of throughput: The total volume of product passing through a facility. • Bottlenecks control the throughput: work centers feeding bottlenecks will build inventory • Work centers fed by bottlenecks have their throughput controlled by the bottleneck • Some workstations are overloaded and some are underloaded • Bottlenecks o "a facility, function, department, or resource whose capacity is equal to or less than the demand put upon it."

Major objectives of MRP

o Determine requirements- calculated to meet product requirements defined in the MPS • What to order • How much to order • When to order • When to schedule delivery Keep priorities current

Strategies to manage bottlenecks

o Establish a time buffer before each bottleneck o Control the rate f material feeding the bottleneck o Do everything to provide the bottleneck with capacity o Adjust loads o Change the schedule

Basic principles of forecasting

o Forecasts are usually incorrect- most demand is dependent on so many variables it is impossible to capture the impact of all. o Forecasts tend to be more accurate: for families or groups of products, for time periods closer to the present o Every forecast should include and estimate of error

Depedent demand

o Generally related to production of an end product (as defined on the MPS) o Can be calculated instead of forecasted

Pros and cons of level

o Good: more stability for employees o Bad: carry inventory

If forecasting is generally incorrect, why do we do it?

o Planning has to start with some projection of anticipated demand o The Key to planning with forecasting data: • How wrong is the forecast likely to be (need forecast error)? • How will the plan accommodate for the expected error?

BOM: purposes and uses

o Purpose and Uses: The BOM shows all parts to make one of the item. Each part has one, and only one, part number, A part is defined by form, fit and function - any change requires a new part number. • Defines the product • Provides method for design change control • Planning • what is needed and when • Order entry • Order configuration and pricing • Production Need to assemble a product Costing Material cost of goods sold

Operation overlapping purpose and trade offs

o Purpose? The next operation is allowed to begin before the entire lot is completed. Reduces manufacturing lead time* order is divided into at least two transfer loads. o What, if any, are the tradeoffs? • Costs involved: handling costs between work centers, may increase queue and wait for other orders, idle time if the second bath doesn't arrive in time, transfer time in between them (could add costs). o Size of the transfer load: • If the second operation is slower than the first make the first transfer batch small: i.e. get the slower machine started early. • If the second machine is faster than the first make the first transfer batch large i.e. the second machine will be able to catch up.

Rated capacity

o Rated capacity: available time * utilization * efficiency o Available number of hours a work center can be used o Utilization: hours worked/ available hours *100% o Efficiency: actual productions rate/ standard production rate *100%

Responsibilities and functions of PAC

o Release work orders o Control work orders to complete on time o Control the flow of work o Manage day-to-day activity and provide support

Operation splitting purpose and tradeoffs

o What is the purpose of it? Reduces manufacturing lead time, the order is split into at least two lots, similar machines are run simultaneously. o What, if any, are the tradeoffs? Setup time is low compared to run time and operators can run more than one machine

Pros and Cons of Chase

o Why is this good? Don't have to carry out a lot of inventory and little inventory costs o Why is this not good? Moral of employees are low because you have to lay people off. Also because there is no inventory. If demand goes up, you need to hire more people but don't have time to train, so quality is low.

Strategic Plan

of a firm is a statement of the major goals and objectives the company expects to achieve over the next 2 to 10 years. Shows product lines, markets and so on. Inputs are marketing, finance, production, and engineering. Usually responsibility of senior management. The level of detail is not high and the planning horizon usually takes 6 months to a year.

Scheduled receipts

open order released for processing (production or purchase) scheduled to be received at a defined time.

Offsetting

placing requirements in the proper period based on lead time

MRP:

plan for production and purchase of components used in items in the MPS. Shows quantities needed and when manufacturing intends to make/use them. Level of detail is MRP is high and planning horizon at least as longed as combined purchase and manufacturing lead times, 3-18 months.

MPS

plan for production of individual end items. It breaks down the production plan to show for periods the quantity of each end item made. Level of detail much greater than the production plan. Planning horizon is 3 to 18 months.

Production Plan

production plan is concerned with the quantities of each product group that must be produced in each period. Desired inventory levels, the resources of equipment, labor and material needed in each period, and availability of resources needed. The level of detail is not too high. The planning horizon is 3 to 18 months.

Performance metrics measures:

quantifeid and objective, contain two parameters ex: orders per dsay and sales per person

Production rate

sales- open inv+ end inv/ # of production periods

Performance metrics standards:

sets the goals, establishes controls: performance standards set the goal and performance measure says how close you came

Planned order release

the amount that should be ordered (using lot size) to prevent a negative projected available balance.

Projected available

the expected inventory position at the end of the period

Basic production plan strategies: Chase

vary production rates to meet changes in demand o Often used when inventory cannot be used or when resources are flexible and inexpensive to change.

Planned order receipt

when the order should be available for use, offset by lead time from the planned order release.

Critical ratio

• CR = due date - present date CR< 1 behind schedule • Lead time remaining CR=1 on schedule • = Actual time remaining CR>1 ahead of schedule • Lead time remaining CR <0 Already late

Intermittent man:

• Many variations in: o Product design, Process requirements, Order quantities • Flow of work is varied- work flow not balanced • Machinery and workers must be flexible- Usually grouped according to function • Throughput times are generally long • Capacity required depends on product mix • Production Activity control is complex: Number of products made, Variety of routings, Scheduling problems and PAC is a major activity controlled through shop orders for each batch

Project man

• One or a small number of units • Usually in one place • Close coordination between: Manufacturing, Marketing, Purchasing, Engineering • Examples: Shipbuilding and House construction

Backward scheduling

• Use MRP logic • Schedule last operation to be complete on the due date • Schedule previous operations back from the last operation • Reduces inventory • Ex: exam is at 3pm and latest start time id 11pm if it going to take you 5 hours to study. Need 11 to complete process/ finishing for exam.

Rules with forecasting for seasonality

• Use only deseaonalized data to forecast • Base forecast if deseasonalized demand • Calculate seasonal forecast by applying seasonal indices to base forecast