Lecture 7 - Production Planning System (Revisited). The contents of this chapter include all of the following: Manufacturing planning and control system, sales and operations planning (SOP), making production plan, developing production plan, market to stock production plan, market to order production plan, production planning hierarchy, inventory cost, type of inventory, production settings.
Lecture 7 Production Planning System (Revisited) Books • Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming College, Emeritus, Stephen N. Chapman, Ph.D., CFPIM, North Carolina State University, Lloyd M. Clive, P.E., CFPIM, Fleming College • Operations Management for Competitive Advantage, 11th Edition, by Chase, Jacobs, and Aquilano, 2005, N.Y.: McGrawHill/Irwin Objectives • • • • • • • • • • Manufacturing Planning and Control System Sales and operations planning (SOP) Making production plan Developing production plan Market to stock production plan Market to order production plan Production planning hierarchy Inventory cost Type of inventory Production settings Manufacturing’s Objectives • The goal of manufacturing is to produce – The right goods – Of the right quality – In the right quantities – At the right time – At minimum cost Four Basic Questions What are we going to make? What does it take to make it? What we already have? What must we get? Priority The APICS Dictionary defines priority as “the relative importance of jobs, i.e., the sequence in which jobs should be worked on.” Priority refers to what is needed, how much is needed, and when it is needed Capacity The APICS Dictionary defines capacity as “the capability of a worker, machine, work center, plant or organization to produce output per time period.” Priority Management Techniques Production Plan Resource Requirements Plan (RRP) Master Production Schedule (MPS) Rough-Cut Capacity Plan (RCCP) Material Requirements Plan (MRP) Capacity Requirements Plan (CRP) Production Activity Control (PAC) Input/Output Control Operation Sequencing Capacity Management Techniques Strategic Business Plan Manufacturing Planning and Control System • Strategic Business Plan A statement of the major goals and objectives the company expects to achieve over the next 210 years or more – – – – – – broad/general direction low level of detail longrange forecasts responsibility of senior management includes participation from Marketing, Finance, and Production usually reviewed every six months to a year Manufacturing Planning and Control System • Production Plan Concerns – – – – Quantities of each product group required to be produced The desired inventory levels The resources of equipment, labor, and material needed in each period The availability of resources needed Manufacturing Planning and Control System • Production Plan must – – – – – – Satisfy market demand within resources available Assist the implementation of the strategic business plan Be based upon families of products Be fairly low level of detail Address a planning horizon of six to 18 months Be reviewed each month or quarter Setup Costs l For • • • • • • • • parts produced in-house, we must: Check status of raw material Possibly place an order Create route sheets with instructions for each stage of the production process Store routing data in a database Check routing data for compatibility with shop status and engineering changes Make routing instructions with raw material Deliver to production workers Machine set up 70 Inventory Carrying Costs l Carrying • • • • • • • inventory incurs a variety of costs Space heated and cooled Move inventory occasionally because it blocks access to other goods Construct and maintain information system to track location Pay taxes based on value Insurance costs Some will be lost, damaged, or perished Cost of capital invested in inventory 71 Shortage Costs l When • • • • customer demands an out of stock item May decide to wait for delivery - backorders May cancel the order – lost sales May look elsewhere next time – lost customer May pay expedite charges l Within the plant, if material is unavailable to start production • • • • Work center may lack work Schedule may have to be modified Completion of products may be delayed Result in late deliveries or lost sales 72 Information Flow for Various Production Systems Order Entry I I Raw Material I a Materials Requirements Planning (MRP) Raw Material b Just-In-Time (KANBAN) I Processor Infinite Capacity Inventory Buffer Finite Capacity Inventory Buffer Material Flow 73 Information Flow KANBAN control • • Kanban control uses the levels of buffer inventories in the system to regulate production. When a buffer reaches its preset maximum level, the upstream machine is told to stop producing that part type. This is often implemented by circulating cards, the kanbans, between a machine and the downstream buffer. The machine must have a card before it can start an operation. It can then pick raw materials out of its upstream (or input) buffer, perform the operation, attach the card to the finished part, and put it in the downstream (or output) buffer. 74 KANBAN control • • Kanban control ensures that parts are not made except in response to a demand. The analogy is to a supermarket: Only the goods that have been sold are restocked on the shelves 75 Information Flow for Various Production Systems Limit on Total Inventory I Raw Material I c Constant Work-In-Process (CONWIP) Raw Material d Hybrid CONWIP-KANBAN I Processor Infinite Capacity Inventory Buffer Finite Capacity Inventory Buffer Material Flow 76 Information Flow CONWIP Control • • • • CONWIP stands for Constant WorkInProcess a control strategy that limits the total number of parts allowed into the system at the same time. Once the parts are released, they are processed as quickly as possible until they fill up the last buffer as finished goods. Once the consumer removes a part from the finished goods inventory, the first machine in the chain is authorized to load another part 77 CONWIP Control • • • Like KANBAN, the CONWIP system only responds to actual demands, so it is still a ``pull'' type system But unlike kanban, the buffers for all downstream machines are empty, except finished goods, which is full. This occurs because any part released to the system will move to finished goods. New parts will not be released if the finished goods buffer is full. 78 Inventory is Needed to Support Production • • • Recent years claim a goal of zero inventory – But some is necessary to meet needs – Economically practical to maintain some WIP to facilitate production scheduling – Variability in processing time and job arrival rates Inventory should not be used to cover problems – Wasteful practice all too common – Prevents the system from improving – Defects not detected until later Lean companies 79 – Operate with reliable processes, quick Large Inventories Imply Long Throughput Times • • • Throughout time (manufacturing Lead Time) – The span of time from when the part enters a system until it leaves Little’s Law I = X · T – Relates average throughput time (T) to the level of average inventory (I) and the production rate (X) for any stationary process Stationary process – Probability of being in a particular state is independent of time 80 To reduce throughput time Eliminate unnecessary, nonvalue added operations: – – – – – Reduce waiting time Reduce transfer time Reduce quality inspection time Increase process rates Reduce batch size 81 Capacity Balancing Flow In l l l l Flow Out Desire to have same number of units produced in each work center Capacity is measured by number of units that can be made per time period Total production is limited by the workstation with the smallest capacity (bottleneck station) Excess capacity reduces cycle time Theory of Constraints (TOC) A management philosophy developed by Dr. Eliyahu Goldratt The goal of a firm is to make money End of Lecture 7 ... Manufacturing Planning? ?and? ?Control System • Production Plan Concerns – – – – Quantities? ?of? ?each product group required to be produced The desired? ?inventory? ?levels The resources? ?of? ?equipment, labor,? ?and? ?material? ?needed ... Represents the implementation? ?and? ?control phase? ?of? ?the production planning? ?and? ?control system – Purchasing is responsible for establishing? ?and? ? controlling the flow? ?of? ?raw materials into the factory... Provides a means? ?of? ?managing change Permits better? ?management? ?of? ?production,? ?inventory? ? and? ?backlog Making the Production Plan • Purpose Production planning is . . setting the overall level? ?of? ?manufacturing output . . .