Production, Capacity and Material Planning

1 Chapter 7 production , Capacity and Material PlanningProduction Management101 production , Capacity and Material PlanningaProduction plan`quantities of final product, subassemblies, parts needed at distinct points in timeaTo generate the production plan we need:`end-product demand forecasts`Master production scheduleaMaster production schedule (MPS)`delivery plan for the manufacturing organization`exact amounts and delivery timings for each end product`accounts for manufacturing constraints and final goods inventoryProduction Management102 production , Capacity and Material PlanningBased on the MPS:arough-cut Capacity planningaMaterial requirements Planning `determines Material requirements and timings for each phase of production `detailed Capacity planningProduction Management103 End-Item Demand EstimateMaster production Schedule (MPS)Rough-Cut CapacityMaterial Requirements Planning (MRP)Detailed Capacity PlanningMaterial PlanShop OrdersPurchasing PlanShop Floor ControlUpdatesUpdatesProduction, Capacity and Material PlanningProduction Management104 Master production SchedulingaAggregate planademand estimates for individual end-itemsademand estimates vs.

2 MPS`inventory` Capacity constraints`availability of Material ` production lead time`..aMarket environments`make-to-stock (MTS)`make-to-order (MTO)`assemble-to-order (ATO) production Management105 Master production SchedulingaMTS`produces in batches`minimizes customer delivery times at the expense of holding finished-goods inventory`MPS is performed at the end-item level` production starts before demand is known precisely`small number of end-items, large number of raw- Material itemsaMTO`no finished-goods inventory `customer orders are backlogged`MPS is order driven, consisits of firm delivery datesProduction Management106 Master production SchedulingaATO`large number of end-items are assembled from a relatively small set of standard subassemblies, or modules`automobile industry`MPS governs production of modules (forecast driven)`Final Assembly Schedule (FAS)

3 At the end-item level (order driven)`2 lead times, for consumer orders only FAS lead time relevantProduction Management107 Master production SchedulingaMPS- SIBUL manufactures phones`three desktop models A, B, C`one wall telephone D`MPS is equal to the demand forecast for each modelProduct12345678 model A10001000100010002000200020002000 model B500500350350 model C1500150015001500100010001000 model D600600300200weekly total31003000360025003350230032003350mon thly totalWEEKLY MPS (= FORECAST)1220012200 JanFebWeekWeekProduction Management108 Master production SchedulingaMPS Planning - Example`MPS plan for model A of the previous example:`Make-to-stock environment`No safety-stock for end-items It= It-1 + Qt max{Ft,Ot} It= end-item inventory at the end of week t Qt = manufactured quantity to be completed in week t Ft = forecast for week t Ot= customer orders to be delivered in week t 12345678forecast Ft10001000100010002000200020002000orders Ot1200800300200100 INITIAL DATA model AWeekWeekJanFebCurrent Inventory = 1600 production Management109 Master production Scheduling`Batch production : batch size = 2500 It= max{0, It-1} max{Ft, Ot} I1= max{0, 1600} max{1000, 1200} = 400 >0 I2= max{0, 400} max{1000, 800} = -600 <0 => Q2 = 2500 I2= 2500 + 400 max{1000, 800} = 1900, etc.

4 >=otherwise ,25000I if ,0ttQ12345678forecast Ft10001000100010002000200020002000orders Ot1200800300200100 Inventory It16004001900900240040090014001900 MPS Qt25002500250025002500 ATP40014002200250025002500 MPSJanFebC urrent Inventory = 1600 WeekWeekProduction Management110 Master production SchedulingaAvailable to Promise (ATP) ATP1= 1600 + 0 1200 = 400 ATP2= 2500 (800 + 300) = 1400, etc. Whenever a new order comes in, ATP must be updatedaLot-for-Lot production12345678forecast Ft10001000100010002000200020002000orders Ot1200800300200100 Inventory It16004000000000 MPS Qt0600100010002000200020002000 ATP40007008001900200020002000 MPSJanFebCurrent Inventory = 1600 WeekWeekProduction Management111 Master production SchedulingaMPS Modeling`differs between MTS-ATO and MTO`find final assembly lot sizes`additional complexity because of joint Capacity constraints`cannot be solved for each product independentlyProduction Management112aMake-To-Stock-ModelingMast er production Schedulingititiiproduction quantity of product i in period tI = Inventory of product i at end of period tDdemand (requirements)

5 For product i in time period taproduction hours per unit of product ihinveitQ====itititntory holding cost per unit of product i per time periodAset-up cost for product iG production hours available in period ty1, if set-up for product i occurs in period t (Q0)===> production Management113aMake-To-Stock-ModelingMast er production Scheduling()11,-1i1it1itmin for all (i,t)a for all tQ0 for all (i,t)Q0; 0; {0,1} nTiitiititi titititnittiTitikkititAyhIIQIDQGyDIy==== ++ = production Management114aAssemble-To-Order Modelingatwo master schedules`MPS: forecast-driven`FAS: order drivenaoverage costs`holding costs for modules and assembled productsashortage costs`final product assemply based on available modules no explicit but implicit shortage costs for modules`final products: lost sales, backordersMaster production SchedulingProduction Management115 Master production Scheduling`mmodule types and nproduct types`Qkt = quantity of module k produced in period t`gkj = number of modules of type k required to assemble order j`Decision Variables:`Ikt = inventory of module k at the end of period t `yjt = 1, if order j is assembled and delivered in period t.

6 0, otherwise`hk = holding cost ` jt = penalty costs, if order j is satisfied in period t and order j is due in period t (t <t); holding costs if t > tProduction Management116aAssemble-To-Order ModelingMaster production Scheduling{}t)k,(j, allfor 1,0;0j allfor 1 tallfor t)(k, allfor subject tomin1111,1111 = +=+ === ====jtktLtjtnjtjtjnjjtkjkttkktmkLtnjLtjt jtktkyIyGyaygQIIyIh production Management117 Master production SchedulingaCapacity Planning `Bottleneck in production facilities`Rough-Cut Capacity Planning (RCCP) at MPS level`feasibility`detailed Capacity Planning (CRP) at MRP level`both RCCP and CRP are only providing informationProduction Management118 Master production SchedulingMPS:Product1234A10001000100010 00B-500500-C1500150015001500D600-600-Jan uaryWeekAsse m b l yI n sp e cti o of Capacity (min) weekly Capacity requirements?

7 Assembly: 1000*20 + 1500*22 + 600*25 = 68000 min = 1133,33 hr Inspection: 1000*2 + 1500*2 + 600*2,4 = 6440 min = 107,33 hr etc. available Capacity per week is 1200 hr for the assembly work center and 110 hours for the inspection station; 1234 Available Capacity per weekAssembly113310831333!!8831200 Inspection107104128!!83110Ca pa city re quire s (hr)WeekProduction Management119 Master production SchedulingaInfinite Capacity Planning (information providing)afinding a feasible cost optimal solution is a NP-hard problemaif no detailed bill of Capacity is available: Capacity Planning using overall factors (globale Belastungsfaktoren)`required input:`MPS`standard hours of machines or direct labor required`historical data on individual shop workloads (%)aExample from G nther/Tempelmeier` : overall factorsProduction Management120 Master production Schedulingcapacity Planning using overall factorsweekproduct123456A100801201001206 0B40-60-40-work on work on Totalproduct critical machinenon-critical machineA123B426historic Capacity requirements on critical machines.

8 40% on machine a60% on machine bProduction Management121 Master production Schedulingin total 500 working units are available per week, 80 on machine a and 120 on machine b;Solution:overall factor = time per unit x historic Capacity needs product A:machine a: 1 x 0,4 = 0,4machine b: 1 x 0,6 = 0,6product B:machine a: 4 x 0,4 = 1,6machine b: 4 x 0,6 = 2,4 production Management122 Master production Schedulingcapacity requirements: product Amachineweek123456a403248404824b60487260 7236other200160240200240120capacity requirements: product Bmachineweek123456a64-96-64-b96-144-96-o ther 80-120-80- production Management123 Master production Schedulingtotal Capacity requirements machine week 1 2 3 4 5 6 a 104 32 144 40 112 24 b 156 48 216 60 168 36 other 280 160 360 200 320 120 production Management124 Master production Scheduling0100200300400123456weekcapacit y requirementsa (max 80)b (max 120)other (max 300)

9 production Management125 Master production SchedulingaCapacity Modeling`heuristic approach for finite- Capacity - Planning `based on input/output analysis `relationship between Capacity and lead time`G= work center Capacity `Rt= work released to the center in period t`Qt= production (output) from the work center in period t`Wt= work in process in period t`Ut= queue at the work center measured at the beginning of period t, prior to the release of work`Lt= lead time at the work center in period tProduction Management126 Master production SchedulingaLead time is not constantaassumptions:`constant production rate`any order released in this period is completed in this periodGWLQURUWQRUURUGQ tttttttttttttt=+=+= +=+= 111},min{ production Management127 Master production SchedulingaExample0123456G (hr/week)363636363636Rt (hours)203060204040Qt (hours)303036363636Ut (hours)10002481216Wt (hours)303060444852Lt(weeks)0,830,831,67 1,221,331,44 PeriodProduction Management128 Material Requirements PlanningaInputs`master production schedule`inventory status record`bill of Material (BOM)aOutputs`planned order releases purchase orders(supply lead time) workorders(manufacturing lead time) production Management129 Material Requirements PlanningEnd-Item1S/A21PP54S/A62PP101MP92 RM132RM124 Level 0 Level 1 Level 2 Level 3 Level 4 Legend.

10 S/A = subassemblyPP = purchased partMP = manufactured partRM = raw materialpart #quantityProduction Management130 Material Requirements PlanningaMRP Process`goal is to find net requirements (trigger purchase and work orders)`explosion Example: MPS, 100 end items yields gross requirements `netting Net requirements = Gross requirements - on hand inventory - quantity on order done at each level prior to further explosion`offsetting the timing of order release is determined`lotsizing batch size is determinedProduction Management131 Material Requirements PlanningaExample 7-6 Telephone1 Hand SetAssembly111 BaseAssembly121 HandSet Cord131 HousingS/A1211 Board PackS/A1221 RubberPad1234 TappingScrew1244 KeyPad12111 KeyPad Cord12121 MicrophoneS/A1111 ReceiverS/A1121 UpperCover1131 LowerCover1141 TappingScrew1152 production Management132 Material Requirements PlanningPART 11 (gross requirements given) net requirements?