Unit - III

Semester - II

Planning and execution of the activities that use workers, energy, information, and equipment to convert raw materials into finished products
Delivering products with the desired functions, aesthetics, and quality to the customers at right time and with minimum cost
MAPCON Technologies is the supplier of the Best Maintenance Management Software and Preventative Maintenance Software for industry & facilities.

Production Activity and Information Flows

Production-planning decisions typically made in a hierarchical manner: Raw Material Forecasting

Fabrication Plant Strategic Planning

Assembly Plant

Administrative Functions (Purchasing, Payroll, Finance, Accounting)

Marketing Aggregate Production Planning

Finished Products Distribution Center

Product Design

Disaggregation

Process Planning
Manufacturing Support (Facilities Planning, Tool Management, Quality Control, Maintenance) c) Support Functions

Production Scheduling

Retailer Shop Floor Control

Customer a) Product Flow b) Decision Hierarchy

Production System Decision Hierarchy

Inputs Process Outputs Length of Planning Horizon
Years Long Range Economic Forecasts Financial Choices Strategic Planning Operating Facilities Product Line (Families) Technologies

Processing Technologies/Efficiency Medium Range Product Family Forecasts Machine Schedules

Production Levels Workforce Levels Current Inventory Status Changeover Times and Costs Item Forecasts

Aggregate Production Planning

Production Level Workforce Level Family Inventories

Months

Disaggregation

Master Production Schedule (MPS) - Final Assembly by item Item Inventories

Weeks

Bill of Materials Process Plans

Labor Status Machine Status Job Priorities Order Releases Machine Schedules

Production Scheduling
Shop Floor Control

Job Priorities Order Releases Machine Schedules

Machine Priorities Job Status Labor Reporting Material Handling Tasks Load/Prices/Unload Authorization

Days-Shift

Real Time Minutes

Production Objectives
High Profitability Low Costs
Low Unit Costs High Throughput High Utilization Low Inventory Quality Product Fast Response

High Sales
High Customer Service Many products

Less Variability

Short Cycle Times

Low Utilization

High Inventory

More Variability

Throughput is the movement of inputs and outputs through a production process

A typical aggregated plan states the level of major product families to be produced monthly over the next year Workforce levels, Overtime levels, Inventory levels

Objective: Generate a long-term production plan that establishes a rough product mix,
anticipates bottlenecks, and is consistent with capacity and workforce plans.

Issues:
Aggregation: product families and time periods must be set appropriately for the environment. Coordination: AP is the link between the high level functions of forecasting/capacity planning and intermediate level functions of MRP, inventory control, and scheduling. Anticipating Execution: AP is virtually always done deterministically, while production is carried out in a stochastic environment.

There are four basic types of production systems:

1. 2. 3. 4. Process Product Cellular Fixed positions

Layout Goals
Use space efficiently Efficient personnel movement Maximum equipment utilization Convenient / safe work environment Simplify repair / maintenance Smooth flow of work

Products, Processes, and Layouts

PRODUCTS PROCESSES LAYOUTS

Make-to-stock standardized commodities

Continuous process industries repetitive mfg

high volume, low variety Product Layout

Assemble-to-order modular

Hybrid, FMS, CAM, CIM

low volume, Cellular Layout medium variety

Make-to-Order custom

Job-Shop(Intermittent)

low volume, high variety

Process Layout

Engineer-to-order one-of-kind

low volume,
Special Project

Fixed Position

low variety

Product Process Matrix

Dimension Job variety Process flexibility Unit cost Volume of output Job Shop Very High Very High Very High Very low Batch Moderate Moderate Moderate Low Repetitive Low Low Low High Continuous Very low Very low Very low Very high

Process Type

High variety
Appliance repair Emergency room Commercial bakery Classroom Lecture

Low variety

Job Shop Batch

Repetitive Continuous (flow)

Automotive assembly Automatic carwash Oil refinery Water purification

Layout
Layout: the configuration of departments, work centers, and equipment,
Whose design involves particular emphasis on movement of work (customers or materials) through the system

Importance of layout

Requires substantial investments of money and effort Involves long-term commitments Has significant impact on cost and efficiency of short-term operations

The Need for Layout Design

Inefficient operations
For Example:
High Cost Bottlenecks

Changes in the design of products or services Accidents

The introduction of new products or services

Safety hazards
Changes in Environmental or other legal requirements Changes in volume of output or mix of products Morale problems

Changes in methods and equipment

Types of Layouts
Plant Layout can be classified into Three Categories . 1.Manufacturing Unit 2. Traders 3. Service Establishments

1. Manufacturing Units
1. Product / Line Layout Layout that uses standardized processing operations to achieve smooth, rapid, highvolume flow. Eg. Auto plants, cafeterias

2. Process / Functional Layout Layout that can handle varied processing requirements. Eg. Tool and die shops, university departments 3. Fixed Position / Location Layout Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed. Example: buildings, dams, power plants 4. Group Layouts / Cellular Layout
5. Combination / Hybrid Layout It is a combination of product & process layout with an emphasis on either Example: hospital: process and fixed position.

Types of Layouts 1. Product / Line layout

Product layout sets up production equipment along a product-flow line, and the work in process moves along this line past workstations. Efficiently produces large numbers of similar items.

Advantages High volume Low unit cost Low labor skill needed Low material handling High efficiency and utilization Simple routing and scheduling Simple to track and control

Disadvantages Lacks flexibility Volume, design, mix Boring for labor Low motivation Low worker enrichment Can not accommodate partial shut downs/breakdowns Individual incentive plans are not possible

Types of Layouts 1. Product / Line layout

A U-Shaped Production Line

Advantage: more compact, increased communication facilitating team work, minimize the material handling

Types of Layouts 2. Process / Functional layout

Process layout groups machinery and equipment according to their functions. Facilitates production of a variety of nonstandard items in relatively small batches. Examples: Supermarkets, job-shops, hospitals

Designing Process Layouts

Requirements: 1. List of departments: Shape requirements 2. Projection of work flows: One way vs. two way: Packaging and final assembly. 3. Distance between locations: One way vs. two way: Conveyors, Elevators. 4. Amount of money to be invested 5. List of special considerations: Technical, Environmental requirements

Types of Layouts 2. Process / Functional layout

Milling

Advantages of process layout

Assembly & Test

Grinding

Better utilization of machines can result; consequently, fewer machines are required. A high degree of flexibility exists relative to equipment or manpower allocation for specific tasks. Comparatively low investment in machines is required. The diversity of tasks offers a more interesting and satisfying occupation for the operator. Specialized supervision is possible.

Drilling

Plating

Process Layout - work travels to dedicated process centers

Disadvantages of process layout

Since longer flow lines usually result, material handling is more expensive. Production planning and control systems are more involved. Total production time is usually longer. Comparatively large amounts of in-process inventory result. Space and capital tied up by work in process. Because of diversity of the jobs in specialized departments, higher grades of skills are required.

Product or Process Make your pick

A
B

B
A

Comparison of Product and Process Layouts

Product

Process
l
l

Workers Inventory Storage space Material handling Aisles Scheduling Layout decision Goal
Advantage

l
l

l
l l l l

Limited skills Low in-process, high finished goods Small Fixed path (conveyor) Narrow Line balancing (Easier) In-line, U-type Equalize work at each station Efficiency

l
l l l l

High skills High in-process, low finished goods Large Variable path (forklift) Wide Dynamic (More difficult) Functional Minimize material handling cost Flexibility

Types of Layouts 3. Fixed-Position / Location Layout

A fixed-position layout places the product in one spot, and workers, materials, and equipment come to it. Fixed Position Layout e.g. Shipbuilding

Types of Layouts 3. Fixed-Position / Location Layout

Types of Layouts 3. Fixed-Position / Location Layout

Advantages:
Material movement is reduced. Promotes job enlargement by allowing individuals or teams to perform the whole job. Continuity of operations and responsibility results from team. Highly flexible; can accommodate changes in product design, product mix, and

Limitations:
Increased movement of personnel and equipment. Equipment duplication may occur. Higher skill requirements for personnel. General supervision required. Cumbersome and costly

production volume. Independence of production centers allows scheduling to achieve minimum total production time.

positioning of material and machinery. Low equipment utilization.

Types of Layouts 4. Group / Cellular Layout

In cellular manufacturing layout the arrangement of a facility so that equipment Used to make similar parts or families of parts is grouped together The group of equipment is called cell The arrangement of cells is called a cellular Layout

Cell 1
1 2 3 5 4

Cell 3

A Group of Parts

Cell 2

Cell 4

Types of Layouts 4. Group / Cellular Layout

Advantages of group layout:

Increased machine utilization. Team attitude and job enlargement tend to occur. Compromise between product layout and process layout, with associated advantages. Supports the use of general purpose equipment. Shorter travel distances and smoother flow lines than for process layout.

Limitations of group layout:

General supervision required. Higher skill levels required of employees than for product layout. Compromise between product and process layout, with associated disadvantages. Depends on balanced material flow through the cell; otherwise, buffers and work-inprocess storage are required. Lower machine utilization than for process layout.

Process vs. Cellular Layouts

Dimension
Number of moves between departments many

Process
few

Cellular

Travel distances Travel paths Job waiting times Amount of work in process
Supervision difficulty Scheduling complexity Equipment utilization

longer variable greater higher

higher higher Lower?

shorter fixed shorter lower

lower lower Higher?

Types of Layouts 5. Combined / Hybrid Layout

The application of the principles of product layout, process layout or fixed location layout in their strict meanings is difficult to come across. A combination of the product and process layouts, with an emphasis on either, is noticed in most industrial establishments. Plants are never laid out either pure form. It is possible to have both types of layout in an efficiency combined form if the products manufactured are somewhat similar and not complex.

F.P= Forging Press G.C= Gear Cutting Machine H.T=Heat Treatment Furnace G.G=Gear Grinding Machine

Product Volume and Variety

Cellular

Quantity

Product Layouts Fixed Position Layouts

Mixed Layouts

Process Layouts

Number of Different Products

Types of Layouts 6. Customer Oriented Layout

Customer-oriented layout arranges facilities to enhance the interactions between customers and a service.

Service organizations must decide appropriate layouts for their production processes. Banks, libraries and universities use a form of process layouts but high-interaction processes in the service industry are commonly called customeroriented layouts.

Types of Layouts 7. Service Layouts

Warehouse and storage layouts Issue: Frequency of orders Retail layouts Issue: Traffic patterns and traffic flows Office layouts Issue: Information transfer, openness

A Flow Line for Production or Service

Raw materials or customer Material and/or labor Station 1 Material and/or labor Station 2 Material and/or labor Station 3 Material and/or labor Station 4
Finished item

Used for Repetitive or Continuous Processing

Facility layout
Process terminology Cycle time: Average time between completions of successive units. Bottleneck: Factor that limits production. Slowest operating component in the production
line.

Capacity: Measure of output per unit time when fully busy. (typically measured as
reciprocal of cycle time) Capacity utilization: Measure of how much output is achieved with respect to the total capacity available. Throughput time: Time taken to complete a process from arrival to exit. Sum of critical path operations plus waiting time in queue.

Product layout and work allocation problem

Standard services can be divided into inflexible sequence of steps that all customer have to go through. Resembles manufacturing assembly line. The job requiring most time per customer is the bottleneck. A well-balanced line would have all jobs of nearly equal duration. Grouping of activities (operations) should focus on line-balancing and avoiding bottlenecks. Additional stations at the bottleneck could also be considered. 32

Symptoms of Poor Layout

A good layout results in

Comfort, Convenience, Safety, Efficiency, Compactness And Finally In Profits To The Organization A poor layout results in
Congestion,

Plant Layout Tools & Techniques

1. Process Chart
i. Operations process chart

ii. Flow process chart

2. Process Flow Diagrams 3. Machine Data cards 4. Visualization of layout i. Two dimensional plan or template

Wastes, Frustration,
Inefficiency And Finally A Lower Profit Or A Loss To An Organization

ii. Three dimensional plan or machine models

How much to order of each material when orders are placed with either outside suppliers or production departments within organizations

When to place the orders The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds by answering these two questions .

Return To Vendor

Independent Demand
A Dependent Demand
C(2)

B(4)

D(2)

E(1)

D(3)

F(2)

Independent demand finished goods, items that are ready to be sold E.g. a computer
Dependent demand components of finished products E.g. parts that make up the computer

Independent demand is uncertain. Dependent demand is certain.

Batch or order size, Q Batch size is the number of units released to the shop floor to be produced Reorder point, r Specifies the timing for placing a new order Inventory Position Inventory Position = Inventory On Hand + On Order Backorders Units on order Have been ordered but not yet arrived Backorders Items promised to customers but not yet shipped

Inventory Definitions and Decisions

I n v e n t o r y Tu r n o v e r
The ratio of annual cost of goods sold to average inventory investment. It indicates how many times a year the inventory is sold. Higher the ratio, the better, because it implies more efficient use of resources. Higher the profit margin and longer the manufacturing lead time, the lower the inventory turns. Example: Supermarkets (low profit margins) have a fairly high turnover rate

Types of Inventory
1. Raw Materials Essential to the production process Often kept in large quantities on site 2. Finished Goods Completed products awaiting shipment to customers 3. Work-in-Process (WIP) Batches of semi finished products currently in production Batches of parts from time of release until finished goods status 4. Pipeline Goods in transit between facilities Raw materials being delivered to the plant Finished goods being shipped to warehouse or customer 5. Replacement parts, tools, & supplies 6. Goods-in-transit to warehouses or customers

The Inventory Cycle

Q Quantity on hand
Profile of Inventory Level Over Time

Usage rate

Reorder point

Receive order

Place order

Receive order

Place order

Receive order

Time

Lead time

Inventory Counting Systems

1. Periodic System Physical count of items made at periodic intervals

Objective of Inventory Control

Level of customer service

Costs of ordering and carrying inventory

2.

Perpetual Inventory System that keeps track of removals from inventory continuously, thus monitoring current levels of each item

Functions of Inventory
To meet anticipated demand

3. Two-Bin System Two containers of inventory; reorder when the first is empty 4. Universal Bar Code Bar code printed on a label that has information about the item to which it is attached

To smooth production requirements

To protect against stock-outs

To help hedge against price increases To permit operations To take advantage of quantity discounts

Effective Inventory Management

A system to keep track of inventory

A reliable forecast of demand Knowledge of lead times Reasonable estimates of 1. Holding costs 2. Ordering costs 3. Shortage costs 2. 1.

Key Inventory Terms

Lead time: time interval between ordering and receiving the order Holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a year Ordering costs: costs of ordering and receiving inventory Shortage costs: costs when demand exceeds supply

A classification system

3.

4.

Economic Order Quantity Models

Economic order quantity (EOQ) model

The order size that minimizes total annual cost Economic production model

Quantity discount model

Assumptions of EOQ Model Only one product is involved Annual demand requirements known Demand is even throughout the year Lead time does not vary Each order is received in a single delivery Inventory Level = 0 when new order just arrived There are no quantity discounts

Assumptions

EPQ: Inventory Profile

Only one product is involved Annual demand requirements are known

Usage rate is constant Usage occurs continually, but production occurs periodically
The production rate is constant Lead time does not vary There are no quantity discounts

Q Q*
Imax
Amount on hand
Production and usage Usage only Cumulative production Production and usage Usage only Production and usage

Time

12-43

The Role of Inventory

Inventory consists of physical items moving through the production system Originates with shipment of raw material and parts from the supplier Ends with delivery of the finished products to the customer Costs of storing inventory accounts for a substantial proportion of manufacturing cost Often 20% or more Optimal level of inventory Allows production operations to continue smoothly A common control measure is Inventory Turnover

Inventory Costs and Tradeoffs

Holding inventory is costly. In constructing economic models for choosing the optimal levels of inventory, trade of the costs caused by: 1. Ordering or set up of machines 2. Investing and storing the goods 3. Shortages (not having inventory available when needed)

Ordering Costs

A fixed ordering cost can be associated with each replenishment when parts are ordered from suppliers

Setup Costs

Identifying the need to order Execute the order Prepare the paperwork Place the order Delivery cost fixed component Receiving inspection Transportation to place of use Storage

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

Inventory Carrying Costs

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

Shortage Costs

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 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

Inventory Control 1. Perpetual inventory 2. Vendor-managed inventory Just-in-Time Systems Improving profits and return on investment by minimizing costs and eliminating waste through cutting inventory on hand. Materials Requirement Planning Computer-based production planning system by which a firm can ensure that it has the correct materials for production.

Information Flow for Various Production Systems

Order Entry

Raw Material

a. Materials Requirements Planning (MRP)

Raw Material
b. Just-In-Time (KANBAN)
Material Flow Information Flow

Processor

Infinite Capacity Inventory Buffer

Finite Capacity Inventory Buffer

Information Flow for Various Production Systems

Limit on Total Inventory

Raw Material

c. Constant Work-In-Process (CONWIP)

Raw Material d. Hybrid CONWIP-KANBAN

Processor

Material Flow

Infinite Capacity Inventory Buffer

Finite Capacity Inventory Buffer

Information Flow

Material Requirement Planning

Objective: Determine all purchase and production components needed to satisfy the aggregate/disaggregate plan. Issues: Bill of Materials: Determines components, quantities and lead times. Inventory Management: Must be coordinated with inventory.

Sequencing and Scheduling

Objective: develop a plan to guide the release of work into the system and coordination with needed resources (e.g., machines, staffing, materials). Methods: Sequencing: Gives order of releases but not times. Scheduling: Gives detailed release times.

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.

Kanban control ensures that parts are not made except in response to a demand.

CONWIP Control
CONWIP stands for Constant Work-In-Process. 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.

Like KANBAN, the CONWIP system only responds to actual demands, so it is still a ``pull'' type system.

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.
CONWIP control. Movement of parts shown in blue, circulation of release authorizations in green.

JIT/Lean Production
Just-in-time (JIT): A highly coordinated processing system in which goods move through the system, and services are performed, just as they are needed, JIT lean production JIT pull (demand) system

Goal of JIT
The ultimate goal of JIT is a balanced system. Achieves a smooth, rapid flow of materials through the system

Big vs. Little JIT

Big JIT broad focus
Vendor relations Human relations Technology management Materials and inventory management

Little JIT narrow focus

Scheduling materials Scheduling services of production

Original Equipment Manufacturer

Just in time vs Old techniques

The most famous stock Management System called Just in Time, where the company tries not to hold stocks but to minimize them.
The main role about the issue of distribution played by intermediaries, who are the link between manufacturer and consumer. Basically the company has to store only what needed. The Japanese say that the warehouse fits those products we do not need and those who look into their warehouse in home theyll find out too many useless items. In the Inventory Management system belongs the system is the Just in Time and the system of Just in Case.

Summary JIT Goals and Building Blocks

Ultimate Goal

A balanced rapid flow

Supporting Goals

Eliminate disruptions Make the system flexible Eliminate waste

Product Design

Process Design

Personnel Elements

Manufacturing Planning

Building Blocks

Dispatching & Follow-up

Dispatching
Manager instructs each department on what work to do and the time allowed for its completion.

Follow-Up Employees and their supervisors spot problems in the production process and determine needed changes.

The control of the production of wealth is the control of human life itself. Hilaire Belloc