Week 1

MANUFACTURING SYSTEMS (0303-766) Week #1
Manufacturing Systems
Andres L. Carrano, Ph.D. Kate Gleason College of Engineering Rochester Institute of Technology
Fords Rouge River Plant (model for Toyota City in Japan)
$
COMMITTED COST ($)
CUSTOMER PRODUCT DEVELOPMENT FABRICATION & ASSEMBLY
DESIGN
PROTOTYPING
END OF LIFE
ACTUAL COST ($)
Time
Copyright 2003, 2008 RIT Dr. Andres L. Carrano 1
What do customers care about?

Environmentally Friendly
Price/Cost
Quality
CUSTOMER
Responsiveness
Customer Service
Features
A Historical Perspective on Manufacturing The automobile Industry

The Industry of industries (Peter Drucker, 1946)
The worlds largest manufacturing activity 50 million new vehicles produced every year 1-out of-7 people is employed (directly or indirectly) by this industry Governments looked to this industry as a major opportunity for national economic development, international trade and foreign direct investment
Automobile is the second largest expenditure item for households after housing It has been at the forefront of thinking about how things are made and how they work
A Historical Perspective on Manufacturing

Stone Age (20,000 B.C. 10,000 B.C.)
In the most general sense, manufacturing is central to existence and survival Many of the breakthrough (Technological ages) and spurts fueled by climate, famine or wars.
Tools for hunting Implements for cooking
Bronze Age (5000 B.C. to 3000 B.C.)

Accidental discovery of copper ore and tin ore More durable weapons 5000 B.C. bronze drinking vessels (Korea)
Iron Age (1,200 B.C. 500 A.D.)

Early arts, crafts and skills (Romans, Greeks) Lost-wax process by Egyptians Iron smelting furnaces Crude turning (the word lathe has romantic roots) Religion influence skills of foundrymen
Relevant Milestones in Mfg. Systems
INDUSTRIAL REVOLUTION (1770-1820)
HORSELESS CARRIAGE TAYLORISM Etienne Lenoir, Paris Frederick Taylor (1860) (1911)
GM STRUCTURE Alfred Sloan (1920)
TOYOTA PRODUCTION SYSTEM Taichi Ohno (1960-1970)
UNIFORMITY SYSTEM Interchangeability Eli Whitney (1798-1813)
MOVING ASSEMBLY LINE MTM Henry Ford Frank and Lillian Gilbreth (1910) (1900-1920)
IMVP @ MIT (1985-1990)
LEAN MFG Womack and Jones (1990)

Industrial Revolution (1770 - 1820) A combination of technological, economical and political factors (Industrialization) Economic base for improvement of British living conditions and later in France, Germany and U.S. Steam Engine (Newcomen, 1712) Improved Steam Engine (Watt, 1769) Massive increase in productivity Transition from cottage industry to Factories System of large-scale machine production U.S. Survey in 1932: only 36 factories with 250 or more workers (31 textiles) Pollution

Transformations of manufacturing systems in the 20th century
Buying a car in 1894..

Commissioned to Panhard and Levassor (worlds leading car company) in Paris Customer had to travel to Paris Mr. Panhard was in charge of talking to customers and obtaining the exact specifications No standard gaging systems and machines back then could not cut hardened steel. Skilled fitters took the first two parts and filed them together until they fit. Then they filed a third part and so on with hundreds of pieces (Dimensional creep) When all parts were assembled, the vehicle differed significantly from blueprints P&L did not try to produce identical cars, instead it tailored them You could order special bodies built by a Paris coachbuilder British customers could order the transmission, brake and engine control to be transferred to the righ (just a matter of reversing the linkages) The customer would make many trips accompanied by a mechanic to test the car extensively The car was delivered in 1895 in London to the customer (Evelyn Henry Ellis of the English Parliament) and became the first automobile in London
Characteristics of Craft Production

Workforce was extremely skilled in design, machine operations and fitting Organizations were extremely decentralized (although within the same city). Parts came from small shops that were coordinated by an owner Use of general-purpose machines tools to perform drilling, grinding, etc. Very low production volume (1,000 or fewer) out of which only 50 were similar (not alike) Usually requires high prices for survival Production costs are high and do not drop with volume
Craft Production Today

Aston Martin (England) Approximately 10,000 cars in the last 65 years Over 75% of the Aston Martins ever built are still on the road Throughout the 1990s, it produced 1 automobile/day Actual cycle time is 6 weeks (www.astonmartin.com)
So where has been the constraint for craft production? Why did Aston Martin had to ally with Ford in 1980s?
Characteristics of Mass Production

Complete interchangeability of standardized parts Ease of assembly (thus less skilled fitters) Standard product design that allows for economies of scale; coupled with large buffers of inventory to prevent any interruptions in production Specialized and narrowly defined tasks
Mass production techniques allowed for reduction of cycle time at Fords Highland Park Plant from 524 min (8.6 Hrs) in 1908 To 1.19 min in 1913
So, how did we transition from craft to mass?

Henry Ford Crazy Henry Importance of speed Assembly lines Mass production Coined the terms Flow Production (1914) and Mass Production or Fordism (1926) The thing is to keep everything in motion and take the work to the man and not the man to the work (Ford, 1926)
More on Mass Production

Basic assumption: the cost per unit falls dramatically as production volume increases Relied more on interchangeability and ease of assembly rather than the continuous assembly line Some actions taken:
Working to gauge Delivering the parts to the workstation
Achievements
12.5 hrs (1913) down to 1.5 hrs (1924) of assembly (Ford T) Prices: $440 (1913), $360 (1916), $290 (1920) Market share: 10% (1908) to 50% (1914)
Japanese Manufacturing Techniques (1950-2000) Pacific Rim countries catch up Quality philosophies and techniques Toyota Production System (TPS)
Describing Production Line Behavior
Kate Gleason College of Engineering Rochester Institute of Technology
Confusion about Objectives

Maximize capacity? Minimize capacity variability? Maximize capacity utilization? Minimize lead time? Minimize lead time variability? Maximize profit? Systemic issues are often studied last, if at all
Goal of a Firm
The goal of a manufacturing firm is to make money
To increase the well-being of the stakeholders (stock holders employees, customers) over the long term
To make a good return on investment (ROI) over the long term
Goal of a Firm
ROI is computed from three financial quantities ROI = Profit / Assets Profit = Revenue Cost
Where the plant-level equivalent of these quantities are: Throughput Inventory Operational expense
Goal of a Manufacturing Firm
The goal of a manufacturing firm is to make money
Increasing throughput Reducing inventory Reducing operational expense
Why Assess Line Performance?

Need for benchmarking manufacturing performance
Current state of the system Directions and areas of improvement
Metrics in manufacturing? Use of metrics? Ideally, it would be desirable to compare actual performance against what is theoretically possible for such facility
Definitions
Workstation Parts End item Consumable Routing Order Job Service level Utilization
(Chapter 7, section 7.2.1)
Throughput Raw material inventory Crib Finished goods inventory Work in process Inventory turns Cycle time Lead time Fill rate
Definitions
Jobs: Set of physical materials that traverse along a routing. Although every job is triggered by actual customer orders or anticipation of customer orders (forecasts), frequently, there is not a one-to-one correspondence between jobs and orders
Manufacturing efficiencies: batch considerations Jobs are measured in terms of individual parts (with unique part numbers) and not the collection of parts that make up an assembly required to satisfy the customer.
Definitions
Throughput rate (TH): the average output of a production process (machine, workstation, line, plant) per unit time, e.g. parts per hour. At the firm level, this is defined as production per unit time that is effectively sold However, at the floor level, control generally relates to what is made rather to what is sold.
Definitions
Capacity: it is the upper limit for throughput in a production process. In most cases, releasing work into the system at or above capacity causes the system to become very unstable (i.e. WIP build up without bound) Raw Material Inventory Crib and Finished Goods Inventory (FGI) Work in Process (WIP): it is the product between the start and end points of a product routing. Since routings begin and end at stock points, WIP is all the product in between but not including the extreme stock points
Inventory Theory and Management

Objective is not simply to reduce inventories, but to seek that the purpose of inventories is met with minimal dollar investment. So, what is the purpose of inventory?

Introduction of mathematics as a management tool Inventory models among the oldest in the operations management field (Harris 1913) Inventory plays key role in logistic behavior in most manufacturing systems Classic models are central to modern techniques such as MRP, JIT, and synchronous mfg.

This is what the theory tries to determine
1.
When should an order be placed? How much should be ordered?
2.
Categories of Inventory
Raw Materials
Components, subassemblies, or materials that are purchased outside the plant
Work in Process (WIP)

Includes all unfinished parts or products that have been released to a production line.
Finished Goods
Finished product that has not been sold
Spare Parts
Component used to repair or maintain production equipment.
Reasons for Holding Inventory / Batch Sizing

RAW MATERIALS (desirable: just in time delivery from suppliers) Batching
Quantity discount from suppliers (+) Economies of scale in deliveries (+) Built-in safety lead time Capacity of the plant (-) Limited tracking Limited storage
Variability
Safety stock
Obsolescence

FINISHED GOODS Customer responsiveness
To provide delivery lead times that are shorter than manufacturing cycle times (make-to-stock versus make-toorder)
Batch production
Sometimes production occurs in pre-specified batches that do not necessarily match the customer orders
Forecast errors Production variability

Variability in production quantity and timing may result in overproduction (yield loss compensation)
Seasonality
Built-ahead inventory to meet demand

SPARE PARTS The main objective of any spare parts system is to support maintenance and repair process. Service
Higher level of service usually requires high level of spare parts in inventory
Purchasing /production leadtimes

In general, the longer the leadtime to obtain a part, the more stock we will have to carry
Batch replenishments
Economies of scale (quantity discount or large fixed costs to produce a part)

WIP will usually be in one of these states Queuing
Waiting for a resource (machine, person, transport, etc)
Processing
Being worked by a resource
Waiting for a batch

Waiting for other jobs to form a batch (e.g. when bulk processing (heat treatment) or handling (a full pallet)
Moving
Being transported between resources
Waiting to match
Waiting for counterparts in assembly

WIP BREAKDOWN
Queuing (40%) Waiting to Batch (30%) Waiting to Match (15%) Processing (10%) Moving (5%)
The causes for queue are high utilization and high variability (both process and flow variability) Wait-to-batch is caused by batching for process or transport (the larger the batch the larger the WIP) Wait-to-match is caused by the lack of synchronization in arrival of parts in assembly
Sources: Wallace and Hopp, 1995 and Bradt 1983
WIP Management / Reduction

JIT and some Japanese Manufacturing Techniques strive for zero inventory Theoretically, this means zero throughput Critical WIP
It is the smallest WIP level required by a line to achieve full throughput under the best conditions
In reality, WIP frequently exceeds the critical amount by 20 or 30 times
Relevant Costs
Holding or Carrying cost
Proportional to the physical amount of inventory
Ordering and setup cost

Fixed. Independent of the size of the order. e.g production setup resources, paperwork
Unit purchasing costs

Variable. Depends on the size of the order. e.g. materials cost, handling, shipping
Stockout (penalty) costs

Includes delay costs, loss of profit and loss of good will from the customer
Relevant Costs
Holding or Carrying cost Cost of capital Taxes and insurance Cost of storage Breakage, spoilage, and theft TOTAL INTEREST CHARGE 28% 2% 6% 1% 37%
EOQ: Notation
The EOQ Model

Assumptions
Instantaneous production Immediate delivery Demand is deterministic and constant No stockouts allowed No interactions between products Production runs incur in a fixed setup
EOQ: Notation
D: p: K: h: Q: demand rate (units/year) unit cost (dollars/unit) fixed setup cost - produce / purchase (dollars) holding cost (dollars/unit/year) h=ip (interest on money tied up) lot size
Annual Annual Annual TC (Q) = Setup + Purchase + Holding Cost Cost Cost
The EOQ Model
EOQ: Notation
Fundamental Trade-Offs
Basic trade-off
Large lots reduce setup costs by requiring less frequent changeovers Small lots tie up less capital related to wages, materials, and overhead Smaller lots reduce inventory by bringing in product closer to the time of use
Smaller lots smooth flow out and brings product closer to the customer (competitive advantage)
Insights from Inventory Theory

There exists a trade-off between setups and inventory
This is the replenishment frequency. The more frequently we replenish inventory, the less cycle stock we will carry
There exists a trade-off between customer service and inventory

Under conditions of random demand, higher customer service levels (i.e fill rates) require higher levels of safety stock
There exists a trade-off between variability and inventory

For a fixed replenishment frequency and fixed (high) customer service; the higher the variability the more inventory we must carry
Lot Size And Inventory Level

Trade-off
F: the average number of lots per year I: total inventory investment
F=
D Q
I = p
Q pD = 2 2F
More Definitions
Definitions
Manufacturing Cycle Time (CT): it is the average time elapsed from the release of a job at the beginning of the routing until it reaches an inventory point at the end of the routing. Also called average cycle time, flow time, throughput time, and sojourn time. This denotes the time spent as WIP Cycle times are random This narrow definition only for individual routings Different for assemblies with multiple routings Cycle Time has different meaning in assembly lines
Definitions
Cycle Time (CT):
Cycle Time = (move time) + (queue time) + (setup time) + (process time) + (wait-to-batch time) + (wait-in-batch time) + (wait-to-match time)
Definitions
Definitions
Lead Times, Service Levels and Fill Rates Lead time for a given routing or line is the time allotted for production of a part in a routing or line. Lead times are a management constant (e.g. time phasing in MRP) Service Level = P{ cycle time lead time } Make-to-order environment (due dates) Service Rates Make-to-stock environment (buffers from where customers obtain parts with no delay Fill Rates
Definitions
Definitions
Usually:
VA < CT < LT
Definitions
Utilization: it is the fraction of time not idle because of lack of parts. This fraction includes time spent on
Working on parts Downtime (parts waiting but unable to work) Setup Other detractors ArrivalRat e
Utilizatio n =
Effective production Rate
Where the effective production rate is defined as the maximum average rate at which the workstations can produce parts considering all detractors over the period of interest More traditionally, at a plant level utilization is defined as U=Q/PC where Q is the actual quantity produced and PC the capacity
Definitions
TAKT time: it is a way to determine the required pace for production. Uses sales rate to pace production.
Takt Time =
Example Daily work time 8 hours 480 min - 60 min (breaks) 420 min
Daily (available ) Work Time Daily required quantity (demand )
Daily required quantity 35,000 parts 20 days . 1750 parts/day
TAKT Time 420 min 1750 parts . 0.24 min/part
DESCRIPTORS OF MANUFACTURING SYSTEMS
Descriptors
Bottleneck Rate (rb) Raw process time (To) Critical WIP (Wo)
Descriptors
Bottleneck rate (rb): measured in part or jobs per unit time. It is the rate of the workstation having the highest long term utilization
Utilization = ArrivalRate Effective production Rate
In a single routing line with no yield loss that is visited only once, the arrival rate for all workstations is the same The bottleneck will be the station with the least long term capacity In lines with more complicated routings or yield loss, the bottleneck may not be the slowest station
Descriptors
Raw process time (To): It is the time that it takes a single job to traverse the empty line (so it does not have to wait behind other jobs) Technically, it is defined as the sum of the long term average process times of each workstation in the line When calculating the average times, it is only necessary to include those random and planned outages that are relevant to the planning horizon in question.
Descriptors
Critical WIP (Wo): it is the WIP level for which a line (with given values of rb and To and no variability) achieves maximum throughput and minimum cycle time Maximum throughput = rb Minimum cycle time = To
W0 = rb T0
Penny Fab One

WK # 1 Punching WK # 2 Stamping WK # 3 Rimming WK # 4 Deburring
2 hours
2 hours
2 hours
2 hours
Assumptions Line is perfectly balanced (process time = 2 hr for all) All product made is sold (no market constraint) Therefore more throughput is better No breakdowns and downtime One machine per workstation
rb = ? To = ? Wo = rb x To = ?
Penny Fab One Observations

WIP = __pennies is the wip level that causes the line to achieve throughput rb = ___penny/hour and cycle time To = __hour This is always the case for balanced lines because having one job per machine is enough to keep all machines busy all the time Not true for unbalanced lines
Penny Fab Two

Where is the bottleneck?
2 hr 5 hr Assumptions Line is not balanced Multiple machine per station Parallel servers Same assumptions as before (each) 3 hr (each)
10 hr (each)
Process time for each machine is shown
Penny Fab Two

WK # 1 Punching WK # 2 Stamping WK # 3 Rimming WK # 4 Deburring
Station number 1 2 3 4
No. of machines 1 2 6 2
Process Time (Hr) 2 5 10 3
Station Capacity ? ? ? ?
Penny Fab Two Observations

Notice that the bottleneck is neither the station that contains the slowest machine (# __) nor the one with the fewest machines (#__) Since bottleneck is Wk # __, then rb = ___penny per hour Since adding a machine does not decrease To To = ___hours
Penny Fab Two Observations

Wo = rb x To = ____pennies
WIP = __ pennies is the wip level that causes the line to achieve throughput rb = ___ penny/hour and cycle time To = ___hour The critical WIP level ___ is less than the number of machines (11) as opposed to Penny Fab One. Why?
RELATIONSHIPS BETWEEN WIP THROUGHPUT AND CYCLE TIME
A Manufacturing Law
Little's Law: The fundamental relation between WIP,
CT, and TH over the long-term is:
WIP = TH x CT
parts =
parts hr hr
Summary
Contrary to popular belief, zero inventory is not a realistic goal More realistic: Critical WIP Although example was deterministic, few companies run low WIP levels:
WIP-to-machine ratio = 20:1 (Bradt 1983)
Due to mathematical relationship, it is possible to achieve the same TH with large WIP and long CT. Bracket performance with worse case.

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MANUFACTURING SYSTEMS (0303-766) Week #1

CUSTOMER PRODUCT DEVELOPMENT FABRICATION & ASSEMBLY

ACTUAL COST ($)

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 1

MANUFACTURING SYSTEMS (0303-766) Week #1

What do customers care about?

A Historical Perspective on Manufacturing The automobile Industry

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 2

MANUFACTURING SYSTEMS (0303-766) Week #1

A Historical Perspective on Manufacturing

Tools for hunting Implements for cooking

Bronze Age (5000 B.C. to 3000 B.C.)

Iron Age (1,200 B.C. 500 A.D.)

Relevant Milestones in Mfg. Systems

INDUSTRIAL REVOLUTION (1770-1820)

GM STRUCTURE Alfred Sloan (1920)

TOYOTA PRODUCTION SYSTEM Taichi Ohno (1960-1970)

UNIFORMITY SYSTEM Interchangeability Eli Whitney (1798-1813)

IMVP @ MIT (1985-1990)

LEAN MFG Womack and Jones (1990)

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 3

MANUFACTURING SYSTEMS (0303-766) Week #1

A Historical Perspective on Manufacturing

A Historical Perspective on Manufacturing

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 4

MANUFACTURING SYSTEMS (0303-766) Week #1

Buying a car in 1894..

Characteristics of Craft Production

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 5

MANUFACTURING SYSTEMS (0303-766) Week #1

Craft Production Today

Characteristics of Mass Production

So, how did we transition from craft to mass?

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 6

MANUFACTURING SYSTEMS (0303-766) Week #1

A Historical Perspective on Manufacturing

More on Mass Production

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 7

MANUFACTURING SYSTEMS (0303-766) Week #1

A Historical Perspective on Manufacturing

Describing Production Line Behavior

Kate Gleason College of Engineering Rochester Institute of Technology

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 8

MANUFACTURING SYSTEMS (0303-766) Week #1

Confusion about Objectives

To make a good return on investment (ROI) over the long term

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 9

MANUFACTURING SYSTEMS (0303-766) Week #1

Goal of a Manufacturing Firm

The goal of a manufacturing firm is to make money

Increasing throughput Reducing inventory Reducing operational expense

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 10

MANUFACTURING SYSTEMS (0303-766) Week #1

Why Assess Line Performance?

(Chapter 7, section 7.2.1)

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 11

MANUFACTURING SYSTEMS (0303-766) Week #1

Copyright 2003, 2008 RIT Dr. Andres L. Carrano 12