Logistics- Supply

chain
Dr. LE THI DIEM CHAU
Industrial Systems Engineering Department
Mechanical Engineering Faculty
Ho Chi Minh City University of Technology (HCMUT)–
VNUHCM
 CHAPTER 8.
PRODUCING GOODS AND SERVICES

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 Learning Objective
• Discuss the strategic value-adding role operations plays in the supply chain

• Explain the concept of a transformation process and its application to goods and services

• Appreciate the tradeoffs and challenges involved in production operations

• Understand the primary production strategies and types of planning.

• Discuss the primary assembly processes and production methods for goods creation.

• Describe the various production process layouts.

• Explain the role of productivity and quality metrics for improving operations performance

• Know how information technology supports efficient production of goods and services

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Production operation
“is a function or system that transforms inputs (e.g., materials and labor)
into outputs of greater value (e.g., products or services)”

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Role of Production Operations in Supply Chain Management
(SCM)
Logistics Production
Warehouse Assembling
.. Optimization of Optimization of ..
. warehouse- driven production in .
material and assembly line
informational flow

Supply chain management

• demand planning
• supply coordination
• inventory
management
• supply monitoring
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Process in production operations

• A job shop process:

 A Midwestern hospital medical

team performs a diagnostic
procedure involving a cardiac
catheterization

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Process in production operations

• A batch process:

 Menu items are prepared in

batches, in the kitchen of the
Spago Restaurant in the Forum
at Caesar’s Palace, Las Vegas,
Nevada

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Process in production operations

• A repetitive process:

 Vans on an assembly line with

parts added in a sequential order

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Process in production operations

• A continuous process:

 An oil refinery performs a

continuous process, mixing and
separating crude oil into gas,
fuel oil, chemicals, and many
other products

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Process in production operations

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Process choice affects numerous activities/functions

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 Production Process Functionality
Make-to-stock Make-to-order
Anticipated Sale of Actual sale Delivery of
demand of Production finished Production customized
product product order product
• Engineer-to-Order (ETO):
 department stores and supermarkets  custom homebuilding, home remodeling, and for
 e-commerce products made in job shops
• Make-to-Order (MTO):
 aircraft manufacturers such as Boeing
• Assemble-to-Order (ATO):
 computer manufacturers such as Dell

 Order fulfillment: The processes involved in responding to customer orders

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Comparison of Make-to-order (MTO) options

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Production Process Functionality

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Production Strategies

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Lean philosophy

 Largely based on the Toyota production system (TPS), which seeks to develop
and redesign production processes to remove overburden (muri), smooth
production (mura), and eliminate waste (muda)

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TPS seven deadly Wastes

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 Production Planning Long-range
plans
(a year or
Materials more)
Capacity planning
planning

• Determines optimal • Focuses on Medium-range

production levels a balancing of plans
company can achieve future supply (6 to 18 months)

• Capacity refers to the and demand

maximum work an
Short-range plans
organization can complete
(a few days to a few weeks)
within a timeframe

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Production
Planning

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Capacity Planning
 The goal of capacity planning is to minimize a discrepancy between capacity and
demands

18 pages per minute 200 pages per minute

System capacity????
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Capacity Planning
Nút thắt cổ chai (Bottleneck)

Công đoạn 1 Công đoạn 2 Công đoạn 3

20/giờ 10/giờ 15/giờ 10/giờ

Mức sản lượng (output rate) cực

đại giới hạn bởi nút thắt cổ chai
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Capacity Planning

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 Capacity Planning
 According to Vollmann et al. (1997), there are five levels of capacity planning:
1. Resource Planning:
2. Rough-Cut Capacity Planning
(RCCP):
3. Capacity Requirement Planning
(CRP):
4. Finite Loading:
5. Input–Output Analysis:
Resource planning takes the production plan as input, converting periodic
resource needs into aggregate requirements such as labor hours, machine
hours, floor space, etc.
Uses the MPS as input to determine total resource requirements over a
specified period
CRP provides more detailed requirement of resources based on MRP and
thus this is not a long-term planning activity.
Finite loading is a shop-floor scheduling technique that distributes work
orders among available machines based on detailed MRP principles
Input–Output analysis observes the actual execution and compares and
checks to see whether the actual consumption of capacity is matching
with the planned one
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Capacity planning

 Methods of rough-cut capacity plan (RCCP)-Bản lập kế hoạch

công suất thô/sơ bộ:
• Capacity planning using overall planning factors (CPOF)

• Capacity bills

• Resource profiles

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 Rough-cut capacity plan: CPOF
Input: Output:
 MPS data CPOF  total resource
 The rate of the resource requirements
spending in respect of the
resource under consideration

Advantages: Disadvantages:
 Simple calculations  only applicable to cases where the historical
 Easy-to-understand method percentages are assumed to be constant this
 Input requirement is very small method is not applicable in most practical situations

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 Rough-cut capacity plan: CPOF (Example)
Table 11.1 shows the MPS quantities over a period of 10 weeks for three products P1, P2,
and P3. The labor hour rates, that is, the labor hours required per unit of the three products
are 0.2 hour, 0.6 hour, and 0.4 hour, respectively. Allocate the total labor hours in each
week to the 4 work centers WC1, WC2, WC3, and WC4 that receive 30%, 40%, 20% and
10% of the total labor hours

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 Rough-cut capacity plan: Capacity Bills

Input: Output:
 MPS data  total resource
 rate of the resource spending in
Capacity requirements
respect of the resource under bills
consideration such as labor
hours required, routing data,
and Bill of Material (BOM)

this method demand more input data compared to the previous method

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Rough-cut capacity plan: Capacity Bills
(Example)
Table 11.4 shows the MPS for three products P1, P2, and P3, each of whose BOM is
shown in Figure 11.2. The routing data are provided in Table 11.5. The labor hour
rates, that is, the labor hours required per unit of the three products are 11.3 hours, 4.8
hours, and 6.6 hours, respectively. Allocate the total labor hours in each week to the 4
work centers WC1, WC2, WC3, and WC4

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Rough-cut capacity plan: Capacity Bills
(Example)

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Rough-cut capacity plan: Capacity Bills
(Example)

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 Rough-cut capacity plan: Resource Profiles

Input:
Output:
 MPS data
 total resource
 rate of the resource spending in Resource requirements
respect of the resource under
consideration such as labor Profiles
hours required, routing data,
and Bill of Material (BOM)
 production lead time data

this method demand more input data compared to the previous method

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Rough-cut capacity plan: Resource Profiles
(Example)

The additional input requirements for the Resource Profile procedure is production
lead time data. The uses of BOM and routing data are also required for this
procedure. Based on the data in Example 11.2 and the additional lead time data (as
shown in Table 11.9), the operations setback chart can be prepared as shown in
Figure 11.3. The operation setback charts are drawn based on the BOMs of Figure
11.2.

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Rough-cut capacity plan: Resource Profiles
(Example)

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Rough-cut capacity plan: Resource Profiles
(Example)
Based on Figure 11.3, the resource profiles by work centers are provided in Table
11.10 through Table 11.12 for products P1, P2, and P3, respectively.

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Rough-cut capacity plan: Resource Profiles
(Example)
Based on Figure 11.3, the resource profiles by work centers are provided in Table
11.10 through Table 11.12 for products P1, P2, and P3, respectively.

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 Capacity Requirements Planning (CRP)

Input: Output:
 MRP data (lead times, the usual  More detailed
lot size data, the BOM, routing
data, and time standards)
CRP requirement of
resources
 MPS data
 finished product and the work-
in-process goods

Disadvantage: substantial cost may be incurred due to maintenance of database for

keeping and managing the required data
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Capacity Requirements Planning (CRP):
Example
 Let us consider an MRP record as shown in Table 11.13 that is the planned order
release from week 2 up to week 11

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Capacity Requirements Planning (CRP):
Example
 If the lead time for the product is taken to be 1 time unit, then if the order is
released today then it will be received tomorrow  an order released in week 2
will be received in week 3.
 Thus, the order released in week 11 will be received in week 12.
 Thus, the CRP records will have to be shown from week 3 up to week 12
 Suppose, the setup time of a lot is assumed to be 1 hour and the per-unit labor is
assumed to be 0.6 hour.

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