Fuck Tenta Flashcards
Draw the relationship of manufacturing planning and control
The picture with all the boxes
In what stage of manufacturing planning and control is forecasting present?
All stages except the last
What step in manufacturing planning and control is part of Sales and Operations planning?
Production planning & resource planning
What step in manufacturing planning and control is part of Master production scheduling?
Master production scheduling & rough cut capacity planning
What step in manufacturing planning and control is part of Order planning?
Material planning and capacity requirements planning
What does S&OP stand for?
Sales and operations planning
What types of production flow types are there?
- V Type
- A
- T
- X
- I
How’s the relation between volume and variety and the different production layouts?
From fixed layout to Line layout, the standard image.
What is fixed position?
Airplanes
What is line layout?
Volvo
What is cell layout?
Operators goes in a loop and do certain procedures on every product. Look at figure.
What is functional layout?
Functional layout groups the machine based on type.
What are commonly used means of transport for material feeding?
- Forklifts
- Conveyors
- Tuggers and trains of tow carts
- Automated Guided Vehicles (AGVs)
Draw figure for difference between direct flow and flow via picking area for material flow in supply process?
One lite picking station in between storage and assembly station.
Give example of characteristics in regards to the context of the manufacturing company that can influence the production logistics?
It needs to be fit between the context that exists within and around the manufacturing company and the approaches used in the production logisitcs.
Eg.
- Market characteristics (required lead time, variations in demand)
- Supplier characteristics ( distance to suppliers, degree of cooperation)
- Products characteristics (complexity, degree of customization)
- Manufacturing strategy
Draw the manufacturing strategy matrix
See figure in introduction slide
What is the relationship between planning horizon and level of detail and where are the stages?
Higher level of detail the closer the planning horizon is.
Longest planning horizon & low level of detail
1. S&OP
2. Master production scheduling
3. Order planning
4. Execution and control
Shortest planning horizon and high level of detail
What is the relationship between planning horizon and level of detail and where are the stages?
Higher level of detail the closer the planning horizon is.
Longest planning horizon & low level of detail
1. S&OP
2. Master production scheduling
3. Order planning
4. Execution and control
Shortest planning horizon and high level of detail
What is the aim of S&OP and in what planning object, horizon and frequency?
Achieve a good balance between demand and supply and coordinate goals and plans in different units.
Planning object: Product group/Product
Horizon: 1-2 years
Frequency: Quarterly/monthly
What is the aim of Master Production Schedule and in what planning object, horizon and frequency?
Achieve a good balance between demand and supply and give info to sales function about what can be promised to customer.
Planning object: Product
Horizon: 0.5-1 years
Frequency: Monthly/weekly
What is the aim of Order planning and in what planning object, horizon and frequency?
Establish quantities and point in time for the orders - initiating material flows and satisfying existing requirements.
Planning object: Item
Horizon: 1-6 months
Frequency: Weekly/Daily
What is the aim of Execution and control and in what planning object, horizon and frequency?
Release orders to the shop floor - material available check and sequencing of orders
Planning object:Operation
Horizon: 1-4 weeks
Frequency: Daily
What does MPS stand for?
Master Production Schedule
What types of material flows do a manufacturing company deal with?
- Inbound flows of materials from external suppliers:
- Raw materials
- Components
Internal flows:
- Internally manufactured parts and semi-finished items being refined into finished products
Outbound flows of finished products to customers
Give a brief explanation of order planning?
Order planning comprises the administrative activities required to control material flows (inbound, internal, outbound) on an operative level.
Draw rhe re-order point system figure
Basically that you order as soon as your stock level reaches a minimum level (before it’s done on the safety stock) to always make sure that there is enough inventory.
Explain traditional push system in term of execution and control?
- Production plans are used for ordering
- Batch production
- The operators are production according to a dispatch list
- When a job is finished in one machine it is moved (pushed) to the next machine. If the next machine is busy will the batch be put in the queue.
- Priority rules are used to decide the next batch to produce
Explain traditional pull system in term of execution and control?
- Production plans are used, however not for scheduling but for capacity planning
- Small batch sizes
- No dispatch lists
- The start of an operation is initiated by a signal from the following operation
What are the advantages and disadvantages of traditional functional layout?
+ Flexibility - product mix, small volumes
- Many transports
- Difficult to plant and control
- Many planning points
- Hard to overview the flow
- Ques
- Long throughput time
- High WIP
- Splited responsibility, optimizing separate functions
What is the relationship between flow efficiency and resource efficiency?
See figure in Production Flow lecture.
What happens if there is excessive focus on resource efficiency?
- Long throughput times, ex. long waiting times generates new demand
- Handling many flow units at the same time, ex. move patients between full wards
- Many re-starts for each flow unit ex. re-book appointments.
What are the advantages of pull controlled, on-piece continuous flow?
- Builds in quality
- Created real flexibility
- Creates higher productivity (reduce non values added work)
- Frees up floor space
- Improves morale (working environment)
- Reduces cost of inventory
- Improves safety
Give example of product flow types and draw how they look
- Serial product flow
- Semi- parallel product flow
- Parallel product flow
- Combinations at different system level
- Organic product flow
Hoe can the operators work differ in regards to flow?
- Fixed on one work station
- Follow the product along the flow to many work stations
- Follow the product along the whole flow (line)
How can capacity impact throughput and WIP?
A more even capacity can generate better throughput of products and drastically reduce WIP.
Think of game of dice: 1-6 capacity vs. 3-4
How do the production cycle time influence balance loss and handling losses?
With very short cycle times it’s a high percentage of it losses. From around 3-4 minutes and more does cycle time level out and the losses are ‘equal’.
So very short cycles is not as good since a lot of time is than unnecessarily spent on losses.
How does buffers impact system loss?
No buffers result in high system losses. Having 1 buffer drastically reduce system losses and is not depending on the number of work stations.
Buffer 2,3 and 4 only have slight improvements on the system loss compared to the impact the first buffer have.
How does variation and number of work station relate to system losses?
With increasing number of work stations the bigger impact have a large variation.
Give the equation to calculate throughput time
Throughput time = (Flow units in the flow, WIP) x (Cycle time)
Can be used to calculated WIP as well.
How do you calculate takt time?
Takt time = Available working hours / Customer demands, units
Why forecast?
Required delivery lead time to customers shorter than purchasing and production lead time
- It takes time to adjust capacity
- A key input to the S&OP process and other plans
- Relates to the budget
- Input for determining batch size and order quantities
- Input to agreements with suppliers
What can cause demand uncertainty?
- Demand uncertainty can result from the increasing rat of change in the market.
- Can result from behavior in the supply chain, making demand fluctuations increase upstream (bull-whip effect)
What factors influence the forecasting process?
- Forecast data
- The length of the forecast period - eg. week, month year?
- Forecast frequency - how often we redo our forecast?
- Forecast horizon - how many periods ahead we are looking?
- Aggregation level - product, product group?
- Forecast units - pieces, meters, liters, kilogram?
What are common demand patterns and how do they look?
- Random variation
- Trend
- Seasonal variation
Can be combined and random variations are always present
What are the two general forecasting methods?
- Qualitative
- Quantitative
Explain qualitative forecasting
Based on subjective judgement and few formal calculations.
+ Up-to-date knowledge of changes and elements occurring in the environment that affect the forecast
- Short term memory, overconfidence bias (wishful thinking)
Explain quantitative forecasting
Based on calculations (more or less advanced)
+ Objective, consistent, capable of processing large amounts of data
- Only as god as the data upon which they are based. When changes occur in the data that are not incorporated in the model cannot the forecast be accurate.
What are the different qualitative forecast methods?
- Sales management method
- Grass root method
- Pyramid forecasting
Explain sales management approach/method
- Management personnel gather in meetings to forecast demand
- Consideration to sales statistics
- Forecast breakdown into regions
- Quick way to produce forecasts
- Consensus achieves among participating management
- Risk of subjective assessments
- Management deiced - rather than the individuals closet to the market
Explain the grassroots approach
- Initial assessments made by salespeople and other personnel in direct contact with the market.
- The initial forecasts are collected and processed centrally
- A common forecast is created for the whole company
- Forecasts produced by those with the most knowledge of the market
- Responsibility to realize forecast fails upon those who made them
- Forecast breakdown into regions not necessary
- Takes more than the sales management approach
- Risk of subjective assessments
Explain pyramid forecasting
- Both management and grass root participation
- Bottom up - top down
- If the grassroot forecast deviate from the managements forecasts, grassroot forecasts are proportionally adjusted
- The original proportion between e.g. regions or products areas remain
- The total equals management total
- Sales staff not tied to its own forecast
What are the quantitative forecasting methods?
- Moving average
- Exponential smoothing
- Focus forecasting
Explain moving average
It’s a quantitative method of forecasting.
It sum the actual demand of the previous x months and divide by x it for the next month forecast. The next month the previous month actually demand is added and the oldest demand removed, so again the sum of x months and than divided by x.
The number of periods (x) is decisive for how the method will operate. A large values gives a more stable demand since random variations don’t have as big of an impact. However, it reacts slowly to systematic changes in demand.
Explain exponential smoothing
F(t+1) = cD(t) + (1-c)F(t)
Using a smoothing constant, alpha, (c in the equation).
A large constant is responsive to systematic changes in demand while a small constant is stable to random variation.
Explain focus forecasting
If it worked before, it will probably work again. Using simulations for every forecast occasion to find which method have given the most accurate result previously. The best method is chosen to generate the forecast for the next period.
Takes trend and seasonal variation into consideration.
Explain forecast monitoring
Important to supplement forecasting methods with different types of forecast monitoring to avoid surprises.
- Estimate forecast error (i.e difference between the forecast for one period and the actual demand of the same period)
- Check that the forecast remains withing acceptable margins of error (e.g demand monitoring and forecast monitoring)
How can forecasting be used in the automotive industry?
- Is dependent on accurate forecast on product model level.
- This forecast is used as input to tactical planning (S&OP and MPS) but also for generating delivery schedules sent to suppliers.
- Long term forecast is always important as it takes time and consumes resources to increase and decrease manufacturing capacity.
- When demand exceeds supply the company might generate an order backlog with delivery times of several months which may reduce criticality of detailed forecast.
How can forecasting be used in the fashion industry?
- Usually has short product life cycles and needs processes that are responsive to market fluctuations
- Forecast on fabric type levels are used as input to tactical planning of manufacturing resources and supplier booking.
- Forecast on product level is used to make to stock products
How can forecasting be used in the ice cream industry?
- Forecast is used for tactical planning in the same way as automotive manufactures and manufactures of fashion clothes - to plan resources and generate deliver schedules to suppliers.
- A manufactures of ice cream usually have long product life cycles and could rely on historical sales data and quantitative methods for forecasting for tactical planning.
Seasonal demand variations.
- Likely to consider e.g. weather forecast for short term forecasting.
Communication is important for customer orders, why?
All sources of demand must be identified and considered.
- Regular customer demand
- Unexpected/rare sources of demand e.g large spare part order orders
Communication is important for customer orders, why?
All sources of demand must be identified and considered.
- Regular customer demand
- Unexpected/rare sources of demand e.g large spare part order orders
Rapid and straightforward communication with customer in case order status changes.
Explain the order process with Make-to-Stock (MTS)
- Products are manufactures without requiring any customer orders
- Prolonged delivery lead time e.g. in case of shortages in stock or order backlog
- Two types of orders: Traditional orders and call-offs
- Available-to-promise (ATP) basis for providing information about delivery lead time
- Order registration
- Picking and delivery
- Allocations removed and quantities updated
Explain available-to-promise (ATP)
ATP is the quantity of end items tat sales can promise to deliver in specified planning period without affecting other customers delivers. Generally performed by the ERP system.
Calculated in the first period and in periods with scheduled receipts.
. For the first period:
ATP (period 1) = Opening stock on hand + Scheduled receipts during first period –Allocations prior to the next inbound delivery
- For following periods:
ATP = Scheduled receipts during the period – Allocations prior to the next inbound delivery
Explain the order process with Make-to-Delivery-Schedule
Make-to-delivery-schedule: Manufacturing takes place according to a predetermined schedule, in line with an overall agreement.
Call-offs made to initiate delivery.
Explain the order process when make-to-order (MTO)
- Final product unknown, semi-finished products and purchased products unknown o some extent.
- Products must be specified before an order can be prepared.
- Available to promise calculations must consider both access to materials and access to capacity.
What is the definition of S&OP?
“Function of setting the overall level of manufacturing output and other activities to best satisfy the current planned levels of sales, while meeting general businesses objectives of profitability, productivity, competitive customer lead times etc. as expressed in the overall business plan.”
What is the aim of S&OP?
To achieve balance between supply and demand in such a way that a company’s efficiency and competitiveness are promoted.
- Demand: Forecast, Customer order
- Supply: Inventory, production capacity
- To integrating organizational functions in the process and create consensus among one set of goals and plans.
- Actual contracts may be written.
What is the S&OP process?
Input
- forecast
- restrictions
- goals
–> Activities 1-5 –>
Output
- supply vs demand
- plan integration
- marketing sales
- production
- logistics
- purchasing
- finance
What are the inputs to S&OP?
- Market and customer data, to anticipate the future demand.
- A forecast of aggregate demand covering the selected planning horizon (12-24 months)
- The current status of the system in term of workforce level, inventory level, production rate, supplier capabilities etc.
- The options available to adjust capacity
- The options available to adjust demand
What are the outputs from S&OP?
A sales plan, a delivery and a production plan: Decision for each planning period within the planning horizon about issues like:
- workforce and capacity levels
- inventory level, or customer lead-time and order backlog
- production rate
Projected costs and cash flow if the production plan was implemented - i.e an economic evaluation
“One set of numbers”
What is the difference between S&OP and budgeting?
Budgeting is a financial statement. S&OP is a long term plan for sales and production.
The sales and operations plan could be constrained by the budget and may also be an important input to the budgeting process.
What are the S&OP design parameters?
- Planning object: What does production and delivery plan refer to? Product group, product family, etc.
- Capacity unit: On what level do we consider capacity? production plants, workshops, assembly lines?
- Planning horizon
- Frequency
What are the activities in S&OP?
Step 1:
Forecast future demand
Step 2:
Prepare preliminary delivery plan
Step 3:
Prepare preliminary production plan
Step 4:
Adjust delivery plan and production plan
Step 5:
Establish delivery plan and production plan
Explain step 1 in S&OP
STEP 1: Forecast future demand
- Forecast - often from marketing/sales department: expected demand in coming period
- Should be as realistic and accurate as possible
- Does not consider potential capacity restrictions
Explain step 2 in S&OP
STEP 2: Prepare preliminary delivery plan
- Compare previous delivery plan with volumes actually delivered
- Adjustments can be made compared to the forecast
- Plan to deliver less, e.g. to phase out product
- Plan to deliver more by use of e.g. price reductions or marketing campaigns.
Establish goals for finished good inventory or order backlog (Make to Stock vs. Make to Order)
What differate MTS and MTO in a S&OP context?
MTS:
Production plans and delivery plans are balanced with changes to the inventory levels (finished good)
MTO:
Production plans delivery plans are balanced with changed to the order stock
Explain step 3 in S&OP
STEP 3: Prepare preliminary production plan
- Compare previous production plan with volumes actually produced
- Takes the preliminary delivery plan as a post of departure
- Considers the balance between delivered volumes, produced volumes and inventory/backlog
- Considers available capacity and start-up materials
Explain step 4 in S&OP
STEP 4: Adjust delivery plan and production plan
Meeting including representatives from:
- marketing/sales
- operations (i.e purchasing, production, logistics)
- finance
Make adjustments:
- delivery plan
- production plan
- inventory levels/backlog
Explain step 5 in S&OP
STEP 5: Establish delivery plan and production plan
Delivery plan and production plan are put forward to top management
Signifies and agreement within the company:
- Marketing department undertakes to sell agreed volumes
- Production and purchasing undertake to produce agreed volumes
What consideration to capacity should be taken considering S&OP?
Consideration to limited amount of capacity in terms of critical or scarce resources:
- Raw materials and components
- Production resources
- Transportation resources
- Storage space
- Supplier capacity
- …
What are the stages and categories in S&OP maturity?
STAGES
- Stage 1: No S&OP process
- Stage 2: Reactive
- Stage 3: Standard
- Stage 4: Advanced
Categories:
- Meeting & collaboration
- Organisation
- Measurements
- Information technology
- S&OP plan integration
What can lack of S&OP lead to?
- Unstable planning conditions (too much/little material and finished goods inventory, capacity, buffers, flexibility)
- Poor customer service
- Conflicting goals (no cross-functional discussions and agreements)
Give an equation for production volume
Production Volume = Volume delivered + ending inventory - starting inventory
Explain monitoring of S&OP
It’s important to monitor actual results and compare to the sales and operations plan
Act upon deviations:
- E.g if inventory is increasing beyond plan, reduce the production rate
Hire/fire staff to accommodate changes? Or use temporary staff?
- Possible to make quick and drastic changes
- .. or to distribute the changes over time
Explain planning horizon
A long planning horizon is associated with uncertainties. How long horizon is actually needed?
The horizon applied must be “long enough”:
- sufficient for budgeting
- seasonal variations and business outlook
- time to adapt capacity
- accumulated product lead-time
Explain time fences for changes in plans
It takes time to make changes, production plans cannot be changed too much too quickly.
Time fences regulate what changes are allowed with which horizon.
Example:
• Month 1 (coming month): no changes to volume allowed
• Month 2: Maximum 20% change allowed
• Month 3: Maximum 40% change allowed
• Month 4: No limitations on basis of current plan
Explain generally what master production scheduling is
- A plan that defines the specifics goods that specifics shops will produce in definite quantities at definite times over a shorter term horizon compared to S&OP, in accordance with the aggregate plan from S&OP.
- Typically stated in product specification terms (end product numbers)
- The basis for promising delivers to customers.
- ATP
- The master production schedule does not present an executable manufacturing plan, further details are needed
What is the difference between S&OP and MPS?
The primary use of the aggregate production plan from S&OP is to balance the production schedule so that the production costs are minimized, given a certain service level and to ensure capacity is available for this.
However, the output of an aggregate plan does generally not indicate individual products. This means that for more detailed planning, the aggregates plan must be dis-aggregated into individual products. The result of such a dis-aggregation is what is known as the master production schedule.
- Partly the same principle used for S&OP and MPS
- May be treated as one single planning level:
- If no reason to plan at product group level, eg. very few end items
- Required planning horizon not too long
- Stable ordering
- MPS tends to be more of calculation compare to S&OP
- MPS must consider incoming customers orders, or cancellations and sometimes deduct orders from forecast (order consume the forecast)
In which term can MPS be stated?
- End-item products
- Options or modules from which a variety of end products could be assembled
- Number of units of an “average” final product configuration
- Applicable when assemble-to-order
What is the MPS process?
Input
- S&OP
- restrictions
- customer orders
–> Activities 1-5 –>
Output
- MPS
- Delivery plan
- Input to ATP
Explain the MPS activites
Step 1:
Forecast future demand
Step 2:
Generate preliminary delivery plan
Step 3:
Generate preliminary MPS
Step 4:
Adjust delivery plan and MPS
Step 5:
Establish delivery plan and MPS
How do the MPS and S&OP differ?
- MPS basically have the same steps as in S&OP but with a shorter planning horizon and a higher level of detail.
- MPS is less of a process, more calculations.
- Fewer people and departments involved for MPS activities.
What are the MPS design parameters?
- Planning object
- The capacity unit
- Planning horizon
- Frequency
How should the planning horizon be for MPS?
Often desirable to have a planning window including several weeks of production
How is MPS used when it’s MTS?
Generation of the preliminary delivery plan:
- The fusion of forecast and order does not cause a problem
Generation of the preliminary MPS:
- The basis for MPS is the delivery plan and the current and targeted stock levels
Explain MPS in relation to type of production
See figure in lecture S&OP and MPS, slide 52
What can MPS be used for beside customer order?
- There can be other types of demand e.g service parts
- Part of the MPS is to decide upon preferred stock balance in different periods
- If we deice to increase of decrease inventory, we can add an extra row to the sheet.
What is the difference between order and forecast in the context of MPS?
A master production schedule may be based on:
- Forecast (MTS environment)
- Customer orders (MTO with long lead time to customers)
- A combination of forecast and customer orders
How is MPS used when it’s MTO?
Generation of the preliminary delivery plan:
- Forecasts relate to product models whereas customer orders relate to product variants
Generation of the preliminary MPS:
- The basis for MPS is the delivery plan
What impact does a balanced MPS in terms of stability and flexibility have?
- A stable MPS translates into stable component schedules, which means possibility of improved performance in production.
- Too many changes - lower productivity.
- Also true upstream the supply chain.
- To few changes - lower customer service levels or too high stock, lower flexibility
How is time fencing used for MPS?
- There are time fences in MPS too. Time fences correspond to different reactions to request for changes and willingness to accommodate these.
- Recognizes increasing cost of change as we approach current time.
- Different time spans specify:
- The types of changes possible
- The allowed size of a change
- Who approves
What are the different time fences in MPS?
- Release time fence: Time in advanced in which manufacturing orders are released.
- Demand time fence: Normally applied lead time to customers. No order normally received within the demand time fence
- Planning time fence: Distinction between planned orders and firm planned orders
- Forecast time fence: The point in time beyond which order backlog is negligible compared to forecast
Give a general description what order planning is
Order planning comprises the administrative activities required to control these flows (inbound, internal, outbound) on an operative level
What are some basic issue in material planning?1
- For what items must new order be planned?
- How large must the quantity of each item in the order be?
- When must the order for each item be delivered (to stock, to another manufacturing department or directly to a customer)?
- When must the order for each item be placed with the supplier, or when must i be started in internal manufacturing?
What is important to remember when it comes to orders?
customer orders ≠ manufacturing orders ≠ purchasing orders
What is independent demand?
Independent demand is for an item that has no direct relation to any other item.
Item sold as end product or e.g. spare parts
What is dependent demand?
Dependent demand can be traced to the demand for another item.
E.g. components that are to be assembled into an end product
How do independent vs dependent demand influence material planning?
Whether demand is independent or dependent sets different conditions for material planning.
What should be balance in material planning?
A balance between supply and demand.
Supply:
- Current stock on hand
- Expected deliveries
Demand:
- Forecasts
- Allocations
- Exploded requirements (from BOM)
Why is synchronization important in material planning?
If components are delivered too early it will lead to tied up capital. If a component is too late it’s leads to a shortage of stock or could lead to that other component is waiting in stock until assembly can take place.
There could situation where a lack of synchronization is desirable. Say that component A,B,C is assembled to one product and Item C have an earlier replenishment time, than you could order A,B,C simultaneously even if A and B have a later required replenishment time.
What material planning methods are there?
- Re-order point systems
- Run-out time planning
- Periodic ordering systems
- Material requirement planning
- Kanban
What is the difference between continuous and periodic review?
For continuous review are stock levels checked continuously or in practice after each transaction. Quick response.
For periodic review are the stock levels are checked in predetermines predetermined intervals, e.g. once a week.
In which environments are a re-order point system appropriate?
- Independent demand
- Finished goods stock
- Even and predictable demand
- Low value items such as nuts & bold (often even and predictable demand)
- Small order sizes and short lead times
- Access to capacity not a major problem
Explain run-out planning
Run-out time is also called cover time planning. It’s related to re-order point system, but calculated time instead of quantity.
To safeguard against uncertainty and variation in demand during replenishment lead time, safety lead is used.
How is run-out time calculated?
Run-out time: Stock on hand / Demand per period
Rule:
Run out time ≤ replenishment lead time + safety lead time -> order
Explain periodic ordering system
Planned deliveries with fixed interval and varying order quantities, coordination of orders. Need to decide appropriate order quantity.
What calculations have to be done to calculate appropriate order quantity in period ordering?
To do so one uses as target level:
T = D*(R+L) + SS
The ordering quantity is then chosen as the order up to level minus the safety stock:
Q= T-S
Q = order quantity T = target level or “order-up-to level” D = demand per time unit R = Reordering interval L = Lead time SS = safety stock S = stock on hand
What is materials requirements planning (MRP) calculations based on?
- Master production schedule data
- Bill-of-material
- Inventory data
What is pegging?
- Shows the parents creating the demand for components, the quantities needed, and when.
- Uses “where-used” logic to identify current sources of demand.
- May be single-level of full level
In which environments are MRP appropriate to use?
- Dependent demands, e.g raw materials and components
- Independent demand, especially with seasonal variations
- High basic data quality e.g. BOM, stock on hand & lead time
What is constraint-based MRP?
Traditional MRP does not consider capacity. Advanced system support can be utilized to consider capacity constraints: Advanced Planning and Scheduling (APS)
- Sets additional demands for quality of basic data: routing and work center data
- Change of plans if capacity is identified as a constraint
Give some example of ordering costs
- Supplier contact and negotiations
- Transport from supplier
- Goods reception and inspection
- Administration around invoice and payment
- Setup times in production
Give some example of inventory carrying costs
- Capital cost
- Cost of equipment for storage and material handling
- Cost of obsolescence
- Insurance cost
Draw the graph of ordering vs. inventory carrying cost
See lecture Order and materials planning, slide 32.
Draw the matrix of different lot sizing methods
See lecture Order and materials planning, slide 33.
What is lot-for-lot?
The order quantity matches the consumption for each period. Can be used in make -to-order contexts or when ordering costs are low.
Lot sizes can be?
Fixed, same each time or variable where the quantity can differ.
What is estimated order quantity?
Decides a fixed quantity and lets run-out tie vary.
Practical restrictions can make estimated order quantities suitable: e.g. procurement in large packages or restrictions in storage space available.
Based on experience.
What is estimated run-out time?
Similar to estimated order quantity but decided a fixed run-out time and lets order quantities vary.
Based on experience.
What is economic order quantity (EOQ)?
EOQ provides for minimum total cost. Where ordering cost and inventory carrying cost crosses in the graph.
What is the equation for EOQ?
EOQ = sqrt(2DS/I*C)
D = demand per time unit S = ordering cost per ordering occasion I = inventory carrying cost per time unit C = item value per stock unit
How does material flow uncertainties impact inventory accuracy?
Needs to be synchronization between demand and supply.
Supply uncertainties and demand uncertainties influence inventory accuracy.
Supply uncertainties:
- Received quantities
- Arrival time
- Quality/scrap
Demand uncertainties:
- Quantities demand
- When demanded
What can be done to handle supply/demand uncertainties?
Extra stock can be introduced, safety stock:
- For end products to customers
- For components and raw materials for production
With completely predictable supply and demand, without uncertainties, no safety stock is needed.
How is average stock calculated?
Average ~ Safety stock + Order Quantity/2
What is safety stock?
Having larger quantities available than what is expected to be needed
What is safety lead-time?
Deliveries are made earlier than when expected to be needed
How much safety should be done to “combat” uncertainties?
Balancing shortage cost and inventory carrying cost:
- Minimizing the sum of them
What is shortage cost?
Shortage cost:
- Lost revenues
- Penalties to customer
- Cost for back order
- Expediting cost (express deliveries)
Difficult to make correct estimates:
- Lost sale or lost customer?
Solution in practice: use service level determined by policy:
- E.g. 95% service level
- Service levels could be differentiated between different items
What could influence differentiation of safety stock levels and service levels?
- Segmentation
- Criticality of the item
- In terms of e.g. shortage cost in production
- Agreements with customers
- Sales margin
- Value of item
- High-value items tie up more capital in stock
What factors could influence safety stock?
- Variability in demand during lead time
- Uncertainty in stock on hand
- Length of the lead time
- Variability of the lead time
- Frequency of ordering
- Desired customer service/shortage cost
Give an example of a method that could be used to differentiate service level
Activity-based costing, ABC
What methods can be used to determine safety stock?
- Manual estimation (experience)
- Cost optimization
- Balance inventory shortage cost and inventory carrying cost
- Percentage of lead time demand
- Proportion of no shortage during order cycle
- Based on cycle service definition
- Proportion of demand fulfilled directly from stock
- Based on fill rate definition
What is cycle service and fill rate service?
Different measures of service level
Explain cycle service
Is the probability that no shortages occur in an inventory cycle
Service level (%) = 100 x (1 - (No.of inventory cycles with shortage/Total number of inventory cycles)
Explain fill rate service
Is the probability that a customer does not have to wait. The proportion of demand that can be fulfilled directly from stock.
Service level (%) = 100 x (Demand satisfied directly from stock/Total demand)
What types of basic data is there?
- Item data
- BOM data
- Routing data
- Work center data
Give examples of item data
See matrix in lecture Capacity planning slide 5
What is the different types of item numbering?
- Running item number (or non-significant number)
- Significant item number (or informative number). (Based on a logic and relating it to the specific item)
In which areas are routing data used?
- Capacity requirements calculations
- Product costing
- Manufacturing instructions
What is routing data?
Data that tell the specific route need to complete a product in production, could include the operation times.
What is a work centre?
A manufacturing unit that, from a planning perspective is considered an undivable unit. May consist of one or more operators and/or one more machines.
Where is work centre data used?
From a planning perspective, the most important centre data relate to capacity:
- Number of machines or production units
- Number of shifts per day
- Number of hours per shift
- Expected degree of utilization
Give a brief explanation on the components in capacity planning
Capacity requirements and available capacity is balanced with rescheduling requirement and adjusting capacity
How is capacity planning for S&OP?
Long time horizon, extensive possibilities to adapt capacity
How is capacity planning for MPS?
More limited possibilities to know adapt. Often focus on known bottleneck resources.
How is capacity planning for Order planning?
Relatively short time horizon. Small capacity adjustments, e.g. using over-time or reallocation between work centres or departments.
What is the difference between infinite vs finite loading in regard to capacity?
Infinite, no regard for capacity. Can be over and under so long it’s match the overall periods capacity.
Finite capacity, never exceed capacity. Take into account that there is a daily capacity as well as the overall periods.
What is nominal capacity?
Is the available capacity a company is planning to use.
This is a product of:
- Number of units (e.g. machines)
- Number of shifts per day
- Number of hours per shift
- Number of working days per time unit (e.g week)
The theoretical maximum capacity is larger than the nominal capacity.
What is net capacity?
Net capacity = nominal capacity – indirect time losses – capacity losses = utilization rate * nominal capacity
Draw the matrix of different types of planning situations for capacity
See lecture Capacity planning, slide 30
Hoe can capacity be adjusted?
- Reallocating capacity requirements by moving manufacturing orders in time
- Temporarily increasing capacity
What is lead strategy for capacity?
Capacity changes precede demand changed for both increasing and decreasing demand.
Proactive
What is lag strategy for capacity?
Capacity changes follow demand changes for both increasing and decreasing demand.
Reactive
What are strategies for capacity utilization?
- Level strategy
- Chase strategy
What is level strategy for capacity utilization?
Same volumes produced for all periods even if demand changes which leads to a varied inventory.
What is chase strategy for capacity utilization?
Producing the volumes that match the demand.
What are the advantages of level production strategy?
- Smooth, level production avoids labor costs of demand matching.
- Are there “sweet spots” regarding production rate?
- Smooth demand on upstream operations.
What are the disadvantages of level production strategy?
Build-up of inventory
- Can we afford producing “in advance” - cash flow
- Other resources being barriers?
Requires accurate forecast
- Risk of obsolete inventory
What are the advantages of chase production strategy?
Stable inventory
What are the disadvantages of chase production strategy?
- Costs of hiring, training, overtime, extra shifts, etc.
- Costs of layoffs and impact on employees
- Possible unavailability of needed work skills, supplier capacity, etc.
- Maximum capacity needed
What is a combined S&OP plan for production?
A mix between level and chase. Adapt to demand but don’t follow the exact peaks and lows of demand.
What is the objective of resource planning?
- Evaluate the feasibility of the production programme
- Consider resources with long acquisition lead times
Example of resources:
- Plant and facilities
- Raw materials and manufactures components
- Labor
- Human capital
Capacity planning using overall factors suitable here
What are different method to calculated required capacity?
- Capacity planning using overall factors
- Capacity planning using capacity bills
- Capacity requirement planning (CRP)
Give a brief explanation what capacity planning with overall factors
Uses the same unties for expressing capacity requirements as used in the production plan (e.g. unit of finished products). Simple way of planning capacity.
In which environments are capacity planning with overall factors appropriate?
- Simulation capabilities desired (rough but simple)
- Short throughput time
- S&OP and MPS
What are the advantage and disadvantage of capacity planning with overall factors ?
+ Need for little data
+ Simple calculations
- Affected by changes in product mix
- No lead time off-setting
What type of capacity planning is suitable for MPS and RCCP?
Capacity bills
How do MPS and Rough-Cut Capacity Planning relate?
Master Production Scheduling:
- Disaggregates the productionplan into end items
- Creates a statement of futureoutput for specific products
- Often has a weekly review cycle
Rough-Cut Capacity Planning:
- Converts MPS end items intorequirements for key resources
- Compares key resourcerequirements to availablecapacity
- -> Identifies issues with MPS
- Often has a weekly review cycle
What are the advantages of using capacity bills?
+ Relatively simple and easy to understand
+ Link between end item and resources needed
+ Can handle product mix changes
What are the disadvantages of using capacity bills?
- Requires data about product structure and operation times
- Does not consider setup times other than in a general manner –i.e. in practice assuming constant order quantities
- Generally no lead time off-setting
In which environments are capacity planning using capacity bills appropriate?
- S&OP and MPS
- Simulation capabilities desirable
- Short throughput time
- Short set up times
What is capacity requirements planning (CRP)?
- Required capacity is calculated from the starting point of operations associated with released and planned production orders
- Basic data used for each item, e.g. routing, set-up times, operation times
- Capacity requirement are calculated individually from the production of each of the incorporated items separately
- Takes labour reporting into consideration -> updated information on capacity requirments
What are the characteristics of CRP?
- Requires detailed product, inventory, routing and work centre planning data.
- Requires standard items with known planning data.
- Gives very detailed plans (e.g. per hour, for single work stations or machines).
- Separates load from planned and scheduled orders.
- Manages long lead times and varying order sizes.
In which environments are capacity planning using CRP appropriate?
- High capacity planning accuracy desired
- Availability of high quality of basic data
- Order planning and execution and control
What is the aim of a pull system?
The aim of a pull system is to create a smooth flow of materials through a production system that meets the demand, without requiring much inventory and work in process and without too much information.
What is a pull system?
A pull system:
- is a replenishment system.
- in a pull system production and transport are authorized only to replenish materials that have been consumed downstream.
- limits WIP
- is not a zero inventory system
- is not a equal to make-to-order
Push vs pull
It’s not either or, it’s to distinguish degree of pull.
What is kanban?
Kanban is an inventory control system. It sometimes called inventory free production which is not accurate.
- Buffers are still needed but only the smallest quantity to minimize the delivery time to the customer.
Where to use kanban?
Use kanban to control production where it is not possible to extend the continuous flow.
- Processes serving many different products
- Processes with long distance (e.g. suppliers)
- Processes with long lead time (e.g heat treatment)
What are the requirements for an efficient pull system?
- Short set up times
- Flow oriented layout
- Relatively smooth production rate
- Production smoothing/ leveled production
- Not too many product variants
- Stable processes
Give some example of pull systems
- One/two card kanban
- Kanban squares
- Two bin system
- CONWIP
What are different method of collecting kanban cards?
- “Milk run” deliveries
- …
How do you decide the number of kanban cards?
- Calculation (preferably)
- Experience
Write the equation for calculating the number of kanban cards needed
n = (D x L x (1+α) / a)
n = Number of kanbans (cards) D = Demand per time unit L = Lead time a = Number of parts in each box α = Safety factor
Similarities to re-order point system
ROP = D×L + safety stock
How is the number of bins in the two bin system?
The number of kanban card equation + 1 to get the total number of bins in the system.
What are the kanban rules ?
- A work center should withdraw only the items which it requires from proceeding work center in the quantities required and, equally important, at the required time.
‒ A work center or process should only produce those items which have been removed by the following work center or process
‒ Defective or substandard items should never be passed to a following work center
‒ The number of Kanbans should be minimized
‒ The Kanban system is only suitable for dealing with relatively small fluctuations in the demand pattern in the final assembly line
What is kanban squares?
A visual system to see when an item should be ordered.
Explain CONWIP
- CONstant Work In Process
- Orders sent from the last process to the first
- Generic signal - what to produce is based on a dispatch list
So instead of the information going back station to station as in kanban it’s goes directly from the last station to the first.
What are the benefits of CONWIP?
- Can handle more complex environments than kanban
- More product variants
- Allows for mix variations over time.
What is pull by item?
Final product initiate pull on several components and their components and so on.
Explain execution and control (a.k.a. production activity control) in a traditional planning environment
Three purposes:
– To release orders at the rate that capacity conditions will allow them to be executed with reasonable throughput times
– To ensure that start-up material are available when each order is planned to start
– To ensure that orders released to manufacturing in the workshop are completed in a suitable sequence with respect to delivery precision, throughput times, and overall setup times.
Draw execution and control in a traditional planning environment chart
See lecture slide execution and control, traditional, slide 10
Explain order release control
Determining which manufacturing orders should be released to the workshop.
Two aspects to consider:
- Available capacity
- Materials requirements
Which method can be used for order release control?
- Order release from planned start times
- Regulated order release
- Input/output control
Explain order release from planned start times
Start times are based on material requirements, orders released without consideration to capacity.
What are the characteristics of order release from start times method?
- Simple to apply, requires little resources
- Start and due times represent actual demand points –> basis for prioritizing in the workshop
- Capacity not considered –> uneven workload –> varying throughput times
Which are the primary environments for order release from start times method?
- Large capacity in relation to production volumes or high volume flexibility
- Stable demand & even workload
- Short throughput times and small order quantities: generally more even workload
What are the characteristics of regulated order release method?
- More complex and time-consuming –> requires advanced system support
- Results in smoother workload –> stable throughput times & fewer queuing problems
- Important to keep capacity requirements updated
Which are the primary environments for regulated order release method?
- Uneven capacity requirements
- Products with simple bills of material and few operations
What are the characteristics of input/output control?
- Simpler than the regulated order release but still provides a smoothing of workload and throughput times
- Start and due times represent actual demand points –> basis for prioritising in the workshop
Which are the primary environments for input/output control?
- Manufacturing cells and line processes, or job shops with short throughput times
Explain material availability check
Checking material availability before order release to avoid material shortages
What are the different method of checking material availability?
Physical allocations:
- Manual check and move to shopfloor stock
Administrative availability check:
- Accounted stock on hand
- Accounted available stock on hand.
Important to keep track of inventory levels!
What is part of generation shop package?
For example:
- Order identify
- Routings
- Tools required
- Materials required
What types of priority control are there?
- Supervisor-managed priority control
- Priority control by priority rules
- Priority based on dispatch list
What are the characteristics of supervisor-managed priority control ?
- Simple to use and has a positive effect on the motivation of the workshop personnel
- Often focus on factors like setup times & throughput
- Less focus on material requirements
Which are the primary environments for supervisor-managed priority control?
Small workshops that are easy to overview.
Give some examples of priority rules.
- First in, first out: orders with the earliest arrival time are also processed first.
- Shortest operation time rule: orders with short operation times are given priority.
- Highest number of remaining operations first: orders with many operations are given priority.
Explain priority based on dispatch list
- Carried out centrally and communicated through printouts or terminals
- Could be based on priority rules
- Could also be based on more advanced logic
What is the purpose of Labour reporting and final reporting?
- Following up on released orders, handling potential deviations compared to plan.
- Updating resource availability, for example materials.
- Supplying information on real resource consumption, to match against what had been planned.
What is a constraint?
A constraint is anything that limits a firm’s performance.
Two types of constraints:
- Resource constraints
- Market constraints
Explain theory of constraints?
- Identify the system’s constraints
- Decide how to exploit the system’s constraints
- Subordinate everything else
- Elevate the system’s constraints
- If a constraint has been eliminated, go back to step 1
What is the drum-buffer-rope principle?
Drum:
The constraint is the drum and the production rate is the drumbeat
Buffer:
An inbound buffer is placed before the bottleneck, so that it is never starved
Rope:
The signals that control the flow are the rope. For example Kanban or CONWIP.
Why do batches vary in size?
- Batch sizes often not the same throughout the processes
- Larger batches desirable in the bottlenecks
- Production batch size vs transfer batch size
What is inventory accounting?
Inbound deliveries -> [Stock on hand] -> Withdrawals
What should material supply be?
- Reliable (right time/ quantity/quality)
- Efficient
- Flexible
The materials supply can support efficiency, quality, flexibility & ergonomics in assembly
What are some material feeding principles?
- Line stocking/continuous supply
- Batching
- Sequencing
- Kitting (stationary/travelling)
Why is ergonomics an aspect to consider in material supply?
Potentially harmful to pick components from large packaging! Having to bend down to grab something in the bottom of a big box, not a good position and place to lift something.
(Think about the ergonomic gradient around a person)
What impact could a potential redesign of the part presentation have?
- Reduce the space needed to store part by the station
- Reduce the walking path for the operator
- Decrease the non-value adding time
- Improve ergonomics
How does a smaller unit load differentiate to a larger unit load?
- Smaller unit loads require more frequent deliveries
Principally different ways of delivering:
- Large unit loads often delivered by forklifts
- Small unit loads can be delivered by tugger trains using a “milk-run” approach
What are the benefits of kitting?
Benefits mainly at the assembly station:
- Space
- Man-hour consumption in assembly and product throughput time
- Improved flexibility for handling part variants and for volume variations
- Improved quality , assuming correct kit content
What are the drawbacks of kitting?
Drawbacks mainly at the material supply:
- Space
- Man-hour consumption in materials supply
- Ensuring quality, picking the right parts
In which situation is continuous supply/kitting most appropriate?
Kitting is good in situations where there is a high number of parts and higher cycle times.
Continuous supply is better where there is a lower number of parts and lower cycle time.
(This however doesn’t cover the full spectrum of possible situations.)
Explain kit preparation
- Parts picked from part number specific containers, filling each kit with the right parts for the respective assembly object.
- Can be performed in a warehouse or in a smaller designated kit preparation area.
- Kits can be prepared either one at a time or in batches.
Give some example of picking information systems
Used to help pick the right products:
- Paper list
- Pick by light
- Pick by voice
- Pick by vision
