20180908-Production Planning And Inventory Management-Eng.Hamza Tahboob

Production/Manufacturing Production/manufacturing is the process of converting raw materials or semi-finished products into finished products that have value in the market place. This process involves the contribution of labor, equipment, energy, and information.

The Production System Raw materials Production Finished System products Energ yLabor SWcraaspte Equipment Informatio n

Inventory Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.

Inventory Management is a component of supply chain management that involves supervising non-capitalized assets, or inventory, and stock items. Specifically, “inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale.

Production Planning and Inventory Control Production planning and inventory control is the subset of SCM functions that focus on managing production operations and inventory throughout the supply chain.

Examples of Performance Measures • Cost (are products being created at minimum or acceptable cost?) • Quality (what are the specifications of the products? What percentages of shipped products meet specification?) • Variety (how many types of products are - or can be – simultaneously produced?) • Service (how long does it take to fulfill a customer order? how often are quoted lead times met?)

Classification of the Production Process ▪ Production Methods: – Mass (Flow) production – Batch production – Job shop production ▪ Product variety : – Single product or product line – Family of similar products – One-of-a-kind products

Mass Production Systems is a method of production that uses a standardized process of creating interchangeable parts in large quantities for a low price. In other words, a standard process for making products is repeated so each time the product is finished it is exactly the same as all the other parts. The parts are then said to be interchangeable. Whether you use the first part created or the millionth part, they should be exactly the same, with no variation in the outcome.

Mass Production Systems Advantages – Continues Production – Low product variety – Faster rate of production – High production volumes – Specialized labor – Dedicated equipment – Make-to-stock production

Batch Production Systems is a technique used in manufacturing, in which the object in question is created stage by stage over a series of workstations, and different batches of products are made.

Batch Production Advantages • Medium product variety. • Products are made in larger lots. • Cheaper to produce a whole batch instead of single, machines can be used more effectively. • It's lower cost, fewer workers because going to use machines. • It would be more accurate and consistent as machines would replicate the exact same product leaving less faulty products. • The company that uses it has a variety of products rather than just one type so therefore it gives customer a larger choice and hence a larger possibility of sales.

Job Shops A job shop is a type of manufacturing process in which small batches of a variety of custom products are made. In the job shop process flow, most of the products produced require a unique set-up and sequencing of process steps.

Production Strategies • Make to Stock (MTS) • Make to Order (MTO) • Assemble to Order (ATO) • Engineer to Order(ETO) 13

Facility Layout Product Logistic Layout Process s 14

Types of layout • Product Layout: Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow Auto plants, cafeterias • Process Layout: Layout that can handle varied processing requirements Tool and die shops, university departments • Fixed Position Layout: Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed Building projects, disabled patients at hospitals • Combination Layouts: Layout based on the grouping of parts to form families based on common machining requirements (and other aspects, such as shapes, material composition, tooling requirements)









Planning Horizon Aggregate planning: is an operational activity critical to the organization as it looks to balance long-term strategic planning with short term production success. Long range Short Intermediate range range Now 2 months 1 Year

Overview of Planning Levels • Short-term plans (Detailed plans) – Machine loading – Job assignments • Intermediate plans (General levels) – Employment – Output • Long-term plans – Long term capacity – Location / layout

Aggregate Planning • Begin with forecast of aggregate demand • Forecast intermediate range • General plan to meet demand by setting – Output levels – Employment – Finished goods inventory level • Production plan is the output of aggregate planning • Update plan periodically – rolling planning horizon always covers the next 12 – 18 months

Aggregate Planning Inputs • Resources • Costs – Workforce – Inventory carrying – Facilities – Back orders – Hiring/firing • Demand forecast – Overtime • Policies – Inventory changes – Subcontracting – Subcontracting – Overtime – Inventory levels – Back orders

Aggregate Planning Strategies • Proactive – Alter demand to match capacity • Reactive – Alter capacity to match demand • Mixed – Some of each

Capacity Options • Hire and layoff workers • Overtime/slack time • Part-time workers • Subcontracting

Aggregate Planning Strategies • Maintain a level workforce • Maintain a steady output rate • Match demand period by period • Use a combination of decision variables

Summary of Planning Techniques 13-27

Disaggregating the Aggregate Plan • Master schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon. • Rough-cut capacity planning: Approximate balancing of capacity and demand to test the feasibility of a master schedule.

Master Scheduling • Master schedule – Determines quantities needed to meet demand – Interfaces with • Marketing • Capacity planning • Production planning • Distribution planning

Master Scheduling Process Inputs Master Outputs Scheduling Beginning Projected inventory inventory Forecas Master production schedule t Uncommitted Customer inventory orders

Example Item : A Order QTY 60 units QTY On Hand:410 LT 1 wk Week 12 13 14 15 16 17 18 19 Demand 320 350 400 400 400 450 290 220 Projected On- Hand Inventory MPS Quantity MPS Start

Example Item : A Order QTY 60 units QTY On Hand:410 LT 1 wk Week 12 13 14 15 16 17 18 19 Demand 320 350 400 400 400 450 290 220 Projected On- 90 40 0 20 40 10 0 20 Hand Inventory MPS Quantity 300 360 420 420 420 300 240 MPS Start 300 360 420 420 420 300 240

Rough-cut capacity planning checks whether critical resources are available to support the preliminary master production schedules. Critical resources include bottleneck operations, labor and critical materials. Here the resource bill is for a single product. As before, the only interest is in bottleneck work centers and critical resources. Basically there are three approaches to perform rough cut capacity planning. These can be summarized as follows: 1- Capacity planning using overall factors (CPOF). 2- Bill of labor (or bill of required types of machine hours) approach. 3- Resource Profile approach.

Time Fences Time Fences – points in time that separate phases of a master schedule planning horizon.

Time Fences in MPS Period 123456789 “frozen” “slushy” “liquid (firm or somewhat ” fixed) (open) firm 13-35

MRP Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

Independent and Dependent Demand Independent Demand A Dependent Demand B(4 C(2 ) ) D(2 E(1 D(3 F(2 )) )) Independent demand is uncertain. Dependent demand is certain.

Dependant Demand • Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods. • Once the independent demand is known, the dependent demand can be determined.

MRP Inputs • Master Production Schedule • Time-phased plan specifying timing and quantity of production for each end item. • Material Requirement Planning Process

Master Schedule Master schedule: One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities. Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.

Bill-of-Materials Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product. Product structure tree: Visual depiction of the requirements in a bill of materials, where all components are listed by levels. Low-level coding: Restructuring the bill of materials so that multiple occurrences of a component all coincide with the lowest level the component occurs

Product Structure Tree Level Chair Back 0 Seat Assembly 1 Leg Side Cross Back Assembly Rails (2) bar Supports (3) 2 Legs (2) Cross bar 3

Inventory Records • One of the three primary inputs in MRP • Includes information on the status of each item by time period – Gross requirements – Scheduled receipts – Amount on hand – Lead times – Lot sizes

Inventory Requirements • Net requirements: Net Requirements = Gross Requirements – Available Inventory • Available Inventory: Available Inventory = Projected on hand – Safety stock – Inventory allocated to other items

MRP Processing • Gross requirements • Schedule receipts • Projected on hand • Net requirements • Planned-order receipts • Planned-order releases

MPR Processing • Gross requirements – Total expected demand • Scheduled receipts – Open orders scheduled to arrive • Planned on hand – Expected inventory on hand at the beginning of each time period

MPR Processing • Net requirements – Actual amount needed in each time period • Planned-order receipts – Quantity expected to received at the beginning of the period – Offset by lead time • Planned-order releases – Planned amount to order in each time period

MRP Output • Planned orders - schedule indicating the amount and timing of future orders. • Order releases - Authorization for the execution of planned orders. • Changes - revisions of due dates or order quantities, or cancellations of orders.

Lot sizing • To Determine the batch size that should be purchased or produced. Lot sizing Decision - Impact and Determined Lot size decision impacts on : Lot size decision impacted by : Inventory levels BOM Levels Setup & Ordering Cost Cost of Setup / Purchased items Capacity requirements Carrying cost