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Haery Sihombing/IP
Sihombing/IP
Pensyarah Fakulti Kejuruteraan Pembuatan
Universiti Teknologi Malaysia Melaka
1 Manufacturing
Supply Chain
Management
Inventory
Control/Mgmt
Requirements
Strategy Planning
Plant Push/Pull
Layout Systems
Manufacturing Management
Manufacturing Factory Flow
Flexibility Dynamics
Shop Floor
Quality
Control
Control
Welcome to DMFD 3513 Course: Aggregate
Planning
Production
Scheduling
MANUFACTURING MANAGEMENT
MANAGEMENT MANAGEMENT
Technique, practice or science of managing or Some writers, teachers and practitioners assert that
controlling; the skillful use of resources and time; the the previous view is rather outmoded and that
specific treatment of a disease or disorder.
management needs to focus more on leadership skills,
Function that organizes the execution of today’
today’s
business. e.g., establishing vision and goals, communicating the
The process of getting activities completed efficiently vision and goals, and guiding others to accomplish
and effectively with and through other people. them. They also assert that leadership must be more
facilitative, participative and empowering in how
Traditionally, the term "management" refers to the set of
visions and goals are established and carried out.
activities, and often the group of people, involved in four
general functions, including planning, organizing, leading
Some people assert that this really isn't a change in
and coordinating activities. (Note that the four functions the management functions, rather it's re-
re-emphasizing
recur throughout the organization and are highly certain aspects of management.
integrated.)
MANAGEMENT MANAGEMENT
Management functions: Management roles:
Changes in Industry
Organization and Work-
Work-Taylorism
Just as important as advances in manufacturing
technology was a wave of changes in how business was INDUSTRIAL PROGRESS
structured and work was organized.
&
Engineers studied and modified production, seeking the
most efficient ways to lay out a factory, move materials, ISSUES
route jobs, and control work through precise scheduling.
Industrial engineer Frederick Taylor and his followers
sought both efficiency and contented workers. They
believed that they could achieve those results through
precise measurement and analysis of each aspect of a
job.
Faster Growth and More Good Jobs
Once an economy reaches the middle income level of development, service industries become a
Stages of Economic Development more important source of job growth than manufacturing
Features
Pre-
Pre- Use of Standard
dominant human Unit of of living
Society Game activity labor social life
life measure Structure Technology
Pre-
Pre- Against Agriculture Raw Extended Sub-
Sub- Routine Simple hand
Industrial Nature Mining muscle household
household sistence Traditional tools
power Authoritative
Post-
Post- Among Services Artistic Community Quality of Inter-
Inter- Information
industrial Persons Creative life in terms dependent
Intellectual
Intellectual of health, Global
education,
recreation
90
Country 1980 1987 1993 1999
80
Proportation of total
70
employement
80
10
40
70
00
18
18
19
19
19
20
Year
Faster Growth and More Good Jobs Percent of U.S. Labor Force by
Once an economy reaches the middle income level of development, service industries become a
more important source of job growth than manufacturing
Industry
80
60
First Industrial Revolution (mid-
(mid-1700’
1700’s)
50 Steam Engine
40 Mass production
30
Vertical Integration
20
10 Interchangeable parts (and workers)
0 Services Economies of Scale
1948 1959 1967 1977 1987 1999 Manufacturing
Year Mining & Agriculture
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli
Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific
American, 244,3 (1981): 31-39.
SUMMARY SUMMARY
Manufacturing History Manufacturing History
Henry Ford: Emphasis on speed of production
Second Industrial Revolution (Late 1800’
1800’s)
Turn of the century (early 1900’
1900’s)
Transport and Communications Infrastructure
Assembly-
Assembly-line production
Allowed for creation of mass markets
Fast labor times
Mass Retailers (Sears)
Repetitive, standardized processes
Horizontal and Vertical Integration
Speed of output impacts cost per unit
Carnegie: Rail, Steel, Mining
High volume production
Measuring
Multi-Factor Productivity
Product Yield & Productivity
Yield is a measure of productivity.
Computing
The Quality-Productivity Ratio The Quality-
Quality-Productivity Ratio (QPR)
The quality-
quality-productivity ratio (QPR)
is a productivity index that includes
productivity and quality costs.
QPR = good-
good-quality units (100)
(input)(processing cost) + (defective units)(rework cost)
Key Variables for Improved Labor Skills
Labor Productivity
About half of the 17-
17-year-
year-olds in the US cannot
correctly answer questions of this type
; Basic education appropriate for the
labor force
; Diet of the labor force
; Social overhead that makes labor
available
; Maintaining and enhancing skills in the
midst of rapidly changing technology
and knowledge
Figure 1.8
THE END
Ir. Haery Sihombing (IP)
Pensyarah Fakulti Kejuruteraan Pembuatan
Universiti Teknologi Malaysia Melaka INVENTORY CONTROL
2 What purpose does inventory serve?
It provides capacity to instantaneously meet
downstream demands and requirements
It provides a buffer between successive
operations stages
It insulates against future uncertainties
Uncertainties in supply
Uncertainties in demand
Uncertainties in capacity
The Figure illustrates the inventory level over From this we determine that H = (1 – D/P)Q.
time. We still have average annual procurement cost equal
to cD, and average annual setup cost equal to AD/Q.
We analyze this in the same way we analyzed
The average annual holding cost equals h multiplied
the EOQ. by the area of the triangle, divided by the cycle
Note that when we order Q, our inventory never reaches Q
We must determine H to find the maximum inventory level.
length, T.
Observe that: This gives: h(1/2)(1 – D/P)Q.
H = (P – D)T1; H = DT2; T1 + T2 = T= Q/D
The average annual cost then equals:
H
I(t) P-D -D Y(Q) = cD + AD/Q + (hQ/2)(1 – D/P)
0 T1 T2 Time, t
T = Q/D
ECONOMIC PRODUCTION LOT DYNAMIC DETERMINISTIC DEMAND
Suppose we let h’ = h(1 – D/P) and EOQ model assumes constant demand
rewrite the equation as: rate, often a dubious assumption
Y(Q) = cD + AD/Q + h’Q/2 If we want to deal with general
This is the exact same form of the cost dynamically changing demand, we must
equation we derived in the EOQ case, except focus on discrete-
discrete-time models
h’ replaces h. We allow demand to vary in daily,
2 AD h '
This implies that the Economic Production Lot weekly, or monthly buckets, or periods
*
size equals Q = This approach minimizes total costs over
Note that if P = f, h’ = h and we have the a finite planning horizon consisting of a
EOQ as a special case of the EPL. fixed number of periods
The parameters of a dynamic lot sizing We wish to satisfy all demand until the
problem are: end of the time horizon at minimum
T, number of periods in the planning horizon total production and holding cost.
Dt, demand in period t. Some potential policies:
ct, variable production cost in period t.
Lot-
Lot-for-
for-lot
rule: Setup in every period and
At, setup cost in period t. produce the requirements for that period.
ht, holding cost per unit remaining at the end of a Maximum setup costs, minimum (zero) holding
period costs
It, inventory at the end of period t (a decision Is this likely to be an optimal policy?
variable). FixedOrder Quantity: Any time we produce
Qt, Lot size (production quantity in period t (a decision we produce the same amount, Q.
variable) Is this likely to be an optimal policy?
Dynamic Lot Sizing Comments Stochastic Inventory Models
What are the pros and cons of this modeling The real world does not behave
approach? deterministically
Pros:
Assumptions of deterministic models
Most production facilities plan in periodic fashion, i.e.,
daily, weekly monthly rarely hold in practice
Has the ability to handle varying demand Deterministic models usually fit best with
Computationally simple make-
make-to-
to-order systems
Cons: Make-
Make-to-
to-stock systems are typically
Assumes infinite capacity
Assumes all parameters are known with certainty
found in environments in which demand
Assumes products are independent is non-
non-deterministic (stochastic)
Assumes zero-
zero-inventory production property is optimal
co = Cost ($) per unit left over after demand occurs E[max{X – Q, 0}] = ³0 max{x Q,0}g ( x )dx ³Q
( x Q ) g ( x )dx
Placing an order incurs a fixed cost, A the average amount on the shelf when a
We have a fixed lead time, L replenishment arrives
We can characterize the distribution of
Inventory Position
Q+s
c = production or purchase cost per item
h = annual holding cost per unit ($/unit per year)
b = cost per backorder ($/stockout)
s
s = safety stock, s = r - T
Q/D Time
(Q, r) Model for Continuous (Q, r) Model for Continuous
Review Review
We would like to minimize the total expected ordering, Determining expected annual backorder costs:
holding, and backorder costs per year
We incur a cost of $b for each backorder
Note that, on average, the inventory level falls from Q + s to
s in a cycle which has length T = Q/D We know that there are, on average, D/Q cycles
This implies an average inventory level equal to Q/2 + s
per year
(the area of the triangle of base Q/D plus a rectangle with If we can determine the expected number of
sides s and Q/D, divided by the cycle length, Q/D) backorders in a cycle, then we need only multiply
The expected annual holding cost then equals h(Q/2 + s), this by the average number of cycles per year to
or h(Q/2 + r - T) get the expected number of backorder per year
This cycle length implies an average of D/Q cycles per year We incur a backorder if the demand during lead
This results in an expected annual order cost of AD/Q time, X, exceeds the reorder point, r.
We have a bit of work to do to determine the expected The number of backorders in a cycle equals max{X
backorder cost per year – r, 0}
(Q, r) Model With Service Levels (Q, r) Model With Service Levels
It is typically very difficult for a manager to We can reformulate our problem to minimize expected
inventory investment subject to a minimum required service
quantify with certainty the value of b, the cost level constraint
per stockout, due to loss of customer goodwill Our average inventory level was Q/2 + r - T, implying that
and its effects on future sales our average investment in inventory equals c(Q/2 + r - T)
We can characterize the fill rate as 1 – n(r)/Q
Note that the higher the value of b, the higher
This is 1 minus the proportion of demands backordered in
Q, and the higher the average service level a cycle, which gives the proportion of demands filled from
Rather than explicitly stating a value for b, we stock
can specify a minimum required service level, We also assume a maximum replenishment frequency, F (this
implies a minimum time between successive orders, or a
which is much easier to quantify intuitively maximum number of replenishments per year)
(Q, r) Model With Service Levels
Our problem now is:
Minimize c(Q/2 + r - T)
subject to: D/Q d F
1 – n(r)/Q t S, where S is the
minimum fill rate
Note that reducing Q reduces inventory
investment, so here we would like Q as small
as possible while meeting the constraints
This implies that we will set Q = D/F
Given this Q, we want the smallest r such that
n(r) d Q(1 – S), which will result when n(r) =
Q(1 – S).
Ir. Haery Sihombing (IP)
Pensyarah Fakulti Kejuruteraan Pembuatan MATERIAL REQUIREMENTS
Universiti Teknologi Malaysia Melaka
PLANNING
3 First widely available software
implementation of a manufacturing
planning system (IBM 1960’
1960’s)
APICS ‘MRP Crusade’
Crusade’ launched in 1972
Quickly became the manufacturing planning
paradigm in the U.S.
The problems of production planning were
all solved, right?
Material Requirements By 1989 total sales and support for MRP
systems exceeded $1 Billion
Planning (MRP)
We then generate the planned order releases scheduled receipts and a 2 week lead time
Component 100 1 2 3 4 5 6 7 8
Part A 1 2 3 4 5 6 7 8
Gross Req’
Req’ts 90 60
Gross Req’
Req’ts 15 20 50 10 30 30 30 30
Sched.
Sched. Receipts
Sched.
Sched. Receipts 10 10 100
Adj. SRs
Adj. SRs 20 100
Proj.
Proj. On-
On-Hand 40 40 40 40 -50
Proj.
Proj. On-
On-Hand 20 5 5 55 45 15 -15
Net Req’
Req’ts 50 60
Net Req’
Req’ts 15 30 30
Planned Order Rec. 50 60
Planned Order Rec. 45 30
Planned Order Rel.
Rel. 50 60
Planned Order Rel.
Rel. 45 30
Lot Sizing Rules for MRP Lot Sizing Rules for MRP
We discussed three lot-
lot-sizing procedures: Part-
Part-Period Balancing Heuristic:
Lot-
Lot-for-
for-lot, FOP, and Wagner-
Wagner-Whitin Based on the observation that in the EOQ, the optimal
solution has order/setup costs equal to holding costs
Here we consider additional heuristic rules
Also satisfies Wagner-
Wagner-Whitin zero-
zero-inventory production
Fixed Order Quantity and EOQ property
Each time we order, we order a set amount We begin with a setup in the first period with net
We cannot directly apply the EOQ formula, since requirements, call this period i. We then consider the total
holding costs incurred if we satisfy demand for period i
we have no constant demand rate, D
only, periods i and i + 1, periods i, i + 1, i + 2, etc., until
One strategy is to use the average demand per holding costs exceed the setup cost.
period in place of D in the EOQ formula and use We next decide the number of periods for which we will
the result as the fixed order quantity produce based on which of these options results in holding
We schedule order receipts for periods in which we costs closest to setup cost.
project negative on-
on-hand inventory We then repeat this process. For example, if the past
decision was to produce for periods i, i + 1, …, i + k, we
repeat, beginning with a setup in period k + 1.
different from MRP and MRP II? do the first two things (speed decisions and slash
costs) if used correctly
ERP systems don’
don’t just target production This cost slashing, however, ironically comes at a
operations, but all operations of the firm steep price (SAP implementations typically cost in
A control system for the entire enterprise excess of $1 Million)