Lect 11 - Line Balancing & EOQ

Line Balancing..
Purpose is to minimize the number

of people and/or machines on an
assembly line that is required to
produce a given number of units
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
71
Line Balancing Example

EXAMPLE
Green Grasss plant manager just received marketings latest
forecasts of fertilizer spreader sales for the next year. She
wants its production line to be designed to make 2,400
spreaders per week. The plant will operate 40 hours per week.
a. What should be the lines cycle time or throughput rate per
hour be?
Throughput rate/hr = 2400 / 40 = 60 spreaders/hr

Cycle Time = 1/Throughput rate= 1/60 = 1 minute = 60 seconds
72
Line balancing Example continued:

Assume that in order to produce the new fertilizer spreader on
the assembly line requires doing the following steps in the order
specified:
Work
Element
Description
Time
(sec)
Immediate
Predecessor(s)
Bolt leg frame to hopper
40
None
Insert impeller shaft
30
Attach axle
50
Attach agitator
40
Attach drive wheel
Attach free wheel
25
Mount lower post
15
Attach controls
20
D, E
Mount nameplate
18
F, G
Total 244
b. What is the total number of stations or machines required?

TM (total machines) = total production time / cycle time = 244/60 = 4.067 or 5
73
Draw a Precedence Diagram

SOLUTION
The figure shows the complete diagram. We begin with work
element A, which has no immediate predecessors. Next, we add
elements B and C, for which element A is the only immediate
predecessor. After entering time standards and arrows showing
precedence, we add elements D and E,
and so on. The diagram simplifies
D
interpretation. Work element F,
H
40
B
for example, can be done
20
anywhere on the line after
E
30
element C is completed.
6
A
However, element I must
F
40
await completion of
C
25
elements F and G.
50
I
G
Precedence Diagram for
Assembling the Big Broadcaster
18
15
74
Allocating work or activities to

stations or machines
The goal is to cluster the work elements into
workstations so that
1. The number of workstations required is minimized
2. The precedence and cycle-time requirements are not
violated
The work content for each station is equal (or

nearly so, but less than) the cycle time for the line
Trial-and-error can be used but commercial
software packages are also available
75
Finding a Solution
The minimum number of workstations is 5 and the
cycle time is 60 seconds, so Figure 5 represents
an optimal solution to the problem
D
B
20
E
30
A
40
40
F
C
25
50
I
G
18
15
Firtilizer Precedence Diagram Solution
76
Calculating Line Efficiency

c. Now calculate the efficiency measures of a five-station
solution:
t
244
Efficiency =
(100) =
= 81.3%
nc
5(60)
Balance delay (%) = 100 Efficiency = 100% - 81.3% = 18.7%
Idle time = nc t = 5(60) 244 = 56 seconds
77
A Line Process
The desired output rate is matched to the
staffing or production plan
Line Cycle Time is the maximum time
allowed for work at each station is
1
c=
r
where
c = cycle time in hours
r = desired output rate
78
A Line Process
The theoretical minimum number of
stations is
t
TM =
c
where
t = total time required to assemble

each unit
79
A Line Process
Idle time, efficiency, and balance delay
Idle time = nc t
where
n = number of stations
t
Efficiency (%) = nc (100)
Balance delay (%) = 100 Efficiency
7 10
Solved Problem 2
A company is setting up an assembly line to produce 192 units
per 8-hour shift. The following table identifies the work
elements, times, and immediate predecessors:
Work Element
Time (sec)
Immediate Predecessor(s)
40
None
80
30
D, E, F
25
20
15
120
145
130
115
C, I
Total 720
7 11
Solved Problem 2
a. What is the desired cycle time (in seconds)?
b. What is the theoretical minimum number of stations?
c. Use trial and error to work out a solution, and show your
solution on a precedence diagram.
d. What are the efficiency and balance delay of the solution
found?
SOLUTION
a. Substituting in the cycle-time formula, we get

8 hours
1
(3,600 sec/hr) = 150 sec/unit
c= r =
192 units
7 12
Solved Problem 2
b. The sum of the work-element times is 720 seconds, so
t
TM = c =
720 sec/unit
150 sec/unit-station
= 4.8
or 5 stations
which may not be achievable.
7 13
Solved Problem 2
c. The precedence diagram is shown in Figure 7.6. Each row in
the following table shows work elements assigned to each of
the five workstations in the proposed solution.
Immediate
Predecessor(s)
None
25
D, E, F
C, I
80
20
30
A
40
Work
Element
15
115
G
120
H
145
130
Figure 7.6 Precedence Diagram

7 14
Solved Problem 2
D
25
B
80
20
30
40
115
15
G
120
I
130
145
Station
Candidate(s)
Choice
Work-Element
Time (sec)
Cumulative
Time (sec)
Idle Time
(c= 150 sec)
S1
S2
S3
S4
S5
7 15
Solved Problem 2
D
25
B
80
20
30
40
115
15
G
H
120
I
130
145
Station
Candidate(s)
Choice
Work-Element
Time (sec)
Cumulative
Time (sec)
Idle Time
(c= 150 sec)
40
40
110
80
120
30
D, E, F
25
145
E, F, G
120
120
30
E, F
20
140
10
S3
F, H
145
145
S4
F, I
130
130
20
15
145
30
30
120
115
145
S1
S2
S5
7 16
Solved Problem 2
d. Calculating the efficiency, we get
Efficiency (%) =
t
720 sec/unit
=
(100)
nc
5(150 sec/unit)
= 96%
Thus, the balance delay is only 4 percent (10096).
7 17
In class - Example
A plant manager needs a design for an assembly line to
assembly a new product that is being introduced. The time
requirements and
immediate
Immediate
Work Element
Time (sec)
Predecessor
predecessors for the
A
12
work elements are

B
60
A
as follows:
C
36
24
38
C, D
72
B, E
14
72
35
G, H
60
12
F, J
Total =
435
7 18
In class - Example
Draw a precedence diagram, complete I, F, J, and K
Work
Element
Time (sec)
Immediate
Predecessor
12
60
36
24
38
C, D
72
B, E
14
72
35
G, H
60
12
F, J
Total =
435
B
F
E
J
7 19
In class - Example
If the desired output rate is 30 units per hour, what are the cycle
time and theoretical minimum?
1
c= r =
1
(3600) = 120 sec/unit
30
t
435
TM = c =
= 3.6
120
or 4 stations
7 20
In class - Example
Suppose that we are fortunate enough to find a solution with
just four stations. What is the idle time per unit, efficiency, and
the balance delay for this solution?
Idle time = nc t = 4(120) 435 = 45 seconds

Efficiency (%) =
t
435
=
(100) = 90.6%
nc (100)
480
Balance delay (%) = 100 Efficiency = 100 90.6 = 9.4%
7 21
In class - Example
Using trial and error, one possible solution is shown below.
Station
Work
Elements
Assigned
Cumulative Time
Idle Time
(c = 120)
1
2
3
4
5
7 22
In class - Example
Using trial and error, one possible solution is shown below.
Station
Work
Elements
Assigned
Cumulative Time
H, C, A
120
B, D, G
98
22
E, F
110
10
I, J, K
107
13
Idle Time
(c = 120)
A fifth station is not needed
7 23
Managerial Considerations
Pacing is the movement of product from
one station to the next
Behavioral factors such as absenteeism,
turnover, and grievances can increase after
installing production lines
The number of models produced

complicates scheduling and necessitates
good communication
Cycle times are dependent on the desired
output rate
7 24
Inventory
Management & the
Economic Order
Quantity (EOQ)
7 25
Lecture today
Why is inventory so bad?
Why hold inventory?
Where to hold inventory?
What are types of inventory to keep?
What are the inventory costs?
How much inventory to keep?
When to order & how much to order?
What do I need to know to make those
decisions?
7 26
Inventory Management
Inventory management is the planning and

controlling of inventories in order to meet the
competitive priorities of the organization.
Inventory management requires information

about expected demands, amounts on hand and
amounts on order for every item stocked at all
locations.
7 27
Inventory Basics
Inventory is created when the receipt of

materials, parts, or finished goods
exceeds their disbursement.
Inventory is depleted when their
disbursement exceeds their receipt.
An inventory managers job is to balance
the advantages and disadvantages of
both low and high inventories.
7 28
Inventory Costs
Cost of capital
Obsolescence
Storage
Insurance
Taxes
Security
Theft
Damage
Locating
Measurement
Management & Labor
7 29
Why hold Inventory?

Customer Sales & Service: Avoid Retail
stock outs and thus customer goodwill
(Retailing)
Seasonal sales (Xmas trees)
Take advantage of quantity discounts
Balance process flow time
Uncertainty in supply and demand
Lead Time
Speculative inventory (wine, gold)
7 30
Inventory at WAL-MART
Making sure the shelves are stocked with tens of
thousands of items at their 5,379 stores in 10 countries is
no small matter for inventory managers at Wal-Mart.
Knowing what is in stock, in what quantity, and where it is
being held, is critical to effective inventory management.
With inventories in excess of $29 billion, Wal-Mart is aware
of the benefits from improved inventory management.
They know that effective inventory management must
include the entire supply chain.
The firm is implementing radio frequency identification
(RFID) technology in its supply chain.
7 31
7 32
Macro Inventory Decisions
Where do we hold inventory?
Manufacturers and suppliers

warehouses and distribution centers
retailers
Types of Inventory to keep?
raw materials
WIP
finished goods
7 33
Micro Inventory Decisions

When to order items?
How much of each item to order?

How much safety stock to keep?
Objective: minimize overall cost of keeping
inventory!
7 34
Relevant Costs in an Inventory System

Procurement costs
Ordering
cost (administrative, inspection,

transportation etc.)
Holding costs
Maintenance
and Handling
Taxes
Obsolescence
Stock-outs costs
Lost
sales (Customer goodwill)
Backorders
7 35
Relevant information to any inventory

decision
Knowing how much demand there is

Knowing if this demand is fairly constant or
varies
Knowing what is in stock

Knowing where they exist in the supply chain
Knowing how long it will take to replenish
Knowing where it is going to be replenished from
7 36
Frequently used inventory terms
Inventory lot size

Replenishment Lead time
Stock out
Reorder Point
Safety stock
7 37
Knowing which Items are Critical

Thousands of items are held in inventory
by a typical organization, but only a
small % of them deserves managements
closest attention and tightest control.
ABC analysis: The process of dividing

items into three classes, according to
their dollar usage, so that managers can
focus on items that have the highest
dollar value.
7 38
ABC Analysis
Percentage of dollar value
100
Class C
Class B
90
Class A
80
70
60
50
40
30
20
10
0
10
20
30
40
50
60
70
80
90 100
Percentage of items
7 39
Economic Order Quantity (EOQ)

Economic Order Quantity (EOQ) is the
lot size that minimizes total annual
inventory holding and ordering costs.
Assumptions of EOQ
1.
2.
3.
4.
5.
The demand rate is constant and known with

certainty.
There are no constraints on lot size.
The only relevant costs are holding costs
and ordering/setup costs.
Decisions for items can be made
independently of other items.
Lead time is constant and known with
certainty.
7 40
7 41
7 42
Cycle-Inventory Levels
On-hand inventory (units)
Receive
order
Inventory depletion
(demand rate)
Average
cycle
inventory
1 cycle
Time
7 43
Total Annual Cycle-Inventory Costs
Annual cost (dollars)
Q = lot size; C = total annual cycle-inventory cost

H = holding cost per unit; D = annual demand
S = ordering or setup costs per lot
Total cost =
Q
D
(H) +
(S)
2
Q
Holding cost =
Ordering cost =
Q
(H)
2
D
(S)
Q
Lot Size (Q)

7 44
Costing out a Lot Sizing Policy

Museum of Natural History Gift Shop:
Bird feeder sales are 18 units per week, and the
supplier charges $60 per unit. The cost of placing an
order (S) with the supplier is $45.
Annual holding cost (H) is 25% of a feeders value,
based on operations 52 weeks per year.
Management chose a 390-unit lot size (Q) so that new
orders could be placed less frequently.
What is the annual cycle-inventory cost (C) of the
current policy of using a 390-unit lot size?
7 45
Costing out a Lot Sizing Policy

Museum of Natural History Gift Shop:
What is the annual cycle-inventory cost (C) of the
current policy of using a 390-unit lot size?
D = (18 /week)(52 weeks) = 936 units
C=
H = 0.25 ($60/unit) = $15
Q
D
936
390
(H) +
(S) =
(15) +
(45)
2
Q
390
2
C = $2925 + $108 = $3033
7 46
Lot Sizing at the Museum

of Natural History Gift Shop
Current
cost
Annual cost (dollars)
3000
Total cost
2000
Holding cost
1000
Ordering cost
Lowest
cost
0
Best Q (EOQ)
|
50
|
100
|
150
|
200
|
250
Lot Size (Q)
|
300
|
350
|
400
Current
Q
7 47
Computing the EOQ

Bird Feeders:
EOQ =
2DS
H
D = 936 units
H = $15
S = $45
C=
Q
D
(H) +
(S)
2
Q
D = annual demand
S = ordering or setup costs per lot
H = holding costs per unit
EOQ =
C=
2(936)45 = 74.94 or 75 units

15
75
936
(15) +
(45)
2
75
C = $1,124.10
7 48
Time Between Orders

Time between orders (TBO) is the average
elapsed time between receiving (or placing)
replenishment orders of Q units for a particular
lot size.
EOQ
TBOEOQ =
D
For the birdfeeder example, using an EOQ of 75

units. TBO = EOQ = 75/936 = 0.080 year
EOQ
D
TBOEOQ = (75/936)(12) = 0.96 months
TBOEOQ = (75/936)(52) = 4.17 weeks

TBOEOQ = (75/936)(365) = 29.25 days
7 49
In Class Example
7 50
In Class Example
7 51
In Class Example (continued)
7 52
In Class Example
continued
7 53
Understanding the Effect of Changes

What happens if there is a change in the
Demand Rate (D)?
What happens if the Setup Costs (S)
changes?
What happens if the holding Costs (H)

change?
What happens if there are errors in
estimating D, H, and S?
7 54

Lect 11 - Line Balancing &amp; EOQ

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Line Balancing..

Purpose is to minimize the number

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Line Balancing Example

Throughput rate/hr = 2400 / 40 = 60 spreaders/hr

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Line balancing Example continued:

Bolt leg frame to hopper

Insert impeller shaft

Attach drive wheel

Attach free wheel

Mount lower post

b. What is the total number of stations or machines required?

Draw a Precedence Diagram

Allocating work or activities to

The work content for each station is equal (or

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Calculating Line Efficiency

Idle time = nc t = 5(60) 244 = 56 seconds

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

t = total time required to assemble

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

a. Substituting in the cycle-time formula, we get

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

which may not be achievable.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Figure 7.6 Precedence Diagram

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

work elements are

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Idle time = nc t = 4(120) 435 = 45 seconds

Balance delay (%) = 100 Efficiency = 100 90.6 = 9.4%

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

A fifth station is not needed

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

The number of models produced

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Inventory management is the planning and

Inventory management requires information

Inventory is created when the receipt of

Why hold Inventory?

Macro Inventory Decisions

Where do we hold inventory?

Manufacturers and suppliers

Types of Inventory to keep?

Micro Inventory Decisions

How much of each item to order?

Relevant Costs in an Inventory System

cost (administrative, inspection,

sales (Customer goodwill)

Relevant information to any inventory

Knowing how much demand there is

Knowing what is in stock

Frequently used inventory terms

Inventory lot size

Knowing which Items are Critical

Lect 11 - Line Balancing & EOQ

Lect 11 - Line Balancing & EOQ