Transcript Class 5 - supply chain research

Facilities Location, Layout
and Planning
FACILITY PLANNING
• The placement of facility – customers,
suppliers, other links in the supply
chain
• Resources
• Strategy – 99cents Only example
• Access to customers
• Government impacts
Objectives of Facility Layout
 Minimize material handling costs
 Utilize space efficiently
 Utilize labor efficiently
 Eliminate bottlenecks
 Facilitate communication and interaction
between workers, between workers and
their supervisors, or between workers and
customers
 Reduce manufacturing cycle time or
customer service time
Objectives of Facility Layout
 Eliminate waste or redundant movement
 Facilitate the entry, exit, and placement of
material, products, or people
 Incorporate safety and security measures
 Promote product and service quality
 Encourage proper maintenance activities
 Provide a visual control of operations or
activities
 Provide flexibility to adapt to changing
conditions
 Increase capacity
Questions on Layout
Planning
• How should the facility be laid out?
• Does my layout cause unnecessary
movement/excess travel time?
• Does my work flow in a logical
manner?
• Does size dictate layout or does
layout/product flow dictate the size?
Basic Types of Layouts
 Process Layout
 Machines grouped by process they perform
 Product Layout
 Linear arrangement of workstations to
produce a specific product
 Fixed Position Layout
 Used in projects where the product cannot
be moved
Manufacturing Process Layout
Lathe Department
L
L
L
L
L
L
L
L
L
L
Milling
Department
Drilling Department
M
M
D
D
D
D
M
M
D
D
D
D
G
G
G
P
G
G
G
P
Grinding
Department
Receiving and
Shipping
Painting Department
A
A
Assembly
A
Manufacturing Process Layout
Lathe Department
L
L
L
L
L
L
L
L
L
L
Milling
Department
Drilling Department
M
M
D
D
D
D
M
M
D
D
D
D
G
G
G
P
G
G
G
P
Grinding
Department
Receiving and
Shipping
Painting Department
A
A
Assembly
A
Manufacturing Process Layout
Lathe Department
L
L
L
L
L
L
L
L
L
L
Milling
Department
Drilling Department
M
M
D
D
D
D
M
M
D
D
D
D
G
G
G
P
G
G
G
P
Grinding
Department
Receiving and
Shipping
Painting Department
A
A
Assembly
A
A Product Layout
In
Out
Fixed-Position Layouts
 Typical of projects
 Equipment, workers, materials, other
resources brought to the site
 Highly skilled labor
 Often low fixed
 Typically high variable costs
Designing Process Layouts
 Minimize material handling costs
 Block Diagramming
 Minimize nonadjacent loads
 Use when quantitative data
is available
 Relationship Diagramming
 Based on location preference between areas
 Use when quantitative data is not available
Block Diagramming
 Create load summary chart
 Calculate composite (two way)
movements
 Develop trial layouts minimizing number
of nonadjacent loads
 Example
Relationship Diagramming
(Murther’s Grid)
 Used when quantitative
data is not available
 Muther’s grid displays
preferences
 Denote location
preferences with weighted
lines
Relationship Diagramming
Example
Production
Offices
Stockroom
Shipping and
receiving
Locker room
Toolroom
Relationship Diagramming
Example
A Absolutely
E
Production
I
O
U
X
O
A
Offices
U
A
U
U
O
O
O
A
X
U
Locker room
Toolroom
E
O
Stockroom
Shipping and
receiving
I
necessary
Especially
important
Important
Okay
Unimportant
Undesirable
Relationship Diagramming
Example
1 Absolutely
2
Production
3
4
5
6
4
1
Offices
5
1
5
5
4
4
4
1
6
5
Locker room
Toolroom
2
4
Stockroom
Shipping and
receiving
3
necessary
Especially
important
Important
Okay
Unimportant
Undesirable
Facility Location
Models
Types Of Facilities
 Heavy manufacturing
Auto plants, steel mills, chemical plants
 Light industry
Small components mfg, assembly
 Warehouse & distribution centers
 Retail & service
Factors in Heavy Manufacturing
Location
 Construction costs
 Land costs
 Raw material and finished goods
shipment modes
 Proximity to raw materials
 Utilities
 Labor availability
Factors in Light Industry
Location
 Construction costs
 Land costs
 Easily accessible
geographic region
 Education & training capabilities
Factors in Warehouse
Location
 Transportation costs
 Proximity to markets (Customers)
Service Location
Considerations
•
•
•
•
•
•
Labor
Cost of Living
Real Estate
Construction
Government Incentives
Examples – Amoco, Mass St, Tattoo
Parlors, Walgreen’s
Global Location Factors
 Government stability
 Government regulations
 Political and economic
systems
 Economic stability and
growth
 Exchange rates
 Culture
 Climate
 Export import regulations,
duties and tariffs
 Raw material availability
 Number and proximity of
suppliers
 Transportation and
distribution system
 Labor cost and education
 Available technology
 Commercial travel
 Technical expertise
 Cross-border trade
regulations
 Group trade agreements
Regional Location Factors
 Community
government
 Local business
regulations
 Government services
 Business climate
 Community services
 Taxes
 Availability of sites
 Financial Services
 Community
inducements
 Proximity of suppliers
 Education system
Site Location Factors
 Customer base
 Construction/
leasing cost
 Land cost
 Site size
 Transportation
 Utilities
 Zoning restrictions
 Traffic
 Safety/security
 Competition
 Area business
climate
 Income level
Location Incentives
 Tax credits Wal-Mart in Wyandotte
 Relaxed government regulation
 Job training
 Infrastructure improvement
 Money
Center-of-Gravity Technique
 Locate facility at center of geographic area
 Based on weight and distance traveled
 Establish grid-map of area
 Identify coordinates and weights shipped
for each location
Facility Summary
• Why is it important?
• Location analysis
• Location Criteria – global, local,
regional - education
• Location and Strategy
• Location and Customers
• Layout planning
Project Management
and Operations
Project
Management
First Essay on Project Management:
1697 – “An Essay Upon Projects”
1959 HBR Article – “The Project Manager”
Air Force Manual 1964
Project Management
In today’s global marketplace, complexity and speed are
certainties. In such an environment, a good axiom for project
management is, Do It, Do It Right, Do It Right Now. Creating
clear direction, efficiency, timely response, and quality outcomes
requires project managers who are agile -- adept at change. The
associated disciplinary areas are clearly spelled out in the
following PMI definition.
“Project management is the application of knowledge, skills,
tools, and techniques to a broad range of activities in order to
meet the requirements of a particular project. Project
management is comprised of five Project Management Process
Groups – Initiating Processes, Planning Processes,
Executing Processes, Monitoring and Controlling
Processes, and Closing Processes.
Source: Project Management Institute - http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501
Elements of Project
Management
 Project team
 Individuals from different departments within
company
 Matrix organization
 Team structure with members from different
functional areas depending on skills needed
 Project manager - Leader of project team
 Project Charter – high level description of what is
to be accomplished in a project and delegates
authority to project manager to implement
actions to complete project
Project Planning
 Statement of work
 Written description of goals, work &
time frame of project
 Activities require labor, resources &
time
 Precedence relationship shows
sequential relationship of project
activities
Elements of
Project Planning
 Define project objective(s)
 Identify activities
 Establish precedence relationships
 Make time estimates
 Determine project completion time
 Compare project schedule objectives
 Determine resource requirements to
meet objective
Work Breakdown
Structure
 Hierarchical organization of work to
be done on a project
 Project broken down into modules
 Modules subdivided into
subcomponents, activities, and tasks
 Identifies individual tasks,
workloads, and resource
requirements
Project Control
 All activities identified and included
 Completed in proper sequence
 Resource needs identified
 Schedule adjusted
 Maintain schedule and
budget
 Complete on time
A Gantt Chart
Around since 1914
 Popular tool for project scheduling
 Graph with bar for representing the time for
each task
 Provides visual display of project schedule
 Also shows slack for activities
 Amount of time activity can be
delayed without delaying project
Gantt Charts
Gantt described two principles for his
charts:
1. measure activities by the amount of time
needed to complete them
2. the space on the chart can be used the
represent the amount of the activity that
should have been done in that time.
Gantt charts were employed on major infrastructure projects
including the Hoover Dam and Interstate highway system and
still are an important tool in project management.
A Gantt Chart
0
|
2
|
Month
4
|
6
|
8
|
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials
Build house
Select paint
Select carpet
Finish work
1
Figure 6.2
3
5
Month
7
9
10
Example of Gantt Chart
Problem
CPM/PERT
 Critical Path Method (CPM)
 DuPont & Remington-Rand (1956)
 Deterministic task times
 Project Eval. & Review Technique
(PERT)
 US Navy, Lockheed
 Multiple task time estimates
PERT/CPM
Program Evaluation and Review Technique (PERT):
developed in conjunction with the development of the
Polaris missile program for submarines – developed by
the US Navy with Lockheed as the lead contractor
Critical Path Method (CPM): developed through a joint
venture between the DuPont Corporation and the
Remington Rand Corporation – the original purpose
was to monitor and evaluate plant maintenance
management projects.
Project Network for a House
3
Lay
foundation
2
3
1
Design house
and obtain
financing
2
Dummy
Build
house
0
1
Order and
receive
materials
4
Select
paint
6
3
1
1
5
Figure 6.4
Finish
work
Select
carpet
1
7
Critical Path
 A path is a sequence of connected
activities running from start to end
node in network
 The critical path is the
path with the longest
duration in the network
 Project cannot be
completed in less than
the time of the critical
path
The Critical
Path
3
Lay
foundation
2
3
1
Design house
and obtain
financing
Dummy
Build
house
0
1
2
4
Order and
receive
materials
Select
paint
Finish
work
6
3
1
1
Select
carpet
5
A: 1-2-3-4-6-7
3 + 2 + 0 + 3 + 1 = 9 months
B: 1-2-3-4-5-6-7
3 + 2 + 0 + 1 + 1 + 1 = 8 months
C: 1-2-4-6-7
3 + 1 + 3 + 1 = 8 months
D: 1-2-4-5-6-7
3 + 1 + 1 + 1 + 1 = 7 months
1
7
The Critical
Path
3
Lay
foundation
2
Dummy
Build
house
0
3
1
1
2
Design house
and obtain
financing
4
Order and
receive
materials
Select
paint
Finish
work
6
3
1
1
7
1
Select
carpet
5
Activity Start Times
3
Start at 5 months
2
1
3
2
0
1
4
6
3
1
1
7
1
Start at 8 months
Start at 3 months
5
Figure 6.6
Finish at
9 months
Project Crashing
 Crashing is reducing project time by
expending additional resources
 Crash time is an amount of time an activity is
reduced
 Crash cost is the cost of reducing the activity
time
 Goal is to reduce project duration at minimum
cost
Time-Cost Relationship
 Crashing costs increase as project duration
decreases
 Indirect costs increase as project duration
increases
 Reduce project length
as long as crashing
costs are less than
indirect costs
Life Cycle Management
• Long term view of projects to guide
decision making – solutions that provide
life time success vice short term
• Acquisition; development; production;
introduction; sustainment; disposal
• Links system costs to big picture; better
use of resources; minimize total cost of
ownership
Capacity and
Aggregate
Planning
Capacity Outputs:
Examples
Type of Business
Input Measures of Output Measures
Capacity
of Capacity
Car manufacturer
Labor hours
Cars per shift
Hospital
Available beds
Patients per month
Pizza parlor
Labor hours
Pizzas per day
Retail store
Floor space in
square feet
Revenue per foot
The goal of capacity planning
decisions
(1) The capacity of the firm to produce
the service or good
(2) The processes for providing the
service or making the good
(3) The layout or arrangement of the
work space
(4) The design of work processes to
enhance productivity
Capacity
• The max output that an organization be
capable of producing
• Measure a single facility:
– Design vs. Effective capacity
– Capacity Utilization: design vs. efficient utilization
• For systems have more than one facility and
flows of product
– System capacity and bottleneck
– Improve system capacity
Determinants of Effective Capacity
• Facilities
• Human considerations
– Adding people
– Increasing employee motivation
• Operations
– Improving operating rate of a machine
– Improving quality of raw materials and
components
• External forces
– Safety regulations
Capacity Utilization
Measures how much of the available capacity
is actually being used:
actual output rate
Utilization 
 100% 
available capacity
– Always <=1(percentage of usage)
– Higher the better
– Denominator:
• If effective capacity used: efficient utilization
• If design capacity used: design utilization
Aggregate Planning
• The process of planning the quantity and
timing of output over the intermediate
range (3-18 months) by adjusting
production rate, employment, inventory
• Master Production Schedule: formalizes
the production plan and translates it into
specific end item requirements over the
short to intermediate horizon
Capacity Planning
• The process of determining the
amount of capacity required to
produce in the future. May be at the
aggregate or product line level
• Master Production Schedule anticipated build schedule
• Time horizon must exceed lead times
for materials
Capacity Planning
• Look at lead times, queue times, set up times, run
times, wait times, move times
• Resource availability
• Material and capacity - should be in synch
• driven by dispatch list - listing of manufacturing
orders in priority sequence - ties to layout
planning
• load profiles - capacity of each section
the capacity decisions:
•
•
•
•
When to add capacity
How much capacity to add
Where to add capacity
What type of capacity to
add
• When to reduce capacity
Capacity Planning
• Rough Cut Capacity Planning process of converting the master
production schedule into
requirements for key resources
• capacity requirements plan - timephased display of present and future
capacity required on all resources
based on planned and released
orders
Capacity Planning
• Capacity Requirements Planning
(CRP) - process of determining in
detail the amount of labor and
machine resources required to meet
production plan
• RCCP may indicate sufficient
capacity but the CRP may indicate
insufficient capacity during specific
time periods
Theory of Constraints
• Every system has a bottle neck
• capacity of the system is constrained
by the capacity of the bottle neck
• increasing capacity at other than
bottle neck operations does not
increase the overall capacity of the
system
Theory of Constraints
• What needs to be changed
• What to change to
• How to make the change happen
Theory of Constraints
•
•
•
•
•
Identify the constraint
Subordinate
Inertia
Walk the process again
inertia of change can create new
bottle necks
Capacity Planning
 Establishes overall level of
productive resources
 Affects lead time
responsiveness, cost &
competitiveness
 Determines when and how
much to increase capacity
Capacity Expansion
 Volume & certainty of anticipated
demand
 Strategic objectives for growth
 Costs of expansion & operation
 Incremental or one-step
expansion
Sales and Operations
Planning (S&OP)
• Brings together all plans for
business
• performed at least once a month
• Internal and external
Adjusting Capacity to
Meet Demand
1. Producing at a constant rate and using inventory
to absorb fluctuations in demand (level
production)
2. Hiring and firing workers to match demand (chase
demand)
3. Maintaining resources for high demand levels
4. Increase or decrease working hours (overtime
and undertime)
5. Subcontracting work to other firms
6. Using part-time workers
7. Providing the service or product at a later time
period (backordering)
Demand Management
 Shift demand into other periods
 Incentives, sales promotions,
advertising campaigns
 Offer product or services with
countercyclical demand patterns
 Partnering with suppliers to reduce
information distortion along the
supply chain
Remedies for Underloads
1. Acquire more work
2. Pull work ahead that is scheduled
for later time periods
3. Reduce normal capacity
Remedies for Overloads
1. Eliminate unnecessary requirements
2. Reroute jobs to alternative machines or
work centers
3. Split lots between two or more machines
4. Increase normal capacity
5. Subcontract
6. Increase the efficiency of the operation
7. Push work back to later time periods
8. Revise master schedule
Scheduling as part of the
Planning Process
Scheduling
• Scheduling is the last step in the planning
process?
• It is one of the most challenging areas of
operations management.
• Scheduling presents many day-to-day
problems for operations managers because of
–
–
–
–
Changes in customer orders
Equipment breakdowns
Late deliveries from suppliers
A myriad of other disruptions
Objectives in Scheduling










Meet customer due dates
Minimize job lateness
Minimize response time
Minimize completion time
Minimize time in the system
Minimize overtime
Maximize machine or labor utilization
Minimize idle time
Minimize work-in-process inventory
Efficiency
Sequencing Rules









FCFS - first-come, first-served
LCFS - last come, first served
DDATE - earliest due date
CUSTPR - highest customer priority
SETUP - similar required setups
SLACK - smallest slack
CR - critical ratio
SPT - shortest processing time
LPT - longest processing time
Critical Ratio Rule
CR considers both time and work remaining
time remaining
work remaining
due date - today’s date
remaining processing time
If CR > 1, job ahead of schedule
If CR < 1, job behind schedule
If CR = 1, job on schedule
Ties scheduling to Gantt Chart or PERT/CPM