Transcript MFS605/EE605 Systems for Factory Information and Control Lecture 7 (Fall 2005) Introductory Production Control and MRP Larry Holloway Dept.

MFS605/EE605
Systems for Factory Information and Control
Lecture 7 (Fall 2005)
Introductory Production Control and MRP
Larry Holloway
Dept. of Electrical and Computer Engineering and
UK Center for Manufacturing
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• Where we’ve come from:
• Models of Manufacturing Systems:
– Deterministic, Queuing, Simulation
– Key ideas:
• Variation is undesirable:
– If unbuffered, we sacrifice capacity
– If buffered, we have more WIP, longer throughput time
– M/M/1, M/M/c represents “practical worst-case”
variability (CV = 1)
• Some WIP useful for “buffering” stations, but…
• More WIP  Longer throughput time (Little’s law)
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3
Key points of material so far:
• Relationship between WIP and time (Little’s law)
• Impact of variability
• Modeling for estimating time, WIP, performance
– Deterministic
– Stochastic/Queueing
– Simulation models
Now… how do we manage the orders and inventory…?
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Manufacturing Planning/Production Control
• Suppose we have a product designed
• Suppose we have a facility to produce it
Question: How do we operate the factory to produce the product?
--> Production Control
Production Control: coordination of resources to meet customer
demands/orders.
(Resources mean: inventory, equipment, labor)
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Balancing in production control
• Production Control requires balance between
– customer service
– process efficiency (cost)
– inventory efficiency (cost)
• Potential conflicts:
– Customer service --> provide product with minimum
leadtime
– process efficiency --> avoid overcapacity
– Inventory efficiency --> avoid tying up capital
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• inventory reduces cost through
– fewer missed sales (if finished product available)
– amortized setups
– reduced order costs (administrative overhead)
– reduced material cost through quantity discounts
• inventory contributes to cost through
– cost of invested funds
– cost of storage space
– quality costs
– coordination costs (tracking and transport of WIP)
– Cost of poor responsiveness, obsolescence, decay
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WIP
• WIP (Work in Process):
– parts and products on the factory floor
• --> not in raw materials inventory
• --> not in finished goods inventory
• WIP means money tied up since products not shippable
•
Value of inventory in average manufacturing
company is 1.61 months sales = 13.4% of annual sales
– From 1988 to 1989, after tax profits of mfg. Companies
averaged 5.4% sales
– This means manufacturing company had 2.5 years of
profits invested in inventory
(From Dilworth):
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Breakdown of time spent by an average part in
traditional metalworking batch manufacturing plant:
Moving and waiting = 95%
Time on machine = 5%
30% cutting
70% loading, gauging, positioning
• Figures are from late 70’s, but still true in many companies
today.
• One of the challenges in manufacturing is to reduce this
non-value-added time.
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Production Control: the coordination of resources to meet customer
demands/orders, balancing
– customer service
– process efficiency (cost)
– inventory efficiency (cost)
•
Example of complexity: modern jetliner.
– How do we go about promising a delivery date?
– How do we ensure necessary parts come together in a timely
manner?
•
Production control addresses these questions:
– How much can we sell?
– What parts do we need, and when?
– What do we have in inventory?
– What do we have to make, and when?
– What is the lead time?
– What processes are required?
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Complex production control: many products,
lots of buffering
simpler production control: few products,
no buffering
Low
Product Focus
High
• Process decoupling: separation of direct effects of different
processes:
– examples: job shop (high) vs. transfer line (low)
– low decoupling --> higher inventory efficiency
– high decoupling --> higher process efficiency
• Product Focus: How dedicated are facilities to a specific product.
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Production Control Classifications
Multiple-period inventory systems
• Methods for Independent Demands
– External demands (final products)
– Uncertainty
– Examples:
• Economic Order Quantity
• Fixed Quantity
• Fixed Interval
•
Methods for Dependent Demands
– Demand depends directly on demand for higher level products.
– Examples:
• Push Systems (MRP)
• Pull Systems (JIT or lean manufacturing)
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Independent Demand Inventory Methods
•
Fixed Quantity Reorder
– reorder a fixed quantity when parts fall below reorder point
– good for parts with constant use rates
– “Two-bin” reorder useful for inexpensive parts
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Independent Demand Inventory Methods
•
Fixed Interval System
– at fixed time points, reorder to replenish up to fill line
– Useful when multiple part types from same supplier.
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Minimum-maximum inventory systems (S,s)
• (S,s) system
– S is maximum level
– s is minimum level
• Inventory is reviewed at fixed intervals t
• Order is placed only if inventory below minimum level s
• Order is placed to refill up to level S
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Economic Order Quantity
•
•
Economic Order Quantity Model: allows determination of “optimal” order
size or order period.
Assumes:
– demand is known and constant
– setup cost and inventory costs are known
C=inventory carrying cost per unit per time
Q=batch size
S=setup cost per batch
D=Demand per unit time
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EOQ
C=inventory carrying cost per unit per time
Q=batch size --> avg inventory level = Q/2
S=setup cost per batch
D=Demand per unit time
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Economic Order Period
Optimal order period based on EOQ calculation
Optim al period 
EOQ
Dem and/ period
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Assumptions of EOQ
Assumptions of EOQ:
•
Use rate is uniform and known (constant demand)
•
Lead time is known in advance
•
Cost of order is same regardless of amount ordered
(item cost does not vary with order size (no quantity discounts))
•
Cost of holding inventory is a linear function of # of items held (no
economies of scale in holding)
•
No backorders (all of order delivered at same time)
•
No probability or uncertainty
•
Setup and inventory costs assumed fixed
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Summary so far…
•
Production Control – coordinate resources (people, equipment,
inventory) to meet customer demands/orders
•
Independent Demand inventory methods…
– Fixed Quantity Reorder – reorder fixed quantity whenever
inventory drops below trigger level
– Fixed Interval System – reorder to refill at periodic interval
– Minimum-Maximum (S,s) method: periodic ordering, order to refill
to level S, but only if inventory is below s.
– Economic Order Quantity: (EOQ): determine batch/order sizes
based on inventory cost and setup cost
– Economic Order Period: Use EOQ to determine order period
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ABC inventory classification
% of $ usage
% of items
Classify and choose policy based on value:
A: items of highest expenditure (top 10-20%)
– given greatest attention
– may warrant constant record keeping
– often fixed quantity reorder or frequent review interval
B: items of mid importance (next 20-30%)
C: items of lowest value
– examples: bolts or screws
– not worthwhile to track individually, don’t worry if some extra
– just reorder on regular basis -- use simple methods
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ABC classification example
Item
5294
5223
4395
8046
9555
6081
1837
3521
4321
9261
1293
2926
•
•
Annual Use in $
97,982
40,566
17,028
16,060
15,602
8,902
8,222
5,691
4,488
3,190
2,127
737
(Dilworth)
% of Sum
44.42
18.39
7.72
7.28
7.07
4.04
3.73
2.58
2.03
1.45
0.96
0.33
Cum. %
44.42
62.81
70.53
77.81
84.88
88.91
92.64
95.22
97.26
98.70
99.67
100.00
Note: keeping an extra month of “A” product #5294 is $8165 worth of
inventory tied up. Keeping an extra month of “C” product #3521 is
$474.25.
Key idea of ABC: for A items, keeping extra inventory is costly, so it is
worth careful tracking. For “C” items, keeping extra inventory is less
costly, so use easy tracking methods to save on inventory tracking
effort.
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ABC continued…
• ABC useful for determining how to manage inventory based
on its cost or value.
• Note that some items may be very critical but of low cost, and
thus justify a higher rating than ABC gives them.
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• DEPENDENT DEMAND INVENTORY MGT.
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Production control for dependent demand items
• Dependent demand items:
• Example: Forklift:
– each order requires 4 wheels, 4 tires, 1 seat, 1 steering
wheel, etc.
• Methods:
– Push
– Pull
– OPT (drum-buffer-rope methods)
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Push System
• Customer orders and forecasts are fed into beginning of line
Forecasts
CUSTOMER
Raw
materials
Manufacturing Facility
Product
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Pull System
• A production system driven by consumption and
controlled by synchronized replenishment signals.
•
Orders for product pulled from end of line, rest of line then
responds to replace removed product
CUSTOMER
Supplier
order
Raw
materials
Manufacturing Facility
Product
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Push System
• Customer orders and forecasts are fed into beginning of line
Forecasts
CUSTOMER
Raw
materials
Manufacturing Facility
Product
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Pull System
•
Orders for product pulled from end of line, rest of line then
responds to replace removed product
CUSTOMER
Supplier
order
Raw
materials
Manufacturing Facility
Product
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MRP / MRPII
MRP: Material Requirements Planning
MRPII: Manufacturing Resource Planning
• Typical Push system:
– “explodes out” demand for final product into orders for
raw materials and subassemblies.
• began in 1960’s as computerized approach to materials
planning (MRP)
• Later expanded (MRPII), which included:
– master production scheduling
– capacity requirements planning
– purchasing
– forecasting
– financial modules
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Background
• Popularity stems to the “MRP crusade” in 70’s by APICS
(American Production and Inventory Control Society)
• Focus:
– convince industry that MRP was integrated decision
support system for management of the total manufacturing
business.
• Promoted by APICS, consultants, and computer industry
• Recently: MRP has come under fire:
– oversold and poorly implemented
– in practice, often leads to large WIP, large lead time
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Bill of Materials (BOM)
• MRP core based on processing of bill of materials
• Bill of materials is product structure: what is needed
• Example: 4-legged stool bill of materials
Stool
Seat
Leg (x4)
Frame
Raw Frame
Cushion
Cushion
Material
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• MRP Requires:
– Master Production Plan
• (orders for finished products with due dates)
– On-hand inventories
– Bill of materials
– Current Status of purchased and manufactured items
– Replenishment rules by item
• lead time
• order quantity
• safety stock
• scrap allowance, etc.
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• MRP is calculating sizing and timing of net requirements for
components/subassemblies
• Time is divided into “time buckets”
Given gross requirements for top level:
• Projected Inventory =
Previous Inventory
+ Scheduled Receipts
- Gross Requirements
• Determine net requirements based on projected inventory
• Shift back by lead time to determine when to order net reqmnts
• Determine Gross Requirement for components by BOM, then
repeat steps above for components
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Example:
• Bill of Materials for Stool A (4 legged) and Stool B (3 legged)
• Master Production Schedule:
• Other info: lead times (weeks)
– Stool A:
2
– Stool B:
2
– Leg:
2
– etc…..
current inventory
10
30
40 (20 more due week 3)
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MRP Example:
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• Summary of basic method:
– take final orders (gross reqmnts)
– determine net requirements (after inventory, sched recpts)
– from lead time, determine when to begin order
– from bill of materials, determine gross reqmnts of
components
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What happens if the schedule changes?
• Two approaches:
– Regenerative
• redo everything over from scratch
• done infrequently
• Problems:
– Net Change MRP
• As changes occur, only recalculate modified parts
• done daily or on-line
• Problems:
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Other issues of MRP
• Time buckets:
– bucket is fixed time slot, and system has fixed # of buckets
(planning horizon)
– typically buckets are 1 week
• note that there is no explicit indication as to whether event
occurs at beginning or end of the bucket
• Safety Stocks:
– excess quantities of inventory maintained to cover
unexpected fluctuations in supply or demand.
– “Just-in-case” inventory
– 2 methods
• always order stock to keep inventory above minimum
• just hide safety stock from MRP system (don’t include in
inventory)
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Net change and regenerative are both “top-down” planning
“Bottom-up planning” is where human operator takes over
– rush orders, special exceptions, scheduling
• Firm-planned orders: allows over-ride of MRP rules
– override lot size or lead time
• Pegged Requirements: allows operator to see what final order
is associated with given component orders (retrace the MRP
steps)
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MRP Review
• MRP: Materials Requirement Planning
– computerized approach to translating orders for final
goods into orders for operations and raw materials
– Key idea: Blow up bill of materials
• expand to subcomponents
• factor in lead times
• determine when operations and orders should be done
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MRPII
• MRPII: Manufacturing Requirements Planning
– built around MRP bill-of-materials processor
– adds additional functionality:
• master production scheduling
• capacity planning
• financial modules
• etc.
– Integrated set of manufacturing planning tools
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Rough Cut Capacity Planning
•
Blows out Bill of Resources similar to explosion of Bill of Materials
for MRP
•
•
Example:
Orders
– Stool A:
– Stool B:
wk1
100
180
wk2
150
180
wk3
120
180
Suppose we need 1 man hour per stool. (This is with setup time
amortized)
Required hours:
Available:
Net:
•
280
300
+20
330
300
-30
300
300
Note: No real planning, just evaluation of requirements
– Highlights resource constraints.
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Positive aspects of MRP
• Better coordination of orders for dependent demand items…
– May reduce WIP by ordering component products only as
needed for final product.
– But…
• Production Planning: Helps determine peaks and valleys
• Purchasing and Finance: tells needs over the horizon.
• Sales: MRP helps sales by giving estimates of lead times…
– But…
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Issues with MRP
• MRP is useful for high-level planning.
• Generally seen as a problem for low-level shop-floor control
• Issues:
– buckets are too course for shop-floor control
– Lead times treated independent of demand or batch size
– Inflation of lead times or safety stock-- no method to see if
these are too big, no method to encourage reduction
– Commonly gives large lead times and large WIP
– Assumes “Transfer quantity = order quantity”
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Transfer Quantity vs. Order Quantity
• Example: 50 components in batch, 10 minutes per part.
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Pull System
• A production system driven by actual consumption and
controlled by synchronized replenishment signals.
•
Orders for product pulled from end of line, rest of line then
responds to replace removed product
CUSTOMER
Supplier
order
Raw
materials
Manufacturing Facility
Product
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Just-in-time manufacturing
• Just-in-time manufacturing: “Lean Manufacturing”
• Key Concept: Continuous improvement to eliminate waste of
all forms.
• Goals:
– Minimum zero inventories
– zero lead time
– zero set up time
– lot size of 1
– zero defects
– total elimination of waste
Is this realistic?
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• We will just study the production control, but concept is much
bigger. Affects:
– transportation
– supplier relations
– quality
– setup
– employee responsibilities
– …all aspects of organization…
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• Background:
– Toyota -- postwar Japan
– Taichi Ohno: Chief production engineer.
– Not really noticed by US until 1970’s
Why so slow for West to notice or catch on?
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JIT/Lean
• JIT/Lean is holistic approach
– keep tackling all parts of system
• different aspects affect each other
– example: lot sizing and setup time
– keep striving for continuous improvement
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Conventional Mfg.
• Why did it take so long for US mfg. To understand?
Possible ideas:
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