Dynamic Modelling: Certainty Case

Dynamic Model

• A dynamic model represents systems that change over time
• Certainty case in a dynamic model:
  • All variables and parameters are known with absolute precision
  • No ambiguity or variability in the system
  • Predictable changes and no external shocks
  • Deterministic relationships between variables
• Limitations of certainty in dynamic models:
  • Overly simplifies real-world conditions
  • Fails to account for uncertainties, variability, and dynamic nature of the external environment

Optimum Lot Size Model with Constant Demand (EPQ Model)

• Deals with constant demand scenarios and is a dynamic lot-sizing model
• Key components:
  • Demand Rate (D)
  • Production Rate (P)
  • Setup (or Ordering) Cost (S)
  • Holding (or Carrying) Cost (H)
  • Shortage Cost (if applicable)

Risk Case in Dynamic Model

• Involves assessing and addressing uncertainties that may impact the model's behavior, outcomes, or predictions
• Characteristics of risk in production planning and control:
  • Uncertainty
  • Variability
  • Complexity
  • Interdependence
  • Time sensitivity

P-System and Q-System

• Part of the Theory of Constraints (TOC), a management philosophy
• P-System:
  • Focuses on maximizing productivity and efficiency of the production process
  • Identifies and eliminates bottlenecks or constraints
  • Emphasizes synchronizing the entire production process with the bottleneck
• Q-System:
  • Manages and controls queues of work-in-progress (WIP) that accumulate in front of bottlenecks
  • Manages the flow of work through the system
  • Balances WIP levels to keep the bottleneck working continuously without overwhelming downstream processes

Material Requirement Planning (MRP)

• Basic calculations to determine components required from end item requirements
• Objectives:
  • Inventory reduction
  • Reduction in manufacturing and delivery lead times
  • Realistic delivery commitments
  • Increased efficiency
• MRP is a methodology used for planning and managing manufacturing operations
• Involves the use of software to assist with planning and scheduling of production processes

Just-In-Time (JIT)

• Inventory management method where goods are received from suppliers only as they are needed
• Reduces inventory holding costs and increases inventory turnover
• Importance of JIT:
  • Reduces inventory waste
  • Decreases warehouse holding costs

Enterprise Resource Planning (ERP)

• Complex information system that incorporates both internal and external information flows
• Need for ERP:
  • Incorporates all business functions and external stakeholders
• Objectives of ERP:
  • Drives the flow of information between all internal business functions
  • Manages functions related to outside stakeholders
• ERP solutions:
  • Address organizational needs, not selected islands of the organization
  • Bring new culture, cohesion, and vigor to the organization
  • Guarantee benefits even if the organization is a multi-plant, multi-location global operation