Manufacturing Management DM202 Semester 2 PDF

Manufacturing Management DM202 Semester 2 Dr Colin Andrews: [email protected] Who Am I?  2011 – Now: University sector, completing a PhD , Knowledge Exchange with industry, teaching in engineering Faculty and Business School  1992 – 2010: Business consultancy – operations improvem...

Manufacturing Management DM202 Semester 2 Dr Colin Andrews: [email protected] Who Am I?  2011 – Now: University sector, completing a PhD , Knowledge Exchange with industry, teaching in engineering Faculty and Business School  1992 – 2010: Business consultancy – operations improvement, manufacturing systems design  1990 – 91: MBA  1985 – 90: Product Engineer in the automotive industry  1981 – 85: B.Sc. Hons Mechanical engineering Class Goals “The module ... provides an understanding of the issues faced when organising the workplace and creates awareness of the systematic approaches available to enhance work environments through the introduction of established manufacturing optimisation practices.”  LO5 : Design and analyse manufacturing layouts for optimum efficiency.  LO6 : Demonstrate knowledge and understanding of established manufacturing optimisation techniques. Class Content ઼  Layout Types  Product Flow Analysis  Work System Design  Cellular Manufacture  Manufacturing Strategy  Lean operations  Globalisation Central Issue: How we design and implement an operational unit has a dramatic impact on the effectiveness of the business as a whole Factory Level Detail Level Business Level “ The factory is the product”: Musk’s take on Tesla’s record 2020 deliveries https://thedriven.io/2021/01/12/the-factory-is-the-product-musks-take-on-teslas-record-2020-deliveries/ Assessment  Group Assignment (25% of DM202): “Using the information provided you have to design a facility layout and then choose a section of your layout to go in-depth and develop a workstation design based on the principles of lean and 5S. A report must be produced that justifies the choices of the configuration and elements of the final design.”  Exam (25% of DM202): Based on the material in these lectures Class operation  Delivery Mode – mostly lecture, will include some group activity  Groups – groups of 5, you CAN select (see myPlace for activity)  Attendance – attendance is required. DMEM attendance policy will be applied.  Reading: R. Dan Reid and Nada R Sanders ‘Operations Management An Integrated Approach’ 2nd Value Edition Wiley (WIE) ISBN: 0- 471-74527-8 (same as discontinued ISBN 0-471-65545-7). Operations Management (5 th Edition), N. Slack, S. Chambers and R. Johnston, 2007, Prentice Hall, UK Operations management, Terry Hill, Macmillan Business, 2005, UK Production and Operations Management, R. Wild, Cassell 1998, UK Service Operations Management, Robert Johnston and Graham Clark, Prentice Hall, 3 rd edition, 2008. Manufacturing Management DM 202 Semester 2 – Introduction to Manufacturing Management Dr Colin Andrews: [email protected] Topics for today  Historical view of manufacturing management  Why manufacturing still matters in UK  How the UK performs v. G7  Impact of new technologies  Manufacturing & Globalisation  Example cases Market Driven… Waste Focused 00s 60s 70s 80s 90s 00FW Taylor Henry Ford Production Engineering Work Study Method Study Layout Planning Simplification Variety ReductionMaintenance management QC Group technology JIT Manufacturing OPT TOCTPM 5S QA TQM SMED Lean“ Any colour you want as long as it is black”People… necessary evil … … … … … … … … …. …. …. …. …. …. …. …. key asset Machine that changed the world Womak and Jones, 1991 Lean thinking Womak and Jones, 2003 Toyota Production System Product and Production Driven Market Driven Six Sigma / DfSSA Brief History of Manufacturing Relevance of Manufacturing © University of Strathclyde 2014 Manufacturing Phases (productivity) New Technologies Need New Approaches  Intense Robotisation  Musk’s Alien Dreadnought  Lights out factories (Castle Precision)  Additive Manufacture  e.g. Shapeways, Stratasys  Information dense product  Type 31 Frigates  Subsea equipment Manufacturing Strategy & Globalisation  Make v Buy decisions  How much of my product do I make?  e.g. mobile phones / cars / clothes / aircraft  Manufacturing goals  Responsiveness  Lowest cost producer  Flexibility  Site locations  Skills v. labour costs  Supply chain length Illustrative Examples - Linn HiFi  Growth pains after early success  How to speed up build?  Team lead could build one herself*  In half the time of the team  Now a Core Competence of Linn *Fun fact – hifi buffs swear they can tell the difference between tone arms built by different people Illustrative Examples – Tesla Model 3  Elon Musk goal – to accelerate the adoption of electric transport (try to save this world …)  Needs – mass market electric vehicle  Speedster proves the concept  Model S/X demonstrate viable (but costly) vehicles  Model 3 is the mass market vehicle ($35,000 target price)  Manufacturing Solution – the Alien Dreadnought  Made in California The Alien Dreadnought  Highly vertically integrated  Highly automated  Machines making machines  Like an alien dreadnought  Targetting 5,000 units / week  300,000 pre-orders ... The Alien Dreadnought  Highly ambitious? Manufacturing Management DM 202 Semester 2 – Introduction to Manufacturing Management Colin Andrews: [email protected] Topics for today  Types of manufacturing businesses  Manufacturing Layouts  Functional  Flow  Cellular  Project  Process  Factors affecting layout decisions  Groups! Classification of Companies Raw materials Components Sub- assemblies Finished goodsS u pp lie rs C u sto m e rs Make To Stock (MTS) Assemble To Order (ATo) Make To Order (MTO) Engineer To Order (ETO) Stock held at this stage Types of companies that  Make to Stock?  Fast Moving Consumer Goods e.g. mobile phones  Assemble To Order?  Customised Products e.g. Mini, boilers  Make To Order?  Specialised Equipment e.g. machining centres  Engineer To Order?  Bespoke Products e.g. power stations Material in the context of business processes  The Supply Chain Operations Reference (SCOR) model shows how material flows and business processes fit together Source: http://www.apics.org/apics-for-business/frameworks/scor Implications of SCOR model  Strong drive for manufacturing businesses to focus on ‘core competence’  Different stages of the SCOR model can be managed by other companies e.g.  third party logistics for deliveries and returns  Component suppliers for stock management  These companies could be on the manufacturing site or elsewhere  Can get very complex, very quickly  See Impact of Fukushima Capabilities Competencies Core CompetenciesWhat we can do What we are really What is difficult good at doing to replicate E.g. CSM  Supply chain management  ISO9000  EFQM  Six sigma  Lean  MRP/ERP  Strategy development  Performance measurement  Product development  Innovation  IT Strategy  BPR  Benchmarking  SPC  Collaborative enterprise dev.  Business Transformation  Supply chain management  EFQM  MRP/ERP  Strategy development  Performance measurement  BPR  Lean  Six sigma  Collaborative enterprise dev.  Business Transformation  Strategy development  Performance measurement  Collaborative enterprise dev.  Business Transformation  MRP / ERP  Six sigma  Lean © University of Strathclyde 2014 Product Type  Products can be categorised based on the nature of the transformation of raw material  ‘ Explosive’ Product  A single / small number of raw materials result in a large variety of final products  e.g. chemicals, food products  ‘ Implosive’ Product  A large number of input materials are required to make a small variety of final products  e.g. electronics, aircraft  Most visible when looking at Bill of Material (BoM) BoM example  Implosive?  Explosive? BoM example  Implosive?  Explosive? Wood Pulp80GSM Sheet 100GSM Sheet 150GSM Sheet80GSM / A4 80GSM / A3 100GSM / A4 100GSM / A380GSM / A4 / 1 Ream 80GSM / A4 / 1 Box 80GSM / A4 / 1 Pallet So …  Different Companies need different operations  Some companies excel at production operations (e.g. Toyota)  Some do not – but are excellent in other ways e.g. customer relationship management, product innovation  What ‘best fits’ a particular company depends on many factors:  Market conditions (growth, contraction, stable/unstable)  Nature of product (fashionable, staple item, customisable …)  Manufacturing system  It is important for the business to understand these factors Laying out a factory  How does the production of ethylene differ from that of an air conditioning unit? Focus on filling bottles with gas Focus on assembling machine that pushes gas around Laying out a factory  Would a factory produce both an electric drill and a drill press? NO! Very similar BoM but very different customer needs and market demand Laying out a factory  How does the production of a wind turbine differ from that of a mobile phone? Range of Manufacturing Architectures Increasing Variety of ProductLow variety High variety Continuous Production Batch Production ‘ Jobbing’ Production Project Build Product Focus Process Focus Skills Focus Production CellsProduction Lines Function basedP rod uct V a riety P rod u ction F o rm at O pe rations F o cu s La yo ut Functional Layout  Like machines are grouped (in departments)  Lathes  Drill Presses  Grinders  Machines are general purpose  Require set-up  Operators have specific skills  High variety of components can be handled  Expertise can be pooled  Machine and operator utilisation can be very high  Part routing can be complex  Suits Jobbing and Batch manuf Flow Layout  Equipment is laid out in a fixed sequence  e.g. for an inkjet cartridge line  Equipment becomes specialised  ‘ Similar’ products use the same line  Providing a product range may require many lines  Part routing is simple (fixed)  Automation is supported  Suits low variety & high volume – continuous manufacture Rinse Fill Label Pack Palletise Cellular Layout  What happens when variety and volume are ‘medium’?  Products can be grouped in to ‘families’  Processing operations and routes are ‘similar’  Demand profiles are ‘compatible’  Workloads ‘balance’  ( i.e. lots of judgement decisions here)  Factory consists of multiple ‘cells’ with required equipment  Cells operate independently (autonomously)  Can be highly flexible  Batch manufacture – could even be single units Project Layout  Layout is focussed on the final product (e.g. a ship)  All elements come to the production site  Labour  Machinery  Materials  Product may be moved afterwards (oil rig) or not (power station)  Suits low volume (unique) products  Often large or fragile  May contain high volume components The ProductMateria l Labou rEquipmen tComponent s ‘ Process’ Layout  Chemical process based  Liquids, powders, gases  General purpose equipment is linked together to produce a single product  Pumps, valves, silos, reactors  Highly automated, centralised control  High capital investment  Low staffing  24/7 running  Hard to start / stop  Efficiency suffers Example – Alcan Chemicals  Manufacturer of specialty chemicals  Key customer groups are  Refractory products  Fire retardants  Product nature is ‘explosive’ - a few raw materials lead to a large variety of final product SKUs (SKU = Stock Keeping Units) Layout Schematic Process layout  High capital  Layout fixed (cheaper to build new than move)  Flow is fixed (via pipework) Functional layout  Medium capital – general equipment  Layout fixed (equipment too costly to move)  Flow is flexible (material can be transported loose) Things to consider  When developing a layout  What is the most appropriate overall architecture?  May involve a mix of the basic layout types  How will the layout meet the capacity requirements?  Is the layout based on optimistic / average / pessimistic projections?  How will the layout cope with variations (short and medium term)?  What internal / external drivers  Types of equipment  Available floor space  Type of product  Evolution of the layout  Cost to change  What technological changes may impact the layout?  What is the expected life of the layout? Summary  There are many basic forms of production layout  Actual layouts can / will be a mix of the basic forms  There is no ‘one best way’  So you can’t get it perfectly right  But you can get it very wrong  A layout must be related to, and fit with, the other areas of the business  Designing a layout is only part of the overall manufacturing system Groups! ● Sign in sheet shows which group I think you are in. ● Groups of 4 (3 off) & 5 (8 off) will stay as is ● Groups of 3 (3 off) will have an additional member each assigned (to make 6 groups of 4) ● Remaining students will be assigned into 4 more groups of 5 ● From next week attendance will be based on groups Manufacturing Management DM202 Semester 2 – Facility Design Colin Andrews: [email protected] Sign in Student password r7tb5n Facilities Design ⚫ Aim − To illustrate a number of the practicalities of arranging machines and other equipment ⚫ Reading − Reid & Sanders Chapter 10 or any other Operations Management book − Muther “Practical Plant Layout” ⚫ Example: https://youtu.be/NTb3SNtwTjg Facilities Design ⚫ Defining the physical arrangement of the equipment on the shop floor ⚫ Assumes: − Location is already known − Products and processes have been identified − Capacities have been calculated − Equipment has been selected ⚫ Most of following relates to batch manufacture − must always relate to type of product, demand and process Design categories ⚫ Facilities Design − where the equipment is to be located − also accessories: tooling cabinets, lockers, etc. ⚫ Materials Handling System Design − how will the material be transferred from one operation to another ⚫ Production System Design − defining management, organisation and systems (e.g. cells) New factory layout ??? * use templates to position? scale models? computer software? Cost of poor facilities design ⚫ Poor layouts incur unnecessary materials handling costs ⚫ Material handling does NOT add value − up to 12% of factory costs are caused by materials handling − up to 30% of factory costs may be caused by non - value adding activities ⚫ Note: layout and transport closely related. Problems in older factories ⚫ Older factory buildings − Column spacing − Low floor to ceiling height − Low roof or mezzanine floor or material handling − Movement between floors / sites − Access for machine movement − Floor strength, Vibrations − Security, Aesthetics ⚫ Older machines − Vibrations − Trenches − If it works, don’t touch it! − Transfer lines − Hydraulics - temperature Non - value adding activities • Inspection areas • material handling equipment • raw material storage area • WIP areas • finished goods storage area • tool and fixture storage area • passageways • dead zonesFactory Space includes... ⚫ Aisle design − Can take up to 20% of space − Passing of trucks − Escape holes for staff? ⚫ Dead zones − Poor layout? − What can be done with them? ⚫ Required for machine maintenance? Machines need Services ⚫ Power − Gas, electricity − Movement of supplies ⚫ Computer links − Data collection, e.g. SCADA systems − Machine monitoring and control − Wireless links on the increase ⚫ Other − Waste − Compressed air − Lighting Operators need Health & Safety ... ⚫ Escape routes ⚫ Fume extraction - e.g. plating ⚫ Trapping - e.g. lathes ⚫ Noise - e.g. presses ⚫ Height of machine operation ⚫ Out of reach of hazards − e.g. working with back to aisle − e.g. underneath crane ⚫ First aid, fire extinguishers ⚫ Standards - e.g. minimum working space Design Objectives ⚫ Objectives − Clear boundaries of areas - ownership. Self contained? − Visibility of processes. Good flow − “Compatible processes” adjacent − Housekeeping − Acceptance by shop floor (use their input) ⚫ Possible procedure − Determine boundaries and equipment availability − Develop machine and other resource databases − Identify potential problems - can they be overcome? − Obtain outputs from flow analysis − Use templates on scale drawing − Invite criticism - especially from shop - floor. Get approval − Develop implementation plan Re - Cap ⚫ Manufacturing Layouts − Functional − Flow − Cellular − Project − Process Design for specific useFocus for today Design of functional systems ⚫ Aim − To illustrate a range of techniques for facility design ⚫ ‘P/Q’ Product Quantity Analysis ⚫ Systematic Layout Planning ⚫ Reading − Operations Management text books, especially by Muther − Reid & Sanders Chapter 10, pp.343 - 359 Some key terms ⚫ Bill Of Material (BoM) − Introduced last week − Structured description of all the parts in a product ⚫ Route Card / Routes / Routing − All the operations required to complete a part − May be a single (assembly) operation on a number of parts − May be a series of (machining) operations on a single blank − Typically the move between stages of a BoM has a route card Route card for this step ⚫ P - Q Analysis ⚫ Product - Quantity analysis developed by Muther ⚫ Arrange products on chart in order of quantity ⚫ Can be used for identifying type of layoutQuantity of each product Products (in descending order of quantity)High vol - flow line Medium vol - Lines / cells Low vol - job shop / functional Systematic Layout Planning (SLP) ⚫ From 1960’s but … − Work still relevant (See paper on myPlace) − Software packages available to support (e.g. FactoryFlow ) ⚫ SLP technique developed by Muther − Developed as methodology (i.e. a pattern to follow) ⚫ Four phases: − Location − General overall layout − Detailed layout − Installation (Functional) Layout planning ⚫ Material based relationships: − the flow of material through the manufacturing processes, as defined by the route cards ⚫ Service based relationships: − all the supporting activities involved in the manufacturing process, e.g. stores, tool rooms, maintenance, etc. ⚫ Relationships can then be ranked Muther’s Ranking of Relationships ⚫ Routes can be ranked Stage 2Stage 1 Take to/from data and the ranking table above and order list of movement relationships can be createdPerform a To / From analysis of operations from the available Route Cards e.g. identifies the following routes: A - B, B - C, B - E, C - D, C - E, C - F, D - E, E - FLabel Comment % routes % intensity of flow A Absolutely necessary 10 40 E Especially important 20 30 I Important 30 20 O Ordinary closeness 40 10 U Unimportant ~ ~ X Undesirable ~ ~ Flow between pair of machines Quantity flowing Percentage flowing Intensity rating B - C 6800 27.4 A A - B 4400 17.7 E B - E 3600 14.5 I C - F 3000 12.1 I C - E 2000 8.1 O C - D 1800 7.3 O D - E 1800 7.3 O E - F 1400 5.6 O Totals 24800 100 - Example Activity Relationship Chart (… how to set out the To / From data) (You must apply judgement here)Label Comment % routes % intensity of flow A Absolutely necessary 10 40 E Especially important 20 30 I Important 30 20 O Ordinary closeness 40 10 U Unimportant ~ ~ X Undesirable ~ ~ ⚫ Activity and space relationship diagrams … can develop this information diagrammatically B CStage 3 Stage 4 A E D FB C Stage 5 E D FC BA Display important relationships first, then add others Use area data to create space relationship diagram NB Different operations (departments) require different areas to operateUse relationship data to create activity relationship diagramActivity/MachineABCDEF Area required 4 2 1 1 1 1 E D FC BAStage 6 Layout plan ⚫ The space relationship diagram can be converted into a layout plan ⚫ The layout plan will have an “efficiency” − Can calculate the number of adjacent and non - adjacent flows − From this calculate a percentage Summary of SLP RAW DATA TO / FROM CHART FROM TO All values in top right corner to give intensity List the movements in order. Calculate % of whole.No. Move Qnty 1 1 - 8 16 2 5 - 7 15 3 4 - 5 13 etc. Use technique to classify into ‘A’, ‘E’, ‘I’, ‘O’, ‘U’ Draw schematic Show space reqts Fit to factoryNote: this is only part of Muther’s approach - other parts such as what to do with the arrangement of machines within the departments has not been covered Summary of Functional Layout 1. Numerous tools and techniques available 2. Only a few covered here 3. Tools vary in ease of use and understanding 4. Many are laborious if not embedded in software 5. Each has strengths and weaknesses 6. Important to decide which tools to use when (if at all!) Design of Cellular Layouts ⚫ Aim − To illustrate the mechanisms of forming cells. − To show the ROC mechanism ⚫ Reading − Burbidge - Production Flow Analysis − Reid & Sanders Chapter 10, pp.367 - 369 ⚫ Topics − Need to identify cells − Coding and classification − Production Flow Analysis − Rank Order Clustering (ROC) − Practical issues Forming Families of Products / Parts ⚫ Objectives − simple material flow system − each part processed in one group − acceptable workloads on machines in group − easily managed by one person − avoid unnecessary duplication of equipment ⚫ Design families − where parts are grouped by design features and should have similar processing requirements ⚫ Production families − where parts are grouped by processing requirements, regardless of design General procedure for group formation Procedure ⚫ collect data (samples, drawings, routings, etc.) ⚫ identify characteristics ⚫ classify characteristics ⚫ group parts with similar characteristics − by eye - largely subjective − by rule of thumb - rotational parts up to 50mm − by classification and coding − by operations sequence analysis General procedure for group formation Manual exercise - Identify cells in the routing data: ⚫ Example shows Part 1 goes to m/c’s 2,3 & 5 ⚫ Suggest: − Sketch out machines on paper − Draw lines between for flow − Identify any patterns by eye 1 2 3 4 5 1 x x x 2 x x 3 x x 4 x x 5 x 6 x x 7 x xMachinesParts Classification and coding Classification • is the arrangement of items into classes on the basis of their characteristics Coding • is assigning a numerical or alphabetic value to the characteristics in order to facilitate classification Example • Aston University “CAMAC” • Diagram: search for cell to use for part • Can reverse process and use iteratively for creation of cells X X X X X X X X X X X X X X X X X X X X X X X XShaded squares indicate component code matrix Machine cell compound matrix Component manufactured on these machines CNC Lathe Horizontal mill Cylindrical grinder Hone Production Flow Analysis (PFA) Three stage technique proposed & developed by Burbidge: • Factory flow analysis - broad sub - division of plant into departments – Only really necessary for large systems • Group flow analysis – Machine families on routing regardless of sequence – Can use Rank Order Clustering • Line analysis – Flow between machines to provide sequence – May be obvious flow, if not ... – Can use To/From analysisO r i g i n a l To A B C D E F G H F r o m A 50 30B C 15 2030D 1015 20E 15 10 20F 70G 35 65H 45 20 Mechanisms for PFA PFA (Group stage) results in matrix of routing data Need mechanisms to sort that information Key mechanisms are: • Cluster analysis – Cluster analysis based on idea of calculating similarity index and group accordingly • Rank Order Clustering (ROC) – Easier to understand than cluster analysis – Matrix manipulated directly by interchanging rows or columns – Binary numbers • Code rows and columns into binary numbers • Sort rows/cols in descending order • Repeat until no change – Note: easily computerised: ROC software or spreadsheets. ROC - manual example Take initial matrix and sort Machines 1 2 3 4 5 Rank Parts 1 0 1 1 0 1 5 2 1 0 0 1 0 =1 3 0 1 1 0 0 6 4 1 0 0 1 0 =1 5 1 0 0 0 0 4 6 1 0 0 1 0 =1 7 0 0 1 0 1 7 Machines 1 2 3 4 5 Parts 2 1 0 0 1 0 4 1 0 0 1 0 6 1 0 0 1 0 5 1 0 0 0 0 1 0 1 1 0 1 3 0 1 1 0 0 7 0 0 1 0 1 Rank 1 4 3 2 5Rank rows... ... order rows Rank cols... ... order colsRandom ... ... cells Machines 1 4 3 2 5 Parts 2 1 1 0 0 0 4 1 1 0 0 0 6 1 1 0 0 0 5 1 0 0 0 0 1 0 0 1 1 1 3 0 0 1 1 0 7 0 0 1 0 11 2 3 4 5 1 x x x 2 x x 3 x x 4 x x 5 x 6 x x 7 x xMachinesParts ROC - practicalities ⚫ Ignores loading. Ignores sequence. ⚫ Depends on accuracy of routing data. ⚫ Backward looking - ignores changes planned. ⚫ Exceptions / ‘real world’ prevents perfect matrix ⚫ Need to use judgment − To ignore certain operations / machines − To split work centres, therefore machines − To visually force solution Cell Design Summary ⚫ There are many ways of forming cells ⚫ Production Flow Analysis (PFA) covers a number of them ⚫ Rank Order Clustering (ROC) is a common and ‘easy’ technique to apply ⚫ There are a number of practical issues to consider Materials Handling Why is transportation an issue? ⚫ All production systems involve materials, machines and people ⚫ Need to bring these together - usually materials ⚫ Transportation: − Results is loss of control? − Component transport time often negligible compared to queue time − <1% transport, 5% value add, 95% queue/wait time ⚫ In manufacturing transportation does not add value − Added expense of equipment and people − Damage and safety issues − Customer does not see benefit “The earliest ideas on material handling centered about mechanical devices to assist persons doing the moving, i.e., mechanize the job . In general, this brought savings. But all too often plant engineers tended to instinctively to “ put in a conveyor ” to solve the handling problem when in many cases a conveyor was not the answer , any more than a universal answer of “use pallets and get a lift truck ” is correct. Each type of handling device has use in its proper place .” Muther 1955 “Practical Layout Planning” Caution! Context of material handling ⚫ How important is it in design? − Primary concern? − Ignore until end of design process? ⚫ Handling is closely linked to: − layout design (i.e. positioning of machines) − macro design (i.e. cells, etc.) ⚫ For small discrete parts, in batch environment: not major influence ⚫ For large products and / or high volumes : it is important Example methods of transportation Rover Mini production Diesel fuel injector nozzles Kitting trolley U - shaped cells compressed air plastic tubingbody chassis minibody descends on chassis manuf comptsmanuf compts assemble Selection of materials handling equipment Affected by many factors: ⚫ characteristics of material: − size − weight − shape − fragility ⚫ frequency of moves ⚫ distance to be covered ⚫ predictability of start and end points ⚫ production line − process based layout, etc. Intensity - distance plot Handling = short distance Transportation = long distance intensity of move distanceSophisticated handling equipment Simple handling equipment Sophisticated transportation equipment Simple transportation equipment Need models such as these to help understand where equipment is relevant and to understand differences ... Conveyors • Powered or unpowered • Continuous or intermittent • Provides point to point transport (does not move itself) • Can have accumulators for buffering, e.g. drinks industry • Bulk handling of powders - blow along pipes, e.g. flour transport • May be computer controlled • Belt, roller, etc. • Cross traffic possible • For flow layouts car door assembly car assembly line Transfer lines ⚫ Combined machines and transportation … flow layout ⚫ Used for transfer of parts - not that common now ⚫ Fixed material flow path ⚫ Dedicated to one production line - inflexible ⚫ Large and very expensive ⚫ Problems − machine breakdowns − maintenance − scrap products carry on through with further operations − upgrading difficult AGV’s - Automated Guided Vehicles Computer controlled Can be guided by rail, painted line or wire Collision detectors for safety Typically used in FMS (Flexible Manufacturing Systems) • however can be used to supply humans at work stations – ICL, Manchester: supply operators with computer components – Linn Products, Glasgow: supply operators with hi - fi components Allows some flexibility of start & end points Parts often transported with fixtures High initial investment Often becomes bottleneck in system • Is it appropriate (transport is non - value add)? • Simple check: is it always in use? work stations work stations ware - house Automated Storage and Retrieval Systems (ASRS) ⚫ Examples: − component stores − shoe shops?! ⚫ Computer controlled ⚫ Make maximum use of 3D space available ⚫ Expensive to install and maintain ⚫ Can encourage inventory (hides the problem) ⚫ Enables accurate records of quantities? ⚫ Warehouse may become Wherehouse? Cranes • EOT - electric overhead travelling cranes • Jib cranes - column mounted or free standing • Expensive to install and maintain • Can cause production delays while waiting • Introduces additional safety hazards • Tend to be fixed in one area • For heavy, bulky materials • Often used in functional layouts Trucks Fork lifts, trucks, carts, etc. Relatively cheap Extremely flexible Limited capacity Layout types • Functional & cellular require wide aisles and turning areas? can have very high reachpower: gas, electric, petrol manual types do not necessarily need dedicated/skilled staff Robots Beneficial for • hazardous environments • arduous environments • accuracy • continuous operation Drawbacks • Expensive • Limited range Different types of power • Electric, hydraulic, pneumatic Easy to teach 1980’s - rise and fall? For flow layouts and cells robot placing windowseries of robotic machining cells Fixed Material handling in flowline systems Transporting - movement to, from and along the line Pacing - maintaining a steady and predicable output - e.g. cars Holding - presenting the work in the appropriate orientation Storing - providing temporary buffer between stations Indicators of poor material handling Safety problems High utilisation of material handling equipment Production delays DamageUnclear flow patterns Unidentified material Lost parts A related issue - Packaging ⚫ Transportation requires close link with packaging ⚫ Packaging used for: − Internal / external movement − Containment, Protection, Identification, Image − Big issue regarding waste, recycling, etc. ⚫ Can be consumed with the product (e.g. bag and contents supplied to customer both fed into manufacturing process) ⚫ Used for lot control − Lot control is were discrete item/product is assigned number and tracked − Assists in the manufacture of the product − Essential for quality control and tracing back • May not need packaging if supplied in bulk − e.g. polymer chips for blow moulding taken by tanker to silo Packaging - exploding variety Final assembly operations and packaging add to variety • Single base product becomes numerous variant products • Need to physically store each variant? • Often difficult to search across variants for specific sale (ie. Preferred item not available but substitute available?) Consequence of changes: increased cost due to • Additional labour (assembly, transportation, admin) • Wasted components / packaging Base Oven/Stove Last assembly Test Pack Store Despatch Different options (e.g. oven LPG not natural gas) Different test spec (e.g. different, tighter) New packaging (e.g. customer labels)3 15 20 40 variants Packaging - Pallets Very common in internal / external transportation, wide variety • Material - wood or plastic (important for food industry) • Physical properties (no one type of pallet) – Size (1100x1100, 1200x1000, etc) – Reversible, 2 way / 4 way Often dictated by customer • high variety leads to stock control issues – money / space required affected Example of pallet flow Pallet stored for customer X on 2 way pallet Needed for customer Y Reversed with slip sheet onto second pallet (happens to be 4 way) Shrink wrapped Loaded into container and pallet slipped off Other stages - not covered here ⚫ Steady state design − capacity analysis − designing for average conditions ⚫ Dynamic design - advanced! − changes over time − things go wrong − Covered in 4th year Computer Modelling and Simulation ⚫ Control system design - advanced! − Covered in 3rd year Manufacturing Operations Management class − How to control material flow between machines/operators Proceedings of 07th IRF International Conference, 22nd June -2014, Bengaluru , India, ISBN: 978 -93-84209 -29-2 124 DEVELOPMENT OF PLANT LAYOUT USING SYSTEMATIC LAYOUT PLANNING (SLP) TO MAXIMIZE PRODUCTION – A CASE STUDY 1ORVILLE SUTARI , 2 SATHISH RAO U 1M.Tech.(Mfg. Engg.), M.I.T, Manipal, 2Asst. Professor (Dept. of Mech. and Mfg. Engg.), M.I.T, Manipal, Abstract -The objective of this research is to study the existing plant layout of a nacelle production unit and to design a lean plant layout using SLP (Systematic Layout Planning) to increase its productivity . Analysis of the existing plant layout was made by studying aspects like flow of materials, activity relat ionships and space requirements. New plant layout alternatives were design ed and compared to the existing layout. The new plant layout finally selected s how ed a significant decrease in the distance of material and work flow travel and resulted in increasing the productivity of the unit . Index Terms - Activity Relationship Chart, Facility layout, Lean , Systematic Layout Planning I. INTRODUCTION Plan t layout refers to the arrangement of physical facilities such as machinery, equipment, furniture etc. with in the factory building in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of handling in processi ng the product from the receipt of material to the shipment of the finished product. Plant layout opt imization is a crucial step towards making an industry more lean. It helps to eliminate non -value adding work caused due to poor layout design and manageme nt. The manufacturing throughput time is also great ly reduced, therefore decreasing productivity and increasing cost s. Previous case studies have shown the practical significance of using SLP in improving productivity and utilization of spa ce in a producti on unit . Manufacturing industries are always under pressure from t heir shareholders to improve productivity. They are not only being compared with their competitors, but also within their own group of companies. An organization can therefore not just look at the competition on their local market, but it has to compare itself with factories all over the world. This case study was carried out at a nacelle production unit having a process type layout. The problems faced by the unit are more time and cost of manufacturing as a result of an inefficient plant layout . It is seen that the distances travelled by components and personnel during the man ufacturing process is a cause for delays in manufacturing. Excess movement and transport is also a cause for extra costs and wasted energy. With these problems in mind, the SLP technique is applied to Fig. 1. Procedure of SLP Optimize the existing layout and reduce the wastes. The basic analysis of the existing layout is done by establishing the relationships of th e different activities in the layout. Space required for each activity area and the necessary equipment is determined. After analyzing the existing layout, a new layout is designed . A final layout plan is selected after making necessary adjustments and eva luation s in a ccordance with any practical limitations . The SLP techni que gives a good result in improving work flow during the manufacturing process. Fig. 2. Process Flow Chart Development of Plant Layout Using Systematic Layout Planning (SLP) To Maximize Production – A Case Study Proceedings of 07th IRF International Conference, 22nd June -2014, Bengaluru , India, ISBN: 978 -93-84209 -29-2 125 II. BASIC OUTLINE OF LAYOUT DEVELOPMENT The tasks carried out in the SLP method used broadly falls into two phases; analysis and design. Fig. 1. shows the general procedure of SLP in the form of a block diagram. Fig. 3. Activity Relationship Chart III. ANALYSIS OF THE EXISTING PLANT LAYOUT This step in SLP deals with the gathering of all the information and data that is required to facilitate the design of an optimized plant layout. There are two types of products being manufactured namely, nacelle and nose cone. The nacelle and nose cone are produced in the same quantities and are de livered as a set. Table I Distances travelled in the existing layout Fig. 4(a). Dimensionless Block Diagram of Layout 1 Fig. 4(b). Dimensionless Block Diagram of Layout 2 A. Flow of Materials The analysis is done on the flow of materials for the two p roducts being manufactured. The sequence of operations performed in the manufacturing process forms the basis for the analysis of flow. Fig. 2. shows the process chart which is applicable to both nacelle and nose cone since the steps in their processes are largely the same. Table II Relationship between equipment size and work area Development of Plant Layout Using Systematic Layout Planning (SLP) To Maximize Production – A Case Study Proceedings of 07th IRF International Conference, 22nd June -2014, Bengaluru , India, ISBN: 978 -93-84209 -29-2 126 Fig. 5 (a). Plant Layout : Original Fig. 5 (b). Plant Layout : Proposed Layout 1 Fig. 5 (c). Plant Layout : Proposed Layout 2 B. Motion and Transportation The term motion is u sed for the movement of people, and transportation for the movement of objects. Quantitative data was obtained to calculate the total distances travelled in terms of motion and transportation during the manufacturing process. Table I displays the data for both th e nacelle and nose cone for the existing plant layout. It presents the from -to distances between different locations for each major process in their manufacturing. The data serves as a baseline and is useful in determining the degree of closeness n ecessary between different departments for material interaction. Efforts are made in layout design to place the departments having more material movement close to each other to minimize material handling. It was seen that movement of raw materials was carried out over long distances. Also, the flow of work was not optimum due to disjoined depa rtment areas . C. Activity Relationship Chart An activity relationship chart (ARC) is one that displays the closeness rating among all pairs of activities or departm ents. In an ARC there are six closeness ratings which may be assigned to each pair of departments. They are defined as A: Absolutely necessary, E: Especially important, I: Important, O: Ordinary, U: Unimportant and X: Undesirable. To make the chart we we re required to consider qualitative aspects like flow of material, ease of super vis ion and unsafe conditions. This was discussed with the work team leaders and supervisors to help identify the relative importance of having one department near to other. The relationship chart as shown in Fig. 3. was prepared after considering both quantitative data of distances travelled as well as the qualitative data collected from working personnel. D. Space Requirements It is important to also consider the space requi rements of each department area in relation with the work equipments. The equipment type and the space they occupy is listed alongside their respective departments in Table II. This data helped in the design phase of the layout planning when relocating the departments. IV. DESIGN OF NEW AND ALTERNATE PLANT LAYOUTS The data collected from the analysis phase of the layout planning was used in proposing new and alternate plant layouts which were checked for optimum flow of work through the processes. A. Dimension less Block Diagram The dimensionless block diagram s in Fig. 4. are prepared based on the relationship chart and serves as a basis for two new alternate layout s. The departments are numbered in the same manner as seen in the ARC. The block diagram ignores s pace and building constraints, and gives us a better idea for designing the optimized layout. B. Proposed Layout The SLP techniqu e resulted in two new alternat e plant layouts after taking into consideration any practical limitations and constraints. Fig. 5. shows the original layout as well as proposed layout s 1 and 2 , drawn to scale. E ach square in the figure grid represent s an area of 6.25 m 2. Table III Distances travelled in the optimized layout Development of Plant Layout Using Systematic Layout Planning (SLP) To Maximize Production – A Case Study Proceedings of 07th IRF International Conference, 22nd June -2014, Bengaluru , India, ISBN: 978 -93-84209 -29-2 127 V. RESULTS OF THE LAYOUT DEVELOPMENT The proposed layout 1 was finally selected as the new optimized plant layout. With the new layout all dis joined department areas were made as one and efficient material flow was achieved. Table III shows the total overall distances travelled in the optimized layout plan. The total distance travelled for nacelle is reduced by 292 m and for nose cone by 47.05 m. There fore in the optimized layout, the total distance reduced in the manufacturing of one set of nacelle and nose cone is 339.05 m. By the application of SLP for the des ign of an optimized plant layout we were able to reduce the wastes due motion and transportation , therefore in creasing the productivity of the plant. REFERENCES [1] Chandra Shekhar Tak , Lalit Yadav , “Improvement in Layout Design using SLP of a small size m anufacturing unit: A case study ,” IOSR Journal of Engineering , vol. 2, pp. 01 -07, October 2012 [2] Subodh B. Patil , S. S. Kuber, “Productivity Improvement in Plant using Systematic Layout Planning (SLP) – a Case Study of Medium Scale Industry ,” International Journal of Research in Engineering and Technology , vol. 3, pp. 770 -775 , April 2014 [3] Pramod P. Shewale , Manmath S. Shete , S. M. Sane , “Improvement in Plant Layout using Systematic Layout Planning (SLP) for Increased Productivity , ”International Journal of A dvanced Engineering Research and Studies , vol. 1, pp. 259 -261 , April -June 2012 [4] M. Khansuwan, C. Poowarat, “A Study on Plant Layout Improvement: a Case Study at Kritchai Mechanical Company Ltd. ”, a project for Bachelor’s degree in Industrial Engineering, Faculty of Engineering Thammasat University, 1999 [5] Vinod Arya, Sanjeev Singh Chauhan, “ Increased Productivity and Planning by Improved Plant Layout using Systematic Layout Planning at NCRM Division, Bhushan Steels Ltd. Khopoli, Mumbai ”, Internationational J ournal of Innovations in Engineering and Technology, vol. 2, pp. 297 -304 , April 2013 [6] R M uther, “Systematic Layout P lanning”, Mc Graw, 1955  Manufacturing Management DM202 Semester 2 – Production Planning Colin Andrews: [email protected] Example of factory operations ... https://youtu.be/yROGg 3 _vHBc Agenda ⚫ Time Horizons ⚫ Forecasting ⚫ Capacity Planning ⚫ Matching to real demand − ‘Economic’ batching − Re - order level / point − ‘Takt’ time Time Horizons ⚫ Short Term − A period in which all capacity is fixed and resources cannot be flexed − What can we do with what we’ve got ‘now’ − Typically a week / month ⚫ Long Term − A period in which capacity can be completely changed and new resources can be added (old resources replaced) − What will we need in the ‘future’ − Typically > 1 year ⚫ Medium term − In between these extremes − What might we need to achieve − How can we flex current resources to achieve this − Typically quarter years or half years Time Horizons ⚫ These are different for every business e.g. − Long term ⚫ Electric Utility → 30 years ⚫ Mobile phones → 3 years ⚫ Supermarkets → 12 months − Short term ⚫ Electric Utility → 1 hour ⚫ Mobile phones → 1 month ⚫ Supermarket →1 day Forecasting and Capacity Planning Forecasting and Capacity Planning ⚫ Aim − To introduce the concepts of forecasting and capacity planning ⚫ Reading − Slack et al textbook, Chapters 10, 11, 12 ⚫ Learning Outcomes − Ability to describe the importance of forecasting − Ability to calculate capacity related information and data Why do organisations forecast sales? ………many supply decisions must be made ahead of demand , e.g. production planning, resource planning, sourcing, distribution planning, etc Despite the advances of supply chain management and the emergence of concepts such as agile, lean, just - in - time, etc……. It takes time to : • Source raw materials, produce and distribute products; • Recruit new staff, find new sources of supply, launch an advertising campaign; • Build new warehouses in new locations, develop new products or technologies, etc. We need to forecast future sales so that we can carry out: • Demand and Inventory planning • Capacity, production and distribution planning • Financial planning • Business planning Purpose Level Reviewed Horizon Business Planning Business Unit /Categories annually 2 – 5 yrs Marketing Product Family/Brand Quarterly / monthly 12 – 18 months Production Planning Individual SKU Monthly / weekly LT - 9 months Stock Replenishment Individual SKU Weekly/daily Lead - time Strategic Tactical OperationalPlanning Horizons: How far into the future do I need to forecast? Forecasting is not easy - the only certainty about a forecast is that it will be wrong ! “Two - thirds of all sales forecasts have a margin of error that exceeds 25 %” “More than 10% of sales forecasts have a margin error greater than 70%” Source: Sales Benchmark Index Demand planners, like weather forecasters rarely get credit for doing a good job, they ’ re only noticed when they get it wrong ( which is most of the time!) Excess Inventory : increased capital employed, obsolescence, relocation costs, clogged up supply chain, discounting, etc Poor Availability: late /emergency deliveries, lost sales, lost profits & lost customers !Either ? Or ?Poor forecasts create imbalances in supply and demand resulting in…. Why is forecasting difficult? “…the volatility of markets ensures that the forecast will be wrong. Whilst many forecasting errors are the result of inappropriate forecasting methodology the root cause of these problems is that forecast error increases as .............. increases” Product proliferation New product introductions Short product life cycles Competition Advertising campaigns Unexpected ‘events’Promotions Customers !! lead - time Cost of Excess InventoryCost of Lost SalesIncrease supplyBad BadPoor Availability High WasteIncreasing cost Decrease supply Best Better ? Source: Colin SheppardA ‘Good’ forecast should form the basis of a more consistent match between supply and demand How can we improve the match between supply and demand? Communicate & Collaborate : Cross - functional (S&OP) Cross - organisational (VMI, CPFR) Manage the Lead - time Gap: Reduce Lead - times and become more AgileBuild a Robust Baseline Forecast : use best - fit algorithms and causal models The need for Integrated cross - functional planning Demand CreationSUPPLY CHAIN OPERATIONS MARKETING & SALES Demand fulfilment Demand Creation Integrated PlanningDemand fulfilment Alignment of demand & supply planning processes across functional boundaries The need for integrated cross - functional planning Mid 1990s – Volvo held an excessive inventory of green cars. • What did they do? • What would be the implication of this action? Source: Lee (2001) *Sales & Operations PlanningWhat is needed? Synchronised Planning cycles across functions 4th week S&OP meetingS & OP* meeting Sales PlanSales Plan Demand Planning Supply PlanningSupply Plan Principles of Forecasting • Common Features of Forecasting Models: – Forecasts are rarely perfect – Forecasts are more accurate for groups or families of items rather than for individual items e.g. Luxury SUVs rather than Audi Q8s – Forecasts are more accurate for shorter rather than longer time horizons (for same level of item) Steps in the Forecasting Process 1. Decide what to forecast 2 . Evaluate and analyse appropriate data 3. Select and test the forecasting model 4. Generate the forecast 5. Monitor forecast accuracy Forecasting Methods Qualitative Methods Quantitative Methods Characteristics Based on human judgement, opinions; subjective and nonmathematical Based on mathematics; numerical in nature Strengths Can incorporate latest changes in the environment and ‘inside information’ Consistent and objective; able to consider much information and data at one time Weaknesses Can bias the forecast and reduce the forecast accuracy Often quantifiable data are not available. Only as good as the data on which they are based ⚫ Qualitative Methods − Executive opinion − Market research − Delphi method ⚫ Quantitative Methods − Simple mean − Simple moving average − Weighted moving average − Exponential smoothing − Seasonal indexes − Linear regression − Multiple regression Forecasting Methods Needs relevant history / data Some common Statistical (Projective) Techniques Moving Average Increase value of n to smooth out lumpy or volatile demand All values given equal weight Simple Exponential Smoothing (SES) Smoothes level only More weight given to most recent data Double Exponential Smoothing (DES) Smoothes level and trend Holt’s Exponential Smoothing Smoothes level and trend Croston’s Exponential Smoothing Smoothes level and intervals between +ve demand Holt - Winter’s Exponential Smoothing Smoothes level, trend and seasonal factors Time Series Decomposition Multiplicative or Additive Decomposes underlying patterns and projects into the future. NO smoothing ⚫ Factors Influencing the Selection of Forecasting Models: − Amount and type of data available − Degree of accuracy required − Length of forecast horizon − Data patterns present Forecasting Methods Links Between Plans Forecasting Marketing Plan Aggregate or Production Plan Aggregate or Capacity Planning • Details the aggregate production rate and size of the workforce, which enables planners to: – Determine the amount of inventory to be held – Amount of overtime or ‘ undertime ’ allowed – Authorised subcontracting – Hiring and firing of employees – Back ordering of customer orders Capacity Planning Definitions: ⚫ Capacity − the maximum output rate that can be achieved by a facility ⚫ Capacity Planning − the process of establishing the output rate that can be achieved by a facility Capacity Planning CustomerMachines People Material Money Product Demand How to reconcile customer demand with the supply of input resources Determining Capacity ⚫ Start with forecast demand − Number of top level items per period (independent demand) − e.g. bicycles ⚫ Use the BoM to work out the demand for lower level items − Sub assemblies and components (dependant demand) − e.g. wheels (2 per bike demand) ⚫ … and the route cards to identify how much time is required on each operation − Frame welding − Wheel assembly etc. ⚫ Either − Calculate the number of machining / assemble / work centres required to meet demand − Compare the time required of each available work centre against demand to see if it is possible Issues: ⚫ Too much capacity − Excess costs − Idle facilities − Idle workers − Idle equipment ⚫ Too little capacity − Order Backlog − Lost sales − Cannot satisfy customer demandsCapacity planning Links Between Plans & Capacity Planning Week 1 2 3 4 5 6 7 8 9 10 Total Forecast (Pieces/ Week) 35 25 10 80 0 85 75 150 45 5 510 Production Plan (Pieces/ Week) 50 50 50 65 65 80 80 80 55 50 625 Capacity Requirement Plan 50 50 50 65 65 80 80 80 55 50 625 Capacity Available 70 70 70 70 70 70 70 70 70 70 700 Capacity Gaps +20 +20 +20 +5 +5 - 10 - 10 - 10 +15 +15 n/a Available Capacity • Design Capacity – Maximum output rate achieved by a facility under ideal conditions – Can only be sustained for short periods of time – Achieved through overtime, subcontracting, etc. • Effective Capacity – Maximum output rate sustained under normal conditions – Include work schedules and breaks, machine maintenance, etc. NOTE: effective capacity is usually lower than design capacity Capacity Utilisation Definition: Percentage measure of how well available capacity is being used Utilisation= actual output rate / design capacity (100%) Making Capacity Planning Decisions 1 . Identify Capacity Requirements 2. Develop Capacity Alternatives 3. Evaluate Capacity Alternatives Forecasting Capacity Capacity Cushions Strategic Implications Do nothing Expand large now Expand small now, with option to add later Decision Trees Rough Cut Capacity Plan ⚫ Simplify the demand forecast into a single (rough cut) measure − Could be machine hours − Could be ‘standard units’ − Could be bottle neck demand ⚫ Vary the plan to ensure Rough Cut Capacity is not exceeded − Pull activity forward into gaps − Make for inventory − Organise overtime − LAST RESORT – delay order Links Between Plans & Capacity Planning Week 1 2 3 4 5 6 7 8 9 10 Forecast Plan (Pieces/ Week) 35 25 10 80 0 85 75 150 45 5 Production Plan (Pieces/ Week) 50 50 50 65 65 80 80 80 55 50 Capacity Req.ment Plan 50 50 50 65 65 80 80 80 55 50 Capacity Available 70 70 70 70 70 70 70 70 70 70 Capacity Gaps +20 +20 +20 +5 +5 - 10 - 10 - 10 +15 +15Rough Cut Measure Pulling orders forward Plan doesn’t work Total = 510 Total = 625 Total = 700 Capacity Plan & Utilisation ⚫ Is it good to plan for 100% utilisation? ⚫ NO! − Leaves no flexibility to respond to ‘within plan’ situations − Capacity is an assumed number – depends on many factors ⚫ ‘Right’ plan level should be based on experience (and challenged) − Return to this later in the course! ‘Economic’ Operations ⚫ Cannot always afford to make to stock ⚫ Inventory is costly to hold ⚫ Changing production hurts utilisation ⚫ Businesses driven towards operating in batches ⚫ What is the ‘right’ batch size − To Order: Economic Order Quantity − To make: Economic Batch Quantity − When to order: Re - order point, Re - order level Economic Order Quantity (EOQ) ⚫ Costs associated with holding stock (C h ) − Working capital cost − Storage cost − Obsolescence risk cost ⚫ Costs associated with ordering stock (C o ) − Administration costs − Transport costs − Opportunity cost of missed discounts EOQ ⚫ Q = Maximum Inventory (Q/2 = average inventory for smooth demand) ⚫ D = Number of deliveries per period ⚫ Total Cost of Inventory (C t ) = C h + C o ⚫ Holding costs can be estimated (holding cost per item x average number of items) = C h x Q/2 ⚫ Delivery costs per unit can be estimated (cost per delivery x deliveries / inventory quantity) = C o x D/Q ⚫ So C t = C h Q /2 + C o D /Q EOQ ⚫ Can an ‘optimum’ be found for C t = C h Q /2 + C o D /Q? ⚫ As inventory quantity is lowered, inventory ordering costs rise. ⚫ The minimum is when the rate of ⚫ change of C t with Q is zero ⚫ i.e. dC t / dQ = 0 EOQ ⚫ So ... dC t / dQ = C h /2 – C o D /Q = 0 ⚫ Solve for Q ... Q = (2C o D/C h ) ½ EBQ ⚫ A similar approach can be used to set an Economic Batch Quantity: D = (Market) Demand rate R = Replenishment (production) rate Re - order Level ⚫ Assume inventory is depleted at a steady rate ⚫ Further, there is a dependable ‘lead time’ for deliveries ⚫ When do I place my EOQ order? ⚫ When: stock level = use rate*lead time ⚫ Known as Re - order Level − (or Re - order Quantity) Re - order Point ⚫ Issues with Re - order Level: − Order period is unknown if the use rate varies − Stock outs may occur if the lead time is longer than expected or the use rate is greater than expected − Requires continuous checking of stock levels ⚫ Or highly accurate stock management ⚫ Re - order Point inventory management is an alternative Re - Order Period ⚫ Stock ordering reviewed at a set period ⚫ Quantity ordered can be: − EOQ − Sufficient to reach target stock level − Some alternative quantity ⚫ Benefits − Ordering happens to a set schedule ‘ this months order is for .. ’ − Ordering is flexible and can respond to changes Real World ‘Adaptations’ ⚫ Include Safety Stock ⚫ Use forecasting ranges ⚫ Focus on uncertain items ⚫ It’s a full - time job! Criticism of ‘Optimum’ approaches ⚫ There are a number of criticisms of the EOQ / EBQ optima: − The assumptions in the analysis are too simplistic − The real costs of stock in operations are not fully visible − The models themselves are descriptive and should inform decisions rather than prescriptive (give ‘the’ answer) − Cost minimisation is not necessarily the best approach for inventory management ⚫ Alternative ‘optimum’ approaches are available ... ⚫ From the German word for