IE 472

Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

IE 472

Operations of Manufacturing Systems

Dr Ateekh-Ur-Rehman

1
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Instructor:
Ateekh-Ur-Rehman Office: 2A 108/2
E-mail: [email protected] Web Site:
http://faculty.ksu.edu.sa/77643/default.aspx

Teaching Assistance:
Eng. Syed Hammad Mian Office: AMT Lab
E-mail: [email protected] (0553118695)

Purpose:
This course deals with the study of recent developments in manufacturing, Japanese
manufacturing techniques, hybrid manufacturing management system, supply chain
management, total quality management, design for manufacturing and assembly. Objective is
to provide an opportunity to the student to gain in-depth knowledge of ERP, Just in time,
Push – Pull and hybrid production systems, total quality manufacturing, and Supply chain
management. In fact, it leads one towards lean manufacturing that meets high throughput or
service demands with little inventory.

Textbooks:
1) Factory Physics by Wallace J. Hopp and Mark L. Spearman, McGraw-Hill, 2001.
2) Manufacturing Planning and Control by Vollmann, Barry and Whybark, 1997,
McGraw-Hill.

Grades:
Course will be determined by the following weights:

Attendance 5%
Weekly Examination 15%
Mid-term Examination 25%
Lecturer 15%
Final Exam 40%

2
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Course Outline:

1. Introduction to Operations and advancement of/in manufacturing system (Book Chapter 1)

2. Inventory Models Material requirements planning, manufacturing resource planning,
enterprise resource planning (Book Chapters 1 and 2)
3. Just in time: History of JIT system, Why JIT, Classic Kanban system, Kanban Cards,
Lessons from JIT (Book Chapter 4)
4. Science of Manufacturing, Basic Factory Dynamics, Operations and manufacturing
variability (Book Chapters 6, 7 and 8)
5. Push (MRP), Pull (Kanban) and Hybrid (CONWIP) production systems (Book Chapter 10)
6. Supply chain management: managing raw materials, managing WIP, managing finished
goods inventory, multi-echelon supply chains

3
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Chapter 1:
Introduction to Operations and
Advancement in Manufacturing
Systems

Manufacturing System?

Definition:
• The set of resources and procedures involved in
converting raw material into products and delivering
them to customers
• Production/Manufacturing and delivery of products are
central to the firm
• Firm Functions have value only if they enhance the
ability to do profit

4
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Manufacturing System Objectives?

Planning and execution of the activities that use workers,

energy, information, and equipment to convert raw
materials into finished products

Deliver products with the desired functions, aesthetics, and

quality to the customers at right place and the right time
and for right cost

System Components and Hierarchy

Corporation
Corporate
level

Parts Plant 1 Parts Plant 2 Assembly Plant 1

Shop
level

Shaft Production Gear Production

Heat
Purchasing
Department
Treating level

CNC Mill CNC Lathe Gear Hobber

Automated Part Workstation
Handling System level

Robotic Load/ Tool Power Force Equipment

4Unload Exchanger Controller Sensor level

5
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Production Activity and Information Flows

Raw Material

Forecasting
Administrative Functions
Fabrication (Purchasing, Payroll,
Plant Finance, Accounting)
Strategic Planning
Assembly Marketing
Plant
Aggregate Production
Finished Planning
Products
Product Design

Distribution
Disaggregation
Center Process Planning

Production Scheduling Manufacturing Support

Retailer (Facilities Planning,
Tool Management,
Shop Floor Control Quality Control,
Customer Maintenance)
a) Product Flow b) Production Planning
& Control Decision Hierarchy
c) Related Technical
& Administrative Functions **
Products, Processes, and Layouts

PRODUCTS PROCESSES LAYOUTS

Make-to-stock Continuous high volume,

standardized process industries Product Layout
commodities repetitive mfg low variety

Assemble-to-order Hybrid, FMS, low volume,

Cellular Layout
modular CAM, CIM medium variety

Make-to-order low volume,

Intermittent Process Layout
custom
high variety

low volume,
Engineer-to-order Special Project Fixed Position
2 one-of-kind low variety

6
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

The Layout Function

Quality

PHYSICAL LAYOUT
• Process
Output
• Product Capacity
Requirements • Fixed Position
• Cellular

Cost

Key Resources

 Labor
 Equipment
 Any resource that limits output is a Bottleneck

Flow In 1 2 3 4 5 Flow Out

 Assembly and light manufacturing are labor-intensive

• Equipment small and inexpensive
• Capacity can be modified by hiring and training workers
or through layoffs

7
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Production Authorization
 Make-to-stock
• Number of units of each product to keep on hand at all times
• Quick delivery to customers upon receipt of an order
• When delivery response time is a key competitive factor
• Limited number of products manufactured repeatedly
• An idea what customers will want
• Allows to schedule production in advance
 Make-to-order
• Only produce items after they have been ordered
• Production system must respond quickly
• Products have high degree of customization
• Shelf life of products is short
 Assemble-to-order
• Assembled to form variety of configurations

Product Volume and Variety

Cellular
Quantity Product
Layouts

Fixed
Position
Layouts Mixed Layouts Process Layouts

Number of Different Products

8
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Recent Developments in Operations of Manufacturing

Systems

 Inventory Models
 MRP-I
 MRP-II
 ERP
 OPT
 JIT
 KANBAN
 CONWIP
 TQM
 SQC
 SCM
**

Modeling Matters!

I often say that when you can measure what you are speaking about,
and express it in numbers, you know something about it; but when
you cannot express it in numbers, your knowledge is of a meager
and unsatisfactory kind; it may be the beginning of knowledge, but
have scarcely, in your thoughts, advanced to the stage of Science,
whatever the matter may be.

- Lord Kelvin

9
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Why Models?

State of world:
• Data (not information!) overload
• Reliance on computers
• Allocation of responsibility (must justify decisions)
Decisions and numbers:
• Decisions are numbers
– How many distribution centers do we need?
– Capacity of new plant?
– No. workers assigned to line?
• Decisions depend on numbers
– Whether to introduce new product?
– Make or buy?
– Replace MRP with Kanban?

Why Models? (cont.)

Data + Model = Information: Managers who don't understand models

either:
• Abhor analysis, lose valuable information, or
• Put too much trust in analysis, are swayed by stacks of computer
output

END

10
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Chapter 2

Inventory Models
Material Requirement Planning
Manufacturing Resource Planning
Enterprise Resource Planning

The Role of Inventory

Inventory consists of physical items moving through the production system

Originates with shipment of raw material and parts from the supplier

Ends with delivery of the finished products to the customer

Costs of storing inventory accounts for a substantial proportion of manufacturing

cost
• Often 20% or more

Optimal level of inventory

• Allows production operations to continue smoothly

A common control measure is Inventory Turns

11
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Inventory Definitions and Decisions

Batch or order size

• Batch size is the number of units released to the shop floor to be produced
Reorder point
• Specifies the timing for placing a new order
Inventory Position
Inventor y Position = Inventor y On Hand + On Or der – Backor der s
Units on order
• Have been ordered but not yet arrived
Backorders
• Items promised to customers but not yet shipped
• New units are shipped out to cancel backorders

Inventory Definitions and Decisions

(Cont)
Lead time
• Time between placing an order and the availability of those items for use
Cycle time
• Time between producing or ordering successive batches of an item

Batch Size (units)

Cycle time =
Demand Rate ( units )
time

 Safety Stock (SS)

• Number of units of inventory on hand when order arrives
• SS = Reorder level – Lead time * Mean demand rate

12
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Types of Inventory

Raw Materials
• Essential to the production process
• Often kept in large quantities on site
Finished Goods
• Completed products awaiting shipment to customers
Work-in-Process (WIP)
• Batches of semi finished products currently in production
• Batches of parts from time of release until finished goods status
Pipeline
• Goods in transit between facilities
• Raw materials being delivered to the plant
• Finished goods being shipped to warehouse or customer

Types of Inventory

**

13
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

EOQ Modeling Assumptions

1. Pr oduction is instantaneous – there is no capacity constraint and
the entire lot is produced simultaneously.
2. Deliver y is immediate – there is no time lag between production and
availability to satisfy demand.
3. Demand is deter ministic – there is no uncertainty about the quantity
or timing of demand.
4. Demand is constant over time – in fact, it can be represented as a
straight line, so that if annual demand is 365 units this translates into
a daily demand of one unit.
5. A pr oduction r un incur s a fixed setup cost – regardless of the size
of the lot or the status of the factory, the setup cost is constant.
6. Pr oducts can be analyzed singly – either there is only a single
product or conditions exist that ensure separability of products.

Notation

D demand rate (units per year)

C unit production cost, not counting setup or inventory costs

(SR per unit)

A fixed or setup cost to place an order (SR)

h holding cost (SR per year); if the holding cost is consists

entirely of interest on money tied up in inventory, then
h = iC where i is an annual interest rate.

Q the unknown size of the order or lot decision var iable

14
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Inventory level

Slope = -D

Reorder level
(s)

Time

Consumption Lead time (L)

cycle (T)

Costs

Holding Cost:
Q
average inventory =
2
hQ
annual holding cost =
2
hQ
unit holding cost =
2D
Setup Costs: A per lot, so
A
unit setup cost =
Q

Production Cost: c per unit

hQ A
Cost Function: Y (Q) = + +c
2D Q

15
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Economic Order Quantity

dY (Q) h A 2 AD 2 AD
0= = − 2 ⇒ Q2 = ⇒ Q=
dQ 2D Q h h
d 2Y (Q) 2 A
∀Q ≥ 0, = ≥0 ⇒ Q* is a minimum.
dQ 2 Q3
2 AD EOQ Square
Q* =
h Root For mula
D Q
Total cost TC(Q)= A × + h × +c ×D
Q 2
Accor dingly TRC(Q*) =
2ADh

16
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Exercises 1
Q1: A gift shop sells dolls stuffed at a very steady pace of 10 per day, 310 days per year. The
wholesale cost of the dolls is SR 5, and the shop uses an annual interest rate of 20 percent to
compute holding costs.
a) If the shop wants to place an average of 20 replenishment orders per year, what order
quantity should it use?
b) If the shop orders dolls in quantities of 100, what is the implied fixed order cost?
c) If the shop estimates the cost of placing a purchase order to be $10, what is the optimal
order quantity?

Q2: Quarter-inch stainless-steel bolts, one and one-half inches long are consumed in a factory at
a fairly steady rate of 60 per week. The bolts cost the plant two cents each. It costs the plant SR
12 to initiate an order, and holding costs are based on an annual interest rate of 25 percent.
Determine the optimal number of bolts for the plant to purchase and the time between
placements of orders. What is the yearly holding and setup cost for this item?

Q3: Reconsider the bolt example in Problem 2. Suppose that although we have estimated
demand to be 60 per week, it turns out that it is actually 120 per week (i.e., we have a 100
percent forecasting error).
a) If we use the lot size calculated in the previous problem (using the erroneous demand
estimate), what will the setup plus holding cost be under the true demand rate?
b) What would the cost be if we had used the optimum lot size?
c) What percentage increase in cost was caused by the 100 percent demand forecasting
error? What does this tell you about the sensitivity of the EOQ model to errors in the
data?
Q4: A Hyper Mall sells 8000 Samsung brand TV screens per year. Each screen carries a variable
cost of SR 8, while the fixed cost to restock the shelves amounts to SR 10. Assume the cost of
capital is 10%.

a) Calculate the Economic Order Quantity (EOQ) and the corresponding number of annual
orders
b) Calculate the Total Cost (TC) associated with the EOQ calculated in part (a).
c) Calculate the best order quantity now, considering a 10% discount on orders greater than
or equal 200.

17
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Q5: A production line is currently used to produce three different models of a washing machine
(W1, W2 and W3). The production line needs to be reconfigured (set up) by changing dies on
presses every time a different model is decided to be produced. This setup process consumes
almost constant time for all product models. Accordingly, the setup cost of the production line
has been estimated at SR500. The unit production costs and annual demand for the washing
machine models are given in the table below. The cost of capital is 15%.
W1 W2 W3
Unit cost (SR/unit) 500 350 200
Annual demand (units/year) 10,000 15,000 30,000
a) Determine the economic production quantity for each washing machine model.
b) If the management decided to use a quicker technique for setting up the dies on presses
which will reduce the setup cost to SR50, show how this decision will affect the
economic production quantities and comment on your calculated values.

Q6: Al Jameel Steel, Inc. fabricates various products from two basic inputs, bar stock and sheet
stock. Bar stock is used at a steady rate of 1,000 units per year and costs SR 200 per bar. Sheet
stock is used at a rate of 500 units per year and costs SR 150 per sheet. The company uses a 20
percent annual holding cost rate, and the fixed cost to place an order is SR 50, of which SR 10 is
the cost of placing the purchase order and SR 40 is the fixed cost of a truck delivery. The
variable (i.e., per unit charge) trucking cost is included in the unit price. The plant runs 365 days
per year.
a) Use the EOQ formula with the full fixed order cost of SR 50 to compute the optimal
order quantities, order intervals, and annual cost for bar stock and sheet stock. What
fraction of the total annual (holding plus order) cost consists of fixed trucking cost?
b) Using a week (seven days) as the base interval, round the order intervals for bar stock and
sheet stock to the nearest power of 2. If you charge the fixed trucking fee only once for
deliveries that coincide, what is the annual cost now?
c) Leave the order quantity for bar stock as in part b, but reduce the order interval for sheet
stock to match that of bar stock. Re-compute the total annual cost and compare to part b.

18
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Topics

• The definition of the lot sizing problem

• Differences from the EOQ model
• Solution algorithms
– Lot-for-lot
– Fixed order quantity
– Fixed order period
– Fixed EOQ

Lot Sizing Problem

• The lot sizing problem is concerned with
determining the order quantity and the period
in which an order will be placed to satisfy
given demand requirements for that period in
the planning horizon.

19
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Difference from EOQ

• The lot sizing problem does not require that the demand rate
is constant and fixed throughout the planning horizon as in
case of EOQ.
• Incase of lot sizing problem demand rate is not constant
throughout the planning horizon
• The demand replenishments are made at specific points in
time.
• Demand occurs at discrete points of time and it is not
continuous.
• Different cost parameters may exist at each period

Notations
t = A time period (day, week or month), where t =
1,…, T, where T represents the planning horizon.
Dt = Demand in period t
ct = Unit production cost (purchase cost) in SR/unit,
not counting setup (ordering) cost
At = Setup (order) cost to produce (purchase) a lot in
period t (in SR)
ht = Holding cost (SR/unit/period)
If it depends solely on the cost of capital, it is
calculated as
ht = i ct / (no. of periods per year)
It = Inventory in units leftover at the end of period t
Qt = size (in units) ordered in period t for all t = 1,…, T

20
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Exercises 2
Q1: Consider the R-mall, where a item carries a variable cost of SR 0.50, while the fixed cost to
restock the shelves amounts to SR 4. Assume the cost of capital is 8%. If the actual forecasted
demand values throughout the year is given by the following table:

Month 1 2 3 4 5 6 7 8 9 10 11 12
Demand 80 64 56 50 45 35 5 0 70 65 60 70
Determine when and how much to order such that the total cost is minimized
{Hint: Use algorithms for lot for lot, FOQ, FOP, Fixed EOQ, and Improved EOQ and compare total cost}

Q2: Consider the following demand information for a specific inventory item.
Month 1 2 3 4 5 6 7 8 9 10 11 12
Demand 20 50 40 70 60 30 80 40 20 60 40 90
If the inventory carrying cost is SR 0.50 per unit per month and the purchase order cost is SR50
per order, determine the total inventory and ordering costs over the 12 months if the EOQ and
FOP (of 3 periods) lot-sizing rules are used. Which lot-sizing rule gives the lower cost?

Q3: Consider an item with the following properties:

A = SR50; v = SR4.00/unit; i = 0.36 SR/SR/year.
At time 0, the inventory has dropped to zero and replenishment with negligible lead-time must be
made. The demand pattern for the next 12 months is:

Month 1 2 3 4 5 6 7 8 9 10 11 12
Demand 100 75 50 100 50 40 80 80 0 50 75 100

All the requirements of each month must be available at the beginning of the month.
Replenishments are restricted to the beginning of each month. Using each of the following
methods, develop a list of orders to meet the demand and determine the total cost of the order
schedule. In each case, there should be no inventory at the end of month 12.

a) One replenishment at the start of month 1 to cover all the demand requirements
b) Lot-for-lot
c) Fixed EOQ
d) Fixed order period of 3 months

21
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Q4: Consider the following demand information for a specific inventory item.
Month 1 2 3 4 5 6 7 8 9 10 11 12
Demand 20 50 40 70 60 30 80 40 20 60 40 90
If the inventory carrying cost is SR 0.50 per unit per month and the purchase order cost is SR50
per order, determine the total inventory and ordering costs over the 12 months if the EOQ and
FOP (of 3 periods) lot-sizing rules are used. Which lot-sizing rule gives the lower cost?

Q 5: Consider an inventory item with the following properties:

A = SR50; c = SR4.00/unit; i = 0.36 SR/SR/year
At time 0, the there was no inventory. The demand pattern for the next 6 months is:
Month 1 2 3 4 5 6
Demand 100 75 50 100 50 40
All the requirements of each month must be available at the beginning of the month.
Replenishments are restricted to the beginning of each month. Using the fixed EOQ lot-sizing
rule, develop a list of orders to meet the demand and determine the total cost of the order
schedule. There should be no inventory at the end of month 6.

22
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

EOQ Assumptions

1. Instantaneous production.

2. Immediate delivery.

3. Deterministic demand.

4. Constant demand. WW model relaxes this one

5. Known fixed setup costs.

6. Single product or separable products.

Dynamic Lot Sizing Notation

t a period (e.g., day, week, month); we will consider t = 1, … ,T,

where T represents the planning horizon.

Dt demand in period t (in units)

ct unit production cost (in dollars per unit), not counting setup or
inventory costs in period t

At fixed or setup cost (in dollars) to place an order in period t

ht holding cost (in dollars) to carry a unit of inventory from period t

to period t +1

Qt the unknown size of the order or lot size in period t decision variables

23
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Wagner-Whitin Example
Data
t 1 2 3 4 5 6 7 8 9 10
Dt 20 50 10 50 50 10 20 40 20 30
ct 10 10 10 10 10 10 10 10 10 10
At 100 100 100 100 100 100 100 100 100 100
ht 1 1 1 1 1 1 1 1 1 1

Lot-for-Lot Solution
t 1 2 3 4 5 6 7 8 9 10 Total
Dt 20 50 10 50 50 10 20 40 20 30 300
Qt 20 50 10 50 50 10 20 40 20 30 300
It 0 0 0 0 0 0 0 0 0 0 0
Setup cost 100 100 100 100 100 100 100 100 100 100 1000
Holding cost 0 0 0 0 0 0 0 0 0 0 0
Total cost 100 100 100 100 100 100 100 100 100 100 1000

24
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

25
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

26
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

27
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Exercise 3
Q1: Consider the following table resulting from lot sizing by the Wagner Whitin algorithm:
Month Demand Min. Cost Order Period
1 69 85 1
2 29 114 1
3 36 186 1
4 61 277 3
5 61 348 4
6 26 400 4
7 34 469 5
8 67 555 8
9 45 600 8
10 67 710 10
11 79 789 10
12 56 864 11
a. Develop the optimal ordering schedule.
b. What will the schedule be if your planning horizon was only six months?

Q2: Nozone, Inc., a manufacturer of Freon recovery units (for automotive air conditioner
maintenance), experiences a strongly seasonal demand pattern, driven by the summer air
conditioning season. This year Nozone has put together a six-month production plan, where the
monthly demands D, for recovery units are given in the table below. Each recovery unit is
manufactured from one chassis assembly plus a variety of other parts. The chassis assemblies are
produced in the machining center. Since there is a single chassis assembly per recovery unit, the
demands in the table below also represent demands for chassis assemblies. The unit cost, fixed
setup cost and monthly holding cost for chassis assemblies are also given in this table. The fixed
setup cost is the firm's estimate of the cost to change over the machining center to produce
chassis assemblies, including labor and materials cost and the cost of disruption of other product
lines.

Use the Wagner Whitin algorithm to compute an optimal six-month production schedule for
chassis assemblies.

28
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Q3: Consider an item with the following properties:

A = SR50; v = SR4.00/unit; i = 0.36 SR/SR/year.

At time 0, the inventory has dropped to zero and replenishment with negligible lead-time must be
made. The demand pattern for the next 12 months is:

Month 1 2 3 4 5 6 7 8 9 10 11 12
Demand 100 75 50 100 50 40 80 80 0 50 75 100

All the requirements of each month must be available at the beginning of the month.
Replenishments are restricted to the beginning of each month. Using each of the following
methods, develop a list of orders to meet the demand and determine the total cost of the order
schedule. In each case, there should be no inventory at the end of month 12. Use Wagner-Whitin
algorithm to find ordering schedule.

29
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

30
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

31
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Product A Product B

X (2) Y (1) Z (2) W (1)

X (1) V (2)

32
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

MRP Calculation Table

Week 1 2 3 4 5 6 7 8 9 10 11 12 13
Gross requirements
Scheduled receipts
Adjusted Scheduled rec.
Projected on hand
Net requirements
Planned order receipts
Planned order releases

33
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Exercise 4
Q1: Consider the following product structure trees.

Product A Product B

X (2) Y (1) Z (2) W (1)

X (1) V (2)

The master production schedule for the next 13 weeks is given as follows:
Week 1 2 3 4 5 6 7 8 9 10 11 12 13
Product A 20 30 50 80 40 40 40 20 10
Product B 30 20 90 120 60 60 60 60
Furthermore, the following information regarding quantity on hand, scheduled receipts, lead time
and lot sizing rules are provided.

Part Current on- Scheduled receipts Lot-sizing rule Lead time

hand Due Quantity
Product A 20 4 200 FOP, 2 weeks 1 week
Product B 40 2 100 FOP, 4 weeks 2 weeks
X 120 -- -- Lot-for-lot 2 weeks
Y 150 2 100 Lot-for-lot 1 week
Z 40 -- -- Lot-for-lot 1 week
W 50 -- -- Lot-for-lot 2 weeks
V 120 -- -- Lot-for-lot 2 weeks

Construct the MRP for products A, B, V, W, X, Y and Z

34
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Q2: Demand for a power steering gear assembly is given by

Period 1 2 3 4 5 6 7 8 9 10
Demand 14 12 12 13 5 90 20 20 20 20
A) Currently, there are 50 parts on hand. The lot-sizing rule is fixed order period using two
periods. Lead time is three periods. Construct an MRP planning sheet and show the
planned order release schedule for the gear.
B) Let’s say each gear assembly requires 2 pinions. Currently there are 100 pinions on hand,
the lot-sizing rule is lot-for-lot and the lead time is two periods. Plan the order release
schedule for the pinions.

Q3:

35
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Q4: Consider the following product structure trees. The master production schedule for the next
8 weeks is given as follows:

Week 1 2 3 4 5 6 7 8
Product A 15 20 50 10 30 30 30 30
Product B 10 15 10 20 20 15 15 15

Furthermore, the following information regarding quantity on hand, scheduled receipts, lead time
and lot sizing rules are provided.

Part Current Scheduled receipts Lot-sizing Lead time

number on-hand Due Quantity rule
A 20 1 10 FOP, 2 2 weeks
2 10 weeks
4 100
B 40 0 FOP, 2 2 weeks
weeks
X 40 0 Lot-for-lot 2 weeks
Y 50 2 100 Lot-for-lot 1 week
Z 40 0 Lot-for-lot 4 weeks

Construct the MRP schedule for parts A, B, C, D, X, Y and Z

A B

D D

X Y Z X X Y Z

36
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

• The basic working model for MRP is a production line with a fixed lead time. Since this
lead time does not depend on how much work is in the plant, there is an implicit
assumption that the line will always have sufficient capacity. This can create problems
when production levels are at or near capacity.
• MRP uses constant lead times while in fact the lead time could vary considerably. Also,
MRP sometimes uses long lead times in order to provide some sort of safety. Such long
lead times results in increased levels of inventory
• System Nervousness in MRP system occurs when a small change in the master
production schedule leads to a large change in planned order releases

• Tactics for smoothing the load and minimizing the impact of changed lead time include:
– Overlapping - reduces the lead time, entails sending pieces to the second
operation before the entire lot has completed the first operation
– Operations splitting - sends the lot to two different machines for the same
operation
– Lot splitting - breaking up the order and running part of it ahead of the schedule

37
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Extension of MRP
• CRP is a computerized system that projects loads, creates load
profile and identifies under and over loads.

38
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Extension for MRP-I

MRP-II
ERP

39
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Manufacturing resources planning (MRP II)

MRP II was introduced to fix some of the problems that are faced by MRP, specifically,
capacity, long lead times and nervousness problems.
- Beyond simply addressing deficiencies of MRP, MRP II also brought together other
functions to make a truly integrated manufacturing management system. The additional functions
subsumed by MRP II included demand management, forecasting, capacity planning, master
production scheduling, rough-cut capacity planning, capacity requirements planning, dispatching
and input/output control.
- The hierarchy of MRP II is represented in the following diagram.
Long-term
Long-range forecast
planning

Aggregate
Resource Firm orders Short term
production
planning forecasts
planning

Rough-cut Master Demand

capacity planning production management
(RCCP) scheduling (MPS)

Intermediate
Bills of material
-range Materials
(BOMs)
planning requirement
planning (MRP)
On-hand and
scheduled receipts

|Planned Capacity
order rel. requirements
planning (CRP)

Job release
Routing
Short-term data
control
Job I/O control
dispatching

40
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Enterprise resource planning (ERP)

Ideally, ERP delivers a single database that contains all data for the software
modules, which would include:

Manufacturing: Engineering, bills of material, scheduling, capacity, workflow

management, quality control, cost management, manufacturing process,
manufacturing projects, manufacturing flow

Supply chain management: Order to cash, inventory, order entry, purchasing,

product configuration, supply chain planning, supplier scheduling, inspection of
goods, claim processing, commission calculation

Financials: General ledger, cash management, accounts payable, accounts

receivable, fixed assets

Project management: Costing, billing, time and expense, performance units,

activity management

Human resources: Human resources, payroll, training, time and attendance,

rostering, benefits

Customer relationship management (CRM): Sales and marketing, commissions,

service, customer contact and call centre support

Data warehouse and various self-service interfaces for customers, suppliers, and
employees

Access control - user privilege as per authority levels for process execution

Customization - to meet the extension, addition, change in process flow

Some organizations — typically those with sufficient in-house IT skills to

integrate multiple software products — choose to implement only portions of an

41
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

ERP system and develop an external interface to other ERP or stand-alone systems
for their other application needs. For example, one may choose to use human
resource management system from one vendor, and the financial systems from
another, and perform the integration between the systems themselves

ERPs are cross-functional and enterprise wide. All functional departments that are
involved in operations or production are integrated in one system. In addition to
manufacturing, warehousing, logistics, and information technology, this would
include accounting, human resources, marketing and strategic management

Because of their wide scope of application within a business, ERP software

systems are typically complex and usually impose significant changes on staff
work practices. Implementing ERP software is typically too complex for "in-
house" skill, so it is desirable and highly advised to hire outside consultants who
are professionally trained to implement these systems. This is typically the most
cost effective way. There are three types of services that may be employed for -
Consulting, Customization, Support. The length of time to implement an ERP
system depends on the size of the business, the number of modules, they extent of
customization, the scope of the change and the willingness of the customer to take
ownership for the project. ERP systems are modular, so they don't all need be
implemented at once. It can be divided into various stages, or phase-ins. The
typical project is about 14 months and requires around 150 consultants. A small
project (e.g., a company of less than 100 staff) may be planned and delivered
within 3-9 months; however, a large, multi-site or multi-country implementation
may take years.[citation needed] The length of the implementations is closely tied
to the amount of customization desired.

To implement ERP systems, companies often seek the help of an ERP vendor or of
third-party consulting companies. These firms typically provide three areas of
professional services: consulting, customization and support. The client
organisation may also employ independent program management, business
analysis, change management and UAT specialists to ensure their business
requirements remain a priority during implementation.

42
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Chapter 4

Basic Factory Dynamics

Basic Definitions
Workstation: a collection of one or more identical machines.
Part: a component, sub-assembly, or an assembly that moves through the workstations.
End Item: part sold directly to customers; relationship to constituent parts defined in bill of
material.
Consumables: bits, chemicals, gasses, etc., used in process but do not become part of the
product that is sold.
Routing: sequence of workstations needed to make a part.
Order: request from customer.
Job: transfer quantity on the line.

Basic Measures
Throughput (TH): for a line, throughput is the average quantity of good (non-defective) parts
produced per unit time.
Work in Process (WIP): inventory between the start and endpoints of a product routing.
Raw Material Inventory (RMI): material stocked at beginning of routing.
Crib and Finished Goods Inventory (FGI): crib inventory is material held in a stockpoint at
the end of a routing; FGI is material held in inventory prior to shipping to the customer.
Cycle Time (CT): time between release of the job at the beginning of the routing until it reaches
an inventory point at the end of the routing.

43
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Factory Physics
A production system is a goal-oriented network of processes and stockpoints through which
parts flow. Network is made up of routings (lines), which in turn are made up of
processes. Factory Physics is concerned with the network and flows at the routing (line)
level .

Parameters
Descriptors of a Line:
1) Bottleneck Rate (r ): Rate (parts/unit time or jobs/unit time) of the workstation with the
b
highest long-term utilization.
2) Raw Process Time (T0): Sum of the long-term average process times of each station in the
line.
3) Congestion Coefficient (α): A unitless measure of congestion.
• Zero variability case, α = 0.
• “Practical worst case,” α = 1.
• “Worst possible case,” α = W .
0

Note that lines with same r and T can behave very differently
b 0
.

44
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Definition of Bottleneck
We use highest utilization instead of slowest to define the bottleneck
If yield loss is greater than 50% then station 1 becomes the bottleneck because it processes
more jobs than station 2. The same thing happens with systems that have multiple
routings.

Critical WIP (W ): WIP level in which a line having no congestion would achieve
0
maximum throughput (i.e., r ) with minimum cycle time (i.e., T ).
b 0

W =r T
0 b 0

45
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Little's Law: The fundamental relation between WIP, CT, and TH over the long-term is:

WIP = TH × CT

parts
parts = × hr
hr

46
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

The Best Case yields the minimum cycle time and maximum throughput for each WIP level.

While worst case would cause the maximum cycle time and minimum throughput
Practical worst case is between the Best Case and Worst Case performance.

47
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

CTvs. WIP: Practical Worst Case

32 Worst Case PWC

28
24
20 Bad (fat)
CT

16 Best Case
12 Good
(lean)
T0 8
4
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0 WIP

48
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

HAL Case
Large Panel Line: produces unpopulated printed circuit boards

Line runs 24 hr/day (but 19.5 hrs of productive time)

Recent Performance:
Throughput = 1,400 panels per day (71.8 panels/hr)
WIP = 47,600 panels
CT = 34 days (663 hr at 19.5 hr/day)
Customer service = 75% on-time delivery

The process is as

49
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Process Rate (p/hr) Time (hr)

Lamination 191.5 4.7
Machining 186.2 0.5
Internal Circuitize 114.0 3.6
Optical Test/Repair - Int 150.5 1.0
Lamination – Composites 158.7 2.0
External Circuitize 159.9 4.3
Optical Test/Repair - Ext 150.5 1.0
Drilling 185.9 10.2
Copper Plate 136.4 1.0
Procoat 117.3 4.1
Sizing 126.5 1.1
EOL Test 169.5 0.5
rb, T0 114.0 33.9

50
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

51
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

52
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Probabilistic Intuition

Uses of Intuition:
• Driving a car
• Throwing a ball
• Making investments

First Moment Effects: g

• Throughput increases with machine speed
• Throughput increases with availability
• Inventory increases with lot size
• Our intuition is good for first moments

Probabilistic Intuition (cont.)

Second Moment Effects:
• Which are more variable – processing times of parts or batches?
• Which are more disruptive – long, infrequent failures or short frequent
ones?
• Which helps more – increasing times to failure or reducing times to
repair?
• Our intuition is less secure for second moments, so we make more
errors (e.g., regression to the mean).

53
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Variability

Definition: Variability is anything that causes the system to

depart from regular, predictable behavior.
May be consequence
of manufacturing
practices
Sources of Variability:
• machine failures • workpace variation
• setups • differential skill levels
• material shortages • material handling
• yield loss • demand fluctuations
• rework • engineering change orders
• operator unavailability • product variety
May be consequence
of business strategy

Measuring Process Variability

te = mean process time of a job

σ e = standard deviation of process time

σe
ce = = coefficient of variation, CV
te

Note: we often use the “squared

coefficient of variation” (SCV), ce2

54
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Variability Classes in Factory Physics

Low variability Moderate variability High variability
(LV) (MV) (HV)
ce
0 0.75 1.33

Effective Process Times:

• actual process times are generally LV
• effective process times include setups, failure outages, etc.
• HV, LV, and MV are all possible in effective process times

Relation to Performance Cases: For balanced systems

• MV – Practical Worst Case
• LV – between Best Case and Practical Worst Case
• HV – between Practical Worst Case and Worst Case

Measuring Process Variability – Example

Trial Machine 1 Machine 2 Machine 3
1 22 5 5
2 25 6 6
3 23 5 5
4 26 35 35
5 24 7 7
6 28 45 45
7 21 6 6
8 30 6 6
9 24 5 5
10 28 4 4
11 27 7 7
12 25 50 500
13 24 6 6
14 23 6 6
15 22 5 5
te 25.1 13.2 43.2
se 2.5 15.9 127.0
ce 0.1 1.2 2.9
Class LV MV HV

55
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Natural Variability

Definition: variability without explicitly analyzed cause

Sources:
• operator pace
• material fluctuations
• product type (if not explicitly considered)
• product quality

Observation: natural process variability is usually in the LV

category.

Down Time – Mean Effects

Definitions:
t 0 = base process time
c0 = base process time coefficient of variability
1
r0 = = base capacity (rate, e.g., parts/hr)
t0
m f = mean time to failure
mr = mean time to repair
cr = coefficent of variability of repair times (σ r / mr )

56
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Down Time – Mean Effects (cont.)

Availability: Fraction of time machine is up

mf
A=
m f + mr

Effective Processing Time and Rate:

re = Ar0

te = t0 / A

Totoise and Hare - Availability

Hare X19: Tortoise:

t0 = 15 min t0 = 15 min
σ0 = 3.35 min σ0 = 3.35 min
c0 = σ0 /t0 = 3.35/15 = 0.05 c0 = σ0 /t0 = 3.35/15 = 0.05
mf = 12.4 hrs (744 min) mf = 1.9 hrs (114 min)
mr = 4.133 hrs (248 min) mr = 0.633 hrs (38 min)
cr = 1.0 cr = 1.0

Availability:

A= A=

57
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Down Time – Variability Effects

Effective Variability:
te = t0 / A
 σ  (m + σ r )(1 − A)t 0
2 2 2
Variability
σ e2 =  0  + r depends on
 A A
repair times
σ 2
m in addition to
ce2 = 2e = c02 + (1 + cr2 ) A(1 − A) r
te t0 availability
Conclusions:
• Failures inflate mean, variance, and CV of effective process time
• Mean (te) increases proportionally with 1/A
• SCV (ce2) increases proportionally with mr
• SCV (ce2) increases proportionally in cr2
• For constant availability (A), long infrequent outages increase SCV
more than short frequent ones

Tortoise and Hare - Variability

Hare X19: Tortoise 2000

te = te =

ce2 = ce2 =

58
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Impact of Variability

2.875 jobs/hr 2.875 jobs/hr

Tor-
Hare
toise

Hare X19 Tortoise 2000

• CT = 28 hours • CT = 8 hours
• WIP = 81 jobs • WIP = 23 jobs

Conclusion: Capacity and arrival variability

are the same. CT and WIP are greatly
inflated by process variability due to failures

Setups – Mean and Variability Effects

Analysis:
N s = average no. jobs between setups
t s = average setup duration
σ s = std. dev. of setup time
σs Capacity Effect – setups
cs = inflate average process time
ts
ts
te = t0 +
Ns
σ s2 Ns −1 2
σ e2 = σ 02 + + ts
Ns N s2 Variability Effect – setups
σ 2 also inflate process time CV
ce2 = 2
e
t e

59
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Setups – Mean and Variability Effects (cont.)

Observations:
• Setups increase mean and variance of processing times.
• Variability reduction is one benefit of flexible machines.
• However, the interaction is complex.

Setup – Example
Data:
• Fast, inflexible machine – 2 hr setup every 10 jobs
t0 = 1 hr
N s = 10 jobs/setup
t s = 2 hrs
te = t0 + t s / N s = 1 + 2 / 10 = 1.2 hrs
re = 1 / te = 1 /(1 + 2 / 10) = 0.8333 jobs/hr

• Slower, flexible machine – no setups

t0 = 1.2 hrs
re = 1 / t0 = 1 / 1.2 = 0.833 jobs/hr

Traditional Analysis? No difference!

60
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Setup – Example (cont.)

Factory Physics Approach: Compare mean and variance
• Fast, inflexible machine – 2 hr setup every 10 jobs
t0 = 1 hr
c02 = 0.0625
N s = 10 jobs/setup
t s = 2 hrs
cs2 = 0.0625
te = t0 + t s / N s = 1 + 2 / 10 = 1.2 hrs
re = 1 / te = 1 /(1 + 2 / 10) = 0.8333 jobs/hr
 c2 N −1
σ e2 = σ 02 + t s2  s + s 2  = 0.4475
 Ns Ns 
ce = 0.31
2

Setup – Example (cont.)

• Slower, flexible machine – no setups

t 0 = 1.2 hrs
c02 = 0.0625

re = 1 / t 0 = 1 / 1.2 = 0.833 jobs/hr

ce2 = c02 = 0.0625

Conclusion:

61
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Other Process Variability Inflators

Sources:
• operator unavailability
• recycle
• batching
• material unavailability
• et cetera, et cetera, et cetera
Effects:
• inflate te
• inflate ce

Consequences:

Flow Variability

Process Variability is bad enough…

• Inflates CT
• Inflates WIP
• Forces lower utilization of capacity

But, variability also propagates…

• Causes uneven arrivals downstream
• Inflates CT and WIP at other stations
• Forces lower utilization of capacity throughout the line

62
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Illustrating Flow Variability

Low variability arrivals

t

High variability arrivals

t

Measuring Flow Variability

t a = mean time between arrivals

1
ra = = arrival rate
ta

σ a = standard deviation of time between arrivals

σa
ca = = coefficient of variation of interarrival times
ta

63
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Propagation of Variability –
High Utilization Station

LV HV HV

HV HV HV

LV LV
LV

HV LV LV

Conclusion: flow variability out of a high utilization station is

determined primarily by process variability at that station.

Propagation of Variability –
Low Utilization Station

LV LV
HV

HV HV HV

LV LV LV

HV LV HV

Conclusion: flow variability out of a low utilization station is

determined primarily by flow variability into that station.

64
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Propagation of Variability
ce2(i)
ca2(i) cd2(i) = ca2(i+1)
i i+1

Single Machine Station:

departure var
cd2 = u 2 ce2 + (1 − u 2 )ca2 depends on
arrival var
where u is the station utilization given by u = rate
and process
var
Multi-Machine Station:
u2 2
cd2 = 1 + (1 − u 2 )(ca2 − 1) +
(ce − 1)
m
rt
where m is the number of (identical) machines and u = a e
m

Variability Interactions

Importance of Queueing:
• manufacturing plants are queueing networks
• queueing and waiting time comprise majority of cycle time

System Characteristics:
• Arrival process
• Service process
• Number of servers
• Maximum queue size (blocking)
• Service discipline (FCFS, LCFS, EDD, SPT, etc.)
• Balking
• Routing
• Many more

65
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Kendall's Classification

A/B/C B
A: arrival process A
B: service process
C: number of machines

Queue C
M: exponential (Markovian) distribution Server
G: completely general distribution
D: constant (deterministic) distribution.

Queueing Parameters

ra = the rate of arrivals in customers (jobs) per unit

time (ta = 1/ra = the average time between
arrivals).
Note: a station
ca = the CV of inter-arrival times. can be
m = the number of machines. described
with 5
re = the rate of the station in jobs per unit time = parameters.
m/te.
ce = the CV of effective process times.

u = utilization of station = ra/re.

66
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Queueing Measures

Measures:
CTq = the expected waiting time spent in queue.
CT = the expected time spent at the process center, i.e., queue time
plus process time.
WIP = the average WIP level (in jobs) at the station.
WIPq = the expected WIP (in jobs) in queue.

Relationships:
CT = CTq + te
WIP = ra × CT
WIPq = ra × CTq

Result: If we know CTq, we can compute WIP, WIPq, CT.

The G/G/1 Queue

Formula:
CTq ≈ V × U × t
 c 2 + ce2  u 
≈  a 
 1 − u t e
 2 

Observations:
• Useful model of single machine workstations
• Separate terms for variability, utilization, process time.
• CTq (and other measures) increase with ca2 and ce2
• Flow variability, process variability, or both can combine to inflate
queue time.
• Variability causes congestion!

67
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

The G/G/m Queue

Formula:
CTq ≈ V × U × t
 c 2 + c 2  u 2 ( m +1) −1 
≈  a e  te
 2  m(1 − u ) 

Observations:
• Useful model of multi-machine workstations
• Extremely general.
• Fast and accurate.
• Easily implemented in a spreadsheet (or packages like MPX).

VUT Spreadsheet
MEASURE: STATION: 1 2 3 4 5
basic data

Arrival Rate (parts/hr) ra 10.000 9.800 9.310 8.845 7.960

2
Arrival CV ca 1.000 0.181 0.031 0.061 0.035
Natural Process Time (hr) t0 0.090 0.090 0.095 0.090 0.090
2
Natural Process SCV c0 0.500 0.500 0.500 0.500 0.500
Number of Machines m 1 1 1 1 1
MTTF (hr) mf 200 200 200 200 200
failures

MTTR (hr) mr 2 2 8 4 4
Availability A 0.990 0.990 0.962 0.980 0.980
Effective Process Time (failures only) te' 0.091 0.091 0.099 0.092 0.092
2
Eff Process SCV (failures only) ce ' 0.936 0.936 6.729 2.209 2.209
Batch Size k 100 100 100 100 100
Setup Time (hr) ts 0.000 0.500 0.500 0.000 0.000
2
Setup Time SCV cs 1.000 1.000 1.000 1.000 1.000
setups

Arrival Rate of Batches ra/k 0.100 0.098 0.093 0.088 0.080

Eff Batch Process Time (failures+setups) te = kt0/A+ts 9.090 9.590 10.380 9.180 9.180
2 2 2
Eff Batch Process Time Var (failures+setups) k*σ0 /A + 2mr(1-A)kt0/A+σs 0.773 1.023 6.818 1.861 1.861
2
Eff Process SCV (failures+setups) ce 0.009 0.011 0.063 0.022 0.022
Utilization u 0.909 0.940 0.966 0.812 0.731
2
Departure SCV cd 0.181 0.031 0.061 0.035 0.028
yield

Yield y 0.980 0.950 0.950 0.900 0.950

Final Departure Rate ra*y 9.800 9.310 8.845 7.960 7.562
2
Final Departure SCV ycd +(1-y) 0.198 0.079 0.108 0.132 0.077
Utilization u 0.909 0.940 0.966 0.812 0.731
Throughput TH 9.800 9.310 8.845 7.960 7.562
measures

Queue Time (hr) CTq 45.825 14.421 14.065 1.649 0.716

Cycle Time (hr) CTq+te 54.915 24.011 24.445 10.829 9.896
Cumulative Cycle Time (hr) Σi(CTq(i)+te(i)) 54.915 78.925 103.371 114.200 124.096
WIP in Queue (jobs) raCTq 458.249 141.321 130.948 14.587 5.700
WIP (jobs) raCT 549.149 235.303 227.586 95.780 78.773
Cumulative WIP (jobs) Σi(ra(i)CT(i)) 549.149 784.452 1012.038 1107.818 1186.591

68
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Effects of Blocking

VUT Equation:
• characterizes stations with infinite space for queueing
• useful for seeing what will happen to WIP, CT without restrictions

But real world systems often constrain WIP:

• physical constraints (e.g., space or spoilage)
• logical constraints (e.g., kanbans)

Blocking Models:
• estimate WIP and TH for given set of rates, buffer sizes
• much more complex than non-blocking (open) models, often
require simulation to evaluate realistic systems

The M/M/1/b Queue

1 2 Note: there is room
Infinite for b=B+2 jobs in
raw
materials system, B in the buffer
B buffer spaces and one at each station.

Model of Station 2
u (b + 1)u b +1
WIP( M / M / 1 / b) = − Goes to u/(1-u) as b→∞
1− u 1 − u b +1
Always less than WIP(M/M/1)
1− ub
TH ( M / M / 1 / b) = ra Goes to ra as b→∞
1 − u b +1
Always less than TH(M/M/1)
WIP( M / M / 1 / b)
CT ( M / M / 1 / b) = Little’s law
TH ( M / M / 1 / b)
where u = t e (2) / t e (1) Note: u>1 is possible; formulas valid for u≠1

69
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Blocking Example
te(1)=21 te(2)=20

B=2
u = t e (2) / t e (1) = 20 / 21 = 0.9524 M/M/1/b system has
u less WIP and less TH
WIP( M / M / 1) = = 20 jobs than M/M/1 system
1− u
TH ( M / M / 1) = ra = 1 / t e (1) = 1 / 21 = 0.0476 job/min
1-u b 1 − 0.9524 4  1 
TH(M/M/ 1/b) = r =   = 0.039 job/min 18% less TH
1-u b +1 1 − 0.9524 5
a
 21 
u (b + 1)u b +1 5(0.9524 5 )
WIP( M / M / 1 / b) = − b +1
= 20 − = 1.8954 jobs 90% less WIP
1− u 1− u 1 − 0.9524 5

Seeking Out Variability

General Strategies:
• look for long queues (Little's law)
• look for blocking
• focus on high utilization resources
• consider both flow and process variability
• ask “why” five times

Specific Targets:
• equipment failures
• setups
• rework
• operator pacing
• anything that prevents regular arrivals and process times

70
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Variability Pooling

Basic Idea: independent sources of variability tend to cancel each

other out, reducing total amount of variability.

Example (Time to process a batch of parts):

t 0 = time to process single part
σ 0 = standard deviation of time to process single part
σ
c0 = 0 = CV of time to process single part Batches are less variable
t0 than parts, because high
t 0 (batch) = nt 0 and low process times
σ 2 (batch) = nσ 2
0 0
“average out.”
σ 02 (batch) nσ 02 σ 02 c02 c0
c02 (batch) = 2
= = = ⇒ c0 (batch) =
t (batch)
0 n 2 t 02 nt 02 n n

Safety Stock Pooling Example

• PC’s consist of 6 components (CPU, HD, CD ROM, RAM,

removable storage device, keyboard)
• 3 choices of each component: 36 = 729 different PC’s
• Each component costs $150 ($900 material cost per PC)
• Demand for all models is normally distributed with mean 100 per
year, standard deviation 10 per year
• Replenishment lead time is 3 months, so average demand during
LT is θ = 25 for computers and θ = 25(729/3) = 6075 for
components
• Use base stock policy with fill rate of 99%

71
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Pooling Example - Stock PC’s

cycle stock
Base Stock Level for Each PC: safety stock
R = θ + zsσ = 25 + 2.33(√ 25) = 37

On-Hand Inventory for Each PC:

I(R) = R - θ + B(R) ≈ R - θ = zsσ = 37 - 25 = 12 units

Total (Approximate) On-Hand Inventory :

12× 729 × $900 = $7,873,200

Pooling Example - Stock Components

Necessary Service for Each Component:

S = (0.99)1/6 = 0.9983 zs = 2.93
Base Stock Level for Each Component: cycle stock
safety stock
R = θ + zsσ = 6075 + 2.93(√ 6075) = 6303

On-Hand Inventory Level for Each Component:

I(R) = R - θ + B(R) ≈ R - θ = zsσ = 6303-6075 = 228 units

Total Safety Stock:

228 × 18 × $150 = $615,600 92% reduction!

72
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Basic Variability Takeaways

Variability Measures:
• CV of effective process times
• CV of interarrival times
Components of Process Variability
• failures
• setups
• many others - deflate capacity and inflate variability
• long infrequent disruptions worse than short frequent ones
Consequences of Variability:
• variability causes congestion (i.e., WIP/CT inflation)
• variability propagates
• variability and utilization interact
• pooled variability less destructive than individual variability

73
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Exercise 4
Q1: Consider the following sets of inter output times from a machine. Compute the coefficient of
variation for each sample, and suggest a situation under which such behavior might occur.
a. 5,5,5,5,5,5,5,5,5,5
b. 5.1,4.9,5.0,5.0,5.2,5.1,4.8,4.9,5.0,5.0
c. 5,5,5,35,5,5,5,5,5,42
d. 10,0,0,0,0,10,0,0,0,0

Q2: Suppose jobs arrive at a single-machine workstation at a rate of 20 per hour and the average
process time is two and one-half minutes.
a. What is the utilization of the machine?
b. Suppose that inter arrival and process times are exponential,
i. What is the average time a job spends at the station (i.e., waiting plus process time)?
ii. What is the average number of jobs at the station?
iii. What is the long-run probability of finding more than three jobs at the station?
c. Process times are not exponential, but instead have a mean of 2.5 minutes and a
standard deviation of five minutes
i. What is the average time a job spends at the station?
ii. What is the average number of jobs at the station?
iii. What is the average number of jobs in the queue?

Q3: The mean time to expose a single panel in a circuit-board plant is two minutes with a
standard deviation of 1.5 minutes.
a. What is the natural coefficient of variation?
b. If the times remain independent, what will be the mean and variance of a job of 60
panels? What will be the coefficient of variation of the job of 60?
c. Now suppose times to failure on the expose machine are exponentially distributed with
a mean of 60 hours and the repair time is also exponentially distributed with a mean of two
hours. What are the effective mean and CV of the process time for a job of 60 panels?

Q4: Reconsider the expose machine of Problem 3 with mean time to expose a single panel of two
minutes with a standard deviation of one and one-half minutes and jobs of 60 panels. As before,
failures occur after about 60 hours of run time, but now happen only between jobs (i.e., these
failures do not preempt the job). Repair times are the same as before. Compute the effective
mean and CV of the process times for the 60 panel jobs. How do these compare with the results
in Problem 3?

74
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Q5: Consider two different machines A and B that could be used at a station. Machine A has a
mean effective process time te of 1.0 hours and an SCV ce2 of 0.25. Machine B has a mean
effective process time of 0.85 hour and an SCV of four.
a. For an arrival rate of 0.92 job per hour with ca2 = 1, which machine will have a
shorter average cycle time?
b. Now put two machines of type A at the station and double the arrival rate (i.e.,
double the capacity and the throughput). What happens to cycle time? Do the same for
machine B. Which type of machine produces shorter average cycle time?
c. With only one machine at each station, let the arrival rate be 0.95 job per hour
with ca2=1. Recompute the average time spent at the stations for both machine A and
machine B. Compare with a.
d. Consider the station with one machine of type A.
i. Let the arrival rate be one-half. What is the average time spent at the
station? What happens to the average time spent at the station if the arrival rate is
increased by one percent (i.e., to 0.505)? What percentage increase in wait time
does this represent?
ii. Let the arrival rate be 0.95. What is the average time spent at the
station? What happens to the average time spent at the station if the arrival rate is
increased by one percent (i.e., to 0.9595)? What percentage increase in wait time
does this represent?

75
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Push and Pull Production Systems

You say yes.

I say no.
You say stop.
and I say go, go, go!

– The Beatles

The Key Difference Between Push and Pull

Push Systems: schedule work Pull Systems: authorize work

releases based on demand. releases based on system status.

• inherently due-date driven • inherently rate driven

• control release rate, observe • control WIP level, observe
WIP level throughput

76
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Push vs. Pull Mechanics

PUSH PULL
(Exogenous)
Schedule
(Endogenous)
Stock Void

Production Process Production Process

Job Job

Push systems do not limit Pull systems deliberately

WIP in the system. establish a limit on WIP.

What Pull is Not!

Make-to-Order:
• MRP with firm orders on MPS is make-to-order.
• But it does not limit WIP and is therefore a push system.

Make-to-Stock:
• Pull systems do replenish inventory voids.
• But jobs can be associated with customer orders.

Forecast Free:
• Toyota’s classic system made cars to forecasts.
• Use of takt times or production smoothing often involves
production without firm orders (and hence forecasts).

77
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Push and Pull Examples

Are the following systems essentially push or essentially pull?

• Kinko’s copy shop:
• Soda vending machine:
• “Pure” MRP system:
• Doctor’s office:
• Supermarket (goods on shelves):
• Tandem line with finite interstation buffers:
• Runway at O’Hare during peak periods:
• Order entry server at Amazon.com:

Push and Pull Line Schematics

Pure Push (MRP)
Stock Stock
Point ... Point

Pure Pull (Kanban)

Stock Stock
Point ... Point

…
CONWIP
Stock Stock
Point ... Point

Authorization Signals Full Containers

78
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Pulling with Kanban

Outbound Outbound
stockpoint Completed parts with cards stockpoint
enter outbound stockpoint.

Production When stock is Production

cards removed, place card authorizes
production card start of work.
in hold box.

Advantages of Pull Systems

Low Unit Cost: Good Customer Service:

• low inventory • short cycle times
• reduced space • steady, predictable output
stream
• little rework
Flexibility:
High External Quality: • avoids committing jobs too
• high internal quality early
• pressure for good quality • encourages floating
• promotion of good quality capacity
(e.g., defect detection)

79
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

The Magic of Pull

Pulling Everywhere?

You don’t never make nothin’ and send it no place. Somebody

has to come get it.
– Hall 1983

No! It’s the WIP Cap:

• Kanban – WIP cannot exceed number of cards
• “WIP explosions” are impossible
WIP

Pull Benefits Achieved by WIP Cap

Reduces Costs: Improves Customer Service:

• prevents WIP explosions • reduces cycle time variability
• reduces average WIP • pressure to reduce sources of
• reduces engineering process variability
changes
• promotes shorter lead times and
Improves Quality: better on-time performance
• pressure for higher quality
• improved defect detection Maintains Flexibility:
• improved communication • avoids early release (like air
traffic control)
• less direct congestion
• less reliance on forecasts
• promotes floating capacity

80
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

CONWIP

Assumptions:
1. Single routing
...
2. WIP measured in units

Mechanics: allow next job to enter line each time a job leaves
(i.e., maintain a WIP level of m jobs in the line at all times).

Modeling:
• MRP looks like an open queueing network
• CONWIP looks like a closed queueing network
• Kanban looks like a closed queueing network with blocking

CONWIP Controller
Work Backlog
PN Quant
–—
–— –––––
–––––
–—
–— –––––
–––––
–—
–— –––––
–––––
–—
–— –––––
–––––
–— –––––
Indicator Lights
–—
–— –––––
––––– LAN
–—
–— –––––
–––––
R G

PC PC

...
Workstations

81
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

CONWIP Efficiency Example

Equipment Data:
• 5 machines in tandem, all with capacity of one part/hr (u=TH·te=TH)
• exponential (moderate variability) process times

w w
CONWIP System: TH ( w) = rb = PWC formula
w + W0 − 1 w+4

u TH
Pure Push System: w(TH ) = 5 =5 5 M/M/1 queues
1− u 1 − TH

CONWIP Efficiency Example (cont.)

How much WIP is required for push to match TH

attained by CONWIP system with WIP=w?

82
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

CONWIP Robustness Example

Profit Function: Profit = pTH − hw

 w 
CONWIP: Profit(w) = p  − hw need to find “optimal”
 w+4 WIP level

 5 TH  need to find “optimal”

Push: Profit(TH) = pTH − h 
 1 − TH  TH level (i.e., release
rate)

Key Question: what happens when we don’t choose optimum

values (as we never will)?

CONWIP vs. Pure Push Comparisons

70 Optimum
CONWIP
60
Efficiency
50
Robustness
40
Profit

30

20 Push
10

0
0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% 140.00%
-10

-20

Control as Percent of Optimal

83
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Modeling CONWIP with Mean-Value Analysis

Notation:
u j ( w) = utilization of station j in CONWIP line with WIP level w
CT j ( w) = cycle time at station j in CONWIP line with WIP level w

∑
n
CT ( w) = j =1
CT j ( w) = cycle time of CONWIP line with WIP level w
TH ( w) = throughput of CONWIP line with WIP level w
WIPj ( w) = average WIP level at station j in CONWIP line with WIP level w

Basic Approach: Compute performance measures for increasing

w assuming job arriving to line “sees” other jobs distributed
according to average behavior with w-1 jobs.

Mean-Value Analysis Formulas

Starting with WIPj(0)=0 and TH(0)=0, compute for w=1,2,…

t e2 ( j ) 2
CT j ( w) = [ce ( j ) − 1]TH ( w − 1) + [WIPj ( w − 1) + 1]t e ( j )
2
n
CT ( w) = ∑ CT (w)
j =1
j

w
TH ( w) =
CT ( w)
WIPj ( w) = TH ( w)CT j ( w)

84
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Exercise 5

85
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

- What is a Supply Chain?

A supply chain consists of the flow of

products and services from:
- Raw materials manufacturers
- Component and intermediate manufacturers
- Final product manufacturers
- Wholesalers and distributors and
- Retailers
Connected by transportation and storage activities, and
Integrated through information, planning, and integration
activities
Many large firms are moving away from in-house
Vertically Integrated structures to Supply Chain
Management

86
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

- History:

87
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

- Importance of Supply Chain

Management:

Who benefits most? Firms with:

– Large inventories
– Large number of suppliers
– Complex products
– Customers with large purchasing budgets

– To gain efficiencies from procurement, distribution and logistics

– To make outsourcing more efficient

– To reduce transportation costs of inventories

– To meet competitive pressures from shorter development

times, more new products, and demand for more
customization

– To meet the challenge of globalization and longer supply chains

– To meet the new challenges from e-commerce

– To manage the complexities of supply chains

– To manage the inventories needed across the supply chain

88
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

- The Foundations of Supply Chain

Management
Supplier management, supplier
Supply
evaluation, supplier certification, strategic
Management
partnerships
Demand management, MRP, ERP,
inventory visibility, JIT (AKA lean
Operations
production & Toyota Production System),
TQM (AKA Six Sigma)
Transportation management, customer
relationship management, distribution
Distribution
network, perfect order fulfillment, global
supply chains, service response logistics
Process integration, performance
Integration
measurement

89
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Purchasing Trends:
– Long term relationships
– Supplier management- improve
performance through
• Supplier evaluation (determining supplier
capabilities)
• Supplier certification (third party or internal
certification to assure product quality and service
requirements)
– Strategic partnerships- successful and
trusting relationships with top-performing
suppliers

Operations Trends:

– Demand management- match demand to

available capacity
– Linking buyers & suppliers via MRP and ERP
systems
– Use JIT to improve the “pull” of materials to
reduce inventory levels
– Employ TQM to improve quality compliance
among suppliers

90
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Distribution Trends:
– Transportation management- tradeoff decisions
between cost & timing of delivery/customer
service via trucks, rail, water & air
– Customer relationship management- strategies
to ensure deliveries, resolve complaints, improve
communications, & determine service
requirements
– Network design- creating distribution networks
based on tradeoff decisions between cost &
sophistication of distribution system

Integration Trends:
– Supply Chain Process Integration- when
supply chain participants work for common
goals. Requires intrafirm functional
integration. Based on efforts to change
attitudes & adversarial relationships
– Supply Chain Performance Measurement-
Crucial for firms to know if procedures are
working

91
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

- Why is supply chain management

difficult?
– Different organizations in the supply chain may have different,
conflicting objectives
• Manufacturers: long run production, high quality, high
productivity, low production cost

• Distributors: low inventory, reduced transportation costs, quick

replenishment capability

• Customers: shorter order lead time, high in-stock inventory, large

variety of products, low prices

– Supply chains are dynamic - they evolve and change over time

- Key issues in supply chain

management include:
– Distribution network configuration:

• How many warehouses do we need?

• Where should these warehouses be located?
• What should the production levels be at each of
our plants?
• What should the transportation flows be
between plants and warehouses?

92
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

– Inventory control:
• Why are we holding inventory? Uncertainty in
customer demand? Uncertainty in the supply
process? Some other reason?
• If the problem is uncertainty, how can we
reduce it?
• How good is our forecasting method?

– Distribution strategies:
• Direct shipping to customers?
• Classical distribution in which inventory is held in warehouses and
then shipped as needed?
• Cross-docking in which transshipment points are used to take
stock from suppliers’ deliveries and immediately distribute to
point of usage?

– Supply chain integration and strategic partnering:

• Should information be shared with supply chain partners?
• What information should be shared?
• With what partners should information be shared?
• What are the benefits to be gained?

93
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

– Product design
• Should products be redesigned to reduce logistics costs?
• Should products be redesigned to reduce lead times?
• Would delayed differentiation be helpful?
– Information technology and decision-support systems
• What data should be shared (transferred)
• How should the data be analyzed and used?
• What infrastructure is needed between supply chain members?
• Should e-commerce play a role?
– Customer value
• How is customer value created by the supply chain?
• What determines customer value? How do we measure it?
• How is information technology used to enhance customer value in
the supply chain?

bullwhip effect:
• Ordering/producing in large lots can also
increase the safety stock of suppliers and its
corresponding carrying cost. It can also create
what’s called the bullwhip effect.
• The bullwhip effect is the phenomenon of
orders and inventories getting progressively
larger (more variable) moving backwards
through the supply chain. This is illustrated
graphically on the next slide.

94
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

Order Size

Retailer Orders
Distributor Orders

Production Plan

Time

Methods for coping with the bullwhip

effect:
– Reducing uncertainty. This can be accomplished by
centralizing demand information.
– Reducing variability. This can be accomplished by
using a technique made popular by WalMart and
then Home Depot called everyday low pricing (EDLP).
EDLP eliminates promotions as well as the shifts in
demand that accompany them.
– Reducing lead time. Order times can be reduced by
using EDI (electronic data interchange).
– Strategic partnerships. The use of strategic
partnerships can change how information is shared
and how inventory is managed within the supply
chain

95
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

- Global Supply Chain

• To compete globally requires an effective
supply chain
• Information technology is an “enabler” of
global trade
• Nations form trading groups
• No tariffs or duties

-Obstacles to Global Chain

Transactions:
• Increased documentation for invoices, cargo
insurance, letters of credit, ocean bills of
lading or air waybills, and inspections
• Ever changing regulations that vary from
country to country that govern the import and
export of goods
• Trade groups, tariffs, duties, and landing costs
• Limited shipping modes
• Differences in communication technology and
availability

96
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

• Different business practices as well as

language barriers
• Government codes and reporting
requirements that vary from country to
country
• Numerous players, including forwarding
agents, custom house brokers, financial
institutions, insurance providers, multiple
transportation carriers, and government
agencies
• Since 9/11, numerous security regulations
and requirements

- Example of SCM in Sabic:

• Transportation
port

Factory container

• This moving takes 30 days

97
 IE 472
Operations of Manufacturing Systems

Spring 2011
Dr Ateekh-Ur-Rehman

• They used supply change management to solve this problem , the

found

port

Factory container

• It is taking now 2 days only

Competition is no longer between

companies ; it is between supply chains

END

98