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Gaafar 2005Production and Inventory Control - Introduction (1)

MENG 445

Production and Inventory ControlIntroduction

Dr. Lotfi K. Gaafar

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Overview

The main components of the PPC system

Qualitative/quantitative forecasting

Aggregate planning

Material requirement planning

Inventory control

Scheduling

The theory of constraints and its applications

Push and Pull production systems

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Production Planning and Control

Demandforecasting

Sales andorder entry Customer

Production

Inventory Vendors

Aggregate planning

Inventorymanagement

Shippingand

receiving

Materialsrequirement planning

Shop-floorschedulingand control

The Production Control System

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Production Planning and Control

Main FunctionsForecasting to predict customer demand on various productsover a given horizon.

Aggregate Planning to determine overall resources needed.

M ater ials Requirement Planning to determine all requiredcomponents and timing.

I nventory M anagement to decide production or purchasequantities and timing.

Scheduling to determine shop-floor schedule of variouscomponents.

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Production Planning and Control

PurposeEffectively utilize limited resources in the production ofgoods so as to satisfy customer demands and create a profitfor investors.

Resources include the production facilities, labor andmaterials.

Constraints include the availability of resources, deliverytimes for the products, and management policies.

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The production control activity is a chain of interrelatedevents that functions as a system. The decisions are made

for different horizons in time and with different degrees ofaccuracy. Yet they must all occur if the ultimate objectiveis to be met: that is, to use limited resources effectively to

produce goods that satisfy customer demands and create a profit for investors.

Production Planning and Control

Summary

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HighProfitability

LowCosts

Low UnitCosts

HighThroughput

LessVariability

HighUtilization

LowInventory

QualityProduct

HighSales

Many products

FastResponse

MoreVariability

HighInventory

LowUtilization

ShortCycle Times

High CustomerService

Production Objectives

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ThroughputWIP

Cycle timeService qualityProfit

Performance Measures

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Forecasting

Objective: predict demand for planning purposes. Laws of Forecasting:

1. F orecasts are always wrong!

2. F orecasts always change!3. The fur ther into the future, the less rel iable the

forecast will be! Forecasting Tools:

Qualitative : Delphi, Analogies Quantitative : Causal and time series models

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Aggregate Planning

Objective: generate a long-term production plan thatestablishes a rough product mix, anticipates bottlenecks,and is consistent with capacity and workforce plans.

Issues:

Aggregation : product families and time periods must beset appropriately for the environment. Coordination : AP is the link between the high level

functions of forecasting/capacity planning andintermediate level functions of MRP, inventory control,and scheduling.

Anticipating Execution : AP is virtually always donedeterministically, while production is carried out in astochastic environment.

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Workforce Planning How much and what kind of labor is needed to support

production goals? Issues:

Basic Staff ing Calculations : standard labor hours

adjusted for worker availability. Working Environment : stability, morale,

learning.

Flexibility/Agility : ability of workforce tosupport plant's ability to respond to shortand long term shifts.

Quality : procedures are only as goodas the people who carry them out.

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Capacity/Facility Planning

How much and what kind of physical equipment isneeded to support production goals?

Issues:

Basic Capacity Calcul ations : stand-alone capacitiesand congestion effects (e.g., blocking)

Capacity Str ategy : lead or follow demand

Make-or-Buy : vendoring, long-term identity Flexibility : with regard to product, volume, mix

Speed : scalability, learning curves

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Demand Management

Objective: establish an interface between the customerand the plant floor, that supports both competitivecustomer service and workable production schedules.

Issues:

Customer Lead Times : shorter is more competitive. Customer Service : on-time delivery.

Batching : grouping like product families can reduce lostcapacity due to setups.

I nterface with Scheduli ng : customer due dates are arean enormously important control in the overallscheduling process.

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Material Requirement Planning

Objective: Determine all purchase and productioncomponents needed to satisfy theaggregate/disaggregate plan.

Issues: Bill of M ateri als : Determines components, quantities

and lead times.

I nventory M anagement : Must be coordinated withinventory.

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Sequencing and Scheduling

Objective: develop a plan to guide the release of workinto the system and coordination with needed resources(e.g., machines, staffing, materials).

Methods: Sequencing :

Gives order of releases but not times. Scheduling :

Gives detailed release times.

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Shop Floor Control

Objective: control flow of work through plant andcoordinate with other activities (e.g., quality control,preventive maintenance, etc.)

Issues:

Customization : SFC is often the most highlycustomized activity in a plant.

I nformation Coll ection : SFC represents the interface

with the actual production processes and is therefore agood place to collect data.

Simplicity : departures from simple mechanisms must be carefully justified.