Planning Production Activity

Preview Planning Manufacturing Facilities Quantitative Tools in Production Planning Production Planning and Control Flexible Manufacturing Systems

Prof.Dr.B.G.etiner

Planning Production Activity

Planning Manufacturing Facilities Plant Location: 7 Basic Steps in locating and building every new plant
1. Establish the need for a new plant 2. Determine best geographical area based on needs 3. Establish the requirements 4. Screen many communities 5. Pinpoint few communities for detailed study 6. Select the best location 7. Build the plant Prof.Dr.B.G.etiner

Planning Production Activity

Planning Manufacturing Facilities Plant Location
Some of the factors affecting choice of region * Transportation (highway, rail, air, water) * Labor (supply, skill level, local wages, and attitudes) * Geographical location (raw materials, customers etc) * Utilities (supply and cost of water, electricity etc) * Business Climate (taxes, pollution controls, community) * Comfortableness (Climate, educational facilities etc) * Plant Sites (land cost etc)

Prof.Dr.B.G.etiner

Planning Production Activity

Planning Manufacturing Facilities Plant Location
Most important factors for plant location will vary with industry
* For producing the bricks, plant has to be close to raw material * Aluminum production needs cheap electricity * High-technology electronic firms have tended to cluster together with technical professionals and educational institutions * Clothing manufacturers look for lower labor-cost areas

Prof.Dr.B.G.etiner

Planning Production Activity

Planning Manufacturing Facilities Plant Design
Nature of plant and its arrangement on the site Multistory plants: Conserve land area, permit use of gravity flow, and cheaper to heat Singlestory plants: More flexible, permit lighter foundations.

Prof.Dr.B.G.etiner

Planning Production Activity

Planning Manufacturing Facilities Plant Layout
Try to achieve most effective arrangement of physical facilities and personnel for making a product. Product Layout: Machines and personnel are arranged along the production line so minimum travel is obtained between processing steps Process Layout: All machines or activity of a particular type are located together. Useful for job-shop environment

Prof.Dr.B.G.etiner

Planning Production Activity

Planning Manufacturing Facilities Plant Layout
Try to achieve most effective arrangement of physical facilities and personnel for making a product. Fixed-position Layout: Product remains stationary. (for example; shipbuilding or mass construction) Group Technology: A set of products requiring similar processing equipment is identified, and a small group of the machines needed to make this set of similar products is placed together.

Prof.Dr.B.G.etiner

Planning Production Activity Plant Layout Product A

1 2 3 4 5

Receiving

Planning Milling Grinding

Drill Inspection Press

Product B
I II III IV V
Drill Turning Press Milling Painting Inspection

Prof.Dr.B.G.etiner

Shipping

Planning Production Activity Plant Layout

Turning Planning 1 Grinding Product A Product B

Receiving

II 2 III Milling I 4 Drill Press V 5 Painting IV

Inspection

Prof.Dr.B.G.etiner

Shipping

Weighted Factor Analysis

Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Economic Order Quantity (EOQ) to Inventory Break-Even Charts Learning Curves

Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Inventory Inventory Level

Production

Production Problem

Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Economic Order Quantity (EOQ) to Inventory
Consider an inventory item for which annual requirement is R units. Storing each unit of the item in inventory will cost I dollars per year. Each batch involves a order/setup cost of S dollars.

EOQ=

2 RS I
Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Economic Order Quantity (EOQ) to Inventory
a) If it costs $2 per unit to store an item for one year, $40 setup cost every time you produce a lot, and you use 1000 units per year, how many lots of what size should be produced each year b) What is the answer if order setup cost is reduced to $10?

a) b)

2 RS EOQ= I 2 RS EOQ= I

2.1000.40 200 1000 / 200 5 lots 2 2.1000.10 EOQ is decreased 100 (more flexible) 2
Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Economic Order Quantity (EOQ) to Inventory
CTotal
Cost (Dollars)

R Q I S ( ) R.C Pr oduct Q 2
Annual Total Cost

Q is batch quantity

ory t en st Inv Co l ua ing n An old H Annual Ordering Cost

Prof.Dr.B.G.etiner

Order Quantity (Q)

Planning Production Activity Quantitative Tools in Production Planning Problem with Economic Order Quantity Why does the setup cost have to be so high? It doesnt need to be.
Solution is a) designing dies and tools to switch to new batch b) including simple cards (kanban) in each small lot
Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Break-Even Charts Break-even analysis divides costs into fixed and variable components to estimate the production levels for profitable operation.

Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Break-Even Charts

A plant may produce and sell U units of product up to a capacity of 2000 units. Fixed costs F1 of $100,000 must be paid in any case. The selling price is assumed a constant S=$250, regardless of volume, so that total revenue R=UxS. The unit variable cost V1 is assumed to be constant $150. Each unit sold makes a contribution C1 of C1=S-V1=$250-$150=$100 The break-even point BE1 is the production level U where total costs TC equals to total revenue R: R=UxS=TC1=F1+UxV1 BE1=U=
F1 S-V1

$100,000 $250-$150

=1000 units

Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Break-Even Charts (Automation)
More efficient production F1=$180,000 and V2=$100 BE2=1200
Thousands of dollars

500 400
T ta l o ev R

ofit Pr

300 200 100 400 800 1200 Units Sold (U) BE Point

s l Co T o ta 1 TC

1600

2000

BE After Automation

Production Capacity

nu e

Planning Production Activity Quantitative Tools in Production Planning Break-Even Charts (Automation)
Total Cost Before=F1+UxV1=$100,000+2000x150=$400,000 Total Cost in Automation=F2+UxV2=$180,000+2000x100=$380,000 Total Revenue=UxS=2000x250=$500,000 Maximum Profit Before=Total Revenue-Total Cost=$500,000-$400,000

$100,000
Maximum Profit in Automation=Total Revenue-Total Cost =$500,000-$380,000

$120,000
In case of using maximum capacity, it is better to automate in this example Prof.Dr.B.G.etiner

Planning Production Activity Quantitative Tools in Production Planning Learning Curves With Learning Curve Rate %90
If the first unit takes 1000 labor hours Second will take 900, Fourth will take 810, Eight will take 729

Prof.Dr.B.G.etiner