1. Performance Measures, Capacity Planning & Scheduling

2. What is the point of the business?

3. Measuring the performance of a manufacturing system
The goal of all manufacturing companies is to make money now and in the future
Goldratt E, The Goal, 1989

4. Business indicators Throughput (T)
The amount of income generated by sales. Generally
sales revenue - material cost
By this definition work can only be counted as throughput if it has been sold to generate income.

5. Business indicators Inventory (I)
The net value of all assets, including work in progress, raw materials, finished parts, machines, buildings.
Operational Expense (OE)
All the costs incurred in operating the business, including wages, maintenance, inventory holding costs, rents/rates, service charges, raw materials etc.

6. Net profit (NP)

7. Financial measures Return on investment (ROI)
how much profit has been produced per the money invested or tied up in the business. Similar to return on capital employed (ROCE).

8. Financial measures Cash flow
The flow of cash into the business to cover expenses.

9. The goal
The goal of manufacturing is defined by Goldratt and Cox (1989) as simultaneously increasing net profit, return on investment and cash flow.

10. How increase increase increase Net Profit Return on Investment
Cash Flow
Throughput
Inventory
Operating Expenses
increase
reduce
reduce

11. How
Decrease inventory
Decrease operating expense
Increase throughput

12. Decrease inventory
After an initial reduction to a low work in progress (WIP) environment it is difficult to make a significant difference to profits solely by reducing inventory.
Sell tools?
Sell factory area or storage space?
Dangers for the future…….

13. Decrease operating expense
Many of a company's operating expenses are fixed.
wages are unchanged regardless of workload
'hire and fire' allows reduction in operational expenses at times of low demand.
Reduce use of overtime, reduce waste.

14. Increase throughput
There is no limit to the amount by which throughput can be increased! You can always sell more!
The objective of the Operations Manager and the management system should be:
Greatest throughput
Minimum operating expense
Minimum inventory

16. Operations / Production
Elements of
Operations / Production
Management Systems

17. Bill of Materials (BOM)
A list of components required to assemble a finished product.
used in calculating the requirements for sub-assemblies and components from the known demand for the finished goods.
requirements for component parts can be calculated.

18. Product: a Bulldog Clip

19. Product Structure Tree for a box of Bulldog clips
Clip complete
Spring
Clip side
Box 2 10
Indented Bill of Materials for a box of Bulldog clips
Box of 10 bulldog clips N1
1 Box N2
10 Clip complete N3
2 Clip side N4
1 Spring N5

20. Master production schedule (MPS)
requirements for finished goods and dates for their completion
A mixture of firm orders and sales forecasts - a list of due dates.
generally whole-product and whole-factory

21. MPS Product Late Nov Dec Jan Feb Mar Apr May SuperComp Firm order 3 126 4 2 1
Under contract - 5 9 8 7
Expected
Total 14 11 15
CompMax 18 21 20 26 19

22. MPS
Slack et al Operations Management 4e p490

24. Rough-cut capacity planning (RCCP)
Calculates the load on each resource area which will be required during each pre-determined time period.
This is re-scheduled to allow the best use of available capacity.
Generally major items / subassemblies and critical resources

25. RCCP
Childe Intro CAPM p44

26. Scheduling
The planning of when each operation on each part should take place. Based upon:
Run time or “op time” - time taken to perform an operation;
Set up time - time taken to set up machinery etc to perform an operation;
Process time – time for a batch in a process such as heat treat / acid dip
Queue time - waiting time before any operation, sometimes included in set up time;
Movement time - to move work from one operation to the next;
Lead time - total of the above times for a whole part or product.

27. Scheduling works Forward or Backward …….
Forward Scheduling
Backward Scheduling

28. Forward scheduling
Forward scheduling starts at the current date and adds the time for each of the operations which is to take place (including queue and move times).
This theoretically gives the earliest date that the component can be completed.

29. Forward scheduling
Childe Intro CAPM p41

30. Forward scheduling
Everybody busy – no waiting for work – low operating cost(?)
Components wait for their partners – high inventory
End date might be too late – but at least you know in advance – good for throughput

31. Backward scheduling
From the requirements date the system schedules backwards the time required for each operation and includes queuing time and movement time.
This type of scheduling should theoretically give the date that the component should be started in order to be completed on time.

32. Backward scheduling
Childe Intro CAPM p41

33. Backward scheduling
Low inventory – material not committed or bought until necessary
Everyone knows the due date (?)
High risk if a component or operation goes late – danger for throughput – everything is critical
Start date might be before now - high expense to catch up by overtime or subcontract

34. Combined Backwards and Forwards Scheduling
Childe Intro CAPM p41

35. Capacity planning
In simple systems it is common to ignore capacity and deal with overloads by working overtime or sub-contracting some of the load.
But to plan for capacity….
Infinite Capacity Planning
Finite Capacity Planning

36. Infinite capacity planning
also known as Capacity Requirements Planning (CRP)
(Schedule either forwards or backwards)
Calculate total capacity required in each period.
Easy to see when the work centre will be overloaded and by how much
shows how much capacity is REQUIRED

37. Infinite capacity planning30 25 20
Hours 15 10 5
Mon
Tues
Wed
Thur
Fri

38. Infinite capacity planning
Overloads are visible and can be planned for
Overloads must be dealt with by
Reschedule the work by hand
Extra working (overtime or extra shift)
Move work to alternative resource (sub-con?)
Re-plan the MPS (possibly change delivery date to customer)

39. Finite capacity planning
(Schedule forward or backward)
Book time on the required machines for each operation.
Finds the next available slot

40. Finite capacity planning30 25 20
Hours 15 10 5
Mon
Tues
Wed
Thur
Fri

41. Finite capacity planning
No overloads can be planned
Automatic move to available time
Cannot see load, only lead time
Lead time is a result not an input of the capacity planning process
Errors are cumulative