1. Facilities

2. Objectives of Facility Layout
Eliminate waste or redundant movement
Facilitate the entry, exit, and placement of material, products, or people
Incorporate safety and security measures
Promote product and service quality
Encourage proper maintenance activities
Provide a visual control of operations or activities
Provide flexibility to adapt to changing conditions
Increase capacity

3. Objectives of Facility Layout
Minimize material handling costs
Utilize space efficiently
Utilize labor efficiently
Eliminate bottlenecks
Facilitate communication and interaction between workers, between workers and their supervisors, or between workers and customers
Reduce manufacturing cycle time or customer service time

4. Basic Types of Layouts Process Layout Product Layout
Machines grouped by process they perform
Product Layout
Linear arrangement of workstations to produce a specific product
Fixed Position Layout
Used in projects where the product cannot be moved

5. Manufacturing Process LayoutD G A
Receiving and
Shipping
Assembly
Painting Department
Lathe Department
Milling
Department
Drilling Department
Grinding P

6. A Product Layout In
Out

7. Fixed-Position Layouts
Typical of projects
Equipment, workers, materials, other resources brought to the site
Highly skilled labor
Often low fixed
Typically high variable costs

8. Block Diagramming Create load summary chart
Calculate composite (two way) movements
Develop trial layouts minimizing number of nonadjacent loads

10. Relationship Diagramming (Murther’s Grid)
Used when quantitative data is not available
Muther’s grid displays preferences
Denote location preferences with weighted lines

11. Relationship Diagramming Example
Production
Offices
Stockroom
Shipping and receiving
Locker room
Toolroom

12. Relationship Diagramming Example
A Absolutely necessary
E Especially important
I Important
O Okay
U Unimportant
X Undesirable A O X U E I
Production
Offices
Stockroom
Shipping and receiving
Locker room
Toolroom

13. Relationship Diagramming Example
1 Absolutely necessary
2 Especially important
3 Important
4 Okay
5 Unimportant
6 Undesirable 1 4 6 5 2 3
Production
Offices
Stockroom
Shipping and receiving
Locker room
Toolroom

15. Service Layouts Usually process layouts due to customers needs
Minimize flow of customers or paperwork
Retailing tries to maximize customer exposure to products
Computer programs consider shelf space, demand, profitability
Layouts must be aesthetically pleasing

16. Designing Product Layouts
Product layouts or assembly lines
Develop precedence diagram of tasks
Jobs divided into work elements
Assign work elements to workstations
Try to balance the amount work of each workstation

17. Line Balancing Precedence diagram Conflict with TOC Cycle time
Network showing order of tasks and restrictions (constraints) on their performance
Conflict with TOC
Cycle time
Maximum time product spends at any one workstation

18. Hybrid Layouts Cellular layouts Flexible manufacturing systems
Group machines into machining cells
Flexible manufacturing systems
Automated machining & material handling systems
Mixed-model assembly lines
Produce variety of models on one line

19. Cellular Layouts Identify families of parts with similar flow paths
Group machines into cells based on part families
Arrange cells so material movement is minimized
Locate large shared machines at point of use

20. Advantages Of Cellular Layouts
Reduced material handling and transit time
Reduced setup time
Reduced work-in-process inventory
Better use of human resources
Easier to control - visibility
Easier to automate

21. Disadvantages Of Cellular Layouts
Inadequate part families
Poorly balanced cells
Expanded training and scheduling of workers
Increased capital investment

22. Mixed Model Assembly Lines
Produce multiple models in any order on one assembly line
Harley, Opel
Issues in mixed model lines
Line balancing
U-shaped line
Flexible workforce
Model sequencing

23. Facility Location Models

24. Types Of Facilities Auto plants, steel mills, chemical plants
Heavy manufacturing
Auto plants, steel mills, chemical plants
Light/Hi Tech industry
Small components mfg, assembly
Warehouse & distribution centers
Retail & service

25. Factors in Heavy Manufacturing Location
Construction costs
Land costs
Raw material and finished goods shipment modes
Proximity to raw materials
Utilities
Labor availability

26. Factors in Light Industry Location
Construction costs
Land costs
Easily accessible geographic region
Education & training capabilities

27. Factors in Warehouse Location
Transportation costs
Proximity to markets (Customers)

30. Warehouse Size Considerations
Customer service level
layout
# of products (Stock Keeping Units - SKUs)
customer base
size of products
racks/shelving
demand variability
MHE requirements/aisle size
regulations - CAL OSHA - earthquake; safety; fire

31. Factors in Retail Location
Proximity to customers
Ease of customer entry and exit
Location is everything

32. Global Location Factors
Government stability
Government regulations
Political and economic systems
Economic stability and growth
Exchange rates
Culture
Climate
Export import regulations, duties and tariffs
Raw material availability
Number and proximity of suppliers
Transportation and distribution system
Labor cost and education
Available technology
Commercial travel
Technical expertise
Cross-border trade regulations
Group trade agreements

33. Regional Location Factors
Community government
Local business regulations
Government services
Business climate
Community services
Taxes
Availability of sites
Financial Services
Community inducements
Proximity of suppliers
Education system

34. Site Location Factors Customer base Construction/ leasing cost
Land cost
Site size
Transportation
Utilities
Zoning restrictions
Traffic
Safety/security
Competition
Area business climate
Income level

35. Location Incentives Tax credits Wal-Mart in Wyandotte
Relaxed government regulation
Job training
Infrastructure improvement
Money

36. Center-of-Gravity Technique
Locate facility at center of geographic area
Based on weight and distance traveled
Establish grid-map of area
Identify coordinates and weights shipped for each location

37. Capacity and Aggregate Planning

38. Capacity Outputs: Examples

39. The goal of capacity planning decisions
The capacity of the firm to produce the service or good
The processes for providing the service or making the good
The layout or arrangement of the work space
The design of work processes to enhance productivity

40. Capacity The max output that an organization be capable of producing
Measure a single facility:
Design vs. Effective capacity
Capacity Utilization: design vs. efficient utilization
For systems have more than one facility and flows of product
System capacity and bottleneck
Improve system capacity

41. Determinants of Effective Capacity
Facilities
Human considerations
Adding people
Increasing employee motivation
Operations
Improving operating rate of a machine
Improving quality of raw materials and components
External forces
Safety regulations

42. Capacity Utilization
Measures how much of the available capacity is actually being used:
Always <=1(percentage of usage)
Higher the better
Denominator:
If effective capacity used: efficient utilization
If design capacity used: design utilization

43. Aggregate Planning
The process of planning the quantity and timing of output over the intermediate range (3-18 months) by adjusting production rate, employment, inventory
Master Production Schedule: formalizes the production plan and translates it into specific end item requirements over the short to intermediate horizon

44. Capacity Planning
The process of determining the amount of capacity required to produce in the future. May be at the aggregate or product line level
Master Production Schedule - anticipated build schedule
Time horizon must exceed lead times for materials

45. Capacity Planning
Look at lead times, queue times, set up times, run times, wait times, move times
Resource availability
Material and capacity - should be in synch
driven by dispatch list - listing of manufacturing orders in priority sequence - ties to layout planning
load profiles - capacity of each section

46. the capacity decisions:
When to add capacity
How much capacity to add
Where to add capacity
What type of capacity to add
When to reduce capacity

47. Capacity Planning
Rough Cut Capacity Planning - process of converting the master production schedule into requirements for key resources
capacity requirements plan - time-phased display of present and future capacity required on all resources based on planned and released orders

48. Capacity Planning
Capacity Requirements Planning (CRP) - process of determining in detail the amount of labor and machine resources required to meet production plan
RCCP may indicate sufficient capacity but the CRP may indicate insufficient capacity during specific time periods

49. Theory of Constraints Every system has a bottle neck
capacity of the system is constrained by the capacity of the bottle neck
increasing capacity at other than bottle neck operations does not increase the overall capacity of the system

50. Theory of Constraints What needs to be changed What to change to
How to make the change happen

51. Theory of Constraints Identify the constraint Subordinate Inertia
Walk the process again
inertia of change can create new bottle necks

52. Capacity Planning Establishes overall level of productive resources
Affects lead time responsiveness, cost & competitiveness
Determines when and how much to increase capacity

53. Capacity Expansion Volume & certainty of anticipated demand
Strategic objectives for growth
Costs of expansion & operation
Incremental or one-step expansion

54. Sales and Operations Planning (S&OP)
Brings together all plans for business
performed at least once a month
Internal and external

55. Adjusting Capacity to Meet Demand
Producing at a constant rate and using inventory to absorb fluctuations in demand (level production)
Hiring and firing workers to match demand (chase demand)
Maintaining resources for high demand levels
Increase or decrease working hours (overtime and undertime)
Subcontracting work to other firms
Using part-time workers
Providing the service or product at a later time period (backordering)

56. Demand Management Shift demand into other periods
Incentives, sales promotions, advertising campaigns
Offer product or services with countercyclical demand patterns
Partnering with suppliers to reduce information distortion along the supply chain

57. Remedies for Underloads
Acquire more work
Pull work ahead that is scheduled for later time periods
Reduce normal capacity

58. Remedies for Overloads
Eliminate unnecessary requirements
Reroute jobs to alternative machines or work centers
Split lots between two or more machines
Increase normal capacity
Subcontract
Increase the efficiency of the operation
Push work back to later time periods
Revise master schedule

59. Scheduling as part of the Planning Process

60. Scheduling Scheduling is the last step in the planning process?
It is one of the most challenging areas of operations management.
Scheduling presents many day-to-day problems for operations managers because of
Changes in customer orders
Equipment breakdowns
Late deliveries from suppliers
A myriad of other disruptions

61. Objectives in Scheduling
Meet customer due dates
Minimize job lateness
Minimize response time
Minimize completion time
Minimize time in the system
Minimize overtime
Maximize machine or labor utilization
Minimize idle time
Minimize work-in-process inventory
Efficiency

62. Sequencing Rules FCFS - first-come, first-served
LCFS - last come, first served
DDATE - earliest due date
CUSTPR - highest customer priority
SETUP - similar required setups
SLACK - smallest slack
CR - critical ratio
SPT - shortest processing time
LPT - longest processing time

63. Critical Ratio Rule CR considers both time and work remaining
If CR > 1, job ahead of schedule
If CR < 1, job behind schedule
If CR = 1, job on schedule
time remaining due date - today’s date
work remaining remaining processing time
Ties scheduling to Gantt Chart or PERT/CPM

64. Chapter 12
Inventory Management

67. Why is Inventory Important to Operations Management?
The average manufacturing organization spends 53.2% of every sales dollar on raw materials, components, and maintenance repair parts
Inventory Control – how many parts, pieces, components, raw materials and finished goods

68. Inventory Conflict Accounting – zero inventory
Production – surplus inventory or “just in case” safety stocks
Marketing – full warehouses of finished product
Purchasing – caught in the middle trying to please 3 masters

69. Inventory Stock of items held to meet future demand
Insurance against stock out
Coverage for inefficiencies in systems
Inventory management answers two questions
How much to order
When to order

70. Types of Inventory Raw materials Purchased parts and supplies
In-process (partially completed) products
Component parts
Working capital
Tools, machinery, and equipment
Safety stock
Just-in-case

71. Inventory Hides Problems
Policies
Inventory
Accuracy
Transportation
Problems
Training
Poor
Quality

72. Aggregate Inventory Management
How much do we have now?
How much do we want?
What will be the output?
What input must we get?
Correctly answering the question about when to order is far more important than determining how much to order.

73. Inventory Costs Carrying Cost Cost of holding an item in inventory
As high as 25-35% of value
Insurance, maintenance, physical inventory, pilferage, obsolete, damaged, lost
Ordering Cost
Cost of replenishing inventory
Shortage Cost
Temporary or permanent loss of sales when demand cannot be met

74. ABC Classification System
Demand volume and value of items vary
Classify inventory into 3 categories, typically on the basis of the dollar value to the firm
PERCENTAGE PERCENTAGE
CLASS OF UNITS OF DOLLARS A
B 30 15 C

75. Why ABC? Inventory controls Security controls Monetary constraints
Storage locations

76. Economic Order Quantity

77. Assumptions of Basic EOQ Model
Demand is known with certainty and is constant over time
No shortages are allowed
Lead time for the receipt of orders is constant
The order quantity is received all at once

78. No reason to use EOQ if: Customer specifies quantity
Production run is not limited by equipment constraints
Product shelf life is short
Tool/die life limits production runs
Raw material batches limit order quantity

79. EOQ Formula 2CoD Cc EOQ = Co = Ordering costs
D= Annual Demand
Cc = Carrying Costs
Cost per order can increase
if size of orders decreases
Most companies have no idea
of actual carrying costs

80. When to Order
Reorder Point is the level of inventory at which a new order is placed
R = dL
where
d = demand rate per period
L = lead time

81. Forms of Reorder Points
Fixed
Variable
Two Bin
Card
Judgmental
Projected shortfall

82. Why Safety Stock Accurate Demand Forecast Length of Lead Time
Size of order quantities
Service level

83. Inventory Control Cyclic Inventory Annual Inventory Periodic Inventory
Sensitive Item Inventory

84. Vendor-Managed Inventory
Not a new concept – same process used by bread deliveries to stores for decades
Reduces need for warehousing
Increased speed, reduced errors, and improved service
Onus is on the supplier to keep the shelves full or assembly lines running
variation of JIT
Proctor&Gamble - Wal-Mart
DLA – moving from a manager of supplies to a manager of suppliers
Direct Vendor Deliveries – loss of visibility

85. Inventory Management: Special Concerns
Defining stock-keeping units (SKUs)
Increase in number of SKUs – 15% over past 3 years
Dead inventory
Deals
Substitute items
Complementary items
Informal arrangements outside the distribution channel
Repair/replacement parts
Reverse logistics