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Performance Measures

,
Capacity Planning & Scheduling

Lean, JIT and 7 Wastes

What is the point of the
business?

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

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.

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

Net profit (NP) NetProfit = Throughput .Operating Expenses .

Operating Expenses) Return On Investment = Inventory . Similar to return on capital employed (ROCE). (Throughput .Financial measures • Return on investment (ROI) • how much profit has been produced per the money invested or tied up in the business.

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

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

How increase increase increase Net Profit Return on Cash Flow Investmen t Throughput Inventory Operating Expenses increase reduce reduce .

How • Decrease inventory • Decrease operating expense • Increase throughput .

. • Sell tools? • Sell factory area or storage space? • Dangers for the future…….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.

reduce . • Zero-hours contracts? • Reduce use of overtime. • wages are unchanged regardless of workload • 'hire and fire' allows reduction in operational expenses at times of low demand.Decrease operating expense • Many of a company's operating expenses are fixed.

increasing – Minimum operating expense – Minimum inventory .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.

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Elements of Operations / Production .

• requirements for component parts can be calculated.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. .

Product: a Bulldog Clip Spring Clip sides .

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

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

2 3 5 9 8 6 7 contract Expecte . 2 3 4 6 9 9 6 contract Expecte . MPS Product Lat Nov Dec Jan Feb Mar Apr May e SuperCom Firm 3 12 6 4 2 1 0 0 p order Under . 0 0 2 4 5 8 8 d Total 3 14 9 11 15 14 14 15 CompMax Firm 6 18 21 12 9 4 1 0 order Under . 2 4 4 7 8 9 d Total 6 20 26 20 19 20 18 15 .

MPS Slack et al Operations Management 4e p490 .

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

RCCP Childe Intro CAPM p44 .

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

• Forward Scheduling • Backward Scheduling .Scheduling works Forward or Backward …….

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.

Forward scheduling Childe Intro CAPM p41 .

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 .

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

Backward scheduling Childe Intro CAPM p41 .

high expense to catch up by overtime or subcontract .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 .

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Combined Backwards and Forwards Scheduling Childe Intro CAPM p41 .

• But to plan for capacity….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. – Infinite Capacity Planning – Finite Capacity Planning .

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

Infinite capacity planning 30 25 20 Hours 15 10 5 0 Mon Tues Wed Thur Fri .

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) .

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

Finite capacity planning 30 25 20 Hours 15 10 5 0 Mon Tues Wed Thur Fri .

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

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I • Elements of Operations Management and how they are used . OE.Summary • Aim of Operations / Production Mgt • Performance measures T.

Brandon-Jones A. 1993. 7th Ed. Introduction to Computer Aided Production Management. Operations Management.Sources / Reading • Goldratt E. Pearson . Chapman & Hall • Slack N. 2013. Johnston R. 1997. The Goal. North River Press • Childe S J.