Notes -pom Module 3

Production and Operations Management Module 3: Facility, capacity, location and layout Forecasting • Estimating future demand for products and service Need for forecasting – New facility planning – Production planning – Work force scheduling – Material planning – Financial planning Types of Forecasts • Long range ( years) – Factory capacity, new product development, • Intermediate range ( months) – Purchasing, inventory management • Short range( weeks) – Cash out flow, production planning, labour planning Forecasting methods • Quantities methods – Based on previous data – Appropriate for shot period • Qualitative methods – Based on judgment of experts – Long periods in future • Demand patterns – Constant – Linear – Seasonal Models for forecasting: • Simple moving average ( SMS) • Weighted moving average( WMA) • Exponential smoothening model ( ESM) • Regression analysis (identifying the variables and developing a model for forecasting) • Delphi Method ( taking views of experts from inside and outside the organisation) • Field expectation method • Customer expectation method SMS example : If the demand for a product was 100, 120, 120 for the months of Jan, Feb. and March, fore cast for April would be ( 100+120+120)/ 3 = 113.33 rounded off to 114.

WMA example : demand forecast for above example with weightage of 4, 2, 1 for previous months would be ( 100 x 1 + 120 x 2 + 120 X 4 ) / 7 = 117.44 rounded off to 118 ESM example Formula: smoothened forecast = forecast + smoothening factor ( Actual demand last period-forecasted demand for last period) Example : a company fore casts a demand of 400 units every month but would like to smoothen forecast based on previous month actual demand by factor 0.25. if the demand for April was 375 what is the forecast for May? Forecasted demand = 400 + 0.25 X ( 375-400) = 400- 6.25 =393.75 rounded off to 394

Plant Location ( Facility Location) Consists of identifying location: 1. Within the country or outside a. Political stability b. Exchange rates c. Closeness to consumption d. Human resources and skills 2. Selection of the region a. Availability of Raw materials b. Nearness to market c. Availability of power d. Transport facilities e. Climate f. Governmental policy g. Competition between regions 3. Selection of locality a. Availability of labour b. Amenities for workers c. Existence of competitors d. Finance facilities e. Local taxes 4. Selection of the exact site. a. Topography, size b. Disposal of wastes c. Land cost

Location Models 1. Factor Rating method 2. Point rating method 3. Break even analysis 4. Quantitative factor analysis Factor rating method Factor

Tax advantage Closeness to Customer Closeness to suppliers Factor 4 Factor n

Factor rating 4 3 5

Location rating Location A 8 2 8

Location B 6 3 10

Total

Location rating X Factor rating Location A Location B 32 6 40

24 9 50

X

Y

Point rating method Factor Availability of Fuel Water supply Topography Other factors Total

Max. points 300 200 200

Location A 200 200 150

Location B 150 200 175

X

Y

Break even analysis 1. Determine all relevant costs 2. Categorize as fixed cost and variable cost 3. Total cost=fixed cost + variable cost X quantity produced 4. Compare total cost for all locations and determine the most suitable location A graph can also be drawn which helps analysis over different production outputs

A B

Total cost

C

Quantity

Problem :A firm is considering 4 alternate locations for a new plant annual interest on capital is 10%. Determine the best location for an output of 1, 20, 000 units Data Rs A B C D Labour cost/unit 0.75 1.10 0.80 0.90 Plant construction cost 46 lakhs 39 lakhs 40 lakhs 48 lakhs Material and 0.43 0.60 0.40 0.55 equipment cost per unit Electricity charges per 30, 000 26, 000 30,000 28,000 year Water charges per year 7,000 6,000 7,000 7,000 Transportation cost per 0.02 0.10 0.10 0.05 unit Taxes per year 33,000 28,000 63,000 35,000

Qualitative Factor analysis method Factors

Assigned Weight 0.35

Score for locations A B 50 40

C 60

Weighted scores A B 17.5 14.0

C 21.0

0.25

70

80

80

17.5

20.0

20.0

0.20

60

70

60

12.0

14.0

12.0

0.05

80

70

40

4.0

3.5

2.0

0.05

50

60

70

2.5

3.0

3.5

Markets

0.10

70

90

80

7.0

9.0

8.0

Total

1.00

60.5

63.5

66.5

Production cost Raw material supply Labour Availability Cost of living Environment

Manufacturing Facility planning Basic input for manufacturing capacity planning is the long range forecast for demand for products and services Deals with: 1. Identification of production and operating equipments 2. Space and building requirements 3. Raw material requirements and Sources 4. Storage quantities and facilities 5. Inspection facilities 6. Maintenance facilities 7. Material handling equipments ( eg. conveyors, cranes) 8. Administrative areas ( eg. purchase, personnel) 9. Canteen, conveniences 10. Other requirements of the plant based on product produced, environmental requirements, power requirements, storage of hazardous materials

Manufacturing planning may be : • • •

Long range planning is normally for 3 to 10 years Medium range planning normally for 1 to 3 years Short range planning is normally for 3 months to 1 year

Plant Layout ( Facility Layout) Plant layout deals with locations for: 1. Production machinery 2. Location of stores ( Raw materials, WIP, Finished goods) 3. Inspection facilities ( Receiving, In- process and Final inspection) 4. Tool rooms 5. Maintenance requirements 6. Material handling equipments ( eg. conveyors, cranes) 7. Administrative areas ( eg. purchase, personnel) 8. Canteen, conveniences 9. Other requirements of the plant based on product produced, environmental requirements, power requirements, storage of hazardous materials. Since the plant layout is not frequently changed because of economic reasons and long production stoppages, utmost attention has to be paid for layout design. However layout may be changed based on changes in product design , change in production methods or towards expansion.

Some of the objectives of a good layout: 1. Provide required production capacity 2. Reduce material handling costs 3. Provides for free movement of materials and people 4. Reduce hazards and hence safety and health of personnel 5. Utilization of available space efficiently and effectively 6. Enhancement of employee morale 7. Flexible to handle variations in volume and product variations 8. Supervision to be easy 9. Easy maintenance on equipments 10. High utilization of equipment 11. Enhanced productivity Major factors influencing the layout are: 1. Materials- solid or liquid, light or heavy 2. Product- normally product moves from work station to work station. When product is very large, machinery and men are moved to product

3. Worker-whether stationery or moving. On conveyor belt operations worker is stationery and belt stops for prearranged time at every work station 4. Machinery- depends on the type of manufacturing operations, size of product, volume of product. Manual, semi automatic, automatic Principles of layout ( Importance of Layout) 1. Minimum travel-Materials and men should travel the shortest distance. Heavier materials are to travel the least. Typically 30% of the production cost is because of material handling 2. Minimum production delays: materials should spend minimum time as possible in the facility. operations to flow in a sequential order. Back tracking for operations on the same machine to be eliminated . bottle necks to be avoided 3. Usage of space- every meter of space to be effectively utilized. Land costs are high. Maintenance costs are also high. 4. Early detection of Quality problems: Continuous flow, Inspection points 5. Better production control.: Less chasing work. Visual control. Few control points. 6. Improved utilization of labour: workers time to be used effectively. 7. Compactness- all functional areas are fully integrated and act as a well knit facility 8. Safety- hazards to be as less as possible. Work place to be ergonomic for productivity 9. Flexibility- slight variations in volume or change in product features should not affect the productivity of the layout 10. Maximum return Investment- fixed capital cost to be as low as possible and Investments to be fully utilized Some types of Layout 1. Process layout ( job shop layout, functional layout) 2. Product layout ( flow line layout, line processing layout) 3. Cellular manufacturing ( CM) or Group Technology layout 4. Combined layout 1.Process layout Turning machines

Grinders

Packing

Milling machines

Drilling machines

Assembly

Features 1. 2. 3. 4. 5. 6. 7. 8.

Different sizes of machines are grouped Distance between grouped machines are made as short as possible Groups are arranged such that there is no back tracking Convenient Inspection Convenience of supervision Many types of products can be manufactured Low volume of production Many inspection points are required

Advantages 1. Machines are general purpose and hence reduced investment 2. Flexibility in production 3. Better supervision 4. Capacity expansion is easy 5. Better utilization of men and machines 6. Break downs can be easily handled Disadvantages 1. Movement of material is difficult. Mechanization not easily possible. 2. Requires more floor space 3. Production control is difficult 4. Distance traveled is more 5. Accumulation of WIP ( work- in -progress) 2. Product Layout Features 1. Individual machines are arranged as per sequence of operations 2. No back track at all. Flow is continuous. 3. All operations eg production, inspection, assembly is include in a line 4. One or two standard products can be produced 5. Large volume of production 6. Minimum inspection required

Individual machines

Assembly line

Testing

Packing

Advantages 1. Mechanization is possible thus reducing martial handling costs 2. Production bottle necks are avoided 3. Better production control 4. Less floor space required for production 5. WIP is very minimum 6. Early detection of mistakes 7. Very high Through put time Disadvantages 1. Inflexible 2. Layout is expensive 3. Expansion is difficult 4. Breakdown or rejections in a line or machine stops the entire production Comparison of product and process layout #

Characteristics

1 2 3 4 5 6 7

Mechanisation of material handling Reduced bottle necks Minimum Manufacturing time ( trough put time) Minimum work in progress Better production control Early detection of bad workmanship Better performance measurement of workers

Product layout • • • • • • •

Process layout

8 9 10 11 12 13

Reduced investment in machines Flexibility in production Scope for expansion Easier handling of breakdowns Better utilization of workers and equipment Specialisation in supervision

• • • • • •

3. Cellular manufacturing

B A C

Features This bring the advantages of product layout to identified products in a process layout facility. Some Machines are grouped into cells to manufacture a group of products with similar characteristics and process flow ( family of products) . Cells could exist in a manufacturing facility along with process layout for other products Machines can be laid out in ‘U’,’L’ and Straight line to suit the material flow and overall layout of the facility Advantages 1. Lower WIP 2. Reduced material handling 3. Shorter throughput times 4. Simplified production planning 5. Improved visual control 6. Less time for setup because of few tool changes 7. Lower cost of production 8. Sorter delivery 9. Improved Quality due to early detection of problems

Disadvantages Reduced flexibility Less machine utilization Additional machines may be required to create cells In a cellular manufacturing setup advantages heavily overweigh the disadvantages

4. Combined layout

Forging presses

Gear cutting mcs

Heat treatment Furnaces

Gear Grinding mcs

G

Features o Machines are grouped as process layout. o Products are processed on identified machines to maintain flow. o Used when batch processing like heat treatment is necessary. o Used when costly machines are involved and duplication for pure product layout is not economical.

Apart from location of production machines, a layout has to integrate the following facilities:

• • • • • •

Receiving and dispatch areas- space, material handling equipments, Storage areas- space , Safety, Material handling equipments Maintenance areas- storage of spares, area for repairs Inspection areas- inspection equipments, Space Employee facilities- Quarters, , rest rooms, change rooms Others – diesel generating sets, treatment plants, Laboratories, tool rooms

Design and Selection of layout depends on : Material handling cost- using material handling equipments , keeping the distances shorter, keeping sequential processing activities in adjacent areas Worker effectiveness- good communication, well placed supporting areas, ergonomics Methods for Selection of layout Travel Chart method The solution may be trial and error. Principle is most active departments should be close together or adjacent. Problem A manufacturing concern has 4 departments and number of moves between departments is as follows. From To A B C D A 2 2 B 2 4 C 3 1 D 2 1 Step1 ; locate most active departments ( compute no. of links) Department A B C No. of links 4 4 4 Step2: try to locate the most active departments at the centre All are important here.

D 4

2

B

A 2

2

2

4

3

1 C

D 1

Step3 : ensure there are no non adjacent movements. Enter no. of moves in the chart Load –Distance analysis Problem : A company wants to add a new wing to its manufacturing shop which layout is better. Lay out A

1

2

4

3

2 Layout B

1-2 1-3 1-4 2-3 2-4 3-4 4-5 5-6 5-7 6-7

6 7

5

6

4

7

3 1

Distances are as below; Between Departments

5

Distances between departments Layout A Layout B 24 50 24 30 38 48 44 20 30 72 44 52 50 40 50 44 50 60 40 40

Products produced , Batches produced per year and sequence of processing; Products

Processing sequence

Batches of products produced per year

P1 P2 P3 P4 P5

1-2-3-4-5-6-7 1-2-4-5-6-7 1-3-4-5-6-7 1-3-4-5-7 1-4-5-6-7

1400 200 1200 300 200

Solution; Step 1: calculate distance traveled for each batch of products for each layout Product

Sequence

Distance moved Layout A 24 + 44 + 44 + 50 + 50 + 40 =252 24 + 30 + 50 + 50 + 40 =194 24 + 44 + 50 + 50 + 40 =208

P1

1-2-3-4-5-6-7

Layout B 50 + 20+ 52+ 40+ 44+ 40 =246 50 + 72+ 40 + 44 + 40 =246 30+52 +40 + 44 + 40 =206

P2

1-2-4-5-6-7

P3

1-3-4-5-6-7

P4

1-3-4-5-7

24 + 44 + 50 + 50 =168

30 + 52 + 40 + 60 =182

P5

1-4-5-6-7

38+ 50 + 50 + 40 =178

48 + 40+ 44+ 40 =172

Step 2 : compute total distance moved per year Product

Batches per year

Distance per batch

Product

P1 P2 P3 P4 P5

1400 200 1200 300 200

Layout A 252 194 208 168 178

Layout B 246 246 206 182 172

Total distance =Batches per year x Distance per batch Layout A Layout B 3, 52, 500 3, 44, 400 38, 800 49, 200 2, 49, 600 2, 47, 200 50, 400 54, 600 35, 600 34, 400

total

7, 26, 900

Layout A is better. The material movement is lower.

7, 29, 800