Detailed Production Planning & Shop-Floor Control

Detailed Production Planning
&
Shop-Floor Control
Dealing with the Problem Complexity
through Decomposition
Corporate Strategy
Aggregate Unit Aggregate Planning

Demand (Plan. Hor.: 1 year, Time Unit: 1 month)
Capacity and Aggregate Production Plans
End Item (SKU) Master Production Scheduling

Demand (Plan. Hor.: a few months, Time Unit: 1 week)
SKU-level Production Plans
Manufacturing Materials Requirement Planning

and Procurement (Plan. Hor.: a few months, Time Unit: 1 week)
lead times
Component Production lots and due dates
Part process Shop floor-level Production Control

plans (Plan. Hor.: a day or a shift, Time Unit: real-time)
Disaggregation and
Master Production Scheduling
(MPS)
The (Master) Production Scheduling Problem
Capacity Company Product Economic
Consts. Policies Charact. Considerations
Placed Orders Master Production

Forecasted Demand Schedule:
Current and Planned MPS When & How Much
Availability, eg., to produce for each
•Initial Inventory, product
•Initiated Production,
•Subcontracted quantities
Planning Time
Horizon unit
Capacity
Planning
MPS Example: Company Operations
Grain cracking
Mashing Boiling
(1 milling
(1 mashing tun) (1 brew kettle)
machine)
Fermentation Bottling
Filtering
(3 40-barrel (1 bottling
(1 filter tank)
ferm. tanks) station)
Fermentation Times:
Brew Ferm. Time
Pale Ale 2 weeks
Stout 3 weeks
Winter Ale 2 weeks
Summer Brew 2 weeks
Octoberfest 8-10 weeks
Example: Implementing the Empirical
Approach in Excel
# Fermentors: 1 Unit Cap: 200 Shelf Life: 20
Microbrewery Performance
Week 0 1 2 3 4 5 6 7 8 9 10
# Fermentors Req'd 0 0 0 0 0 0 0 0 0 0
Feasible Loading?
Min # Fermentors Req'd 2 2 2 2 2 2 2 2 2 2
Fermentor Utilization 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Total Spoilage 0 0 0 0 0 0 0 0 0 0
Pale Ale Fermentation Time: 2

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 45 50 40 40 40 40 40 40 40 40
Scheduled Receipts 200
Fermentors Released 1
Inventory Spoilage
Inventory Position 100 255 205 165 125 85 45 5 -35 -40 -40
Net Requirements 35 40 40
Batched Net Receipts
Scheduled Releases
Fermentors Seized
Total Fermentors Occupied
Stout Fermentation Time: 3

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 35 40 30 30 40 40 40 40 50 50
Scheduled Receipts
Fermentors Released
Inventory Spoilage
Inventory Position 150 115 75 45 15 -25 -40 -40 -40 -50 -50
Net Requirements 25 40 40 40 50 50
Scheduled Releases
Fermentors Seized
Computing Inventory Positions and
Net Requirements
Inventory Position:
IPi = max{IPi-1,0}+ SRi+BNRi -Di
(Material Balance Equation)
(IPi-1)+ Di
i
SRi+BNRi IPi
Net Requirement:
NRi = abs(min{0, IPi})

Problem Decision Variables:
Scheduled Releases
Week 0 1 2 3 4 5 6 7 8 9 10
# Fermentors Req'd 0 0 0 0 0 1 1 0 0 0
Feasible Loading?
Total Spoilage 0 0 0 0 0 0 0 0 0 0

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 45 50 40 40 40 40 40 40 40 40
Inventory Spoilage
Inventory Position 100 255 205 165 125 85 45 5 165 125 85
Net Requirements
Batched Net Receipts 200
Scheduled Releases 200
Fermentors Seized 1
Total Fermentors Occupied 1 1

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 35 40 30 30 40 40 40 40 50 50
Scheduled Receipts
Fermentors Released
Inventory Spoilage
Inventory Position 150 115 75 45 15 -25 -40 -40 -40 -50 -50
Net Requirements 25 40 40 40 50 50
Scheduled Releases
Fermentors Seized
Testing the Schedule Feasibility
Week 0 1 2 3 4 5 6 7 8 9 10
# Fermentors Req'd 0 1 1 1 0 1 2 1 1 0
Feasible Loading? NO
Total Spoilage 0 0 0 0 0 0 0 0 0 0

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 45 50 40 40 40 40 40 40 40 40
Inventory Spoilage
Net Requirements
Fermentors Seized 1

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 35 40 30 30 40 40 40 40 50 50
Scheduled Receipts
Fermentors Released
Inventory Spoilage
Net Requirements
Batched Net Receipts 200 200
Scheduled Releases 200 200
Fermentors Seized 1 1
Total Fermentors Occupied 1 1 1 1 1 1
Fixing the Original Schedule
Week 0 1 2 3 4 5 6 7 8 9 10
# Fermentors Req'd 0 1 1 1 1 1 1 1 1 0
Feasible Loading?
Total Spoilage 0 0 0 0 0 0 0 0 0 0

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 45 50 40 40 40 40 40 40 40 40
Inventory Spoilage
Net Requirements
Fermentors Seized 1

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 35 40 30 30 40 40 40 40 50 50
Scheduled Receipts
Fermentors Released
Inventory Spoilage
Net Requirements
Infeasible Production Requirements
Week 0 1 2 3 4 5 6 7 8 9 10
# Fermentors Req'd 1 1 1 1 0 0 0 0 0 0
Feasible Loading?
Total Spoilage 0 0 0 0 0 0 0 0 0 0

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 45 50 40 40 40 40 40 40 40 40
Inventory Spoilage
Inventory Position 100 55 205 165 125 85 45 5 -35 -40 -40
Scheduled Releases
Fermentors Seized
Total Fermentors Occupied 1

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 35 40 40 40 40 40 40 40 50 50
Scheduled Receipts
Fermentors Released
Inventory Spoilage
Inventory Position 150 115 75 35 -5 160 120 80 40 -10 -50
Fermentors Seized 1
Total Fermentors Occupied 1 1 1
A feasible schedule with spoilage effects
Week 0 1 2 3 4 5 6 7 8 9 10
# Fermentors Req'd 1 1 1 1 1 0 1 1 1 0
Feasible Loading?
Total Spoilage 0 0 0 0 0 0 45 0 0 5

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 45 50 40 40 40 40 40 40 40 40
Inventory Spoilage 45
Net Requirements
Fermentors Seized 1

Week 0 1 2 3 4 5 6 7 8 9 10
Demand 35 40 30 30 40 40 40 40 50 50
Scheduled Receipts
Fermentors Released
Inventory Spoilage 5
Net Requirements
Computing Spoilage and
Modified Inventory Position
Spoilage:
SPi = max{0, IPi-1-SRi-1+SRi-2+…+SRi-sl+1)
-BNRi-1+BNRi-2+…+BNRi-sl+1)}
Inventory Position:
IPi = max{IPi-1,0}+ SRi+BNRi -Di-SPi
(Material Balance Equation)
(IPi-1)+ Di
i
SPi
SRi+BNRi IPi
The Driving Logic behind the Empirical Approach
•Initial Inventory Position

Demand Availability: •
Scheduled Receipts due to
initiated production or
subcontracting
Compute Future
Inventory Positions
Net
Requirements
Future inventories
Lot Sizing
Scheduled Resource (Fermentor)

Releases Occupancy Product i
Feasibility Schedule Revise

Testing Prod. Reqs
Infeasibilities
Master Production Schedule

MRP II:
Manufacturing Resource Planning
&
Scheduling
The “MRP Explosion” Calculus
Lead Lot Sizing

BOM Times Policies
Planned
MPS
Order Releases
MRP
Current Priority
Availabilities Planning
Example: The (complete) MRP Explosion
Calculus
Item BOM:
Alpha Item Lead Time Current Inv. Pos.
Alpha 1 10
B 2 20
B(1) C(1) C 3 0
D 1 100
E 1 10
D(2) C(2) E(1) F(1) F 1 50
E(1) F(1) Gross Reqs for Alpha

Period 6 7 8 9 10 11 12 13
Gross Reqs. 50 50 100
Item Levels:
Level 0: Alpha Level 1: B Level 2: C, D Level 3: E, F
The “MRP Explosion” Calculus
External Demand
Level 0
Initial
Inventories
Level 1
Capacity
Planning
Level 2
Scheduled
Receipts
Level N
Planned
Gross Requirements Order Releases
(borrowed from Heizer and Render)
Computing the item Scheduled Releases
Item C
Period 1 2 3 4 5 6 7 8 9 10 11 12
Gross Requirements 12 10 90 75
Inventory Position: 20 20 40 40 40 40 28 18 18 -72 0 -75 0
Net Requirements 72 75
Planned Sched. Receipts 72 75
Planned Sched. Releases 72 75
Safety Stock Lot Sizing

Lead Time
Requirements Policy
Parent Gross Planned Planned
Sched. Rel. Reqs Projecting Net Order Order
Synthesizing Releases
Inv. Positions Reqs Receipts Time-
item demand and Lot Sizing
Phasing
series Net Reqs.
Item External
Demand
Scheduled
Receipts
Initial
Inventory
Lot Sizing
• If affordable, a lot-for-lot (L4L) policy will incur the lowest inventory holding
costs and it will maintain a smoother production flow.
• Possible reasons for departure from a L4L policy:
– High set up times and costs => need for serial process batching to control the
capacity losses
– Processes that require a large production volume in order to maintain a high
utilization (e.g., fermentors, furnaces, etc.) => need for parallel process
batching
• Selection of a pertinent process batch size
– It must be large enough to maintain feasibility of the production requirements
– It must control the incurred
• inventory holding costs, and/or
• part delays (this is a measure of disruption to the production flow caused
by batching)
• Move or transfer batches: The quantities in which parts are moved between the
successive processing stations.
– They should be as small as possible to maintain a smooth process flow
Some Lot Sizing Methods employed
in the traditional MRP framework
• Main focus: Balance set-up and holding costs
• Wagner-Whitin Algorithm for dynamic Lot Sizing
• Economic Order Quantity (EOQ): Compute a lot size using the EOQ formula with the
demand rate D set equal to the average of the net requirements observed over the
considered planning horizon.
• Periodic Order Quantity (POQ): Compute T = round(EOQ/D), and every time you
schedule a new lot, size it to cover the net requirements for the subsequent T periods.
• Silver-Meal (SM): Every time you start a new lot, keep adding the net requirements of the
subsequent periods, as long as the average (setup plus holding) cost per period decreases.
• Least Unit Cost (LUC): Every time you start a new lot, keep adding the net requirements
of the subsequent periods, as long as the average (setup plus holding) cost per unit
decreases.
• Part Period Balancing (PPB): Every time you start a new lot, add a number of subsequent
periods such that the total holding cost matches the lot set up cost as much as possible.
Optimal Parallel Batching:
A factory physics approach
Model Parameters:
k: (parallel) batch size B: maximum batch size
ra: arrival rate (parts/hr) ca: CV of inter-arrival times
t: batch processing time (hrs) ce: CV for effective batch processing time
Then
CT = WTBT + CTq+t
1 1 k −1 1 ( k −1) k k −1
WTBT = [0 + + ... + ]= =
k ra ra kra 2 2ra
ca2b + ce2 u 2 kσ a2 ca2 ra
CTq = t ; c ab = = ; u = t < 1 ⇒ k > ra t
2 1−u (kta )2 k k
From the above,
k −1 ca2 / k + ce2 u k −1 ca2 / k + ce2 u Remark: Notice that CT as
CT = + t +t =[ + +1]t u1 but also as u0 !
2ra 2 1 −u 2ku 2 1 −u
Determining an “optimal” batch size
Let um  rat . Then u = um / k  k = um / u . Substituting this expression for k in the
expression for CT, we get:
k −1 ca2 / k + ce2 u u m / u −1 ca2u / u m + ce2 u
CT = [ + +1]t = [ + +1]t
2ku 2 1 −u 2um 2 1 −u
ca2u c2
⏐⏐
⏐→ 0
k→ ∞ ca2u
Recognizing that um = a
k
, we set ≅ β → 0 and we get
um
1 1 β + ce2 u y (u ) 1 1 2 u
CT ≈[ − + +1]t = [ − +1]t where y (u )≡ + (β + ce )
2u 2u m 2 1 −u 2 2u m u 1−u
To minimize CT, it suffices to minimize y(u). This can be achieved as follows:
dy (u ) −(1 −u ) 2 + ( β + ce2 )u 2 −1 + β + ce2 1

= = 0 ⇒ ( β + ce
2
−1)u 2
+ 2u −1 = 0 ⇒ u *
= =
du u 2 (1 −u ) 2 β + ce2 −1 1 + β + ce2
1
and β ≈0 ⇒ u * ≈ which further implies that k * ≈ra t (1+ ce )> ra t
c e +1
Remark: If ce2 2 0, the term  in the original expression for u* will significant. In that case,
* ca 1
we can set β ≈ u 1+ c and obtain u* and k* as before.
m e
Finite-Capacity Planning & Scheduling
in the MRP II / ERP context:
Load Reports (Example)
Available
resource
time
150
100
50
1 2 3 4 5 6 7 8 Periods
More Systematic Approaches
• Bottleneck-based scheduling in a cellular manufacturing context (Goldratt’s
Theory of Constraints approach):
– Each part (family) has its own production cell with a well-defined bottleneck resource.
– Production is scheduled on the bottleneck resource and the schedule for the other
resources are organized around this schedule by taking consideration the expected
cycle times.
– Typically, a “cushion” of extra workload is maintained at the bottleneck in order to
prevent its starvation, in case of any disruptions in the upstream processes.
– If the bottleneck supports the production of more than one part types, a “single-
machine” scheduling problem arises naturally. This is addressed by selecting an
appropriate dispatching rule.
• Earliest Due Date (EDD) => minimizes maximum lateness (tardiness)
• Least slack (LS), where slack = difference between job due date and expected
completion time => tend to reduce average tardiness
• Shortest Processing Time (SPT) => minimizes average flowtime at the bottleneck,
and (by Little’s law) average WIP
• Other heuristics addressing different problem variations including weighted
performance measures, non-zero release times, etc.
More Systematic Approaches (cont.)
• Cases where the previous approach is not effective:
– There are more than one capacity-constrained resource
– Bottlenecks are shifting depending on the product mix
– There are operations involving parallel process batching
– Process routes are non-linear (e.g., due to routing flexibility, re-entrance, extensive
need for rework)
• Remark: The semiconductor manufacturing operational context is a typical example of
all of the above.
• A more global view of the system operations is necessary in order to support effective
and efficient scheduling.
• Possible approaches
– Employ a set of pertinently selected dispatching rules at the different (critical)
resources, and assess its efficacy through simulation (possibly maintain a bank of
such rules for different operational conditions – meta-heuristics)
– Generate efficient (not necessarily optimal) global schedules by employing an
approach that searches for such a schedule in the space of feasible schedules
Typical approaches employed in the solution
of the job shop scheduling problem
• Branch & Bound (B&B): Constructs all possible schedules incrementally, fathoming
options that are clearly suboptimal to some other options. Can generate optimal schedules
but it is very time consuming.
• Beam search: Similar to B&B, but it employs additional heuristics to increase fathoming.
• Local search techniques: Given an initially constructed schedule, try to identify an
improved schedule that is obtained from the original one through a localized change (e.g.,
through the change of the order of two jobs on a single machine); repeat. Also, need a
mechanism to avoid local optima.
– Simulated annealing: Seeks to avoid local optima by maintaining a non-zero
probability for transitioning to an inferior schedule. However, this probability is
reduced with the passage of time.
– Tabu search: Seeks to avoid local optima by pronouncing certain schedule changes as
taboo (these changes are apparent improvements that might attract the schedule back to
a local optimum)
– Genetic algorithms: Maintains an entire set of schedules at each iteration, and it
updates this set by replacing schedules of inferior performance with new schedules
resulting from the “combination” of the most efficient schedules currently available;
the synthesis of such new schedules is known as “crossover”. Also, “mutation”
provides additional schedules resulting from the local modification of some single
schedules.
Pegging and Bottom-up Replanning
(borrowed from Heizer and Render)
Some Limitations of MRP-based Planning
• The employment of fixed nominal lead times
– This problem is mitigated in case of a stable operational environment where past
experience and / or approximate formal models can provide insight for setting lead
times
– Lead time assessment is also facilitated by a well-structured, cellular shop-floor
• Possible system nervousness due to re-planning and the applied lot sizing
policies
– Potential remedies
• Firm orders
• Time fences
• L4L planning whenever possible
• Lack of an inherent mechanism for detecting and managing shop-floor
congestion – a purely “Push” approach
– However, it is possible to combine the planning visibility offered by the MRP
explosion calculus with more sophisticated production control mechanisms that
take advantage of the existing technology of Manufacturing Execution Systems
(MES).
The Revolution of
Just-In-Time (JIT) and
Lean Manufacturing
The essence of the JIT revolution and
Lean Manufacturing
• Try to reduce the system operational inefficiencies and the
resulting waste by identifying the sources of these inefficiencies
and working proactively to eliminate them as much as possible.
• In the emerging philosophy, inventories should be carefully
controlled and they should not function as the mechanism for
accommodating the system inefficiencies => Just-In-Time (JIT)
• The aforementioned effort should be an ongoing process
towards continuous improvement rather than one-time/shot
effort.
Targeting the sources of inefficiency
– input
• unreliable quality of raw material
• unreliable delivery times
– operation
• unreliable processes in terms of
– required processing times
– process outcome
• complex interacting process flows
• long set-up times
• unreliable (irresponsive and irresponsible) personnel
– output
• Highly variable production requirements in terms of
– production volume, and
– production scope
JIT enabling factors and practices
• Emphasis on quality at both the process and the supply side by promoting
– Statistical Process Control (SPC) theory and practice
– Quality certification programs
– Deployment of stable automated processes and foolproof practices (like
checklists and machines gauges) to guarantee the desired performance
– Employee empowerment and knowledge management (quality circles)
• “Tightening” of the supply chain by promoting
– Long-lasting and trustful relationships between the different parties in the supply
chain
– Timely and reliable information flow across these parties that takes advantage of
modern IT technologies, like
• Electronic Data Interchange (EDI), and e-commerce practices
• Real-time communications and global positioning systems
– Promotion of vendor owned and managed inventory practices that
• Establish economies of scale and protection to variability through pooling
• Enhance the demand visibility across the entire supply chain.
JIT enabling factors and practices (cont.)
• Simplification of the process flows by promoting cellular manufacturing practices
– Dedication of separate production cells to product families with similar processing
requirements
– U-shaped layouts for facilitating employee sharing
– Employee cross-training for more flexible and higher utilization
• Set-up time reduction through
– The adoption of cellular manufacturing
– Externalization of set-up times
– Employment of flexible processes and pertinent auxiliary equipment like pertinent fixtures
– Part standardization
• Focus on repetitive manufacturing and promote the establishment of stable production
rates through
– Smoothing of the aggregate production requirements by appropriate quota setting
– Pertinent sequencing of the final assembly to support a desired product mix
– Use of buffer capacity (planned overtime) to protect against slippages from the target
production rates
– Component standardization
Institutionalizing the JIT practice
through the KANBAN-based
Production Authorization Mechanism
Station 1 Station 2 Station 3
Remarks:
• The KANBANS at each station cap the WIP at that station and they offer a natural
mechanism for reacting to various disruptions taking place in the system operation.
• In particular, production at each station is “pulled” as a result of the downstream
activity rather than “pushed” by an MPS-generated schedule.
• The KANBANS at each station should be set at a level that enables production
at the target rate
• A safe approach to set the KANBAN level at each station is by setting it initially to
the “historical” WIP level, and subsequently decrease it incrementally while
observing its impact on the production rate
• Frequent KANBAN changes are ineffective, since the production rate of the line is
rather insensitive to these changes, and they should be avoided
From KANBAN to CONWIP
Station 1 Station 2 Station 3 FGI
Why?
• It maintains the WIP cap but at the same time it offers more operational flexibility than
KANBAN.
• The unrestricted flow of WIP within the line enables better utilization of the (shifting)
bottleneck, and therefore, higher throughput.
• Less stress for the line operators since it enables them to work at the “natural pace” of the line.
• It enables more flexible scheduling of the line, since in the CONWIP operational context,
WIP is interpreted more generally as some aggregate amount of workload loaded into
the line (even measured in time-units, rather than number of parts) – new parts are pulled from
an available “work backlog” according to a pertinent set of dispatching rules.
• Easier to analyze and parameterize through the theory of closed-queueing networks.
• Remark: While the above features of CONWIP mitigate the rigidity of the KANBAN-based
shop-floor control, its “pull” nature still implies that it requires stable target production rates
in order to function well, and therefore, it is appropriate for repetitive manufacturing contexts.
A CONWIP-based “pull” framework
(borrowed from Hopp & Spearman)
Course Outline
• 1. Inventory Control Theory
– The basic EOQ model and some of its variants
– Replenishment coordinating approaches
– Dynamic Lot Sizing
– Statistical Inventory Control Models
• The News Vendor Model
• The Base Stock Model
• The (Q,r) Model
– An introduction to multi-echelon models
2. Factory Physics: A queueing-theoretic analysis of serial production systems

– Characterizing a flow line as a queueing system
– Some fundamental relationships between the line attributes and its performance indices
– The nature, role and impact of the operational variability
– An introduction to logical control of production systems
Course Outline
• 3. Integrating the Factory Physics insights to the OM practice
– Process Design, Capacity Planning and Line Balancing
– Hierarchical Production Planning
• The classical hierarchical planning framework
• Forecasting
• Aggregate Planning
• Master Production Scheduling (MPS) and Material Requirement Planning (MRP), and their
limitations
• Shop floor scheduling
– Just-in-Time (JIT) and Lean Manufacturing
• The JIT philosophy
• JIT practices and the KANBAN production authorization system
• Shop-floor control based on the CONWIP production authorization model
• Production Planning and Scheduling for CONWIP-controlled production systems
• The JIT limitations
Thanks for being in the class!
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Detailed Production Planning

Aggregate Unit Aggregate Planning

Capacity and Aggregate Production Plans

End Item (SKU) Master Production Scheduling

SKU-level Production Plans

Manufacturing Materials Requirement Planning

Part process Shop floor-level Production Control

Placed Orders Master Production

Pale Ale Fermentation Time: 2

Stout Fermentation Time: 3

NRi = abs(min{0, IPi})

Pale Ale Fermentation Time: 2

Stout Fermentation Time: 3

Pale Ale Fermentation Time: 2

Stout Fermentation Time: 3

Pale Ale Fermentation Time: 2

Stout Fermentation Time: 3

Pale Ale Fermentation Time: 2

Stout Fermentation Time: 3

Pale Ale Fermentation Time: 2

Stout Fermentation Time: 3

•Initial Inventory Position

Scheduled Resource (Fermentor)

Feasibility Schedule Revise

Master Production Schedule

Lead Lot Sizing

E(1) F(1) Gross Reqs for Alpha

Safety Stock Lot Sizing

To minimize CT, it suffices to minimize y(u). This can be achieved as follows:

dy (u ) −(1 −u ) 2 + ( β + ce2 )u 2 −1 + β + ce2 1

2. Factory Physics: A queueing-theoretic analysis of serial production systems

But in the meantime,

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