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Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
Capacity resource planning and production scheduling
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Capacity resource planning and production scheduling

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  • 1. Production Scheduling and Capacity Resource planning Olufemi Ogunbode 08023825663 [email_address]
  • 2.  
  • 3. Introduction <ul><li>Management’s desire to be more competitive and to increase profits through manufacturing is evident. Customer responsiveness, increase output, lower manufacturing costs, better quality, short cycle times, bottleneck control and operational predictability, among many other opportunity areas, are hot management issues. Improvement in these areas offers enormous potential in profit improvement and competitive advantage for the overwhelming majority of manufactures. </li></ul>
  • 4. Production process <ul><li>To achieve the above mention objectives, production scheduling is eminent. What is production Scheduling; it is the management and allocation of resources, events and processes to create goods and services. A business adjusts its production schedule based on the availability of resources, client orders and efficiencies. The goal of production scheduling is to balance client needs with available resources while operating in the most cost-efficient manner . </li></ul><ul><li>P.S requires a strong focus on the availability of the resources of a business. Resources include the raw materials used to create goods, the availability of machines and the availability of workers </li></ul>
  • 5. <ul><li>P.S is a method for the effective planning of all resources of a manufacturing company which addresses operational planning in units, financial planning in currency, and has a simulation capability to answer &amp;quot;what-if&amp;quot; questions and extension of closed-loop MRP . </li></ul><ul><li>This is not exclusively a software function, but a marriage of people skills, dedication to data base accuracy, and computer resources. It is a total company management concept for using human resources more productively. </li></ul>
  • 6. Importance of P.S <ul><li>P. S is all about tracking all resources and to find constraints or resource outages that will affect different volume levels of production; this is called CAPACITY PLANNING . </li></ul><ul><li>Once a scheduler identifies resource constraints, he adds additional supplies, machines and personnel to ensure production goals are met. </li></ul><ul><li>2. P.S review client orders based on the time frame requested, client importance and available production capacity. They work closely with sales and marketing to meet customer expectations and maximize sales. </li></ul>
  • 7. <ul><li>P.S includes giving orders to the production department about the volume of goods produced, scheduling personnel, the order of production processing and due dates . Production scheduling also arranges necessary down time for routine maintenance and cleaning. </li></ul><ul><li>P.S attempts to maximize personnel through job rotation, effective break schedules, cross-training and teamwork opportunities. A balance between work processes, training and group activities creates a more productive workforce. </li></ul>
  • 8. <ul><li>Typically, P.S create plans that account for potential problems, such as resource outages, machine failure and employment shortages, so personnel and management know what action to take when facing an unexpected glitch in production. </li></ul><ul><li>Most companies with large-scale production use powerful software for scheduling, which must account for complex multiple constraints and varied information levels. Popular software includes AMS Real Time Projects, Artemis 7, Cando, Delmia 5, D-Opt, Hydra, Microsoft Project, Primavera and Prochain. Many software packages are tailored to specific industries and can be modified for individual business needs. </li></ul>
  • 9. CAPACITY PLANNING <ul><li>Importance of Capacity Planning </li></ul><ul><ul><li>“ Capacity” refers to an upper limit or ceiling on the load that an operating unit can handle </li></ul></ul><ul><ul><li>Basic questions in capacity planning </li></ul></ul><ul><ul><ul><li>What kind of capacity is needed? </li></ul></ul></ul><ul><ul><ul><li>How much is needed? </li></ul></ul></ul><ul><ul><ul><li>When is it needed? </li></ul></ul></ul><ul><ul><li>relates to their potential impact on the ability of the organization to meet future demands for products and services </li></ul></ul><ul><ul><li>relationship between capacity and operating costs </li></ul></ul><ul><ul><li>the initial cost involved </li></ul></ul><ul><ul><li>long-term commitment of resources </li></ul></ul>
  • 10. CAPACITY PLANNING <ul><li>B. Defining and Measuring Capacity </li></ul><ul><ul><li>Refers to an upper limit on the rate of output </li></ul></ul><ul><ul><li>In selecting a measure of capacity, it is important to choose one that does not require updating. </li></ul></ul><ul><ul><li>Where only one product or service is involved, the capacity of the productive unit may be expressed in terms of that item relationship between capacity and operating costs </li></ul></ul><ul><ul><li>When multiple products or services are involved, capacity is stated in terms of each product or to use a measure of capacity that refers to availability of inputs </li></ul></ul>
  • 11. Measures of Capacity Business Inputs Outputs Auto manufacturing Labor hours, machine hours Number of cars per shift Steel mill Furnace size Tons of steel per day Oil refinery Refinery size Gallons of fuel per day Farming Number of acres, number of cows Bushels of grain per acre per year, gallons of milk per day Restaurant Number of tables, seating capacity Number of meals served per day Theater Number of seats Number of tickets sold per performance Retail sales Square feet of floor space Revenue generated per day
  • 12. Example in Computing Efficiency and Utilization <ul><li>Given the information below, compute the efficiency and the utilization of the vehicle repair department: </li></ul>Efficiency = Actual Output Effective Capacity = 36 per units per day 40 units per day = 90% Utilization = Actual Output Design Capacity = 36 per units per day 50 units per day = 72% Design Capacity = 50 trucks per day Effective Capacity = 40 trucks per day Actual Output = 36 units per day
  • 13. C. Factors that determine effective capacity
  • 14. CAPACITY PLANNING <ul><li>B. Defining and Measuring Capacity </li></ul><ul><ul><li>Definitions of Capacity </li></ul></ul><ul><ul><ul><li>Design capacity – the maximum output that can possibly be attained </li></ul></ul></ul><ul><ul><ul><li>Effective capacity – the maximum possible output given a product mix, scheduling difficulties, machine maintenance, quality factors, and so on. </li></ul></ul></ul><ul><ul><ul><li>Actual output – the rate of output actually achieved </li></ul></ul></ul><ul><ul><li>Measures of System Effectiveness </li></ul></ul><ul><ul><ul><li>Efficiency – the ratio of actual output to effective capacity </li></ul></ul></ul><ul><ul><ul><li>Utilization – the ratio of actual output to design capacity </li></ul></ul></ul>
  • 15. CAPACITY PLANNING <ul><li>D. Determining Capacity Requirements </li></ul><ul><ul><li>Long-Term Considerations </li></ul></ul><ul><ul><ul><li>Relates to overall level of capacity </li></ul></ul></ul><ul><ul><ul><li>Determined by forecasting demand over a time horizon and then converting those forecasts into capacity requirements (Demand Patterns) </li></ul></ul></ul>
  • 16. Some possible demand patterns Growth Decline Cyclical
  • 17. CAPACITY PLANNING <ul><li>D. Determining Capacity Requirements </li></ul><ul><ul><li>Long-Term Considerations </li></ul></ul><ul><ul><ul><li>Relates to overall level of capacity </li></ul></ul></ul><ul><ul><ul><li>Determined by forecasting demand over a time horizon and then converting those forecasts into capacity requirements (Demand Patterns) </li></ul></ul></ul><ul><ul><ul><li>Complex demand patterns (trends and cycles) </li></ul></ul></ul><ul><ul><ul><ul><li>When trends are identified: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>How long the trend might persist </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Slope of the trend </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>When cycles are identified: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The approximate length of the cycles </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The amplitude of the cycles </li></ul></ul></ul></ul></ul>
  • 18. CAPACITY PLANNING <ul><li>D. Determining Capacity Requirements </li></ul><ul><ul><li>Short-Term Considerations </li></ul></ul><ul><ul><ul><li>Relates to probable variations to capacity requirements </li></ul></ul></ul><ul><ul><ul><li>Concerned with: </li></ul></ul></ul><ul><ul><ul><ul><li>Seasonal Fluctuations in Demand </li></ul></ul></ul></ul>
  • 19. Example of seasonal demand patterns Period Items Year Beer sales, toy sales, airline traffic, clothing, vacations, tourism, power usage, gasoline consumption, sports and recreation, education Month Welfare and social security checks, bank transactions Week Retail sales, restaurant meals, automobile traffic, automotive rentals, hotel registrations Day Telephone calls, power usage, automobile traffic, public transportation, classroom utilization, retail sales, restaurant meals
  • 20. CAPACITY PLANNING <ul><li>D. Determining Capacity Requirements </li></ul><ul><ul><li>Short-Term Considerations </li></ul></ul><ul><ul><ul><li>Relates to probable variations to capacity requirements </li></ul></ul></ul><ul><ul><ul><li>Concerned with: </li></ul></ul></ul><ul><ul><ul><ul><li>Seasonal Fluctuations in Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Random Fluctuations in Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Irregular Fluctuations in Demand </li></ul></ul></ul></ul>
  • 21. CAPACITY PLANNING <ul><li>E. Developing Capacity Alternatives </li></ul><ul><ul><li>General Considerations </li></ul></ul><ul><ul><ul><li>Conduct a reasonable search for possible alternatives </li></ul></ul></ul><ul><ul><ul><li>Consider doing nothing </li></ul></ul></ul><ul><ul><ul><li>Take care not to overlook nonquantitative factors </li></ul></ul></ul><ul><ul><li>Specific Considerations </li></ul></ul><ul><ul><ul><li>Design flexibility into systems </li></ul></ul></ul><ul><ul><ul><ul><li>Provision for future expansion </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Layout of equipment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Location </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Equipment selection </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Production planning </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Scheduling </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Inventory Policies </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Product cycle </li></ul></ul></ul></ul>
  • 22. CAPACITY PLANNING <ul><li>Developing Capacity Alternatives </li></ul><ul><ul><li>Specific Considerations </li></ul></ul><ul><ul><ul><li>Take a “big picture” approach to capacity changes </li></ul></ul></ul><ul><ul><ul><li>Prepare to deal with capacity “chunks” </li></ul></ul></ul><ul><ul><ul><li>Attempt to smooth out capacity requirements </li></ul></ul></ul><ul><ul><ul><ul><li>Trace the source of the unevenness of the demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Possible solutions: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Allowances can be made in planning and scheduling activities and inventories </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Identify products or services that have complementary demand patterns </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Use of overtime work </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Subcontract some of the work </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Draw down finished goods inventories during periods of high demand and replenish them during periods of slow demand </li></ul></ul></ul></ul></ul>
  • 23. CAPACITY PLANNING <ul><li>Developing Capacity Alternatives </li></ul><ul><ul><li>Specific Considerations </li></ul></ul><ul><ul><ul><li>Indentify the optimal operating level </li></ul></ul></ul>
  • 24. CAPACITY PLANNING <ul><li>F. Evaluating Capacity Alternatives </li></ul><ul><ul><li>Quantitative Aspect </li></ul></ul><ul><ul><ul><li>Reflects the following economic considerations </li></ul></ul></ul><ul><ul><ul><ul><li>Will an alternative be economically feasible? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>How much will it cost? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>How soon can we have it? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>What will operating and maintenance costs be? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>What will its useful life be? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Will it be compatible with present personnel and present operations? </li></ul></ul></ul></ul><ul><ul><li>Qualitative Aspect </li></ul></ul><ul><ul><ul><ul><li>Public opinion </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Personal preferences of managers </li></ul></ul></ul></ul>
  • 25. CAPACITY PLANNING <ul><li>F. Evaluating Capacity Alternatives </li></ul><ul><ul><li>Quantitative Aspect </li></ul></ul><ul><ul><ul><li>Techniques useful in evaluating capacity alternatives from an economic standpoint: </li></ul></ul></ul><ul><ul><ul><ul><li>Cost-volume analysis </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Financial analysis </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Decision theory </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Waiting-line analysis </li></ul></ul></ul></ul>
  • 26. Example for Calculating Processing Requirements <ul><li>A department works one 8-hour shift, 250 days a year, and has these figures for usage of a machine that is currently being considered: </li></ul><ul><li>Working one 8-hour shift, 250 days a year provides an annual capacity of 8 x 250 = 2,000 hours per year. We can see that three of these machines would be needed to handle the required volume: </li></ul><ul><li> 5,800 hours </li></ul><ul><li>2,000 hours/machine </li></ul>= 2.90 machines Product Annual Demand Standard Processing Time per Unit (hr.) Processing Time Needed (hr.) # 1 400 5.0 2,000 #2 300 8.0 2,400 #3 700 2.0 1,400 5800
  • 27. CAPACITY PLANNING
  • 28. CAPACITY PLANNING <ul><li>F. Evaluating Capacity Alternatives </li></ul><ul><ul><li>Quantitative Aspect </li></ul></ul><ul><ul><ul><li>Techniques useful in evaluating capacity alternatives from an economic standpoint: </li></ul></ul></ul><ul><ul><ul><ul><li>Cost-volume analysis </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The assumptions are: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>One product is involved. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Everything produced can be sold </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The variable cost per unit is the same regardless of the volume. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Fixed costs do not change with volume changes, or they are step changes. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The revenue per unit is the same regardless of volume. </li></ul></ul></ul></ul></ul>
  • 29. CAPACITY PLANNING <ul><li>F. Evaluating Capacity Alternatives </li></ul><ul><ul><li>Quantitative Aspect </li></ul></ul><ul><ul><ul><li>Techniques useful in evaluating capacity alternatives from an economic standpoint: </li></ul></ul></ul><ul><ul><ul><ul><li>Cost-volume analysis </li></ul></ul></ul></ul>Cost-Volume Symbols FC = Fixed Cost VC = Variable cost per unit TC = Total Cost TR = Total Revenue R = Revenue per unit Q = Quantity or volume of output Q BEP = Break-Even Quantity SP = Specified Profit
  • 30. CAPACITY PLANNING <ul><li>F. Evaluating Capacity Alternatives </li></ul><ul><ul><ul><li>Cost-volume analysis </li></ul></ul></ul>Cost-Volume Formulas TC = FC + (VC x Q) TR = R x Q P = TR – TC P = (R X Q) – [FC + (VC X Q)] Volume = SP + FC R - VC Q BEP = FC R - VC
  • 31. Example for Cost-Volume Analysis <ul><li>The owner of Old-Fashioned Berry Pies, S. Simon, is contemplating adding a new line of pies, which will require leasing new equipment for a monthly payment of N6,000. Variable cost would be N2.00 per pie, and pies would retail for N7.00 each. </li></ul><ul><ul><li>How many pies must be sold in order to break even? </li></ul></ul><ul><ul><li>What would the profit (loss) be if 1,000 pies are made and sold in a month? </li></ul></ul><ul><ul><li>How many pies must be sold to realize a profit of N4,000? </li></ul></ul>
  • 32. Solution for the Cost-Volume Analysis Problem <ul><li>Given: </li></ul><ul><ul><li>a) </li></ul></ul><ul><ul><li>b) For Q = 1,000, </li></ul></ul><ul><ul><li>c) P = $ 4,000; solve for Q in the preceding equation </li></ul></ul>FC = N6,000 VC = N2 per pie R = N7 per pie Q BEP = FC R - VC = N6,000 N7 - N2 = N1,200 pies/month P = (R X Q) – [FC + (VC X Q)] (N7 X 1,000) – [N6,000 + (N2 X 1,000)] P = P = (N1,000) P = (R X Q) – [FC + (VC X Q)] N4,000 = N7Q – (N6,000 + N2Q) N5Q = N10,000 Q = 2,000 pies
  • 33. Example for Capacity Alternatives that Involve Step Costs <ul><li> A manager has the option of purchasing one, two, or three machines. Fixed costs and potential volumes are as follows </li></ul><ul><li>Variable cost is N10 per unit, and revenue is N40 per unit. </li></ul><ul><ul><li>Determine the break-even point for each range </li></ul></ul><ul><ul><li>If projected annual demand is between 580 and 660 units, how many machines should the manager purchase? </li></ul></ul>Number of Machines Total Annual Fixed Costs Standard Processing Time per Unit (hr.) 1 N9,600 0 to 300 2 15,000 301 to 600 3 20,000 601 to 900
  • 34. Solution for the Problem on Capacity Alternatives that Involve Step Costs <ul><li>a) Computer the break-even point for each range using the formula </li></ul><ul><li>For one machine </li></ul><ul><li>For two machines </li></ul><ul><li>For three machines </li></ul><ul><li>b) The manager should choose two machines only. </li></ul>Q BEP = FC R - VC = N9,600 N40/unit - N10/unit = 320 units = = = 500 units = 666.67 units Q BEP Q BEP N15,000 N40/unit - N10/unit Q BEP N20,000 N40/unit - N10/unit
  • 35. CAPACITY PLANNING <ul><li>F. Evaluating Capacity Alternatives </li></ul><ul><ul><li>Quantitative Aspect </li></ul></ul><ul><ul><ul><li>Techniques useful in evaluating capacity alternatives from an economic standpoint: </li></ul></ul></ul><ul><ul><ul><ul><li>Financial analysis </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Cash Flow </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>- refers to the difference between the cash received from sales and other sources and the cash outflow for labor, materials, overhead, and taxes. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Present Value </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>- expresses in current value the sum of all future cash flows of an investment proposal </li></ul></ul></ul></ul></ul>
  • 36. CAPACITY PLANNING
  • 37. <ul><li>? </li></ul>
  • 38. <ul><li>Thank you </li></ul>

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