Production cycle


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Representing production in formal way in computer Logic

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Production cycle

  2. 2. Outline <ul><li>Introduction </li></ul><ul><li>Production cycle activities </li></ul><ul><li>Models on each activities </li></ul><ul><li>Control Objectives </li></ul><ul><li>Conclusion </li></ul>
  3. 3. Introduction <ul><li>The Production Cycle is a recurring set of business activities and related data processing operations associated with the manufacture of products. </li></ul>
  4. 4. PRODUCTION CYCLE ACTIVITIES <ul><li>The four basic activities in the production cycle are: </li></ul><ul><ul><ul><li>Product design </li></ul></ul></ul><ul><ul><ul><li>Planning and scheduling </li></ul></ul></ul><ul><ul><ul><li>Production operations </li></ul></ul></ul><ul><ul><ul><li>Cost accounting </li></ul></ul></ul>
  5. 5. General Assumptions <ul><li>Data is persistent and backed up properly </li></ul><ul><li>System stores data according to integrity constraints </li></ul><ul><li>System is secure, available and maintainable </li></ul><ul><li>Information provided by the customer is correct, complete and reliable </li></ul><ul><li>Only complete and undamaged products are considered as finished goods. </li></ul>
  6. 6. PRODUCT DESIGN <ul><li>The objective of product design is to design a product that strikes the optimal balance of: </li></ul><ul><ul><ul><li>Meeting customer requirements for quality, durability, and functionality; and </li></ul></ul></ul><ul><ul><ul><li>Minimizing production costs. </li></ul></ul></ul><ul><li>A simulation software can improve the efficiency and effectiveness of product design. </li></ul>
  7. 7. PRODUCT DESIGN <ul><li>Key documents and forms in product design: </li></ul><ul><ul><li>Bill of Materials: Lists the components that are required to build each product, including part numbers, descriptions,and quantity. </li></ul></ul><ul><ul><li>Operations List : Lists the sequence of steps required to produce each product, including the equipment needed and the amount of time required. </li></ul></ul>
  8. 8. Model <ul><li>Business Rules : </li></ul><ul><li>Each of the design criteria must be satisfied as much as possible. </li></ul><ul><li>During redesign, the Bill of material must be rewritten. </li></ul><ul><li>Each of the databases used are taken care by its responsible authority. </li></ul>
  9. 9. PLANNING AND SCHEDULING <ul><li>The objective of the planning and scheduling activity: </li></ul><ul><ul><li>To develop a production plan that is efficient enough to meet existing orders </li></ul></ul><ul><ul><li>Anticipated shorter-term demand while minimizing inventories of both raw materials and finished goods. </li></ul></ul>
  10. 10. PLANNING AND SCHEDULING <ul><li>There are two common approaches to production planning: </li></ul><ul><ul><li>Manufacturing Resource Planning (MRP-II) </li></ul></ul><ul><ul><li>Lean Manufacturing </li></ul></ul>
  11. 11. PLANNING AND SCHEDULING <ul><li>Key documents and forms: </li></ul><ul><ul><li>Master production schedule </li></ul></ul><ul><ul><li>Production order </li></ul></ul><ul><ul><li>Materials requisition </li></ul></ul><ul><ul><li>Move ticket </li></ul></ul>
  12. 12. PLANNING AND SCHEDULING <ul><li>Use of information technology: </li></ul><ul><ul><li>Improve the efficiency of material-handling activities by using: </li></ul></ul><ul><ul><ul><li>Bar coding of materials to improve speed and accuracy </li></ul></ul></ul><ul><ul><ul><li>RFID tags can eliminate human intervention in the scanning process </li></ul></ul></ul>
  13. 13. Model <ul><li>Business Rule: </li></ul><ul><li>Mass production is done based on the forecast and lean manufacturing is done based on the customer order. </li></ul><ul><li>If current inventory < required inventory then, update purchase requisition. </li></ul>
  14. 14. PRODUCTION OPERATIONS <ul><li>Production operations vary greatly across companies, depending on the type of product and the degree of automation. </li></ul><ul><li>The use computer-integrated manufacturing (CIM) can significantly reduce production costs. </li></ul>
  15. 15. PRODUCTION OPERATIONS <ul><li>In a lean manufacturing environment , a customer order triggers several actions: </li></ul><ul><ul><li>System first checks inventory on hand for sufficiency. </li></ul></ul><ul><ul><li>Calculates labor needs and determines whether overtime or temporary help will be needed. </li></ul></ul><ul><ul><li>Based on bill of materials, determines what components need to be ordered. </li></ul></ul><ul><ul><li>The master production schedule is adjusted to include the new order. </li></ul></ul>
  16. 16. PRODUCTION OPERATIONS <ul><li>Sharing information across cycles helps companies be more efficient by timing purchases to meet the actual demand. </li></ul><ul><li>All companies need to keep track of data on: </li></ul><ul><ul><li>Raw materials used </li></ul></ul><ul><ul><li>Labor hours expended </li></ul></ul><ul><ul><li>Machine operations performed </li></ul></ul><ul><ul><li>Other manufacturing overhead costs incurred </li></ul></ul>
  17. 17. Model <ul><li>Business Rule: </li></ul><ul><li>Raw Material Used==Total Material Requisition - Damaged Materials </li></ul><ul><li>WIP==WIP + Production orders </li></ul><ul><li>Production orders= =total production – # damaged products </li></ul><ul><li>Raw Material Inventory== RMI – Material Requisition </li></ul>
  18. 18. COST ACCOUNTING <ul><li>The objectives of cost accounting are: </li></ul><ul><ul><li>To provide information for planning, controlling, and evaluating the performance of production operations; </li></ul></ul><ul><ul><li>To provide accurate cost data about products for use in pricing and product mix decisions; and </li></ul></ul><ul><ul><li>To collect and process information used to calculate inventory and COGS values for the financial statements. </li></ul></ul>
  19. 19. COST ACCOUNTING <ul><li>Types of cost accounting systems: </li></ul><ul><ul><li>Job order costing </li></ul></ul><ul><ul><li>Process costing </li></ul></ul>
  20. 20. COST ACCOUNTING <ul><li>Accounting for Fixed Assets: </li></ul><ul><ul><li>The AIS must collect and process information about: </li></ul></ul><ul><ul><ul><li>Property </li></ul></ul></ul><ul><ul><ul><li>Plant </li></ul></ul></ul><ul><ul><ul><li>Equipment used in the production cycle. </li></ul></ul></ul><ul><ul><li>These assets represent a significant portion of total assets for many companies and need to be monitored as an investment. </li></ul></ul>
  21. 21. COST ACCOUNTING <ul><li>A system can be used for a job-order or process costing system . </li></ul><ul><li>Both require that data be accumulated about: </li></ul><ul><ul><li>Raw materials </li></ul></ul><ul><ul><li>Direct labor </li></ul></ul><ul><ul><li>Machinery and equipment usage </li></ul></ul><ul><ul><li>Manufacturing overhead </li></ul></ul><ul><li>Information processing procedures </li></ul><ul><li>The choice of method: </li></ul><ul><ul><li>Does not affect how data are collected </li></ul></ul><ul><ul><li>Does affect how costs are assigned to products </li></ul></ul>
  22. 22. Model Business Rules WIP==WIP-PO FG==FG+PO
  23. 23. Key Performance Indicators <ul><li>Number of products produced per day </li></ul><ul><li>Average duration between planning and production </li></ul><ul><li>Percentage of damaged raw materials </li></ul><ul><li>Percentage of damaged produced products </li></ul><ul><li>Labour and inventory used per product </li></ul><ul><li>Defect rates </li></ul><ul><li>Breakdown frequency </li></ul><ul><li>Percent of finished goods needing rework </li></ul><ul><li>Percent of defects discovered by customers </li></ul>
  24. 24. CONTROL: OBJECTIVES, THREATS, AND PROCEDURES <ul><li>In the production cycle (or any cycle), a well-designed AIS should provide adequate controls to ensure that the following objectives are met: </li></ul><ul><ul><li>All transactions are properly authorized </li></ul></ul><ul><ul><li>All recorded transactions are valid </li></ul></ul><ul><ul><li>All valid and authorized transactions are recorded </li></ul></ul><ul><ul><li>All transactions are recorded accurately </li></ul></ul><ul><ul><li>Assets are safeguarded from loss or theft </li></ul></ul><ul><ul><li>Business activities are performed efficiently and effectively </li></ul></ul><ul><ul><li>The company is in compliance with all applicable laws and regulations </li></ul></ul><ul><ul><li>All disclosures are full and fair </li></ul></ul>
  25. 25. CONTROL: OBJECTIVES, THREATS, AND PROCEDURES <ul><li>There are several actions a company can take with respect to any cycle to reduce threats of errors or irregularities. These include: </li></ul><ul><ul><li>Using simple, easy-to-complete documents with clear instructions </li></ul></ul><ul><ul><li>Using appropriate application controls, such as validity checks and field checks </li></ul></ul><ul><ul><li>Providing space on forms to record who completed and who reviewed the </li></ul></ul><ul><ul><li>Pre-numbering </li></ul></ul><ul><ul><li>Restricting access to blank documents </li></ul></ul><ul><ul><li>Using RFID tags when feasible to improve data entry accuracy </li></ul></ul>
  26. 26. THREATS <ul><li>Product Design </li></ul><ul><ul><li>Poor Design </li></ul></ul><ul><li>Planning and Scheduling </li></ul><ul><ul><li>Over or Under Production </li></ul></ul><ul><ul><li>Suboptimal investment in fixed assets </li></ul></ul><ul><li>Production Operation </li></ul><ul><ul><li>Theft of inventories and fixed assets </li></ul></ul><ul><ul><li>Disruption of operations </li></ul></ul><ul><li>Cost Accounting </li></ul><ul><ul><li>Inaccurate recording and processing of production activity data </li></ul></ul><ul><li>General threats </li></ul><ul><ul><li>Loss, alteration, or unauthorized disclosure of data </li></ul></ul><ul><ul><li>Poor Performance </li></ul></ul>
  27. 27. Conclusion <ul><li>Automated system helps in increasing the productivity and security. Eg: CIM </li></ul><ul><li>The more we automate the system, easier it is to detect flaws and frauds in the process. Eg: RFID </li></ul><ul><li>Digital system helps in easy and secure authorization. Eg: coded ID’s </li></ul><ul><li>AIS helps to identify the appropriate product mix which will eventually help in reducing the production cost. </li></ul>
  28. 28. <ul><li>THANK YOU </li></ul>