Manufacturing system

The classic definition of manufacturing usually defines manufacturing as the transformation of raw materials into finished products.

With increasing competition and changing customer demands, manufacturers must innovate to ensure that they stay ahead.

All work areas, production lines, material storage facilities, etc. should be designed to perform to the highest rate and the corresponding shortest cycle time. When designing a plant layout it is necessary to take into account all the functions within the business.

In manufacturing, networking and transparency provide for a paradigm shift from “centralised” to “local” production. Today, manufacturing already works with “embedded systems”, which collect and pass on specific data. In the “factory of the future”, a central computer organizes the intelligent network-ing of these subsystems into cyber-physical systems (CPS).

The systems are able to work with increasing independence. Through human-machine inter-faces, the physical and the virtual worlds nevertheless work closely together: The human defines the requirements, while the process management takes place autonomously.

Manufacturing system

Production warehouse

Warehousing is an integral part of every logistics system that stores products (raw materials, parts, goods in process, finished goods) at and between point of origin and point of consumption. Warehouses must be continually re-evaluated to ensure that they are consistent with both market’s demands and management’s strategies.

Types of warehouses:
*distribution warehouse or
*production warehouse

A distribution center is a warehouse in which products from one or more suppliers are collected for delivery to a number of customers.

The function of a production warehouse is to store raw materials, work-in-process and finished products, linked to a manufacturing and/or assembly process. Raw materials and semi-finished goods are delivered to a nearby production plant, and finished goods are received from this plant and can be directly delivered from the warehouse to customers or to other warehouses.

Raw materials and finished products may be stored for long periods, this situation increases when the incoming goods of raw materials is much larger than the production rate, or when the production rate exceeds the customer order quantity of finished products.

In production, ideally, raw material should arrive at a manufacturing facility just when it is needed and then immediately processed, the resulting products should be fabricated and assembled without delay, and the final finished products should be immediately shipped to their customers; in this situation (what could be termed pure “Just-In-Time” or JIT) there is little need for buffering or storing materials.

Production warehouse

Work-In-Process inventory

The objective of a production system is to transform raw materials or sub-components into a final product which is delivered to customers. Therefore, the production process of a product consists of several stages such as raw material inventory, machining (processing), buffer inventory (WIP), and final product inventory.

The purpose of WIP is to give each stage of a production system some degree of independent action. Work-in-process (WIP) inventory exists in production systems where different types of raw materials are processed into finished products. Also, it exists as buffer between two work stations if the output of a work station is transferred in batches to the next work station. Two work stations in series without intervening WIP must perfectly synchronized to operate effectively.

Work-In-Process inventory has been given the least consideration. There are two conceivable reasons for this. First, the dollar value of the WIP inventory is relatively small compared to raw materials and finished products.

Second, it is difficult to analyze the WIP inventory because of its complex relation with production scheduling.

The objective of work-in-process (WIP) inventory is to smooth and balance the work flow of operations (decouple operations) in a production system which results in systems performance enhancement. However, increasing the buffer size would result in more space requirement and more inventory holding costs.
Work-In-Process inventory

Production capacity

Today’s business environment is dominated by change and uncertainty, and global competition is diminishing defined markets. Meeting customer demands require a high degree of flexibility, low-cost/low-volume manufacturing skills, and short delivery times.

Production capacity defines a volume of products that can be generated by a production plant or enterprise in a given period by using current resources.

For various reasons, the level of production capacity fluctuates even on a daily basis. It can be due to random employee absences, unexpected breakdown of machinery and equipment or problems that may arise with the supply of materials, media and components.

Dynamics of the company’s production capacity reflects not only the usage and replacement of the production means, but also improvement of technology and production organization. Therefore, production capacity depends not only on specific factors used in the production process, such as operating resources, objects of labor and manpower, but also on technical and organizational progress.

The production capacity of the industry can be expanded through the importation of production facilities to meet the short-term needs of a country, but experience has shown that more often than not such measures lead to a continuing dependence on imported factors inputs with little increase in domestic technological capacity.
Production capacity

Make-to-stock productions

The classical production strategies are make-to-stock, which determine the planning to great extent. In make-to-stock productions there is no direct connection between a customer’s order and a manufacturing order.

Generally a manufacturing order does not cover the requirements of the customer order that triggers it; rather the customer’s order is filled from existing stock.

The replenishment process at the production facility of an make-to-stock system is governed by a replenishment policy, which typically sets the size of the replenishment order so as to attain a prescribed inventory position, defined as the inventory level minus the backorder level and plus all the pending order level en route to the inventory facility.

In a typical make-to-stock environment planning is triggered only by independent requirements and therefore demand planning has a great significant.

Forecast should be considered a control aid. The forecast can give a sense of whether current replenishment levels are adequate.

Typical industries were make-to-stock strategy is applied are commodities and consumer goods, since the same products are usually sold to many customers and the lead time of the sales order is usually very short.

Make-to-stock allows fast reactions to changes in market demand. Make-to-stock lends itself as a very good control mechanism that can signal when a problem is emerging.

One such problem may be that the demand increases sharply, and the current replenishment level may be insufficient.
Make-to-stock productions 

Aggregate production planning

A planning system starts with a forecast of future demand over some forecast horizon of length H periods. The long term portion of this forecast is an input into an aggregate planning module that assesses whether there is sufficient capacity to satisfy the demand forecast.

This is the aggregate the production plan as it is usually the development of monthly or quarterly production requirements that will meet the estimates of demand. Gross capacity considerations must be taken into account during production planning.

To the extent that there is mismatch between the available capacity and the long term demand forecast, the module needs to examine and decide how to rectify this gap.

Therefore, sales orders have to be met by strategies like using overtime, hiring of extra staff (temporary) or layoff of such persons, carrying inventory or giving a subcontract.

By its nature aggregate production planning lies in a hierarchy of decisions that includes policy directions from above as well as the problem of disaggregating the plan into detail schedule.

Once a production plan is made, it must be desegregated into tome-phased requirements for individual products. This plan is called the master production schedule (MPS). The MPS usually states weekly product requirements over a 6 to 12 month time horizon.
Aggregate production planning

Manufacturing lead times

Manufacturing lead times are very important to all production and inventory control systems. This is the time for order to start to order completion inside the factory. They influenced nearly every aspect of the planning and execution activities that take place within production and inventory control the system.

It could be asserted that lead times are one of the most important measures of manufacturing performance, since many costs can be related directly to them.

Manufacturing lead times can be defined as the time that elapses between the release of the order to the shop floor and the completion of all operations on the order and its receipt into stock.

Traditionally, manufacturing lead time is comprised of five components or activities:
*Queue: Time waiting for work to begin
*Setup: Time required to set up equipment
*Run: Time required to work on the part
*Wait: Time waiting for the part to be moved to the next operation
*Move: Time taken to move the part to the next operation

Reducing the cumulative lead time or the sum of lead times for purchasing materials, manufacturing operations and product assembly allows a company to reduce the planning horizon for production.

Reducing the planning horizon allows a company to increase the accuracy of its demand predictions.
Manufacturing lead time

Make-to-order production

Many companies today produce goods according to specific customer orders instead of according to an abstract production program.

The process in which a product is individually manufactured for a particular customer is known as make-to-order production.

In this process, a material is created only once through the same or a similar production process might be repeated at a later time.

Once a customer order is launched into the production system, detailed requirements are computed and production is planned. The key implication of this method is that it results in along planning and execution window for order delivery.

For make-to-order products, stock keeping is seldom carried out. The demand program only determines the production area in companies by using make-to-order production in which various variant types are produced.

The majority of small and medium sized manufacturing companies work in make-to-order style.

These companies, unlike make-to-order manufacturers who produce standard goods to be stocked and sold from the warehouse, produce their goods when customers order them.

In make-or-order system, there is a direct interaction with customers during all the stages of but it is extensive during engineering phase. Manufacturer quotes delivery schedule and price and there is a discussion among the customer and producer regarding alternatives to reduce cost, reduce time to deliver.
Make-to-order production

Production scheduling

Production scheduling is a complex decision-making procedure to allocate resources to tasks over time, with the goal to optimize various performance measures under various constraints.

In this case, scheduling is defined as the process of allocation of scarce resources over time. It is also establishing the timing for performing task.

Within all activities of production management, production scheduling is a major part covering planning and control functions. The goal of scheduling is to optimize one or more objectives in a decision-making process.

By optimizing the production schedule, it can improve the efficiency of a manufacturing system, elevate the utilization rate of resources, reduce production cost, and improve customer satisfaction.

Indeed, production scheduling has huge economic implications on the manufacturing industry.

The two major categories in scheduling are deterministic and stochastic scheduling. Deterministic scheduling is characterized by processing times, set-up times, and job priorities that are known in advance. They are not influences by uncertainty.

In contrast, stochastic scheduling problem do not assume the existence of deterministic values for processing times, set-up times or other quantities that are used within the scheduling model.

Production planning and production scheduling should be very detailed. A top level project schedule should serve as the production baseline.

The scheduling of all activities must be fully integrated and reflect a synchronized flow of events that result in product or process completion when required.
Production scheduling

What is demand planning?

Supply chain processes in general span the areas of demand planning, order fulfillment, distribution, production and procurement.

Demand planning controlling has the task to control the quality of the forecast and the quality of the demand planning process itself.

It is the process that an organization takes to anticipate customer demand and ensure sufficient product is available – in the right place, at the right time, to the required level of service and at the lowest possible supply chain cost.

This process using the forecast as a foundation for their decisions (pre-production, purchasing, provision of additional capacity, etc) need a quality measure to understand the accuracy of the forecast and the dimension of possible deviations of the forecast from the actual demand.

As a result of demand planning, independent requirements are created, triggering further production, distribution and procurement planning.

Demand planning has the task to provide the production planning process with forecast to trigger production before the customer places the sales order.
What is demand planning?

What is production planning?

A definition of the term ‘planning’ leads to a group of related terms such as ‘strategic planning’, ‘design planning’, ‘master planning’, ‘operative planning’ and ‘production planning.’

The goal of the production planning system is to maximize profits. There is cost per unit to manufacture and a selling price per unit that has been pre-negotiated.

Production planning can be defined as the planning of the acquisition of the resources and raw materials, as well as the planning of the production activities, required to transform raw materials into finished products meeting customer demand in the most efficient or economical way.

Production planning may be viewed as providing a bridge between production and marketing/sales.

In many organizations, production planning is part of a hierarchical planning, resource allocation, scheduling and control framework.

The production plan considers resource capacities, time periods, supply and demand within a reasonably long planning horizon at a high level and is the input to more detail, shorter-term functions at the lower level, such as scheduling and control, which usually have more accurate estimates of supply demand, and capacity levels.
What is production planning?