Session 1Planning, execution, and control overview

Closed-loop system
The MPC system is a closed-loop system. A close-looped system is a system that monitors
accomplishment against the plan. It has an internal control and replanning capability. It typically
includes:

Sales and operations planning

Master production scheduling

Material requirements planning

Capacity planning

The execution functions include the manufacturing control functions of

Input-output capacity

Detailed scheduling

Dispatching

Anticipated delay reports from both the plant and suppliers

Supplier scheduling

The planning and control process consists of the following steps: establish a plan, execute the plan,
measure performance, and take corrective actions.

Primary object of planning and control process

Maximizing customer service

Limiting inventory investment

Maintaining high operating efficiencies.

Interface is a point of interaction between two systems or work groups.

Planning interfaces

Interactions that facilitate the planning and control of production activity

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Communication channels that transfer the following information to the production organization

o Production plan
o Master production schedule
o Material requirements plan
o Capacity requirements plan
1. Business planning
Business planning, while outside of the MPC boundaries, is considered part of the MPC system
because it has d direct impact on the subsequent planning activities. The plan must be consistent with
strategic plans, departmental budgets, and the firms capabilities. The business plan is typically
prepared annually and updated on a quarterly basis. A business plan is usually accompanied by
supporting financial statements, such as budgets and a projected balance sheet or cash flow statement.
A business plan is a statement of long-range:

Strategy

Revenue

Cost

profit

A business plan is usually stated in terms of dollars and grouped by product family. The business plan,
the production plan, the master schedule, the material requirements plan, and the capacity
requirements plan, although frequently stated in different terms, must agree with each other.
2. Sales and operations planning
Sales and operations planning, establishes the overall level of manufacturing output by creating the
production plan. Sales and operations planning focuses on

Meeting business goals and objectives

Establishing production quantities

Confirming resource availability

The production plan is the primary input to resource requirements planning. The resource
requirement planning is used to confirm that critical resources with long lead times can be made
available. Resources that should be checked include:

facilities

long-lead-time equipment

critical materials

technology

labor skills
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Sales and operations planning provide a direct and consistent dialogue between manufacturing and top
management. The production plan is a primary output of sales and operation planning.
3. Master scheduling
Master scheduling is the process where the master production schedule is created, reviewed, and
approved. The MPS is the planned build schedule for manufactured end products or product options. It
interfaces with rough-cut capacity planning.
At an operational level, master scheduling focuses on:

processing transactions

maintaining records and reports

performing a periodic review-and-update cycle

processing and responding to exceptions and conditions

measuring effectiveness on a routine basis

There are four master scheduling approaches:

make-to-stock

engineer-to-order

make-to-order

assemble-to-order

Rough-cut capacity planning is a process used to ensure that potential bottleneck resources are
available to accomplish the MPS.
4. Material requirements planning
MRP explodes the MPS into a detailed, time-phased set of component and raw material requirements.
MRP uses the product bills of material, inventory data by part number, and part production or
procurement lead times to calculate the net material requirements for each part number required to
calculate the MPS. The material requirements planning process begins with the MPS and determines:

the quality of all components and materials required

the date that the components and material are required

This is accomplished by

exploding the bill of material

adjusting or netting for inventory quantities on hand or on order

offsetting the net requirements by appropriate component or raw material lead times

While MRP can be run frequently to reflect a timely material s requirements plan, it has weak points
especially when viewed from JIT perspective. If deliveries are expected to be late, safety stock can be
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used; if production may be late, safety time can be built into item lead times; and if poor yields are
typical, scrap and yield factors can be used for planning. JIT addresses these exceptions differently.
In addition, the traditional MRP manufacturing approach to production scheduling has been to
minimize change. This makes reacting in a JIT environment extremely difficult.
JIT and MRP are not mutually exclusive, but rather, complementary. While they are different in terms
of how the integration and coordination are performed, they both emphasize the integration and
coordination of manufacturing and the various interfacing activities. Many JIT-based companies have
implemented MRP, not necessarily for production scheduling but for planning production over large
periods of time. The three characteristics described below further depict the relationship between the
two concepts:

informational versus physical

planning versus execution

bills of material

Routing data, work center parameters, planned orders, and open orders is the input data for CRP.
Capacity requirements planning refer to the process of determining in detail the amount of labor
and/or machine resources required to accomplish the production schedule. The detailed material plans
drive the capacity requirements planning process.
Planned and released shop orders in the MRP system are primary input to CRP. CRP translates these
orders into ours of work. Although rough-cut capacity planning may indicate that sufficient capacity
exists to execute the MPS, CRP may show that capacity is insufficient during specific time periods.
Scheduled workload and capacity must be kept in balance.

Execution interfaces

Execution interfaces facilitate production activity control.

Support the systems, plans and methods of communicating and executing activities on the shop
floor.

Offer feedback and facilitate production activities.

Execution interfaces occur in the back end of the system.

1. Production activity control

Production activity control (PAC) embodies the execution of material and capacity plans. It comprises
the execution part of the MPC system. Shop floor scheduling and control, typically referred to as shop
floor control (SFC), and supplier control systems are the major parts of PAC. The objectives of
execution systems are to

Communicate detailed shop floor schedules to manufacturing and suppliers

Identify bottleneck resources

Highlight behind-schedule situations

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Provide feedback to the front-end systems (using manufacturing performance measures)

o Identify and resolve problems and delays

o Provide status information
o Track costs
o Update inventory balances
o Measure workload
o Adjust work-center priorities
PAC and MPC
The primary connections between PAC and the rest of the MPC system are the material and capacity
plans
The capacity requirements plan

Determines the amount of capacity required to execute the materials requirements plan

Allows achievable shop floor schedules to be established

Reflects current and future resource availability

The material requirements plan

Provides detailed, time-phased material requirements information to the CRP, operations

scheduling and supplier scheduling systems

Establishes manufacturing schedule performance objectives

The link between PAC, CRP and MRP are bi-directional. Feedback is of two types: status
information, warning signals.
PAC and JIT
PAC the primary characteristic of batch manufacturing is that all
components are completed at a workstation before they move to the next one.
Under JIT, order release is still part of PAC, but typical shop orders are not used; therefore, the PAC
functions are largely simplified.

Detailed scheduling becomes unnecessary because work in process is pulled through the
manufacturing cells

Work is completed fast enough to eliminate the need for detailed operations scheduling

Detailed scheduling of workers and equipment is not an issue because the JIT system design
determines schedules

Data collection, monitoring, and other status are not needed since work in process inventory is not
tracked

Receipts of finished goods are used to backflush raw materials, components, and labor

Use of Kanbans eliminates the need for order authorization

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The essential inputs to a PAC system are routing and lead-time data.
The schedules represent loading a particular job onto a particular work center for a particular time
period. After loading, the job is added into the queue for the work center.

Facility layout
The objectives of a production layout are

Reduced costs

Reduced time

Increased quality

Inventory reduction

The layout of the shop floor is the physical arrangement of resources or centers of economic activity
within a facility. Layouts include linear, functional, cellular, and fixed-position
If JIT is implemented, a disconnected flow will eventually become like a connected-flow process.
Every time the disconnected flow is simplified, it moves closer to being a connected flow.

1. Functional layout
A functional layout is a shop floor configuration characterized by locating machine tools that perform
a similar function in the same area or department. Disadvantages:

Geographical distances

Excessive materials transport

Time separation

Possible alienation

2. Improper layout

Birdcage layout

Isolated island layout

Linear layout

3. Job shop
A job shop process is characterized by the organization of similar equipment by function. Job shop
operations, like repetitive flow operations, are characterized by batches. A job shop design is chosen
for one or more of the following purposes:

Providing flexibility for the customer

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Making small batches for test marketing or early in the production of a product

Ensuring quality whenever highly skilled labor is required to meet specifications

Making unique or low-volume products, such as machines, tools, and fixtures used to produce
other products

Making prototypes of new products.

4. Flow
There are three types of flow designs:

Continuous flow

Dedicated repetitive flow

Batch flow

Objectives of flow design

One-piece flow

Lower inventory

Minimized space requirements

Attainment of operational requirements

Flexibility to meet changes in output rates

A focused factory is a plant in which the entire manufacturing systems is focus on a limited, concise,
manageable set of products, technologies, volumes, and markets precisely defined by the companys
competitive strategy, technology, and economics. This enables the operation to approach a flow-like
condition, thus achieving the objectives of the JIT philosophy more effectively.
For large scale operations, a common approach is to have a number of focused factories under one
roof.

5. Cellular manufacturing
Cellular manufacturing is a manufacturing process that produces families of parts within a single line
or cell of machines operated by operators who work only within the line or cell. Usually, the most
functional arrangement is not a straight line, but rather a U-line.
A cell is a manufacturing unit consisting of

A number of workstations

Material transporting mechanisms

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Storage buffers that interconnect the cells

The purpose of cellular manufacturing is to streamline production

Functional clusters are broken up into cells, enabling improved material flow, visibility, and
continuous manufacturing

Families of parts are produced within a line or group of cells

Floor space is minimized

Direct handoff of parts is emphasized.

6. Hybrid
Pure production design processes are rarely found. Most production processes combine two or three of
these designs.
The process for determining which production layout to use is to first document the existing flow and,
second, to understand why a new flow may be needed.

Session 2: Scheduling production and process operations

Scheduling concept
Schedule
Schedule is a plan that defines the sequence and time allocation for each operation necessary to
complete a task. The detailed schedule includes:

Sequence constraints

Sequence of operations

Time estimates

Resource utilization and capacity.

Objectives of Scheduling

Establish due dates

Determine throughput times

Keep the shop floor running smoothly

The goal of scheduling is to balance these objectives in order to provide timely and cost effective
delivery of products.
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Establishing a Schedule
1. Selection of Scheduling Approaches
Master Scheduling is the final activity of the front end of the manufacturing planning and control
(MPC) system. It is the process in which the master production schedule (MPS) is created, reviewed,
and approved. The manufacturing environment determines which of the master scheduling approaches
should be used. The manufacturing environment could be any of the following:

Make-to-stock

The competitive strategy of make to stock emphasizes immediate delivery of standard items. MPS is
the anticipated build schedule of the items required to maintain the finished goods at the desired
inventory level. Quantities are scheduled based on manufacturing economics and forecasted demand
as well as desired safety stock levels. Items may be produced either on a repetitive line or in batch
production.

Assemble-to-order

The competitive strategy is to supply a large variety of final product configurations from standard
components and subassemblies within a relatively short lead time. There is a schedule for options,
accessories, and common components as well as a final assembly schedule(FAS).Forward scheduling
is typically used to establish promise dates in this environment. However, backward scheduling is used
to actually schedule the work after commitment () is made.

Make-to-order or Engineer-to-order

The final configuration of the end product is determined after receiving specifications and an order
from the customer. In this case, a company is capable of producing a large range of potential finished
units from a relatively small number of component and raw materials.

2. Inputs Necessary for Effective Scheduling:

What to make

When to make it

Where to make it

How to make it

How much to make

Time needed to make it

Due date

Raw material availability

Machine maintenance and failure schedules

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Rework or scrap percentages

Other demands on the facility

3. Scheduling Guidelines

Business Priorities

Targets
o
o
o
o

Minimum and maximum inventory levels

Production run lengths
Capacity utilization
Production sequences

Rules

Procedures, must specify the following:

o
o
o
o
o
o

Scheduling frequency
Schedule time intervals
Scheduling horizons
Responsibilities
Sources for updating the schedule
Techniques for linking the production plan with the production schedule.

4. Production Scheduling
The purpose of scheduling in production environment is control.

Assists in gaining control over production materials and processes by determining and authorizing
production rates and levels.

Servers as a performance measure

Utilizes capacity and material plans.

Detailed production scheduling occurs in the back end of the MPC system. Its a form of shop
floor control. It is responsible for scheduling the activities required to execute the planned
production.

Capacity and material plans provide input for production scheduling and determine where can and
should be scheduled.

Capacity plans
The importance of capacity planning for production scheduling is illustrated by considering two
extremes.
Capacity plans are based on the results of backward and forward scheduling.
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Backward Scheduling

It calculates start dates by starting with the MRP order due date and working backward to

determine the required start date for each operation on the shop floor.
Forward Scheduling

Is a convenient method for establishing a schedule, providing that the order completion date is
consistent with the master schedule and customers required date.

Is often used to give customers promise dates

May focus on critical or bottleneck operations

Does not work well for complex product structures because of the timing interrelationships.

Material plans
Material plans provide information to production scheduling and set performance objectives.

Scheduling production and process operations

Three methods of Production Scheduling:
1. Mixed-Model Scheduling
Mixed-model scheduling facilitates making several different components in varying lot sizes. The goal
is to build every item every day, according to daily demand in order to minimize work in process and
control costs.
Mixed-model scheduling affects operations scheduling by forcing it to facilitate the production of each
of the different components.

2. Rate-Based Scheduling
Which is used in either push or pull system, is a method for scheduling and producing based on a time
period, such as daily, weekly, or monthly this method traditionally has been applied to high-volume an
process industries; however, it can be applied within job shops using cellular layouts and mixed-model
level schedules where the production rate is matched to the selling rate.
Rate-based scheduling affects operations scheduling in the same way as mixed-model scheduling.
In the presence of the following conditions, consider rate-based scheduling:

Time coverage instead of reorder points

Demand replacement

Backlog management

Load schedules tied to a uniform production rate

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3. Synchronous Scheduling
Methods that synchronize all operations with the constraint of the system: Drum-buffer-ropeKanbans.
The following scheduling guidelines apply when this approach is used:

Schedule the constraint to maximize its throughput

Schedule upstream resources to produce to the needs of the constraint and no more.

Schedule the downstream resources based on the planned output of the constraint.

Operation Scheduling
It is the assignment of start or completion dates to activities. It considers:

Setup and run times at each operational step.

Move times between work centers

Queue and wait times

The operation schedule is used to execute the production schedule. It shows when each operation must
be completed to meet the due date when backward scheduling is used or when each operation can be
expected to be completed when forward scheduling is used.
The operation schedule feeds information into the report that is used to dispatch production.
Operation Scheduling Steps

Obtain data for product or component to be produced.

o
o
o
o

Bills of materials
Operation sequence
Standards, engineered or estimated
Due dates

Choose scheduling method

o Backward scheduling
o Forward scheduling

Load facility

Schedule
o Multiply order quantity by time per operation
o Add move and queue time
o Add allowances for delays

Release work to shop; execute schedule

Provide feedback to initial load and schedule.

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Project Scheduling
( ), Project scheduling is composed of the
following steps:
Estimating the duration of each activity

Critical path method(CPM)

Program evaluation and review technique(PERT)

Determining the sequence of activities

Gantt is a form of bar chart and typically includes bot the schedule and actual progress.

Milestone charts typically used to display the results of project scheduling rather than for
developing the project schedule

Network diagrams are the tool to graphically illustrate the relationships between activities. There
are two methods for constructing network: diagrams-Arrow diagram (activity-on-arrow) method
and precedence diagram (activity-on-node) method.

Calculating the start and finish times for each activity, is composed three steps:

Determine the earliest start and finish dates

Determine the latest start and finish dates

Determine the slack or float.

Identifying the critical path.

A single deterministic, estimate of the duration of each activity is used for the critical path method.
This method id most appropriate for those activities that are well defined and/or those that are similar
to activities that have been performed before.

Managing the operations schedule

In order to manage the schedule, input and output must be controlled and operations must be
prioritized.

Input and Output control Technique

The primary tool for monitoring a capacity plan is input and output control. Input and output control
involves comparing planned work input and output with actual work input and output. It is a method
of managing queues and work-in-process lead times.
Input and output control reports provide the means to manage work center queues and lead times by
applying the basic principles of planning and control: plan, execute, measure, and correct.
Interpreting input and output control reports:

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Actual output less than planned=work center behind schedule

o Cause-insufficient capacity or not enough input
o Effect-queues and lead times increase and orders may be late

Actual input less than planned=work arriving late

o Cause-feeding centers behind schedule or work was not released on time
o Effect-queues become less than expected, but output may suffer and order may be late

Actual output greater than planned=work center ahead of schedule

o Cause-excess capacity
o Effect-queue less than expected, and could run out of work

Actual input greater than planned=work arriving early

o Cause-feeding centers ahead of schedule, work being released early
o Effect-queues and lead times increase

Actual output less than input=increase in queue and lead times

o Cause-not enough capacity to proceeding work centers ahead, releases early
o Effect-additional inventory at work center. Risk of late orders

Actual output greater than input=work center ahead of schedule or feeders behind

o Cause-excess capacity or feeding work centers behind

o Effect-wasted capacity, center may not have enough work, and orders may be late.
Basic principles of input/output control

Never load in more than you expect out

Separate the planning and control of capacity from the planning and control of production

Place the due date on the order at the last possible moment

Capacity should be planned in the largest possible group of items

Prioritizing
Priority sequencing rules
Priority sequencing rules are primarily used when determining which job to run next at a specific
workstation or work center. Priority rules assign the sequence in which manufacturing orders should
be processed. The priority is often expressed numerically.

FIFO

Earliest Due Date

Shortest Processing Time

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Fewest Operations

Slack Time and Slack Time per Operation

Critical Ratio

Disruptive priorities
Planning order priority is fundamental to effective production activity control and scheduling.
Priorities must reflect actual needs and be consistent among items in the same assembly. Changing
order priorities frequently will destroy an organizations credibility.
The following are informal methods of sequencing production that disrupts priority sequencing and
usually results in inappropriate sequencing of work: Squeaky wheels Gravy jobs informal hot
lists Red tags, green tags and rush stickers.
Maintaining Priorities
Manufacturing systems can maintain priorities only if they are kept up to date with current master
schedules, lead times, routings, order status, and so forth.

Improving the flow

Production flow can be improved by completing one of the following activities:

Bottleneck management

Reducing lead time

Maintenance

Bottleneck management
There are five steps:

Identify the bottleneck

Keep the bottleneck working

Only feed into the process what can be handled at the bottleneck

Accelerate and improve the bottleneck

Once the bottleneck has been improved, start at step 1 again to find the new bottleneck.

Lead time
Lead time is the time elapsed between recognizing that an item is needed and having it available in
usable condition. Lead time must be managed in order to provide:

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Responsive customer service

Effective use of resources

Optimum inventory investment

Elements of lead time

Queue time

Setups or changeovers

Run time

Wait time

Move time

Others:
o Order administration may require time to confirm resource availability, open orders, and
pick and issue components from the storeroom
o Purchased items require time for replenishment review, order execution, supplier lead time,
shipping time, incoming inspection, and storage time
o Customer orders may require time to interpret specifications, approve credit, and process
through order entry procedures

Type of Lead Time

Planned lead time: based on lot size and estimates of the elements of the lead time

Scheduled lead time: based on actual lot quantity and routing and the scheduling rules and
parameters

Actual lead time: the elapsed time from the release of a lot until the items in the lot are available
for use.

Functions of Lead Time

Determines when orders must be released

Determines work-in-process(WIP) inventory investment

Affect customer service in several ways

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Reducing lead time

Lot splitting
This is done to compress lead time or to expedite an order. Fundamentally, it involves spreading run
quantities over several workstations within a work center. In some cases a completely different work
center or an outside operation may be able to provide concurrent production for split-lot quantities/
when this occurs, however, more setups are required. Nevertheless, running quantities in parallel
shortens lead times.
Overlapping
This consists of work being started at an operation before the entire quantity is completed at the prior
work center. This allows some work to be done in parallel rather than serial fashion.
Lot size
This is the amount of a particular item that is ordered form the plant or supplier. Small lot sizes have
several benefits:

Improved costs

Improved quality

Improved delivery responsiveness

Maintenance
The purpose of maintenance is to ensure that production quality is maintained and that delivery
schedules are met. There are two types of planned maintenance on the shop floor:

Preventive

Predictive

Preventive and predictive maintenance begin with the following simple housekeeping procedures:

Simplification

Organization

Discipline

Cleanliness

Participation

The benefits of preventive and predictive maintenance are:

Increased flexibility

Reduced material handling

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Flow improvement

Under JIT, the worker is responsible for performing the maintenance initiatives. In order to minimize
the impact on the production schedule, maintenance should be scheduled.

Session 3: Authorizing, Executing, and Reporting Activities for

Push Systems
What is a push system?
A system in which products are pushed through production or distribution, based on a schedule.

Push methodology
MPS->MRP->work order->work center or MPS->MRP->purchase order->supplier

Shop Floor control

SFC within a push system, also referred to as production activity control, uses data to maintain and
communicate status on shop manufacturing orders and on work centers. The major subfunctions of
SFC within a push system are:

Assigning priority to each shop order

Maintaining work-in-work-process(WIP) quantity information

Conveying shop orders status information

Providing actual output data for capacity control

Providing quantity by location for WIP inventory and accounting purposes

Measuring efficiency, utilization, and productivity of the workforce and equipment.

These subfunctions are managed by releasing activities, staging/kitting, dispatching, and

expediting/de-expediting techniques.

Job shops
Job shop is an organization in which similar equipment is organized by function. Each job follows a
distinct routing through the shop. Job shops generally use push system for production activity control.

Weaknesses of a push system

Output continues without regard to actual downstream needs

Short-interval changes cause delays and production system disruptions

The push system to MRP is helpful for forward planning but has limitations for executions.
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Authorizing activities
Work order release authorizes production in the push systems.

Authorization of order release is based on

o
o
o
o

Planned orders in the MRP output

Current priority
Availability of materials and tooling
Loads specified by input/output planning

Release of an order triggers the release of

o Requisitions for resources required by the order
o Production order documentation
o Requisitions for tools required

Availability Checking
Checking for capacity

Capacity requirements are established by CRP

Capacity available is determined by

o Rated capacity, demonstrated capacity, or both
o Exceptions

Lead-time validity must also be checked

o Imbalances can extend lead time
o Deferred orders may lack planned lead times
o Special handling may be needed to complete orders on time

Checking for material

Requirements are calculated in MRP

Quantities consider balances on hand and quantities allocated to other orders

Availability that is checked by staging

o Runs the risk of pirating components for other orders
o Takes up space
o Complicates cycle counting

Computerized systems have the capability to inquire about material availability. They provide
o Shortage reports
o Material availability inquires
o Component screens

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Check Other Resources

Tooling
o
o
o
o

Determined from routing file information

May be included on the bills of material
Should be treated like components in terms of availability checking
May need manual verification of availability and readiness for use

Programs or tapes for numerically controlled equipment

Test equipment and gauges

Unique skills

Capacity shortages
Following are options for resolving capacity shortages

Increase capacity. Short-term opportunities include

o
o
o
o

Over time
Temporary help
Reassignments
Equipment rental

Reduce load by
o
o
o
o

Using alternate routings

Subcontracting
Rescheduling releases
Splitting lots

Material shortages
Actions that may be taken to resolve material shortage include:

Requesting rush orders, which will affect the supplier

Substituting material

Producing parts normally purchased

Building partially complete parts

Borrowing parts

Other resource shortages

Alternate tooling

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Outsourcing

Subcontracting

Rented skills or test equipment

Adjust Schedules
If all fails, schedule must be revised. Adjustment could include:

Delaying release

Planning catch-up efforts

Evaluating impact on higher level assemblies and associated components

Changing order quantity

Splitting lots to alleviate lead time problems

Building partially complete components

Documentation
Documents are generated to provide information and instructions to the shop and facilitate feedback
regarding material issues, order status, and so forth. The amount and type of information needed
depends on

Product and manufacturing complexity

Degree of control required

Accessibility of such information through computerized systems

Shop packets
The following items would typically be included in such a packet:

Engineering drawing

Production process information, called routers, routings, process sheets, shop orders or job tickets

Pick lists

Additional information and feedback documents

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Executing activities
Execution in the push system involves

Staging/kitting

Dispatching

Work assignment

Expediting/de-expediting

Activity reporting

To effectively execute operations within a push system, execution activities must focus on overcoming
three hidden hurdles. These hurdles are

Lack of valid dates

Lack of valid data

Lack of good management and measurement on the shop floor

Staging/kitting
Staging is pulling material for an order from inventory before the material is required. Kitting is the
process of constructing kits. A kit contains the components of a parent item that have been pulled from
stock and readied for movement to the production area. Staging produces:

Lack of inventory visibility

Inaccurate inventory records

Inaccurate bill of material records

The need to physically check inventory

The need to expedite orders from discovered shortages.

Dispatching
Dispatching is the selecting and sequencing of available jobs to be run at individual work centers as
well as the assignment of those jobs to workers.
Dispatch lists contain detailed information on

Priority

Location

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Quantity

Capacity requirements

Job selection
Definition: is the selection of specific jobs to run in priority sequence.
Purpose: is to ensure that manufacturing objectives are being met.
Job selection cannot be done solely by computer.
Scheduling techniques provide a means to determine the relative priorities. The most common way to
priorities is by date.
When applied to dispatching, priority rules, or rules must have four characteristics:

Give relative priority --- no two orders alike

Be dynamic --- reflect customer and plant changes

Be valid --- based on up-to-date, accurate plans

Be simple --- clear and easy to understand

A dispatcher will determine the priority ranking of orders based on

Priority rules

Order status data

Three scenarios to ranking priority to complete the job selection

Start Date priority: start date and least-processing-time rule

Order Completion Date: job due date and job left days
Work Content of Orders: critical ratio

Rescheduling
The process of changing order or operation due dates, which occurs

As a result of orders or operations being out of phase when they are needed

After job selection

Assumes that existing open orders can be rescheduled more easily than new orders
The formal system for providing the daily dispatch list considers at least two major factors:

Schedule dates

Work content

Daily dispatch list considerations

Schedule dates
Work content
Downstream load

Work center capacity

Personal preference
Shift preference

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Customer demands
Penalty clauses
Shipping quota
Stock versus sold order
Tooling
Combined setups

Profit margins
Customer out of service
Machine down
Alternate routings
Outside processing

Work assignment,
Assigning of work to

Individuals

Machines

Work centers

Based on

Priority

Skill sets

Availability

Expediting

Rushing or chasing productin orders that are needed in less than normal lead time

Taking extraordinary action because of an increase in priority

De-Expediting

Reprioritizing jobs to a lower level of activity

Human Interaction in Push Systems

Dispatcher: familiar with operation system needs and order priority, use a dispatch list to
communicate order priority

Department supervisor: familiar with department capability, allocates resources to orders released
by the dispatcher

Operator: familiar with the process and products, make ultimate decisions about the exact
sequences to process orders

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Reporting Activities
Production reporting
Shop feedback

Updates order status

Keeps on-hand balances current

Highlights problems to initiate corrective actions

Production Overload
Sound feedback is extremely difficult to obtain when it is most urgently needed. When the plant is
overburdened and functioning under the crisis of a shortage or downtime, many things work against
the feedback system
Preventing Overload
Early warning signals of problems: more alternate options used, more split lots processed, excess
overtime, and increasing queues
Production Progress
Progress must be reported to maintain schedules and respond to inquiries.
Capacity resource reporting
Labor-typical labor reports include

Quantities completed

Actual setup and run times

Changes in staffing levels and hours of work

Temporary changes, such as illness and funeral leaves

Equipment-the actual time spent on each of the following should be reported

Preventive maintenance

Overhauls

SPC charts

Recordings of physical conditions

Tooling

PAC reporting must include information about tooling usage and condition

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The status of the following must be reported

o
o
o
o
o

Tools
Fixtures
Dies
NC (numerically controlled) machine programs
Testing devices

Feedback is needed on tooling to confirm availability

Material reporting
All material activity must be reported. Material reporting includes the following.

Storeroom inventories: receipts, issues, adjustments, and location transfers must recorder.

Work in process: losses must be reported to keep track of the quantities remaining in process.
Scraprework and so on.
o Scrap: parts or products that are ruined during production or fail tests
o Rework: items that do not meet specifications
o Procedures should be established to periodically review materials in scrap or rework
condition in order to ensure that they are either discarded or repaired.

Data collection techniques

Procedures and methods should focus on collecting accurate and timely information, as simple as
possible
Basic techniques include

Manual methods
o
o
o
o
o
o

Forms
Logs
Reports
Personal contact
Meetings
Use signals

Batch reporting (may be manual or auto)

o Advantage:
1. entry equipment can be centralized
2. skilled people can improve accuracy and efficiency of data entry
o Disadvantage:
1. delays
2. error checks after the fact
3. split responsibility for accuracy

Data collection technology

o On-line reporting systems
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1. Real-time
2. Centralized recording station
o Scanning devices
1. Read bar codes
2. Eliminate entry errors
3. Provide portable scanning capability
o Electronic counters
o Personal computers networked to the data source

Session 4: Authorizing, Executing, an Reporting Activities for

Pull Systems
What is a pull system?

Just-in-time focused manufacturing methodology, works well in a structured environment, less

variation in process flow

Pulls material sequentially through the plant (from finished product to supplier)

Controls production system

Uses the concept of Kanban

Pull system objectives

Synchronize the movement of material throughout the manufacturing and distribution system

Limit the total inventory in the system: produce exactly what is needed, when it is needed

Facilitate analysis, process improvements, and further reductions in inventory

Reduce throughput time

Simplify or eliminate documentation

Improve quality

Differences between push and pull

Push
Planning
All work complete is based on
planning and scheduling
Work
Work center sends next work center
Authorization an order when it is completed
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pull
Work center receives authorization to
complete work from downstream users
Parts are not forwarded until

It is assumed that the next work

center will be ready
Pull system can be applied in any environment where production activities fall within well-defined
parameters.

Advantage of a pull system

The major benefit derived from a pull system is timely and effective control of production operations.
Compared to a push system, pull-system production operations are better coordinated and
synchronized and in-process inventories become lower and better balanced. Additionally, a pull system
can operate autonomously and has low data-processing and communication expenses.

Disadvantage of pull system

It is sometimes more difficult to respond rapidly to a significant change in demand.

Pull system characteristics

Standardized application:
Most work centers in the system function in both customer and supplier mode

Visibility

Simplicity

Standard lot sizes

Discipline

Versatility/flexibility (/)

Flattening the bill of materials

Pull production system

While job shops typically use push system for production activity control(PAC), flow production used
pull system. Pull system are used to route and dispatch the work to be accomplished through the
production facility.

Work is performed only if needed

Work authorization is based on demand from

o Customer orders
o Subsequent work cell requirements

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Authorizing activities
Two-bin systems
It is a type of fixed-order system in which inventory is carried in two bins.

Visual reorder point systems

A simple inventory control system where the inventory reordering is based on actually looking at the
amount of inventory on hand

Kanban

Process that uses signals to withdraw parts from feeding operations or suppliers
o Cards
o Containers
o pigeonholes

Links operations and final assembly

Establishes a fixed number of containers between point of consumption and point of production.

Two varieties of Kanban cards

The Kanban methodology is fairly fundamental: every product is authorized to exist by a Kanban, and
a Kanban without a product authorizes the creation of a replacement product.

Brand-name Kanban( A B
generic Kanban)
o Authorizes what to replenish and when to replenish it
o Specifically names the product to be produced

Generic Kanban
o Authorizes when to replenish, but not what
o Does not specify a product.
It works well in situations where the product variety is high, volumes are low, or the demand is
unstable and intermittent.

Establishing a Kanban ceiling

The total amount of work in process that can exist on the shop floor is considered to be the Kanban
ceiling.

Expressed in terms of the maximum number of pieces

Requires a relatively consistent amount of time

The objectives when establishing a Kanban ceiling are to keep it simple, keep it visual, and keep it
consistent.

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Kanban rules

No Kanban, no production

Never exceed a Kanban ceiling

Follow first in first out

Never pass on a known defect

Reduce Kanbans to expose problems

The customer pulls material from the supplier

Only active material is allowed at the workstation

Everything has a place.

The two-card system

Move card: indicate that a specific number of units of particular item are to be taken from a source
(usually an outbound stockpoint) to a point of use (usually an inbound stockpoint). The card is always
attached to a standard container of parts when the container is moved
Production card: indicates that items should be made either for use or to replace some items removed
from pipeline stock. These cards are used only at the supplying work center and its outbound
stockpoint.
Two-card Kanban rules

Use one card/container:

o Move card
o Production card

Return move card immediately

Leave production card at supply point

Move card and production card should contain the following information:
Move card

Production card

Part number

Part number

Container capacity

Quantity produced

Supplier work center No

work center No

User work center No

Materials required
Tools required

One card system

If the outbound stockpoint of a work center is next to the operation, a production card is not really
necessary. In this approach, an empty space in the designated outbound stockpoint confirms the
operators authorization to obtain an empty standard container and fill it with the correct number of
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required parts.
Volume and mix considerations for Kanban
Companies must consider the following elements when developing a pull environment

Repetition of processes must be the norm

Generic Kanban handles volume/mix changes

System automatically reacts to mix considerations.(-Card -)

Authorization to build/move

Containers as signals

Kanban squares as signals

Other signaling methods

Mixed-mode pull techniques

Documentation
Pull system simplify documentation because

Simplifies order release

Material and tooling availability are visible

Schedules are reestablished and sustained

Work authorization is based on current needs

Detailed routing information is not necessary

Order due dates and operation start and finish dates are not needed

Feedback needs are minimized

Signaling system serve as the job packet

Production information is maintained at the point of use.

Elimination of work orders

Kanban as a replacement for work orders

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Eliminating information that travels with the work order.

Executing activities
In order to execute activities in a pull system

Production flow must be synchronized

Visual review system must be in place

There must be flexibility in operations

Works must be capable of performing multiple tasks.

The principles of synchronized production

The utilization of a non-bottleneck resource is not determined by its own potential, but by some
other constraint in the system

Activating a resource is not synonymous with utilizing a resource

An hour lost at a bottleneck is an hour lost for the total system

An hour saved at a non-bottleneck is mirage

The transfer batch may not, and many times should not, be equal to the process batch.

The process batch size should be variable and not fixed

Capacity and priority need to be considered simultaneously and not sequentially

Murphy is not an unknown and his damage can be isolated and minimized

Plant capacity should not be balanced when variation in operation time is significant

The sum of local optimums is not equal to the optimum of the whole.

Flexibility
Being flexible refers to short setup times and the ability to switch quickly from one product to another.
The following qualities are desirable:

Mobility()

Variable output rates

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Multipurpose

Flexible capability and capacity

Simplicity

Worker flexibility and skills

Job flexibility is fundamental within pull system

The capability to do many different jobs makes an employee valuable and irreplaceable

Employers are seeking flexible generalists, rather than specialists

Training must continue throughout the employees career.

Reporting Activities
Data Collection Techniques

Timeliness of Reporting

Computer Terminals

Bar Code Systems

Magnetic Strip systems

Optical Recognition Devices

Automatic Counting Devices

Voice Recognition Devices

Data Communication

Computer Considerations

Common Database

User Interface

Security

Cost

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Simulation

Count Points
Pull systems reduce the number of count points by exploding the bill of material for whichever item
has been delivered to the count point. Backflushing facilitates the reduction of count points.

Work In Process
The number of Kanban cards directly determines the level of WIP.

Immediate Feedback
Within a pull system the quality of a product is determined at the instant the product is made.
Feedback comes from the production line operator and is instantaneous. Offering rapid feedback
improves the overall product quality.
Summary

In a pull system, orders are pulled through the production process by using signals, or Kanbans.
Discipline, standard lot sizes, manual simplicity, versatility and flattened bill of materials are all
characteristics of the system. The focus of the pull system is to establish and maintain control.
The strength of a pull system is that it maintains timely and effective control of production operations.
The weakness is that orders are submitted without any consideration of available inventory, production
schedules, or irregular occurrences.
To authorize activities, two-bin system, Kanbans, or documentation management methods must be
employed, within a two-bin systems, stock replenishment is ordered when one of the two bins
becomes empty, a Kanban signals to feeding operations or supplier to send parts to next operation. The
idea of Kanban is to link the various operations with a rope. Order and documentation reduction is
intended to eliminate non-value-added waste and to facilitate the execution of pull system activities.
To execute activities within a pull system, production must be synchronized, visual review system
must be in place, and system must flexible. The goals of every activity should be synchronized and
executed with the goals of the entire production network in mind. A visual review system is a simple
inventory control system in which the inventory reordering is based on the actual amount of inventory
at hand. For a pull system to execute activities in a dynamic fashion, it must have flexibility and the
ability to adapt to changes.
Reporting in a pull system consists of collecting data for all activities and providing feedback. Data
needs to be reported in a timely manner to be valuable. Because time is an issue, computers and other
systems that are capable of maintaining real time information should be considered. Feedback should
come from the production line operator and be instantaneous. The operator is responsible for detecting
and reporting any errors within the pull system.
In conclusion, when authorizing, executing, and reporting activities are in place, a pull system is
capable of minimizing waste, time, and non-value-added activities.

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Session 5: communicating customer-supplier information and

controlling resource
Communication customer-supplier information
Communication between customers and suppliers must be open and consistent n order to obtain the
objective of total customer satisfaction
Lack of open and consistent communication produces the following problems:

Poor understanding of customer wants, needs and expectations

Poor internal understanding of requirements

Poor cooperation among internal departments

Poor communication between purchaser and supplier

Poor follow-through or not no follow-through

Building Commitment
One way to help close communication gap between the customer and the supplier is to build
commitment. Building commitment, Focuses on customer-supplier

Concerns

Wants

Capabilities

Maintaining Commitment
Unexpected or abnormal circumstances cause variation in normal business procedures, which create
disruptions and result in poor quality. All changes should be communicated as soon as possible.

Sharing Information
Information sharing is fundamental to the development of good customer-supplier relationships. It
assists in building and maintaining commitment.

Supplier interfaces

Supplier interfacing facilitates the following activities

o Establishing and maintaining relationships
o Increasing the amount of information available
o Opening communication lines
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Three types of supplier interfaces should be considered

o External
1. Treat suppliers as partners
2. JIT philosophy
3. Establish direct contacts between shop people and suppliers
4. Develop guidelines to define communications or problems that must be channeled
through purchasing
5. Treat outside services like work centers within the plant
o Internal --- team effort
1. material planning
2. production scheduling
3. design engineering
4. manufacturing engineering
5. customer service or sales
6. accounting
7. purchasing
8. personnel department
9. quality assurance
10. engineering changes
11. other manufacturing departments and work centers
o Interplant
1. Planning and scheduling coordination can be achieved in a centralized or
decentralized organization
2. Communication is more difficult when hampered by distance
3. Allied divisions are often the worst suppliers

Integrating suppliers
For optimal levels of information sharing, it is desirable that a supplier be fully integrated into the
customers operations. Benefits of integrating suppliers in the design, manufacture, and test of
components to the customer by

lowering internal direct costs

reducing development costs

obtaining access to proprietary technologies

spreading overhead costs

Having the ability to focus on areas in which in is an expert.

Integrate suppliers also simplifies problem solving.

Data communication
Timely and accurate data is fundamental to controlling the shop flow and keeping communication
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lines open. The following is the communication methods:

inter-enterprise systems(IES)

IES incorporates the following items into a seamless information flow

o intercompany electronic mail
o videotext/online database
o facsimiles (Fax)
o electronic funds transfers
o exchange of CAD and manufacturing graphics
o specifications
o documents
o web-based communications

supplier scheduling and control

electronic data interchange

bar coding

fax

internet is new tool

Scheduling and control of suppliers

Supplier scheduling:

determine purchased item release and need dates from MRP

include outside operations in routing to establish start and completion dates

lead ties must consider

o shipment of materials to and from the outside operation
o internal and external queues
o internal and external wait times

Supply control:

keep plans up to date

measure performance

take corrective actions

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Electronic Data Interchange (EDI)

What is EDI

Electronic exchange of information

A method of improving communication and information flow among suppliers, carriers,

distributors, and internal departments

Why should you use EDI?

Duplication and mistakes and be eliminated

Communication is instantaneous and paperless

Bar coding
Benefits of bar coding include

Encodes data quickly and accurately

Enables the automation of data acquisition

Hand-held bar code readers and wands

Read information

Perform local processing

Controlling storage and movement of material, include the following

parts:
Identifying inventory items
The following principles are associated with the creation of effective item identification systems

Uniqueness

Only one number for all uses

Assignment of responsibility

No reuse

Conciseness

Uniformity in length and composition

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No confusing characteristics

Expansion

Storage and location

Material can be stored in a variety of locations: warehouse, point of use, point of manufacture.
Physical Control of Inventory
Inventory location methods:

Preassigned locations

Random locations

Zoned locations

Automated storage and retrieval system, including:

Completely automated warehouses

Driverless carts that follow paths imbedded in the floor.

Smaller prefabricated units for smaller parts

Stock keeping principles

Security-

Transaction recording-

Authorization control-

Automation when cost effective-

Perishable stock shelf-life

Lot traceability

Containerization
Containerization is a shipment method in which commodities are placed in containers, and after initial
loading, the commodities per se are not rehandled in shipment until they are unloaded at the
destination.

Containerization approach encourages the reuse of containers

Containerization of items also helps to minimize the handling of containers and materials.

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Containerization allows materials to be handled and controlled consistently.

Containers should be moved as little as possible.

Point of use
Point of use storage involves: keeping inventory in specified locations on a plant floor near the
operation where it is to be used. Point-of-use storage is one of the JIT philosophies. Using point-of-use
storage reduces resource movement and response time and minimizes handling steps. Planning must
then address the need for spacing between work cells and storage locations near the point of
production. One solution to this problem is machinery rearrangement. One of the most effective JIT
layouts for point-of use storage is the U-line
The farther away the storage is located, the more steps are needed to complete the process.

Transportation
Transportation is the function of planning, scheduling, and controlling activities related to mode,
vendor and movement of inventories into and out of an organization.

Transportation functions: planning, scheduling, controlling.

Transportation elements: mode selection, vendor relationships and movement of product.

JIT transportation
Transportation must focus on eliminating waste and achieving a continuous flow of materials. This can
be achieved by implementing point-of use storage and other JIT techniques. Transportation must be
synchronized with the operations of both the company and the supplier to accomplish a smooth
transfer of materials between them, When apply JIT to transportation, the goal is to receive and deliver
more frequently with less cost. Conventional experience implies that smaller, more frequent shipments
will increase costs. Nevertheless, the offsetting savings result in reduced total acquisition costs. The
savings result from the reduction of:

Handling damage

Excess or obsoletes inventory due to bad timing

Quality and communication problems resulting from excess inventory.

One possible benefit of JIT in transportation is to deliver materials to the point of use.
Transportation methods:
A linear programming model concerned with minimizing the costs involved in supplying requirements
to several locations from several sources with different costs related to the various combinations of
source and requirements locations.

Repetitive schedules

Mixed loads

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Milk runs, is a regular route for pickup of loads from several suppliers.

Freight consolidation

Local warehouses

Local final assembly operation.

The last two methods is to resolve the not synchronization due to transportation time.

Session 6: Quality and continuous improvement initiatives-basic

concepts
Executing Quality Initiatives, Eliminating Waste, and Implementing
Continuous Improvement Plans
While executing quality initiatives, implementing continuous improvement plans, and eliminating
waste are all objectives of the Just-in-time philosophy, they can be applied to all organizations and
production environments. These activities strive to

Streamline production processes

Reduce non-value-added activities

Ensure effective process execution

Deliver total customer satisfaction.

Quality Initiatives
Quality is defined as conformance to requirements or fitness for use. It can also be defined through
five principal approaches.

Transcendent quality is an ideal, a condition of excellence

Product-based quality is based on a product attribute

User-based quality is fitness for use

Manufacturing-based quality is conformance to requirements

Value-based quality is the degree of excellence at an acceptable price.

Quality has two major components

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quality of conformance-quality is defined by the absence of defects

quality of design-quality is measured by the degree of customer satisfaction with a products

characteristics and features

To execute a quality initiative, companies must follow seven steps:

identify problems

organize implementation team

verify need and mission

diagnose causes of poor quality

provide a remedy

deal with resistance to change

institute controls to hold gains

TQM (total quality management)

focused on customer needs and how systems are set up to meet those needs

a tool used to understand constraints

a management approach to long-term success

based on the participation of all members of an organization

In TQM, the word Total applies to all:

Levels

Employees

Functions

Processes

Output

Input

Suppliers

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customers

Quality imperative
The quality imperative facing manufacturing organizations today can be segmented into four elements:

Strategic role of quality

To use continual process improvement as a strategy

Quality and productivity

An increase in quality can lead to an increase in productivity, because time is spent on value-added
activities and not on wasteful endeavors.

Cost of quality

Implementing quality initiatives costs money. However, the long-term savings from ensuring quality
surpasses initial startup costs. Four categories of quality costs are:
o Internal failure costs
o External failure costs
o Appraisal costs
o Prevention costs

Quality and market share

Higher quality allows you to receive higher market share.

Customer-driven quality standard
Customer-driven quality standard are an integral part of JIT. Three major elements make up a
customer-driven quality standard.

A definition of quality

The concept of developing products with customer involvement

The concept of internal customers

Quality at the source

Quality at the source means that a producer is responsible to provide 100 percent acceptable quality
material to the consumer of the material. The objective of quality at the source is to reduce or
eliminate shipping or receiving quality inspections and line stoppages as a result of supplier defects.
There are several requirements for quality at the source:

Companywide involvement

Employee empowerment

Development of world-class suppliers.

Prevention orientation
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Eliminating waste
For an organization to reach an improved production level, it must eliminate waste. One of the primary
focuses of JIT is the elimination of waste. In a JIT environment, waste is defined as any activity that
does not add value to the product or service in the eyes of the customer. Eliminating waste includes
eliminating waste due to:

Overproduction

Waiting

Transportation

Stocks

Motion

Defects

Processing itself

Implementing continuous improvement plans

Continuous improvement must involve everyone managers and workers. It involves finding and
eliminating waste in machinery, labor, or production methods. The continuous improvement effort
requires time, resources, planning, and direction.
Below are listed some guidelines for use in continuous improvement activities

Establish a team

Develop an action plan

Develop specifications and standards

Prioritize attributes

Determine process control and capability

Measure performance

Take ownership

Quality improvement tools

Affinity diagrams

Arrow diagrams

Matrices

Interrelationship diagrams
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Prioritization matrices

Taguchi method

Tree diagrams

Mistake-proofing

Program charts(PDPC)

10

Autonomation

11

Benchmarking

Affinity diagrams
An affinity diagram is a tool whereby employees generate ideas individually on card or post note and
later categorize there ideas under similar headings. Constructing an affinity diagram helps to group
similar items and ideas and then provides a heading for each group of ideas.
There are six process steps for constructing an affinity diagram

State the issue in general terms

Record ideas on cards

Display cards

Sort the cards into logical groupings

Create header cards

Decide on a course of action

Matrix chart
A matrix is a graphical technique that shows the relationship between two or more related groups of
ideas. It is used to analyze the relationship of items n one set of ideas to another set. The matrix
systematically organizes information to make a comparison selection, or choice.
There are five process steps for constructing matrix:

Determine important factors

Select the type of matrix to be used

Select the relationship symbols to be used

Complete the matrix

Analyze the chart.

Prioritization matrix
This enables the individual or team ro select priority items by applying a set of criteria to each item. It
narrows down options by selecting, weighing, and applying criteria and priority rules.

Tree diagram
A tree diagram is a management technique used to analyze a situation in increasing detail. The full
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range of tasks to achieve a primary goal and subgoal is typically illustrated in the diagram. It logically
progresses from general to specific.

Process decision program chart

A process decision program chart is a technique used to show alternate paths to achieving given goals.
It is a tool for preparing contingency plans and maintaining project schedules. PDPC begins by first
listing the steps in a particular activity and then listing what could go wrong at each step. It then lists
possible countermeasures. It includes the following steps:

Select a team

Determine flow

Construct a tree diagram

Determine contingencies

Develop solutions

Arrow diagram
Helps establish a plan for completing tasks. It has the following steps:

Select a team

List all tasks

Sequence the tasks

Assign time duration

Calculate various times per task (include a probable time, a pessimistic time, a most likely time,
and an optimistic time)

Calculate the critical path

Update the schedule

Interrelationship diagram
This is a analysis technique used to define how factors relate to one another. the interrelationship
diagram slows a team to identity the cause-and-effect relationships among critical issues so that it can
distinguish between issue that serve as drivers and those that are outcomes.
An interrelationship diagram is best used when a team is struggling to understand the relationships
among several issues associated with a process. The tool can also be useful in identifying root
causes, even when objective data are not available.
There are seven process steps for constructing an interrelationship diagram:

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Develop the problem statement

Identify issues related to the problem

Arrange the issues in a circle

Identify cause-and-effect relationships

Draw arrows to indicate the directions of influence

Add arrows

Identify drivers and outcomes, a high number of incoming arrows indicates that an issue is an
outcome

Taguchi method
Taguchi extended the list of quality improvement activities to include product and process design.
Taguchis concept, often called off-line quality, holds that quality efforts are conducted at the product
and process design stages in the product development cycle--not just during production.
The Taguchi method encompassed three phases of product design:

System design

Parameter design

Tolerance design

The goal is to reduce quality loss by reducing the variability of the products characteristics during the
parameter phase.
Determine the optimum values of product and process parameters to minimize variation while keeping
the mean value on target.
An important contribution of this technique is the emphasis on setting target values on design
parameters.
The two elements of the Taguchi method are the quality loss function and the design of experiments.
Design of experiments:
The objective is to improve production processes
The idea is to identify product or process parameter settings that educe variation by using statistically
designed experiments.
Taguchi defines quality in terms of the loss imparted to society from a product is shipped. According
to this quality perspective, quality improvement efforts save society more resources than they cost, and
everyone benefits.

Mistake-proofing (Poka-Yoke) and Autonomation

Have to do with designing manufacturing or setup activity to prevent an error from resulting in a
defect.
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Designed for prevent defective output

Prevent incorrect actions from being passed on to next operation

Employ simple and inexpensive approaches

o Simple jigs and fixtures

o Sensors
o Visual signals
Autonomation is automated shutdown of a line, process, or machine upon detection of an abnormality
or defect.

Benchmarking
Benchmarking is the continuous process of measuring the companys products, services, costs,
processes, and practices against those of companies that display best-in-class achievements. The
comparison process helps to determine areas within the company that can be targeted for
improvement.
Performance benchmarking
Performance, or competitive, benchmarking refers to the comparison of a product or service with that
of competitors in the world market.
Process benchmarking
Process benchmarking goes outside of an industry to look at true best practices.
Both performance and process benchmarking data can come from a variety of sources. Items to
benchmark include:

Products and services

Processes

Management leadership

Employee satisfaction

Continuous Improvement Tools

A continuous improvement effort is one in which a company undertakes many small, incremental
improvements rather than one or two large improvement.
Tools that can be used for the continuous improvement effort are:

Shewhart cycle/Deming Circle of Quality

The circle includes four steps: plan, do, check, action.

Brainstorming
It is a technique that teams use to generate ideas on a particular subject. There are five brainstorming
ground rules:
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Clearly state the idea to be brainstormed

Maintain an open atmosphere

Use facts and data as the basis for new ideas

Generate as many ideas as possible

Review each idea when done.

Cause-and-effect diagram
It is a tool for analyzing process dispersion (). It is also referred to as the Ishikawa
diagram. The diagram illustrates the main causes and subcauses leading to an effect.
The cause-and-effect diagram and the root cause analysis technique look similar. In fact, both
techniques use the fishbone diagram process. The main difference is that the root cause analysis is a
more detailed view of possible causes of problems.

Root cause analysis

It allows for an in-depth look at the possible causes by asking who, what, where, when, why, and how
about each one. In essence, each cause becomes a problem in the cause-and-effect diagram. This
methodology successively examines all possible causes of problems.

Pareto chart
It is a graphic tool for ranking causes from the most significant to least significant. The chart is usually
a bar graph that ranks, in order of importance, the causes, sources, types, or reasons for problems. The
process for building and using a Pareto chart consists of four steps:

Gather the data

Count the frequency or quantity

Construct a bar graph

Analyze the data.

Problem-solving storyboard
Using a problem-solving storyboard can help to visualize the steps in a problem-solving model such as
the Shewhart cycle. Note that it starts by showing which department and individual has overall
responsibility for the problem-solving effort, and then states the problem. Following are the definitions
of each process step:

Problem box

Responsibility box

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History box

Goal box

Priority box

Cause box

Solution box

Check box

Standardize box

Residual box

Force field analysis

It is a technique for analyzing the forces that will aid or hinder an organization in reaching an
objective. A force field analysis is often used when developing an action plan to implement a change.
It helps identify driving forces that may work against the proposed change.

Developing, evaluating, and rewarding people

Developing, evaluating, and rewarding employees is fundamental to implementing a continuous
improvement plan. Management, staff and workers must be continually motivated and free to think
about improvements. They must be involved and empowered.

Developing People
Empowerment
A condition whereby employees have the authority to make decisions and take action in their work
areas without prior approval

Employee empowerment

Empowerment allows the employee to take on responsibility for tasks normally associated with staff
specialists.

Employee involvement

Treat employee with respect, keep them informed, and include them and their ideas in decisionmaking processes appropriate to their areas of expertise.

Total employee involvement

An empowerment program whereby employees are invited to participate in actions and decisionmaking that were traditionally reserved for management

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Suggestion programs
One effective method of involving employees and involving them in various aspects of the
organization is to develop and effective suggestion program. Effective suggestion programs allow
employees to have direct input into the operations and functions of the organization. Several
guidelines exist for implementing suggestion programs:

Reward good suggestions

Encourage participation

Implement suggestions quickly

Allow anonymous as well as named submissions

Thank the workers.

Cross-Functional Problem-Solving Teams

Cross-function problem-solving teams recommend solutions to solve major, companywide problems.
Cross-functional problem-solving teams use standard project management techniques. A crossfunctional team:

Bridges gaps between various departments

Opens lines of communication

Addresses problems from multiple perspectives

Unites workers from different departments

Focuses on and solves specific organizational problems

One example is concurrent engineering.

Quality circles
A quality circle is a small group of people who normally work as a unit and meet frequently to uncover
and solve problems concerning the quality of items produced, process capability, or process control.
Quality circle members typically select the problems and are given training in problem-solving
techniques. Quality circles have three main objectives:

Improve the enterprise. The entire company needs to focus on meeting customer needs and
expectations

Build a better workforce

Develop individual abilities.

The most important benefit of quality circles is their effect on peoples attitudes and behavior. A better
term to use than quality circle is small group improvement activity (SGIA)
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Self-directed work teams

Small, independent groups

Plan, organize, determine, and manage there own duties

Have authority to select, hire, promote, or discharge members

Job design

Jobs and workers must have high flexibility and adaptability

Concepts associated with this include

o Job rotation: the practice of an employee periodically changing job responsibilities to
provide a broader perspective and a view of the organization as a total system to enhance
motivation and to provide cross-training.
o Job enlargement: an increase in the number of tasks that an employee performs. Job
enlargement is associated with the design of jobs, particularly production jobs, and its
purpose is to reduce employee dissatisfaction
o Job enrichment: an increase in the number of tasks that an employee performs and an
increase in the control over those tasks. It is associated with the design of jobs in the form
and especially the production workers job. Job enrichment is an extension of job
enlargement.

Education and Training

JIT Education and Training
The focus is on developing employees to contribute to the organization and on providing the skills
necessary to keep the organization competitive.
Training at All Level

Top management education

Middle management, line supervisor, and staff education

Worker education

Implementation facilitator education

Objective of Education

Transferring facts

Changing behavior

Line accountability

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Peer confirmation

Total immersion

Continuing reinforcement

Credibility

Enthusiasm

Methods of Education

Reading

Audiotapes

Videotapes

Visiting other companies

External resources

Training the trainers

Learning by doing and by sharing experiences

Types of Training

Basic skills training

Technical skills training

Problem-solving skills

Evaluating People
Pitfalls of Traditional Evaluation Techniques

Building unneeded inventory

Giving Priority to output over quality

Emphasizing control of direct labor

JIT Evaluation Measures

The following are measures that can be used in a JIT environment:
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Profit contributions

Quality

Teamwork

Ideas

Flexibility

JIT performance Enablers

Value added per employment dollar

Parts per million defects

Throughput-based performance measures

Cost of quality

Total cost of material acquisition

Shipment linearity

Trends versus absolutes

Velocity costing

Number of Kanbans

JIT performance Inhibitors

Purchase price variance

Utilization

Efficiency

Defects per person

Overhead rates

Rewarding People
Rewarding people for their work reinforces a productive environment. Rewards can include:

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Nonmonetary

Skill-based pay

Pay for knowledge

Scanlon plan

An appropriate compensation strategy should be composed of two parts:

Pay for capability

Gain sharing

Session 7: Quality and Continuous Improvement Initiatives making it happen

Process Improvement
Process improvement: the activities designed to identify and eliminate causes of poor quality, process
variation, and non-value-added activities. They may no longer be recognized because they are part of a
daily routine.

Improvement opportunities may not be recognized because they are a part of a daily routine

Improvement efforts go unaddressed because priority coordination is difficult.

People learn to live with problems rather than deal with them

Methods of process improvement

Addressing sporadic and chronic quality problems and the one-less-at-a-time approach are two
methods of process improvement. Both methods strive to eliminate causes of poor quality, process
variation, and non-value-added activities.
Addressing sporadic and chronic quality problems
The distinction between chronic and sporadic problems is important for two reasons:

The approach to solving sporadic problems differs from that for solving chronic problems.
Sporadic problems are attacked by control process. Chronic problems use continuous improvement
processes.

Sporadic problems are dramatic and must receive immediate attention. Chronic problems are not
dramatic because they occur for a long time, are often difficult to solve, and are accepted as
inevitable.
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Project-by-project approach
The most effective approach for quality improvement is project by project. The following information
describes how this approach is executed. Some people call this reengineering the work. Setting up the
approach involves three main steps:

Proving the need

Identifying projects

Organizing project teams

Carrying out each project involves five main steps:

Verify the project need and mission;

Diagnosing the causes

Providing a remedy and proving its effectiveness

Dealing with resistance to change

Instituting controls to hold the gains.

One less at a time

Process improvement focuses on revealing and eliminating constraints and waste. As JIT philosophy
demands, to meet the goal of zero waste, manufacturers must learn how to economically produce one
less at a time.
The process of one less at a time is fundamental to process improvement. It is used to expose,
prioritize, and force communications about constraints. One less at a time exposes constraints by
putting pressure on the system.
Benefits of one less at a time
Decreased

increased

Setup time

Delivery frequency

Lot sizes

Quality of product and process preventive maintenances

Material handling

Preventive maintenance

Move distances

Planning accuracy

Transportation costs

Forecast accuracy

Paperwork

Schedule stability

Number of suppliers

Flexibility of process and personnel

Number of part numbers

Links to other departments

Links to suppliers
Links to customers

Methods of eliminating waste

There are six proven quality and continuous improvement methods for process improvement and
waste reduction.
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Move/transit time reduction

The goal within this process is to reduce:

The time that material is waiting to be released in the factory

The transit time from supplier to the factory

The transit time from the factory to the customer.

Setup time reduction

The single-minute exchange of die (SMED) approach is the concept of setup times of less than 10
minutes, or single-digit setups.
Reduced setups times are

The result of a continual and relentless process

Achieved by taking one step at a time

A means to convert runs into smaller lot sizes

Capable of providing more capacity at bottlenecks

Four stages of the SMED process:

Identify each setup as one that is either internal or external

Examine the internal events and determine which events can be converted to an external activity

Reduce the time it takes to perform each of those internal and external events

Repeat the process

Lot size reduction

Smaller lot sizes help to

Improve the ability to respond to change economically

Improve process flows

Resolve constraints.

Smaller lots allow organizations to improve cost by

Increasing the return on inventory assets

Increasing the return on the total asset base

Reducing exposure to scrap and rework

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Allowing lower volumes to break even

Improve quality by

quickening feedback on quality problems

speeding the phase-in of an engineering change

Improve delivery responsiveness by

decreasing manufacturing lead times

increasing the frequency of access to equipment

improving product-mix flexibility

Throughput and lead time reduction

Throughput and lead time can be reduced by

Analyzing different types of processes and equipment

Arranging processes into a more effective production flow

Group technology
Group technology is one concept that allows for the reduction of throughput and lead time. By
applying group or cellular technology to a factory, equipment would be arranged into work centers,
which would allow for rapid transfer of small lots of material from one machine to another.
Order cycles

Customer order processing cycle

Manufacturing order processing cycle

Purchase order processing cycle

Paperwork and transaction reduction

Excess paperwork and transactions are waste. The following areas become trouble points if they are
not reduced:
Inventory reporting
Inventory reporting -- help create an effective transaction reporting system

Four-wall inventory

Production material and components are processed into a finished product without ever having entered
a formal stock area. The normal inventory record of a part or product is kept only at the plant level.

Pre-deduct inventory transaction processing

It is a method of inventory bookkeeping in which the computer inventory of components is reduced

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before issue. It is reduced at the time a scheduled receipt for their parents or assemblies is created via a
bill of material explosion. This approach has the disadvantage of a built-in differential between the
book record and what is physically in stock.

Post-deduct inventory transaction processing

Also known as Backflushing, this is a method of inventory bookkeeping where the inventory of
components is automatically reduced by the computer after completion of the parent item.

Synchro-Deduct inventory transaction processing

It is similar to post-deduct inventory transaction processing except that the inventory is consumed at
periodic count points along the production process.

Inventory accuracy

For example: cycle counting.

Purchasing and payable
Long term contract with monthly billing for multiple shipments
Tracking work orders
It is burdensome with short cycle times in JIT process, no value added
Tracking labor
Traditionally, labor is tracked by work orders. In JIT, Much shorter time intervals, will result in
numerous and mostly meaningless detail. It becomes undesirable and impossible to separate direct and
indirect labor within a cell. For example, some companies have begun labor collection by exception,
such as doing rework, attending a meeting Otherwise, all the workers time is attributed directly to
the products made by the cell.
Workplace organization

Movement is minimized

Handling is reduced

Visibility is maximized

Layouts are simple and flexible

Layouts are orderly.

Session 8: Quality management processes

Quality is customer satisfaction or fitness for use.

The customer is anyone who is impacted by product or process

o Internal customer
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o External customer

Customer satisfaction is achieved through two components:

o Product features
o Freedom from deficiencies

Quality perspectives
Marketing
Quality is user- or customer- based. Quality is defined as the ability to satisfy a customers wants,
needs, and expectations.

Design
The focus is on the engineering team, who develops understandable, realistic, complete, usable, and
measurable specification.

Product
The focus is on preventing defects and minimizing variability in the manufacturing process and
products. Three categories of products have been identified: goods, software, services.

Service
The focus is on delivering and servicing products.

Concept of variation
The concept of variation states that no two items will be perfectly identical.
A variation is a change in

Dimension

Characteristic

Function

Data

For process management, the variation must be traced to its source.

Process variables control product dimensions and characteristics.

Special- and common-cause variation

Special-cause

Common-cause

Leads to unpredictable changes

Behaves like a stable system of chance causes
Changes process distribution
Results from numerous uncontrollable everyday factors
Continues to affect output if it is not Produces predictable output
identified and rectified
Creates an unstable process
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Statistical quality control

The application of statistical techniques to control quality. It can be described as a feedback system.
Statistical quality control is a broader concept that encompasses both acceptance sampling and SPC.

Acceptance sampling
Acceptance sampling is defined as the process of sampling a portion of goods for inspection rather
than examining the entire lot.

By attribute

By variables

Statistical process control (SPC)

By attribute

By variables

SPC is the application of statistical methods to the measurement and analysis of variations in process.
It measures process signals to eliminate the need for inspection and reduce the need for acceptance
sampling. SPC is a technique that prevents defects from occurring while a product is being produced.
SPC is based on six ideas:

Quality is conformance to specifications

Processes cause products to vary

Variation in processes and products can be measured

Common cause variation produces measurements that follow a predictable pattern

Special cause variation disrupts the predictable pattern

Causes of variation can be isolated and identified.

Distribution curve
A normal distribution curve is a particular statistical distribution wherein most of the observations fall
fairly close to one mean. An important characteristic of a normal distribution is that almost all
variations fall within three standard deviations from the mean.
To tighten a distribution curve, the special-cause variations need to be eliminated. Next, if necessary,
the common-cause variations should be reduced. Reducing common-cause variation after removing
special-cause variation results in tightening the bell curve.

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Statistical process control charts

The SPC chart is a graphic comparison of process performance data with predetermined control limits.
SPC charts trace two kinds of variation cause:

Common, which are inherent in the process

Special, which cause excessive variation

The control chart distinguishes between common and special caused of variation through its control
limits. Control limits are calculated using the laws of probability. When variation exceeds the
statistical control limits, it is a signal that special causes have entered the process.

The four part of the SPC chart:

Upper control limit(UCL)

Lower control limit(LCL)

Central tendency: This is where the process typically tends to run. It may or may not be ideal.

Data point

Steps in setting up a control chart:

Choose the characteristic to be charted

o
o
o
o

High priority to characteristics

Identify the process variables and conditions
Choose measurement methods
Determine the earliest point to test in the process

Choose the control chart type

Decide the basis of calculating the limits and the centerline to be used

Choose the sampling period

Collect the data

Calculate the control limits and provide specific instructions on interpreting results and actions

Plot the data and interpret the results.

Run charts
An additional chart that can be used for process control is a run chart. A run chart consists of several
different subcharts. Each is used in SPC for different reasons:
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Averages are plotted on x-bar charts

Ranges are plotted on r-charts

Percentages are shown on p-charts

Counts are shown on np- or c-charts

Rates are shown on u-charts

P-charts, np-charts, and c-charts are used specifically to measure and classify defects within parts and
processes.

Advantages of statistical process control

The process is stable

Behavior can be predicted

The process operates with less variability than a process with special-cause variation.

Process capability analysis

Provides a quantified prediction of process adequacy

Compares actual variation in product characteristics to the allowable variation, which is

determined from engineering tolerances

Determines whether existing variance of a process will result in the process consistently producing
parts within the design tolerance

Uses for Process Capability Information

Predicting the extent of variability that processes will exhibit, providing important information on
realistic specification limits

Choosing the most appropriate process for tolerances to be met

Planning the interrelationship of sequential processes.

Providing a quantified basis for establishing a schedule of periodic process control checks and
readjustments

Assigning machines to classes of work for which they are best suited

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Testing theories for causes of defects during quality improvement programs

Serving as a basis for specifying the quality performance requirements for purchased machines

The Assumption of Statistical Control and Its Effects on Process Capability

All statistical predictions assume a stale population. If one stable process can meet the product
specifications, usually no economic problem exists. While conforming to product specifications does
not mean the process is in a state of statistical control. The instability of the process means that the
prediction is faulty.

Incoming inspection
Inspection is measuring, examining, testing, or gauging one or more characteristics of a product or
service and comparing the results to specified requirements to determine whether conformity is
achieved for each characteristic. Inspection is performed for a variety of purposes, such as:

Distinguishing between good and bad lots

Determining if a process is changing

Measuring process capability

Rating product quality

The major problem with incoming inspection is that quality cannot be improved through after-the-fact
statistical sampling or 100% inspection.

Product acceptance
Product acceptance is based on the disposition and quality of the product. Include the following
criteria:

Conformance to specifications

Fitness for use? The following questions should be asked:

o
o
o
o
o

Are there risks to human safety or to structural integrity

Who will be the user
How will the product be used
What are the companys and users economics
What are the users measures of fitness for use

The communication decision: Deciding what to communicate to insiders and outsiders

o Communication to outsiders
o Communication to insiders

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Disposition of Nonconforming Product

Decision not to Ship sorting, repairing, downgrading, or scrapping

Decision to Ship Waiver by (designer, customer, quality department, formal material review
department, upper manager)

Inspection Planning
Inspection planning is the activity of:

Designating work areas where inspection will take place

Providing those stations with information needed to complete inspection.

Location of inspection areas

At receipt of goods from suppliers, (incoming inspection/supplier inspection)

Following the setup of a production process

During the running of critical or costly operations, (Process Inspection)

Prior to delivery of goods from one processing department to another (Lot approval/tollgate
inspection)

Prior to shipping completed products (Finish goods inspection)

Before performing a costly, irreversible operation

At natural breaks in the process

Choose and interpreting quality characteristics

The planner should be certain to provide inspectors with:

Inspection and test environments that simulate the conditions of use

Supplementary information that goes beyond specifications

Help to better understand the conditions of product use and specification requirements

Seriousness classification.

Detailed Inspection Planning

The type of test to be done (test environment, test equipment, test procedure, tolerance)

The number of units to be tested or the sample size

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The method of selecting the samples to be tested

The type of measurement to be made

Conformance criteria for the units

Inspection Accuracy
Accuracy depends on the

Completeness of inspection planning

Bias and precision of the inspection process

Level of human error

Monitoring supplier performance

Monitoring supplier performance includes examining and evaluating the processes and products of a
suppliers organization. It involves assessing and auditing the quality of products and processes and
surveying quality in service and delivery.

Assess
The following situations may require quality assessments:

New product

Product development

Design transfer

Product modification

Process change

New contract

Special product

The specifications and standards of assessing conformance should be current, accurate, complete, and
realistic.

Audit
Audits provide assurance that

Plans for attaining quality ensure that quality will be attained

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Products are fit for use and safe for the user

Standards and regulations are being followed

There is conformance to specifications

Procedures are adequate and are being followed

The data system provides accurate and adequate information

Deficiencies are identified and corrective action is taken

Opportunities for improvement are identified and the appropriate personnel alerted

Audit program approaches

Organizational units

Product lines

Quality systems

Specific activities

Industry standard

Structuring the Audit Program

Participation groups: Leader in audit department, leader in activities department, upper management
who presides over both areas
The audit program are designed to carried out based on agreed charter, which contains the published
statement of purposes, policies, and methods.
Planning and performing audits on activities
The main steps in performing activity audits are initiation, planning, implementation, reporting, and
completion.
Human Relations in Auditing
Human relations problems are sufficiently important to warrant extensive discussion with respect to:

The reasons behind the audit

Avoiding the atmosphere of blame

Balance in reporting

Depersonalizing the report

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Post-audit meetings

Audit Reporting
Summarize Audit Data
Reporting findings requires two different levels of communication:

Reports of discrepancy to secure corrective action

A report of the overall status of the subject matter under review

Seriousness Classification
Define ad serious, major and minor
Distribution of Audit Report
The audit report is sent only to the manager whose activity is audited. Then a follow-up audit is
schedule. If the deficiencies are not corrected, the last report will be send to upper management.
Essential Elements of a Quality Audit Program
There are five parts in a successful quality audit program:

An emphasis on conclusions based on fact

Assurance to management and managers

A focus on identifying opportunities for improvement

Human relations issues

Competence of auditor

Certification and rating of suppliers

Rating suppliers
o
o
o
o
o

Quality
Delivery
Flexibility
Improvement
price

Rating buyers

Certifying suppliers

Customer survey
Surveys focus on collecting information from customers to ensure that they are satisfied with the
product as well as service.
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A survey can provide

An understanding of an organizations relative standing in the marketplace with regard to quality

An analysis of users situations with respect to cost and convenience over the life of the product

Quality in delivery performance

Quality of delivery and service contribute to the customers perception of quality

Delivery and service can be monitored when a product is made available to potential customers

Insights gained from surveying performance will help to deliver and service products successfully

Customer perception can be broken down into three phases

o Before purchasing
o At the point of purchase
o After purchase
Warranty of Quality
A warranty is a form of assurance that a product is fit for use or, failing this, the user will receive some
kind of compensation. An organization makes two implied warranties at the point of use:

General warranty the product is fit for use

Special warranty the product is fit for the specific purpose for which the product will be used

As the product complexity grows, the extent of field problems increases. Such as the services in
shipping, the after purchase services (installation, checkout, operation/training, maintenance) cause
20-30% of problems concerning fitness for use.

Session 9: Evaluating performance of production operations

Evaluation Performance of Production Operations
The most effective way of measuring performance is by comparing actual performance results to
planned results. Another dimension of control is performance reporting
Performance measures
Measures
Reporting
Conformity of the MPS to the production plan

Weekly

Capacity utilization

Weekly

Critical resource utilization

Daily

Delivery performance

Daily

Actual production to MPS

Weekly

Inventory/backlog performance

Weekly

Data sources and requirements

Information needed to perform ship operations is provided in shop information packets. In return,
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feedback and status reports are required to track order status, material receipts and issues, and report
exception conditions.
Data collection
The following decisions need to be made to effectively collect data

Online versus manual collection methods

Real-time versus periodic reporting.

The following information should be available in report form on either a real-time or periodic basis:

Open(released) order status

Unreleased order status

Dispatch list or priority scheduling report

Weekly input and output by department

Exception report

Performance summary report

Characteristics of Manufacturing Environments

Characteristics

Job Shop

Flow Production

Strategy

Make to order

Make to stock

Volumes

Low

High

Demand pattern

Irregular, lump

Consistent

Lot sizes

Varies

Varies with process

Lot size objective

Spread setup costs

Work toward a lot size of one

Queue, move, wait time

High-70-90% of total time

Very low to none

Load determination

Number of orders multiplied by standard hours

Work-cell unit-flow rate

Capacity

Standard hours

Cycle time

Routings

Variable

Fixed

Scheduling

Complex

First in, first out

Equipment layout

By functions

By product or process

Shop operating units

Work centers

Work cells

Push versus pull

Push

Pull

Reporting detail

High

Low

Effect of production type on data requirements

Data requirement

Job shop

Flow production

Lead times

Long

Short

Reporting detail

Detailed, by operation

General, by work cell

Example

Quality completed by operation, by work

Daily quantity completed through the process

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center
Information
purpose

needs,

Measure performance, track order status

Identify problems, ensure steady flow

Material issues

To individual orders

To the process, may be backflushed

Exceptions

Important, take corrective actions

Very important-could stop production

Exception conditions

Scrap and rework, downtime, resource

shortages

Scrap and
shortages

rework,

downtime,

resource

Work center and department definition

Clearly defining work centers and departments in an organization allows clear performance objectives
and measures to be developed.
A job shop planning is done at the work center level, poor work center definition can result in poor
performance. It is important that workstations within a work center have the same capabilities.
Manufacturing process and sequence definition
The required information to define manufacturing process and operational sequence are stored in
routing database and work center database.
Routing and work center information
Routing database

Work center database

Part number

Work center number

Operation sequence

Work center name

Work center

Planned queue time

Operation description

Capacity info(staffing, shifts, efficiency, utilization factor)

Run time

Costing info(average labor rate, overhead rate)

Open orders/work in process

Open orders or scheduled receipts are released manufacturing orders. Until the order is completed, it is
considered to be work in process or an open order.

Open order information is assembled from

o
o
o
o
o

Heading data that comes form order release information

Other header information from the part master file
Operation-by-operation details
Operation start and completion dates
Quantities completed and quantities remaining

Reporting this information might occur when

o
o
o
o

Each operation is completed

There are long wait or move times
Distance or quantity disputes occur
The last operation is completed

Bill of material
Production control and inventory planning uses the BOM in conjunction with the master production
schedule(MPS) to determine the items for which purchase requisitions and production orders must be
released. Accounting uses the BOM to cost the product.
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The BOM is a mandatory input for production planning and control activities.
Measuring capacity

Available capacity is required information for planning and controlling production systems

The amount of capacity available can

o Facilitate changes to scheduling
o Offer feedback to production systems

Rated capacity=time available*utilization*efficiency

Accuracy of Inventory Records

Consequences of inaccurate data include the following:

Lost sales

Late delivery

Shortages

Excessive expediting

Excesses

Excess freight costs

Missed schedules

High inventory levels

Low productivity

High levels of obsolescence

Key Inventory information

Permanent information changes only occasionally:
Part number, description, part name, safety stock, item classification, cost, yield, lead time, production
group, shelf life, batch control requirements, substitutes, suppliers and their ratings, UOM.
Variable information includes:
Quantities ordered, received, issued, allocated, on hand balance, and batch identification.

Auditing inventory records

The two methods for inventory counting are

Cycle counting-usually a daily count of certain items

Cycle counting not only provides a higher level of accuracy, but more importantly, results in
continuous improvement in accuracy levels as the causes of errors are identified and corrected.

Periodic inventory-usually an annual count of all items.

Accuracy targets the conformity level that production strives to achieve

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Performance Reporting
Adherence to schedule
A primary objective of performance is to be consistent with the schedule. Performance to schedule is a
vital measurement of customer service.

Cost
The following costs affect performance in various ways

Relevant the costs are incurred because of a decision, such as lot size decision.

Opportunity costs

Sunk costs

Direct costs

Indirect costs

Overhead costs

Incremental costs

Marginal costs

Actual costs

Standard costs

Intangible costs

Unfavorable cost variances:

High material costs can be caused by

o Abnormal scrap and shrinkage in production
o Substitutions of higher priced materials
o Purchase price variance

High labor costs can be caused by

o
o
o
o

Rework
Undue scrap and shrinkage
Alternate routings
Poor efficiencies that consume labor time

High overhead costs can be caused by

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o The same reasons cited for high labor costs

o Routing a job through an alternate work center with higher overhead rates.
Favorable cost variances

Workers may produce products in fewer hours than expected according to time standards, yielding
favorable variances

Scrap is lower and yield is better than expected, allowing less material to be consumed

Raw materials are purchased at prices below standard cost, producing favorable purchase price
variances.

Overhead cost absorption

Methods used to allocate the overhead costs (department overhead, factory overhead, general
overhead)

Labor hours or costs for setup and run

Machine hours

Direct material costs

Overhead is absorbed based on expected productive hours, so costs can be:

Over absorption
o The fixed costs may be spread over more units produced
o However, more hours than planned ay have been required to achieve the necessary
production

Under absorption
o Production goals may have been achieved with fewer hours of work through better methods
and improved efficiencies
o However, perhaps there was not enough work to utilize available resources effectively.

Scrap, rework and yield

Scrap - the material outside of specifications and of such characteristics that rework is impractical

Rework - reprocessing to salvage a defective item or part

Yield - the ratio of usable output from a process to its inputs.

Productivity
It measures the utilization and efficiency of people and equipment:
Utilization = actual production time/scheduled time intended for production
Efficiency=actual output/standard output expected.

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Throughput time
The following are characteristics of reporting throughput time.

Actual times must be tracked and compared with planned times

Deviations must be investigated and corrected

Throughput time should be measured weekly or daily

Quantities produced in flow processes are usually measured per shift, daily, or on a cumulative
basis by work cells or process

Work in Process (WIP)

WIP inventories are resources currently undergoing transformation into more valuable states. JIT
environments typically have less WIP than traditional manufacturing environments.
The value of WIP depends on the planned production output and the manufacturing lead times. The
simplest approach to calculating projected WIP is to estimate it as a percentage of planned production.

Inventory
Keeping track of inventory

Perpetual inventory systems

Periodic review inventory systems

supply item

Visual review systems

MRO

Four-wall inventory system the inventory is recorded when receipt, not deduct until they are
delivered as finished goods (consumed into this FG), it often using if the time from receiving
component to delivery is very shot.

Quality measures

Operational reports
o Assist in conducting day-to-day operations
o Focus on achieving improvement

Executive reports
o Summarize what is going on in the company
o Typically include
Summaries of quality information
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Summaries of field complaints

Monetary measurements
Identification of improvement areas

Evaluating Cost of Operations

The cost accounting methods that are presented here include:

Job order costing

It is a cost accounting system in which costs are assigned to specific jobs.
Job order costing characteristics:

Material quantities

Labor hours for setup and run

Overhead: labor hours/machine hours * overhead rate

Product costing
Characteristics of product costing:

The standard unit cost of purchased items is the standard material cost

Elements of cost for manufactured parts include:

o Material costs
o Labor costs
o Overhead costs

Costs are rolled up using bill of material information and yield a total standard cost for the product
and all lower level assemblies and fabricated parts

Standard costs are usually stabilized for the fiscal year to provide a consistent target.

Process costing
Process costing is a cost accounting system in which the costs are collected by time period and
averaged over all units produced during the period. This system can be used with either actual or
standard costs in the manufacture of a large number of identical units.
Material, labor, and overhead costs are typically charged to the work center.
Activity-based costing is a form of process costing.

Transaction costs

Many systems may require extra time and personnel

Equipment involved for the timely reporting of production information

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Hardware and software systems help reduce costs of transaction

Cost of not making a transaction are:

o Poor customer service
o Inaccurate inventory
o Operating inefficiencies

Reporting should be kept as simple as possible

Inventory costs
There are four types of inventory costs

Preparation costs, sometimes called setup costs.

Include the cost of all activities required in issuing a purchase or production order. They include
the costs of:
o Writing the order
o Preparing specifications
o Recording the order
o Order follow-up
o Processing of invoices r plant reports
o Preparation of payment

Carrying costs
o
o
o
o
o
o

o
o
o
o
o

Capital invested
Deterioration
Pilferage
Insurance
Taxes
Storage costs

Stockout costs

Capacity costs

Handling
Security
Space
Record-keeping requirements
Obsolescence

Audits and Reporting

Auditing can focus directly on results and on a visual inspection of the operating areas. But more
importantly, it should focus on detailed checks of underlying systems and procedures. This should
include:

Cross-checking databases
The object is to use computer as much as possible to screen out transaction errors and to focus
attention on required remedial actions.

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Reconciling database errors

An exception condition results when any cross-check fails. In a system with detailed transaction
processing, entire jobs should be focused around auditing and reconciling exception conditions.

Completing a checklist for planning and control system

It is necessary to have a checklist prepared for audit based on the object to its designed specifications.

The planning and control system audit process

The audit help the company assess where it truly is, where it might be in the future, and how to get
there. The objective is to examine the general level of effectiveness of each of the systems functions.

Quality Audits
System Audit
Product Audit
Start-up Audit

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