Introduction to Industrial Engineering

By Jane M. Fraser

Chapter 7

Operate a production system

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7.3 Operations planning

Two different philosophies can be used for operations planning, although most organizations fall somewhere between these two extremes. The two philosophies are called Materials Requirements Planning (or push production) and Just in Time (or pull production).

MRP or push. After a forecast has been turned into an aggregate plan, more detailed production plans are made, based on knowledge of the components needed for each part and the lead time to receive supplies from suppliers and to produce and assemble products. Materials Requirements Planning works backward in time using knowledge of the required production schedule and the product structure to determine how many of which parts have to be ready by what time, and works backward in time from the knowledge of lead times from suppliers to determine when orders should be placed.

For example, an organization that wants to produce 200 bicycles by the end of a specified week plans backward in time for the manufacture of 200 frames and the assembly of 200 bicycles, and plans backward in time for the delivery of 400 wheels and other parts from suppliers or from other parts of the production system. If the supplier of wheels needs one week notice, then the order must be placed at least one week before they will be needed. A restaurant that plans to offer a prime rib special will need to place an order with its supplier of meats in order to meet the planned demand. The chef will also need to plan for the side dishes that customers are likely to eat with prime rib. Perhaps some items can be made ahead of time and frozen for later use.

MRP is a very simple concept, but all the required planning can be very complicated. The production schedule interacts with the choice of lot size, that is, the number of a particular type of component, say, a type of bicycle frame, that are manufactured before the production process is switched over to another type of frame. MRP must also adjust to the capacity constraints on the plant and to the need for rework or scrapping of defective parts. Material Requirements Planning (MRP) can also be extended as Manufacturing Resource Planning (MRP II) where the Master Production Schedule produced by MRP is also used in planning marketing. The MRP plans must be adjusted as new forecasts become available. Very accurate and sophisticated information systems are needed to trace inventory and production.

MRP has a very serious problem, which is indicated by its other name: push production. The production process is planned around a forecast, which will not, of course, be exactly correct. No forecast is perfect. The bicycle company may find that it has produced 200 bicycles of a type that is decreasing in popularity. Automobile manufacturing in the US was notoriously a push system and car lots at sales places might be littered with models that customers didn’t want while there would be shortages of more popular models. MRP pretends that we have a planned economy, but we don’t. MRP ignores the uncertainty about what customers will actually buy.

JIT or pull. If the production process can be made lean, especially if lead times on production and lead times for delivery from suppliers can be reduced, the need for forecasts is reduced and the production process can be made more responsive to current customer demand. At the extreme version, no supplies are ordered and no products are made until a customer has placed an order. In a less extreme version, customization for the particular customer (for example, a customer who has ordered a car with a specific color scheme and other features) is postponed until late in the production process, so the final product already has a buyer who wants exactly those features.

Pull production requires a different kind of precision and discipline than MRP, as is implied by the other name for pull production: JIT, or Just In Time. Lean manufacturing requires reduction in WIP (Work in Progress), which means that each production step produces the amount needed for the next step at exactly the point in time when that next step is ready for more input. Suppliers make frequent small deliveries just when the supplies will be needed. Lot sizes are smaller and the production system can be changed quickly from one model to another.

A kanban system can be used to control the production. A physical card or ticket is attached to an item as it completes one step in the manufacturing process; when the item has moved through the next processing step, the kanban is returned to the previous production step to trigger production of another item. Kanban systems can be designed in several ways and a crucial decision is how many kanbans should be used in each part of the system. The kanban system emphasizes the importance of the flow of information in a production system. While a card system is simple and easy to implement, a computer based system allows for faster flow of information back up the production line to trigger more production. This feature is why JIT is also called “pull” production: demand pulls production through the process.

JIT also requires that disruptions to the production process be fixed immediately. The production process has little WIP (Work In Progress) so the breakdown of a machine crucial to one step can quickly bring the entire production process to a stop. Organizations implementing JIT production must also look at the lead time necessary to repair machines or to receive replacement parts. Preventive maintenance becomes absolutely crucial so that breakdowns can be avoided.

A major advantage of JIT or pull production is the reduction in WIP (Work In Progress) and the increase in the ability of the production system to respond to a change in demand. With less WIP, a change in customer preferences leads to fewer items having been produced based on an incorrect forecast.

Some lean production can be described as mass customization, where the production process takes advantage of the efficiencies of mass production, but information technology and the ability to switch models quickly allows almost infinite variations in the actual product.