Production Concepts

Production Concepts

Let’s assume we are a manufacturer of bicycles • What do we need to make a bicycle?

For example, to build this bicycle (an assembly), we need: Seat

For example, to build this bicycle (an assembly), we need: Frame Seat

For example, to build this bicycle (an assembly), we need: Frame Seat Handle Bars

For example, to build this bicycle (an assembly), we need: Frame Seat Handle Bars Brakes

For example, to build this bicycle (an assembly), we need: Frame Seat Handle Bars Brakes Wheels (2)

For example, to build this bicycle (an assembly), we need: Frame Seat Handle Bars Brakes Wheels (2) Tires (2)

For example, to build this bicycle (an assembly), we need: Frame Seat Handle Bars Brakes Wheels (2) Tires (2) Pedal Assembly

For example, to build this bicycle (an assembly), we need: Frame Seat Handle Bars Brakes Wheels (2) Tires (2) Chain Pedal Assembly

For example Frame Seat Handle Bars Gear Assembly Brakes Wheels (2) Tires (2) Chain Pedal Assembly

Bills of Materials • bill of materials (BOM) - the term used to describe the "parts list" of components needed to build another assembled item or part.

SO, my BOM for this bicycle is: Frame Seat Handle Bars Gear Assembly Brakes Wheels (2) Tires (2) Chain Pedal Assembly

SO, my BOM for this bicycle is: • PART How Many • Bicycle 1 • Seat 1 • Frame 1 • Handle Bars 1 • Brakes 2 • Wheels 2 • Tires 2 • Pedal Assembly 1 • Chain 1 • Gear Assembly 1 Frame Seat Handle Bars Gear Assembly Brakes Wheels (2) Tires (2) Chain Pedal Assembly

But, two of the parts in this list are assemblies too: • PART How Many • Bicycle 1 • Seat 1 • Frame 1 • Handle Bars 1 • Brakes 2 • Wheels • Rim 2 • Spokes 60 • Tires 2 • Pedal Assembly • Foot Rests 2 • Sprocket 1 • Axle Assembly 1 • Chain 1 • Gear Assembly 1 Frame Seat Handle Bars Gear Assembly Brakes Wheels (2) Tires (2) Chain Pedal Assembly

So, I have actually created 3 bills of materials (BOMs) • Part How Many • Bicycle 1 • Seat 1 • Frame 1 • Handle Bars 1 • Brakes 2 • Wheels 2 • Tires 2 • Pedal Assembly 1 • Chain 1 • Gear Assembly 1 • Part How Many • Wheels • Rim 1 • Spokes 30 • Pedal Assembly • Foot Rests 2 • Sprocket 1 • Axle Assembly 1

With this BOM, building 2 bicycles would require: PART Per Bicycle For 2 bicycles • Bicycle 1 • Seat 1 2 • Frame 1 2 • Handle Bars 1 2 • Brakes 2 4 • Wheels • Rim 2 4 • Spokes 60 120 • Tires 2 4 • Pedal Assembly • Foot Rests 2 4 • Sprocket 1 2 • Axle Assembly 1 2 • Chain 1 2 • Gear Assembly 1 2 Sub-assembly Sub-assembly

With this BOM, building 1000 bicycles would require: PART Per Bicycle For 1000 bicycles • Bicycle 1 • Seat 1 2000 • Frame 1 2000 • Handle Bars 1 2000 • Brakes 2 4000 • Wheels • Rim 2 4000 • Spokes 60 120000 • Tires 2 4000 • Pedal Assembly • Foot Rests 2 4000 • Sprocket 1 2000 • Axle Assembly 1 2000 • Chain 1 2000 • Gear Assembly 1 2000

Now, consider the factory where we build the bicycles Receiving Dock Inventory Storeroom Frames Seats Rims Chains Pedals Spokes H.B. Wheels Brakes Wheel Assembly Area Pedal Assembly Area General Assembly Area Shipping Dock Red denotes purchased inventory, Black denotes manufactured inventory

Purchased inventory is received at the receiving dock: Receiving Dock Inventory Storeroom Frames Seats Rims Chains Pedals Spokes H.B. Wheels Brakes Wheel Assembly Area Pedal Assembly Area General Assembly Area Shipping Dock Red denotes purchased inventory, Black denotes manufactured inventory

Sub-assemblies need to be manufactured before we begin manufacturing the bicycle Receiving Dock Inventory Storeroom Frames Seats Rims Chains Pedals Spokes H.B. Wheels Brakes Wheel Assembly Area Pedal Assembly Area General Assembly Area Shipping Dock Red denotes purchased inventory, Black denotes manufactured inventory

Lead Time • For manufactured items, lead time is the period of time between the initiation of any process of production and the completion of that process. • For vendor supplied items, lead time is the period of time between placing the order and its receipt.

Let’s make a bicycle! • Let’s assume: • bicycle lead time = 7 days • wheel assembly lead time = 4 days • pedal assembly lead time = 6 days • rim order lead time = 14 days • spokes order lead time = 20 days • Need the bicycle by November 30

Here is the process October (timeline) November 31 5 10 15 20 25 30 Bicycle Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23.

Here is the process October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process.

Here is the process October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days.

Here is the process October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. Ped A

Here is the process October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Spokes Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. Ped A

Here is the process October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Spokes Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. To insure we have the Rims before we build the wheel, we need to place an order with the vendor on Nov. 5 since it has a lead time of 14 days. Ped A Rims

Material Requirements Planning • Materials Requirements Planning (MRP) is a systematic production planning and inventory management system used to manage manufacturing processes by meeting these three objectives: • Ensure materials and products are available for production and delivery to customers. • Maintain the lowest possible level of inventory. • Plan manufacturing activities, delivery schedules and purchasing activities.

Here is the process So if you tell your MRP system that you need a bicycle produced by November 30… October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Spokes Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the Rims before we build the wheel, we need to place an order with the vendor on Nov. 5 since it has a lead time of 14 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. Ped A Rims

Here is the process So if you tell your MRP system that you need a bicycle produced by November 30… It will handle the remaining steps to produce that bicycle. October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Spokes Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the rims before we build the wheel, we need to place an order with the vendor on Nov. 5 since it has a lead time of 14 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. Ped A Rims

Master Production Schedule • The input to your MRP system is the Master Production Schedule (MPS). • The MPS is the list of all shop orders for the company’s “end items.” • An “end item” is an item that my company sells that is NOT used in another assembly (for example, the bicycle is an end item.)

It can be quite complicated… • Suppose I make two types of bicycles, one blue and one green. • PART How Many • BicycleB 1 • Seat 1 • FrameB 1 • Handle Bars 1 • Brakes 2 • Wheels 2 • Tires 2 • Pedal Assembly 1 • Chain 1 • Gear Assembly 1 • PART How Many • BicycleG 1 • Seat 1 • FrameG 1 • Handle Bars 1 • Brakes 2 • Wheels 2 • Tires 2 • Pedal Assembly 1 • Chain 1 • Gear Assembly 1

Other complications • What my company makes 150 different types of bicycles?

Other complications • What my company makes 150 different types of bicycles? • What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs?

Other complications • What my company makes 150 different types of bicycles? • What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs? • What about items that have customer ordered options?

Other complications • What my company makes 150 different types of bicycles? • What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs? • What about items that have customer ordered options? • What if there are other “end items” that are not really “end items”? For example, spare parts….

Other complications • What my company makes 150 different types of bicycles? • What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs? • What about items that have customer ordered options? • What if there are other “end items” that are not really “end items”? For example, spare parts…. • I’m ultimately dependent upon my suppliers for some of the purchased items that are crucial to my production schedule. Wouldn’t it be nice if I could work closely with them to manage our relationship to mutual benefit.?

Production Concepts