production management (1): How to conceptualize production systems Outline of production management (2): Framework of production planning and control Inventory control and management (1): Economic order quantity (EOQ) and the role of safety stock Inventory control and management (2): Conventional inventory control models Production planning and linear programming MRP (1): Bill of materials (BOM), priority planning, capacity planning, etc. MRP (2): Lot sizing and dynamic order quantity (DOQ)
replenished to the inventory, then they are sold to customers from the inventory. Make-to-order: MTO • After receiving orders from customers, the products corresponding to the orders are produced. These policies can be combined. For example, it is often the case that final products are assembled in MTO, but their units and parts are produced in MTS. Classification of Production Systems #4
Forecasting and Production Planning Time axis Due date Production lead time 3Ms for production Materials huMans Machines Preparation lead time Necessary means of production should be prepared systematically in advance according to demand forecast not only in MTS but also in MTO production.
product. In economics, it is the amount of the product that consumers are willing to buy at a particular price. Demand forecasting • Predict the demand quantity for a product in a future time period. Why necessary? • As a basis for establishing long-term, medium-term, and short-term plans for production and sales. Demand and Demand Forecasting
forecasting Input information Past time series of the demand itself Other factors related to the demand Subjective judgment of the demand Output forecast Point forecast Confidence interval Forecast distribution Of which product category, in which time interval, and in which market segment is the demand quantity to be predicted?
element: 𝑇𝑡 • Cyclical elements: – Long term economic cycle – Seasonal cycle: 𝑆𝑡 – Weekly cycle, etc. • Random element: 𝑅𝑡 Structural Models for Demand Time Series Additive model 𝑌! = 𝑇! + 𝑆! + 𝑅! Multiplicative model 𝑌! = 𝑇! ×𝑆! ×𝑅!
5 10 15 20 25 30 35 80 100 120 140 160 180 t I + S + T Demand time series 0 5 10 15 20 25 30 35 0 50 100 150 t T 0 5 10 15 20 25 30 35 -40 -20 0 20 40 t S 0 5 10 15 20 25 30 35 -40 -20 0 20 40 t I Trend element Seasonal cycle Random element
approach Random element Moving average, simple exponential smoothing, etc. Autocorrelated stationary time series (AR/MA) Non- autocorrelated random variable + Trend element Brown’s model, Holt’s model Box-Jenkins model (ARIMA model), etc. Polynomial model, growth curve model, etc. + Cyclical elements Winters’ model Seasonal ARIMA model, etc. Trigonometric curve, seasonal adjustment, etc. Time Series Forecasting Methods Short-term Long-term
latest demand quantities as the point forecast for the next time period. Simple Moving Average (Rolling Average) Demand quantity (y) H terms Time period (t) H terms ( 𝑦!"# = 1 𝐻 , $%!&'"# ! 𝑦$
the next time period by combining the forecast value and forecasting error for this period as: ( 𝑦!"# = ( 𝑦! + 𝛼 . 𝑒! = ( 𝑦! + 𝛼 . (𝑦! − ( 𝑦! ) = 𝛼 . 𝑦! + 1 − 𝛼 . ( 𝑦! = ∑$%( ) 𝛼 . 1 − 𝛼 $ . 𝑦$ This is also called exponentially weighted moving average, because of the last expression of the above equation. Exponential Smoothing Weight Time period (t) Smoothing coefficient: 0 < 𝛼 ≤ 1
what (workload) Planning horizon Time unit Resource Production capacity Planning cycle A decision making on • When • Where • How much of what products should be produced (or operations should be carried out). Rolling horizon A shorter cycle time than the planning horizon is used, to make it easier to incorporate realized uncertainties into the plan.
0.5 ~ 1 Year 1 ~ 3 Months 1 ~ 10 Days Cycle 1 ~ 3 Months Week ~ Month Day ~ Week Time unit Week ~ Month Day ~ Week Hour ~ Day Resource Factories Divisions/Shops Workers/Machines Job Product categories Products/Parts Operations Workload Person-days/ Machine-days Person-hours/ Machine-hours Person-minutes/ Machine-minutes Usage Preparation of machines/humans Preparation of materials/parts Production scheduling and control An Example of Hierarchical Production Planning
monitoring the difference between the plan and actual progress of production, and taking suitable measures for resolving the gap if necessary. • Since production does not always proceed completely as planned in practice, it needs to be controlled as well as planned appropriately. → Not only P&D but also C&A! • Possible measures include adding resources, rescheduling, and, if necessary, revising production plans of different layers. Production Control
control Goals, constraints, other system-wide information Actual progress, other situational information Real-time autonomous operational policies Rough-sketch system- wide optimization