capacity management. trade offs the fresh connection is full of trade offs –over multiple roles...
TRANSCRIPT
Capacity Management
Trade offs
• The Fresh Connection is full of trade offs– Over multiple roles and within roles– Sometimes conflicting with role incentives
Supplier mgt
Capacity mgt
Inventory mgt
Demandmgt
Capacity managementVolatility manaagment
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Production Strategies
• Four basic production strategies:– Chase (demand matching)– Level – Subcontracting– Hybrid (combination)
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Chase Strategy
J F M A M J J A S O N D
Un
its
Demand
Production
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Chase Strategy
• Advantages:– Stable inventory– Varied production to meet sales requirements
• Disadvantages:– Costs of hiring, training, overtime, and extra
shifts– Costs of layoffs and impact on employee morale– Possible unavailability of needed work skills– Capacity must match maximum demand
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Level Strategy
J F M A M J J A S O N D
Un
its
DemandProduction
Source: Arnold et al., Introduction to Materials Management, 6th ed.Reprinted by Permission of Pearson Education
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Level Strategy
• Advantages:– Avoids labor and capacity costs of demand
matching– Avoids changeover costs and lowers the average
production cost per item
• Disadvantages:– Buildup of inventory– Requires a very accurate forecast
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Meet demand by subcontracting
Subcontracting
• Advantages:– No excess capacity– Level production
• Disadvantages:– Costs of
subcontracting– Proprietary
production technology
J F M A M J J A S O N D
Unit
s
Demand
Production
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Hybrid Strategy
J F M A M J J A S O N D
Uni
ts
Demand
Production
Source: Arnold et al., Introduction to Materials Management, 6th ed.Reprinted by Permission of Pearson Education
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Hybrid Strategy: Characteristics
• Produces at or close to full capacity for part of the cycle
• Produces at a lower rate during the other part of the cycle
• Production is level in both parts of the cycle
• Inventory and workforce adjustment costs are lower than in the chase strategy
• Requires an accurate forecast as in the level strategy
Capacity management in TFC
• Subcontracting in not an option TFC• Levelling of capacity is impossible for a fresh
product• Two choices by varying the frozen period
– Chasing– Hybrid
What is the % runtime, breakdowntime, changeover time and unused for the filling line?
How can you influence breakdown and change over time?
Explore TFC
Capacity Planning Issuesin the game
Finished productComponents
Supply Production Distribution
PalletlocationsFTE
PalletlocationsFTEShifts
Improvements
What is the utilization rate per resource?
What is the overtime/overflow per resource?
What can you conclude from this?
Explore TFC
Capacity in time
Capacity required
Time
OvertimeOverflow
Idle timeUnused capacity
Resulting in• Overtime/Overflow%• Utilization rate
What is the optimal utilization rate?
Volatility of capacity required is important
Costs
Utilization rate
High volatilitycapacity required
Average volatilitycapacity required
Low volatilitycapacity required
How can you influence the volatility of capacity required?• Inbound warehousing• Production• Outbound warehousing
90%80%70%
Capacity volatility reduction
• Small batches for high volume products (orange)• Steady flow of incoming goods• Decrease demand volatility caused by production• (Increase intake time)
Raw materials warehouse
Capacity volatility reduction
• Short fixed period (bullwhip effect)• Decrease volatility caused by customer demand• Short production intervals
Production
Capacity volatility reduction
• Early order deadlines• Pallet shipments• Decrease customer demand volatility• Stable production rate
Finished goods warehouse
Utilization finished goods warehouse
Influence of overtime in TFC
• Overtime in production and warehousing will influence your costs.
• What is the other important effect of overtime?
Production reliability in the game
Production reliability
Terms of delivery
Overtime% bottling lines Availability components
Fixed period
Component stock
Overtime % bottling lines in the game
# shifts per bottling line
Overtime % bottling lines
Improve-ment projects
Past shelf lifeBottling line
Raw materials inspection
Decrease peaks