Optimization Requirements in Industrial Sector and Sensitivity Analysis in Industrial Scenario.

Dr. Paruchuri S S PrasadAssociate Professor

Department of Mechanical EngineeringPSG College of Technology

Coimbatore – 641 004pssai@yahoo.com

Necessary metrics to carryout optimization in manufacturing industry

• Labor

• Material

• Process Improvements

• Overhead

• Gaining Disciples and Measuring Progress

Labor optimization

key part of any cost reduction effort.• Defining an appropriate headcount and

controlling staff growth.• Developing and implementing time standards.• Measuring and using efficiency to improve

performance.• Assessing machine utilization and improving it.• Controlling overtime.• Making multiple shifts productive.• Finding and reducing lost time.• Using the learning curve to drive costs down

Mathematical Model

• Min(LHEN)

• LHEN=total labor hours in evening and night shifts;

• W=planner defined weight to represent the relative importance of minimizing total number of labor hours on night shift; LHE=total number of labor hours in evening shifts;

• LHN=total number of labor hours in night shifts;

Dho Heon Jun and Khaled El-Rayes, “Optimizing the utilization of multiple labor shifts in construction projects”.Automation in Construction 19 (2010) 109–119.

Defining Headcountand Controlling Staff Growth

• How many people do we have?

• How many people do we need?

• How do we determine how many people we need?

• Who approves staff additions?

• Are there alternatives to hiring more people?

Headcount determination approach

Developing and ImplementingTime Standards

• Do we have time standards?

• How accurate are the time standards?

• How are the time standards communicated to the people doing the work?

• Do we compare actual performance to the time standards?

• What do we do when we don't meet the time standards?

Time standard development approach

Measuring and Using Efficiency

• Do we measure our efficiency?

• Can we identify areas of low efficiency and act on these to reduce cost?

• Is a focus on efficiency adversely affecting product quality?

• Is there a system that reports efficiencies on a regular basis, and do we use this information appropriately ?

Efficiency Measurement And Improvement Approach

Assessing Machine Utilization

• Do we measure utilization?

• What are the sources of low personnel or machine utilization?

• Is a focus on utilization adversely affecting efficiency?

Utilization Approach

Controlling Overtime

• Why do we need overtime?

• How much overtime is appropriate?

• Who authorizes overtime?

• Do we have an overtime budget?

• Should we pay overtime to our salaried workforce?

• How can we reduce overtime?

Overtime Management Approach

Making Multiple ShiftsProductive

• Do we need a second or third shift?

• Do the reasons that led to a second or third shift still exist?

• How do we manage efficiency, quality, and utilization on the second or third shift?

• Is there anything we can do on the first shift to eliminate the need for a second or third shift?

Multiple-shift Management Approach

Finding and ReducingLost Time

• How much of our time is spent actually making product?

• What are the tasks that take time away from making product, and what can we do to eliminate or reduce this time?

Delay Ratio Analysis Approach.

Using the Learning Curveto Drive Costs Down

• Are we using learning curve theory ?

• What is our learning curve, and how did we arrive at this number?

• How do our current costs compare to the learning curve prediction, and if there is a variance, what are we doing about it?

Applications of the learning curve theory include (1) pricing decisions, based on the estimates of expected costs; (2) requirements for scheduling labor; (3) capital budgeting decisions; and (4) setting incentive wage rates. The following data illustrate the 80% learning curve relationship:

Read more: http://www.answers.com/topic/experience-curve-

effects#ixzz1XoyS8IzK

Learning curve

Where

n is number of tasks repeated;

Tn is time required for nth item

C is constant.

S is slope constant, always negative.

Tn = Cns

Learning Curve Approach

Break even chart

http://www.google.com/search?hl=en&q=break%20even%20analysis&gs_sm=c&gs_

upl=1422l5500l0l7906l17l16l0l6l6l0l594l2016l0.2.2.2.0.1l7l0&bav=on.2,or.r_gc.r_pw.r

_cp.&biw=1366&bih=546&wrapid=tlif131597685589011&um=1&ie=UTF-

8&tbm=isch&source=og&sa=N&tab=wi

Material

Area with huge cost-reduction opportunities.

• Make-versus-buy determinations.

• Inventory minimization.

• Material utilization.

• Minimizing supplier costs.

• Supplier negotiations.

• Supplier competition.

Make versus Buy Determinations

• What is our current make-versus-buy mix?

• How do we make decisions to do work in-house versus buying goods or services from outside suppliers?

• Are there any areas in which changing the existing make-versus-buy decision will result in significant savings, and do the savings outweigh the risks?

Make-versus-buy Approach

Inventory Minimization

• Do we have a program in place to reduce inventory?

• Do we have any areas where we order more than needed to address process yield?

• Do we know how much absolute inventory we have?

• What are our inventory turns?

Inventory Reduction Road Map

Material Utilization

• What kinds of raw materials do we use in our production operations, and how do we maximize utilization of these materials?

• Have we contacted any of our material suppliers and enlisted their support and expertise in minimizing material consumption?

• What do we do with our drop-off, scrap, and supplier packaging materials?

• Do we use any metrics for assessing our material utilization?

The Material Utilization Improvement Road Map

Minimizing Supplier Costs

• Have we asked our suppliers to tell us what we are doing that is driving their cost?

• Have we prepared our own "should cost" estimates?

• Are there any features on the supplier's parts that increase cost unnecessarily?

• Do we ask our suppliers for cost reductions?

• Does the supplier offer a cost reduction for larger quantity orders?

• Do all of the requirements imposed on the supplier make sense?

Supplier Cost-Reduction Road Map

Mathemaical Model

• TRC – Transaction Cost

• RSC – Supplier Risk Cost

• CFC – Collaborative Forecasting Cost

• IVC – Supplier innovation cost

• RPC – Supply Responsiveness cost

Seong-Hyun Nama, JohnVitton and Hisashi Kurata“Robust supply base management: Determining the optimal number of suppliers utilized by contractors “ .Int. J. Production Economics 134 (2011) 333–343.

Supplier Negotiation

• How do we negotiate with suppliers?

• Do we know our objectives and plan a strategy prior to entering the negotiation?

• Who negotiates for us?

• What has our history been in attaining what we want in a negotiation?

• How skilled are our negotiators?

Supplier Negotiation Road Map

Supplier Competition

• Do we make suppliers compete for our business?• Where and why do we use sole-source suppliers?• Where does it make sense to incorporate supplier

competition?• What are the risks that existing sole-source

suppliers will exit the business if we compete the work?

• What are the risks that existing sole-source suppliers will exit the business for reasons other than competition?

Supplier Competition Road Map

Process Improvements

• Work-flow improvement.

• Setup time reduction.

• Material-handling improvement.

• Scrap and rework reduction.

• Work center cleanliness and organization.

Workflow Optimization

• How do we design our processes?

• Does our workflow in a straight line?

• Have we flowcharted our processes to search for improvement opportunities?

• DO operators have a defined sequence for what they do, or is it left up to them?

Flowcharting and Process Analysis

Setup Time Reduction

• Do we have a program in place to reduce setup time?

• Do we perform setups online or offline?

• Which of our setups consume the most time?

Mathematical Model

Guisen Xue a,n, O.FelixOffodile , HongZhou and MarvinD.Troutt “Integrated

production planning with sequence-dependent family setup times.Int”. J.

Production Economics 131 (2011) 674–681.

Setup Time Reduction Road Map

SMED

http://en.wikipedia.org/wiki/Single-Minute_Exchange_of_Die#Example

SMED

changeover time at this stage is between

10 to 15 seconds

changeover time at this stage is between

20 to 30 minutes

http://www.fredwebberking.com/SMED%20Examples/PDF%20Version/SMED%20Examples%20

Volume%201.pdf

Material-HandlingImprovements

• Do we have any issues with material-handling damage?

• Are we doing anything to reduce how often and how far we have to move material?

Material-Handling Improvement Road Map

Layout vs Material Handling

http://www.me.utexas.edu/~jensen/ORMM/omie/desi

gn/unit/layout/layout.pdf

Layout vs Material Handling

http://www.ateneonline.it/chase2e/studenti/tn/6184-7_tn05.pdf

Layout vs Material Handling

http://www.ateneonline.it/chase2e/studenti/tn/6184-7_tn05.pdf

Scrap and Rework Reduction

• What are our most frequently occurring non-conformances?

• What are our most expensive non-conformances?

• What is our approach for eliminating recurring non-conformances?

• Do we measure our progress in eliminating recurring non-conformances?

Mathematical Model

• Repairing cost:

• Total defective products:

Sijkt is Quantity of product i sold from plant j to market k in period t.

Xijt is Quantity of product i manufactured at regular time at plant j in period t.

Yijt is Quantity of product i manufactured at overtime at plant j in period t.

C9ij denotes Repairing cost per unit for product i as plant j.

ρij denotes Defect rate for product i at plant j.

Stephen C.H. Leung and Shirley S.W. Chan,“A goal programming model for aggregate production planning with resource utilization constraint”.Computers & Industrial Engineering 56 (2009) 1053–1064.

Scrap and Rework Reduction Road Map

Work Center Cleanliness

• Are we satisfied with the cleanliness of our work environment, both in the shop and in the office?

• How often does management get into the plant?

• What is our approach for keeping our facility clean and organized?

Autonomous Maintenance• Machine

concern / fault analysis

• …..through cleaning you touch, through touching you find

• when you find, you fix !!

http://www.beyondlean.com/support-files/autonomous-maintenance.pdf

5S

http://www.tocforme.com/5s/finishing5spicturesn.html

Cleanliness Road Map

Overhead

• General overhead expenses.

• Travel.

• Inspection.

General Overhead Expenses

• Do we have an overhead budget, and do we monitor performance to it?

• How do we determine headcount in the purchasing, quality assurance, and other overhead departments?

• How many organizational layers are there from a worker in the shop to the president?

• Who gets a company cell phone?

• Do we need a facility as big as the one we have now?

• Have we recently assessed the necessity of each overhead expense?

Overhead cost-reduction approach

Travel

• Do we have travel guidelines?

• Do we have a travel budget?

• Who approves travel plans?

• How do we make sure each trip is necessary?

• What are we doing to minimize airfare and other travel expenses?

• What trade shows do we attend, and what has resulted from our attendance?

Travel Cost-Reduction Road Map

Inspection

• How do we assign inspection points?

• How do our returns and warranty claims compare to our final inspection results?

• Do we use redundant inspections?

• Do any of our receiving inspections duplicate supplier final inspections?

• Do our manufacturing people feel responsible for the quality of what they produce?

Improving Inspection

Gaining Disciples and MeasuringProgress

• It offers a simple approach for measuring how well the cost-reduction team and the entire organization are doing.

Recommended suggestion program approach

Supply Chain Optimization in Process Industries

Production

Preparation

Production

Execution

(Batch)

Production

Data

Analysis

Asset

Managemen

t

SAP: Enterprise Resource Planning (ERP)

WM

Warehouse

Management

Manufacturing Execution System

Information exchange

Technical

Logistics

(MIMS)

Plant - Unit - Process - Laboratory

Laboratory

Automation

(LIMS)

Control Systems

Electrical & Instrumentation On-Line PAT In-Process Control

MM

Materials

Management

QM

Quality

Management

PP-PI

Production Planning

Process Industries

PM

Plant

Maintenance

Performance

Monitoring

Process

Optimization

Advanced Process Control

APO

Advanced Planner

and Optimizer

Raw Material Logistics Sales Products

Logistics

Training

Simulator

Cost Reduction and Optimization for Manufacturingand Industrial Companies (Wiley-Scrivener Publishers)JOSEPH BERK

http://library.nu/docs/FWXZO8BMN0/Cost%20Reduction%20and%20Optimization%20for%20Manufacturing%20and%20Industrial%20Companies%20%28Wiley-Scrivener%29

BIBLIOGRAPHY