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Production LogisticsProduction Logistics

February, 16th 2009 Hessel Visser

February, 20th 2009

Lecture 5/6

Course Logistics 08

Production Logistics Course Overview

• Introduction from

Production Orientation to Customer Relations

• Just in time effects film from Push to Pull by Hewlett Packard

• The way to Lean Manufacturing• The case MOBA egg sorters

Overview PRoductionLogistics course

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Brief History of the Model TAfter 20 years of experimentation, Henry Ford finally saw the fruits of his labour in October of 1908 with the Model T. This was the vehicle he had wanted to build since his first Model A in 1903

In October of 1913, mass production of the automobile began. Ford had previously organized workers and components to enhance the production of the Model T, but the moving assembly line quickly improved the speed of chassis assembly from 12 hours and 8 minutes to

1 hour and 33 minutes.

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In 1914 Ford produced 308,162 cars, which was more than all other auto manufacturers combined. It was also in 1914 that the Model T, in the interest of streamlining the production process, was no longer available in black, red, blue, green or grey; it was now available in "any colour so long as it is black."

Mass production did allow for flexibility in the price tag. Henry Ford introduced the Model T at $850 for the Touring Car, but by October of 1924, he was able to offer the Runabout for as low as $260. Few things other than the price ever changed on the Model T

time1909 1926

2.000.000/Year

1.000.000/Year$ 850.-

$ 260.-

FordFactory

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The Vision of “Lean” in the USA

• Perhaps best stated by James Womack, and Daniel Jones in two popular books…

First…The Machine That

Changed the World (1990)

James Womack Daniel Jones

1990 1995 2003 2005 2006

What has been changed in car industry?

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Vision about cost in the past and now

SIC

MRP

MRP II

ERP

SCM

1960 1970 1980 20001990

Evolution of manufacturing systems

Statistic Inventory Control

Material Requirement Planning

Manufacturing Resources Planning

Enterprise Resources Planning

Supply Chain Management

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View on logistical organization.......in the early sixties functional organization

Goods flow

Pur

chas

ing

Pro

d. D

ept.

1

Pro

d. D

ept.

2

Pro

d. D

ept.

3

Dis

tribu

tion

Purc

hasi

ng

Prod

. Dep

t. 1

Prod

. Dep

t. 2

Prod

. Dep

t. 3

Dis

trib

utio

nProduct Market Combination 1

Product Market Combination 2

Product Market Combination 3

Suppliers CustomersNowadays we try to streamline it in a flow

S S

Incoming goods and expedition

sow (S) + cut (C) mill (M)

storehouse (S)

S S S S

assembly (A)

A A

A A

W W

W W

W W

weld (W)

F F

fitting (F)

M M

F FC C

C C

S S

Example of a functional lay out

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The Customer Order Decoupling Point CODP

Parts Assembly

Customer Order

Anonymous production

Customer driven production

Processbefore

the CODPProcess

after the CODP

Customer order

Down stream

CODP inventory

point

Up stream

Product

Production

People

Control

Risk

Productivity

Anonimous production Customer order driven production

Standardisation

High volume

Specialist

Forecast

Unsaleable

Efficiency

Option possibilities

Flexibility

Generalist

Orders

Throughput time / Capacity

Effectiveness

Different aspects before and afterthe Customer Order Decoupling Point

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parts assembly installation

purchase production distribution sales

suppliers

CODP1

CODP2

CODP3

CODP4

CODP5

make for local supply

make to central supply

assembly to order

make to order

purchase and engineer to order customer order

Client Order Decoupling Point concept (CODP): how far does a customer order penetrate?

activ

ities bas

ed

on planning

activ

ities bas

ed on customers

Customer Order Decoupling Point positions represent five control concepts (Source: Hoekstra & Rome, 1993)

complying with delivery obligations

inventories

fixed assets

risk

cost

s

CODP 5 CODP 4 CODP 3 CODP 2 CODP 1

The entrepreneurial risk, related to the choice of CODP

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Damen shipyards Gorinchem

Visit to Damen

miningblast-

furnaceengine factory

natural resources

materials single products

assembled products

installations

mineralspetroleum

agriculturalproducts

metalschemicals

wood

wirespressed products

cast work

carsaudio equipment

instruments

sea shipsdrilling derrick

airplanes

shipyard

pressing mill

electronics factory

foundry

wire rolling-

mill

instruments factory

Examples of flows of goods in production companies

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continuous production

group production

functional production

Basic shapes of production

people and materials

station1

raw materials

finishedproduct

station2

station3A

station4

station3B

station3C

station3D

Continuous production in production line

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I

II

III

IV

employeeactivities in station A to D

activity coordination

1 drill frames

2 seal and rivet skin

3 drill and chamber skin

4 place fitting

5 place brackets

6 final inspection

I

III

III

IV

IVIII

IV

1 2 3 4 5 6 7 8

throughput time in daysdelivery interval 2 days1 man

1 day

Example of a bar chart

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machine 450 to 453, station A to D

1 2 3 4 5 6 7 8 9 10 11 12 13 14

startingline

station453 A

452 B

451 C

450 D

V

III

VI

IIIIV

finish line

interval2 days

throughput time in days

personnel 6 men

Example of group coordination

Ssow C M F Wcut mill fitting weld

S C M F W

production cel 3

incominggoods

S C M W

production cel 2

C M F

production cel 3

A

assembly (A)

expedition

A

Example of group lay out

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A pick car, example of an assembled productraw materials

and purchase parts

parts welding parts CODPcompositions

end products

incominggoodscontrol

partsproduction

purchase

weld sub-assembly

end-assembly

Basic shape of a construction company

Fron Design to Process

paint RAL 902purchase partlitre F

blind rivetpurchase partbox 100 pcs E

push barpartpieces D

wheels setassemblypieces C

tube profile 30×2purchase partmetre K

wheel fasteningpurchase part pieces J

wheelpurchase partpieces I

trayassemblypieces G

tube profile 30×2purchase partmetre K

blind rivetpurchase partbox 100 pcs.E

bottom platepurchase partm2 M

profile 30×30×2purchase part0,8 metre N

profile 30×30×2purchase part0,6 metre N

pick carwheel fasteningpieces A

weld assemblyassemblypieces B

1× 4× 1× 0,1× 0,4×

2× 4× 1× 1× 1×

1× 1× 0,2× 1×framepartpieces L

2× 2×

Low Level Code (LCC) = 0

KOOP LLC = 1

LLC = 2

LLC = 3

LLC = 4purchase partsparts / production partswelding partssub assemlby partsend assembly parts

supportspartpieces H

Identical parts

Product structure of a pick car

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Name Number Unity Buy or Delivery time Cumulative

make part in weeks delivery time

Pick car pieces M 1 1

Weld compositons 1 pieces M 1 2

Tray composition 2 pieces M 2 4

Tray frame 1 pieces M 1 5

profile 30 × 30 × 2 × 0,6 m 2 pieces B 3 8

profile 30 × 30 × 2 × 0,8 m 2 pieces B 3 8

Bottom plate 0,48 m2 B 2 6

Blind rivets 20 pieces B 6 10

Support bars 4 pieces M 1 3

Tube 30 × 2 1,3 metre B 4 7

Wheel composition 4 pieces M 2 3

Wheel 1 pieces B 8 11

Wheel fastening 1 pieces B 5 8

Push bar 1 pieces M 2 2

Tube 30 × 2 1,2 metre B 4 6

Blind rivets 12 pieces B 6 7

Paint Ral 9022 0,4 litre B 2 3

Product number

low level code

0 1 2 3 4

A

B

G

L

N

O

M

E

H

K

C

I

J

D

K

E

F

The product structure in list form

time scale related to completeness in weeks

E E E E E EM M

O O ON N N

LG G

BA

HK K K K

C CI I I I I I I

J J J J J

D DK K K KE E E E E E

F F

I

2030

3020

1520

20

5

205

302012

106

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CODP

11 10 9 8 7 6 5 4 3 2 1 0= costs made per product

The product structure at a 90º angle with delivery times

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I II III IV V VIP Name Costs Cumulative Delivery Week Costs

per financial time in from madeproduct obligation weeks start

I Wheel 20 20 11 0E Blind rivets 5 25 10 1J Wheel holder 12 37 8 3O Profile 30 × 30 × 2 20 57 8 3N Profile 30 × 30 × 2 15 72 8 3E Blind rivets 3 75 7 4K Tube 30 × 2 5 80 7 4K Tube 30 × 2 6 86 6 5M Bottom plate 20 106 6 5L Tray frame 20 126 5 6 35G Tray composition 30 156 4 7 80F Paint Ral 9022 5 161 3 8D Push bar 10 171 3 8H Support bars 20 191 3 8 117C Wheel composition 30 221 2 9B Weld composition 30 251 2 9 173A Pick car 20 271 1 10 251

Delivery 11 271

The financial obligations and costs made based on the production structure

ordering moments of the products:I E L G AJ

ON

EK

KM

FDH

CB

300

250

200

150

100

50

0

€

0 1 2 3 4 5 6 7 8 9 10 weeks

= obligations= costs time

amou

nt

12

35

80

123

173

251

271271

251191

156

126106

8672

252520a. Ordering risk b. interest

1

2

Flow of the obligations and costs based on the product structure

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classical approach

integral approach

The production process as chain of inventorypoints and production units

BLZ. 235

project planning

MRP

just in time

continuous

complexity

time between successive products

num

bero

f par

ts

seconds

minutes

hoursdays

weeksmonths

years

TOC

Possible application areas of MRP, JIT en TOC

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Weeknumber 0 1 2 3 4 5 6 7 8 9 10Set actions

Gross need (G) 180 210 100 230 50 120 130 50 100 250In stock (I) 100 50 0 0 0 0 0 0 0 0

planned actions

Planned stock (P) 220 140 130 30 100 50 80 100 50 100 0Planned receipt order (R) 0 150 0 300 0 150 150 0 150 150Planned release order (O) 150 0 300 0 150 150 0 150 150Too late (T) 0

The average planned stock of week 0 to 10 amounts to 91 pieces

In stock (Iv) 220 piecesSecurity stock (Sv) 0 piecesDelivery time (Dt) 1 weekOrdering quantity (Qv) 150 pieces

Table 8.1 MRP-I scheme of product number A: pick car

Week number 0 1 2 3 4 5 6 7 8 9 10Set actions

Gross need (G) 180 210 100 230 50 120 130 50 100 250In stock (I) 100 50 0 0 0 0 0 0 0 0

Planned actions

Planned stock (P) 220 140 130 180 100 200 230 100 200 100 150Planned receipt order (R) 0 150 150 150 150 150 0 150 0 300Planned release order (O) 150 150 150 150 150 0 150 0 300Too late (T) 0

The average planned stock of week 0 to 10 amounts to 159 pieces.

In stock (Iv) 220 piecesSecurity stock (Sv) 90 piecesDelivery time (Dt) 1 weekOrdering quantity (Qv) 150 pieces

Table 8.2 MRP-I scheme of product number A: pick carwith security stock

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= planned stock (P)

= security stock + ordering quantity (SV + QV)

= average planned stock

= security stock (SV)

250

225

200

175

150

125

100

750 1 2 3 4 5 6 7 8 9 10

time weeks

num

bero

f par

ts

+ + + + + + + + + + +

× × × × × × × × × × ×

• • • • • • • • • • •

•×+

Grafics of flow of stock

per assembly

1

4

A

B

H

per assembly

number of parts

number of parts

product parts list

Figure 8.9 Part of the product structure of the pick car

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Week number 0 1 2 3 4 5 6 7 8 9 10

Gross need 180 210 100 230 50 120 130 50 100 250In order 100 50 0 0 0 0 0 0 0 0Planned stock 220 140 130 180 100 200 230 100 200 100 150Planned receipt order 0 150 150 150 150 150 0 150 0 300Planned release order 150 150 150 150 150 0 150 0 300 300Too late 0The average planned stock is 159 eenheden at € 271,– = € 43.114,–

MRP-scheme product number A: Pick car LLC = 0In stock 220 pieces Note: we assume that the needSecurity stock 90 pieces remains constant from week 10Delivery time/throughput time 1 weekOrdering quantity 150 pieces

Week number 0 1 2 3 4 5 6 7 8 9 10

Gross need 150 150 150 150 150 0 150 0 300 300In order 0 0 0 0 0 0 0 0 0 0Planned stock 250 100 250 100 250 100 100 250 250 250 250Planned receipt order 0 300 0 300 0 0 300 0 300 300Planned release order 300 0 300 0 0 300 0 300 300 0Too late 0The average planned stock is 195 units at € 140,– = € 27.364,–

MRP-scheme product number B: Weld assembly LLC = 1In stock 250 piecesSecurity stock 100 piecesDelivery time/throughput time 1 weekOrdering quantity 300 pieces

Week number 0 1 2 3 4 5 6 7 8 9 10

Gross need 1200 0 1200 0 0 1200 0 1200 1200 0In order 800 0 0 0 0 0 0 0 0 0Planned stock 250 650 650 250 250 250 650 650 250 650 650Planned receipt order 800 0 800 0 0 1600 0 800 1600 0Planned release order 0 800 0 0 1600 0 800 1600 0 800Too late 800The average planned stock is 159 units at € 110,– = € 17.490,–

Total average inventory costs A, B en H: € 87.879,–

MRP-scheme product number H: Support bar LLC = 2In stock 250 piecesSecurity stock 200 piecesDelivery time/throughput time 1 weekOrdering quantity 800 pieces

Figure 8.3 MRP-scheme of products A, B en H

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stock replenishment

system MRP-I

Stock replenishment system MRP-1

one planned new order

parameters

demand forecast

product structure

parameters

time fased plannednew orders

desired alterationsoutstanding orders

Stock information

order information

stockinformation

order information

Differences between stock replenishment systems and MRP-I

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routing

stock status

product structures

capacity req.planning

material req.planning

master productionschedule

productionplanning

product enmarket planning

organizational goals

dispatch

production

purchasing

planningfeasible

no

yes

meansavailable

no

yes

strategical level

tactical level

operational level

goals

market demand

means

products

materials

people andmachines

parts

hoursdeliveryreliability

F e e d b a c k

Figure 8.11 Basic principle of manufacturing resources planning (MRP-II)

input / output planning and control

organizationalgoals

product enmarket planning

productionplanning

master productionscheduling

(MPS)

materialrequirements

planning (MRP)

productionactivity control

(PAC)

purchasingplanning and

control

capacityrequirements

planning (CRP)

rough-cut capacityplanning(RCCP)

planning of means

organizationalforecasts

demandmanagement

distributionrequirements

planning (DRP)

final assemblyscheduling

(FAS)

financialplanning

short term(operational)

mid term(tactical)

long term(strategical)

Figure 8.12 MRP-II; control model for planning and control in production organizations

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Stockless ProductionFrom Push to Pull

• At HP there was in 1983 a division which wanted to make a change over from Push to Pull.

• It was the Greely Colorada Division• They made Disc Units• Their goal was to get a batch quantity of

one piece

Their idea behind the change was:

Out of balance

Scrap

Unreliable deliveries

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The Film Stockless Production

Be aware of the problems in this simulated production line.Don’t look only to the working procedures.Watch to the people themselves.Write down all what you find remarkable.

Produce and Package the Box

To stickerTo Stitch Tape it To Pack

Halve a box

Box in the Box

Box with sticker

Box with wire stich

Sticker on box

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QualityProblems

Rework

Cycle timeLead time

Work on Hand

Space

Pull1 piece

Pull3 pieces

Push6 pieces

MethodMeasurement

Performance-Indicators 1

Results at HP

Before2,8 months4000 m2

5 days

100%

After1,2 months2000m2

2,5 days

115%

SubjectInventorySpace

Work on Hand

Productivity

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processI

processII

order board order board(2)(4)

container

container

Inbound stock point

product H (5)outbound-stock point

container

container

product B

(6)

(3) container

container

product B

(7)

(1)

container

container

container

end product A

= production kanban

= transportation kanban

= route production chart product B

= route transportation chart product B

= route production chart product A

Operation of the kanban system

aimed at customertotal quality carerobotsproduction circlesuggestion boxautomationwork area disciplineTPM (total productivemaintenance)

kanbanquality improvementjust-in-time0-faultactivities of small groupscooperation of management andemployeesimproving productivitydevelopment of new products

K A I Z E N

The Kaizen umbrella

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CASE MOBA egg-sorters

World-wide egg grading market

800 billion eggs/year

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800 billion eggs/year

Asia 57% (China 24%)N. America 14%Europe 19%Rest of the world 10%

800 billion eggs/year

6 billion people= 130 eggs / person / year

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Egg consumption*

Netherlands 180 E/P/YJapan 347 E/P/YUSA 250 E/P/YIndia 35 E/P/YIndonesia 45 E/P/Y

* shell eggs + industry

Moba market position

• World-wide market leader in egg grading equipment

• Market share > 60%• Export > 90%• Major markets:

– Europe– Asia & Australia– Japan

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Company information

• Founded 1947• Main office

Barneveld• 43,000 m²• Subsidiaries in USA,

UK, Asia and Japan• 280 employees• 50 employees R&D• € 60 million revenue• PBT > 10%

Company information

• Marketing & Sales• Research & Development• Engineering• Manufacturing• Assembly• Service

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Products

• Automatic graders up to 180,000 eggs/h• Auto candling technology• Farm packers• Container handling • Automatic packaging• Software for track and trace

Auto candling technology

• Crack (24 hits per egg)

• Dirt (4 pictures per egg)

• Blood (Xenon light)• Weighing • Leaker detection

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MOBA

How did it look in 2000?

Where is that part?

Does an ERP-package help?

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Why do we have to change?

Misfit between market requirements and internal capabilities:

– time to market unacceptable (R&D) – customer specific configurations tend to be

more complex (from machine to system)– delivery times very long– high warranty costs

=> Monopolist behaviour <=

Situation early 2000

• Centralised organisation• Responsibilities diffuse• Bad mentality and de-motivated crew• Outdated production equipment• Dirty working places• Implementation BaaN very complex and

time and labour consuming• Inflexible planning and control

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5 Key Elements of Lean

Value Value Stream Flow Pull Perfection

Ensure WASTEdoes not

creep back into my VALUE

STREAM.

Determine what my

Customer Values

and what my

Customer considers WASTE.

Ensure that only those

products and services that

my customers

immediately want are

FLOWINGthrough my

VALUE STREAM.

Determine the Steps I go through to design,

make, and/or

deliver my product or service to

my Customer and where VALUE is created in

these steps.

Reduce the WASTE

and shorten the cycle-time

in the steps of my

VALUESTREAM.

Seven Categories of Waste

1. Overproduction2. Waiting and Queues3. Unnecessary Transport4. Bad Processes5. Inventories 6. Unnecessary Personal

Movements7. Lack of Quality+1 Unused Creativtiy of Personal

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What does 5 S mean?

The 5 S are translated from Japanese to English and Dutch:1. Seiri /Sort / Selecteren en Scheiden2. Seiton /Set in order / Schikken en Sorteren3. Seiso /Shine / Schoonmaken en Schrobben4. Seiketsu/ Standardise / Systematiseren,

Standaardiseren en structureren5. Shitsuke /Sustain / Stimuleren en Stijlvol werken/

Total results at MOBA

• Sheet metal lead time 9 weeks tot 1• Less space in stock room from• 4200m2 to 1700m2

• 40 % shorter lead time overall• Better quality: almost no scrap• Easier handling• More profit

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Planning

Material Handling

SupplierManagement

Sales OrderEntry

Tools andMachinesMaterials

and Products

Management

Thanks for your attention.