Production Management Notes

Circular Economy

  • Circular Economy:
    • Aims to avoid/recycle industrial waste. Resources are extracted, used in production, and then redistributed, disassembled, and recycled.
    • Encompasses maintaining, reusing, remanufacturing, and recycling.
    • Focuses on material/energetic use of renewable resources.
    • Involves closed-loop supply chains for essential raw materials like metals, plastics, and composites.
    • Includes biomass-based value chains covering provision, logistics, transformation, and products.
  • Global Supply Chains:
    • Involve primary and secondary raw materials, OEMs, and optimized return logistics (reverse logistics).
    • Include usage phases, raw material/recyclers, pre-product manufacturers, collection points, and trading platforms.
    • Aims to make sustainable value chains, from the extraction/production of raw materials to the end-of-life management of products
  • Project “URBAN”:
    • Aims to reduce CO2 emissions by at least 40% in comparison to conventional recycled concrete.

Sustainable Value Chains

  • Sustainable Value Chains:
    • Covers raw material extraction/production, basic material production, energy supply, manufacturing/construction, usage, and end-of-life.
    • Focuses on long-lasting, repair-friendly, or divisible products.
    • Includes business models like “Sharing” for mobility services, involving network planning, transport, and repair services.
  • Example: Bioliq Process:
    • Thermo-chemically breaks down biomass into hydrogen and carbon monoxide, then uses chemical catalysts to build clean fuels and chemical feedstocks.
    • KIT operates a pilot BTL (Biomass to Liquid) plant with a maximum input of 500 kg of biomass per hour.
  • Project “DeMoBat“:
    • Industrial disassembly of batteries and electrical motors. The aim is to secure raw materials for E-mobility
    • Models for the development of return networks for batteries. Optimizing a two-stage recycling network, taking into account different economics of scale.
  • End-of-Life Examples: Michelin is establishing their first tire recycling plant.
  • Eco-Industrial Parks:
    • Companies and communities cooperate locally, implementing circular economy at the process and enterprise level.
    • They are based on the concept of industrial symbiosis. Local municipalities are provided with excess energy.
    • Goal is to reduce pollution and resource/energy consumption.

Production Program Planning

  • Production Program Planning:
    • Defines the types, quantities, and timing of products to be manufactured.
    • It´s an output planning. Important inputs are matter, energy and information, while output consists of marketable services and emissions.
  • Time Levels of Production Program Planning:
    • Strategic: Defines product fields.
    • Tactical: Specifies product fields, defining breadth and depth.
    • Operative: Determines the type and quantity of products for the next planning period.
  • Operative Production Planning:
    • Maximizes total contribution margin given capacities and contribution margins per product.
    • (Gesamt−)Gewinn=Erlo¨s–Kosten(Gesamt-) Gewinn = Erlös – Kosten
    • Deckungsbeitrag=Stu¨ckerlo¨s–variableStu¨ckkostenDeckungsbeitrag = Stückerlös – variable Stückkosten
  • Linear Programming (LP):
    • Used to maximize contribution margins while adhering to constraints.
  • Example
    • Objective Function: Max3x<em>1+2x</em>2Max 3x<em>1 + 2x</em>2
    • Resource constraints: 2x<em>1+x</em>2≤100,x<em>1+x</em>2≤80,x<em>1≤40,x</em>1,x2≥02x<em>1 + x</em>2 ≤ 100, x<em>1 + x</em>2 ≤ 80, x<em>1 ≤ 40, x</em>1, x_2 ≥ 0
    • X1 = chairs, X2 = tables
    • The Iso-profit line is calculated as: 𝑋2 = - rac{3}{2}𝑥1
  • Methods to solve Lineare Programming (LP): Graphical solution, Corner Point Method and Simplex Algorithm

Material Requirements Planning

  • Objective:
    • Determine necessary good and services, to ensure the security of supply across value chains
  • Material Requirements Planning Methods:
    • Production program driven. It´s deterministic.
    • Consumption-oriented methods. It´s stochastic.
    • There is a trade-off between reducing costs and having material in time by using more accurate material requirement planning methods
  • Production Program Driven Material Requirements Planning:
    • Based on Bills of Materials (BOM).
    • Includes primary, secondary and tertiary requirements.
  • Bill of Material
    • Characterize de amounts of components between end products, assemblies and parts. They are depicted in Gozinto graphs, BOMs or Matrixes.
    • The piece list are specially useful for manufactures that have multi-part, multi-stage production.
    • The use module bills of material is useful for repeated pieces.
  • Consumption-oriented material requirements planning:
    • Applied when historical data of expected values are present, instead of BOMs.
    • Quantitative Methods:
      • Arithmetic Mean
      • Moving Average
      • Exponential Smoothing
      • ARIMA models

Sourcing

  • Sourcing: In 2022/2023 countries like India, Turkey, Pakistan, Spain, Italy and China were the top 10 of cotton producers. Germany imports cotton from those countries.
  • Supply Chain Law:
    • Applicable to companies with a minimum of 3,000 employees in the short-term.
    • Aims to reinforce global labor and environmental protection aspects of the chain.
  • Procurement:
    • Involves defining material requirements, planning lot sizes, managing inventory, and organizing material procurement.
  • Procurement costs:
    • Comprises variable costs of goods and services, fixed storage costs, order-related fixed costs, transaction costs, transport fees, storage costs, and costs due to spoilage and shrinkage.
  • Procurement methods
    • Just-in-case: higher security of supply, higher inventory costs.
    • Just-in-time: Needs high planning, coordination, and transport requirements.
  • ABC Analysis for Material Classification:
    • A small category of goods generate the turnover of the business. (A-Goods)

Lot Size Planning

  • Lot Size Planning:
    • Lot size: Amount of identical components that are produced between 2 retooling in a production plant.
    • Objective: Minimize the costs of setups or purchasing.
  • Economic effects of lot sizes Large lot sizes result in few setups and elevated storage while small lot sizes cause fewer inventories, but higher setup times.

Factors for Batch Size Planning:

  • Purchase from outside, set up factory
  • Costs of material
  • Renovation costs
  • Stock costs
  • Lack of Quantity

Reasons for Inventory Management:

  • Reduce number of orders. Buffer between purchase and production, take advantage of speed and price of delivery.

Harris/Andler Model (Inventory Optimization)

  • Assumptions of Harris/Andler Model:

    • A single good is considered.
    • Purchase price is independent from lot size.
    • Lead times do not exist, initial stock level is zero, and backorders are not allowed.
    • Instant Delivery.
    • Material consumption is steady over time.

  • Elements of Harris/Andler Model:

    • One article with price p and demand D.

    • Lot size equal to q. Ordering cost equal to Kf. There is an interest portion in height of the storage cost factor h.

    • q∗=2DKfphq* = \sqrt{\frac{2DK_f}{ph}}

  • Limitations of Harris/Andler Model: Model Refinements: Discount model, safety inventory concepts.

  • Uncertainity Factors Demand variations, variations in manufacturing time, variations in order time.

  • Example on state held storage: Analysis of standby-costs due to scenarios of blackouts, pandemics or defence. Project name ALANO

Inventory Management

*Inventory is necessary due to uncertainties.
*Relevant terminology includes Nettostock (existing stock), fail amount quantity of not delivered or short items, order quantity, quantity on the go, quantity-physical items on stock- quantity.
*There are three key questions as to inventory management quantities and quantities to release in production facility.

  • Order Quantity:
    • r-method releases stock every certain period.
    • Quantity- method- Stock get´s released with new orders.
    • The inventory gets released at a certain restocking level S. Or at a certain time t
      *Different factors influence safety inventory quantity

Evaluation of stock with Service Levels:

  • alpha grade: Is the probability of not failing on delivery.
  • beta grade: quantity available, related to quantity total.

Bullwhip effect:

  • Demand variations increase over supply chain. Countermeasures are better flow of information, early communication on price changes, more frequent order releases, shorter delivery times and smaller supply chains.

  • Ripple Effect: Strong disturbance in the supply chain by disruption in any point. Disruptions might be natural catastrophes (flooding) or wars. Countermeasures are procurement of material, inventory for risks, post-ponement, diversification and risk management with suppliers.

Supply Chain Management

  • Objective: Reinforce cooperation to gain a competitive edge. Goals are cost reduction, innovation, quality improvements and risk minimization.

  • Suppliers management: Classification of supplier depending on significance and type of material is crucial. Sustainability is important. Make or buy decision.

  • Suppliers should be evaluated depending on qualitative and quantitative criteria (price, communication) including factors of ecology. There analysis can include cluster analytics and Multi-criteria and mathematic methods.