Lecture No. 12: Delivery Improvement and Inventory System. Takahiro Fujimoto

Transcription

1 Business Administration Lecture No. 12: Delivery Improvement and Inventory System 1.Reduction of Production Period 2.Variety and Function of Inventory 3.Fixed-Quantity Order and Fixed-Period Order 4.Kanban System Takahiro Fujimoto Department of Economics, University of Tokyo The figures, photos and moving images with marks attached belong to their copyright holders. Reusing or reproducing them is prohibited unless permission is obtained directly from such copyright holders.

2 1.Reduction of Production Period Competitive effect of reducing production period (Throughput Time) Direct effect (1) order production delivery reduction (2) stock production demand projection accuracy prevent out-of-stock inventory cost Indirect effect elicitation of waste, production problem increase in productivity, quality

3 What is Production Period (Throughput Time)? Time required for material to absorb (receive) product design information stocked within process, and be transformed to a product Production Period = time for receiving product design information + time for not receiving product design information Actually, in general, "time for not receiving information" is overwhelmingly large. (typically, time to accumulate as an inventory) Key to reduce a throughput time is in improving the inventory system.

4 Production Lead-Time as Time to Receive (absorb) Information (conceptual diagram) transmit product design information from worker/machine materials receiving in-process products receiving final products first process second process inventory time inventory time transpor tation time inven tory time inventory time cycle time cycle time production lead-time legends: net working hours ( time for receiving information) time for not receiving information (inventory, transportation, etc.) Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp209 figure.6.13)

5 information B product design (information M+A+B) information A information M design/worker information stock B design/worker information stock A customer information M+A+B M+A+B M+A M+A M finished-product inventory product design information B second operation in-process product inventory product design information A first operation material inventory information M supplying company information flow product (Mono) flow work (in-process product)

6 Diagram 6 14 In-Process Product Inventory and Throughput Time grinding process cycle: 1 min. in-process product inventory = zero lathe process cycle: 1 min production period: 2 min. grinding process cycle: 1 min in-process product inventory = 1 lathe process cycle: 1 min production period: 3 min. grinding process cycle: 1 min in-process product inventory = 10 (first-in, first-out) lathe process cycle: 1 min production period: 12 min Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp211 figure.6.14)

7 2.Variety and Function of Inventory (1) Pipeline inventory (warehouse, inventory in transportation) (2) Cycle inventory (to accrue depending on lot size) (3) Buffer inventory (to correspond to fluctuation of order volume) (4) Inventory corresponding to seasonal variation (gap between seasonal variation and leveled production) (5) Decoupling in-process inventory (to relieve interdependence among processes)

8 Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp213 figure.6.15)

9 Types of Inventory System (1) System corresponding to independent demand fixed-quantity order system fixed-time order system IPS (Inventory Planning System: MRP's independent-demand version) (skip) (2) System corresponding to dependent demand MRP, MRP Ⅱ Kanban system

10 Types of Main Inventory System system corresponding to independent demand fixed-quantity order model (fixed-order quantity) (independent demand) fixed-time/period order model (fixed-time period) Material Requirement Planning System (MRP) system corresponding to dependent demand (dependent demand) Kanban system Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp215 figure.6.16)

11 3.Fixed-Quantity Order and Fixed-Period Order (1) Fixed-Quantity Order Order lot is constant. Check inventory all the time. Automatically place order when inventory reaches reorder point. Order interval is elastic. "2 bin system" is a typical case in point.

12 Fixed-Quantity Order System Order volume is constant each time. Order cycle is elastic. cycle inventory safety inventory Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp216 figure.6.17)

13 1 Case: Order cycle Lead-time average production base order lot order cycle lead-time average parts consumption volume (slope) point of order cycle inventory safety inventory = B Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp216 figure.6.17)

14 2 Case: Lead-time Order cycle lead-time point of order order lot order cycle unfilled order cycle inventory safety inventory = B Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp216 figure.6.17)

15 2-Bin System container 1 container 2 capacity = P Consume material from Container 1. When Container 1 becomes empty, place a refill order. Container 2 is firstly filled with the arrived material. Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp217 figure.6.18)

16 Fixed-Quantity Order : Level of Buffer Inventory (Safety Inventory) Balance between inventory-holding cost and out-of-stock cost (opportunity cost) Assume a probability distribution of demand volume to accrue in a given period. Set "probability of desirable out-of-stock" (service level: 1 - s). Set safety inventory at a level where out-of-stock probability becomes "S" at the bottom of inventory. for example, in Critical Fractile method, s = L / (G + L) L = variable profit, G = inventory cost, etc.

17 Level of Safety Stock order lot = Q lead-time = t ~ d ~~ D = d t ~ D s distribution safety inventory=b timing of order σ S = 2.5% (service level = 97.5%) B 2σ ~ where σ is D s standard deviation Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp218 figure.6.19)

18 Fixed-Quantity Order: Setting Order Lot Size (EOQ) When an order lot size = Q, then, an average cycle inventory level = Q / 2. EOQ (Economic Order Quantity) an optimum lot size in short term, on assumptions of fixed-quantity order, without buffer inventory, with no uncertainty static balance concept ( Kanban system)

19 concept of EOQ annual demand volume (production volume in succeeding process) annual ordering cost lot size ordering cost per 1 time cost per unit annual inventory cost annual inventory interest rate (borrowing interest + warehouse/マテハン) Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp220 figure.6.20)

20 Aggregate cost = Inventory cost + Ordering cost ---Minimization thereof cost per period aggregate cost ordering cost inventory cost Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp220 figure.6.20)

21 (2)Fixed-Period Order System Order periodically (Order interval is constant.). Order quantity per one occasion is elastic (Qt). Set an upper limit value (M) for unfilled order + inventory, based on safety inventory, order interval, and delivery lead-time When unfilled order = Ot, inventory = It,at ordering time-point = t, an order volume at t time t is Qt = M - Ot - It. Basic thought on setting a safety inventory level is the same with one on the fixed-volume order.

22 Fixed-Period Order System Order cycle is constant. Order volume is elastic each time. cycle inventory safety inventory Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp222 figure.6.21)

23 Case: Delivery Lead-time (t) Order Cycle (T) order cycle lead-time order lot level point of inventory replenishment = M upper limit of "inventory + backlog = upper limit of B+d (T+t) cycle inventory unfilled order cycle inventory unfilled order cycle inventory unfilled order unfilled order safety inventory = B while, M = inventory level point = upper limit of "safety inventory + cycle inventory + unfilled order" Ii = inventory at ordering time-point of sequential order i Oi = unfilled order = 0 at ordering time-point of sequential order i Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp222 figure.6.21)

24 Case: Delivery Lead-time (t) > Order Cycle (T) order cycle lead-time level point of inventory replenishment = M upper limit of "inventory + backlog unfilled order unfilled order unfilled order unfilled order unfilled order = upper limit of B+d (T+t) cycle inventory cycle inventory cycle inventory cycle inventory safety inventory = B while, M = inventory level point = upper limit of "safety inventory + cycle inventory + unfilled order" Ii = inventory at ordering time-point of sequential order i Oi = unfilled order = 0 at ordering time-point of sequential order i Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp222 figure.6.21)

25 4.Kanban System One of representative "dependent demand corresponding systems", along with MRP. Which was established primarily by 耐 一 Ono in Toyota Automobiles. Kanban is--- used for both delivery instruction (order) and production instruction (order release) the card (circulating invoice) which can be used repeatedly. (1) take-back Kanban (2) order release (in-process) Kanban

26 Take-back Kanban parts delivery place supplier product content quantity per box Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp225 figure.6.22)

27 Variety of Kanban

28 Basics of Kanban System "Take back by succeeding process --- Process in a downstream goes to its upper stream to take its required parts in a required quantity. I.e., a "pull method". Kanban moves together with a standardized container which includes n units of in-process parts. (shadow of container) number of containers (N) = number of Kanban pieces speed of container's movement = speed of Kanban (synchronization of Mono and information)

29 Flow of Kanban, Container, and Actual Items acts as an identification tag in- process Kanban acts as an identification tag take-back Kanban acts as an identification tag in- process Kanban acts as an identification tag take-back Kanban assembly instruction parts consumption smaller parts process smaller parts storage site parts line side parts consumption parts process finished parts storage site assembly line side parts consumption assembly process assembly completion in- process Kanban take-back Kanban in- process Kanban take-back Kanban empty empty empty empty acts as an order release acts as a delivery instruction acts as an order release acts as a delivery instruction Reference: Drawn by the author in reference to Shgeo Shingo, previously stated book Legends: parts box actual parts flow of actual item flow of information Kanban Kanban Author making (reference: Shigeo Shingo 'IE consideration of the Toyota Production System') Reference: Takahiro Fujimoto 'Introduction to Production Mmanagement' Nihon Keizai Shimbun, Inc (Ⅰp226)

30 Function of Kanban changes depending on the container' conditions. (1)When it is with a container full of parts (outward): ---- Kanban is an "identification tag". (2)When it is with an empty box (homeward): --- Kanban is a "delivery instruction tag and an "order release". Analogy of a ski lift Consider the ski lift's chairs as containers, and persons as parts; An equalized movement; Number of people disembarked at the mountain peak accrues number of empty seats ( accrual of empty boxes); Number of seats (content quantity) is set (1 seat, 2 seats, 3 seats ---); People get on the lift at the hillside when empty seats come around; Departure time is not fixed. (fixed-quantity and irregular trip).

31 Kanban Test --- Design-Draw Product <parts> <product assembly drawing> front view side view hollow triangle pole

32 Kanban Test --- Work Standardization of Upstream Process <Work Standard of the First Process> (1) Prepare 2 plates. (2)Bring 2 sheets together as the following. (3) Put the completed parts (sub assembly) into a container.

33 Kanban Test --- Work Standardization of Downstream Process

34 initial condition 40 parts first process (total number of parts: 75) today's production:25units 25 parts second process order-release Kanban container take-back Kanban take-back Kanban in-transit condition 30 parts first process 22 parts second process 5 units finished order-release Kanban take-back Kanban 3 units finished take-back Kanban

35 Take-back Kanban name of parts: subassembly (pair of 2 sheets) preceding process = first process succeeding process = 2nd process container content quantity = 5 Take-back Kanban name of parts: subassembly (pair of 2 sheets) preceding process = first process succeeding process = 2nd process container content quantity = 5 Order-release Kanban name of parts: subassembly (pair of 2 sheets) preceding process = first process production quantity = 5

36 Decision on Pieces of Kanban (= Quantity of Containers) N = (Q + B)/n Demand speed of a succeeding process (constant, assured) = d When a delivery equals a re-order (zero lead-time), N = (d t + B)/n While t = delivery lead-time of preceding process, = time for container to make one cycle of trip between preceding and succeeding processes = cycle time of take-back K + cycle time of order- release K

37 Case of Kanban System inventory preceding process on passage succeeding process Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp230 figure.6.24) inventory total

38 (continued from previous slide) Number of Kanban Pieces order-release Kanban's take-back Kanban's Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp231 figure.6.24)

39 Number of Containers Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp231 figure.6.24)

40 preceding process shipping area at succeeding process (a) Snapshot of Kanban System (time point AA) succeeding process receiving area at succeeding process production in succeeding process post for receiving Kanban's empty containers at preceding process empty containers at succeeding process post for receiving take-back Kanban's parts container order-release (containing 10 pieces) take-back Kanban Kanban Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp232 figure.6.25)

41 preceding process shipping area at succeeding process (b) Snapshot of Kanban System (time point BB) succeeding process receiving area at succeeding process production in succeeding process post for receiving Kanban's empty containers at succeeding process post for receiving take-back Kanban's parts container (containing 10 pieces) take-back Kanban order-release Kanban Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc (Ⅰp232 figure.6.25)

42 Improvement of Production by Reducing Quantity of Kanban's Calculate an optimum number of Kanban pieces by EOQ (Economic Order Quantity)? N = (EOQ + B ) / n (right side left side) but, this is a static balance concept. No idea on improvement. Rather, improve production through an effort to reduce number of Kanban pieces. (left side right side) (1) improvement on production and distribution cutting down of lead-time (t) (2) deduction of reserved-capability time (3) equalization and stabilization of production reduction of safety inventory (B)

43 Kanban System Contrasted to MRP Both are based on Master Schedule Calculate requirements by parts explosion. Premises for Kanban are an equalization and a consistent cycle time. Instead, no "lead-time compensation". Kanban is a "pull method", while MRP is a "push method MRP does not have a means of an order release contained in Kanban. MRP does not contain a fine-tuning means and an improvement mechanism when deviations from plans incur. MRP (planning) and Kanban (execution/fine-tuning) can be used together complementarily.

44 1 Kanban System market D Ď t; t + i P 1 T 1 P 2 T 2 P 3 B 0 1 B 1 I 2 2 B 2 I 3 3 B 3 information feedback transportation B I inventory waiting for process inventory waiting for transportation P volume for order release T instructed volume for transportation 2 MRP flow of Mono (product) process central control Ď k t; t+1 Ď k t; t+2 market D Ď k t; t+3 P 1 P 2 P 3 I 0 1 I 1 2 I 2 3 I 3 L 1 L 2 L 3 information feedback flow of Mono (product) inventory process P n L n order- release volume instructed volume for transportation Ď t; t + I important demand forecast for i period ahead made at the end of t period

45 For Reference: Comparison Between Waiting-in-Procession Problem and Inventory Problem EOQ (decision on order lot) EOQ (decision on product lot) Safety inventory decision problem cumulative input cumulative input cumulative input 1 input (arrival) 2 waiting, stagnation, inventory 3 output (process) fixed volume of arriving inventory order lot = Q Q t fixed volume of arriving inventory production lot = Q Q fixed volume of arriving inventory t (case of order lot problem) t inventory inventory inventory B Q t safety inventory level = B t t cumulative output cumulative output cumulative output fixed volume of inventory consumption fixed volume of inventory consumption inventory consumption volume as per probability distribution t t t 4 Waiting-in-procession problem cumulative number of arrived persons (arrival) ~ A(t) t pace of arrivals as per probability distribution waiting in procession, to reduce t cumulative number of processed persons service ratio t pace of process as per probability distribution