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Tutorial #1

This document provides examples and problems related to calculating production requirements for manufacturing processes that involve rework or defective products. Problem 1 gives an example of calculating the initial input required for a three-step process where the defective rates at each step are given. Problem 2 gives another example of calculating component requirements for an assembled product where two assemblies require different combinations of three components and defective rates are provided for each component and assembly. Problem 3 asks the reader to calculate the required input and total scrap costs for a three-step process given demand, defective rates, and scrap costs at each step, and asks which system would be preferred if the scrap rates were reversed between the first and third steps.

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Omar Abu-obialla
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111 views

Tutorial #1

This document provides examples and problems related to calculating production requirements for manufacturing processes that involve rework or defective products. Problem 1 gives an example of calculating the initial input required for a three-step process where the defective rates at each step are given. Problem 2 gives another example of calculating component requirements for an assembled product where two assemblies require different combinations of three components and defective rates are provided for each component and assembly. Problem 3 asks the reader to calculate the required input and total scrap costs for a three-step process given demand, defective rates, and scrap costs at each step, and asks which system would be preferred if the scrap rates were reversed between the first and third steps.

Uploaded by

Omar Abu-obialla
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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TUTORIAL #1 o [email protected].

ca

INDU 421: FACILITIES DESIGN AND MATERIAL HANDLING SYSTEMS


PROBLEM 1

• Example 2.2 from textbook

Calculating production requirements for operations with rework

The end product requirement is 100,000 pieces. Given that rework is performed based on the assumption
above, calculate the number of units required for processing at the first operation (see figure below). As-
sume that the defective rates (in decimal) are d1 = 0.03, d2 = 0.40, and d3 = 0.02.

I1 = 100,000/0.98 [0.97 + 0.03 (0.60)] = 103,280 The initial input required is 103,280.

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PROBLEM 2

• Example 2.3 from textbook

Calculating production requirements for assembled products

This example illustrates the use of Equation 2.3 in calculating component requirements for assembled
products. We assume that the components are outsourced and the final assembly is performed locally. The
final products are two assemblies requiring three components. Assembly 1 requires four units of component
1 and three units of component 2. Assembly 2 requires two units of component 2 and one unit of component
3. See Figure 2.17 for a graphifical representation of the two assemblies. The percentage defectives are d1
= 0.06, d2 = 0.05, d3 = 0.04, d4 = 0.03, and d5 = 0.02. The calculations required are also shown in Figure
2.17. The initial requirements for component/assembly 1 through 5 are 438,693, 432,968, 53,146, 103,093,
and 51,020, respectively.

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PROBLEM 3

• Consider a simple three-step manufacturing process as illustrated in the given figure. Assuming that
demand is 1,000 units, what is the required input to meet demand? Youll note that the required input is
the same if the scrap rates are reversed for processes 1 and 3. Assume that the scrap cost is $5 at process
1, $10 at process 2, and $15 at process 3. The defective rates are 3%, 5%, and 7%, respectively. Compute
the total scrap cost for the given system and the system where the scrap rates are reversed. Which system
would be preferred?

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TUTORIAL #1 o [email protected]

PROBLEM 4

• A foundry receives an order for four custom-designed castings. The customer will pay $30,000 for each of
four good castings. The customer will accept neither fewer nor more than four castings. It will cost $15,000
to produce each casting. Each casting is produced independently; the probability of a casting being good
is estimated to be 0.90.

a. How many castings should be produced?


b. What is the probability of losing money on the transaction?
c. It has been argued that the estimate of cost to produce each casting is not very accurate. Analyze
the sensitivity of the optimum batch production quantity to errors in estimating the values of the cost
parameters; determine how much the cost of producing each casting has to decrease in order to increase
by one the number of castings to produce.
d. It has been argued that the estimate of the probability of a casting being good is in- accurate. Analyze
the sensitivity of the optimum batch production quantity to changes in the probability.

Shown below is the probability mass function for the number of good custom-designed castings produced
(x), based on Q castings scheduled for production.

(b) The probability of losing money on the transaction is the probability of the net income being negative when Q
equals 5. From above, a negative net cash flow occurs if less than 4 good castings are produced. The probability
of producing less than 4 good castings equals 0.0005 + 0.0081 + 0.0729, or 0.0815.

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TUTORIAL #1 o [email protected]

(c) Using Excel it is easy to perform the sensitivity analysis. By varying the cost parameter, it is found that a
cost of $22,044.96 yields an expected profit of zero for Q = 5. Likewise, when the cost of producing a casting
is reduced to $7,873.19, the optimum number to schedule increases to 6. We could not find a cost that would
reduce the optimum production batch to 4 and still have a positive expected profit.

(d) Again, using Excel it is easy to perform sensitivity analyses. For example, if the probability of a good casting
is reduced to 0.84248 then the optimum production batch increases to 6; likewise, if the probability of a good
casting increases to 0.963781, then the optimum batch production quantity decreases to 4.

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