ISE 140 Term Project

December 10, 2012

ISE 140

By: Denny Laines, Dina Verdin, Wayne Odd, Ashley Lindsay

INTRODUCTION
This report was done to provide a summary of the methodologies used to improve the
Vikings Production Division. Basic areas of improvements to the firm included forecasting,
production & capacity planning and finally scheduling. In each of these categories, multiple
methodologies were analyzed to achieve a specific goal.
In exploring how to improve forecasting for the firm, the goal of a MAD (Mean Absolute
Deviation) tolerance of less than 10 was desired. All approaches including moving average,
exponential smoothing and seasonal modeling were tested for each product. The specific forecast
model chosen for each product has been validated to match reasonably close to the last ten weeks
demand for the given product.
The production (aggregate) planning methodologies explored for each product were to
follow either a chase or level plan. In some instances, due to the type of forecasting performed,
the plan for the given product was one in the same. Here the desire was to achieve a relatively
low cost. This was followed by capacity planning to provide an even further breakdown of total
cost for each product. Finally, a scheduling methodology was created and simulated on
ProModel to successfully minimize cycle times.
Forecasting
One of the first things that should be done is to graph the data given for each product.
The data was graphed to observe whether there was a trend, a seasonal trend, or if it was random.
This is important when trying to choose which forecasting method to use that would produce a
Mean Absolute Deviation (MAD) no greater than ten. Forecasting was needed so that the next
five weeks of demand could be predicted for costing purposes of manufacturing. One of the
easiest methods of forecasting is Moving Average, so our first strategy was to use moving

average on all of the products that didnt have a trend on the graph and if that didnt work we
used a simple exponential smoothing method. For the rest of the products, we used either
exponential smoothing trend, without trend and with seasonality, or with trend and seasonality.
We were able to forecast every product with a MAD lower than ten and use the forecasts for
aggregate planning.
Product 1 (MAD= 6)
Histor
y
Horizo
n
11
12
13
14
15
16
17
18
19
20

Dema
nd

9-Period
Moving
Avg.

Forecast Error

186
187
187
187
186
187
187
188
187
187

7
1
9
10
6
5
5
3
13
1

21
22
23
24
25

187
187
187
187
187

Product 2 (MAD= 7)
=
0.8
=
0.3
Histo
ry
Dema
Horiz nd
on

Base

Trend

70

146.00

0.2165

10
11
12

160
183
200

157.16
178.47
197.42

3.20
8.63
11.73

Forecast
Error

3
5
3

13
14
15
16
17
18
19
20

215
197
170
110
100
105
177
215

213.83
202.99
177.79
122.88
100.80
100.20
158.83
205.32

21
22

215
215

234
254

23

215

273

24
25

215
215

292
312

13.13
5.94
-3.40
-18.86
-19.82
-14.06
7.75
19.37

1
6
8
13
1
5
18
10

Product 3 (MAD= 1)
History
Horizon

Demand

Exp. Smoothing
Forecast

Forecast
Error

9
10

70
88

74
89

4
1

11
12
13
14
15
16
17
18
19
20
21
22
23
24

65
43
68
84
61
44
65
82
59
44

65
43
67
83
61
41
64
80
58
41
63
79
59
41

0
0
1
1
0
3
1
2
1
3

25

61

Product 4 (MAD= 5)
=
0.2
History
Horizon
10
11

Demand
37
39

Exp. Smoothing
Forecast
34
35

Forecast Error
4

12
13
14
15
16
17
18

39
40
41
44
44
45
46

36
36
37
38
39
40
41

3
4
4
6
5
5
5

19
20
21
22
23
24
25

50
53

42
44
45
45
45
45
45

8
9

Product 5 (MAD= 9)
Histo
ry
Dema
10-Period
Horiz
nd
Moving Avg.
on
11
64
52
12
54
52
13
48
52
14
55
53
15
67
52
16
45
54
17
76
52
18
66
52
19
53
53
20
65
52

Forc
ast
Error
12
2
4
2
15
9
24
14
0
13

53
53
53
53
53

21
22
23
24
25

Production Planning

As stated before, the products followed either a chase or level production plan based on
results from the corresponding forecast model. The goal we achieved here was to make small

adjustments using employment levels to reduce total cost yet still provide sufficient production
levels.
For Product one, the level and chase plan are the same, due to the even rate of production
matching the forecasted demand. By hiring seven workers for the next five periods, we were
able to have minimal undertime and no backlog. With a bulk of the cost due to employment, the
total cost for this product came to $234k.
For Product two, the level plan was chosen to be the better option with roughly $18,000
savings compared to the chase plan. Hiring/firing cost was sacrificed for holding cost and higher
undertime cost. The latter cost though, still netted a lower total cost of $264k.
Product three, similarly, sacrificed backorder cost for minimally higher undertime cost.
The chase plan was chosen with a net savings of roughly $1.7k and a total cost of $87.7k.
Product four, once again the chase and level plan were one in the same. With minimal
undertime cost and no backlog or ending inventory, total cost was estimated to be about $55.4k.
Lastly, Product five also had an equal level and chase plan. Total cost for the five-week
production of this product was estimated to be approximately $74.6k.
Product 1
Level/Chase
Plan
Beg Inv
Production
Forecast
End Inv
Backlog
Workers
needed
Possible
Units
Undertime
Undertime

21
0
187
187
0
0

Rate
22
0
187
187
0
0

187
23
0
187
187
0
0

24
0
187
187
0
0

25
0
187
187
0
0

210

210

210

210

210

23

23

23

23

23
$575.00

Sub-Cost:
Hiring SubCost:
Regular SubCost:
Total Cost=

$140,000.
00
$93,500.0
0
$234,07
5.00

Product 2
Level Plan
Beg Inv
Production
Forecast
End Inv
Backlog
Workers
Possible
Units
Undertime

Undertime
Cost
Hiring Cost
Holding
Cost
Backorder
Cost
Regular
Cost

21
0
273
234
39
0
10

Rate
22
39
273
254
58
0
10

300
27

$5.00
$20,000.0
0

273
23
58
273
273
58
0
10

24
58
273
292
39
0
10

25
39
273
312
0
0
10

300

300

300

300

27

27

27
Undertime SubCost:
Hiring SubCost:
Holding SubCost:
Regular SubCost:

27

/unit

Total Cost=

$675.00
$200,000.0
0
$2,037.00
$61,425.00
$264,137.
00

/worker

$10.50

/unit/wk

$54.00

/unit/wk

$45.00

/unit

Product 3
Chase Plan
Beg Inv
Production
Forecast
End Inv
Backlog

21
0
63
63
0
0

22
0
79
79
0
0

23
0
59
59
0
0

24
0
41
41
0
0

25
0
61
61
0
0

Workers
needed
Workers
Hired
Workers
Fired
Possible
Units
Undertime

90

90

90

90

90

27

11

49

29

31
Undertime SubCost:
Hiring Sub-Cost:
Regular Sub-Cost:
Total Cost=

$735.00
$60,000.
00
$26,967.
00
$87,702
.00

Product 4
Level/Chase Plan
Beg Inv
Production
Forecast
End Inv
Backlog
Workers needed
Possible Units
Produced
Undertime
Undertime SubCost:
Hiring Sub-Cost:
Regular Sub-Cost:
Total Cost=

21
0
45
45
0
0
2

Rate
22
0
45
45
0
0
2

45
23
0
45
45
0
0
2

24
0
45
45
0
0
2

25
0
45
45
0
0
2

60

60

60

60

60

15

15

15

15

15

Rate
22
0
53
53
0
0
2

53
23
0
53
53
0
0
2

24
0
53
53
0
0
2

25
0
53
53
0
0
2

$375.00
$40,000.
00
$15,075.
00
$55,450
.00

Product 5
Level/Chase Plan
Beg Inv
Production
Forecast
End Inv
Backlog
Workers needed

21
0
53
53
0
0
2

Possible Units
Produced
Undertime
Undertime SubCost:
Hiring Sub-Cost:
Regular Sub-Cost:
Total Cost=

60

60

60

60

60

$175.00
$40,000.
00
$34,450.
00
$74,625
.00

Material Requirements Planning

After aggregate planning we were able to create our Material Requirements Planning
(MRP) Record, which provided us with how many of the sub products to order and when to
order them. This information was vital for the simulation. The MRP Record was created using
the production quantities from the aggregate planning Level or Chase plan that we chose based
on which plan had the lowest total cost. We also needed to know how many machines to buy, the
uptime of the machines, and the random breakdowns of the machines. To obtain this information
we had to create a Capacity Requirements Planning (CRP) Record. The record was created using
downtimes, number of machines on hand, and processing times given in the project guidelines.
Product 1
Q = L4L, SS =
10, LT= 0
Sub-Product 1
Gross
Requirements
Scheduled
Receipt
PAB/ 50
Net
requirements
Planned Order
Receipt
Planned Order

21

22

Period
23

187

187

187

187

187

10

10

10

10

10

134

87

87

87

187
187

87
87

87
87

87
87

147
147

24

25

Release
Q = 500, LT = 1,
SS = 5
Sub-Product 4
Gross
Requirements
Scheduled
Receipt
PAB/ 120
Net
requirements
Planned Order
Receipt
Planned Order
Release

21

22

Period
23

24

25

187

187

187

187

187

433

246

59

372

185

500

500
500

500

Product 2
Q = 500
Sub-Product 3
Gross
Requirements
Scheduled
Receipt
PAB/ 50
Net
requirements
Planned Order
Receipt
Planned Order
Release

21

22

Period
23

24

25

468

508

546

584

624

82

74

28

444

320

369

376

422

507

131

500

500

500

1000

500

500

500

500

1000

500

21

22

Period
23

24

25

734

754

773

1292

812

386

132

359

67

255

1000

500

1000

1000

1000

1500

1000

1000

1000

Q = 500, LT = 1,
SS = 5
Sub-Product 4
Gross
Requirements
Scheduled
Receipt
PAB/ 120
Net
requirements
Planned Order
Receipt
Planned Order
Release

Product 3
Q = 500, LT=1,
SS=5
Sub-Product 4
Gross
Requirements
Scheduled
Receipt
PAB/ 120
Net requirements
Planned Order
Receipt
Planned Order
Release

21

22

Period
23

24

25

63

79

59

41

61

57

478

419

378

317

500
500

Q = Fixed 2, LT = 1, SS = 15
Sub-Product 2

Gross Requirements

Period
21

22

23

24

25

63

79

59

41

61

87

74

15

15

15

Scheduled Receipt
PAB/ 150
Net requirements
Planned Order
Receipt
Planned Order
Release

18
66
66

41

41

61

61

Q = L4L, LT = 0, SS =
10
Sub-Product 1

Gross Requirements

Period
21
13
2

22

23

24

25

82

122

10

10

10

10

10

Scheduled Receipt
PAB/ 50
Net requirements

Planned Order
Receipt
Planned Order
Release

92
92

82

122

82

122

Product 4
Q = Fixed 2, LT = 1, SS = 15
Sub-Product 2
2
21 2
Gross
4
Requirements
45 5
Scheduled
Receipt
10 6
PAB/ 150
5
0
Net requirements
Planned Order
Receipt
Planned Order
Release
0
0
Q = L4L, LT = 0, SS = 10
Sub-Product 1
2
21 2
Gross
4
Requirements
45 5
Scheduled
Receipt
1
PAB/ 50
10 0
Net requirements
Planned Order
4
Receipt
5
5
Planned Order
4
Release
5
5

Period
23

24

25

45

45

45

15

60

15

90
90

23

24

25

225

45

45

10

10

10

225

45

45

225

45

45

Period

Product 5
Q = L4L, LT = 0,
SS = 10
Sub-Product 1
Gross
Requirements
Scheduled

21

22

Period
23

53

53

53

24

25

53

53

Receipt
PAB/ 50
Net
requirements
Planned Order
Receipt
Planned Order
Release
Q = 500, LT = 0,
SS = 0
Sub-Product 3
Gross
Requirements
Scheduled
Receipt
PAB/ 50
Net
requirements
Planned Order
Receipt
Planned Order
Release
Q = 500, LT =1, SS
=5
Sub-Product 4
Gross
Requirements
Scheduled
Receipt
PAB/ 120
Net
requirements
Planned Order
Receipt
Planned Order
Release

10

10

10

10

10

13

53

53

53

53

13

53

53

53

53

21

22

Period
23

24

25

53

53

53

53

53

497

444

391

338

285

500

500

21

22

Period
23

24

25

500

120

120

120

120

120

500
500

Scheduling
In this project, the scheduling methodology has shown that the machining operation
works better if is divided by stations and sub-products. From the capacity planning, the amount
of sub-products needed to make a whole product was totaled, divided in batches and then

multiplied by the respective set-up time and processing time. An interesting point to analyze is
that the amount of machines obtained from the capacity planning and the amount of the
machines obtained in the simulation, did not match. These numbers did not match due to the
considerations put in each one of the situations. With the help of the simulation we were able to
obtain a recommended number of machines taking in consideration the utilization percentage of
each machine and possible bottlenecks depending on the capacity of the amount of machines
utilized.
Another point worth noting is that the simulation was programmed to utilized FIFO a rule
meaning that the first item in is the first item out, utilized. This rule helps utilize sub-products as
soon as they are machined and not delay the whole machining process.
Finally, the batch size calculated is 10. This batch size allows a reduced cycle time and an
optimum utilization of the stations (machines). The percentage utilization produced in this
simulation is around 85% and bottlenecks in station number four.
Conclusion
In conclusion, the methods that we used yielded our project an excellent MAD
which was below ten and that was an essential part of the project. Moving Average
was a prime choice for the forecasting method, which made the cost for the level
and chase plans practically identical. After completing the MRP and CRP we had
enough information to run the simulation and complete it successfully. For our final
results we arrived at $596740.50 for our ultimate total cost for one week of
production, which took into consideration the cheapest aggregate, plan and the
least amount of machines needed to run the production.

Appendices

Capacity Requirements Planning:

Week 21
SubProduct
SubProduct
SubProduct
SubProduct

2400

2400

2400

2400

2400

Product 1

Product 2

Product 3

Product 4

Product 5

Total

147

92

13

257

66

66

500

500

1000

500

1500

500

500

3000

Down for:
Time it was
down:
Time it wasn't
down:

Station 1
13.71428
571
205.7142
857
2194.285
714

Down for:
Time it was
down:
Time it wasn't
down:

Station 2
9.230769
231
184.6153
846
2215.384
615

Down for:
Time it was
down:
Time it wasn't
down:

Station 3
13.71428
571
205.7142
857
2194.285
714

Down for:
Time it was
down:
Time it wasn't
down:

Station 4
9.230769
231
184.6153
846
2215.384
615

Down for:

Station 5
6.857142

times in 2400 min

min
(UPTIME)

times in 2400 min

min
(UPTIME)

times in 2400 min

min
(UPTIME)

times in 2400 min

min
(UPTIME)

times in 2400 min

2400

2400

Batch Size

Station 1
Processing
Setup Time
Total

Station 2
Processing
Setup Time
Total

Station 3
Processing
Setup Time

Time it was
down:
Time it wasn't
down:

857
205.7142
857
2194.285
714

Down for:
Time it was
down:
Time it wasn't
down:

Station 6
26.66666
667
266.6666
667
2133.333
333

Down for:
Time it was
down:
Time it wasn't
down:

Station 7
13.71428
571
205.7142
857
2194.285
714

min
(UPTIME)

times in 2400 min

min
(UPTIME)

times in 2400 min

min
(UPTIME)

10
Sub-Product
1
3341

Sub-Product
2
660

3341

660

Sub-Product
1
3341

Sub-Product
2
660

3341

660

Sub-Product
1

Sub-Product
2

Sub-Product
3
0
0

SubProduct 4
21000

0
21000
Machine Needed

Sub-Product
3
17000

SubProduct 4

17000
0
Machine Needed

Sub-Product
3
19000

SubProduct 4

Total

2500
1
11
5

Total

2100
1
9
10

Total

Total

Sub-Product
1

Sub-Product
2

Total

Station 5
Processing
Setup Time

Sub-Product
1
0
0

Sub-Product
2
0
0

Total

Station 6
Processing
Setup Time

Sub-Product
1
0
0

Sub-Product
2
0
0

Total

Station 7
Processing
Setup Time

Sub-Product
1
0
0

Sub-Product
2
0
0

Total

Station 4
Processing
Setup Time

19000
0
Machine Needed

Sub-Product
3
11000

SubProduct 4
30000

11000
30000
Machine Needed

SubProduct
3
12000

Sub-Product 4
45000

12000
45000
Machine Needed

Sub-Product
3
0
0

SubProduct 4
24000

0
24000
Machine Needed

Sub-Product
3
9000

SubProduct 4
36000

9000
36000
Machine Needed

1900
0
9
5

Total

4100
0
19
10

Total

5700
0
26
15

Total

2400
0
11
5

Total

4500
0
21
10

Comparison of cost with suggested number of machines according to CRP and number of
machines according to optimum utilization.

Regular Cost
Undertime
Cost
Buy Machine
Cost

2 $/min
2500 $/Machine

Station 1
undertime
machines
bought

cost
0
6
TC

Station 2
undertime
machines
bought

0
15984.212
24
15984.212
24

cost
1152.84615
2305.6923
4
08
0
TC

Station 3
undertime
machines
bought

0
2305.6923
08

cost
0
4
TC

Station 4
undertime
machines
bought

0
9147.1354
17
9147.1354
17

cost
0
9
TC

Station 5
undertime
machines
bought

0
21267.361
11
21267.361
11

cost
0
11
TC

0
27441.406
25
27441.406
25

Regular Cost
Undertime
Cost
Buy Machine
Cost

2 $/min
$/Machin
2500 e

Station 1
undertime
machines
bought

cost
0

15000

TC

15000

Station 2

cost

undertime
machines
bought

TC

Station 3
undertime
machines
bought

cost
0

17500

TC

Station 4
undertime
machines
bought

17500

cost
0

5000

TC

Station 5
undertime
machines
bought

5000

cost

TC

0
0

Station 6
undertime
machines
bought

cost
0

15625
15625

TC

Station 7
undertime
machines
bought

cost
0
11
TC

0
26269.531
25
26269.531
25

Station 6
undertime
machines
bought

cost
0

0
0

TC

Station 7
undertime
machines
bought

cost

TC

0
0

ProModel Simulation
Location Summary

Scenari
o
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin

Name

Scheduled Time
(Hr)

Capacity

Total
Entries

%
Utilizatio
n

Station 1
Station
1.1
Station
1.10
Station
1.11
Station
1.12
Station
1.2
Station
1.3
Station
1.4
Station
1.5
Station
1.6
Station
1.7
Station
1.8
Station
1.9

480.00

12.00

247.00

81.09

40.00

1.00

20.00

80.21

40.00

1.00

20.00

79.58

40.00

1.00

21.00

81.58

40.00

1.00

20.00

79.58

40.00

1.00

21.00

83.33

40.00

1.00

21.00

81.58

40.00

1.00

21.00

83.33

40.00

1.00

21.00

81.58

40.00

1.00

20.00

79.58

40.00

1.00

21.00

81.58

40.00

1.00

20.00

79.58

40.00

1.00

21.00

81.58

Station 2
Station
2.1
Station
2.10
Station
2.2
Station
2.3
Station
2.4
Station
2.5
Station
2.6
Station

400.00

10.00

102.00

67.60

40.00

1.00

13.00

80.25

40.00

1.00

7.00

51.75

40.00

1.00

13.00

76.92

40.00

1.00

11.00

73.54

40.00

1.00

11.00

74.67

40.00

1.00

11.00

71.08

40.00
40.00

1.00
1.00

10.00
9.00

64.21
61.21

e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin

2.7
Station
2.8
Station
2.9

40.00

1.00

9.00

62.42

40.00

1.00

8.00

59.92

Station 3
Station
3.1
Station
3.10
Station
3.11
Station
3.12
Station
3.2
Station
3.3
Station
3.4
Station
3.5
Station
3.6
Station
3.7
Station
3.8
Station
3.9

480.00

12.00

131.00

87.30

40.00

1.00

11.00

89.58

40.00

1.00

11.00

86.88

40.00

1.00

12.00

89.25

40.00

1.00

11.00

86.88

40.00

1.00

11.00

86.88

40.00

1.00

10.00

84.79

40.00

1.00

11.00

86.88

40.00

1.00

11.00

87.25

40.00

1.00

10.00

86.33

40.00

1.00

11.00

87.25

40.00

1.00

10.00

86.33

40.00

1.00

12.00

89.25

Station 4
Station
4.1
Station
4.10
Station
4.11
Station
4.12
Station
4.2
Station
4.3
Station
4.4
Station
4.5
Station
4.6
Station
4.7
Station

480.00

12.00

228.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00

1.00

19.00

92.50

40.00
40.00

1.00
1.00

19.00
19.00

92.50
92.50

e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin

4.8
Station
4.9

40.00

1.00

19.00

92.50

Station 5
Station
5.1
Station
5.10
Station
5.11
Station
5.12
Station
5.13
Station
5.14
Station
5.15
Station
5.2
Station
5.3
Station
5.4
Station
5.5
Station
5.6
Station
5.7
Station
5.8
Station
5.9

600.00

15.00

146.00

73.92

40.00

1.00

10.00

76.08

40.00

1.00

9.00

70.00

40.00

1.00

9.00

70.00

40.00

1.00

10.00

72.29

40.00

1.00

9.00

73.33

40.00

1.00

9.00

73.33

40.00

1.00

11.00

72.21

40.00

1.00

9.00

76.67

40.00

1.00

10.00

76.08

40.00

1.00

10.00

76.08

40.00

1.00

10.00

76.83

40.00

1.00

10.00

76.25

40.00

1.00

10.00

73.33

40.00

1.00

10.00

73.33

40.00

1.00

10.00

72.92

Station 6
Station
6.1
Station
6.2
Station
6.3
Station
6.4
Station
6.5

200.00

5.00

89.00

83.87

40.00

1.00

17.00

85.00

40.00

1.00

18.00

83.58

40.00

1.00

18.00

83.58

40.00

1.00

18.00

83.58

40.00

1.00

18.00

83.58

Station 7
Station
7.1
Station
7.10
Station

400.00

10.00

158.00

77.86

40.00

1.00

18.00

86.92

40.00
40.00

1.00
1.00

13.00
17.00

64.58
82.71

e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e
Baselin
e

7.2
Station
7.3
Station
7.4
Station
7.5
Station
7.6
Station
7.7
Station
7.8
Station
7.9

40.00

1.00

17.00

81.04

40.00

1.00

17.00

80.96

40.00

1.00

16.00

80.83

40.00

1.00

16.00

80.75

40.00

1.00

15.00

75.42

40.00

1.00

15.00

75.42

40.00

1.00

14.00

70.00