Advanced

Reduction of inventory level in a production with capacity constraints - A study to analyse investments and production planning

Svensson, Tuva LU and Nordmark, Lisa LU (2015) MTT820 20151
Engineering Logistics
Abstract
Equal capacity in the activities of a production line is of great importance when a good
material flow is desired. This is one of the basic ideas of the Lean philosophy, a mindset
every modern company strives to follow. In a production with unequal capacity, the
company might have to build up inventory to be able to meet the costumer demand.
Inventory is a recognized waste in a production and a cost in terms of inventory holding
costs.
This study is conducted to the production at BorgWarner TorqTransfer System, a producing
company of awd couplings for the automotive industry. The production process is
controlled with a MRP system and consists of two main processes, the parts manufacturing
and the assembly. Currently, the parts... (More)
Equal capacity in the activities of a production line is of great importance when a good
material flow is desired. This is one of the basic ideas of the Lean philosophy, a mindset
every modern company strives to follow. In a production with unequal capacity, the
company might have to build up inventory to be able to meet the costumer demand.
Inventory is a recognized waste in a production and a cost in terms of inventory holding
costs.
This study is conducted to the production at BorgWarner TorqTransfer System, a producing
company of awd couplings for the automotive industry. The production process is
controlled with a MRP system and consists of two main processes, the parts manufacturing
and the assembly. Currently, the parts manufacturing has a capacity constraint and
is forced to work seven days a week, the reason why a high inventory buer needs to be
built up during the weekend when the assembly is not producing.
The solution approach is based on four developed scenarios, all consisting of dierent
solution approaches. The rst scenario is an hypothetical implementation of a Kanban
system, with required investments for equal capacity during the weekdays. In the second
scenario, the theoretical rescheduling tool Rotation Cycle Policy is examined. The third
scenario implies manual rescheduling of high rate products at the weekdays and low rate
products at the weekends. In the last scenario, required investments for equal capacity
during the weekdays with a maintained MRP-production is done. The study indicates that
it is most protable to eliminate the weekend production, which results in an elimination
of unnecessary inventory. The most benecial scenario is the last one, which implies a
rescheduling of the weekly production planning in combination with required investments
for a MRP controlled ve-day production. With this scenario, a steady material flow is
achieved. The savings of reduced inventory holding costs and reduced costs of salary for
unsocial hours are compared against the cost for investments for a higher capacity in the
parts manufacturing. With a annual depreciation of seven years, the investment proposal
is viable after four years. A long term solution, based on forecasts four years foreward,
assures the company of a sustainable production planning and predetermined investment
proposals. (Less)
Please use this url to cite or link to this publication:
author
Svensson, Tuva LU and Nordmark, Lisa LU
supervisor
organization
course
MTT820 20151
year
type
H2 - Master's Degree (Two Years)
subject
report number
5797
language
English
id
8408707
date added to LUP
2015-12-17 11:26:13
date last changed
2015-12-17 11:26:13
@misc{8408707,
  abstract     = {Equal capacity in the activities of a production line is of great importance when a good
material flow is desired. This is one of the basic ideas of the Lean philosophy, a mindset
every modern company strives to follow. In a production with unequal capacity, the
company might have to build up inventory to be able to meet the costumer demand.
Inventory is a recognized waste in a production and a cost in terms of inventory holding
costs.
This study is conducted to the production at BorgWarner TorqTransfer System, a producing
company of awd couplings for the automotive industry. The production process is
controlled with a MRP system and consists of two main processes, the parts manufacturing
and the assembly. Currently, the parts manufacturing has a capacity constraint and
is forced to work seven days a week, the reason why a high inventory buer needs to be
built up during the weekend when the assembly is not producing.
The solution approach is based on four developed scenarios, all consisting of dierent
solution approaches. The rst scenario is an hypothetical implementation of a Kanban
system, with required investments for equal capacity during the weekdays. In the second
scenario, the theoretical rescheduling tool Rotation Cycle Policy is examined. The third
scenario implies manual rescheduling of high rate products at the weekdays and low rate
products at the weekends. In the last scenario, required investments for equal capacity
during the weekdays with a maintained MRP-production is done. The study indicates that
it is most protable to eliminate the weekend production, which results in an elimination
of unnecessary inventory. The most benecial scenario is the last one, which implies a
rescheduling of the weekly production planning in combination with required investments
for a MRP controlled ve-day production. With this scenario, a steady material flow is
achieved. The savings of reduced inventory holding costs and reduced costs of salary for
unsocial hours are compared against the cost for investments for a higher capacity in the
parts manufacturing. With a annual depreciation of seven years, the investment proposal
is viable after four years. A long term solution, based on forecasts four years foreward,
assures the company of a sustainable production planning and predetermined investment
proposals.},
  author       = {Svensson, Tuva and Nordmark, Lisa},
  language     = {eng},
  note         = {Student Paper},
  title        = {Reduction of inventory level in a production with capacity constraints - A study to analyse investments and production planning},
  year         = {2015},
}