Batchsize Vs Feedingcosts 2016 – 2017

Assignment LCM – batchsize vs feedingcosts 2016 – 2017

Inleverdatum: ntb

Production lines  organized according to the lean principles use small batchsizes. This is done to reduce leadtime of the process and create flexibility.  The most extreme example of this principle is single piece production. Another principle is the use of JIT (just in time) to feed the production process with materials and components.  In the most extreme form every single part is delivered on the place and the moment it is needed for production. Of course this means that many ‘milkruns’ are needed to feed the production line. For the picking of materials in the warehouse the principle of single piece production means a lot of work.

This raises the question if single piece production doesn’t lead to a lot of waste (unnecessary movements/handling) in the feeding process (picking and milkrun). On the other hand, single piece production results in a very low WIP inventory and low inventory in the warehouse and therefore very low inventory holding costs.

Perhaps it is possible to develop a model that describes the relation between  the batchsize and the feeding process. The variables in this model are:

1. Number of workstations (drop places for the milkrun)
2. Batchsize

Derived from the 2 variables the value of the other variables can be calculated:

1. Distance of a milkrun (from warehouse to productionline, dropdistance and back)
2. Time to complete a milkrun
3. Time to complete the picking in the warehouse
4. Amount of WIP in the process
5. Processing time
6. Leadtime of the process

In order to understand the relation between the variables it is useful to construct  (draw) a lay-out of a production line. In this layout you have to position an assembly line with a number of workstation. Than position the warehouse. Now the routing of the milkruns can be established.

To define the model use the following assumptions:

• The layout of the productionline is a straight line
• The warehouse is situated in the middle of the productionline
• The distance between the warehouse and the productionline is 15 meters
• The distance between the workstations is 4 meters
• Milkrunspeed is 1 m/second
• Time for a drop of the parts at a workstation is 3 seconds per part. So if the batchsize is 2 it takes 6 seconds, etc.
• The product produced consists of 24 different parts
• The processing-time of a part (component) at a workstation depends on the number of workstations. The fewer workstations, the more time it costs to assemble a part. The formula to calculate the processing time per part is: 30 seconds minus the number of workstations divided by 2. F.e. 4 workstations means 28 seconds of processing time (30 minus 4/2) per part.
• Daily demand for the product is 160 (8 hours of production time)
• The picktime in the warehouse per item is  2 second per item
• Average distance between picklocations is 5 meter (speed orderpicker is 1 m/second)
• Orderpicking and executing the milkrun can be done simultaneously (2 different persons)
• Cost of  orderpicking/milkrun/operators is Euro 45,-/hour
• Inventory holdingcosts (WIP) are 15% of the value of a finished product per year
• The value of a finished product is Euro 600,-
• The company operates 200 days per year, 8 hours per day

 If the batchsize increases the amount of inventory in the company increases also. This generates inventory holdingcosts and dissatisfied customers due to waiting time. Assume that the number of weeks for a product (in parts or as finished product) it stays in the company is equal to the squareroot of the batchsize. So if the batchsize is 1 the product (and it’s components) stays 1 week (√1) in the company. If the batchsize is 2 it will be 1,41 (√2) weeks, and so on.