Lecture no. 2
Held on: Wednesday, July 26, 2000
Notes Written by: Vikas Kapoor
JIT
Systems must be put in place to move material through the plant in small batches so that WIP (work in process ) does not accumulate.
JIT is also applied to vendor relationship. For it to be successful:
Benefits of JIT:
JIT-II
Supplier deputes people at manufacturer or retailer site to help improve information on anticipated demand.
Economics of scale: produce in bulk so that cost per unit comes down.
Economics of scope: cost savings realized from combining the production of the two or more product lines at a location. This motivates investment in FMS.
Benefits:
Efficiency is wrought by variety and not volume.
Classification of decision making in manufacturing:
Long term strategic decision-making. E.g.,
· When to build a plant?
· Where to build a plant?
· How much capacity?
· What technology to be used?
Impact of such decisions is observed over the years.
Medium term tactical decision-making. (Impact in months, upto a year)
Short term operational decisions. (Daily and weekly basis)
Capacity planning:
Whenever the demand is changing.
The timing depends on:
Location depends on:
How much?
There exists a trade off between too little and too much.
Break-even analysis
Let "C2" is the cost/unit for buying.
Let "C1" is the cost/unit for making it.
K is fixed cost.
C2 >C1
For making X units, cost is C1X + K.
K