Optimization of the production run-length
| Optimization of the production run-length |
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| See also |
Stocks in companies are created due to the purchase of materials and goods and the production of series of specific products. Companies bear the costs of storage and run batches (series) of materials, products or goods.
These costs depend on the size of the batch of production. When choosing optimal batch size company must take into account the many factors that require different decision. Increasing the batch causes an increase in storage costs and decrease the costs of preparation. In such case it becomes important to determine the optimal production quantity and an optimal order size.
Optimization of production series
Costs relevant to the determination of this value:
- Startup production costs of one batch:
- cost of equipment and transposition devices adjustment,
- costs for the preparation and design of production schedule,
- costs of procurement of materials for the production of new batch.
- Costs of storage:
- rents, insurance, taxes,
- cost of credit for the financing of stocks,
- cost of maintaining storage facilities.
The total cost of storage and production relevant to decision about the length of the series:
K = Kp + Km
- where:
- K - total costs of production and of the contract,
- Kp - total costs of production,
- Km - the total costs of the contract.
Km= km * D/2
- km - the storage costs of the product in a single period,
- D/2 – average number of product in storage in a single period.
KP = kp * Q/D
- kp - unitary cost of launching a series of production,
- Q/D - number of production series, which must be run within a set period (e.g. in the course of one year).
Total costs of storage and production, relevant to the decision about the length of production series, can thus be presented as follows:
K = km * D/2 + kp * Q/D
This function has a minimum at the point:
D0 = (2 * kp * Q/km)
This formula allows to determine the optimal length of production series, where the total cost of the production and storage of the product is the smallest (in given period).
Examples of Optimization of the production run-length
- One example of optimization of the production run-length is the use of Just-in-Time (JIT) production. JIT production is a system in which parts and components are delivered to the production line only when needed, thus minimizing the amount of inventory stored at any one time. This reduces the costs associated with storing and managing inventory, as well as increases the efficiency of the production process by eliminating the need for waiting for parts to arrive.
- Another example of optimization of the production run-length is the use of advanced planning and scheduling (APS) systems. These systems are designed to optimize production run lengths by analyzing the available resources and determining the most efficient production schedule. The system can also take into account customer demand, production process timing and capacity constraints. By using an APS system, companies can reduce the time needed to produce a given product and maximize efficiency.
- A third example of optimization of the production run-length is the use of simulation software. Simulation software can provide an accurate representation of the production process, enabling companies to test different scenarios and determine the most efficient production run length. Simulation software can also help to identify potential bottlenecks in the process and suggest ways to reduce production times.
Advantages of Optimization of the production run-length
Optimizing the production run-length can provide a number of benefits for companies and their stakeholders. Here are some of the advantages:
- Reduced costs: By optimizing the production run-length, companies can reduce production costs by minimizing waste, using less energy and materials, and decreasing labor time.
- Increased efficiency: Optimizing the production run-length can increase production efficiency by improving the workflow, reducing downtime, and eliminating unnecessary steps.
- Improved quality: Companies can improve product quality by controlling production processes to ensure that each product is produced to the same high standards.
- Better customer service: By optimizing the production run-length, companies can reduce lead times and provide better customer service.
- Increased profitability: Optimizing the production run-length can help companies to reduce costs and increase efficiency, thus leading to greater profitability.
Limitations of Optimization of the production run-length
- Optimization of the production run-length can be limited by a variety of factors. These include:
- Time constraints - Companies may not have sufficient time to complete large runs. This may be due to deadlines imposed by customers or the need to switch production to different items quickly.
- Supply constraints - Companies may not have access to enough raw materials to complete a large run. This could be due to limited supply from vendors or problems with the quality of the raw materials.
- Cost constraints - Companies may not have the budget to complete a large run. This could be due to the cost of the raw materials or labor costs associated with the run.
- Technical constraints - Companies may not have the necessary technical skills or equipment to complete a large run. This could be due to a lack of trained personnel or the complexity of the production process.
- Environmental constraints - Companies may be restricted in the size of their run due to environmental regulations. This could be due to restrictions on emissions, waste disposal, or the use of hazardous materials.
An introduction to the optimization of the production run-length is to ensure that the production process is efficiently managed to maximize profits. Other approaches related to this process include:
- Determining optimal reorder points to minimize inventory costs – this involves tracking the consumption rate of inventory and the cost of the inventory to determine the right time to order new stock.
- Scheduling production to meet customer demand – this involves forecasting customer demand and scheduling production to meet the estimated demand, while avoiding overproduction or stockouts.
- Establishing a minimum lot size – this involves setting a minimum size for production batches to ensure efficient production and cost-effectiveness.
- Utilizing just-in-time strategies – this involves scheduling production to meet customer demand and reducing lead times to minimize storage costs.
In summary, optimization of the production run-length involves various approaches such as determining reorder points, scheduling production, setting a minimum lot size, and utilizing just-in-time strategies. These strategies help to ensure efficient production and cost effectiveness, while meeting customer demand.
References
- Kim, C. H., & Hong, Y. (1999). An optimal production run length in deteriorating production processes. International Journal of Production Economics, 58(2), 183-189.
