This page contains a tutorial demonstrating how to build a production system model for an assembly process. This tutorial assumes that the reader has reviewed Map a Production System and Model a Production System. If not, please refer to those sections of the Help Menu before continuing.
XYZ Assembly Company
The XYZ Assembly Company fabricates and assembles roughly 100 assemblies for their customers each year. For the upcoming new year, they have secured orders totaling 300 additional assemblies. Because of the increase in demand, the company was forced to expand into a new, larger assembly facility. In the startup of the new facility, the company has been facing serious and consistent stock outs.
Objectives
- Increase Fill Rate from 41% up to at least 95%.
- Backorder time for any part should not exceed 8 days.
Constraints
- The company is limited on cashflow and cannot have more than $3 million cash tied up in inventory
- Receiving teams can handle no more than 25 deliveries per week.
Demand & Replenishment
Three hundred new assemblies provides an average demand of 6 per week, assuming a 2 week break at the end of the year. For each assembly, 10 parts are needed. The bill of materials for a single assembly is as follows.
| Assembly Component | Quantity per Assembly |
|---|---|
| Part 1 | 4 |
| Part 2 | 7 |
| Part 3 | 9 |
| Part 4 | 56 |
| Part 5 | 5 |
| Part 6 | 6 |
| Part 7 | 5 |
| Part 8 | 10 |
| Part 9 | 2 |
| Part 10 | 3 |
Demand and Replenishment Time
The associated demand and lead times for each part is as follows.
| Assembly Component | Average Demand per Week | Standard Deviation of Demand | Average Lead Time (Days) | Variance of Lead Time (Days) |
|---|---|---|---|---|
| Part 1 | 24 | 12 | 8.18 | 9.55 |
| Part 2 | 42 | 21 | 33.05 | 60.81 |
| Part 3 | 54 | 27 | 7.75 | 8.51 |
| Part 4 | 336 | 168 | 9.22 | 12.28 |
| Part 5 | 30 | 15 | 13.92 | 19.49 |
| Part 6 | 36 | 18 | 9.66 | 10.81 |
| Part 7 | 30 | 15 | 7.53 | 4.94 |
| Part 8 | 60 | 30 | 19 | 20.03 |
| Part 9 | 12 | 6 | 1 | 0.1 |
| Part 10 | 18 | 9 | 20.22 | 13.43 |
Current Replenishment Policies
Current replenishment policies have been extracted from the company’s ERP system and provided in the following table.
| Assembly Component | Current Reorder Point | Current Reorder Quantity | Unit Cost ($) | Quantity On Hand |
|---|---|---|---|---|
| Part 1 | 30 | 20 | 220 | 50 |
| Part 2 | 60 | 30 | 905 | 260 |
| Part 3 | 30 | 20 | 870 | 120 |
| Part 4 | 190 | 20 | 680 | 150 |
| Part 5 | 60 | 30 | 450 | 40 |
| Part 6 | 30 | 20 | 2360 | 130 |
| Part 7 | 20 | 20 | 3960 | 110 |
| Part 8 | 40 | 30 | 1153 | 160 |
| Part 9 | 50 | 20 | 1426 | 150 |
| Part 10 | 90 | 20 | 3516 | 50 |
Create the Model
Begin at the production process library menu. Create a process named “Assembly Stock Model”.
Next, open the production process and draw a single production routing with the following characteristics. Add all relevant data depicted below. All input fields not mentioned in this section’s tables should be kept as their default values. When finished, the user interface should resemble the following picture.
| Shape | Shape Name | Sequence | Process Center | Average Nominal Process Rate per Machine (Units/Hour) | SCV of Process Times for a Transfer Batch |
|---|---|---|---|---|---|
| Stock | Supplier | ||||
| Operation | Delivery | 100 | Default | 1 | 1 |
| Stock | Component Inventory |
Next open the Process Center menu and ensure that the Default Process Center has the Not Capacity Constrained check box selected. This model is interested in stocking policies only, not production system capacity.
Next, add the items described above and their data to the Item list. All data for items that are not mentioned in the tables above, should be kept as their default values.
Next assign each item to the single routing in this model. Each item should be given 100% Fraction of Releases.
Finally, replace the default input values for the Component Inventory stock point with the data in the following table.
| Input Parameter | Value |
|---|---|
| Minimum ROP Value | Safety Stock GTE0 |
| Current Fill Rate | 18 |
| Minimum Fill Rate | 50 |
| Maximum Inventory Investment | 10,000,000 |
| Reorders Case 1 | 30 |
| Reorders Case 2 | 10 |
| Reorders Case 3 | 5 |
| Annual Inventory Carrying Cost Ratio | 100 |
| Target Fill Rate | 97 |
In the next article, the user will be guided through the analysis and interpretation of the model results.