Planning Optimization and Automation in Manufacturing

© 2010-13 OptiRisk India (P) Ltd, All rights reserved
Bala. Padmakumar
Director & CEO,
OptiRisk India

1. Business Challenges
2. Optimization
3. SCN Analysis & Redesign
4. Production Planning & Scheduling
5. Transportation Scheduling
6. Solution Approach
7. Summary
2© 2010-13 OptiRisk India (P) Ltd, All rights reserved

Uncertain DemandUncertain Demand
Unhappy CustomersUnhappy Customers
Bloated InventoryBloated Inventory
Production-line stoppageProduction-line stoppage
Stock OutageStock Outage
LTL FleetsLTL Fleets
Lower ROILower ROI
Higher InvestmentHigher Investment
Competitive PressureCompetitive Pressure
Subpar Revenue GrowthSubpar Revenue Growth
Escalating CostEscalating Cost
Shrinking MarginsShrinking Margins
Supply-Demand GapSupply-Demand Gap Too far from CustomersToo far from Customers
Too far from SuppliersToo far from SuppliersRegulatory ChangesRegulatory Changes
Product ObsolesceProduct Obsolesce
Higher Cost of CapitalHigher Cost of Capital
Uncertain NPVUncertain NPV
Discounted Stock PriceDiscounted Stock Price
Unnecessary tripsUnnecessary trips
Delayed DeliveriesDelayed Deliveries
Angry InvestorsAngry Investors
Stressed EmployeesStressed Employees Quality IssuesQuality Issues

Integration
PlanProcess
People
Culture
Quality
Communication
Policy

What kind of planning system your company has?
1. No planning
2. Based on Gut feeling
3. Manual planning – done separately for each function – paper
& pencil
4. Excel based planning – done separately for each function
5. Planning using ERP extension tools.
6. Advanced planning tools – separate for each function
7. Integrated Planning Platform

- Winston Churchill
Achieve Business objective with minimal resources
Generate Plans in minutes rather than hours or days

Long Term 1+ yearsStrategic
Supply Chain Network Design
Medium Term Monthly / QuarterlyTactical
Production Planning and scheduling
Short Term Weekly/ DailyOperational
Transport Planning and Scheduling
Resource Acquisition (Capital)
Resource Allocation (Machine and labors)
Resource Scheduling

SC Network optimization
Locate facilities
Match Supply & Demand
Managing seasonality, and
Reduce carbon footprint.
Benefits:
5-15% reduction in SC costs
Better service level
Sourcing Selection
Select Suppliers
Determine Order Quantities
Benefits :
Enhanced S&OP capability,
2-5% reduction in mfg costs
Transportation Scheduling
Fleet Selection
Route Plan / Schedule
Benefits :
10-30% reduction in Transport
cost Increased on-time deliveries
Production planning
Optimal production schedule
Meet plant floor constraints.
Benefits :
Improved throughput
Reduced costs,
Reduced inventory
Leaner plants
Operational Inventory Management
Order quantity
Order time
Supplier identification
Benefits :
10-30% reduction in inventory
Improved service level
Demand Planning
Choose best price
Indentify Optimal Commission
Benefits :
Higher sales volume
Better Margins

2. Optimization
7. Summary

Optimization is a
decision making process
and a set of related tools that
employ mathematics,
Algorithms, and computer software not
only to sort and organize data, but to
use that data to make
Recommendations faster and better
than humans can.
- The Optimization Edge, Steve Sashihara

Route
#
Possible
Routes
Distance(KM)
1 A – B – C 245
2 A – C – B 315
3 B – A – C 370
4 B – C – A 315
5 C – A – B 370
6 C – B – A 245
Example : Find the shortest path for delivery
Deliveries Possible Routes Time to process
manually
3 3! = 6
10 10! = 3,628,800
13 13! = 6,227,020,800 3 centuries
20 20! = 11 billion
centuries
10 seconds to calculate each route manually
A
B
C
Warehouse
80
35
115
60
70
105
Best Routes

Wherever decisions are made !Wherever decisions are made !
Where, Decisions require resources for implementation !!Where, Decisions require resources for implementation !!
Capital AllocateCapital Allocate
People Acquire, schedule, assign, TrainPeople Acquire, schedule, assign, Train
Equipment Acquire, schedule, LocateEquipment Acquire, schedule, Locate
Facilities Locate, scheduleFacilities Locate, schedule
Vehicles Acquire, route, scheduleVehicles Acquire, route, schedule
Raw Material Acquire, assignRaw Material Acquire, assign
Time Allocate, ScheduleTime Allocate, Schedule

FacilityLayoutPlanning
OR Key
Areas
Production
Planning
Allocation
Job,
Machines
Inventory
Optimization
Transportation
(Routing,
Scheduling)
Network
Optimization

What-If Analysis
Collaboration
Courtesy: IBM Limited

2 Chilean Forestry firms* Timber Harvesting $20M/yr + 30% fewer trucks
UPS* Air Network Design $40M/yr + 10% fewer planes
South African Defense* Force/Equip Planning $1.1B/yr
Motorola* Procurement Mgmt $100M-150M/yr
Samsung Electronics* Semiconductor Mfg 50% reduction in cycle times
SNCF (French RR)* Scheduling & Pricing $16M/yr rev + 2% lower op ex
Continental Airlines* Crew Re-scheduling $40M/yr
AT&T* Network Recovery 35% reduction spare capacity
Grant Mayo van Otterloo* Portfolio Optimization $4M/yr
Indeval* Securities Trade Settlement $150M/yr financing costs
Midwest ISO* Energy Grid Management $2.1B to $3B savings over 4 years
*Franz Edelman Competition Finalists, Science of Better, http://www.scienceofbetter.org , Published Case
Studies
16© 2010-13 OptiRisk India (P) Ltd, All rights reserved 16© 2010-13 OptiRisk India (P) Ltd, All rights reserved

2. Optimization
7. Summary

Warehouse
Production Facility
Consumer
Highway
10 – 30% reduction in overall Supply chain and Logistics Cost

Input
What-if Analysis
Output

Software GUI *
*Courtesy : IBM ILOG LogicNet+ XE
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU
MANU

What we Delivered
OptiRisk developed SCN model
suggested reconfiguring order delivery to
reduce out-bound transportation cost,
overall taxes, and inventory level. In
addition, it suggested potential
warehouse locations, plants, and their
optimal capacity for future growth. At
the end, "what-if" analysis is done to
study the impact of proposed Goods &
Services Tax (GST) on the existing and
proposed Supply Chain Network.
What we Delivered
OptiRisk developed SCN model
suggested reconfiguring order delivery to
reduce out-bound transportation cost,
overall taxes, and inventory level. In
addition, it suggested potential
warehouse locations, plants, and their
optimal capacity for future growth. At
the end, "what-if" analysis is done to
study the impact of proposed Goods &
Services Tax (GST) on the existing and
proposed Supply Chain Network.

Existing Supply Linkage Optimal Supply Linkage

2. Optimization
7. Summary

Dr. Ramasubramaniam M
© 2010-13 OptiRisk India (P) Ltd, All rights reserved

• Production: Transformation of raw
materials to finished goods.
• Planning: Looks ahead, anticipates possible
difficulties and decides in advance as to how
the production, best, be carried out.

Three Planning Horizons
1. Strategic (Long term)
2. Tactical (Medium term)
3. Operational (short term)

Work CenterWork Center
Routing
(Track List)
Routing
(Track List)
Bill of Materials
(BOM)
Bill of Materials
(BOM)
Aggregate
Production Plan
Aggregate
Production Plan
Master
Production
Scheduling
Master
Production
Scheduling
Materials
Requirement
Planning
Materials
Requirement
Planning
Manufacturing
Schedule
Manufacturing
Schedule

• Maximises throughput
• Improved efficiency
• Cost reduction
• Improved visibility

 Headquartered at Munich, Germany
 Focus on premium-class car segments
 2004 sales 1.25 million Cars

 Production at eight plants including Germany, US, UK, Austria
and South Africa
 Engines at four more sites
 CKD assembly at six sites

 Plans of products & sales before production capacities
 Plant loading & allocation of products to plants & determine
production capacities

 Market trends
 Market dynamics
 Globalization of suppliers, production and markets
 Requirement for launching new models frequently

 Manual planning procedure requires a great deal of effort
 Mostly done in excel spreadsheets
 Manual planning considers only capacity at FG level whereas
capacities at each of stages required

 Development of MIP based model
 Developed and implemented in a commercial software systems
 Later extended to include even financial variables
 Used IBM ILOG CPLEX to Solve the problem.

 Reduction in Production Cost by 7%
 Increased Throughput
 Increased Visibility
 User friendly decision support system

 One of the largest cereal producer
 1999 sales totalled 7 billion
 100’s of products, 1000’s of SKUs
 5 plants in US, Canada
 7 core DCs in LA & Chicago
 15 Co-packers (Contractors)
Background:
Kellogg’s Operations:
80 Products
600 SKUs in 27 locations
90 production lines
180 packaging lines
Cereal Business

 Some products have to be coordinated across plant.
 Production, packaging & shipping operations need
to be synchronised with assembly.
 Use of constituents across different plants to produce a
single product.

 Current Planning Model Using Manual Spreadsheets
 Inconsistency in data
 Decentralized planning - Inconsistency across different plants

Minimize total cost of production & operation by coming up with
suitable production plan.

 User friendly decision – support system called KPS.
 Basically a multi-period linear program that makes production,
packaging, inventory and distribution decisions at a weekly level.
 Used IBM ILOG CPLEX to Solve the problem.

 Savings 45 million / year in 1995.
 Estimated future savings of $25 million / year.
 Increased visibility across the supply chain.

2. Optimization
7. Summary

Logistics Transportation Planning & Scheduling
Product: ORPSS (OptiRisk Route Planner & Scheduler Studio)
Product Concept Video available at
http://www.optiriskindia.com/vehicle-route-planner-scheduler-video

Shareholder Value
ROI
Profit Investment
Cost Revenue # Trucks
BusinessLess mileage
(10 to 30% )
Service Level .
Lead time
(5 to 10%)
Planning
Errors

2. Optimization
7. Summary

Intranet
SPSS Server
(Optional)
Optimization
Server
External Data Server
(Optional)
Database DB2
Firewall
External
Router
Planning & Execution
Staffs
Top Management
Internet
.
.
..Web Server
Other RDBMS
Suppliers
Dealers
• Ubiquity
• Visibility
• Recency
• Agility
• Optimality
• Ubiquity
• Visibility
• Recency
• Agility
• Optimality
Advantages

50© 2013 OptiRisk India (P) Ltd, All rights reserved
Assessment Analysis Saving Realization Plan
• PoC Report covering benefit analysis
• Recommendation on business improvement projects
• Solution proposal
Typical Duration:
• 1 – 2 Months
Typical Duration:
• 1 – 2 Months
 Understanding
• Business
• Business Processes
• Pain Points
 Identify quick-hit
opportunities
 Opportunity prioritization:
time, cost, risk, benefits
Assessment
 Focus on 1 or 2 most
promising opportunities
 Business Case Overview
 Current & Desired Situation
 Success Factors
 Timeline
 PoC/ Prototype Development
Analysis
 Key Findings
 Use Cases
 Benefit Analysis
 Solution and Project
Approach
 Resource Charts
 Suggested Next Steps &
Timeline
Recommendation
Budget
• 3 to 6 man months
Budget
• 3 to 6 man months
Deliverable:

51© 2013 OptiRisk India (P) Ltd, All rights reserved
Assessment Analysis Saving Realization Plan
Blue-Print
 Each iteration must bring
Business Value
 Plan / Do / Check / Act
methodology
 Plan : Detailed Design, KPIs,
Data Required, How to
mitigate the top risks.
Do : Implement functional
requirements
Check : Test functional
requirements, measure KPIs
Act : Tuning
Iterative & Incremental
Implementation Deployment
 Kick-Off
 High-Level Design :
Project scope, Risks.
 Training
 Go-Live Support
• Incremental build
• Minimize risks
• Go / No Go at each iteration
Deliverable:
• Fully functional solution
Deliverable:
• Fully functional solution
Typical Duration:
• 6 – 12 months
Typical Duration:
• 6 – 12 months
Benefits of this approach:

2. Optimization
7. Summary

___________________________________________________________________________________________________________________________

Bala. Padmakumar
Ph: +91 98406 18472 / +91 44 4501 8472
Email: optimize@optiriskindia.com
Web: http://www.optiriskindia.com/
Asia Pacific, Africa, Australia &
Middle East:
Europe & America:
Corporate Head Quarters:
No 1/4 ,
Justice Dwarkanath Road,
Kolkata - 700020,
India.
Development Center:
No 12, 25th Cross Street
Thiruvalluvar Nagar ,
Thiruvanmiyur,
Chennai –600041, India
OptiRisk R&D House,
One Oxford, Uxbridge,
Middlesex, UB9 4DA,
United Kingdom
Corporate Office:

Planning Optimization and Automation in Manufacturing

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