Ratios

The goal of step 7 is to create an overview of purchase items and variants and the goal of step 8 to determine ratios, based on both historic and SPO Future demand data. A ratio is the relative size of a variant compared to other variants. The computations and results are given in Appendix I. The intention was to approximate PI demand with the ratios, and use this as input for the inventory model. However, during the computations, it was concluded that most characteristics required to define a variant are described in the SPO Future demand. These are the following characteristics:

 Number of projects;

 Steel or plastic carriers;

 Expected shipping date for manufacturing;

 Number of SPO meters;

 Width of the SPO;

 Number of exits;

 Sorting angle of 20 or 30 degrees;

 Dual or single sided sorter.

There are three characteristics required for the variants that are not defined in the SPO Future demand:

 Left or right sorting;

 Missing pin detection or no missing pin detection;

 Molded merge block or solid merge block.

5.4 Conclusion

In section 5.3, a demand analysis is executed to define input for the conceptual models discussed in section 5.2. Due to the project environment, the goal was to first use SPO Future demand to compute ratios of variants that require information defined in the conceptual design phase, and then use historic data for all ratios of variants that require information defined in the detailed design phase, as this information is not available in the SPO Future demand. However, the demand analysis proved that SPO Future demand can be used to compute most ratios. Therefore the majority of the information required to compute PI demand is available after sales engineering, and thus before engineering. As a result, it seems worthwhile to adjust the control structure. An intermediate question is formulated:

To what extent can Vanderlande order its purchase items for the SPO projects at the end of the conceptual design phase?

Chapter 6 analyses the purchase items individually, in order to answer this question.

24 6. PURCHASE ITEM ANALYSIS

In Chapter 5, an intermediate question is defined, as the results of a demand analysis of SPO projects revealed that most information about characteristics of the SPO, required to determine PI demand, is available after the conceptual design phase, accomplished by sales engineering. This phase is followed up by the detailed design phase, which takes approximately two months. Splitting a SPEC into OFs and POs takes approximately one week. If Vanderlande is able to order PIs before the start of the detailed design phase, this results in around two extra months for the second tier suppliers to produce and deliver material. The characteristics required to determine a BOM are described in Chapter 5. In this chapter, the PIs and their lead-times are analysed individually, to determine which items can be ordered at the end of the conceptual design phase. This is done by the following approach:

1. Define which purchase items require which characteristics to determine demand;

2. Check which items have lead-times longer than four weeks;

3. Draw conclusions.

6.1 Characteristics

The list of purchase items for SPO projects consists of 76 items, and one item can be used in multiple components. In step 1 of the PI analysis, per component the PIs are split up into two groups: a group consisting of items with characteristics known in the conceptual design and a group consisting of items with characteristics unknown in the conceptual design. The characteristics defined in the SPO Future demand are referred to as known, and the characteristics not defined are referred to as unknown.

Component (B)

In total, the sub-components in component (B) require 21 different PIs. 5 of these items ask for unknown characteristics, and 16 require known characteristics.

Component (C)

There are 31 items needed for the production of the sub-components of component (C). Out of these 31 items, there are 13 items with unknown characteristics and 18 items with known characteristics.

Component (F)

Component (F) consists of 39 items. All characteristics required for the variants of this component are known in the SPO Future demand. Consequently, there are no items with unknown characteristics.

6.2 Standard lead-times

According to the process structure at Vanderlande, second tier suppliers have four weeks to produce and deliver material. However, the standard lead-time given by second tier suppliers might deviate from this. The standard lead-times given by second tier suppliers are within Europe, the extra time required for shipping material to America is thus excluded. In step 2, these lead-times, together with the characteristics of the purchase item, are analysed.

Component (B)

Out of the 5 items with unknown characteristics, there is one item with a lead-time longer than four weeks. This item has a standard lead-time of five weeks. In total, there are four items with a standard

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lead-time longer than four weeks. The other three items with known characteristics have a standard lead-time of between five and eight weeks.

Component (C)

The group of thirteen items with unknown characteristics, consists of two items with a standard lead-time longer than four weeks. These items have a standard lead-lead-time of five, and six weeks. In the group with known characteristics, there are five items with a standard lead-time longer than four weeks, with standard lead-times ranging between five and eight weeks.

Component (F)

The sub-components in component (F) have the largest BOM and the longest standard lead-times. All items are part of the group with known characteristics, and 21 out of the 39 items have a standard lead-time longer than four weeks. These standard lead-lead-times vary between six and eight weeks.

6.3 Conclusion

Step 3 is to draw a conclusion upon order placing of SPO purchase items and therefore answers the intermediate question in Chapter 5:

To what extend can Vanderlande order its purchase items for the SPO projects at the end of the conceptual design phase?

28 of the 76 purchase items have a lead-time longer than four weeks, while the planned lead-time is four weeks. Those items negatively affect the Delivery to request performance of the second tier suppliers, and consequently the performance of the factories. The material is currently ordered after all uncertainty is eliminated. Ordering is thus proceeded by the conceptual and detailed design phase.

Section 6.1 and 6.2 show which PIs with a lead-time longer than four weeks are known by the end of the conceptual design, and which PIs with a lead-time longer than four weeks are unknown.

Component (B) consists of a single item that requires unknown characteristics and that has a lead-time longer than four weeks. Component (C) consists of two of these items, and one of these two items is equal to the item in component (B). Component (F) contains most items with lead-times longer than four weeks, but has no items with unknown characteristics. Appendix J displayes the results of the analysis.

To conclude, 37% of the PIs has a lead-time longer than four weeks, and is currently stocked. This percentage can be reduced to 3% if the SPO Future demand is used to determine PI demand, and if PIs are ordered at an earlier stage. However, this asks for a redesign of the control structure in which the procurement proceedings are expedited, and suppliers can start their production at an earlier moment in time. The only uncertainty at the moment an order is placed, is the location to which material should be transported. Transportation time is one week within Europe and four weeks to America.

Consequently, the material can be transported within the four weeks and after a OF or PO is allocated to a factory. Due to this new insight, the original research question is extended and a new sub-question is introduced in section 6.4.

26 6.4 Extended research question

Due to the results of the PI analysis, the research question can be extended into the following question:

What is the effect of proactive inventory control for the Posisorter equipment on performance of the factories and suppliers and how can Vanderlande better control its supply?

6.4.1 Additional Sub-question

The additional sub-question that should be answered is:

7. How do the factories and suppliers perform if a redesign is introduced in the control structure?

This new research question and sub-question ask for an extra analysis of the control structure of Vanderlande and an additional literature search in ‘Design Control Structures’. Chapter 7 elaborates on the analysis and redesign of the control structure. To answer the initial research question, Chapter 8 elaborates on a modest inventoy control model for the purchase items with uncertainty in their demand.

Moreover, the effect of lead-time uncertainty is investigated.The new approach, acoording to the model of Van Strien (1986) is illustrated in Figure 15.

Figure 15, Adjusted Regulative Cycle

27 7. REDESIGN OF THE CONTROL STRUCTURE

In Chapter 6, it was concluded that a redesign in which PIs are ordered after the conceptual design, increases factory performance more than inventory control. The original research question was therefore extended and an new sub-question was defined. This chapter answers the new sub-question:

How do the factories and suppliers perform if a redesign is introduced in the control structure?

First, the current control structure is described, next the opportunties for improvements and characteristics of an ETO control structure are discussed, and the actual redesign is developed. The chapter finalizes with the results. The production control model of Bertrand and Muntslag (1993) is used as guidance during the redesign, and within each step, there is shortly referred to their model.

This report does not take the different characteristics of VIA in consideration, as too little information is available about the factory in America. In Chapter 2, it is stated that VIA is not operating yet, and that Vanderlande is still equipping the factory and collecting information about transportation possibilities.

This information is indispensable if one wants to create a redesign that considers the characteristics of the control structure of America. For simplicity, it is therefore assumed that there are no differences between the European factories and the American factory and that the standard lead-time given by a supplier is applicable to each factory.

7.1 Current Control Structure

Chapter 2 explaines the current control structure of SCCE and manufacturing at Vanderlande. Figure 16 illustrates the current control structure from sales engineering to the FG stored at the distribution centre, as the sales engineering process and FG stockpoint mark the boundaries of the system that is in the scope of the redesign. There are two order acceptance functions in this scope:

1. Project acceptance function, the moment at which a contract is signed or rejected;

2. Order acceptance function, the moment at which an order is accepted and allocated to a factory.

Figure 16, Current Control Structure

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Goods Flow Control (GFC) consists of the high level coordination of all processes and production units.

This currently involves the activities of SCCE and the planning department. According to Betrand et al.

(2015) GFC should also be in charge of the materials supply to the various stock points between the manufacturing phases. However, the material supply is currently the responsibility of the factories and as a result, four local inventory points for purchase items are illustrated.

7.2 Improvement possibilities

There are numerous possibilities for Vanderlande to look into a redesign. The possibilities between and within departments are discussed in Chapter 2, 5, and 6, and are summarized in Table 6. The redesign should address all these possibilities to increase the performance of the factories and second tier suppliers.

Table 6, Improvement possibilities

Department Sales Engineering SCCE Factories Second tier

suppliers

Factories - (3) Order acceptance

is based on historic

7.3 Characteristics of an ETO control structure

Chapter 1 describes multiple ETO characteristics. Uncertainty and complexity are two of those characteristics and these are further elaborated on in this sub-section. Bertrand and Muntslag (1993) state that there are 3 types of uncertainty:

A. Uncertainty of product specifications; during engineering, design, and process planning activities the details for the production and material become known.

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B. Mix and volume uncertainty for future demand; it is very difficult to make a detailed demand forecast because of customer specific characteristics of each project.

C. Process uncertainty; parts of the system are unknown at the beginning of a project. It is difficult to make an estimation of the type and amount of resources required.

Complexity is caused by three factors:

D. Structure of goods flow; controlling the goods flow in both the physical and non-physical stage.

The non-physical stage concerns engineering, design and process planning activies and the physical stage involves in component manufacturing, assembly and installation activities. The internal structure of a product makes it difficult to define routings and operation times.

E. Multi-project character of the situation; a customer order consists of a network of activities and a number or uncertainties. The same departments can control various projects at the same time.

Bottlenecks, caused by uncertainties, can affect other projects.

F. Assembly structure of a product; a system may consist of thousands of purchase items. Specific material might be needed for a specific project. Those items are specially purchased for this project. There are two options: buy the items in an early stage of the project without knowing the full details of the product, or cope with long lead-times.

The characteristics are reflected by the products and processes of Vanderlande’s supply chain and although the organisation is flexible to its customers, there is only little flexibility within the organisation.

7.4 Redesign

The control structure redesign takes complexity and uncertainty, and the improvement possibilities into account, and is developed in three steps:

I. The logistic chain is designed;

II. The production control framework is developed;

III. The decision structure is defined.

Figures 16 to 22 display parts of the redesign and Figure 23 displays the complete redesign. Each part refers to information explained in the sub-section elaborated on proir to the figure. Next to the three steps, the changes within the information systems are considered in the redesign.

7.4.1 Logistic chain

The logistic chain refers to the primary process involved in production planning control. This step is split up into three sub-steps: ‘define the operations’, ‘identify GFC items and production phases’, and

‘establish the production units’.

Define the operations

The operations at Vanderlande are defined in section 2.4.1, and are in short sales engineering to create a conceptual designed system, engineering to define a detailed system, SCCE to to determine the workload, planning to attach a planning to a project, SCCE to divide orders among factories and subcontractors, manufacturing and assembly to order materials and to produce the actual system, and distribution to ship the system to site.

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The redesign adds one activity to SCCE: the procurement of items with a standard lead-time longer than four weeks (Figure 17). Meanwhile, the engineering department can conduct its activities. The factories can still order the material with a lead-time equal to or shorter than four weeks, and place an order request at the suppliers of items with a lead-time longer than four weeks, to make the supplier aware of the location to which their material should be sent to.

Figure 17, Procurement activity

Identify the Goods Flow Control items and production phases

It is the task of GFC to coordinate activities while keeping both the economic and production system objectives in mind (Bertrand et al., 2015). Next to GFC, there is Production Unit Control (PUC), and this control level is involved in the coordination of a specific Production Unit (PU). A PU is a grouping of resource capacities that can perform activities independently and is capable of making reliable commitments (Bertrand and Muntslag, 1993). According to Bertrand and Muntslag (1993) there are five production phases related to GFC items: ‘the conceptual product design’, ‘detailed conceptual product design’, ‘completion of detailed product specifications’, ‘manufacturing of components and assemblies’, and ‘assembly of the finished product’. Per phase, the activities and the application to the logistic chain of Vanderlande are defined. The phases and activities of Vanderlande are illustrated in Figure 18.

Figure 18, Goods Flow Control and production phases

1. Conceptual product design

The first phase involves the development of a global conceptual product design (Bertrand and Muntslag, 1993). This is the sales engineering phase at Vanderlande. The price quotation, delivery date of a project, and conceptual design are agreed upon, but there is still a lot of uncertainty at sub-component level and within the processes. The information available about product characteristics from signed contracts should be reported at GFC level, where this information can be added to the SPO Future demand.

2. Detailed conceptual product design

After a tender is accepted, the second phase is initiated. A detailed view of the design is created and uncertainties about the product and processes are eliminated (Bertand and Muntslag, 1993). This phase is the engineering phase at Vanderlande, in which the detailed design is engineered. By the end of this phase, most uncertainty about the product is eliminated.

3. Completion of detailed product specifications

In the third phase, the engineering drawings and the BOM are developed. Detailed information about the components and assemblies is established and the uncertainty about the products or processes is

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reduced to zero (Bertrand and Muntslag, 1993). The drawings are developed by engineering, but all other activities are executed by engineering manufacturing and production planning, which are part of manufacturing. The activities include defining the routing, creating WKs and WOs and attaching a BOM.

When engineering manufacturing and production planning are finished, all uncertainty about the product and process of production is eliminated.

4. Manufacturing of components and assemblies

The fourth phase concerns manufacturing of sub-components. It is important that manufacturing reports updated information to GFC, allowing them to coordinate the manufacturing and assembly activities. Bertrand and Muntslag (1993) state that this phase starts with the preparation of production documentation and ordering of materials. This is in line with the current control structure at Vanderlande, as material is ordered after all uncertainty about product specifications and routing is eliminated. However, in the redesign, items with a lead-time longer than four weeks are already ordered centrally. After material is received, manufacturing activities can take place.

5. Assembly of the finished product

The final phases consists of assembling the various assemblies and sub-components. The planning activities for this phase precede the physical assembly process (Bertrand and Muntslag, 1993). At Vanderlande, the planning for phase 4 and 5 is combined and preceded before the start of physical production. After the assembly activities are finished, the sub-components are transported to the EDC.

Establish the production units

Now that the production phases are identified, the production units can be established. Bertrand and Muntslag (1993) defined four generic production units required for the five phases:

 PU1: Conceptual Design;

 PU2: Product Engineering;

 PU3: Component Manufacturing;

 PU4: Assembly.

The first two phases can be processed within a single production unit, as the nature of the required capabilities is similar (Bertrand and Muntslag, 1993). However, within Vanderlande, an acceptance function is located between the two phases, the phases contain many activities, and the difference

The first two phases can be processed within a single production unit, as the nature of the required capabilities is similar (Bertrand and Muntslag, 1993). However, within Vanderlande, an acceptance function is located between the two phases, the phases contain many activities, and the difference

In document Eindhoven University of Technology MASTER Redesign of the control structure and inventory control at Vanderlande Gubbels, P.M. (pagina 40-0)