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This paper presents an integrated simulation and activity-based management approach for determining the best sequencing scheme for processing a part family through a manufacturing cell. The integration is illustrated on a loop or U-shaped manufacturing cell and a part family consisting of four part types (A, B, C, and D). Production requirements for the cell demand that part batches be processed one type at a time. For example, all part A’s are processed until weekly demand is met, then part B’s, etc. The objective of this example is to determine the best part sequence (e.g., ABCD, DCBA or CABD). In addition to traditional measures, the simulation model produces detailed activity-based costing estimates. Analysis of cost and performance parameters indicates part sequence CDBA provides the best overall choice. This sequence achieves a low per unit manufacturing cost, minimizes average time in the system and in-cell inventory cost, and maximizes unused production capacity. Although the scope of this effort was restricted to a small scale manufacturing cell, the costing concepts have general applicability to manufacturing operations at all levels.