851033

Modelling uncertainty
under a multi-echelon
ERP-controlled
manufacturing system
Siau Ching Lenny Koh and
Sameh Saad
Introduction
Modern manufacturing industry is facing
increasing pressure to improve its
responsiveness to market dynamics. Central to
this are the issues addressed by production
planning and control systems and philosophies.
Customer expectations for shorter delivery
lead-times, greater agility, improved quality and
reduced costs have made the effective
application of an appropriate system a
significant determinant of success for many
manufacturing enterprises.
Within batch manufacture, a wide variety
of systems, each with its own philosophy,
may be adopted. These include material
requirements planning (MRP)[1],
manufacturing resource planning (MRPII),
enterprise resource planning (ERP),
just-in-time, optimised production technology
and advanced production scheduling, used
either discretely or in combination. MRP was
originally designed and developed to operate
within batch manufacture and was defined by
Cox and Blackstone (1998) as a set of backward
scheduling release logic that uses bill of material
(BOM) data, inventory data and master
production schedule (MPS) to calculate net
requirements for parts and finished products.
Its output is a planned order release (POR)
schedule to determine what and when to
manufacture or to purchase.
Koh and Saad (2002a) found that MRP,
MRPII and ERP were the most dominant
systems used in batch manufacture. Enns
(2001) claimed that MRP release logic
centralises within these systems; thus, when
used for production planning and control,
identical POR schedule will be produced.
Therefore, this research refers to the use of
these systems for production planning and
control in batch manufacture as
ERP-controlled manufacturing system.
Over the last 30 years, many millions of
pounds and extensive research effort have been
invested in designing, developing and
implementing MRP, MRPII and ERP systems
in order to improve their performance. A
The authors
Siau Ching Lenny Koh is a Lecturer, Management School,
University of Sheffield, Sheffield, UK and Sameh Saad is
Senior Lecturer, School of Engineering, Sheffield Hallam
University, Sheffield, UK.
Keywords
Uncertainty management, Manufacturing resource planning,
Modelling, Manufacturing systems, Simulation
Abstract
This paper discusses the experimental work in modelling
uncertainty under a multi-echelon enterprise resource
planning (ERP)-controlled manufacturing system. A new
method known as part tagging (Ptag) is successfully
implemented in a material requirements planning (MRP)
planning architecture, which is used to generate a planned
order release (POR) schedule for controlling purchase and
manufacture operations in a batch manufacturing system
using simulation. One of the most important findings is that
parts tardy delivery (PTD) is a more responsive performance
measure compared with finished products tardy delivery
(FPTD); therefore it is recommended that PTD should be
measured to reveal the unmasked effects of uncertainty. The
main conclusion and implication from this experiment are
that an ERP-controlled manufacturing enterprise should
diagnose for uncertainty in a way that produces significant
effects on delivery tardiness, so that reduction of their levels
will significantly minimise tardy delivery.
Electronic access
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Received: December 2001
Revised: June 2002
Accepted: July 2002
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Journal of Manufacturing Technology Management
Volume 15
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Number 3
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# Emerald Group Publishing Limited
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ISSN 1741-038X
DOI 10.1108/17410380410523470
contemporary study by Forrester Research
identified that 40 per cent of enterprises
believed ERP systems would not provide any
optimisation capabilities, while 46 per cent
expected them to play a partial role at best
(Gormley, 1998). Boston-based Advanced
Manufacturing Research predicted that the
ERP market would reach $66.6bn by 2003 at
an estimated compound annual growth rate of
32 per cent (Angerosa, 1999). These systems
are still identified to be under-performing even
under such a rapidly growing market (Koh et al.,
2000b).
This research hypothesises that uncertainty
may be the underlying cause of the
underperformance of ERP-controlled
manufacturing system. Uncertainty is defined
as unpredictable events occurring during
production that cannot be planned for, such as
machine breakdowns, late delivery from
suppliers, scrap (Koh et al., 2000a). If resources
loading and lead-times in manufacturing shop-
floors are identical to those planned in the
systems, then the functions of such systems in
planning and control will be illusory. In reality,
actual resources loading and lead-times are
most likely to be different from those that were
planned due to uncertainties. If uncertainty can
be diagnosed and tackled, realistic manufacture
and purchase orders may be generated, thus
leading to more efficient resource allocation and
improving delivery performance.
How uncertainty has been addressed
Initially, review of the literature on uncertainty
in an ERP-controlled manufacturing system
was performed. This was carried out to examine
what uncertainty has been studied, how it has
been modelled and tackled, what research
methodology has been deployed and the
validity of the results. Comprehensive review of
this kind can be found in Whybark and
Williams (1976), Yeung et al. (1998), Guide
and Srivastava (2000) and Koh et al. (2002).
The following is a sample to typify the review.
A capacity-sensitive, decentralised and
distributed MRP was developed by Love and
Barekat (1989) to solve product order variety
uncertainty in a cellular manufacturing
shopfloor. They suggested that running MRP at
the shop-floor level would achieve low initial
systems costs and enable more flexibility for
future expansion. Brennan and Gupta (1993)
modelled uncertainties on product structures,
external demand, lead-times, set-up and
holding costs, shortage costs and lot-sizing
rules. Simulation modelling was used and
ANOVA results showed that lead-time and
demand uncertainties were individually and
interactively significant determinants of delivery
performance. Number of parts at a given level
in the product structure and its shape were
significant when lead-time and demand
uncertainties were applied. It was identified that
choice of lot-sizing rules and the value of set-up,
holding and shortage costs had significant
effects on delivery performance. Multi-products
MPS and multi-echelon BOM were simulated.
POR schedule was modelled to control all
manufacture and purchase operations.
However, the order release logic implemented
had ignored the possibility of parts completed
early, which consequently allowed orders at the
upper level BOM to be released early. This had
violated the MRP release logic, which says that
an order will never be released until its release
date is reached.
Similar cases can be found in Ho and Carter
(1996), Molinder (1997), Homem-de-Mello
et al. (1999) and also Enns (2001), who have
modelled almost the entire MRP release logic,
that is a multi-echelon dependent demand
BOM with multi-products MPS, where orders
release is governed by POR schedule. However,
two common mistakes were being made: early
release of orders at the upper level BOM when
some parts at the lower levels BOM are
completed early, resulting in parts shortages at
the upper level BOM and distorted resources
planned loading profile; and all parts at the
lower levels BOM are completed early,
overwriting MRP release date in the POR
schedule. Demand, process lead-times and
batch size increments uncertainties were being
independently examined and some useful
buffering or dampening techniques were
proposed, for example, real-time optimisation
approach to minimise lead-times uncertainty.
Nevertheless, a sub-optimal outcome could
result due to partial representation of an
ERP-controlled manufacturing system.
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Modelling uncertainty under a multi-echelon manufacturing system
Siau Ching Lenny Koh and Sameh Saad
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Using the same simulation model, Ho and
Ireland (1998) found that forecast errors do not
cause a high degree of scheduling instability and
in any case it could be dampened using an
appropriate lot-sizing rule. Their study
concluded that applying economic order
quantity and lot-for-lot rules created
significantly more nervous systems than
applying silver meal and part period balancing
rules. It was noted that the former rules
assumed stable demand and hence were not
responsive to large forecast errors, therefore
resulting in more rescheduling. However, the
latter rules incorporated changes of order sizes
over time and hence responded well to forecast
errors. As a result, they need less rescheduling.
Yang and Pei (1999) modelled engineering
changes using a standard for transfer and
exchange product model database. It linked
design tasks with MRP activities. For each
engineering change activity, engineering BOM
data relating to the change that were stored in a
computer-aided design database would be
extracted and transformed to manufacturing
BOM data to be stored in the MRP database.
The modified MRP record was generated and
compared with the original data. Based on this
information, the designer could determine an
appropriate design alternative in order to
minimise the effects on inventory level.
When faced with uncertainty, a variety of
buffering or dampening techniques can be used
to tackle the unwanted effects, such as safety
stock, safety lead-time, overtime, sub-contract,
etc. Buffering refers to any extra quantity of
materials waiting for processing. It could exist
in the form of raw material, semi-finished
goods, or work backlog that is purposely kept
behind a work centre. An example of buffering
technique is safety stock. Dampening refers to
planning methodologies (not physical
inventory), such as rescheduling and safety
lead-time. It was identified that ERP-controlled
manufacturing enterprise applied these
techniques with little or no discrimination and
no consensus was found that enterprises using
these techniques would perform better than
their counterparts (Koh et al., 2000b).
This sample of literature highlighted some
research gaps that have been overlooked.
Despite the wide range of uncertainties
examined, little research has considered the
significance of underlying causes of uncertainty.
Many of the uncertainties examined were
themselves the product of a number of other
uncertainties. For example, unplanned machine
downtimes could be due to planned
set-up/change-over times exceeded, machine
breakdowns or planned maintenance times
exceeded. Thus, modelling unplanned machine
downtimes is too rudimentary to identify the
relative effect of each of the possible causes.
Simulation modelling has been widely used to
model uncertainty. However, little emphasis
has been placed on ensuring that the simulation
model truly reflected MRP release logic in a
multi-product and multi-echelon dependent
demand system. This review identified that
many researchers have partially modelled the
MRP release logic. In addition, operating
environment was often being ignored. Implicit
assumption was made for which operating
environment has no correlation with the types
of significant uncertainty. However, Koh et al.
(2000a) identified that an ERP-controlled
manufacturing enterprise, that operated in
mixed-mode environments, implying with
demand mixture of some make-to-stock,
make-to-order and assemble-to-order products,
suffered more uncertainties.
This paper aims to address these gaps by
modelling underlying causes of uncertainty
under a multi-echelon ERP-controlled
manufacturing system. The entire MRP release
logic would be represented using simulation
modelling. A mixed-mode operating
environment would be modelled.
ERP-controlled manufacturing system
simulation model development
Underpinning the ERP-controlled
manufacturing system modelling is to represent
the manufacturing system within which its
purchase and manufacture operations are
controlled by MRP release logic. It is therefore
important to understand how this logic can be
effectively implemented in a simulation model.
Knowing that a finite-capacitated
manufacturing system might distort MRP
planned release date and batch size for parts,
Koh and Saad (2002b) suggested that the most
important governing rules in this case were to
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ensure: multi-echelon demand dependency
between parts for releasing parts at the upper
level BOM is linked, and correct release date is
applied whenever delay or early completion
occurs.
To this end, an ERP-controlled batch
manufacturing system simulation model was
programmed using SIMAN V within the
ARENA simulation software. The
parent-and-child relationships were modelled
within the simulation model. A parent part is
defined as any part or assembly at the upper
level BOM chain, which is made by the
completion of all required child parts at the
associated lower level BOM chain.
Multi-echelon dependency can be realised
when a parent part is also a child part for
another parent part. It has been justified that a
BOM of at least three levels and above would
benefit from the role of an MRP, MRPII or
ERP system to generate purchase and
manufacture orders (Koh, 2001).
The POR schedule represents the output
from an infinite capacity MRP run. The
simulation model must trial the dependent
demand logic in MRP and at the same time
operates as a finite scheduling platform. Typical
data contained in a POR schedule is insufficient
to peg the parent-and-child relationships of
each part in the simulation model, because
many different orders would be placed for the
same part and hence recognition of direct
parent-and-child relationships is crucial. To
model direct pegging, a new method called part
tagging (Ptag) was developed. The Ptag method
was designed in such a way that any additional
attribute was programmed in the POR schedule
and the simulation model. These attributes
enabled all parts to recognise their parent part
for modelling demand dependency, within
which all parent parts cannot be released until
all required child parts have completed their
operations.
The typical data contained in a POR schedule
include customer order number, part number,
batch size, release date and due date. During
order execution, a routeing number would be
assigned to each part. The additional attributes
from Ptag method implementation were parent
tag, part tag and child tag. Parent tag and part
tag define the parent and child relationship of
the parts with an equal value. To verify this
relationship, comparison was made between
parent tag of the child part and part tag of
the parent part for matching value. The
comparison between parent tag and part tag
was made unlimited to the levels of the BOM;
therefore it accommodated the condition when
a parent part was also a child part for another
parent part. Child tag defines the number of
child parts of a parent part. The child tag for
parts at the lowest level BOM would always be
zero (purchased parts have no child) and others
were initially assigned according to the number
of child parts required in the BOM.
Figure 1 shows the implementation of the
part tagging (Ptag) method. A total of nine
attributes for each record were defined in the
POR schedule: customer order number, part
number, batch size, release date, due date,
routeing number, parent tag, part tag, and child
tag. Initially, the records in the POR schedule
were read into the simulation model. A search
was made to identify whether a parent part
exists. Two conditions were programmed to
perform this: child tag of the part must be
greater than zero to conform with a parent part
and if violated it conforms with a purchased
part. All parent parts were routed to a queue to
wait for availability of the required child parts.
This scenario of matching the parent with the
child parts was programmed within the
simulation model to reduce simulation time. All
purchased parts were routed for supply.
When they ultimately arrived, implying that
the required purchase or manufacture
operations were completed, a signal was sent to
search for their parent part in the queue.
Identical values between parent tag of the child
part and the part tag of the parent part would
decrement the child tag of the parent part by
one. If an identical value could not be found, it
implied that it is a finished product and hence
can leave the system. This scenario was also
programmed to ensure that all required child
parts are completed before the parent part can
be released.
Figure 2 shows an example of the way that
parent-and-child relationship is linked in a
snapshot of a POR schedule. For customer
order number 19546 on product number 19,
there were a total of seven immediate child
parts required. Two out of the seven were
shown, namely part number 19001 and 19002.
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To design identical values of parent tag and part
tag to verify the parent-and-child relationship,
customer order number was used to create a
datum. The part tag was generated from a
combination of customer order number and
part number. The parent tag was generated
from a combination of customer order number
and parent's part number. This would result in
identical values and therefore would enable
parent and child recognition to be carried out
effectively.
For parent parts that have child shortages
(Child tag >0), they would be re-routed to their
queue and continue to wait for other required
child parts to arrive. If a parent part was also a
child part for another parent part, the same
comparison would recur. Only when no parent
part would claim for any child would this
routine cease.
When all required child parts have arrived, a
second constraint is applied to evaluate their
planned release date with the potential
release date. Figure 3 shows the release date
evaluation logic. This was executed to ensure
that parts are never released early, because the
MRP release logic would only release the parts
when the release date is reached in this
condition. As a result, it was programmed so
that the planned release date would overwrite
the potential release date (time now (TNOW)
Figure 1 Implementation of the part-tagging (Ptag) method
Figure 2 Parent-and-child linkage using Ptag method in a POR schedule
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indicates current time in the simulation) by
delaying the time deviation. However, if delay
has occurred during operations, late release of
parent part would result. The value of TNOW
would automatically be applied in this
condition. On-time completion of required
child parts would simply imply that the planned
release date is a valid time to start the next
operation. Uncertainty, which tends to occur
after planning, that is post-MRP run, would
then be programmed in the simulation model.
Experimental design
To achieve a robust outcome, an experimental
design for modelling uncertainty was devised.
Several issues were addressed:
.
What parameters to use to model a
multi-echelon ERP-controlled
manufacturing system?
.
What are the appropriate performance
measures?
.
What uncertainties to model?
.
How to model the uncertainties?
.
How many replications are required?
.
How to set up a robust simulation datum?
Parameters derivation
The parameters in the simulation model were
derived from a commercial transformer
manufacturer who uses a proprietary ERP
system for production planning and control.
This is a medium-sized enterprise operating in
batch manufacture. Their product nature,
which has overall 60 per cent purchase parts
and 40 per cent manufacture parts with a
minimum of three and a maximum of five levels
BOM (multi-echelon); and demand pattern,
which combines a mixture of make-to-stock and
make-to-order items (mixed-mode),
substantiated the fitness to control their
purchase and manufacture operations through
an ERP system.
Their resources comprise ten types of
machine, for example, brake pressure or coiler
and six types of labour-intensive workstation,
for example, assembler or inspector, which were
all modelled with their current capacity level of
three for machine and five for labour in each
workstation respectively. Of their most popular
products (multi-product), ten were modelled to
give a more accurate response on current
resource implications and delivery
performance. These products consisted of three
runners, four repeaters and three strangers
(Parnaby, 1988) to create a mixed demand
pattern. This has resulted in ordering a total of
434 different parts. Two years' MPS was run
through the MRP planning architecture,
resulting in some 50,000 orders in the POR
schedule. This represented their workload over
the years.
Performance measures
Koh et al. (2001) identified that the level of
finished products tardy delivery (FPTD) was
the preferred performance measure by
ERP-controlled manufacturing enterprise.
However, FPTD was found to be under-
responsive to level increments. Figure 4 shows
an example of a BOM to explain this finding. If
part number 10006 were delivered late and no
slack existed to recover the tardiness thereafter,
the finished product 10001 would be delivered
late. Hence, a 100 per cent FPTD would be
recorded. If part number 10008 were delivered
late simultaneously, no increments of FPTD
would result. Thus, irrespective of the number
of tardy parts in a single BOM, FPTD would
not provide a net effect.
If the level of parts tardy delivery (PTD) were
measured, then the effect from part number
10006 would cause part numbers 10005, 10003
Figure 3 Release date evaluation logic
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and the finished product to be late. The effect
would be 44.4 per cent PTD (as there were nine
parts). Since PTD provided a more responsive
outcome, it was chosen as the performance
measure.
Uncertainties modelling
In the previous study, Koh and Saad (2002a)
found eight underlying causes of uncertainty
that were likely to result in delivery tardiness in
an ERP-controlled manufacturing system.
They were: late delivery from suppliers
(LDFS), insecure stores (INST), planned
set-up or change-over times exceeded (PSE),
machine breakdowns (MBD), waiting for
labour (WFL), waiting for tooling (WFT),
unexpected/urgent changes to schedule
affecting machines (USM), and customer
design changes (CDC). Simulation
experiments for these uncertainties would be
designed. The manufacturing enterprise that
provided data for developing the simulation
model was one of the respondents in that study;
hence the results obtained in this study could be
validated.
A low and a high level were set to model the
uncertainties in the best and worst case
scenario. The levels set for each uncertainty
were determined by the responsiveness of the
simulation model to small changes. The
simulation methods used to model the
uncertainties reflected how it would occur
realistically. Table I shows the simulation
methods for modelling the uncertainties with its
low and high levels setting.
Delay could be either discretely distributed by
a specified proportion of parts or distributed
within the operation time of their routeings.
Interviewing several ERP-controlled
manufacturing enterprises has concluded that
delay is often distributed discretely with a
proportion of parts; therefore this was applied
to model these uncertainties. When applying a
discrete probability distribution, it was found
that greater robustness would be achieved via
varying the magnitude of delay than its
frequency; hence this rule was implemented in
setting the levels for all uncertainties. Figure 5
shows the robustness of varying frequency and
magnitude using LDFS as an example.
It can be seen that increment of frequency of
uncertainty would proportionally increase the
level of tardy delivery, but increasing the
magnitude of uncertainty would reach a steady
state at which any further increment would not
result in additional tardy delivery. The latter
was useful in determining a worst case scenario
for an uncertainty. The level at which steady
state was achieved would be used to set its high
level. Therefore, LDFS was set at the tardiness
of one day and three days (assuming an eight-
hour working day) respectively to model its low
and high levels. The levels of frequency
modelled for each uncertainty were matched
with the results collected from a previous survey
(Koh and Jones, 1999).
LDFS, PSE, WFL and WFT are intrinsically
lead-time-oriented, which implies that delay
can be used to model these uncertainties. The
difference between their implementation is that
LDFS was modelled on purchased parts, PSE
on machine-oriented resources that involve
set-up/change-over, WFL on labour-oriented
resources such as manual assembly workstation,
Figure 4 Responsiveness of FPTD and PTD
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and WFT on tools. INST was also modelled
using the same distribution and rules, assuming
that delays occur due to reordering for
purchased and/or manufactured parts that have
gone missing. However, CDC was modelled by
varying frequency because delay due to
engineering changes was modelled using
alternative routeings with additional operations,
to which the randomness was applied in the
routeings selection process.
MBD was modelled with mean time
between failures (MTBF) and mean time
to repair (MTTR). MTBF modelled how
frequently breakdown occurs and how
reliable is the machine. MTTR modelled
how long a breakdown will last and how
quickly repair can be made. Pegden et al.
(1995) recommended an exponential
distribution to model MTBF and a gamma
distribution for MTTR. MTBF was fixed and
MTTR was varied because feedback from
interviewing the ERP-controlled
manufacturing enterprises has concluded that
the frequency of machine breakdowns is very
low. MBD was only implemented on
machine-oriented resources.
USM was modelled with a batch size
multiplier, assuming that batch size increment
would result due to unexpected/urgent changes
to schedule. A double batch size (100 per cent)
was modelled with variation in number of
orders affected. Only orders requiring
machine-oriented resources input were
affected.
Table I Simulation methods and parameter levels settings for uncertainties modelled
Parameter levels setting
Uncertainties Codes Simulation methods Low High
Late delivery from suppliers LDFS Purchase lead-time increment subjected to discrete
probability distribution
Freq =2 per cent
Mag =480 mins
Freq =2 per cent
Mag =1,440 mins
Insecure stores INST Purchase or manufacture lead-time increment subjected
to discrete probability distribution
Freq =2 per cent
Mag =480 mins
Freq =2 per cent
Mag =1,440 mins
Planned set-up/change-over times
exceeded
PSE Set-up time increment subjected to discrete probability
distribution
Freq =5 per cent
Mag =15 mins
Freq =5 per cent
Mag =240 mins
Machine breakdowns MBD Machine failure subjected to mean time between failures
(MTBF): exponential distribution on Brake
pressure =60,000 mins; Coiler =24,000 mins and
Weld =30,000 mins; and mean time to repair (MTTR):
gamma distribution
Brake pressure
=600 mins
Coiler =240 mins
Weld =300 mins
Brake pressure
=2,400 mins
Coiler =2,400 mins
Weld =2,400 mins
Waiting for labour WFL Manufacture lead-time increment for order with
labour-oriented resources subjected to discrete
probability distribution
Freq =5 per cent
Mag =15 mins
Freq =5 per cent
Mag =240 mins
Waiting for tooling WFT Manufacture lead-time increment for order with tooling
resources subjected to discrete probability distribution
Freq =5 per cent
Mag =30 mins
Freq =5 per cent
Mag =480 mins
Unexpected/urgent changes to schedule
affecting machines
USM Doubled batch size for manufacture order with
machine-oriented resources
No. of orders
affected =1
No. of orders
affected =10
Customer design changes CDC Alternative routeing with additional operations subjected
to discrete probability distribution
Freq =4 per cent Freq =10 per cent
Key: Freq =frequency; Mag =magnitude; mins =minutes
Figure 5 Robustness on frequency and magnitude variation of LDFS
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Experiments and replications
An experiment consists of varying the levels of
each uncertainty. For example, experiment 1
set all uncertainties to low level and experiment
n +1 set the first four to low level and the next
four to high level. Every experiment has
different combinations of levels setting. The
number of levels per uncertainty determines the
total number of experiments. Two levels were
considered sufficient in this simulation study,
because the objective was to model uncertainty
realistically at both ends of the spectrum, i.e.
high and low levels. Therefore, a full factorial
design of eight uncertainties each at two levels
would require 256 (2
8
) experiments.
Replications repeat the same experiment x
number of times. The purpose of replications is
to minimise variations by obtaining an
approximately normal distributed response.
The variations come from the use of random
seed in the probability distribution. A minimum
of ten replications for each experiment is
necessary (Pegden et al., 1995). Hence, a total
of 2,560 replications would need to be run.
This amount was considered too many; thus a
half factorial design was used instead.
Therefore, a total of 128 experiments was
studied, resulting in 1,280 replications. This is a
Resolution VIII design, implying that any
interactions above three-way are confounded
(Croarkin and Tobias, 2001). Hence, only up
to three-way interactions were examined.
The normality of simulation responses in this
study was assessed using Pegden et al.'s (1995)
formulae. A normal distributed response was
measured by an acceptable half-width (h) value,
considered to be less than 5 per cent of the
sample mean (Saad, 1994), while the
confidence level () was set in all experiments
at 95 per cent. This implied that a maximum
5 per cent standard error of the mean was
allowed amongst the responses from the
replications for each experiment. The formula
to calculate the h value is:
h = t
1=2;n1
S(x)
n
_ ;
where h =distribution half-width;
t
1=2;n1
= standard deviation in t-distribution
for confidence level; S(x) =an unbiased
estimator of the standard deviation; and
n = number of replications.
A 5 per cent error from the sample mean was
then calculated to yield the lower and upper
confidence intervals as below:
Confidence interval = x h;
where x =sample mean.
A normal distributed response is achieved
when the error from the sample mean is _5 per
cent, implying that it lies within the confidence
interval and hence no further replications are
required. Otherwise, to calculate the number of
further replications, the following equation was
used:
n
+
_ n
h
h
+
2
;
where n* =total replications required; n =initial
number of replications; h =initial calculated
half-width for n replications; and h* =desired
distribution half-width.
This process of obtaining a normal
distributed response has resulted in a total of
1,534 replications for the entire simulation
study.
Simulation datum
A warm-up period of 25,000 minutes was set
for the simulation run to eliminate any bias
performance at the early stages of the process
when all resources were not run in normal
capacity. All results during this period would be
discarded. The number of orders in the POR
schedule determined the run length of the
simulation.
In order to measure the net effects of
uncertainty, any slack within the simulation
model was initially removed prior to modelling
uncertainty. This would eliminate any possible
effects from the application of buffering or
dampening techniques. This was achieved by
gradually reducing the capacity of the resources
and parts lead-times. Ideally, only when all
parts were delivered on time can it be
concluded that slack was totally removed. This
level was very difficult to achieve, knowing that
the data provided were masked by the buffering
or dampening techniques applied in the case
enterprise and that unmasked data do not exist.
Hence, an approximation was considered
acceptable and it was decided that only when
the minimum level of parts that could be
delivered early and PTD remained at its
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minimum, would the level of PTD be offset in
all experiments to reveal the net effects.
Table II shows the results of the iterations
involved. At the ninth iteration, an
approximate optimum result was obtained
with a minimum PTD of 0.2 per cent and parts
delivered early of 0.18 per cent. A small
amount of slack still existed in the simulation
model and hence all results obtained from the
experiments would be slightly better than
those that would be recorded in reality.
However, this level of accuracy was considered
sufficient to demonstrate the effects of
uncertainty.
Results, analysis and discussions
The PTD simulation results were collected and
scrutinised in analysis of variance (ANOVA)
using SPSS. ANOVA is an appropriate analysis
to assess the effects of uncertainty, because it
analyses whether changes in levels of the
uncertainty will increase PTD with a set
acceptable level of confidence. A p <0.05 was
considered to exert significant effects. ANOVA
provides two types of analysis: main effects and
interactions analyses. These analyses are valid
for examining what uncertainty independently
and/or interactively results in a significant level
of PTD.
Table III shows the summary header and
footer data from ANOVA. It can be seen that a
total of 1,534 replications were made and there
were significant effects of uncertainty to PTD.
Knock-on and compound effects
Whenever any delay affected a part within a
BOM, it would propagate up through the BOM
chain to cause additional tardiness, unless slack
existed to recover the delay. The extent of
tardiness and the number of parts affected were
dependent on the BOM level at which the
uncertainty occurred. This phenomenon may
be termed a knock-on effect. Where a delay
occurred on a resource, it affected not only the
batch being processed, but also every batch held
in the queue for the resource. This queue could
contain batches from a number of different
BOM; thus delays could propagate across
products, which created consequent knock-on
effects on the products concerned, unless slack
existed to recover the delay. This phenomenon
may be termed as a compound effect. Figure 6
illustrates examples of PTD resulting from
knock-on and compound effects due to LDFS
and MBD.
LDFS at purchased part number 10006
caused part numbers 10005, 10003 and
product A to be late. The tardiness from part
number 10006 therefore resulted in a knock-on
effect on all of its subsequent parts in the BOM.
If the coiler broke down while part number
10005 was being processed, this would result in
PTD of the part itself and a knock-on effect on
all subsequent parts in the BOM (product A).
However, if part number 20005 were in the
queue at the coiler waiting to be processed after
the completion of part number 10005, this
would also result in PTD of part number 20005
and a knock-on effect on all subsequent parts in
Table II Result of simulation datum experiments
Iterations
Measures 1 2 3 4 5 6 7 8 9
Parts tardy delivery (PTD) (%) 0.07 3.09 0.20 0.21 0.27 0.09 0.16 4.58 0.20
Parts early delivery (%) 0.42 0.04 0.21 0.19 0.17 1.30 1.16 1.04 0.18
Parts on-time delivery (%) 99.51 96.87 99.59 99.60 99.56 98.61 98.68 94.38 99.62
Table III ANOVA summary header and footer results
Source Sum of square (SS) Degree of freedom (df) Mean square (MS) F p
Corrected model 57,225.029 92 622.011 98.463 0.000
Intercept 149,609.592 1 149,609.592 23,682.779 0.000
Error 9103.130 1,441 6.317
Total 256,965.068 1,534
Corrected total 66,328.159 1,533
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the BOM (product B). The effect from MBD
propagated across products and hence
compounded PTD would be recorded. Since
prediction on parts that would be forming in the
queue of the affected resource in the future was
difficult, tackling the compound effect was
relatively more severe.
Main effects
Table IV shows the results of the main effects
analysis. There were four uncertainties that
exert significant effects on parts tardy delivery
(PTD), namely late delivery from suppliers
(LDFS), machine breakdowns (MBD),
unexpected/urgent changes to schedule
affecting machines (USM), and customer
design changes (CDC).
When LDFS occurred, the part affected
would be recorded as PTD. This was due to the
knock-on effect up through the BOM chain, the
extent of which depended on the level at which
the part existed within the BOM. Within any
BOM, purchased parts tend to occur at lower
levels, causing maximum knock-on effects up
through the structure. Therefore, LDFS was
found to have significant effects on PTD.
MBD results in machine stoppage. Although
the direct effect was on parts processed at the
affected machine, parts from several different
products that were in the queue when the event
occurred would also be delayed. MBD
produced compound, then knock-on effects on
PTD. Those parts, either in-process and/or in
the queue of the affected machine would be
recorded as PTD. In addition, their parent
parts would also be delayed due to the
knock-on effect, causing multiple parts to be
recorded as PTD. This persisted until the
backlog was cleared. These effects have resulted
in significantly high PTD and therefore MBD
was found to be significant.
When an order was affected by USM, the
increase in batch size caused an extended stay
within all work centres due to be visited. This
primarily would result in resource unavailability
for other orders requiring the same resources,
thus inducing compound effect. When this
effect took place, they consequently induced
secondary knock-on effect, as parent parts
would be started late. The effects were found to
be significant but not as strong as MBD.
Figure 6 PTD due to knock-on and compound effects of LDFS and MBD
Table IV Main effects results
Source SS df MS F p
LDFS 3,705.849 1 3,705.849 586.626 0.000*
INST 19.618 1 19.618 3.105 0.078
PSE 6.953 1 6.953 1.101 0.294
MBD 50,881.286 1 50,881.286 8,054.365 0.000*
WFL 0.240 1 0.240 0.038 0.846
WFT 0.532 1 0.532 0.084 0.772
USM 378.375 1 378.375 59.896 0.000*
CDC 53.634 1 53.634 8.490 0.004*
Key: * Significant uncertainty at p <0.05
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Additional operations of CDC have had
significant effects on PTD. As some additional
resources capacity was consumed, resources
unavailability has delayed the scheduled order,
therefore creating a queue. Parts in the queue
were unpredictable, hence resulting in a
compound effect. Consequently, release and
delivery timeliness of parent parts of the delayed
parts would also be affected. In short, CDC
produced compound, then knock-on effects on
PTD.
Interactions
Interactions analysis was executed to assess the
existence of any significant interactions between
uncertainties that would result in additional
effects on PTD. Two significant two-way
interactions, namely LDFS*MBD and
MBD*USM, and four significant three-way
interactions, namely LDFS*PSE*WFL,
INST*PSE*USM, INST*MBD*WFL, and
WFL*WFT*USM, were identified. Table V
shows the significant results from the
interactions analysis.
Interactions between LDFS and MBD could
only happen when the latter followed the
former. On its own, LDFS would result
primarily in a knock-on effect. However, the
affected parent batch could also experience
MBD that occurred in the same BOM chain
and hence created additional compound and
knock-on effects. Although LDFS only affected
purchased parts directly, changes in the
resources loading profile could result in its
interaction with MBD, because, when the
affected part ultimately arrived, the resources
loading profile would be different from before.
MBD could occur in the new profile,
subsequently resulting in their parent parts
being delayed again. These situations had
occurred frequently and hence were found to be
significant to PTD.
Both MBD and USM, when acting
separately, produced a primary compound
effect. Their interactions implied that their
individual compound effects were further
compounded when acting together.
Additionally, their knock-on effects as a result
of their compound effects would be amplified
too. Therefore, additional PTD resulted.
LDFS*PSE*WFL, INST*PSE*USM and
INST*MBD*WFL all consisted of primary
compound effects with the exception of
knock-on effects from LDFS and INST. If
purchased parts were affected by INST, it
produced a knock-on effect. If manufactured
parts were affected, then resources availability
would affect remanufacture of the missing part
and eventually result in a compound effect.
WFL and PSE resulted in hold-up in resources,
which created compound effects.
WFL*WFT*USM consisted only of primary
compound effects on each. WFT caused
resource unavailability, which led to extended
queue for batches requiring the same tools.
The existence of significant interactions
between these uncertainties implied that, when
they acted on the same order, batch or part
within the same BOM chain, an additional
effect (larger PTD) occurred over and above
the main effects. Many other interactions could
have existed, but were found to be not
significant, as the additional level of PTD could
be tolerated.
Conclusions and implications
This paper has addressed the research gaps
highlighted from the literature on uncertainty
Table V Significant interaction results
Source SS df MS F p
LDFS*MBD 238.565 1 238.565 37.764 0.000*
MBD*USM 38.791 1 38.791 6.140 0.013*
LDFS*PSE*WFL 25.076 1 25.076 3.970 0.047*
INST*PSE*USM 43.305 1 43.305 6.855 0.009*
INST*MBD*WFL 29.125 1 29.125 4.610 0.032*
WFL*WFT*USM 30.846 1 30.846 4.883 0.027*
Key: * Significant uncertainty at p <0.05
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under a multi-echelon ERP-controlled
manufacturing system and provided some
insights into the way that uncertainty should be
tackled. These can be summarised by the aim of
this paper, which was to model underlying
causes of uncertainty under a multi-echelon
ERP-controlled batch manufacturing system
within a mixed-mode operating environment,
using simulation modelling.
A new method known as part tagging (Ptag)
was developed to effectively model the MRP
release logic. This method was successfully
implemented in an MRP planning architecture,
which was used to generate a planned order
release (POR) schedule for controlling purchase
and manufacture operations in a batch
manufacturing system. The manufacturing
system was represented in a simulation model,
within which the Ptag method was also
embedded to enable integration between two
architectures to model an ERP-controlled
manufacturing system.
It was programmed in the simulation model
that operations were delayed by batch rather
than on a unit basis. Multi-product MPS and
multi-echelon BOM were parameterised in the
POR schedule, while demand dependency
between parts and parts release timeliness was
programmed in the simulation model. Using a
mixture of runner, repeater and stranger
products in the MPS, the mixed-mode
demand pattern was satisfied. It can be
concluded that the underpinning requirement
of this paper, which was to develop a
multi-echelon ERP-controlled batch
manufacturing system simulation model
operating under mixed-mode environment,
has been achieved. Simply by changing the
parameters involved, this simulation model
can be used to model any uncertainty in such
environment in the future.
All key issues in design of experiments were
addressed. A real enterprise case was studied
and data from the enterprise were used to
derive the parameters for the ERP-controlled
manufacturing system. One of the most
important findings was that parts tardy delivery
(PTD) was a more responsive performance
measure compared with finished products tardy
delivery (FPTD); therefore it was
recommended that PTD should be measured to
reveal the unmasked effects of uncertainty. A
total of eight underlying causes of uncertainties,
each at two levels, were modelled in 128
experiments. A total of 1,534 replications were
made to achieve a normal distributed response.
An approximately balanced manufacturing
system datum was achieved to enable the net
effects of uncertainty to be measured rather
than any gross effects as a result of buffering or
dampening techniques.
The simulation results of PTD were analysed
using ANOVA at the 5 per cent significance
level. The main effects analysis identified four
significant uncertainties: late delivery from
suppliers (LDFS), machine breakdowns
(MBD), unexpected/urgent changes to
schedule affecting machines (USM), and
customer design changes (CDC). This implied
that increasing the levels of these uncertainties
would significantly increase the level of PTD.
Some significant two- and three-way
interactions were also identified in the
interactions analysis. This showed that a
significant additional level of PTD would result
when these uncertainties occurred
simultaneously. Therefore, it can be concluded
that ERP-controlled manufacturing enterprise
should diagnose for uncertainty that produces
significant effects on delivery tardiness, so that
reduction of their levels will significantly
minimise tardy delivery.
It can be learned from this experiment that
the exertion of such significant effects was due
to knock-on and compound effects of
uncertainty. Knock-on effects are relatively
easy to measure compared with compound
effects, because parts where used can be
analysed, but only after uncertainties have
taken place, whilst propagation of compound
effects cannot be determined due to part type
unpredictability in the queue of the affected
resources and future incoming parts to the
queue. It can be highlighted that significant
uncertainties that are likely to result in
compound effects need to be tackled
effectively and efficiently relative to those that
produce knock-on effects.
To prevent diffusion of knock-on and
compound effects and to improve delivery
performance, an ERP-controlled batch
manufacturing company is encouraged to
record their levels of uncertainties, diagnose
their levels of significance to delivery tardiness,
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understand the knock-on and compound effects
of uncertainties, and finally target their
improvement effort on those that are found to
be significant. The above activities were carried
out at the selected ERP-controlled batch
manufacturing company. After
implementation, a significant reduction of parts
tardy delivery (PTD) was achieved.
Note
1 For this and all succeeding acronyms see Appendix.
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Appendix. Glossary
ANOVA Analysis of variance
BOM Bill of material
CDC Customer design changes
ERP Enterprise resource planning
FPTD Finished products tardy delivery
INST Insecure stores
LDFS Late delivery from suppliers
MBD Machine breakdowns
MPS Master production schedule
MRP Material requirements planning
MRPII Manufacturing resource planning
MTBF Mean time between failures
MTTR Mean time to repair
POR Planned order release
PSE Planned set-up/change-over times
exceeded
Ptag Part tagging
PTD Parts tardy delivery
TNOW Time now
USM Unexpected/urgent changes to
schedule affecting machines
WFL Waiting for labour
WFT Waiting for tooling
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