Computation Section
Process Flow Models

- Raw Materials


Every product requires material inputs into one or more operations. The amounts used depend on the product demands and the amounts of flow through the operations per unit of product. Raw materials generally have costs that affect the profitability of the product. They may also be limited in amount and may cause bottlenecks to production.

The main difference between resources and raw materials is that resources have a time dimension and production uses up the time-capacity of the resources. Raw material expenditures depend on the number of items passing through operations, rather than the time spent.



Checking the Raw Materials box in the dialog causes the process definition to include raw material columns, one for name and another for amount. The raw materials described by these columns are called System Raw Materials. The other boxes checked in the figure, add other features specific to the example. This is the same example used for the resource discussion, but now we concentrate on raw materials.

The field labeled General Raw Materials specifies the number of columns to include for raw materials that are used for several operations in the process. We use Transactions as a general raw material for the example.

Although we do not specify that parameter columns be included, two columns are automatically created because they are necessary for the time functions.


To illustrate we use a serial pull process with inventories and queues. The triangle for operation 1 represents the raw material inventory. The triangle for operation 7 represents the finished goods inventory. The d-shaped symbols for operations 2 and 4 are delays for the queues waiting for machining operations 3 and 5.

We add a second pull location at the output of operation 6. The value of 0.2 indicates that for each unit leaving operation 7, 0.2 will leave at operation 6. The two pull amounts are not independent, the flow withdrawn from 6 will always be 20% of the amount withdrawn from 7. If independent demands at the two locations were required, separate processes would be defined for each pull location.

Parameters for the operations are on the Excel worksheet below. The worksheet is shown in two parts for clarity. All operations use lot sizes of 10. Only operations 3, 5 and 6 have nonzero operation times. Nonzero scrap rates are at the three processing operations, so their ratios are less than 1, and the unit flows increase as we move backwards from operation 7. Defects are not included in the model, so there is no need for inspection. Operation 6 models a batch process where 10 items are processed at the same time.

The process uses raw materials as listed in column J. The names of the raw materials are important, because the use of like-named raw materials by separate operations and separate processes are combined for the economic analysis. The four system raw materials for the example are: kit, part 1, part 2 and coat.

The entries in column J are called System Raw Materials. Column K shows the number of units of each raw material used by the operation. The measurement dimension may differ between raw materials. In the example, the kit, part 1, and part 2 raw materials are measured in units. Coat refers to a material that covers the product in operation 6. We assume that coat has a liquid measure, liters. In the example, we indicate that one kit is required for each item passing through operation 1, the raw material inventory. One part 1 is required for each item passing through machine 1. Machine 2 requires only 0.5 units of part 2 for each item passing through. This might represent some customer selected part that is not required for every item. Machine 3 implements a coating process that uses 0.4 liters per item. Some entries in column J are blank, indicating that the associated operations use no raw material. In this case the number in column K, the default value, is irrelevant.

We title column L, the general raw material column, Transact to stand for computer transactions. Each item passing through an operation requires a data transaction with the central computer to identify the item and track its progress. The analyst wants to compute the number of transactions required. Although this might not fit the traditional definition of raw material, it is an example of a quantity where the count is important, not the time of passage. We see a coefficient of 1 for the RM inventory and machine operations, indicating that a computer transaction is required for each item passing through these operations.

Note that raw materials do not affect the flow of product through the system. The flow is caused by the pull or push values associated with the operations. With raw materials we count quantities that are related to the flow.


Data Items for the Example (related to raw materials)





Raw Material Type

This is the raw material identifier used by the operation. Raw materials are identified with names. Different operations and processes may use the same raw materials.


Raw Material Amount

This is the number of units of raw material used by the operation. It has no meaning if the associated Raw Material Type is blank or 0.
General Raw Materials
The dialog allows the user to produce columns for general raw materials. An example might be electric power. An entire column is provided for each general raw material, so different operations may use the same raw material. The name of a general raw material should be placed on the top of the column. A general raw material should not use the same name as the names listed in the Raw Material Type column.


Economic Analysis - Raw Material Use and Cost


The Economic Analysis option on the OM/IE menu produces the Project worksheet. All parts of the worksheet are constructed by the add-in with default data in several areas defined for user input. Generally, ranges with a white background and maroon outlines are for user data, yellow areas hold Excel formulas and green areas hold the output of computer computations. The user data for the example has been entered by the author to illustrate meaningful values.One exception to the color coded cells are those that hold the material names. These have been left white although they are filled in by the add-in.

Several of the ranges on this worksheet refer to raw materials. Although, not specifically showing raw materials, we include the Product portion of the worksheet because the product sales per week (cell I3) drives the total raw material requirements. The number is initially taken from the Flow Out cell (B4) in the process definition, but can be changed here to investigate the impacts of different sales (or production) levels. The example has only one process defined, otherwise there would be multiple lines in the Product portion. Although we choose to sell (and manufacture) 100 units of product B which is the output of operation 7 in the process, we also produce 20 units at operation 6. The product is identified by the process name.

Starting at row 17 for the example (row numbers will be different for other examples), we see the portion of the worksheet that accepts data and compiles information from the processes that are defined in the workbook. The current example only has one process, so all the information comes from that process (B).

Column E lists the raw materials used as compiled by the add-in from the process definitions. Column F shows the unit cost of the raw materials. The costs of kit, part 1 and part 2 are given per item. The cost of coat is given per liter. The cost of transact is given per transaction. Column G gives the maximum number of each raw material. Default values are shown here. The contents of this column are used to construct mathematical programming models. Columns F and G hold user data which can be changed to represent the system being modeled.

Columns H and I hold formulas that compute the amounts used based on the product sales and process definitions. The associated cost per week is computed in column I.


Unit raw material Use


The table starting in row 31 shows the raw material use for each unit of product. Only a single product is defined here, but more products would be represented by additional columns. The numbers reflect the loses caused by scrap. The Raw Material Cost/Unit is the sum-product of the raw material costs (F18:F22) and the contents of (F33:F37). This value is subtracted from the revenue per unit to obtain the operating profit column of the product portion of the worksheet (cell J3).

The primary model assumption is that raw material use is proportional to the number of items passing through an operation.


Summary and Refilling


In the upper left corner of the Project worksheet there is a summary of the economic results. This summary is linked to the product sales and the results of the various data items and computations on the worksheet.

It may be that the user will want to change process definitions or add new processes. The contents of the Project worksheet may be updated after changes by clicking the button to "Fill usage matrices".

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Operations Management / Industrial Engineering
by Paul A. Jensen
Copyright 2004 - All rights reserved

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