Lot sizes can be optimized a lot better than before and result in significantly lower overall production costs. During the first review in July, Production4.0 partner Bosch demonstrated the result of its use case in work package 4 and mainly 5. It is the prototype of a computer model which will solve a classical dilemma almost all producers are confronted with when manufacturing various items on the same production equipment or a limited number of them.

Set-up costs vs. inventory costs

The more products of a kind are produced the more have to be stored. The production manager, on the one hand, wants to optimize the workload. With big lot sizes he postpones a necessary set-up of the machine for a product changeover because this would cause downtime and set-up costs.

The inventory management, however, is facing the challenge of having to provide enough cost intensive storage space for things that are nothing but tied-up capital until they are sold. Big items, small items, trucks or mid-size cars – they all must be produced in sufficient numbers meeting a customer demand that can easily fluctuate.

Taking this into consideration, a neat planning and the right decision between set-up costs and inventory costs can be quite tricky, and in bottleneck situations the spread could be even wider. In order to specify the appropriate lot size rules of thumb have to serve in most cases. In the future, however, the right balance will be found a lot easier.

Computing optimum lot sizes

The new optimization based lotsizing algorithm developed for Bosch by the Department of Supply Chain Management and Production of the University of Cologne is used to calculate optimal lot sizes and schedules for different steps in the semiconductor production process. “It is still a prototype which will be further refined, but already its results are approx. 15 percent better”, work package 5 leader Georg Laipple says. “In the end, the model will apply to a lot of production machines and hundreds of different products”.

Using a system that automatically determines the optimum lot size, will not only safe money it will also take the pressure off the responsible parties. The production manager will make a changeover without groan, and the inventory management will know that there is no better way.