PROTOTYPING OF PRODUCTION NETWORKS IN ...

23. - 25. 5. 2012, Brno, Czech Republic, EU

PROTOTYPING OF PRODUCTION NETWORKS IN REGIONAL METALLURGICAL CLUSTER Sebastian SANIUK, Anna SANIUK University of Zielona Góra, Faculty of Mechanical Engineering, Institute of Computer Science and Production Management, Prof. Szafrana 4, 65-516 Zielona Góra, [email protected] University of Zielona Góra, Faculty of Mechanical Engineering, Institute of Computer Science and Production Management, Prof. Szafrana 4, 65-516 Zielona Góra, [email protected]

Abstract Small and medium production enterprises from the metallurgical sector must now compete with large companies, which have much larger capital, more advanced technologies and information systems. One of the possibilities for the development of the sector of SME’s is the creation of regional metallurgical clusters and the joint production of industrial products in production networks. Creating production networks in regional clusters strengthens the position of the region and reduce the risk of a cooperation with completely unknown companies and enables an execution of more complex and more capital-consuming production orders which exceed the capacities of individual enterprise from the cluster. Thanks to the network, it can be made the products more quickly, sometimes cheaper, and above all better use the production capacity of enterprises belonging to the network, which increases the profits of enterprises. The article presents the idea of prototyping production networks in the regional metallurgical clusters. An essential component of the proposed production networks prototyping concept is the broker. The strong position of the broker in the cluster structure allows for better cooperation with local authorities and development of both the cluster and the region. Apart from that there is the possibility of applying for and obtaining European Union funds to support development and innovation activities, as well as central and regional state funding (funding of innovative products, introducing new technologies, etc.). An important task of the broker is also a rapid exchange of information between partners and the cluster's market. Keywords: regional metallurgical cluster, production networks, SME’s 1.

INTRODUCTION

The development of the global economy, building long-term competitiveness of enterprises requires cooperation through the various forms of networking between businesses, the science sector, business institutions and local government units [3], [6], [7], [13]. One of the most advanced forms of networking is known as clustering. A modern industrial cluster is understood as a union organization that is characterized by geographical proximity, a common industry sector (e.g. metal industry) and similar employment levels, relations which are also a motivating factor in building mutual trust between the partners [1]. The cluster concept is becoming more popular both in the scientific and business communities. The potential that lies in the SME sector can, through appropriate policies to support the development of regional industrial clusters and the formation of production networks within them, provide an additional source of development across the region. This helps to maintain a high level of employment and innovation, and develops and improves the competitiveness of businesses connected to the cluster [4], [11]. The realization of the production order in the cluster is based, on the one hand, on taking into account the requirements of carrying out the planned production order (project), and on the other hand, the possibilities of potential partners. Possibilities for fulfilling the order are determined mainly by the available competencies, production and human resources and logistical constraints (transport, storage) in the cluster [2], [5], [14].

23. - 25. 5. 2012, Brno, Czech Republic, EU

In the paper a concept of prototyping a production network of regional metallurgical cluster is presented. The proposed model of formation of the networks in the cluster should resolve most concerns related to the accession of enterprises to the production network [12]. This applies above all to building trust between partners, defining the basic framework for cooperation, responsibilities in providing information and acceding to the network to achieve a single production order, rules for participation in the costs and benefits of its implementation. The proposed model should reduce the risk of unfair competition and loss of know-how of the participants of the cluster. 2.

THE PROBLEM FORMULATION

In the considered case, there is a production network, which consists of a set of small and medium production enterprises specialized in limited field of production with specific production capacity and a set of transportation enterprises which can guarantee material flow between partners. Such a defined network should allow the execution of a new production process on time. Production order planning in a production network shows in Fig. 1.

Cluster

F3

F1 F4 FN

F2

Order - Project

A map of accessible of resources

R1 R2 Ri

t

Which of the companies belonging to the cluster can guarantee joint realization of the production order within the deadline T and cost K, given available resources at the time of production?

Fig. 1 Production order planning in a production network. Source: Own work. An essential component of the briefly proposed production networks prototyping concept is the broker. In practice the broker can be a company specialized in a specific trade, a specific trade organization or specialized unit of a technological center (they are formed near public universities). The main task of the broker is matching enterprises which are able to realize given production undertaking according to resource and logistic constraints. A key role of the broker is to work out a production undertaking (constructional and technological) and then to select enterprises which function in logistics communications system and guarantee production order execution on time and with the lowest total cost of production order realization.

23. - 25. 5. 2012, Brno, Czech Republic, EU

The model of a network dedicated to realizing a new production order is formed to take into account given limitations such as: production capacity (nature of operations, time of availability, cost of using production resources), transportation routes and means of transport (quantity, capacity, time and cost of transport) and capacity of warehouses. A planned-to-execute production order is an undertaking which is realized by a network of geographically dispersed organizations using the available transportation system. The production order is specified by the size of the planned production, given time of execution and costs of realization (price). The method of production order realization is described by the production process which is a set of partial processes (operations) executed in individual enterprises. In common cases, there is a production order planned to realization and a set of production enterprises with free production capacity which function within a known communication structure and a set of transportation enterprises with known shipping potential. The answer is sought to the question: Is there a production network in a regional metallurgical cluster which can realize the production order on time with the assumed costs? 3.

THE METHOD OF A NETWORK PROTOTYPING

The proposed model of the production network should be treated as a conceptual model that attempts to solve the major problems associated with the appointment and operation of a temporary network created for the purpose of the joint implementation of production orders within the cluster. Orders accepted in a cluster often exceed the individual production capacity at the disposal of each company because of production capacity limitations (machinery, equipment, time availability), competencies, skills, hence the idea of implementing such orders in a network of companies. The proposed method of production network forming allows to be planned production workflow between enterprises which take part in the network (compare [8], [9], [10]). The proposed working model is similar to the Danish or Dutch cluster model, where an important role is played by the so-called network broker, who initiates contact between the partners and coordinates the cluster [15]. These models differ, especially with the cooperation of separate and strong scientific research institution, which provide a constant supply of innovative products and technologies affecting the continued development of the cluster. An interesting issue is raised by the results of the survey, which was conducted in one of Polish metallurgical cluster, according to which more than half the companies surveyed are willing to co-create a network by answering the query of a reliable broker, accepting the role of organizer of the network (55% of respondents). Companies are afraid of entrusting sensitive information about the current state of the production capacity, the costs of resource use or fields of competence to another company with whom they usually compete. The issue of information on spare capacity of all participants in the network is associated with serious resistance from potential partners. This is confirmed by numerous cases of a lack of interest from companies, especially SME’s, in revealing capacity. The strong position of the broker in the cluster structure also allows for better cooperation with local authorities and development of both the cluster and the region. An additional advantage of this strong representation of the cluster is the possibility of applying for and obtaining European Union funds to support development and innovation activities, as well as central and regional state funding (funding of innovative products, introducing new technologies, etc.). An important task of the broker is also the balancing of both the demand and supply sides of the sphere, through a rapid exchange of information between partners and the cluster's market. The broker should not act as a decision maker, for example in determining the choice of variant, which consequently involves the rejection of the other potential enterprises applying for participation in the execution of the order. The reason for this is the possibility of conflict at the broker - business interface which may consequently lead to the disintegration of the cluster. In this situation, the role of the broker must end with the development of proposals for feasible solutions, based on information gathered from potential

23. - 25. 5. 2012, Brno, Czech Republic, EU

partners, while the final decision on the network variant must be taken by the principal or manager appointed by the cluster network. The main tool for the broker, which allows the realization of joint ventures (e.g. production orders, projects), is the capacity exchange platform, which allows both the entry of data relating to production orders planned for implementation, while also assessing the feasibility of timely completion of orders, based on the reported production capacity of the cluster participants. The platform should be a tool for the rapid selection of partners for a virtual production network, who guarantee the planned order execution and the production flow planning for the chosen network variant. The method for the formation of a production network can be represented as a three-phase procedure implemented by the broker holding the information about the cluster assignment of available production capacity and potential contractors planned orders. Fig. 2 shows the sequence of the formation phase of a production network.

OFFER PHASE

DECLARATION PHASE

FORMATION PHASE

Fig. 2 Three phases of the formation of production networks. Source: Own work. In the first phase, the cluster broker introduces a job offer to the production network planning system and the data about tasks of production order is made available for potential partners to access via the network. Particulars of the order placed on the proposed system for computer-aided network planning. This step must be preceded by preparation of design and technological documentation for the product with a precise description of the technological process, along with the separation of tasks and their technological implications in the process of execution. Due to the limited ability to instruct the broker, documentation must be supplied by the client or developed earlier in the design phase of the order. The order is placed in the system by the broker, who sets a deadline for submitting bids for the task and sends a notification to all members of the cluster. In the second phase deals (declarations) are collected from companies with appropriate capacity (production resources), who declare the type of resource offered, periods of availability, time needed to complete the task and the total cost, which is the sum of the cost of resource utilization, the cost of materials used for the task and other costs. In this phase, bids are also collected from transport companies, which are able to guarantee the implementation of the transport operation. A set of variants is limited to such ones which fulfill conditions connected with logistical constraints (transportation and storage systems). Each variant is checked according to available route structure between partners, quantity and capacity of transportation means and storehouse capacity of co-operators. In the proposed approach, the transportation system realizes operations of transferring material between enterprises according to the established schedule. Transportation means with known capacity move along given routes of connected participants of the logistic network. The schedule is established on the basis of offers of forwarding enterprises which guarantee availability of transportation means with given capacity in a length of time in a given section of the route. It allows for quick and credible assessment of the possibility of transportation operation execution, without time-consuming and cost-consuming planning of transportation timetables.

23. - 25. 5. 2012, Brno, Czech Republic, EU

In the last stage of the presented method, total costs of the production order execution are confirmed. In this work, the proposed concept assumes that manufacturing and cooperation costs are minimized through maintaining enterprises’ independence (using market mechanism in partner selection), and at the same time transaction costs are minimized through a casual and reversible integration of companies which form manufacturing production networks. The main objective of the formation phase is the selection of partners who can cooperate in the various systems to guarantee the timely execution of orders. In this phase, three basic stages of the production network of prototyping can be identified. In the first stage a set of production variants which fulfill constraints (production capacity, sequence of operations) is formed, in accordance to the preliminary schedule from first phase, followed by time limits and batch size of supplies depending on production capacity. In this stage, enterprises which do not guarantee sequences of operations and a quality correct workflow or whose operation time is too long are rejected. Finally, in the presented approach all variants which guarantee production order execution on time with lower total costs than the given price are singled out. Information about costs allows selection of the cheapest variant of manufacturing production networks. When a set of solutions is empty, the proposed method assumes the rejection of a new production order. At the same time, reasons for order rejection are known. This information allows changes to be made in the structure of the system (e.g. additional negotiation process) and in a new production order (negotiations concerning time, price of realization, etc.). The application of the computer aided system for the suggested solution allows the use of this method in practice. The effect of the prototyping of production networks is the generation of variants of planned order realization, which are shown in Fig. 3.

Fig. 3 The effect of prototyping of production networks in regional metallurgical cluster. Source: Own work. 4.

CONCLUSION

The prototyping of production networks in regional metallurgical clusters allows more production order realization by groups of SME’s. This can allow cheaper or faster execution. The presented method guarantees the possibility of finding acceptable quality solutions to ensure that production workflow of orders which are currently being undertaken is not disturbed. As a result of this, there are acceptable variants of networks with variants of transportation-storage support, which guarantee sufficient quality production order execution on time.

23. - 25. 5. 2012, Brno, Czech Republic, EU

In the presented approach all variants which guarantee production order execution on time with lower total costs than the given price are singled out. Information about costs allows selection of the cheapest variant of production networks. When a set of solutions is empty, the proposed method assumes the rejection of a new production order. At the same time, reasons for order rejection are known. This information allows changes to be made in the structure of the system (additional negotiation process, extension of time of phase, etc.) and in a new production order (negotiations concerning time of realization, price, etc.). ACKNOWLEDGEMENTS This paper contains current results of the project “Modelling of virtual production networks of SMEs”. The project is financed by National Science Centre (Poland) on the base of agreement no. 4039/B/H03/2011/40. LITERATURE [1]

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