1
Aggregate Planning
2
Process planning
Long
range
Strategic capacity planning
Intermediate Forecasting
& demand
range
management
Sales and operations (aggregate) planning
Sales plan
Aggregate operations plan
Manufacturing
Services
Master scheduling
Material requirements planning
Short
range
Order scheduling
Weekly workforce and
customer scheduling
Daily workforce and customer scheduling
3
The Aggregate Operations Plan
• Main purpose: Specify the optimal combination of
–
production rate (units completed per unit of
time)
–
workforce level (number of workers)
–
inventory on hand (inventory carried from
previous period)
• Product group or broad category (Aggregation)
• This planning is done over an intermediate-range
planning period of 3 to18 months
4
Required Inputs to the Production Planning System
Competitors’
behavior
External
capacity
Current
physical
capacity
Raw material
availability
Planning
for
production
Current
workforce
Inventory
levels
Market
demand
External
to firm
Economic
conditions
Activities
required
for
production
Internal
to firm
5
Key Strategies for Meeting Demand
 Chase
 Level
 Some
combination of the two
6
Mixing Options to
Develop a Plan
Chase strategy
• Match output rates to demand
forecast for each period
• Vary workforce levels or vary
production rate
• Favored by many service
organizations
7
Mixing Options to
Develop a Plan
Level strategy
• Daily production is uniform
• Use inventory or idle time as buffer
• Stable production leads to better
quality and productivity
 Some combination of capacity
options, a mixed strategy, might be
the best solution
8
Aggregate Planning Examples: Unit Demand and Cost Data
Suppose we have the following unit
demand and cost information:
Demand/mo
Jan
Feb
Mar
Apr
May
Jun
4500
5500
7000
10000
8000
6000
Materials
Holding costs
Marginal cost of stockout
Hiring and training cost
Layoff costs
Labor hours required
Straight time labor cost
Beginning inventory
Productive hours/worker/day
Paid straight hrs/day
Rs5/unit
Rs1/unit per mo.
Rs1.25/unit per mo.
Rs200/worker
Rs250/worker
.15 hrs/unit
Rs8/hour
250 units
7.25
8
9
Cut-and-Try Example: Determining
Straight Labor Costs and Output
Given the demand and cost information below, what
are the aggregate hours/worker/month, units/worker, and
rupees/worker?
Demand/mo
J an
Feb
Mar
Apr
May
Jun
4500
5500
7000
10000
8000
6000
Productive hours/worker/day
Paid straight hrs/day
22x8hrsxRs8=Rs1
Jan
408
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker
22
159.5
1063.33
1,408
Feb
19
137.75
918.33
1,216
7.25
8
Mar
21
152.25
1015
1,344
7.25x2
2
7.25/0.15=48.33 &
48.33x22=1063.33
Apr
21
152.25
1015
1,344
May
22
159.5
1063.33
1,408
Jun
20
145
966.67
1,280
10
Chase Strategy
(Hiring & Firing to meet demand)
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker
Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory
Jan
22
159.5
1,063.33
1,408
Jan
4,500
250
4,250
3.997
3
4
0
Lets assume our current workforce is 7
workers.
First, calculate net requirements for
production, or 4500-250=4250 units
Then, calculate number of workers
needed to produce the net
requirements, or
4250/1063.33=3.997 or 4 workers
Finally, determine the number of
workers to hire/fire. In this case we
only need 4 workers, we have 7, so
3 can be fired.
11
Below are the complete calculations for the remaining
months in the six month planning horizon
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker
Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory
Jan
22
159.5
1,063
1,408
Feb
19
137.75
918
1,216
Mar
21
152.25
1,015
1,344
Apr
21
152.25
1,015
1,344
May
22
159.5
1,063
1,408
Jun
20
145
967
1,280
Jan
4,500
250
4,250
3.997
Feb
5,500
Mar
7,000
Apr
10,000
May
8,000
Jun
6,000
5,500
5.989
2
7,000
6.897
1
10,000
9.852
3
8,000
7.524
6,000
6.207
2
8
0
1
7
0
3
4
0
6
0
7
0
10
0
12
Below are the complete calculations for the remaining months in
the six month planning horizon with the other costs included
Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory
Material
Labor
Hiring cost
Firing cost
Jan
4,500
250
4,250
3.997
3
4
0
Jan
21,250.00
5,627.59
750.00
Feb
5,500
Mar
7,000
Apr
10,000
May
8,000
Jun
6,000
5,500
5.989
2
7,000
6.897
1
10,000
9.852
3
8,000
7.524
6,000
6.207
2
8
0
1
7
0
6
0
7
0
10
0
Feb
27,500.00
7,282.76
400.00
Mar
35,000.00
9,268.97
200.00
Apr
50,000.00
13,241.38
600.00
May
Jun
40,000.00 30,000.00
10,593.10 7,944.83
500.00
250.00
Costs
203,750.00
53,958.62
1,200.00
1,500.00
260,408.62
13
Level Workforce Strategy (Surplus and Shortage
Allowed)
Lets take the same problem as
before but this time use the
Level Workforce strategy
This time we will seek to use
a workforce level of 6 workers
Demand
Beg. inv.
Net req.
W orkers
P roduction
Ending inventory
Surplus
Shortage
Jan
4,500
250
4,250
6
6,380
2,130
2,130
14
Below are the complete calculations for the remaining
months in the six month planning horizon
Demand
Beg. inv.
Net req.
Workers
Production
Ending inventory
Surplus
Shortage
Jan
4,500
250
4,250
6
6,380
2,130
2,130
Feb
5,500
2,130
3,370
6
5,510
2,140
2,140
Mar
7,000
2,140
4,860
6
6,090
1,230
1,230
Apr
10,000
1,230
8,770
6
6,090
-2,680
May
8,000
-2,680
10,680
6
6,380
-1,300
Jun
6,000
-1,300
7,300
6
5,800
-1,500
2,680
1,300
1,500
Note, if we recalculate this sheet with 7 workers
we would have a surplus
15
Below are the complete calculations for the remaining
months in the six month planning horizon with the
other costs included
Jan
4,500
250
4,250
6
6,380
2,130
2,130
Jan
8,448.00
31,900.00
2,130.00
Feb
5,500
2,130
3,370
6
5,510
2,140
2,140
Mar
7,000
10
4,860
6
6,090
1,230
1,230
Apr
10,000
-910
8,770
6
6,090
-2,680
May
8,000
-3,910
10,680
6
6,380
-1,300
Jun
6,000Note, total
-1,620costs under
7,300
6this strategy
5,800are less than
-1,500
2,680
1,300
Feb
Mar
Apr
7,296.00 8,064.00 8,064.00
27,550.00 30,450.00 30,450.00
2,140.00 1,230.00
3,350.00
May
8,448.00
31,900.00
Jun
7,680.00
29,000.00
1,625.00
1,875.00
Chase at
1,500Rs260.408.62
48,000.00 Labor
181,250.00 Material
5,500.00 Storage
6,850.00 Stockout
241,600.00
16
Chapter
15
Materials Requirements
Planning
Planning for Materials
Two types of inventories

Two types of inventories exist in any operations system
– Operating Inventory:

Denotes all the resources (broadly of material and capacity) that are
available for the operating system to consume in the production
process
Dependant demand attributes
– Distribution Inventory:



Meant for market consumption
Independent demand attributes
They differ in their demand attributes & therefore
require alternative planning methodologies
17
18
Material Requirements Planning
Defined
• Materials requirements planning (MRP) is a
means for determining the number of parts,
components, and materials needed to produce
a product
• MRP provides time scheduling information
specifying when each of the materials, parts,
and components should be ordered or
produced
• Dependent demand drives MRP
• MRP is a software system
19
Independent Demand
20
Dependent Demand
21
Demand Characteristics
Demand Characteristics for Finished Products and Their Components
Dependent demand
Independent demand
100 x 1 =
100 tabletops
100 tables
Discrete demand
Continuous demand
400 –
300 –
No. of tables
No. of tables
400 –
100 x 4 = 400 table legs
200 –
100 –
1
2
3
Week
4
300 –
200 –
100 –
5
M T W Th F
M T W Th F
21
22
Independent vs. Dependent Demand
Independent Demand
(Demand not related to other items)
Dependent Demand
(Derived)
Drives MRP
E(1)
6
23
Major Inputs to MRP Process:
1. Bill of Material
• Product structure file
• Determines which component items need to be scheduled
Product Structure Record
Level 0
Clipboard
Pressboa
rd (1)
Top
Clip (1)
Clip
Assembly
(1)
Bottom
Clip (1)
Rivet
s (2)
Piv
ot
(1)
Level 1
Sprin
g (1)
Level 2
23
24
Example of MRP Logic and Product Structure
Tree
Given the product structure tree for “A” and the lead time and
demand information below, provide a materials requirements
plan that defines the number of units of each component and
when they will be needed
Product Structure Tree for Assembly A
A
B(4)
D(2)
C(2)
E(1)
D(3)
F(2)
Lead Times
A
1 day
B
2 days
C
1 day
D
3 days
E
4 days
F
1 day
Total Unit Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6
15 D (Spares)
25
First, the number of units of “A” are scheduled
backwards to allow for their lead time. So, in the
materials requirement plan below, we have to place
an order for 50 units of “A” on the 9th day to receive
them on day 10.
Day:
A Required
Order Placement
1
2
3
4
5
6
7
8
9
50
LT = 1 day
10
50
26
Next, we need to start scheduling the components that make up
“A”. In the case of component “B” we need 4 B’s for each A.
Since we need 50 A’s, that means 200 B’s. And again, we back
the schedule up for the necessary 2 days of lead time.
Day:
A
1
2
3
4
5
6
7
8
R e q u ire d
50
R e q u ire d
20
O rd e r P la c e m e n t
20
LT = 2
A
B(4)
D(2)
10
50
O rd e r P la c e m e n t
B
9
D(3)
200
Spares
4x50=200
C(2)
E(1)
200
F(2)
27
Finally, repeating the process for all components, we have the
final materials requirements plan:
Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1
1
2
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
3
4
5
6
20
7
8
9
20
50
200
10
50
200
100
55
20
400
55
400
20
200
100
300
300
200
200
200
A
Part D: Day 6
B(4)
D(2)
C(2)
E(1)
D(3)
40 + 15 spares
F(2)
©The McGraw-Hill Companies, Inc., 2001
28
Example of MRP Logic and Product Structure
Tree
Given the product structure tree for “A” and the lead time and
demand information below, provide a materials requirements
plan that defines the number of units of each component and
when they will be needed
Product Structure Tree for Assembly A
A
B(3)
D(1)
C(4)
E(2)
D(2)
F(3)
Lead Times
A
2 day
B
1 days
C
2 day
D
3 days
E
2 days
F
3 day
Total Unit Demand
Day 10 60 A
Day 8
15 B (Spares)
Day 6
20 D (Spares)
29
Material Requirements Planning System
• Based on a master production schedule, a material
requirements planning system:
– Creates schedules identifying the specific parts
and materials required to produce end items
–
Determines exact unit numbers needed
–
Determines the dates when orders for those
materials should be released, based on lead
times
30
Aggregate
product
plan
Firm orders
from known
customers
Engineering
design
changes
Master production
Schedule (MPS)
Bill of
material
file
Material
planning
(MRP
computer
program)
Forecasts
of demand
from random
customers
Inventory
transactions
Inventory
record file
Secondary reports
Primary reports
Planned order schedule for
inventory and production
control
Exception reports
Planning reports
Reports for performance
control
©The McGraw-Hill Companies, Inc., 2004
31
Bill of Materials (BOM) File
A Complete Product Description
•
•
•
•
•
Materials
Parts
Components
Production sequence
Modular BOM
–
Subassemblies
• Super BOM
–
Fractional options
32
Inventory Records File
• Each inventory item carried as a separate file
–
Status according to “time buckets”
• Pegging
–
Identify each parent item that created demand
33
Primary MRP Reports
• Planned orders to be released at a future time
• Order release notices to execute the planned
orders
• Changes in due dates of open orders due to
rescheduling
• Cancellations or suspensions of open orders due
to cancellation or suspension of orders on the
master production schedule
• Inventory status data
34
Secondary MRP Reports
• Planning reports, for example, forecasting
inventory requirements over a period of time
• Performance reports used to determine
agreement between actual and programmed
usage and costs
• Exception reports used to point out serious
discrepancies, such as late or overdue orders
35
General Format of an MRP Report
•
•
•
•
•
•
•
•
Item Identification
Lead Time
Available Inventory
Lot size
Safety Stock
Allocated
Low-level-code:
Report date:
Period Week
1 2 3 4 5 6 7 8
• Gross Requirements
• Scheduled receipts
• Projected available balance
• Net requirements
• Planned order receipt
• Planned order release
36
37
MRP Example
Item
X
A
B
C
D
X
A(2)
C(3)
B(1)
C(2)
On-Hand Lead Time (Weeks)
50
2
75
3
25
1
10
2
20
2
D(5)
Requirements include 95 units (80 firm orders and 15 forecast) of X
in week 10
38
X
A(2)
It takes
2 A’s for
each X
X
LT=2
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
39
X
LT=2
X
A(2)
B(1)
It takes
1 B for
each X
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
40
X
LT=2
X
A(2)
C(3)
It takes 3
C’s for
each A
B(1)
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
41
X
LT=2
X
A(2)
C(3)
B(1)
C(2)
It takes 2
C’s for
each B
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
42
X
LT=2
X
A(2)
C(3)
B(1)
C(2)
D(5)
It takes 5
D’s for each
B
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
43
Calculation of Order Size in MRP
• Lot-for-lot Method
• EOQ Method
• Least Total Cost Method
• Least Unit Cost Method
44
Operation Scheduling
45
What is Scheduling?
• Last stage of planning before production
occurs
• Specifies when labor, equipment, and facilities
are needed to produce a product or provide a
service
17-45
46
Scheduled Operations
• Process Industry
– Linear programming
– EOQ with non-instantaneous
replenishment
• Mass Production
– Assembly line balancing
• Project
– Project -scheduling techniques
(PERT, CPM)
• Batch Production
– Aggregate planning
– Master scheduling
– Material requirements
planning (MRP)
– Capacity requirements
planning (CRP)
17-46
47
Objectives in Scheduling
•
•
•
•
•
Meet customer due dates
Minimize job lateness
Minimize response time
Minimize completion time
Minimize time in the system
• Minimize overtime
• Maximize machine or labor
utilization
• Minimize idle time
• Minimize work-in-process
inventory
17-47
48
Shop Floor Control (SFC)
•
scheduling and monitoring of day-to-day production in a
job shop
also called production control and production activity
control (PAC)
usually performed by production control department
•
•
–
Loading
•
–
Check availability of material, machines, and labor
Sequencing
•
–
Release work orders to shop and issue dispatch lists for individual
machines
Monitoring
•
Maintain progress reports on each job until it is complete
17-48
49
Loading
• Process of assigning work to limited resources
• Perform work with most efficient resources
• Use assignment method of linear
programming to determine allocation
17-49
50
Assignment Method
1. Perform row reductions
–
subtract minimum value in each
row from all other row values
2. Perform column reductions
–
subtract minimum value in each
column from all other column
values
3. Cross out all zeros in matrix

use minimum number of
horizontal and vertical lines
4. If number of lines equals number of
rows in matrix, then optimum
solution has been found. Make
assignments where zeros appear
–
Else modify matrix
•
•
•
subtract minimum uncrossed value
from all uncrossed values
add it to all cells where two lines
intersect
other values in matrix remain
unchanged
5. Repeat steps 3 and 4 until optimum
solution is reached
17-50
51
Assignment Method: Example
Initial
Matrix
Bryan
Kari
Noah
Chris
1
10
6
7
9
Row reduction
5
4
2
5
0
0
1
1
1
2
0
0
5
4
1
6
2
5
2
6
5
PROJECT
3
6
4
5
4
4
10
6
6
10
Column reduction
Cover all zeros
3
2
0
3
3
2
0
3
0
0
1
1
1
2
0
0
4
3
0
5
0
0
1
1
1
2
0
0
4
3
0
5
Number lines  number of rows so modify matrix
17-51
52
Assignment Method: Example (cont.)
Modify matrix
1
0
1
0
0
2
0
3
2
1
1
0
Cover all zeros
1
0
1
0
0
2
0
3
2
1
1
0
2
1
0
3
2
1
0
3
Number of lines = number of rows so at optimal solution
Bryan
Kari
Noah
Chris
1
1
0
0
1
PROJECT
2
3
0
1
0
2
3
2
1
0
4
2
1
0
3
Bryan
Kari
Noah
Chris
1
10
6
7
9
PROJECT
2
3
4
5
6 10
2
4
6
6
5
6
5
4 10
Project Cost = (5 + 6 + 4 + 6) X $100 = $2,100
17-52
53
Sequencing
Prioritize jobs assigned to a resource
If no order specified use first-come first-served (FCFS)
Other Sequencing Rules
FCFS - first-come, first-served
LCFS - last come, first served
DDATE - earliest due date
CUSTPR - highest customer priority
SETUP - similar required setups
SLACK - smallest slack
CR - smallest critical ratio
SPT - shortest processing time
LPT - longest processing time
17-53
54
Minimum Slack and
Smallest Critical Ratio
SLACK considers both work and time remaining
SLACK = (due date – today’s date) – (processing time)
CR recalculates sequence as processing continues and
arranges information in ratio form
CR =
time remaining
work remaining=
due date - today’s date
remaining processing time
If CR > 1, job ahead of schedule
If CR < 1, job behind schedule
If CR = 1, job on schedule
17-54
55
Sequencing Jobs through One Process
• Flow time (completion time)
– Time for a job to flow through system
• Makespan
– Time for a group of jobs to be completed
• Tardiness
– Difference between a late job’s due date
and its completion time
17-55
56
Simple Sequencing Rules
JOB
PROCESSING
TIME
DUE
DATE
A
B
C
D
E
5
10
2
8
6
10
15
5
12
8
17-56
57
Simple Sequencing
Rules: FCFS
FCFS
SEQUENCE
START
TIME
PROCESSING COMPLETION DUE
TIME
TIME
DATE
TARDINESS
17-57
58
Simple Sequencing
Rules: FCFS
FCFS
SEQUENCE
START
TIME
A
B
C
D
E
Total
Average
0
5
15
17
25
PROCESSING COMPLETION DUE
TIME
TIME
DATE
5
10
2
8
6
5
15
17
25
31
93
93/5 = 18.60
10
15
5
12
8
TARDINESS
0
0
12
13
23
48
48/5 = 9.6
17-58
59
Simple Sequencing Rules:
DDATE
DDATE
SEQUENCE
START
TIME
PROCESSING COMPLETION DUE
TIME
TIME
DATE
TARDINESS
17-59
60
Simple Sequencing Rules:
DDATE
DDATE
SEQUENCE
START
TIME
C
E
A
D
B
Total
Average
0
2
8
13
21
PROCESSING COMPLETION DUE
TIME
TIME
DATE
2
6
5
8
10
2
8
13
21
31
75
75/5 = 15.00
5
8
10
12
15
TARDINESS
0
0
3
9
16
28
28/5 = 5.6
17-60
61
Simple Sequencing Rules:
SLACK
SLACK considers both work and time remaining
SLACK = (due date – today’s date) – (processing time)
A(10-0) – 5 = 5
B(15-0) – 10 = 5
C(5-0) – 2 = 3
D(12-0) – 8 = 4
E(8-0) – 6 = 2
17-61
62
Simple Sequencing Rules:
SLACK
SLACK
SEQUENCE
START
TIME
PROCESSING COMPLETION DUE
TIME
TIME
DATE
TARDINESS
17-62
63
Simple Sequencing Rules:
SLACK
SLACK
SEQUENCE
START
TIME
E
C
D
A
B
Total
Average
0
6
8
16
21
PROCESSING COMPLETION DUE
TIME
TIME
DATE
6
2
8
5
10
6
8
16
21
31
82
82/5 = 16.40
8
5
12
10
15
TARDINESS
0
3
4
11
16
34
34/5 = 6.8
17-63
64
Simple Sequencing
Rules: SPT
SPT
SEQUENCE
START
TIME
PROCESSING COMPLETION DUE
TIME
TIME
DATE
TARDINESS
17-64
65
Simple Sequencing
Rules: SPT
SPT
SEQUENCE
START
TIME
C
A
E
D
B
Total
Average
0
2
7
13
21
PROCESSING COMPLETION DUE
TIME
TIME
DATE
2
5
6
8
10
2
7
13
21
31
74
74/5 = 14.80
5
10
8
12
15
TARDINESS
0
0
5
9
16
30
30/5 = 6
17-65
66
Example of Job Sequencing: Critical Ratio Method
Suppose you have the four
jobs to the right arrive for
processing on one machine
What is the CR schedule?
Jobs (in order
of arrival)
A
B
C
D
Processing
Time (days)
4
7
3
1
Due Date
(days hence)
5
10
6
4
Do all the jobs get done on time?
In order to do this schedule the CR’s have be calculated
for each job. If we let today be Day 1 and allow a total of
15 days to do the work. The resulting CR’s and order
schedule are:
CR(A)=(5-4)/15=0.06 (Do this job last)
CR(B)=(10-7)/15=0.20 (Do this job first, tied with C and D)
CR(C)=(6-3)/15=0.20 (Do this job first, tied with B and D)
CR(D)=(4-1)/15=0.20 (Do this job first, tied with B and C)
No, but since
there is threeway tie, only
the first job or
two will be on
time
67
Example of Job Sequencing:
Last-Come First-Served
Suppose you have the four
jobs to the right arrive for
processing on one machine
What is the LCFS schedule?
Jobs (in order
of arrival)
A
B
C
D
Processing
Time (days)
4
7
3
1
Due Date
(days hence)
5
10
6
4
Do all the jobs get done on time?
Answer: Last-Come First-Served Schedule
Jobs (in order
of arrival)
D
C
B
A
Processing
Time (days)
1
3
7
4
Due Date Flow Time
(days hence)
(days)
4
1
6
4
10
11
5
15
No, Jobs B
and A are
going to be
late
68
Simple Sequencing Rules:
Summary
AVERAGE
RULE COMPLETION TIME
AVERAGE
TARDINESS
NO. OF
JOBS TARDY
MAXIMUM
TARDINESS
17-68
69
Simple Sequencing Rules:
Summary
AVERAGE
RULE COMPLETION TIME
FCFS
DDATE
SLACK
SPT
18.60
15.00
16.40
14.80
AVERAGE
TARDINESS
9.6
5.6
6.8
6.0
NO. OF
JOBS TARDY
3
3
4
3
MAXIMUM
TARDINESS
23
16
16
16
17-69
70
Guidelines for Selecting a
Sequencing Rule
1.
2.
3.
4.
5.
6.
SPT most useful when shop is highly congested
Use SLACK for periods of normal activity
Use DDATE when only small tardiness values can be
tolerated
Use LPT if subcontracting is anticipated
Use FCFS when operating at low-capacity levels
Do not use SPT to sequence jobs that have to be
assembled with other jobs at a later date
17-70
71
n-jobs m-machines
JOB
PROCESS 1
PROCESS 2
A
B
C
6
11
7
8
6
3
17-71
72
Sequencing Jobs Through Two
Serial Process
Johnson’s Rule
1.
2.
3.
4.
5.
List time required to process each job at each machine. Set up
a one-dimensional matrix to represent desired sequence with
# of slots equal to # of jobs.
Select smallest processing time at either machine. If that
time is on machine 1, put the job as near to beginning of
sequence as possible.
If smallest time occurs on machine 2, put the job as near to
the end of the sequence as possible.
Remove job from list.
Repeat steps 2-4 until all slots in matrix are filled and all jobs
are sequenced.
17-72
73
Johnson’s Rule
JOB
PROCESS 1
PROCESS 2
A
B
C
D
E
6
11
7
9
5
8
6
3
7
10
E
A
D
B
C
17-73
74
Johnson’s Rule (cont.)
E
E
A
5
A
D
D
11
B
C
B
Process 1
(sanding)
C
20
31
38
Idle time
E
5
A
15
D
23
B
30
Process 2
(painting)
C
37
41
Completion time = 41
Idle time = 5+1+1+3=10
17-74
75
Monitoring
• Work package
– Shop paperwork that travels with a job
• Gantt Chart
– Shows both planned and completed activities
against a time scale
• Input/Output Control
– Monitors the input and output from each work
center
17-75
76
Gantt Chart
Job 32B
Behind schedule
Facility
3
Job 23C
Ahead of schedule
2
Job 11C
Job 12A
On schedule
1
1
Key:
2
3
4
5
6
8
Today’s Date
9
10
11
12
Days
Planned activity
Completed activity
17-76
77
Input/Output Control
Input/Output Report
PERIOD
Planned input
Actual input
Deviation
Planned output
Actual output
Deviation
Backlog
1
2
3
4
TOTAL
65
65
70
70
75
75
75
75
270
0
0
300
0
0
30
20
10
5
0
17-77
78
Input/Output Control (cont.)
Input/Output Report
PERIOD
Planned input
Actual input
Deviation
Planned output
Actual output
Deviation
Backlog
30
1
2
3
4
65
60
-5
75
75
-0
15
65
60
-5
75
75
-0
0
70
65
-5
75
65
-10
0
70
65
-5
75
65
-10
0
TOTAL
270
250
-20
300
280
-20
17-78
79
Supply Chain Management:
80
Some Definitions
Supply Chain Management encompasses every effort
involved in producing and delivering a final product
or service, from the supplier’s supplier to the
customer’s customer. Supply Chain Management
includes managing supply and demand, sourcing raw
materials and parts, manufacturing and assembly,
warehousing and inventory tracking, order entry and
order management, distribution across all channels,
and delivery to the customer.
The Supply Chain Council, U.S.A.
Sources:
plants
vendors
ports
Regional
Warehouses:
stocking
points
Field
Warehouses:
stocking
points
Customers,
demand
centers
sinks
Supply
Inventory &
warehousing
costs
Production/
purchase
costs
Transportation
costs
Inventory &
warehousing
costs
Transportation
costs
81
82
Flows in a supply chain
Information
Product
Customer
Funds
83
Philosophy of SCM
• The entire supply chain is a single, integrated entity.
• The cost, quality and delivery requirements of the
customer are objectives shared by every company in
the chain.
• Inventory is the last resort for resolving supply and
demand imbalances.
84
Efficiency: Basis of
Production Management
• Efficiency leads to lower costs
• Lower cost implies
Lower Price => Greater demand => Better market
growth => Higher profits => Product/ Process
development => Better market share
• 1980s and 1990s: Era of achieving excellence at the
firm level (JIT, TQM, TPM, BPR, ERP, etc)
• 2000s: Era of achieving excellence at the value chain
level (SCM, CRM, E-Commerce, etc.)
85
Evolution of SCM
Stage 1: Vendor – Purchase – Production
- Distribution – Retailer
Stage 2: Materials Management Logistics Management
Stage 3: Supply Chain Management
86
Why is SCM Important?
• Strategic Advantage – It Can Drive Strategy
* Manufacturing is becoming more efficient
* SCM offers opportunity for differentiation (Dell) or
reduction (Wal-Mart or Big Bazaar)
• Globalization – It Covers The World
* Requires greater coordination of production and
distribution
* Increased risk of supply chain interruption
* Increases need for robust and flexible supply chains
cost
87
Why is SCM Important?
(continued)
• At the company level, supply chain management
impacts
* COST – For many products, 20% to 40% of
total product costs are controllable
logistics costs.
* SERVICE – For many products, performance
factors such as inventory availability
speed of delivery are critical to
satisfaction.
and
customer
88
Conflicting Objectives in the Supply
Chain
1. Purchasing
• Stable volume requirements
• Flexible delivery time
• Little variation in mix
• Large quantities
2. Manufacturing
• Long run production
• High quality
• High productivity
• Low production cost
89
Conflicting Objectives in the Supply
Chain
3. Warehousing
• Low inventory
• Reduced transportation costs
• Quick replenishment capability
4. Customers
• Short order lead time
• High in stock
• Enormous variety of products
• Low prices
90
Decision Phases in
a Supply Chain
• Supply chain strategy or design
• Supply chain planning
• Supply chain operation
91
Process view of a supply chain
• Cycle view
• Push/pull view
92
Cycle View of Supply Chains
Customer
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
93
Customer order cycle
•
•
•
•
Customer arrival
Customer order entry
Customer order fulfillment
Customer order receiving
94
Replenishment cycle
•
•
•
•
Retail order trigger
Retail order entry
Retail order fulfillment
Retail order receiving
95
Manufacturing cycle
• Order arrival from the distributor, retailer,
or customer
• Production scheduling
• Manufacturing and shipping
• Receiving at the distributor, retailer, or
customer
96
Push/Pull View of
Supply Chains
• Pull processes: execution is initiated in response
to a customer order
• Push processes: execution is initiated in
anticipation of customer orders
97
Push/Pull View of Supply Chains
Procurement,
Manufacturing and
Replenishment cycles
PUSH PROCESSES
Customer Order
Cycle
PULL PROCESSES
Customer
Order Arrives
SUPPLY CHAIN DESIGN:
Three Components
1.
Insourcing/OutSourcing
(The Make/Buy or Vertical Integration Decision)
2.
Partner Selection
(Choice of suppliers and partners for the chain)
3.
The Contractual Relationship
(Arm's length, joint venture, long-term contract,
strategic alliance, equity participation, etc.)
98
99
Supply chain objective
• Maximize overall value generated
• Value strongly correlated to supply chain
profitability – the difference between the
revenue generated from the customer
and the overall cost across the supply
chain
• Example: A customer purchasing a
computer from Dell pays $ 700 (the
revenue)
• Dell and other stages of the supply chain
incur cost to convey information, produce
the components, store them, transport
them, transfer funds, etc.
100
Examples of Supply Chains
•
•
•
•
•
•
Dell / Compaq
Toyota / GM / Ford
Milk Distribution System of NDDB
Merry-Go-Round System of NTPC
Dabbawalas of Mumbai
Amazon / Borders / Barnes and Noble
101
Order Size
The Dynamics of the Supply Chain
Customer
Demand
Distributor Orders
Retailer Orders
Production Plan
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
102
Order Size
The Dynamics of the Supply Chain
Customer
Demand
Production Plan
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998