MS&E 261
Inventory Control & Production Systems
Winter 2014-15
COURSE DESCRIPTION
MS&E261–Inventory Control and Production Systems: Topics in the planning and control of manufacturing
systems. The functions of inventory, determination of order quantities and safety stocks, alternative inventory
replenishment systems, item forecasting, production-inventory systems, materials requirements planning and
manufacturing resource planning (MRP/MRP II), Just-in-Time systems, operations scheduling, and supply
chain management.
Course Objectives: This course will enable you to recognize and solve problems involving inventory control,
demand forecasting, and production planning and scheduling. You will also learn how to evaluate alternative
approaches and proposed solutions to these problems and how to apply the solution principles to unfamiliar
settings.
Intended Audiences:
(1) Graduate students in the MS&E Department who are interested in these topics.
(2) If classroom capacity allows, undergraduate students and students from other departments with interest in
these topics.
(3) SCPD students: Non-matriculated students with interest in these topics who take the course under the
Stanford Center for Professional Development (SCPD) via Stanford Online or delayed broadcast. There is no
capacity limit for SCPD students.
Prerequisite: Statistics 116 or equivalent. (Specifically, you need to understand the Normal distribution and
how to find and interpret cumulative probabilities from Normal tables.)
3 units, Winter Quarter: Prof. Hausman, TTh, 12:50–2:05 p.m.
Room: Thornton 102
Required Text: Nahmias, S., and Olsen, T., Production and Operations Analysis, 7th ed. (Waveland Press,
2015; ISBN 978-1-4786-2306-9) available for purchase from the Stanford Bookstore. (Do not buy the 6th
edition—you need the 7th edition.) Note: The publication date for the 7th ed. has recently slipped from
12/15/14 to 1/15/15, so we will post PDF files of the Chapters assigned for January reading on our
CourseWork website.
Required Course Reader: MS&E 261 Course Reader available for purchase from the Stanford Bookstore.
Course Website: The class website can be accessed through coursework (http://coursework.stanford.edu),
under the name W15-MS&E-261-01. In addition Piazza will be utilized for Q&A (more details below).
Course Administration:
1.
Instructor:
Prof. Warren H. Hausman; Huang 323; (650) 723-9279;
hausman@stanford.edu
2.
Prof. Hausman’s Office Hours: Tuesdays and Thursdays 2:30–4:00 p.m.,
and by appointment
MS&E 261
Inventory Control & Production Systems
Winter 2014-15
3.
Teaching Assistants:
Meric (MC) Usta; (650) 308-8652; usta@stanford.edu
Sharan Srinivasan; (650) 289-8020; sharanms@stanford.edu
Kunal Kathpalia; (650) 223 4089; kunalk@stanford.edu
4.
TA Office Hours;
In-class students (Huang Basement 019):
Tuesdays 4:30–7:00 p.m. (MC Usta)
Wednesdays 1:30–4:00 p.m. (Kunal)
SCPD students (via Google Hangouts at
msande261.win15@gmail.com):
Mondays & Tuesdays 6:00–7:30 p.m. (Sharan, starting 1/12)
5.
Prof. Hausman’s Assistant:
Ms. Marilynn Rose; Huang 344B; (650) 725-1622
mjrose@stanford.edu
6.
Course Materials: Course materials will be posted on the course website (see above). We recommend
you bring the lecture notes to each class, either on a laptop or a hardcopy that you print out, to facilitate
taking notes.
7.
Homework assignments: Experience has shown that achieving the course objectives requires each
student to solve homework problems requiring the application of the theoretical concepts and models
presented in class. Thus, weekly written homework assignments are required for the course; see the
CourseWork Website for MS&E 261. Homework assignments will be graded and returned to you to
provide feedback on your mastery of the course material. You ARE allowed to collaborate on them; just
remember that on exams and later on in the real world your collaborators won't be present! Grading of
weekly homework assignments is as follows:
10 = excellent (A)
9, 8 = very good (B)
7 = good (C)
6 = satisfactory (D)
below 6 = unsatisfactory (NC)
For course grading we will drop one homework (your lowest) from your score to allow for unexpected
events.
8.
Deadlines for Homework: For everyone including SCPD students, homework is collected at the
beginning of class on the day it is due. We will also accept homework given to the TAs immediately
after class. Late homework will not be accepted. Homework solutions are to be posted automatically to
the CourseWork Website at 8 a.m. five days after the due date.
For SCPD Students: Please send your homework solutions to SCPD via fax or email. Detailed
submission instructions are available at (http://scpd.stanford.edu/programs/courses/graduatecourses/homework). Graded homework will be returned electronically through SCPD.
9.
Examinations: In order to evaluate your mastery of the course objectives stated above, we use two
examinations. There will be an in-class closed-book and closed-notes midterm examination on
Thursday, February 5, 2015. The final examination (also closed-book, closed-notes) will be on
Thursday, March 19, 2015 from 7:00–10:00pm at Gates B03.
MS&E 261
Inventory Control & Production Systems
Winter 2014-15
Please arrange other commitments so as to avoid conflicts with these two scheduled examinations;
contact the instructor before January 15 if you have an unavoidable conflict. We will not offer any
alternative times for the scheduled final examination, so please do not schedule your Spring
Break travel to conflict with this examination.
For SCPD Students: Examinations will be sent to your examination monitor in early morning on the
date of the exam (PST); you must start and finish each exam on the designated day (PST), not earlier or
later. Each SCPD student must contact the SCPD Distribution Department (scpddistribution@lists.stanford.edu) to have a monitor appointed well ahead of the midterm exam date. You
should NOT email completed examinations to the TAs. You should give your completed exam to your
monitor, who will return it to us through SCPD for grading. SCPD students who are local (near
Stanford) may also request taking the exams at Stanford; check with the TAs to ensure there is space.
10.
Pop Quizzes: There may be in-class 1-minute pop quizzes promptly at 12:50 p.m. at random, to evaluate
that you have studied the case reading (when assigned) for the day [not applicable to SCPD students].
Late quizzes and/or absences count as zero. We will drop one pop quiz (your lowest) from your score.
11
Absences: You are expected to attend all classes (except for illness). Please send the instructor an email
explaining any anticipated absence prior to the occurrence; please explain unanticipated absences by
email also.
12.
Case Studies: Cases provide an opportunity to apply the concepts and methodologies from the course to
"real-life" situations. You are encouraged to work on cases in groups of two to four people (however,
this may not be feasible for SCPD students). We will discuss each case extensively in class, and a
portion of your class participation grade [not applicable to SCPD students] depends on your input during
these class discussions. Cases often contain extraneous information and confusing statements of
opinion by the "characters" in the case. You must decide what is useful and relevant. You may find that
the concepts and methodologies discussed previously in the course need to be adapted somewhat to
accommodate other factors.
13.
Computers and Software: You may use a calculator or a spreadsheet to solve the problem sets. You are
allowed to bring and use a calculator in the exams.
14.
Performance evaluation: Performance will be evaluated 25% by the midterm examination, 50% by the
final examination, 5% by class participation, 15% by homework, and 5% by pop quizzes. Letter grades
only (A, B, C, D, NC) will be given; the Pass/No Credit option is not offered in this course. For SCPD
Students: We will not use class participation and pop quizzes for SCPD students, so weights for the
examinations and homework will be increased pro-rata to add to 100%.
15.
We have set up a Piazza forum for students to engage in Q&A. All students approved to take the course
will be sent an invitation to enroll on the MS&E 261 Piazza page. To avoid duplication of efforts and
promote shared understanding in the class, TAs will only respond to questions on course material
(including assignments) via the Piazza forum and will not respond to these questions via email. For
other matters not related to the course material, reach out to Prof. Hausman or the TAs via an email or a
private post on Piazza.
Please do not sign up for this course unless you can meet all the conditions described here.
MS&E 261
Inventory Control & Production Systems
Winter 2014-15
COURSE OUTLINE
DATE
TOPIC AND ASSIGNMENT
Tuesday
Jan. 6
COURSE INTRODUCTION AND OVERVIEW;
ECONOMIC ORDER QUANTITIES; QUANTITY DISCOUNTS
Read1: Chapter 1(skim); Chapter 4 (Sections 4.1–4.7 only); skim the rest of the chapter
Thursday
Jan. 8
SINGLE-PERIOD INVENTORY CONTROL (Newsvendor Model)
Read: Chapter 5 (Sections 5.1–5.3 only) & Appendix 5-B, Section 1
Hand in: Problem Set #1 (separate file)
Tuesday
Jan. 13
ONGOING INVENTORY CONTROL UNDER UNCERTAINTY
Read: Chapter 5 (Sections 5.4–5.6) and Appendix 5-C
Thursday
Jan. 15
ONGOING INVENTORY CONTROL (continued)
Prepare2: Donner Manufacturing case3
Questions: See assignment at end of case
Hand in: Problem Set #2 (separate file)
Tuesday
Jan. 20
PERIODIC REVIEW SYSTEMS; ABC ANALYSIS;
EXCHANGE CURVES
Read: Chapter 5 (Sections 5.7–5.10)
Thursday
Jan. 22
INVENTORY CONTROL CASE STUDY
Prepare: Scientific Glass, Inc.: Inventory Management case
Note: Assume that production orders are placed once every two weeks, and there is a oneweek transit time on most products.
Questions:
(1) What are the problems facing SG in January 2010?
(2) How does the number of warehouses affect inventory levels?
(3) What alternatives are available to deal with the inventory problems? How would you
evaluate them?
(4) What actions should Ava Beane propose to Eric Gregory and Melissa Hayes?
Hand in: Problem Set #3 (separate file)
1
All chapter and page references are to Nahmias, Production and Operations Analysis, 7th ed., Waveland Press (2015), required
text for the course. Do not buy the 6th edition—you need the 7th edition.
2
"Prepare" means study carefully, perform some analysis, and be prepared to explain and justify your analysis in class. No written
answer is required unless a Problem Set specifies it.
3
All cases and other readings are in the required course reader available for purchase from the Stanford Bookstore.
MS&E 261
Inventory Control & Production Systems
Winter 2014-15
DATE
TOPIC AND ASSIGNMENT
Tuesday
Jan. 27
DEMAND FORECASTING
Read: Chapter 2 (Sections 2.1–2.7)
Thursday
Jan. 29
DEMAND FORECASTING (continued)
Read: Chapter 2 (Sections 2.8–2.9 and 2.11–2.15)
Hand in: Problem Set #4 (separate file)
Tuesday
Feb. 3
REVIEW SESSION
Thursday
Feb. 5
MIDTERM EXAMINATION (in-class; closed book, closed notes)
Tuesday
Feb. 10
SERVICE PARTS MANAGEMENT
Prepare: Spare Parts Planning at ASML case
Thursday
Feb. 12
MATERIALS REQUIREMENTS PLANNING/MANUFACTURING
RESOURCE PLANNING (MRP/MRP II)
Read: Chapter 8 (Chapter Overview and Sections 8.1–8.5)
Prepare: Mayfield Motors case
Questions: see question in case
Hand in: Problem Set #5 (separate file)
Tuesday
Feb. 17
JUST-IN-TIME (JIT) SYSTEMS
Read: Chapter 1, Section 1.5 and Chapter 8, Sections 8.6–8.10
Thursday
Feb. 19
JOB SHOP SCHEDULING (SHOP FLOOR CONTROL)
Read: Chapter 9 (Chapter Overview and Sections 9.1–9.9 and 9.11–9.13)
Hand in: Problem Set #6 (separate file)
Tuesday
Feb. 24
SCHEDULING AND CONTROL (continued)
Prepare: American Semiconductor, Inc. (A) and (B) cases
Questions:
1) Describe the difference between scheduling in a "clockwork" environment and in a
statistical environment.
2) How are on-schedule delivery (OSD) goals actually measured? What difficulties
does this create?
3) Do you agree with the authors that production scheduling is essentially statistical in
character? What are the implications of this?
MS&E 261
Inventory Control & Production Systems
DATE
TOPIC AND ASSIGNMENT
Thursday
Feb. 26
INDUSTRIAL APPLICATIONS
Reading: none
Guest Speaker: Dr. Hugo Mora, Nike Inc.
Winter 2014-15
Hand in: Problem Set #7 (separate file)
Tuesday
Mar. 3
OPERATIONS IN THE SERVICE SECTOR
Read: Skim Chapter 7
Prepare: Manzana Insurance—Fruitvale Branch
Questions:
1) What is the basis for competition in the market that Fruitvale serves?
2) What are the important measures of operating performance for the branch? How well
has the branch been performing according to these measures?
3) Why have profits been deteriorating over the past year?
4) How would you go about calculating utilization of each processing stage?
5) How would you go about calculating profitability of each policy type?
6) What is your assessment of the rules used to assign priorities at Fruitvale?
7) What are your recommendations for managerial action? In particular, how should
Manzana respond to Golden Gate's new policy of one-day service?
Thursday
Mar. 5
SUSTAINABILITY IN PRODUCTS AND MANUFACTURING
Reading: none
Guest speaker: Dr. Dariush Rafinejad
Hand in: Problem Set #8 (separate file)
Tuesday
Mar. 10
RFID: CHALLENGES AND OPPORTUNITIES
Reading: none
Thursday
Mar. 12
SUPPLY CHAIN CASE STUDY
Prepare: Hewlett-Packard Deskjet Printer Supply Chain (A)
Questions: See assignment at end of case
Thursday
Mar. 19
FINAL EXAMINATION: 7:00–10:00pm
(Closed-book, closed-notes)
Room: Gates B03