4. Operations Management PERT & CPM

4. PPC & PERT/CPM 1

4. Production Planning & Control&

PERT / CPM

4. PPC & PERT/CPM 2

Introduction to Production Planning & Control (PPC)

Inputs from L C Jhamb(especially chapter 5)

4. PPC & PERT/CPM 3

PPC - defined

• Production is “manufacturing of goods and / or services”

• Planning is “the series of related & co-ordinated activities –demand management, aggregate sales & operations planning, process planning, materials management (incl. MRP & Inventory control), Operations scheduling, and others; designed to systematize in advance the manufacturing efforts. Planning aims to utilize resources most effectively, to provide the right goods, at the right time, in the right quantity”

• Control is “the review of work progress, make corrections where required; thus ensuring that the actual is as per plan. Control includes activities such as dispatching, progressing & expediting”

• Overall PPC is thus:– Planning production in advance– Setting the “run-rate” for each item– Fixing starting & end dates for each item– Authorizing shop floor activity by release of production orders– Follow-up, inspect & expedite to stay on course (as per plan)

4. PPC & PERT/CPM 4

Objectives of PPC

• Meet targets of production, as aligned with demand, with available resources

• Provide resources (men, material, machines) of the right quantity, quality at right time.

• Optimum scheduling of facilities

• To achieve balanced flow of production, with co-ordination between all departments

• Ensure conformance to delivery commitments, and make sales aware of any potential difficulties

• Inform all concerned, especially management, well in time, re: difficulties which may crop up

4. PPC & PERT/CPM 5

Regular (essential) Functions of PPC (IMP)

ORDER PREPARATION: includes preparation of work orders, converting them to shop orders & auxiliary orders, release of such orders to appropriate entities

MATERIAL CONTROL: includes making material estimates, indenting, purchasing, follow-up, allocating material to shop orders

PROCESS PLANNING (or ROUTING): includes method of manufacture, operations & their sequences, machine & tool requirements for each activity, defining requirements of supporting equipment – i.e. jigs & fixtures, measuring instruments, …

TOOLS CONTROL: estimating requirement & specifications of tools (e.g. cutting tools), jigs & fixtures, measuring instruments,. Replenishment of non – consumable tools due to wear & tear (e.g. allen keys, spanners, ..)

SCHEDULING: fixing calendar dates of various operations for various job-orders, committing delivery dates to sales & despatch schedules

DISPATCHING: preparation & distribution of shop orders & manufacturing instructions; assigning responsibilities to appropriate persons; authorizing them to perform the work at respective work-centres as per the predefined schedule; authorize them to draw the necessary resources (tools, consumables, material, etc);

PROGRESSING: recording progress of work & comparing with plan

EXPEDITING: identify (and anticipate) delays & interruptions: take corrective actions; inform relevant stake-holders of potential & actual deviations from planned schedules

4. PPC & PERT/CPM 6

Optional Functions of PPC (IMP)

COST ESTIMATION: pre-production cost estimates used for budgeting, pricing & profitability management. Alternatively this could the responsibility of Costing dept. or Industrial Engineering

WORK MEASUREMENT: to estimate the time taken by a qualified worker to perform a task, under given conditions, and at the desired level of performance. Techniques like time & methods study, work sampling, etc. Alternatively this could the responsibility of Industrial Engineering

SUB-CONTRACT: outsourcing work for various reasons! Alternatively this could the responsibility of Materials / Purchase depts.

CAPACITY PLANNING: Estimation of requirements of men & machines to meet the firms planned level of business over the short / medium & long term. Alternatively this could the responsibility of the Engineering dept.

DEMAND MANAGEMENT: making projections of demand for various products, which can become a basis for production planning. Various demand forecasting techniques are used to forecast demand. For the medium term (6-18 months) an “Aggregate Sales & Operations plan” is prepared. Thereon a firm schedule is created (Master Production Schedule). Normally the sales / marketing / product management departments will do this.

4. PPC & PERT/CPM 7

The Order Preparation process – a block diagramMANUFACTURING

METHODS

Order Acceptance (OA) Receive Sales Program

Entry of OA into the system (say ERP)

Raise Work Order

Convert Work order intoShop Order

Shop order – part A

Shop order – Part B

Prepare Production Program

Check on-hand availability

Issue Shop orders

Produced to stock

Produced to order

4. PPC & PERT/CPM 8

4a. Demand Management

4. PPC & PERT/CPM

• Demand Management

• Qualitative Forecasting Methods

• Simple & Weighted Moving Average Forecasts

• Exponential Smoothing

• Simple Linear Regression

• Web-Based Forecasting

OBJECTIVES

4. PPC & PERT/CPM

Demand Management

A

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand:Raw Materials, Component parts,Sub-assemblies, etc.

Independent Demand:Finished Goods

4. PPC & PERT/CPM

Independent Demand: What a firm can do to manage it?

• Can take an active role to influence demand

• Can take a passive role and simply respond to demand

4. PPC & PERT/CPM

Types of Forecasts

• Qualitative (Judgmental)

• Quantitative– Time Series Analysis– Causal Relationships– Simulation

4. PPC & PERT/CPM

Components of Demand

• Average demand for a period of time

• Trend

• Seasonal element

• Cyclical elements

• Random variation

• Autocorrelation

4. PPC & PERT/CPM

Finding Components of Demand

1 2 3 4

x

x xx

xx

x xx

xx x x x

xxxxxx x x

xx

x x xx

xx

xx

x

xx

xx

xx

xx

xx

xx

x

x

Year

Sal

es

Seasonal variationSeasonal variation

Linear

Trend

Linear

Trend

4. PPC & PERT/CPM 15

Qualitative Methods

Grass Roots

Market Research

Panel Consensus

Executive Judgment

Historical analogy

Delphi Method

Qualitative

Methods

4. PPC & PERT/CPM

Delphi Method

l. Choose the experts to participate representing a variety

of knowledgeable people in different areas

2. Through a questionnaire (or E-mail), obtain forecasts

(and any premises or qualifications for the forecasts)

from all participants

3. Summarize the results and redistribute them to the

participants along with appropriate new questions

4. Summarize again, refining forecasts and conditions, and

again develop new questions

5. Repeat Step 4 as necessary and distribute the final

results to all participants

4. PPC & PERT/CPM

Time Series Analysis

• Time series forecasting models try to

predict the future based on past data

• You can pick models based on:

1. Time horizon to forecast

2. Data availability

3. Accuracy required

4. Size of forecasting budget

5. Availability of qualified personnel

4. PPC & PERT/CPM

Simple Moving Average Formula

F = A + A + A +...+A

ntt-1 t-2 t-3 t-nF =

A + A + A +...+A

ntt-1 t-2 t-3 t-n

• The simple moving average model assumes an average is a good estimator of future behavior

• The formula for the simple moving average is:

Ft = Forecast for the coming period N = Number of periods to be averagedA t-1 = Actual occurrence in the past period for up to “n” periods

4. PPC & PERT/CPM

Simple Moving Average Problem (1)

Week Demand1 6502 6783 7204 7855 8596 9207 8508 7589 892

10 92011 78912 844

F = A + A + A +...+A

ntt-1 t-2 t-3 t-nF =

A + A + A +...+A

ntt-1 t-2 t-3 t-n

Question: What are the 3-week and 6-week moving average forecasts for demand?

Assume you only have 3 weeks and 6 weeks of actual demand data for the respective forecasts

Question: What are the 3-week and 6-week moving average forecasts for demand?


4. PPC & PERT/CPM

Week Demand 3-Week 6-Week1 6502 6783 7204 785 682.675 859 727.676 920 788.007 850 854.67 768.678 758 876.33 802.009 892 842.67 815.33

10 920 833.33 844.0011 789 856.67 866.5012 844 867.00 854.83

F4=(650+678+720)/3

=682.67F7=(650+678+720 +785+859+920)/6

=768.67

Calculating the moving averages gives us:

©The McGraw-Hill Companies, Inc., 2004

20

4. PPC & PERT/CPM

500

600

700

800

900

1000

1 2 3 4 5 6 7 8 9 10 11 12

Week

Dem

and

Demand

3-Week

6-Week

Plotting the moving averages and comparing them shows how the lines smooth out to reveal the overall upward trend in this example

Plotting the moving averages and comparing them shows how the lines smooth out to reveal the overall upward trend in this example

Note how the 3-Week is smoother than the Demand, and 6-Week is even smoother

Note how the 3-Week is smoother than the Demand, and 6-Week is even smoother

4. PPC & PERT/CPM

Simple Moving Average Problem (2) Data

Week Demand1 8202 7753 6804 6555 6206 6007 575

Question: What is the 3 week moving average forecast for this data?


Question: What is the 3 week moving average forecast for this data?


4. PPC & PERT/CPM

Simple Moving Average Problem (2) Solution

Week Demand 3-Week 5-Week1 8202 7753 6804 655 758.335 620 703.336 600 651.67 710.007 575 625.00 666.00

F4=(820+775+680)/3

=758.33F6=(820+775+680 +655+620)/5 =710.00

4. PPC & PERT/CPM

Weighted Moving Average Formula

F = w A + w A + w A +...+w At 1 t-1 2 t-2 3 t-3 n t-nF = w A + w A + w A +...+w At 1 t-1 2 t-2 3 t-3 n t-n

w = 1ii=1

n

w = 1ii=1

n

While the moving average formula implies an equal weight being placed on each value that is being averaged, the weighted moving average permits an unequal weighting on prior time periods

While the moving average formula implies an equal weight being placed on each value that is being averaged, the weighted moving average permits an unequal weighting on prior time periods

wt = weight given to time period “t” occurrence (weights must add to one)

wt = weight given to time period “t” occurrence (weights must add to one)

The formula for the moving average is:The formula for the moving average is:

4. PPC & PERT/CPM

Weighted Moving Average Problem (1) Data

Weights: t-1 .5t-2 .3t-3 .2

Week Demand1 6502 6783 7204

Question: Given the weekly demand and weights, what is the forecast for the 4th period or Week 4?

Question: Given the weekly demand and weights, what is the forecast for the 4th period or Week 4?

Note that the weights place more emphasis on the most recent data, that is time period “t-1”

Note that the weights place more emphasis on the most recent data, that is time period “t-1”

4. PPC & PERT/CPM

Weighted Moving Average Problem (1) Solution

Week Demand Forecast1 6502 6783 7204 693.4

F4 = 0.5(720)+0.3(678)+0.2(650)=693.4

4. PPC & PERT/CPM

Weighted Moving Average Problem (2) Data

Weights: t-1 .7t-2 .2t-3 .1

Week Demand1 8202 7753 6804 655

Question: Given the weekly demand information and weights, what is the weighted moving average forecast of the 5th period or week?

Question: Given the weekly demand information and weights, what is the weighted moving average forecast of the 5th period or week?

4. PPC & PERT/CPM

Weighted Moving Average Problem (2) Solution

Week Demand Forecast1 8202 7753 6804 6555 672

F5 = (0.1)(755)+(0.2)(680)+(0.7)(655)= 672

4. PPC & PERT/CPM

Exponential Smoothing Model

• Premise: The most recent observations might have the highest predictive value

• Therefore, we should give more weight to the more recent time periods when forecasting

Ft = Ft-1 + (At-1 - Ft-1)Ft = Ft-1 + (At-1 - Ft-1)

constant smoothing Alpha

period epast t tim in the occurance ActualA

period past time 1in alueForecast vF

period t timecoming for the lueForcast vaF

:Where

1-t

1-t

t

4. PPC & PERT/CPM

Exponential Smoothing Problem (1) Data

Week Demand1 8202 7753 6804 6555 7506 8027 7988 6899 775

10

Question: Given the weekly demand data, what are the exponential smoothing forecasts for periods 2-10 using =0.10 and =0.60?

Assume F1=D1

Question: Given the weekly demand data, what are the exponential smoothing forecasts for periods 2-10 using =0.10 and =0.60?

Assume F1=D1

4. PPC & PERT/CPM

Week Demand 0.1 0.61 820 820.00 820.002 775 820.00 820.003 680 815.50 793.004 655 801.95 725.205 750 787.26 683.086 802 783.53 723.237 798 785.38 770.498 689 786.64 787.009 775 776.88 728.20

10 776.69 756.28

Answer: The respective alphas columns denote the forecast values. Note that you can only forecast one time period into the future.

Answer: The respective alphas columns denote the forecast values. Note that you can only forecast one time period into the future.

4. PPC & PERT/CPM

Exponential Smoothing Problem (1) Plotting

500

600

700

800

900

1 2 3 4 5 6 7 8 9 10

Week

Dem

and

Demand

0.1

0.6

Note how that the smaller alpha results in a smoother line in this example

Note how that the smaller alpha results in a smoother line in this example

4. PPC & PERT/CPM

Exponential Smoothing Problem (2) Data

Question: What are the exponential smoothing forecasts for periods 2-5 using a =0.5?

Assume F1=D1

Question: What are the exponential smoothing forecasts for periods 2-5 using a =0.5?

Assume F1=D1

Week Demand1 8202 7753 6804 6555

4. PPC & PERT/CPM

Exponential Smoothing Problem (2) Solution

Week Demand 0.51 820 820.002 775 820.003 680 797.504 655 738.755 696.88

F1=820+(0.5)(820-820)=820 F3=820+(0.5)(775-820)=797.75

4. PPC & PERT/CPM

The MAD Statistic to Determine Forecasting Error

MAD = A - F

n

t tt=1

n

MAD =

A - F

n

t tt=1

n

1 MAD 0.8 standard deviation

1 standard deviation 1.25 MAD

• The ideal MAD is zero which would mean there is no forecasting error

• The larger the MAD, the less the accurate the resulting model

4. PPC & PERT/CPM

MAD Problem Data

Month Sales Forecast1 220 n/a2 250 2553 210 2054 300 3205 325 315

Question: What is the MAD value given the forecast values in the table below?

Question: What is the MAD value given the forecast values in the table below?

4. PPC & PERT/CPM

MAD Problem Solution

MAD = A - F

n=

40

4= 10

t tt=1

n

MAD =

A - F

n=

40

4= 10

t tt=1

n

Month Sales Forecast Abs Error1 220 n/a2 250 255 53 210 205 54 300 320 205 325 315 10

40

Note that by itself, the MAD only lets us know the mean error in a set of forecasts

Note that by itself, the MAD only lets us know the mean error in a set of forecasts

4. PPC & PERT/CPM

Tracking Signal Formula

• The Tracking Signal or TS is a measure that indicates whether the forecast average is keeping pace with any genuine upward or downward changes in demand.

• Depending on the number of MAD’s selected, the TS can be used like a quality control chart indicating when the model is generating too much error in its forecasts.

• The TS formula is:

TS =RSFE

MAD=

Running sum of forecast errors

Mean absolute deviationTS =

RSFE

MAD=

Running sum of forecast errors

Mean absolute deviation

4. PPC & PERT/CPM

Simple Linear Regression Model

Yt = a + bx0 1 2 3 4 5 x (Time)

YThe simple linear regression model seeks to fit a line through various data over time

The simple linear regression model seeks to fit a line through various data over time

Is the linear regression modelIs the linear regression model

a

Yt is the regressed forecast value or dependent variable in the model, a is the intercept value of the the regression line, and b is similar to the slope of the regression line. However, since it is calculated with the variability of the data in mind, its formulation is not as straight forward as our usual notion of slope.

4. PPC & PERT/CPM

Simple Linear Regression Formulas for

Calculating “a” and “b”

a = y - bx

b =xy - n(y)(x)

x - n(x2 2

)

a = y - bx

b =xy - n(y)(x)

x - n(x2 2

)

4. PPC & PERT/CPM

Simple Linear Regression Problem Data

Week Sales1 1502 1573 1624 1665 177

Question: Given the data below, what is the simple linear regression model that can be used to predict sales in future weeks?

Question: Given the data below, what is the simple linear regression model that can be used to predict sales in future weeks?

4. PPC & PERT/CPM

Week Week*Week Sales Week*Sales1 1 150 1502 4 157 3143 9 162 4864 16 166 6645 25 177 8853 55 162.4 2499

Average Sum Average Sum

b =xy - n(y)(x)

x - n(x=

2499 - 5(162.4)(3)=

a = y - bx = 162.4 - (6.3)(3) =

2 2

) ( )55 5 9

63

106.3

143.5

b =xy - n(y)(x)

x - n(x=

2499 - 5(162.4)(3)=

a = y - bx = 162.4 - (6.3)(3) =

2 2

) ( )55 5 9

63

106.3

143.5

Answer: First, using the linear regression formulas, we can compute “a” and “b”

Answer: First, using the linear regression formulas, we can compute “a” and “b”

42

4. PPC & PERT/CPM

Yt = 143.5 + 6.3x

180

Period

135140145150155160165170175

1 2 3 4 5

Sal

es

Sales

Forecast

The resulting regression model is:

Now if we plot the regression generated forecasts against the actual sales we obtain the following chart:

43

4. PPC & PERT/CPM

Web-Based Forecasting: CPFR

• Collaborative Planning, Forecasting, and Replenishment

(CPFR) a Web-based tool used to coordinate demand

forecasting, production and purchase planning, and inventory

replenishment between supply chain trading partners.

• Used to integrate the multi-tier or n-Tier supply chain,

including manufacturers, distributors and retailers.

• CPFR’s objective is to exchange selected internal information

to provide for a reliable, longer term future views of demand

in the supply chain.

• CPFR uses a cyclic and iterative approach to derive

consensus forecasts.

4. PPC & PERT/CPM

Web-Based Forecasting: Steps in CPFR

• 1. Creation of a front-end partnership

agreement

• 2. Joint business planning

• 3. Development of demand forecasts

• 4. Sharing forecasts

• 5. Inventory replenishment


Question Bowl

Which of the following is a classification of a basic

type of forecasting?

a. Transportation method

b. Simulation

c. Linear programming

d. All of the above

e. None of the above

Answer: b. Simulation (There are four types including Qualitative, Time Series Analysis, Causal Relationships, and Simulation.)


Question Bowl

Which of the following is an example of a

“Qualitative” type of forecasting technique or

model?a. Grass rootsb. Market researchc. Panel consensusd. All of the abovee. None of the above

Answer: d. All of the above (Also includes Historical Analogy and Delphi Method.)


Question Bowl

Which of the following is an example of a “Time

Series Analysis” type of forecasting technique or

model?

a. Simulation

b. Exponential smoothing

c. Panel consensus

d. All of the above

e. None of the aboveAnswer: b. Exponential smoothing (Also includes Simple Moving Average, Weighted Moving Average, Regression Analysis, Box Jenkins, Shiskin Time Series, and Trend Projections.)


Question Bowl

Which of the following is a reason why a firm

should choose a particular forecasting model?

a. Time horizon to forecast

b. Data availability

c. Accuracy required

d. Size of forecasting budget

e. All of the above

Answer: e. All of the above (Also should include “availability of qualified personnel” .)


Question Bowl

Which of the following are ways to choose

weights in a Weighted Moving Average

forecasting model?a. Costb. Experiencec. Trial and errord. Only b and c abovee. None of the above

Answer: d. Only b and c above


Question Bowl

Which of the following are reasons why the

Exponential Smoothing model has been a

well accepted forecasting methodology?a. It is accurateb. It is easy to usec. Computer storage requirements are smalld. All of the abovee. None of the above

Answer: d. All of the above


Question Bowl

The value for alpha or α must be between

which of the following when used in an

Exponential Smoothing model?

a. 1 to 10

b. 1 to 2

c. 0 to 1

d. -1 to 1

e. Any number at all

Answer: c. 0 to 1


Question Bowl

Which of the following are sources of error in

forecasts?

a. Bias

b. Random

c. Employing the wrong trend line

d. All of the above

e. None of the aboveAnswer: d. All of the above


Question Bowl

Which of the following would be the “best” MAD

values in an analysis of the accuracy of a

forecasting model?

a. 1000

b. 100

c. 10

d. 1

e. 0

Answer: e. 0


Question Bowl

If a Least Squares model is: Y=25+5x, and x is

equal to 10, what is the forecast value using

this model?

a. 100

b. 75

c. 50

d. 25


Answer: b. 75 (Y=25+5(10)=75)


Question Bowl

Which of the following are examples of

seasonal variation?

a. Additive

b. Least squares

c. Standard error of the estimate

d. Decomposition

e. None of the aboveAnswer: a. Additive (The other type is of seasonal variation is Multiplicative.)


4b. Aggregate Sales and Operations Planning

4. PPC & PERT/CPM

• Sales and Operations Planning

• The Aggregate Operations Plan

• Examples: Chase and Level strategies

OBJECTIVES


Master scheduling

Material requirements planning

Order schedulingWeekly workforce andcustomer scheduling

Daily workforce and customer scheduling

Process planning

Strategic capacity planning

Sales and operations (aggregate) planning

Longrange

Intermediaterange

Shortrange

ManufacturingServices

Exhibit 14.1Exhibit 14.1

Sales plan Aggregate operations plan

Forecasting & demand management

4. PPC & PERT/CPM

Sales and Operations Planning Activities

• Long-range planning– Greater than one year planning horizon– Usually performed in annual increments

• Medium-range planning– Six to eighteen months – Usually with weekly, monthly or quarterly increments

• Short-range planning– One day to less than six months– Usually with weekly or daily increments

4. PPC & PERT/CPM

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. PPC & PERT/CPM

Balancing Aggregate Demandand Aggregate Production Capacity

0

2000

4000

6000

8000

10000

Jan Feb Mar Apr May Jun

45005500

7000

10000

8000

6000

0

2000

4000

6000

8000

10000

Jan Feb Mar Apr May Jun

4500 4000

90008000

4000

6000

Suppose the figure to the right represents forecast demand in units

Suppose the figure to the right represents forecast demand in units

Now suppose this lower figure represents the aggregate capacity of the company to meet demand

Now suppose this lower figure represents the aggregate capacity of the company to meet demand

What we want to do is balance out the production rate, workforce levels, and inventory to make these figures match up

What we want to do is balance out the production rate, workforce levels, and inventory to make these figures match up

4. PPC & PERT/CPM

Required Inputs to the Production Planning System

Planning for

production

External capacity

Competitors’behavior

Raw material availability

Market demand

Economic conditions

Currentphysical capacity

Current workforce

Inventory levels

Activities required for production

External to firm

Internal to firm

4. PPC & PERT/CPM

Key Strategies for Meeting Demand

• Chase

• Level

• Some combination of the two

4. PPC & PERT/CPM

Aggregate Planning Examples: Unit Demand and Cost Data

Materials Rs5/unitHolding costs Rs1/unit per mo.Marginal cost of stockout Rs1.25/unit per mo.Hiring and training cost Rs200/workerLayoff costs Rs250/workerLabor hours required .15 hrs/unitStraight time labor cost Rs8/hourBeginning inventory 250 unitsProductive hours/worker/day 7.25Paid straight hrs/day 8

Suppose we have the following unit demand and cost information:

Suppose we have the following unit demand and cost information:

Demand/mo Jan Feb Mar Apr May Jun

4500 5500 7000 10000 8000 6000


Jan Feb Mar Apr May JunDays/mo 22 19 21 21 22 20Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145Units/worker 1063.33 918.33 1015 1015 1063.33 966.67Rs/worker 1,408 1,216 1,344 1,344 1,408 1,280

Productive hours/worker/day 7.25Paid straight hrs/day 8

Demand/mo Jan Feb Mar Apr MayJun

4500 5500 7000 10000 80006000

Given the demand and cost information below, whatare the aggregate hours/worker/month, units/worker, and dollars/worker?

Given the demand and cost information below, whatare the aggregate hours/worker/month, units/worker, and dollars/worker?

7.25x22

7.25x0.15=48.33 & 84.33x22=1063.33

22x8hrsxRs8=Rs1408

Cut-and-Try Example: Determining Straight Labor Costs and Output

4. PPC & PERT/CPM

Chase Strategy(Hiring & Firing to meet demand)

JanDays/mo 22Hrs/worker/mo 159.5Units/worker 1,063.33Rs/worker 1,408

JanDemand 4,500Beg. inv. 250Net req. 4,250Req. workers 3.997HiredFired 3Workforce 4Ending inventory 0

Lets assume our current workforce is 7 workers.

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.

4. PPC & PERT/CPM

Jan Feb Mar Apr May JunDays/mo 22 19 21 21 22 20Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145Units/worker 1,063 918 1,015 1,015 1,063 967Rs/worker 1,408 1,216 1,344 1,344 1,408 1,280

Jan Feb Mar Apr May JunDemand 4,500 5,500 7,000 10,000 8,000 6,000Beg. inv. 250Net req. 4,250 5,500 7,000 10,000 8,000 6,000Req. workers 3.997 5.989 6.897 9.852 7.524 6.207Hired 2 1 3Fired 3 2 1Workforce 4 6 7 10 8 7Ending inventory 0 0 0 0 0 0

Below are the complete calculations for the remaining months in the six month planning horizon


4. PPC & PERT/CPM

Jan Feb Mar Apr May JunDemand 4,500 5,500 7,000 10,000 8,000 6,000Beg. inv. 250Net req. 4,250 5,500 7,000 10,000 8,000 6,000Req. workers 3.997 5.989 6.897 9.852 7.524 6.207Hired 2 1 3Fired 3 2 1Workforce 4 6 7 10 8 7Ending inventory 0 0 0 0 0 0

Jan Feb Mar Apr May Jun CostsMaterial 21,250.00 27,500.00 35,000.00 50,000.00 40,000.00 30,000.00 203,750.00Labor 5,627.59 7,282.76 9,268.97 13,241.38 10,593.10 7,944.83 53,958.62Hiring cost 400.00 200.00 600.00 1,200.00Firing cost 750.00 500.00 250.00 1,500.00

260,408.62

Below are the complete calculations for the remaining months in the six month planning horizon with the other costs included

4. PPC & PERT/CPM

Level Workforce Strategy (Surplus and Shortage Allowed)

JanDemand 4,500Beg. inv. 250Net req. 4,250Workers 6Production 6,380Ending inventory 2,130Surplus 2,130Shortage

Lets take the same problem as before but this time use the Level Workforce strategy

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

This time we will seek to use a workforce level of 6 workers

4. PPC & PERT/CPM

Jan Feb Mar Apr May JunDemand 4,500 5,500 7,000 10,000 8,000 6,000Beg. inv. 250 2,130 2,140 1,230 -2,680 -1,300Net req. 4,250 3,370 4,860 8,770 10,680 7,300Workers 6 6 6 6 6 6Production 6,380 5,510 6,090 6,090 6,380 5,800Ending inventory 2,130 2,140 1,230 -2,680 -1,300 -1,500Surplus 2,130 2,140 1,230Shortage 2,680 1,300 1,500

Note, if we recalculate this sheet with 7 workers we would have a surplus

Note, if we recalculate this sheet with 7 workers we would have a surplus



4. PPC & PERT/CPM

Jan Feb Mar Apr May Jun4,500 5,500 7,000 10,000 8,000 6,000

250 2,130 10 -910 -3,910 -1,6204,250 3,370 4,860 8,770 10,680 7,300

6 6 6 6 6 66,380 5,510 6,090 6,090 6,380 5,8002,130 2,140 1,230 -2,680 -1,300 -1,5002,130 2,140 1,230

2,680 1,300 1,500

Jan Feb Mar Apr May Jun8,448.00 7,296.00 8,064.00 8,064.00 8,448.00 7,680.00 48,000.00

31,900.00 27,550.00 30,450.00 30,450.00 31,900.00 29,000.00 181,250.002,130.00 2,140.00 1,230.00 5,500.00

3,350.00 1,625.00 1,875.00 6,850.00

241,600.00



Note, total costs under this strategy are less than Chase at Rs260.408.62

Note, total costs under this strategy are less than Chase at Rs260.408.62

LaborMaterialStorageStockout


Question Bowl

Sales and Operations Planning activities are usually conducted during which planning time horizon?

a. Long-range b. Intermediate-rangec. Short-ranged. Really short-rangee. None of the above

Answer: b. Intermediate-range (i.e., 6 to 18 months)


Question Bowl

Which of the following are Production Planning

Strategies can involve trade-offs among the

workforce size, work hours, inventory, and

backlogs?

a. Chase strategy

b. Stable workforce-variable work hours

c. Level strategy

d. All of the above




Question Bowl

Which of the following are considered “relevant

costs” in the Aggregate Production Plan?a. Costs associated with changes in the

production rateb. Inventory holding costsc. Backordering costsd. Basic production costse. All of the above

Answer: e. All of the above


Question Bowl

Which of the following Aggregate Planning

Techniques can be performed using simple

spreadsheets?a. Cut-and-tryb. Linear programmingc. Transportation methodd. All of the abovee. None of the above

Answer: a. Cut-and-try (The other two involve more complex computational effort than simple spreadsheets.)


Question Bowl

Which of the following methods can be used to

allocate the right type of capacity to the right

type of customer at the right price and in time to

maximize revenue?

a. Cut-and-try

b. Yield management

c. Transportation method

d. All of the above

e. None of the above Answer: b. Yield management


Question Bowl

From an operational perspective Yield

Management is most effective as a capacity

technique, when which of the following happens?

a. Demand can not be segmented by customer

b. Variable costs are high

c. Fixed costs are low

d. Demand is highly variable

e. All of the aboveAnswer: d. Demand is highly variable


4c. Inventory Control(A Part of Material Planning)

4. PPC & PERT/CPM

• Inventory System Defined

• Inventory Costs

• Independent vs. Dependent Demand

• Single-Period Inventory Model

• Multi-Period Inventory Models: Basic Fixed-Order

Quantity Models

• Multi-Period Inventory Models: Basic Fixed-Time

Period Model

• Miscellaneous Systems and Issues

OBJECTIVES

4. PPC & PERT/CPM

Inventory System

• Inventory is the stock of any item or resource

used in an organization and can include: raw

materials, finished products, component parts,

supplies, and work-in-process

• An inventory system is the set of policies and

controls that monitor levels of inventory and

determines what levels should be maintained,

when stock should be replenished, and how

large orders should be

4. PPC & PERT/CPM

Purposes of Inventory

1. To maintain independence of operations

2. To meet variation in product demand

3. To allow flexibility in production scheduling

4. To provide a safeguard for variation in raw

material delivery time

5. To take advantage of economic purchase-order

size

4. PPC & PERT/CPM

Inventory Costs

• Holding (or carrying) costs

– Costs for storage, handling, insurance, etc

• Setup (or production change) costs

– Costs for arranging specific equipment

setups, etc

• Ordering costs

– Costs of someone placing an order, etc

• Shortage costs

– Costs of canceling an order, etc

4. PPC & PERT/CPM

E(1)

Independent vs. Dependent Demand

Independent Demand (Demand for the final end-product or demand not related to other items)

Dependent Demand

(Derived demand items for

component parts,

subassemblies, raw materials,

etc)

Finishedproduct

Component parts

4. PPC & PERT/CPM

Inventory Systems

• Single-Period Inventory Model– One time purchasing decision (Example:

vendor selling t-shirts at a football game)– Seeks to balance the costs of inventory

overstock and under stock• Multi-Period Inventory Models

– Fixed-Order Quantity Models• Event triggered (Example: running out of

stock)– Fixed-Time Period Models

• Time triggered (Example: Monthly sales call by sales representative)

4. PPC & PERT/CPM

Single-Period Inventory Model

uo

u

CC

CP

uo

u

CC

CP

sold be unit will y that theProbabilit

estimatedunder demand ofunit per Cost C

estimatedover demand ofunit per Cost C

:Where

u

o

P

This model states that we should continue to increase the size of the inventory so long as the probability of selling the last unit added is equal to or greater than the ratio of: Cu/Co+Cu

This model states that we should continue to increase the size of the inventory so long as the probability of selling the last unit added is equal to or greater than the ratio of: Cu/Co+Cu


Single Period Model Example

• Our college basketball team is playing in a tournament game this weekend. Based on our past experience we sell on average 2,400 shirts with a standard deviation of 350. We make Rs100 on every shirt we sell at the game, but lose Rs50 on every shirt not sold. How many shirts should we make for the game?

Cu = Rs100 and Co = Rs50; P ≤ 100 / (100 + 50) = .667

Z.667 = .432 (use NORMSDIST(.667) or Appendix E) therefore we need 2,400 + .432(350) = 2,551 shirts


Multi-Period Models:Fixed-Order Quantity Model Model

Assumptions (Part 1)

• Demand for the product is constant and uniform throughout the period

• Lead time (time from ordering to receipt) is constant

• Price per unit of product is constant

4. PPC & PERT/CPM

Multi-Period Models:Fixed-Order Quantity Model Model Assumptions

(Part 2)

• Inventory holding cost is based on average inventory

• Ordering or setup costs are constant

• All demands for the product will be satisfied (No back orders are allowed)


Basic Fixed-Order Quantity Model and Reorder Point Behavior

R = Reorder pointQ = Economic order quantityL = Lead time

L L

Q QQ

R

Time

Numberof unitson hand

1. You receive an order quantity Q.

2. Your start using them up over time. 3. When you reach down to

a level of inventory of R, you place your next Q sized order.

4. The cycle then repeats.

4. PPC & PERT/CPM

Cost Minimization Goal

Ordering Costs

HoldingCosts

Order Quantity (Q)

COST

Annual Cost ofItems (DC)

Total Cost

QOPT

By adding the item, holding, and ordering costs together, we determine the total cost curve, which in turn is used to find the Qopt inventory order point that minimizes total costs

By adding the item, holding, and ordering costs together, we determine the total cost curve, which in turn is used to find the Qopt inventory order point that minimizes total costs

4. PPC & PERT/CPM

Basic Fixed-Order Quantity (EOQ) Model Formula

H 2

Q + S

Q

D + DC = TC H

2

Q + S

Q

D + DC = TC

Total Annual =Cost

AnnualPurchase

Cost

AnnualOrdering

Cost

AnnualHolding

Cost+ +

TC=Total annual costD =DemandC =Cost per unitQ =Order quantityS =Cost of placing an order or setup costR =Reorder pointL =Lead timeH=Annual holding and storage cost per unit of inventory

TC=Total annual costD =DemandC =Cost per unitQ =Order quantityS =Cost of placing an order or setup costR =Reorder pointL =Lead timeH=Annual holding and storage cost per unit of inventory

4. PPC & PERT/CPM

Deriving the EOQ

Using calculus, we take the first derivative of the total cost function with respect to Q, and set the derivative (slope) equal to zero, solving for the optimized (cost minimized) value of Qopt

Using calculus, we take the first derivative of the total cost function with respect to Q, and set the derivative (slope) equal to zero, solving for the optimized (cost minimized) value of Qopt

Q = 2DS

H =

2(Annual D em and)(Order or Setup Cost)

Annual Holding CostOPTQ =

2DS

H =

2(Annual D em and)(Order or Setup Cost)

Annual Holding CostOPT

Reorder point, R = d L_

Reorder point, R = d L_

d = average daily demand (constant)

L = Lead time (constant)

_

We also need a reorder point to tell us when to place an order

We also need a reorder point to tell us when to place an order

4. PPC & PERT/CPM

EOQ Example (1) Problem Data

Annual Demand = 1,000 unitsDays per year considered in average

daily demand = 365Cost to place an order = Rs10Holding cost per unit per year = Rs2.50Lead time = 7 daysCost per unit = Rs15

Given the information below, what are the EOQ and reorder point?

Given the information below, what are the EOQ and reorder point?

4. PPC & PERT/CPM

EOQ Example (1) Solution

Q = 2DS

H =

2(1,000 )(10)

2.50 = 89.443 units or OPT 90 unitsQ =

2DS

H =

2(1,000 )(10)

2.50 = 89.443 units or OPT 90 units

d = 1,000 units / year

365 days / year = 2.74 units / dayd =

1,000 units / year

365 days / year = 2.74 units / day

Reorder point, R = d L = 2.74units / day (7days) = 19.18 or _

20 units Reorder point, R = d L = 2.74units / day (7days) = 19.18 or _

20 units

In summary, you place an optimal order of 90 units. In the course of using the units to meet demand, when you only have 20 units left, place the next order of 90 units.

In summary, you place an optimal order of 90 units. In the course of using the units to meet demand, when you only have 20 units left, place the next order of 90 units.

4. PPC & PERT/CPM

EOQ Example (2) Problem Data

Annual Demand = 10,000 unitsDays per year considered in average daily demand = 365Cost to place an order = Rs10Holding cost per unit per year = 10% of cost per unitLead time = 10 daysCost per unit = Rs15

Determine the economic order quantity and the reorder point given the following…

Determine the economic order quantity and the reorder point given the following…

4. PPC & PERT/CPM

EOQ Example (2) Solution

Q =2DS

H=

2(10,000 )(10)

1.50= 365.148 units, or OPT 366 unitsQ =

2DS

H=

2(10,000 )(10)

1.50= 365.148 units, or OPT 366 units

d =10,000 units / year

365 days / year= 27.397 units / dayd =

10,000 units / year

365 days / year= 27.397 units / day

R = d L = 27.397 units / day (10 days) = 273.97 or _

274 unitsR = d L = 27.397 units / day (10 days) = 273.97 or _

274 units

Place an order for 366 units. When in the course of using the inventory you are left with only 274 units, place the next order of 366 units.

Place an order for 366 units. When in the course of using the inventory you are left with only 274 units, place the next order of 366 units.

4. PPC & PERT/CPM

Fixed-Time Period Model with Safety Stock Formula

order)on items (includes levelinventory current = I

timelead and review over the demand ofdeviation standard =

yprobabilit service specified afor deviations standard ofnumber the= z

demanddaily averageforecast = d

daysin timelead = L

reviewsbetween days ofnumber the= T

ordered be toquantitiy = q

:Where

I - Z+ L)+(Td = q

L+T

L+T

order)on items (includes levelinventory current = I

timelead and review over the demand ofdeviation standard =

yprobabilit service specified afor deviations standard ofnumber the= z

demanddaily averageforecast = d

daysin timelead = L

reviewsbetween days ofnumber the= T

ordered be toquantitiy = q

:Where

I - Z+ L)+(Td = q

L+T

L+T

q = Average demand + Safety stock – Inventory currently on handq = Average demand + Safety stock – Inventory currently on hand

4. PPC & PERT/CPM

Multi-Period Models: Fixed-Time Period Model: Determining the Value of T+L

T+L di 1

T+L

d

T+L d2

=

Since each day is independent and is constant,

= (T + L)

i

2

T+L di 1

T+L

d

T+L d2

=

Since each day is independent and is constant,

= (T + L)

i

2

• The standard deviation of a sequence of random events equals the square root of the sum of the variances

4. PPC & PERT/CPM

Example of the Fixed-Time Period Model

Average daily demand for a product is 20 units. The review period is 30 days, and lead time is 10 days. Management has set a policy of satisfying 96 percent of demand from items in stock. At the beginning of the review period there are 200 units in inventory. The daily demand standard deviation is 4 units.

Given the information below, how many units should be ordered?

Given the information below, how many units should be ordered?

4. PPC & PERT/CPM

Example of the Fixed-Time Period Model: Solution (Part 1)

T+ L d2 2 = (T + L) = 30 + 10 4 = 25.298 T+ L d

2 2 = (T + L) = 30 + 10 4 = 25.298

The value for “z” is found by using the Excel NORMSINV function, or as we will do here, using Appendix D. By adding 0.5 to all the values in Appendix D and finding the value in the table that comes closest to the service probability, the “z” value can be read by adding the column heading label to the row label.

So, by adding 0.5 to the value from Appendix D of 0.4599, we have a probability of 0.9599, which is given by a z = 1.75

4. PPC & PERT/CPM

Example of the Fixed-Time Period Model: Solution (Part 2)

or 644.272, = 200 - 44.272 800 = q

200- 298)(1.75)(25. + 10)+20(30 = q

I - Z+ L)+(Td = q L+T

units 645

So, to satisfy 96 percent of the demand, you should place an order of 645 units at this review period

4. PPC & PERT/CPM

Price-Break Model Formula

Cost Holding Annual

Cost) Setupor der Demand)(Or 2(Annual =

iC

2DS = QOPT

Based on the same assumptions as the EOQ model, the price-break model has a similar Qopt formula:

i = percentage of unit cost attributed to carrying inventoryC = cost per unit

Since “C” changes for each price-break, the formula above will have to be used with each price-break cost value

4. PPC & PERT/CPM

Price-Break Example Problem Data (Part 1)

A company has a chance to reduce their inventory ordering costs by placing larger quantity orders using the price-break order quantity schedule below. What should their optimal order quantity be if this company purchases this single inventory item with an e-mail ordering cost of Rs4, a carrying cost rate of 2% of the inventory cost of the item, and an annual demand of 10,000 units?

A company has a chance to reduce their inventory ordering costs by placing larger quantity orders using the price-break order quantity schedule below. What should their optimal order quantity be if this company purchases this single inventory item with an e-mail ordering cost of Rs4, a carrying cost rate of 2% of the inventory cost of the item, and an annual demand of 10,000 units?

Order Quantity(units) Price/unit(Rs)0 to 2,499 Rs1.202,500 to 3,999 1.004,000 or more .98

4. PPC & PERT/CPM

Price-Break Example Solution (Part 2)

units 1,826 = 0.02(1.20)

4)2(10,000)( =

iC

2DS = QOPT

Annual Demand (D)= 10,000 unitsCost to place an order (S)= Rs4

First, plug data into formula for each price-break value of “C”

units 2,000 = 0.02(1.00)

4)2(10,000)( =

iC

2DS = QOPT

units 2,020 = 0.02(0.98)

4)2(10,000)( =

iC

2DS = QOPT

Carrying cost % of total cost (i)= 2%Cost per unit (C) = $1.20, $1.00, $0.98

Interval from 0 to 2499, the Qopt value is feasible

Interval from 2500-3999, the Qopt value is not feasible

Interval from 4000 & more, the Qopt value is not feasible

Next, determine if the computed Qopt values are feasible or not

4. PPC & PERT/CPM


Since the feasible solution occurred in the first price-break, it means that all the other true Qopt values occur at the beginnings of each price-break interval. Why?

Since the feasible solution occurred in the first price-break, it means that all the other true Qopt values occur at the beginnings of each price-break interval. Why?

0 1826 2500 4000 Order Quantity

Total annual costs

So the candidates for the price-breaks are 1826, 2500, and 4000 units

So the candidates for the price-breaks are 1826, 2500, and 4000 units

Because the total annual cost function is a “u” shaped function

Because the total annual cost function is a “u” shaped function

4. PPC & PERT/CPM


iC 2

Q + S

Q

D + DC = TC iC

2

Q + S

Q

D + DC = TC

Next, we plug the true Qopt values into the total cost annual cost function to determine the total cost under each price-break

TC(0-2499)=(10000*1.20)+(10000/1826)*4+(1826/2)(0.02*1.20) = Rs12,043.82TC(2500-3999)= Rs10,041TC(4000&more)= Rs9,949.20

TC(0-2499)=(10000*1.20)+(10000/1826)*4+(1826/2)(0.02*1.20) = Rs12,043.82TC(2500-3999)= Rs10,041TC(4000&more)= Rs9,949.20

Finally, we select the least costly Qopt, which is this problem occurs in the 4000 & more interval. In summary, our optimal order quantity is 4000 units

4. PPC & PERT/CPM

Maximum Inventory Level, M

Miscellaneous Systems:Optional Replenishment System

MActual Inventory Level, I

q = M - I

I

Q = minimum acceptable order quantity

If q > Q, order q, otherwise do not order any.

4. PPC & PERT/CPM

Miscellaneous Systems:Bin Systems

Two-Bin System

Full Empty

Order One Bin ofInventory

One-Bin System

Periodic Check

Order Enough toRefill Bin

4. PPC & PERT/CPM

ABC Classification System

• Items kept in inventory are not of equal importance in terms of:

– Rupees invested

– profit potential

– sales or usage volume

– stock-out penalties

0

30

60

30

60

AB

C

% of Rs Value

% of Use

So, identify inventory items based on percentage of total dollar value, where “A” items are roughly top 15 %, “B” items as next 35 %, and the lower 65% are the “C” items

4. PPC & PERT/CPM

Inventory Accuracy and Cycle Counting

• Inventory accuracy refers to how well the inventory records agree with physical count

• Cycle Counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year


Question Bowl

The average cost of inventory in the United States is which of the following?

a. 10 to 15 percent of its costb. 15 to 20 percent of its costc. 20 to 25 percent of its costd. 25 to 30 percent of its coste. 30 to 35 percent of its costAnswer: e. 30 to 35 percent of its cost


Question Bowl

Which of the following is a reason why firms

keep a supply of inventory?

a. To maintain independence of operations

b. To meet variation in product demand

c. To allow flexibility in production scheduling

d. To take advantage of economic purchase

order size

e. All of the aboveAnswer: e. All of the above (Also can include to provide a safeguard for variation in raw material delivery time.)


Question Bowl

An Inventory System should include policies

that are related to which of the following?

a. How large inventory purchase orders should be

b. Monitoring levels of inventory

c. Stating when stock should be replenished

d. All of the above




Question Bowl

Which of the following is an Inventory Cost item

that is related to the managerial and clerical

costs to prepare a purchase or production order?

a. Holding costs

b. Setup costs

c. Carrying costs

d. Shortage costs


Answer: e. None of the above (Correct answer is Ordering Costs.)


Question Bowl

Which of the following is considered a

Independent Demand inventory item?

a. Bolts to a automobile manufacturer

b. Timber to a home builder

c. Windows to a home builder

d. Containers of milk to a grocery store

e. None of the aboveAnswer: d. Containers of milk to a grocery store


Question Bowl

If you are marketing a more expensive

independent demand inventory item, which

inventory model should you use?

a. Fixed-time period model

b. Fixed-order quantity model

c. Periodic system

d. Periodic review system

e. P-modelAnswer: b. Fixed-order quantity model


Question Bowl

If the annual demand for an inventory item is 5,000

units, the ordering costs are Rs100 per order, and

the cost of holding a unit is stock for a year is Rs10,

which of the following is approximately the Qopt?

a. 5,000 units

b. Rs5,000

c. 500 units

d. 316 units


Answer: d. 316 units (Sqrt[(2x1000x100)/10=316.2277)


Question Bowl

The basic logic behind the ABC Classification

system for inventory management is which of the

following?

a. Two-bin logic

b. One-bin logic

c. Pareto principle

d. All of the above


Answer: c. Pareto principle


Question Bowl

A physical inventory-taking technique in

which inventory is counted frequently

rather than once or twice a year is which of

the following?

a. Cycle counting

b. Mathematical programming

c. Pareto principle

d. ABC classification

e. Stockkeeping unit (SKU)Answer: a. Cycle counting


4d. Materials Requirements Planning ( a Part of MATERIALS PLANNING)

4. PPC & PERT/CPM

• Material Requirements Planning (MRP)

• MRP Logic and Product Structure Trees

• Time Fences

• MRP Example

• MRP II and Lot Sizing

OBJECTIVES

4. PPC & PERT/CPM

Material Requirements Planning

• 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

4. PPC & PERT/CPM

Example of MRP Logic and Product Structure Tree

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

Product Structure Tree for Assembly A Lead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

Total Unit DemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)

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

4. PPC & PERT/CPM

LT = 1 day

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50

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.

4. PPC & PERT/CPM

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: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50B Required 20 200

Order Placement 20 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

SparesLT = 2

4x50=200

4. PPC & PERT/CPM

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

LT=1 Order Placement 50B Required 20 200

LT=2 Order Placement 20 200C Required 100

LT=1 Order Placement 100D Required 55 400 300

LT=3 Order Placement 55 400 300E Required 20 200

LT=4 Order Placement 20 200F Required 200

LT=1 Order Placement 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

40 + 15 spares

Part D: Day 6

Finally, repeating the process for all components, we have the final materials requirements plan:


127

4. PPC & PERT/CPM

Master Production Schedule (MPS)

• Time-phased plan specifying how many and when the firm plans to build each end item

Aggregate Plan(Product Groups)

Aggregate Plan(Product Groups)

MPS(Specific End Items)

4. PPC & PERT/CPM

Types of Time Fences

• Frozen

– No schedule changes allowed within this

window

• Moderately Firm

– Specific changes allowed within product

groups as long as parts are available

• Flexible

– Significant variation allowed as long as overall

capacity requirements remain at the same

levels

4. PPC & PERT/CPM

Example of Time Fences

8 15 26

Weeks

FrozenModerately

Firm Flexible

Firm Customer Orders

Forecast and availablecapacity

Capacity


4. PPC & PERT/CPM

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

4. PPC & PERT/CPM

From Exhibit 15.6From Exhibit 15.6

132


Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Bill ofmaterial

file

Engineeringdesign

changes

Inventoryrecord file

Inventorytransactions

Master productionSchedule (MPS)

Primary reportsSecondary reports

Planned order schedule for inventory and production control

Exception reportsPlanning reportsReports for performance control

Materialplanning(MRP

computer program)

4. PPC & PERT/CPM

Bill of Materials (BOM) FileA Complete Product Description

• Materials

• Parts

• Components

• Production sequence

• Modular BOM – Subassemblies

• Super BOM– Fractional options

4. PPC & PERT/CPM

Inventory Records File

• Each inventory item carried as a separate file– Status according to “time buckets”

• Pegging– Identify each parent item that created

demand

4. PPC & PERT/CPM

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

4. PPC & PERT/CPM

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

4. PPC & PERT/CPM

Additional MRP Scheduling Terminology

• Gross Requirements

• Scheduled receipts

• Projected available balance

• Net requirements

• Planned order receipt

• Planned order release

4. PPC & PERT/CPM

MRP Example

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

4. PPC & PERT/CPM

A(2)

X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45


On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 A’s for each X

It takes 2 A’s for each X

4. PPC & PERT/CPM












B(1)A(2)

X

It takes 1 B for each X

It takes 1 B for each X

4. PPC & PERT/CPM

A(2) B(1)

X

C(3)












It takes 3 C’s for each A

It takes 3 C’s for each A

4. PPC & PERT/CPM

A(2) B(1)

C(2)

X

C(3)












It takes 2 C’s for each B

It takes 2 C’s for each B

4. PPC & PERT/CPM

A(2) B(1)

D(5)C(2)

X

C(3)












It takes 5 D’s for each B

It takes 5 D’s for each B

4. PPC & PERT/CPM

Closed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback

4. PPC & PERT/CPM

Manufacturing Resource Planning (MRP II)

• Goal: Plan and monitor all resources of

a manufacturing firm (closed loop):

– manufacturing

– marketing

– finance

– engineering

• Simulate the manufacturing system

4. PPC & PERT/CPM

Lot Sizing in MRP Programs

• Lot-for-lot (L4L)

• Economic order quantity (EOQ)

• Least total cost (LTC)

• Least unit cost (LUC)

• Which one to use?

– The one that is least costly!


Question Bowl

Which type of industry has only “medium”

expected benefits from the use of MRP?

a. Assemble-to-stock

b. Fabricate-to-stock

c. Assemble-to-order

d. Fabricate-to-order

e. Process

Answer: e. Process


Question Bowl

To ensure good master scheduling, a master

scheduler must do which of the following?

a. Never lose sight of the aggregate plan

b. Identify and communicate all problems

c. Be involved with customer order promising

d. Be visible to all levels of management

e. All of the aboveAnswer: e. All of the above (Correct answer can also include objectively trade off manufacturing, marketing, and engineering conflicts and include all demands from product sales, warehouse replenishment, spares, and interplant requirements.)


Question Bowl

The purpose of a “time fence” is which of the

following?

a. Make sure the cows don’t get out of the barn

b. Control flow through the production system

c. Maximize sales to retailers

d. All of the above


Answer: b. Control flow through the production system


Question Bowl

Which of the following is an objective under an

MRP system?

a. To improve customer service

b. Minimize inventory investment

c. Maximize production operating efficiency

d. All of the above



Question Bowl

Which of the following is one of the three

main inputs into an MRP system?

a. BOM file

b. Exception report

c. Planning report

d. All of the above


Answer: a. BOM file (Correct answer can also include Master Schedule and Inventory Records File.)


Question Bowl

An MRP program accesses the status of a job

according to specific time periods called which

of the following?

a. Peg record

b. Time fence

c. Time bucket

d. Time clock


Answer: c. Time bucket


Question Bowl

In MRP, workload per work center can be determined. When the work capacity is exceeded, which of the following options can be implemented to correct the imbalance of workload?

a. Work overtimeb. Renegotiate the due date and reschedulec. Subcontract to an outside shopd. All of the abovee. None of the above

Answer: d. All of the above (Correct answer can also include selecting an alternative work center and rescheduling the work at a different time.)


Question Bowl

Which of the following are reasons why a Lot-For-

Lot (L4L) method of lot sizing can be used in an

MRP application?

a. Minimizes carrying costs

b. Sets planned orders to exactly match the net

requirements

c. Produces exactly what is needed

d. Does not carry any units over into future periods

e. All of the above



4e. Process Planning & Analysis

4. PPC & PERT/CPM

• Process Analysis

• Process Flowcharting

• Types of Processes

• Process Performance Metrics

OBJECTIVES


Process Planning – as defined by L C Jhamb

• Process planning is the establishment of shortest (normally time) & most economical (cost) path for a manufactured item, from the start (say a raw material) up to being a finished good. – Process planning indicates operations to be performed & their

sequence;– Specifies the machines / equipment required– The tooling required (e.g. jigs, fixtures, …) for each operation; – Provides data (e.g. speeds, feeds; – Indicates processing times (such as set-up time, operations

time;– Specifies the skill requirements for each operation

• Documents that incorporate such information are:– Process Sheets or Route Sheets– Service Blue-prints

4. PPC & PERT/CPM

Process Analysis Terms

• Process: Is any part of an organization that takes inputs and transforms them into outputs

• Cycle Time: Is the average successive time between completions of successive units

• Utilization: Is the ratio of the time that a resource is actually activated relative to the time that it is available for use

4. PPC & PERT/CPM

Process Flowcharting Defined

• Process flowcharting is the use of a diagram to present the major elements of a process

• The basic elements can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues

• It is an ideal methodology by which to begin analyzing a process

4. PPC & PERT/CPM

Flowchart Symbols

Tasks or operations Examples: Giving an admission ticket to a customer, installing a engine in a car, etc.

Examples: Giving an admission ticket to a customer, installing a engine in a car, etc.

Decision Points Examples: How much change should be given to a customer, which wrench should be used, etc.

Examples: How much change should be given to a customer, which wrench should be used, etc.

Purpose and Examples

4. PPC & PERT/CPM

Examples: Sheds, lines of people waiting for a service, etc.

Examples: Sheds, lines of people waiting for a service, etc.

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Storage areas or queues

Flows of materials or customers

Purpose and Examples Flowchart Symbols

4. PPC & PERT/CPM

Example: Flowchart of Student Going

to School

Yes

No

Goof off

Go to school today?

Walk to class

Drive to school

4. PPC & PERT/CPM

Types of Processes

Single-stage Process

Stage 1

Stage 1 Stage 2 Stage 3

Multi-stage Process

4. PPC & PERT/CPM

Types of Processes (Continued)

Stage 1 Stage 2

Buffer

Multi-stage Process with Buffer

A buffer refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage

4. PPC & PERT/CPM

Other Process Terminology

• Blocking– Occurs when the activities in a stage must stop

because there is no place to deposit the item just completed

– If there is no room for an employee to place a unit of work down, the employee will hold on to it not able to continue working on the next unit

• Starving– Occurs when the activities in a stage must stop

because there is no work – If an employee is waiting at a work station and no

work is coming to the employee to process, the employee will remain idle until the next unit of work comes

4. PPC & PERT/CPM

Other Process Terminology (Continued)

• Bottleneck– Occurs when the limited capacity of a process

causes work to pile up or become unevenly distributed in the flow of a process

– If an employee works too slow in a multi-stage process, work will begin to pile up in front of that employee. In this is case the employee represents the limited capacity causing the bottleneck.

• Pacing– Refers to the fixed timing of the movement of

items through the process

4. PPC & PERT/CPM

Other Types of Processes

• Make-to-order

– Only activated in response to an actual order

– Both work-in-process and finished goods

inventory kept to a minimum

• Make-to-stock

– Process activated to meet expected or

forecast demand

– Customer orders are served from target

stocking level

4. PPC & PERT/CPM

Process Performance Metrics

• Operation time = Setup time + Run time

• Throughput time = Average time for a unit tomove through the

system

• Velocity = Throughput time

Value-added time

4. PPC & PERT/CPM

Process Performance Metrics (Continued)

• Cycle time = Average time betweencompletion of units

• Throughput rate = 1 . Cycle time

• Efficiency = Actual output Standard Output

4. PPC & PERT/CPM

Process Performance Metrics (Continued)

• Productivity = Output

Input

• Utilization = Time Activated

Time Available

4. PPC & PERT/CPM

Cycle Time Example

Suppose you had to produce 600 units in 80 hours to meet the demand requirements of a product. What is the cycle time to meet this demand requirement?

Suppose you had to produce 600 units in 80 hours to meet the demand requirements of a product. What is the cycle time to meet this demand requirement?

Answer: There are 4,800 minutes (60 minutes/hour x 80 hours) in 80 hours. So the average time between completions would have to be: Cycle time = 4,800/600 units = 8 minutes.

Answer: There are 4,800 minutes (60 minutes/hour x 80 hours) in 80 hours. So the average time between completions would have to be: Cycle time = 4,800/600 units = 8 minutes.

4. PPC & PERT/CPM

Process Throughput Time Reduction

• Perform activities in parallel

• Change the sequence of activities

• Reduce interruptions


Question Bowl

Which of the following are possible examples of “cycle times”?

a. Time for each television to come off an assembly line.

b. Time it takes for a stock purchasec. Time it takes for an instructor to grade

an examd. Time it takes to build an automobilee. All of the above



Question Bowl

Which of the following are used as symbols in a Process Flowchart?

a. Decision pointsb. Blockingc. Starvingd. Bottlenecke. All of the above

Answer: a. Decision points (A diamond shaped symbol.)


Question BowlWhich type of process is configured as

follows?

a. Single-stage processb. Multi-stage processc. Make-to-order processd. Make-to-stock processe. All of the above

Answer: b. Multi-stage process

1 2 3


Question Bowl

When an assembly line employee is waiting

for a unit of work to come down the line so

they can stop being idle and get back to

work, it is an example of which of the

following process terms?

a. Buffering

b. Blocking

c. Starving

d. Bottleneck

e. All of the above

Answer: c. Starving


Question Bowl

When a company waits until they have an order for their product in hand before beginning any production for that order, we can characterize their operation as which of the following processes?

a. Single-stage processb. Multi-stage processc. Make-to-order processd. Make-to-stock processe. All of the above

Answer: c. Make-to-order process


Question Bowl

If the Run Time for a batch of parts is 45 minutes on a machine, and the Setup Time is 65 minutes, which of the following is the Operation Time?

a. 75 minutesb. 110 minutesc. Only 45 minutesd. 65/45 minutes or 1.44 hourse. Can not be computed on the data above

Answer: b. 110 minutes ( Operation Time is the sum of Run Time and Setup Time, or 65 + 45 = 110 minutes)


Question Bowl

If the standard expected phone calls for a

telephone marketers is 24 per hour, and one

telephone marketer did 27 per hour, which of

the following can be used to describe their

Efficiency?

a. 88.8%

b. 100%

c. 112.5%

d. Well over 150%

e. Can not computed on the information given.

Answer: c. 112.5% (Ratio of actual performance/expected performance, or (27/24) x 100 = 110 minutes)


4e contd. Service Process Selection and Design

4. PPC & PERT/CPM

• The Nature of Services

• Service Strategy: Focus & Advantage

• Service-System Design Matrix

• Service Blueprinting

• Service Fail-safing

• Characteristics of a Well-Designed Service Delivery System

OBJECTIVES

4. PPC & PERT/CPM

The Nature of Services1. Everyone is an expert on services

2. Services are idiosyncratic

3. Quality of work is not quality of service

4. Most services contain a mix of tangible and intangible attributes

4. PPC & PERT/CPM

Service Generalizations (Continued)

5. High-contact services are experienced,

whereas goods are consumed

6. Effective management of services requires an

understanding of marketing and personnel,

as well as operations

7. Services often take the form of cycles of

encounters involving face-to-face, phone,

Internet, electromechanical, and/or mail

interactions

4. PPC & PERT/CPM

Service Businesses

• Facilities-based services: Where the customer must go to the service facility

• Field-based services: Where the production and consumption of the service takes place in the customer’s environment

A service business is the management of organizations whose primary business requires interaction with the customer to produce the service

4. PPC & PERT/CPM

Internal ServicesDefined

Internal Supplier

Internal Supplier

InternalCustomer

ExternalCustomer

Internal services is the management of services required to support the activities of the larger organization. Services including data processing, accounting, etc

4. PPC & PERT/CPM

The Customer Centered ViewExhibit 7.1Exhibit 7.1

TheCustomer

The ServiceStrategy

ThePeople

TheSystems

A philosophical view that suggests the organization exists to serve the customer, and the systems and the employees exist to facilitate the process of service.

A philosophical view that suggests the organization exists to serve the customer, and the systems and the employees exist to facilitate the process of service.

4. PPC & PERT/CPM

Service Strategy: Focus and AdvantagePerformance Priorities

• Treatment of the customer

• Speed and convenience of service delivery

• Price

• Variety

• Quality of the tangible goods

• Unique skills that constitute the service offering

4. PPC & PERT/CPM

Service-System Design Matrix


Mail contact

Face-to-faceloose specs

Face-to-facetight specs

PhoneContact

Face-to-facetotal

customization

Buffered core (none)

Permeable system (some)

Reactivesystem (much)

High

LowHigh

Low

Degree of customer/server contact

Internet & on-site

technology

SalesOpportunity

ProductionEfficiency

4. PPC & PERT/CPM

Example of Service Blueprinting

Brushshoes

Applypolish

Failpoint

BuffCollect

payment

Cleanshoes Materials

(e.g., polish, cloth)

Select andpurchasesupplies

Standardexecution time

2 minutes

Total acceptableexecution time

5 minutes

30secs

30secs

45secs

15secs

Wrongcolor wax

Seen bycustomer 45

secs

Line ofvisibility

Not seen bycustomer butnecessary toperformance

4. PPC & PERT/CPM

Service Fail-safingPoka-Yokes (A Proactive Approach)

• Keeping a mistake from becoming a service defect

• How can we fail-safe the three Ts?

Task

TangiblesTreatment

4. PPC & PERT/CPM

Have we compromised

one of the 3 Ts?

1. Task

2. Treatment

3. Tangible

1. Task

2. Treatment

3. Tangible

4. PPC & PERT/CPM

Three Contrasting Service Designs

• The production line approach (ex. McDonald’s)

• The self-service approach (ex. automatic teller machines)

• The personal attention approach (ex. Ritz-Carlton Hotel Company)

4. PPC & PERT/CPM

Characteristics of a Well-Designed Service System

1. Each element of the service system is consistent

with the operating focus of the firm

2. It is user-friendly

3. It is robust

4. It is structured so that consistent performance by

its people and systems is easily maintained

4. PPC & PERT/CPM

Characteristics of a Well-Designed Service System (Continued)

5. It provides effective links between the back office and the front office so that nothing falls between the cracks

6. It manages the evidence of service quality in such a way that customers see the value of the service provided

7. It is cost-effective

4. PPC & PERT/CPM

Applying Behavioral Science to Service Encounters

1. The front-end and back-end of the encounter are not created equal

2. Segment the pleasure, combine the pain

3. Let the customer control the process

4. Pay attention to norms and rituals

5. People are easier to blame than systems

6. Let the punishment fit the crime in service recovery


Service Guarantees as Design Drivers

• Recent research suggests:– Any guarantee is better than no guarantee– Involve the customer as well as employees

in the design– Avoid complexity or legalistic language– Do not quibble or wriggle when a customer

invokes a guarantee– Make it clear that you are happy for

customers to invoke the guarantee


Question Bowl

Which of the following are generalizations about the nature of services?

a. Services contain tangible attributesb. Services are experiencedc. Services often take the form of cycles of

encounters involving face-to-face interactions

d. All of the abovee. None of the above



Question Bowl

Which of the following is an example

of a Service Business?

a. Law firm

b. Hospital

c. Bank

d. Retail store

e. All of the aboveAnswer: e. All of the above


Question Bowl

Which of the following is an example of

Internal Services?

a. Finance department

b. Marketing department

c. Operations department

d. All of the above



Question Bowl

According to the Chase and Dasu (2001) study

which of the following are behavioral concepts

that should be applied to enhance customer

perceptions of a service encounter?

a. Flow of the service experience

b. Flow of time

c. Judging encounter performance

d. All of the above



Question Bowl

Service strategy development begins by selecting

which of the following as an operating focus or

performance priority?

a. Price

b. Quality

c. Variety

d. Treatment

e. All of the above



Question Bowl

Which of the following “best practices emphasized

by service executives” had the highest mean

emphasize rating?

a. Leadership

b. Accessibility

c. Quality values

d. Customer orientation

e. Listening to the customerAnswer: b. Accessibility (Had the highest mean rating at 4.02 on a 5 point scale.)


Question Bowl

Based on the Service-System Design Matrix,

which of the following has a lower level of

“production efficiency”?

a. Face-to-face loose specs

b. Phone contact

c. Internet and on-site technology

d. Face-to-face tight specs

e. Mail contactAnswer: a. Face-to-face loose specs


4f. Operations Scheduling

4. PPC & PERT/CPM

• Work Center Defined

• Typical Scheduling and Control Functions

• Job-shop Scheduling

• Examples of Scheduling Rules

• Shop-floor Control

• Principles of Work Center Scheduling

• Issues in Scheduling Service Personnel

OBJECTIVES

4. PPC & PERT/CPM

Work Center

• A work center is an area in a business in which productive resources are organized and work is completed

• Can be a single machine, a group of machines, or an area where a particular type of work is done

4. PPC & PERT/CPM

Capacity and Scheduling

• Infinite loading (Example: MRP)

• Finite loading

• Forward scheduling

• Backward scheduling (Example: MRP)

4. PPC & PERT/CPM

Types of Manufacturing Scheduling Processes and Scheduling Approaches

Continuous process

Type of Process Typical Scheduling Approach

High-volume manufacturing

Med-volume manufacturing

Low-volume manufacturing

Finite forward of process, machine limited

Finite forward of line, machined limited

Infinite forward of process, labor and machined limited

Infinite forward of jobs, labor and some machine limited

4. PPC & PERT/CPM

Typical Scheduling and Control Functions

• Allocating orders, equipment, and

personnel

• Determining the sequence of order

performance

• Initiating performance of the

scheduled work

• Shop-floor control

4. PPC & PERT/CPM

Work-Center Scheduling Objectives

• Meet due dates

• Minimize lead time

• Minimize setup time or cost

• Minimize work-in-process inventory

• Maximize machine utilization

4. PPC & PERT/CPM

Priority Rules for Job Sequencing

1. First-come, first-served (FCFS)

2. Shortest operating time (SOT)

3. Earliest due date first (DDate)

4. Slack time remaining (STR) first

5. Slack time remaining per operation (STR/OP)

4. PPC & PERT/CPM

Priority Rules for Job Sequencing (Continued)

6. Critical ratio (CR)

7. Last come, first served (LCFS)

8. Random order or whim

remaining days of Number

date) Current-date (DueCR

4. PPC & PERT/CPM

Example of Job Sequencing: First-Come First-Served

Jobs (in order Processing Due Date Flow Timeof arrival) Time (days) (days hence) (days)

A 4 5 4B 7 10 11C 3 6 14D 1 4 15

Answer: FCFS Schedule

Jobs (in order Processing Due Dateof arrival) Time (days) (days hence)

A 4 5B 7 10C 3 6D 1 4

Suppose you have the four jobs to the right arrive for processing on one machine


What is the FCFS schedule?What is the FCFS schedule?

No, Jobs B, C, and D are going to be late

No, Jobs B, C, and D are going to be late

Do all the jobs get done on time?Do all the jobs get done on time?

4. PPC & PERT/CPM

Example of Job Sequencing: Shortest Operating Time


A 4 5B 7 10C 3 6D 1 4

Answer: Shortest Operating Time Schedule


D 1 4 1C 3 6 4A 4 5 8B 7 10 15



What is the SOT schedule?What is the SOT schedule?

No, Jobs A and B are going to be late

No, Jobs A and B are going to be late


4. PPC & PERT/CPM

Example of Job Sequencing: Earliest Due Date First


A 4 5B 7 10C 3 6D 1 4

Answer: Earliest Due Date First


D 1 4 1A 4 5 5C 3 6 8B 7 10 15



What is the earliest due date first schedule?

What is the earliest due date first schedule?

No, Jobs C and B are going to be late

No, Jobs C and B are going to be late


4. PPC & PERT/CPM

Example of Job Sequencing: Critical Ratio Method


A 4 5B 7 10C 3 6D 1 4



What is the CR schedule?What is the CR schedule?

No, but since there is three-way tie, only the first job or two will be on time

No, but since there is three-way tie, only the first job or two will be 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)


4. PPC & PERT/CPM

Example of Job Sequencing:Last-Come First-Served


A 4 5B 7 10C 3 6D 1 4

Answer: Last-Come First-Served ScheduleJobs (in order Processing Due Date Flow Time

of arrival) Time (days) (days hence) (days)D 1 4 1C 3 6 4B 7 10 11A 4 5 15

No, Jobs B and A are going to be late

No, Jobs B and A are going to be late



What is the LCFS schedule?What is the LCFS schedule?Do all the jobs get done on time?Do all the jobs get done on time?

4. PPC & PERT/CPM

Example of Job Sequencing: Johnson’s Rule (Part 1)

Suppose you have the following five jobs with time requirements in two stages of production. What is the job sequence using Johnson’s Rule?

Suppose you have the following five jobs with time requirements in two stages of production. What is the job sequence using Johnson’s Rule?

Time in HoursJobs Stage 1 Stage 2 A 1.50 1.25 B 2.00 3.00 C 2.50 2.00 D 1.00 2.00

4. PPC & PERT/CPM

Example of Job Sequencing: Johnson’s Rule (Part 2)

First, select the job with the smallest time in either stage.

That is Job D with the smallest time in the first stage. Place that job as early as possible in the unfilled job sequence below.

Drop D out, select the next smallest time (Job A), and place it 4th in the job sequence.

Drop A out, select the next smallest time. There is a tie in two stages for two different jobs. In this case, place the job with the smallest time in the first stage as early as possible in the unfilled job sequence.

Then place the job with the smallest time in the second stage as late as possible in the unfilled sequence.

Job Sequence 1 2 3 4

Job Assigned D A B C

Time in HoursJobs Stage 1 Stage 2 A 1.50 1.25 B 2.00 3.00 C 2.50 2.00 D 1.00 2.00

4. PPC & PERT/CPM

Shop-Floor Control:Major Functions

1. Assigning priority of each shop order

2. Maintaining work-in-process quantity information

3. Conveying shop-order status information to the office

4. PPC & PERT/CPM

Shop-Floor Control:Major Functions (Continued)

4. Providing actual output data for capacity

control purposes

5. Providing quantity by location by shop order

for WIP inventory and accounting purposes

6. Providing measurement of efficiency,

utilization, and productivity of manpower and

machines

4. PPC & PERT/CPM

Input/Output Control

Input Output

• Planned input should never exceed planned output

• Focuses attention on bottleneck work centers

WorkCenter

4. PPC & PERT/CPM

Principles of Work Center Scheduling

1. There is a direct equivalence between work flow and cash flow

2. The effectiveness of any job shop should be measured by speed of flow through the shop

3. Schedule jobs as a string, with process steps back-to-back

4. A job once started should not be interrupted

4. PPC & PERT/CPM

Principles of Job Shop Scheduling (Continued)

5. Speed of flow is most efficiently achieved by focusing on bottleneck work centers and jobs

6. Reschedule every day

7. Obtain feedback each day on jobs that are not completed at each work center

8. Match work center input information to what the worker can actually do

4. PPC & PERT/CPM

Principles of Job Shop Scheduling (Continued)

9. When seeking improvement in output,

look for incompatibility between

engineering design and process

execution

10. Certainty of standards, routings, and

so forth is not possible in a job shop,

but always work towards achieving it

4. PPC & PERT/CPM

Personnel Scheduling in Services

• Scheduling consecutive days off

• Scheduling daily work times

• Scheduling hourly work times


Question Bowl

A Work Center may be which of the

following?

a. A single machine

b. A group of machines

c. An area where a particular type of work

is performed

d. All of the above




Question Bowl

When work is assigned to a work center simply

based on what is needed over time, we would

refer to this as which of the following scheduling

systems?

a. A finite loading of work

b. An infinite loading of work

c. Forward scheduling

d. All of the above


Answer: b. An infinite loading of work


Question Bowl

Typical scheduling and controlling of operations

include which of the following functions?

a. Allocating orders at work centers

b. Allocating equipment at work centers

c. Allocating personnel at work centers

d. All of the above



Question Bowl

Typical scheduling and controlling of

operations include which of the following

functions?

a. Determining the job sequences

b. Dispatching

c. Expediting late and critical orders

d. All of the above



Question Bowl

Which of the following are standard measures

of schedule performance used to evaluate

priority rules?

a. Meeting due dates

b. Maximizing job flow time

c. Maximizing work-in-process inventory

d. All of the above

e. None of the above Answer: a. Meeting due dates (Correct answer can also include minimizing WIP inventory, idle time, and job flow time.)


Question Bowl

Which priority rule uses the calculation of the

difference between the due date and the current

date divided by the number of work days

remaining?

a. STR

b. SOT

c. DDate

d. FCFS


Answer: e. None of the above (Correct answer can is CR or critical ratio.)


Question Bowl

The major functions of a shop-floor control are

which of the following?

a. Conveying shop-order status

b. Measuring efficiency

c. Assigning priorities

d. Maintaining WIP quantity information

e. All of the above

Answer: e. All of the above (Correct answer can also include providing quantity by location and actual output data.)


Question Bowl

Which of the following are Tools of

Shop-Floor Control?

a. Daily dispatch lists

b. Scrap reports

c. Rework reports

d. All of the above


Answer: d. All of the above (Correct answer can also include all status and exception reports and input/output control reports.)


Question Bowl

Which of the following is a Principle of Work-

Center Scheduling?

a. There is a direct equivalence between work flow

and cash flow

b. Certainty of routings are very possible in a

shop

c. Reschedule only once a week

d. All of the above


Answer: a. There is a direct equivalence between work flow and cash flow (There are nine other principles.)


4g. Project Management(PERT / CPM)

4. PPC & PERT/CPM

• Definition of Project Management

• Work Breakdown Structure

• Project Control Charts

• Structuring Projects

• Critical Path Scheduling

OBJECTIVES

4. PPC & PERT/CPM

• Project is a series of related jobs usually directed toward some major output and requiring a significant period of time to perform

• Project Management are the management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project

Project Management Defined


Characteristics of projects

• Non-routine

• Have a specific objective to achieve

• Identifiable Start & Finish

• Consist of a number of inter-related activities. Each activity in turn requires time & resources for its completion.

• The resources and skills required are multi-faceted. Sometimes, they are unique to the specific project.

• Co-ordination of the efforts of multiple agencies (departments, external organizations, individuals) is required

4. PPC & PERT/CPM

Gantt Chart

Activity 1Activity 2Activity 3Activity 4Activity 5Activity 6

Time

Vertical Axis: Always Activities or Jobs

Vertical Axis: Always Activities or Jobs

Horizontal Axis: Always TimeHorizontal Axis: Always Time

Horizontal bars used to denote length of time for each activity or job.

Horizontal bars used to denote length of time for each activity or job.

4. PPC & PERT/CPM

Structuring Projects Pure Project: Advantages

Pure ProjectA pure project is where a self-contained team works full-time on the project

• The project manager has full authority over the project

• Team members report to one boss• Shortened communication lines• Team pride, motivation, and commitment

are high

4. PPC & PERT/CPM

Structuring Projects Pure Project: Disadvantages

• Duplication of resources• Organizational goals and policies

are ignored• Lack of technology transfer• Team members have no functional

area "home"

4. PPC & PERT/CPM

Functional Project

President

Research andDevelopment

Engineering Manufacturing

ProjectA

ProjectB

ProjectC

ProjectD

ProjectE

ProjectF

ProjectG

ProjectH

ProjectI

A functional project is housed within a functional division

Example, Project “B” is in the functional area of Research and Development.

Example, Project “B” is in the functional area of Research and Development.

4. PPC & PERT/CPM

Structuring Projects Functional Project: Advantages

• A team member can work on several projects

• Technical expertise is maintained within the functional area

• The functional area is a “home” after the project is completed

• Critical mass of specialized knowledge

4. PPC & PERT/CPM

Structuring Projects Functional Project: Disadvantages

• Aspects of the project that are not directly related to the functional area get short-changed

• Motivation of team members is often weak

• Needs of the client are secondary and are responded to slowly

4. PPC & PERT/CPM

Matrix Project Organization Structure

President

Research andDevelopment

Engineering Manufacturing Marketing

ManagerProject A

ManagerProject B

ManagerProject C

4. PPC & PERT/CPM

Structuring Projects Matrix: Advantages

• Enhanced communications between functional areas

• Pinpointed responsibility

• Duplication of resources is minimized

• Functional “home” for team members

• Policies of the parent organization are followed

4. PPC & PERT/CPM

Structuring Projects Matrix: Disadvantages

• Too many bosses

• Depends on project manager’s negotiating skills

• Potential for sub-optimization

4. PPC & PERT/CPM

Work Breakdown Structure

Program

Project 1 Project 2

Task 1.1

Subtask 1.1.1

Work Package 1.1.1.1

Level

1

2

3

4

Task 1.2

Subtask 1.1.2

Work Package 1.1.1.2

A work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages

4. PPC & PERT/CPM

Network-Planning Models

• A project is made up of a sequence of activities that

form a network representing a project

• The path taking longest time through this network of

activities is called the “critical path”

• The critical path provides a wide range of scheduling

information useful in managing a project

• Critical Path Method (CPM) helps to identify the

critical path(s) in the project networks

4. PPC & PERT/CPM

Prerequisites for Critical Path Methodology

A project must have:

well-defined jobs or tasks whose completion marks the end of the project;

independent jobs or tasks;

and tasks that follow a given sequence.

4. PPC & PERT/CPM

Types of Critical Path Methods

• CPM with a Single Time Estimate– Used when activity times are known with certainty– Used to determine timing estimates for the project,

each activity in the project, and slack time for activities

• PERT is CPM with Three Activity Time Estimates – Used when activity times are uncertain – Used to obtain the same information as the Single

Time Estimate model and probability information• Time-Cost Models

– Used when cost trade-off information is a major consideration in planning

– Used to determine the least cost in reducing total project time

4. PPC & PERT/CPM

Steps in the CPM with Single Time Estimate

• 1. Activity Identification - requires knowledge & experience.

• 2. Activity Sequencing and Network Construction– The network may be denoted with “Activity on Arrow” (AoA)

or “Precedence Network”

• 3. Determine the critical path– From the critical path all of the project and activity timing

information can be obtained


Important termsNetwork The diagram that depicts all activities & their inter-relationships

Activity Has a duration, a start time and an end time. Can shown on arrow or on node

Events Represent the start & finish of activities, projects, etc. All activities have Early Start (ES) Early Finish (EF), Late Start (LS) & Late Finish (LF)

Activity relationships

Two or more activities can be concurrent, preceding or succeeding; w.r.t. each other

Dummy activity

Used to break “ambiguity”. Has zero duration.

Activity time In PERT there is concept of optimistic (O), most likely (M), pessimistic (P) and expected times (E). E = [ (O+4M+P) / 6 ]

Critical Path The path that determines the duration / completion of the project, and hence must the focus of attention. .

Slack When an activity can be delayed, without affecting project completion time.. Activities on the critical path have no slack.

Float Is the amount of slack available. There are 4 types of float – i.e. TOTAL FLOAT, FREE FLOAT, INTERFERING FLOAT & INDEPENDENT FLOAT


Four Types of Activity Float


PERT CPM

1. It is a technique for planning scheduling & controlling of projects whose activities are subject to uncertainty in the performance time. Hence it is a probabilistic model

1. It is a technique for planning scheduling & controlling of projects whose activities not subjected to any uncertainty and the performance times are fixed. Hence it is a deterministic model

2.It is an Event oriented system

2. It is an Activity oriented system


3.Basically does not differentiate critical and non-critical activities

Differentiates clearly the critical activities from the other activities.

4. Used in projects where resources (men, materials, money) are always available when required.

4. Used in projects where overall costs is of primarily important. Therefore better utilized resources

5. Suitable for Research and Development projects where times cannot be predicted

5.Suitable for civil constructions, installation, ship building etc.


Rules for drawing the network diagrams (AoA)

In a network diagram, arrows represent the

activities and circles represent the events.

•The tail of an arrow represents the start of an

activity and the head represent the completion

of the activity.

1 2 3 4


•The event numbered 1 denotes the start of the

project and is called initial event.

• Event carrying the highest number in the network

denotes the completion of the project and is called

terminal event.

1 2 3 4


•Each defined activity is represented by one and only

arrow in the network.

•Determine which operation must be completed

immediately before other can start.

•Determine which other operation must follow the

other given operation.

1 2 3 4


•The network should be developed on the basis of

logical, analytical and technical dependencies

between various activities of the project.

1 2 3 4


The basic network construction – Terminology used.

Network representation: There are two types of

systems –

AOA system (Activity on Arrow system)

AON system(Activity on Node system )

In this activities are represented by an arrows.

In this method activities are represented in the circles.


Problem 1.Construct an arrow diagram for the following project.

Activities Relationship

A Precedes B,C

B Precedes D,E

C Precedes D

D Precedes F

E Precedes G

F Precedes G


A

B

C

D

E

F

G



Job Immediate predecessor

Duration

A - 14 Days

B A 3 Days

C A 7 Days

D C 4 Days

E B,D 10 Days


A

B

C

D

E

14

3

7

4

10

KeyJob

Duration



Job Immediate predecessor

A -

B -

C A,B

D A

E D

F C,E


A

BC

D

E

F



Activity Predecessor

A -

B -

C -

D A,B

E B,C


A

B

C

D

E



Activity Predecessor

A -

B -

C -

D A,B

E B,C

F A,B,C


A

B

C

D

E

F


CPM with Single Time Estimate (AoN)

Consider the following consulting project:

Activity Designation Immed. Pred. Time (Weeks)Assess customer's needs A None 2Write and submit proposal B A 1Obtain approval C B 1Develop service vision and goals D C 2Train employees E C 5Quality improvement pilot groups F D, E 5Write assessment report G F 1

Develop a critical path diagram and determine the duration of the critical path and slack times for all activities.

4. PPC & PERT/CPM

First draw the network

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

A None 2

B A 1

C B 1

D C 2

E C 5

F D,E 5

G F 1

Act. Imed. Pred. Time

4. PPC & PERT/CPM

Determine early starts and early finish times

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

Hint: Start with ES=0 and go forward in the network from A to G.

Hint: Start with ES=0 and go forward in the network from A to G.

4. PPC & PERT/CPM

Determine late starts and late

finish times

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

LS=14LF=15

LS=9LF=14

LS=4LF=9

LS=7LF=9

LS=3LF=4

LS=2LF=3

LS=0LF=2

Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.

Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.

4. PPC & PERT/CPM

Critical Path & Slack

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

LS=14LF=15

LS=9LF=14

LS=4LF=9

LS=7LF=9

LS=3LF=4

LS=2LF=3

LS=0LF=2

Duration=15 weeks

Slack=(7-4)=(9-6)= 3 Wks


Example 2. CPM with Three Activity Time Estimates (AoN)

TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28


Example 2. Expected Time Calculations

ET(A)= 3+4(6)+15

6

ET(A)= 3+4(6)+15

6

ET(A)=42/6=7ET(A)=42/6=7Task

Immediate Predecesors

Expected Time

A None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

TaskImmediate


Expected Time = Opt. Time + 4(Most Likely Time) + Pess. Time

6Expected Time =

Opt. Time + 4(Most Likely Time) + Pess. Time

6


Ex. 2. Expected Time Calculations

TaskImmediate

PredecesorsExpected

TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

ET(B)=32/6=5.333ET(B)=32/6=5.333

ET(B)= 2+4(4)+14

6

ET(B)= 2+4(4)+14

6

TaskImmediate



6Expected Time =


6


Ex 2. Expected Time Calculations

TaskImmediate

PredecesorsExpected

TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

ET(C)= 6+4(12)+30

6

ET(C)= 6+4(12)+30

6

ET(C)=84/6=14ET(C)=84/6=14

TaskImmediate



6Expected Time =


6


Example 2. Network (AoN)

A(7)

B(5.333)

C(14)

D(5)

E(11)

F(7)

H(4)

G(11)

I(18)

Duration = 54 Days


Example 2. Probability Exercise

What is the probability of finishing this project in less than 53 days?

What is the probability of finishing this project in less than 53 days?

p(t < D)

TE = 54

Z = D - TE

cp2

Z = D - TE

cp2

tD=53


Activity variance, = (Pessim. - Optim.

6)2 2Activity variance, = (

Pessim. - Optim.

6)2 2

Task Optimistic Most Likely Pessimistic VarianceA 3 6 15 4B 2 4 14C 6 12 30 16D 2 5 8E 5 11 17 4F 3 6 15G 3 9 27H 1 4 7 1I 4 19 28 16

(Sum the variance along the critical path.)

2 = 41 2 = 41


There is a 43.8% probability that this project will be completed in less than 53 weeks.

There is a 43.8% probability that this project will be completed in less than 53 weeks.

p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156)p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156)

Z = D - T

=53- 54

41= -.156E

cp2

Z = D - T

=53- 54

41= -.156E

cp2

TE = 54

p(t < D)

tD=53

4. PPC & PERT/CPM

Ex 2. Additional Probability Exercise

• What is the probability that the project duration will exceed 56 weeks?

• What is the probability that the project duration will exceed 56 weeks?

4. PPC & PERT/CPM

Example 2. Additional Exercise Solution

tTE = 54

p(t < D)

D=56

Z = D - T

=56 - 54

41= .312E

cp2

Z = D - T

=56 - 54

41= .312E

cp2

p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312)) p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312))

4. PPC & PERT/CPM

Time-Cost Models

• Basic Assumption: Relationship between activity completion time and project cost

• Time Cost Models: Determine the optimum point in time-cost tradeoffs– Activity direct costs– Project indirect costs– Activity completion times

4. PPC & PERT/CPM

CPM Assumptions/Limitations • Project activities can be identified as entities

(There is a clear beginning and ending point for each activity.)

• Project activity sequence relationships can be specified and networked

• Project control should focus on the critical path

• The activity times follow the beta distribution, with the variance of the project assumed to equal the sum of the variances along the critical path

• Project control should focus on the critical path


Project CrashingThe process of accelerating a project is referred as crashing.Crashing a project relates to resource commitment; the more resources expended, the faster the project will finish.There are several reasons to crash a project:

Initial schedule was too optimistic Market needs change and the project is in demand earlier than anticipatedThe project has slipped considerably behind scheduleThere are contractual late penalties


Project CrashingPrincipal methods for crashing

Improving existing resources’ productivityChanging work methodsIncreasing the quantity of resources

Increasing the quantity of resources is the most commonly used method for project crashing. There are 2 approaches:

Working current resources for longer hours (overtime, weekend work)Adding more personnel


Project Crashing

Cost

Activity Duration

Normal

Crashed

Crashed Normal

CrashPoint

NormalPoint

Cost

Activity Duration

Normal

Crashed

Crashed Normal

CrashPoint

NormalPoint

Time-Cost Trade-Offs for Crashing Activities

Fully expedited (no expense is spared)


Project CrashingIn analyzing crash options, the goal is to find the point at which time and cost trade-offs are optimized.

Various combinations of time-cost trade-offs for crash options can be determined by using the following formula:

Slope = crash cost – normal cost normal time – crash time


ExampleSUPPOSE:

NORMAL ACTIVITY DURATION = 8 WEEKSNORMAL COST = Rs.14,000

CRASHED ACTIVITY DURATION = 5 WEEKSCRASHED COST = Rs.23,000

THE ACTIVITY COST SLOPE = 23,000 – 14,000 OR Rs.9,000 = Rs. 3,000 per week

8 – 5 3

Cease crashing whenthe target completion time is reachedthe crash cost exceeds the penalty cost


Example Normal Crashed

Activity Duration Cost (Rs) Duration Cost (Rs)

A 4 days 1,000 3 days 2,000B 5 days 2,500 3 days 5,000C 3 days 750 2 days 1,200D 7 days 3,500 5 days 5,000E 2 days 500 1 day 2,000F 5 days 2,000 4 days 3,000G 9 days 4,500 7 days 6,300

a) Calculate the per day costs for crashing each activityb) Which are the most attractive candidates for crashing? Why?


Example

Activity Per Day Cost (Rs)

A 1,000B 1,250C 450D 750E 1,500F 1,000G 900


Resource Allocation ProblemA shortcoming of most scheduling procedures is that they do not address the issues of resource utilization and availability.

Scheduling procedures tend to focus on time rather than physical resources.


Resource Allocation ProblemSchedules should be evaluated not merely in terms of meeting project milestones, but also in terms of the timing and use of scarce resources.

A fundamental measure of the project manager’s success in project management is the skill with which the trade-offs among performance, time, and cost are managed.

“I can shorten this project by 1 day at a cost of $400. Should I do it?”


Resource Allocation ProblemThe extreme points of the relationship between time use and resource use are the following:

Time Limited: The project must be finished by a certain time, using as few resources as possible. But it is time, not resource usage, that is criticalResource Limited: The project must be finished as soon as possible, but without exceeding some specific level of resource usage or some general resource constraint


Resource LoadingResource loading describes the amounts of individual resources an existing schedule requires during specific time periods

The loads (requirements) of each resource type are listed as a function of time period

Resource loading gives a general understanding of the demands a project or set of projects will make on a firm’s resources


Resource LoadingThe project manager must be aware of the ebbs and flows of usage for each input resource throughout the life of the project.

It is the project manager’s responsibility to ensure that the required resources, in the required amounts, are available when and where they are needed.


Resource Leveling (Smooting)Resource leveling aims to minimize the period-by-period variations in resource loading by shifting tasks within their slack allowances.The purpose is to create a smoother distribution of resource usage.Resource leveling, referred to as resource smoothing, has two objectives:

To determine the resource requirements so that they will be available at the right time,To allow each activity to be scheduled with the smoothest possible transition across usage levels


Resource Leveling (Smooting)Resource management is a multivariate, combinatorial problem, i.e. multiple solutions with many variables, the mathematically optimal solution may be difficult or infeasible.

More common approach to analyzing resource leveling problems is to apply some resource leveling heuristics.


Resource Leveling HeuristicsPrioritizing resource allocation include applying resources to activities:

with the smallest amount of slackwith the smallest durationthat start earliestwith the most successor tasksrequiring the most resources


Resource Leveling StepsCreate a project activity network diagramCreate a table showing the resources required for each activity, durations, and the total float availableDevelop a time-phased resource loading tableIdentify any resource conflicts and begin to smooth the loading table using one or more heuristics


Resource Loading Chart

Display the amount of resources required as a function of time.

0 A 4 Res = 6

4 B 5 Res = 2

5 D 9 Res = 7

9 E 11 Res = 3

4 C 7 Res = 2

11 F 12 Res = 6

1. Start with a network diagram


Resource Loading ChartsActivity Resource Duration ES Slack LF

A 6 4 0 0 4

B 2 1 4 0 5

C 2 3 4 4 11

D 7 4 5 0 9

E 3 2 9 0 11

F 6 1 11 0 12

2. Produce a table that shows the duration, early start, late finish, slack, and resource(s) required for each activity.


Resource Loading Charts

A

2

4

6

8

2 1210864 14

C

BD

E

F

Project Days

Res

ourc

es

3. Draw an initial loading chart with each activity scheduled at its ES.

Resource imbalance


Resource Loading Charts4. Rearrange activities within their slack

to create a more level profile. Splitting C creates a more level project.

A

2

4

6

8

2 1210864 14

C

BD

E

F

Project Days

Res

ourc

es

C


Resource Loading Chart


Question Bowl

Which of the following are examples of Graphic Project Charts?

a. Gantt b. Barc. Milestoned. All of the abovee. None of the above



Question Bowl

Which of the following are one of the three organizational structures of projects?

a. Pure b. Functionalc. Matrixd. All of the abovee. None of the aboveAnswer: d. All of the above


Question Bowl

Answer: a. SOW (or Statement of Work)

A project starts with a written description of the objectives to be achieved, with a brief statement of the work to be done and a proposed schedule all contained in which of the following?

a. SOW

b. WBS

c. Early Start Schedule

d. Late Start Schedule



Question Bowl

For some activities in a project there may be some leeway from when an activity can start and when it must finish. What is this period of time called when using the Critical Path Method?

a. Early start time

b. Late start time

c. Slack time

d. All of the above

e. None of the aboveAnswer: c. Slack time


Question Bowl

How much “slack time” is permitted in the “critical path” activity times?

a. Only one unit of time per activity b. No slack time is permittedc. As much as the maximum activity time in the

networkd. As much as is necessary to add up to the total

time of the projecte. None of the above

Answer: b. No slack time is permitted (All critical path activities must have zero slack time, otherwise they would not be critical to the project completion time.)


Question Bowl

When looking at the Time-Cost Trade Offs in the Minimum-Cost Scheduling time-cost model, we seek to reduce the total time of a project by doing what to the least-cost activity choices?

a. Crashing them b. Adding slack timec. Subtracting slack timed. Adding project time e. None of the above

Answer: a. Crashing them (We “crash” the least-cost activity times to seek a reduced total time for the entire project and we do it step-wise as inexpensively as possible.)


UNIVERSITY QUESTIONS• Given data for a project

– Draw the network diagram and identify critical path. – Calculate project duration and total float for each activity. – Calculate standard deviation for critical path.

• 'Production Planning and Control is the key to the success of a business organisation'. Discuss the statement listing the various functions carried out under production planning & control and their purpose in brief.

• Given data for a project – Draw Network Diagram – Calculate project duration & determine critical path – Determine slack for each activity.

• Explain how production control functions are carried out in Mass Production (Give examples).• Given data for a project

– a) Draw the Network Diagram for the Project.– b) Determine the critical path and its duration.– c) Compute slack, earliest start time & earliest finish time.

• Narrate the functions of production Planning and control. Explain their objective clearly .


UNIVERSITY QUESTIONS …cont

• Given data for a project– Draw a network diagram.– Compute project completion time.– Identify critical path.

• 'Production, planning and control function involves balancing between Priority' (Demand) and capacity (Resources)'. Discuss the statement.

• Compare CPM and PERT method for project management. What do you understand by 'Network crashing'?

• Explain those functions of Production Planning & Control which enable a company to control cost of Production & Capacity utilization.

• Write short notes on any three: a) Aggregate Planning b) Line Balancing c) Scheduling d) Critical Path Method.


UNIVERSITY QUESTIONS…contd

• Following are the activities of a project: Activity Immediate Activity time in weeks Predecessor Most Most Most Activity Optimistic Likely Pessimistic A None 4 7 13 B A 6 9 11 C A 5 7 09 D B 3 5 07 E C 7 8 10 F D 2 3 05 G E 6 7 08 H F&G 2 3 04 a) Calculate the expected time of each activity [3] b) Draw the network and indicate the expected time on each activity. [7] c) Compute the earliest completion time of the project. [2] d) Identify the critical path in the diagram. [2]


UNIVERSITY QUESTIONS…contd

• a) Explain the term scheduling in Production Planning. [4]• b) What are the different types of scheduling? [4]• c) What considerations will you apply in "Scheduling" the jobs in Job-Production.

[6]

• Write short notes (Any three) : [14] a) Process.:-flow-chart. b) Control charts in Q.C.b) Control charts in Q.C. c) Spare- parts for maintenancec) Spare- parts for maintenance. d) Despatching in Production Control. • Distinguish between the following (any three) : a) Product and Services b) Routing and Scheduling. c) Statistical Quality Control and Statistical Process Control. c) Statistical Quality Control and Statistical Process Control. d) Inspection and Quality Control.d) Inspection and Quality Control. e) Method study and work measurement.e) Method study and work measurement.


UNIVERSITY QUESTIONS… contd

• What are the objectives of Production Planning and control. Enlist functions of Production Planning and Control.

• "Project control should always focus on critical path" comment.

Q4) The following information has been gathered for a project: Activity Activity Duration in Days Immediate Predecessor/s

A 12 -- B . 9 -- C 10 A D 10 B E 24 B F 10 A G 35 C H 40 D I 4 E, G, H J 7 F, I a) Draw the Network Diagram for the project b) Determine critical path for the project and compute project duration. c) Compute slack, EST (Earliest Start Time), EFT (Earliest Finish Time)


University Questions …contd

• The activities of a project and estimated time in days for each activity are given below:

Activity Optimistic Most Likely Pessimistic Time Time Time 1-2 2 5 8 1-4 4 19 28 1-5 5 11 17 2-3 3 9 27 2-6 3 9 15 3-6 2 5 14 4-6 3 6 15 5-7 1 4 7 5-8 2 5 14 6-8 6 12 30 7-8 2 5 8 a) Determine expected time for each activity. b) Draw Network Diagram and determine critical path. c) Calculate project duration and slack for each activity.


University Questions …contd

• Distinguish between following (ant three): (a) Job production and batch production.Job production and batch production. (b) Process Layout and Product Layout.(b) Process Layout and Product Layout. (c) Product and service.(c) Product and service. (d) (d) Production planning and Production control. (e) Statistical Quality Control and statistical process control.(e) Statistical Quality Control and statistical process control.

4. Operations Management PERT & CPM

Documents

planning production

ppc pertcpm independent

ppc defined production

objectives of ppc

preparation of work

orders process planning

projections of demand

production program