4. Operations Management PERT & CPM

4. Production Planning & Control & PERT / CPM

4. PPC & PERT/CPM

1

Introduction to Production Planning & Control (PPC) Inputs from L C Jhamb (especially chapter 5)

4. PPC & PERT/CPM

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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

3

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

4

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, followup, 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

5

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

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The Order Preparation process – a block diagram MANUFACTURING METHODS

Order Acceptance (OA)

Receive Sales Program

Entry of OA into the system (say ERP)

Prepare Production Program

Raise Work Order

Produced to order

Produced to stock

Check on-hand availability

Convert Work order into Shop Order

Issue Shop orders

Shop order – part A

Shop order – Part B 4. PPC & PERT/CPM

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4a. Demand Management

4. PPC & PERT/CPM

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OBJECTIVES • Demand Management • Qualitative Forecasting Methods • Simple & Weighted Moving Average Forecasts • Exponential Smoothing • Simple Linear Regression • Web-Based Forecasting

4. PPC & PERT/CPM

Demand Management Independent Demand: Finished Goods Dependent Demand: Raw Materials, Component parts, Sub-assemblies, etc.

A

C(2)

B(4)

D(2)

E(1)

D(3)

F(2)

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 Seasonal Seasonalvariation variation

Sales

x

x x x

xx x x xx x x x x x x x x x x x x x x x xxxx

1

2

x x

x x

x

3

Year 4. PPC & PERT/CPM

x

x

x

x x

x x x x x

4

Linear Linear x

x

Trend Trend x

Qualitative Methods Executive Judgment

Historical analogy

Grass Roots

Qualitative

Market Research

Methods

Delphi Method

Panel Consensus

4. PPC & PERT/CPM

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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 • The simple moving average model assumes an average is a good estimator of future behavior • The formula for the simple moving average is:

A t-1 + A t-2 + A t-3 +...+A t- n Ft = n Ft = Forecast for the coming period N = Number of periods to be averaged A t-1 = Actual occurrence in the past period for up to “n” periods 4. PPC & PERT/CPM

Simple Moving Average Problem (1)

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

Demand 650 678 720 785 859 920 850 758 892 920 789 844

A t-1 + A t-2 + A t-3 +...+A t- n Ft = n Question: Question: What What are are the the 33week week and and 6-week 6-week moving moving average average forecasts forecasts for for demand? demand? Assume Assume you you only only have have 33 weeks weeks and and 66 weeks weeks of of actual actual demand demand data data for for the the respective respective forecasts forecasts

4. PPC & PERT/CPM

Calculating the moving averages gives us:

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

20

Demand 3-W eek 6-W eek 650 F4=(650+678+720)/3 678 =682.67 720 F7=(650+678+720 785 682.67 +785+859+920)/6 859 727.67 =768.67 920 788.00 850 854.67 768.67 758 876.33 802.00 892 842.67 815.33 920 833.33 844.00 789 856.67 866.50 844 867.00 854.83 4. PPC & PERT/CPM

©The McGraw-Hill Companies, Inc.,

Plotting Plotting the themoving moving averages averagesand andcomparing comparing them them shows showshow how the the lines linessmooth smooth out outto toreveal reveal the theoverall overall upward upward trend trend in in this thisexample example 10 00

Demand

9 00 Dema nd

8 00

3 -W e ek

7 00

6 -W e ek

6 00 5 00 1 2 3 4 5 6 7 8 9 10 1 1 1 2 Week

4. PPC & PERT/CPM

Note Notehow howthe the 3-Week 3-Weekisis smoother smootherthan than the theDemand, Demand, and and6-Week 6-Weekisis even evensmoother smoother

Simple Moving Average Problem (2) Data

Week 1 2 3 4 5 6 7

Demand 820 775 680 655 620 600 575

Question: Question: What What is is the the 33 week week moving moving average average forecast forecast for for this this data? data? Assume Assume you you only only have have 33 weeks weeks and and 55 weeks weeks of of actual actual demand demand data data for for the the respective respective forecasts forecasts 4. PPC & PERT/CPM

Simple Moving Average Problem (2) Solution Week 1 2 3 4 5 6 7

Demand 820 775 680 655 620 600 575

3-Week

5-Week

F4=(820+775+680)/3 =758.33

758.33 703.33 651.67 625.00

4. PPC & PERT/CPM

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

710.00 666.00

Weighted Moving Average Formula While While the the moving moving average average formula formula implies implies an an equal equal weight weight being being placed placed on on each each value value that that isis being being averaged, averaged, the the weighted weighted moving moving average average permits permits an an unequal unequal weighting weighting on on prior prior time time periods periods The The formula formula for for the the moving moving average average is: is:

Ft = w 1A t-1 + w 2 A t-2 + w 3A t-3 +. ..+w n A t-n wwt ==weight weightgiven givento totime timeperiod period“t” “t” t occurrence occurrence(weights (weightsmust mustadd addto toone) one) 4. PPC & PERT/CPM

n

∑w i=1

i

=1

Weighted Moving Average Problem (1) Data Question: Question:Given Giventhe theweekly weeklydemand demandand andweights, weights,what whatisis th the theforecast forecastfor forthe the44th period periodor orWeek Week4? 4? Week 1 2 3 4

Demand 650 678 720

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

Note Notethat thatthe theweights weightsplace placemore moreemphasis emphasison onthe the most mostrecent recentdata, data,that thatisistime timeperiod period“t-1” “t-1” 4. PPC & PERT/CPM

Weighted Moving Average Problem (1) Solution

Week 1 2 3 4

Demand Forecast 650 678 720 693.4

F4 = 0.5(720)+0.3(678)+0.2(650)=693.4 4. PPC & PERT/CPM

Weighted Moving Average Problem (2) Data Question: Question:Given Giventhe theweekly weeklydemand demandinformation informationand and weights, weights,what whatisisthe theweighted weightedmoving movingaverage averageforecast forecast th of ofthe the55th period periodor orweek? week? Week 1 2 3 4

Demand 820 775 680 655 4. PPC & PERT/CPM

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

Weighted Moving Average Problem (2) Solution W eek 1 2 3 4 5

Demand Forecast 820 775 680 655 672

F5 = (0.1)(755)+(0.2)(680)+(0.7)(655)= 672 4. PPC & PERT/CPM

Exponential Smoothing Model

FFtt == FFt-1t-1 ++ α α (A (At-1t-1 -- FFt-1t-1))

Where : Ft = Forcast value for the coming t time period Ft - 1 = Forecast value in 1 past time period At - 1 = Actual occurance in the past t time period α = Alpha smoothing constant • 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 4. PPC & PERT/CPM

Exponential Smoothing Problem (1) Data

Week 1 2 3 4 5 6 7 8 9 10

Demand 820 775 680 655 750 802 798 689 775

Question: Question: Given Given the the weekly weekly demand demand data, data, what what are are the the exponential exponential smoothing smoothing forecasts forecasts for for periods periods 2-10 2-10 using using αα =0.10 =0.10 and and αα =0.60? =0.60? Assume Assume FF1=D 1=D1 1

4. PPC & PERT/CPM

Answer: Answer:The Therespective respectivealphas alphascolumns columnsdenote denotethe theforecast forecastvalues. values. Note Note that thatyou youcan canonly onlyforecast forecastone onetime timeperiod periodinto intothe thefuture. future.

Week 1 2 3 4 5 6 7 8 9 10

Demand 820 775 680 655 750 802 798 689 775

0.1 820.00 820.00 815.50 801.95 787.26 783.53 785.38 786.64 776.88 776.69

4. PPC & PERT/CPM

0.6 820.00 820.00 793.00 725.20 683.08 723.23 770.49 787.00 728.20 756.28

Exponential Smoothing Problem (1) Plotting Note Notehow howthat thatthe thesmaller smalleralpha alpharesults resultsin inaa smoother smootherline line in inthis thisexample example

Demand

900 800

Demand

700

0 .1

600

0 .6

500 1

2

3

4

5

6

7

8

Week 4. PPC & PERT/CPM

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10

Exponential Smoothing Problem (2) Data Week 1 2 3 4 5

Question: What are the Question: What are the Demand exponential smoothing exponential smoothing 820 forecasts forecasts for for periods periods 2-5 2-5 775 using a =0.5? using a =0.5? 680 655 Assume Assume FF11=D =D11 4. PPC & PERT/CPM

Exponential Smoothing Problem (2) Solution F1=820+(0.5)(820-820)=820

Week 1 2 3 4 5

Demand 820 775 680 655

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

0.5 820.00 820.00 797.50 738.75 696.88

4. PPC & PERT/CPM

The MAD Statistic to Determine Forecasting Error n

MAD =

∑A

t

t=1

- Ft

1 M AD≈ 0.8 standard deviation 1 standarddeviation ≈ 1.25 M AD

n

• 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 Question: Question: What What isis the the MAD MAD value value given given the the forecast forecast values values in in the the table table below? below? Month 1 2 3 4 5

Sales Forecast 220 n/a 250 255 210 205 300 320 325 315 4. PPC & PERT/CPM

MAD Problem Solution Month 1 2 3 4 5

Sales 220 250 210 300 325

Forecast Abs Error n/a 255 5 205 5 320 20 315 10

40 n

MAD =

∑A

t

t=1

n

- Ft

40 = = 10 4

Note Notethat thatby byitself, itself,the theMAD MAD only onlylets letsus usknow knowthe themean mean error errorin inaaset setof offorecasts 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:

RSFE Running su m of forec ast errors TS = = MAD Mean absol ute deviat ion 4. PPC & PERT/CPM

Simple Linear Regression Model The Thesimple simplelinear linearregression regression model modelseeks seeksto tofit fitaaline line through throughvarious variousdata dataover over time time

Yt = a + bx

Y

a 0 1 2 3 4 5

x

(Time)

Is Isthe thelinear linearregression regressionmodel model

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) 2

∑ x - n(x )

2

4. PPC & PERT/CPM

Simple Linear Regression Problem Data Question: Question:Given Giventhe thedata databelow, below,what whatisisthe thesimple simplelinear linear regression regressionmodel modelthat thatcan canbe beused usedto topredict predictsales salesin infuture future weeks? weeks?

Week 1 2 3 4 5

Sales 150 157 162 166 177

4. PPC & PERT/CPM

42

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

Week Week*Week Sales Week*Sales 1 1 150 150 2 4 157 314 3 9 162 486 4 16 166 664 5 25 177 885 3 55 162.4 2499 Average Sum Average Sum xy - n(y)(x) 2499 - 5(162.4)(3) 63 ∑ b= = = = 6.3 2 2 55 − 5(9) 10 ∑ x - n(x ) a = y - bx = 162.4 - (6.3)(3) = 143.5 4. PPC & PERT/CPM

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The resulting regression model is:

Yt = 143.5 + 6.3x

Sales

Now if we plot the regression generated forecasts against the actual sales we obtain the following chart: 180 175 170 165 Sales 160 155 Forecast 150 145 140 135 1 2 3 4 5 Period 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 4. PPC & PERT/CPM

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.) 4. PPC & PERT/CPM

46

Question Bowl

Which of the following is an example of a “Qualitative” type of forecasting technique or a. b. c. d. e.

model? Grass roots Market research Panel consensus All of the above None of the above

Answer: d. All of the above (Also includes Historical Analogy and Delphi Method.) 4. PPC & PERT/CPM

47

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 above

Answer: b. Exponential smoothing (Also includes Simple Moving Average, Weighted Moving Average, Regression Analysis, Box Jenkins, Shiskin Time Series, and Trend Projections.) 4. PPC & PERT/CPM

48

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” .) 4. PPC & PERT/CPM

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Question Bowl

Which of the following are ways to choose weights in a Weighted Moving Average a. b. c. d. e.

forecasting model? Cost Experience Trial and error Only b and c above None of the above

Answer: d. Only b and c above 4. PPC & PERT/CPM

50

Question Bowl

Which of the following are reasons why the Exponential Smoothing model has been a a. b. c. d. e.

well accepted forecasting methodology? It is accurate It is easy to use Computer storage requirements are small All of the above None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

51

Question Bowl

a. b. c. d. e.

The value for alpha or α must be between which of the following when used in an Exponential Smoothing model? 1 to 10 1 to 2 0 to 1 -1 to 1 Any number at all

Answer: c. 0 to 1 4. PPC & PERT/CPM

52

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.Answer: None of the above d. All of

the above

4. PPC & PERT/CPM

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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 4. PPC & PERT/CPM

54

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

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

b. 75 c. 50 d. 25 e. None of the above 4. PPC & PERT/CPM

55

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 above Answer: a. Additive (The other type is of seasonal variation is Multiplicative.) 4. PPC & PERT/CPM

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4b. Aggregate Sales and Operations Planning

4. PPC & PERT/CPM

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OBJECTIVES • Sales and Operations Planning • The Aggregate Operations Plan • Examples: Chase and Level strategies

4. PPC & PERT/CPM

Exhibit Exhibit14.1 14.1

Process planning

Long range

Strategic capacity planning

Intermediate Forecasting & demand range management Manufacturing

Sales and operations (aggregate) planning Sales plan

Aggregate operations plan

Services

Master scheduling Material requirements planning

Short range

Weekly workforce and customer scheduling

Order scheduling

Daily workforce and customer scheduling

4. PPC & PERT/CPM

59

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 Demand and Aggregate Production Capacity Suppose Supposethe thefigure figureto to the theright rightrepresents represents forecast forecastdemand demandin in units units Now Nowsuppose supposethis this lower lowerfigure figurerepresents represents the theaggregate aggregatecapacity capacity of ofthe thecompany companyto to meet meetdemand demand

10000

10000

8000

8000 6000

7000 6000

5500 4500

4000 2000 0 Jan

Feb

Mar 9000

10000

Apr

May

Jun

8000

8000

What Whatwe wewant wantto todo doisis balance balanceout outthe the production productionrate, rate, workforce workforcelevels, levels,and and inventory inventoryto tomake make these figures these figuresmatch matchup up

6000

6000 4500

4000

Jan

Feb

4000

4000 2000 0

4. PPC & PERT/CPM

Mar

Apr

May

Jun

Required Inputs to the Production Planning System Competitors’ behavior External capacity

Current physical capacity

Raw material availability

Planning for production

Current workforce

Inventory levels

Market demand

External to firm

Economic conditions

Activities required for 4. PPC & PERT/CPMproduction

Internal to firm

Key Strategies for Meeting Demand

• Chase

• Level

• Some combination of the two 4. PPC & PERT/CPM

Aggregate Planning Examples: Unit Demand and Cost Data Suppose Supposewe wehave havethe thefollowing followingunit unit demand demandand andcost costinformation: information: Demand/mo

Jan

Feb

Mar

Apr

May

Jun

4500

5500

7000

10000

8000

6000

Materials Rs5/unit Holding costs Rs1/unit per mo. Marginal cost of stockout Rs1.25/unit per mo. Hiring and training cost Rs200/worker Layoff costs Rs250/worker Labor hours required .15 hrs/unit Straight time labor cost Rs8/hour Beginning inventory 250 units Productive hours/worker/day 7.25 Paid straight hrs/day 8 4. PPC & PERT/CPM

Cut-and-Try Example: Determining Straight Labor Costs and Output Given Giventhe thedemand demandand andcost costinformation informationbelow, below,what what are arethe theaggregate aggregatehours/worker/month, hours/worker/month,units/worker, units/worker,and and dollars/worker? dollars/worker?

Demand/mo Jun

Jan

Feb

4500 5500 Productive hours/worker/day 6000 Paid straight hrs/day

22x8hrsxRs8=Rs1 Jan 408

Mar

Apr

May

7000 7.25

10000

8000

8

7.25x2 2

7.25x0.15=48.33 & M ar 84.33x22=1063.33 A pr M ay

F eb D ay s /m o 22 19 21 H rs /w ork er/m o 159.5 137.75 152.25 U nits /w ork er 1063.33 918.33 1015 R s /w ork er 1,408 4. PPC 1,216 1,344 & PERT/CPM

Jun 21 22 20 152.25 159.5 145 1015 1063.33 966.67 1,344 1,408 66 1,280

Chase Strategy (Hiring & Firing to meet demand) Days/mo Hrs/worker/mo Units/worker Rs/worker

Demand Beg. inv. Net req. Req. workers Hired Fired Workforce Ending inventory

Jan 22 159.5 1,063.33 1,408

Jan 4,500 250 4,250 3.997 3 4 0

Lets Letsassume assumeour ourcurrent currentworkforce workforceis is77 workers. 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

Below Beloware arethe thecomplete completecalculations calculationsfor forthe theremaining remaining months monthsin inthe thesix sixmonth monthplanning planninghorizon horizon Days/mo Hrs/worker/mo Units/worker Rs/worker

Demand Beg. inv. Net req. Req. workers Hired Fired W orkforce Ending inventory

Jan 22 159.5 1,063 1,408

Feb 19 137.75 918 1,216

Mar 21 152.25 1,015 1,344

Apr 21 152.25 1,015 1,344

May 22 159.5 1,063 1,408

Jun 20 145 967 1,280

Jan 4,500 250 4,250 3.997

Feb 5,500

Mar 7,000

Apr 10,000

May 8,000

Jun 6,000

5,500 5.989 2

7,000 6.897 1

10,000 9.852 3

8,000 7.524

6,000 6.207

2 8 0

1 7 0

3 4 0

6 0

7 0

4. PPC & PERT/CPM

10 0

Below are the complete calculations for the remaining months in the six month planning horizon with the other costs included D em and B eg. inv. N et req. R eq. w ork ers H ired F ired W ork forc e E nding inventory

M aterial Labor H iring c os t F iring c os t

Jan 4,500 250 4,250 3.997 3 4 0

F eb 5,500

M ar 7,000

A pr 10,000

M ay 8,000

Jun 6,000

5,500 5.989 2

7,000 6.897 1

10,000 9.852 3

8,000 7.524

6,000 6.207

6 0

7 0

10 0

2 8 0

1 7 0

Jan F eb M ar A pr M ay Jun C os 21,250.00 27,500.00 35,000.00 50,000.00 40,000.0030,000.00 203,750 5,627.59 7,282.76 9,268.97 13,241.38 10,593.10 7,944.83 53,958 400.00 200.00 600.00 1,200 750.00 500.00 250.00 1,500 4. PPC & PERT/CPM

260,408

Level Workforce Strategy (Surplus and Shortage Allowed) Lets Letstake takethe thesame sameproblem problemas as before beforebut butthis thistime timeuse usethe the Level LevelWorkforce Workforcestrategy strategy

Demand This Thistime timewe wewill willseek seekto touse use Beg. inv. aaworkforce level of 6 workers workforce level of 6 workers Net req. W orkers P ro duction Ending invento ry Surplus Shortage 4. PPC & PERT/CPM

Jan 4 ,500 250 4 ,250 6 6 ,380 2 ,130 2 ,130

Below Below are arethe thecomplete completecalculations calculationsfor for the theremaining remaining months months in inthe the six sixmonth month planning planning horizon horizon

Jan 4,500 250 4,250 6 6,380 2,130 2,130

Feb 5,500 2,130 3,370 6 5,510 2,140 2,140

Mar 7,000 2,140 4,860 6 6,090 1,230 1,230

Apr 10,000 1,230 8,770 6 6,090 -2,680

Demand Beg. inv. Net req. Workers Production Ending inventory Surplus Note, Note, ifif we we recalculate recalculate this this sheet sheet with with 77 workers workers Shortage 2,680

we we would would have have aa surplus surplus

4. PPC & PERT/CPM

8, -2, 10,

6, -1,

1,

Below Below are are the the complete complete calculations calculations for for the the remaining remaining months months in in the the six six month month planning planning horizon horizon with with the the other other costs costs included included Jan 4,500 250 4,250 6 6,380 2,130 2,130

Jan 8,448.00 31,900.00 2,130.00

Feb 5,500 2,130 3,370 6 5,510 2,140 2,140

Mar 7,000 10 4,860 6 6,090 1,230 1,230

Apr 10,000 -910 8,770 6 6,090 -2,680

May 8,000 -3,910 10,680 6 6,380 -1,300

2,680

1,300

Feb Mar Apr 7,296.00 8,064.00 8,064.00 27,550.00 30,450.00 30,450.00 2,140.00 1,230.00 3,350.00

Jun 6,000 Note, Note, total total -1,620 costs costs under under 7,300 this strategy 6 this strategy 5,800 are areless lessthan than -1,500

Chase Chaseat at Rs260.408.62 1,500 Rs260.408.62

May Jun 8,448.00 7,680.00 31,900.00 29,000.00 1,625.00

4. PPC & PERT/CPM

1,875.00

48,000.00 Labor 181,250.00 Material 5,500.00 Storage Stockout 6,850.00 241,600.00

Question Bowl

a. b. c. d. e.

Sales and Operations Planning activities are usually conducted during which planning time horizon? Long-range Answer: b. Intermediate-range Intermediate-range Short-range (i.e., 6 to 18 months) Really short-range None of the above 4. PPC & PERT/CPM

73

Question Bowl

a. b. c. d. e.

Which of the following are Production Planning Strategies can involve trade-offs among the workforce size, work hours, inventory, and backlogs? Chase strategy Stable workforce-variable work hours Level strategy All of the above None of the above Answer: d. All of the above

4. PPC & PERT/CPM

74

Question Bowl

Which of the following are considered “relevant a. b. c. d. e.

costs” in the Aggregate Production Plan? Costs associated with changes in the production rate Inventory holding costs Backordering costs Basic production costs All of the above

Answer: e. All of the above 4. PPC & PERT/CPM

75

Question Bowl Which of the following Aggregate Planning Techniques can be performed using simple a. b. c. d. e.

spreadsheets? Cut-and-try Linear programming Transportation method All of the above None of the above

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

4. PPC & PERT/CPM

76

Question Bowl

a. b. c. d. e.

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? Cut-and-try Yield management Transportation method All of the above None of the above

Answer: b. Yield management

4. PPC & PERT/CPM

77

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 above

Answer: d. Demand is highly variable

4. PPC & PERT/CPM

78

4c. Inventory Control (A Part of Material Planning) 4. PPC & PERT/CPM

79

OBJECTIVES • 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 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

Independent vs. Dependent Demand Independent Demand (Demand for the final endproduct or demand not related to other items)

Finished product

E(1 )

Component parts

4. PPC & PERT/CPM

Dependent Demand (Derived demand items for component parts, subassemblies, raw materials, etc)

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

Cu P≤ Co + Cu

This Thismodel modelstates statesthat thatwe we should shouldcontinue continueto toincrease increase the thesize sizeof ofthe theinventory inventoryso so long longas asthe theprobability probabilityof of selling sellingthe thelast lastunit unitadded addedisis equal equalto toor orgreater greaterthan thanthe the ratio ratioof: of:Cu/Co+Cu Cu/Co+Cu

Where: Co = Cost per unit of demandover estimated Cu = Cost per unit of demand under estimated P = Probability that theunit willbe sold 4. PPC & PERT/CPM

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

4. PPC & PERT/CPM

87

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

88

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) 4. PPC & PERT/CPM

Basic Fixed-Order Quantity Model and Reorder Point Behavior 1. You receive an order quantity Q. Number of units on hand

Q

4. The cycle then repeats.

Q

Q

R

2. Your start using them up over time.

L Time

R = Reorder point Q = Economic order quantity L = Lead time

L 3. When you reach down to a level of inventory of R, you place your next Q sized order.

4. PPC & PERT/CPM

90

Cost Minimization Goal By Byadding addingthe theitem, item,holding, holding,and andordering orderingcosts costs together, together,we wedetermine determinethe thetotal totalcost costcurve, curve,which whichin in turn turnis isused usedto tofind findthe theQ Qopotpt inventory inventoryorder orderpoint pointthat that minimizes minimizestotal totalcosts costs Total Cost

C O S T

Holding Costs Annual Cost of Items (DC) Ordering Costs QOPT 4.Order PPC & PERT/CPM Quantity

(Q)

Basic Fixed-Order Quantity (EOQ) Model Formula Total Annual = Cost

Annual Annual Annual Purchase + Ordering + Holding Cost Cost Cost

D Q TC = DC + S + H Q 2 4. PPC & PERT/CPM

TC=Total TC=Totalannual annual cost cost DD=Demand =Demand CC=Cost =Costper perunit unit QQ=Order =Orderquantity quantity SS=Cost =Costof ofplacing placing an anorder orderor orsetup setup cost cost RR=Reorder =Reorderpoint point LL=Lead =Leadtime time H=Annual H=Annualholding holding and andstorage storagecost cost per perunit unitof ofinventory inventory

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

Q OPT =

2DS = H

We Wealso alsoneed need aa reorder reorder point pointto to tell tell us uswhen whento to place placean anorder order

2(Annual Demand)(Orde r or Setup Cost) Annual Holding Cost _

Reorder p oint, R = d L _

d = average daily demand (constant) L = Lead time (constant) 4. PPC & PERT/CPM

EOQ Example (1) Problem Data Given Given the theinformation information below, below, what what are arethe theEOQ EOQ and and reorder reorder point? point?

Annual Demand = 1,000 units Days per year considered in average daily demand = 365 Cost to place an order = Rs10 Holding cost per unit per year = Rs2.50 Lead time = 7 days Cost per unit = Rs15 4. PPC & PERT/CPM

EOQ Example (1) Solution Q OPT =

2DS = H

2(1,000 )( 10) = 89.443 un its or 90 units 2.50

1,000 unit s / year d = = 2.74 unit s / day 365 days / year _

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

In Insummary, summary,you youplace placean anoptimal optimalorder orderof of90 90units. units. In In the thecourse courseof ofusing usingthe theunits unitsto tomeet meetdemand, demand,when when you youonly onlyhave have20 20units unitsleft, left,place placethe thenext nextorder orderof of90 90 units. units. 4. PPC & PERT/CPM

EOQ Example (2) Problem Data Determine Determine the the economic economic order order quantity quantity and and the the reorder reorder point point given given the the following… following…

Annual Demand = 10,000 units Days per year considered in average daily demand = 365 Cost to place an order = Rs10 Holding cost per unit per year = 10% of cost per unit Lead time = 10 days Cost per unit = Rs15 4. PPC & PERT/CPM

EOQ Example (2) Solution Q OPT =

2DS = H

2(10,000 ) (10) = 365.148 un its, or 366 units 1.50

10,000 uni ts / year d= = 27.397 uni ts / day 365 days / year _

R = d L = 27.397 uni ts / day (10 da ys) = 273.97 or 274 units

Place Placean anorder order for for366 366units. units. When Whenin inthe thecourse courseof of using usingthe theinventory inventoryyou youare are left left with withonly only274 274units, units, place placethe thenext next order order of of366 366units. units. 4. PPC & PERT/CPM

Fixed-Time Period Model with Safety Stock Formula qq==Average Averagedemand demand++Safety Safetystock stock––Inventory Inventorycurrently currentlyon onhand hand q = d(T + L) + Z σ T + L - I Where : q = quantitiy to be ordered T = the number of days between reviews L = lead time in days d = forecast average daily demand z = the number of standard deviations for a specified service probabilit y σ T + L = standard deviation of demand over the review and lead time I = current inventory level (includes items on order) 4. PPC & PERT/CPM

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

σ T+ L =

∑(σ

T+ L i =1

di

)

2

Since each day is independent and σ d is constant,

σ T+ L =

(T + L)σ d 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

Given Given the the information information below, below, how how many many units units should should be be ordered? ordered? 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. 4. PPC & PERT/CPM

Example of the Fixed-Time Period Model: Solution (Part 1) σ T+ L =

(T + L)σ d = 2

( 30 + 10) ( 4) = 25.298 2

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) q = d(T + L) + Z σ T + L - I q = 20(30 + 10) + (1.75)(25.298) - 200 q = 800 + 44.272 - 200 = 644.272, or 645 units

So, to satisfy 96 percent of the demand, you should place an order of 645 units at this review period4. PPC & PERT/CPM

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

Q OPT

2DS 2(Annual Demand)(Order or Setup Cost) = = iC Annual Holding Cost

i = percentage of unit cost attributed to carrying inventory C = 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 A company company has has aa chance chance to to reduce reduce their their inventory inventory ordering ordering costs costs by by placing placing larger larger quantity quantity orders orders using using the the price-break price-break order order quantity quantity schedule schedule below. below. What What should should their their optimal optimal order order quantity quantity be be ifif this this company company purchases purchases this this single single inventory inventory item item with with an an e-mail e-mail ordering ordering cost cost of of Rs4, Rs4, aa carrying carrying cost cost rate rate of of 2% 2% of of the the inventory inventory cost cost of of the the item, item, and and an an annual annual demand demand of of 10,000 10,000 units? units? Order Quantity(units) Price/unit(Rs) 0 to 2,499 Rs1.20 2,500 to 3,999 1.00 4,000 or more 4. PPC .98& PERT/CPM

Price-Break Example Solution (Part 2) First, plug data into formula for each price-break value of “C” Annual Demand (D)= 10,000 units Cost to place an order (S)= Rs4

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

Next, determine if the computed Qopt values are feasible or not Interval from 0 to 2499, the Qopt value is feasible

Q OPT =

2DS = iC

2(10,000)( 4) = 1,826 units 0.02(1.20)

Q OPT =

2DS = iC

2(10,000)( 4) = 2,000 units 0.02(1.00)

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

2DS = iC

2(10,000)( 4) = 2,020 units 0.02(0.98)

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

4. PPC & PERT/CPM

Price-Break Example Solution (Part 3) Since Since the thefeasible feasiblesolution solution occurred occurredin inthe thefirst firstpricepricebreak, break, itit means means that thatall all the theother othertrue trueQ Qopotpt values valuesoccur occur at at the thebeginnings beginningsof ofeach each price-break price-breakinterval. interval. Why? Why? Because Becausethe thetotal total annual annual cost costfunction functionis is aa“u” “u”shaped shapedfunction function

Total annual costs

So So the thecandidates candidates for forthe thepricepricebreaks breaks are are 1826, 1826, 2500, 2500, and and4000 4000 units units 0

1826

25004. PPC4000 Order Quantity & PERT/CPM

Price-Break Example Solution (Part 4) Next, we plug the true Qopt values into the total cost annual cost function to determine the total cost under each price-break

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

Miscellaneous Systems: Optional Replenishment System Maximum Inventory Level, M

q=M-I Actual Inventory Level, I

M 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

Order One Bin of Inventory Full

Empty

One-Bin System

Order Enough to Refill Bin Periodic Check

4. PPC & PERT/CPM

ABC Classification System • Items kept in inventory are not of equal importance in terms of: –

Rupees invested

60

% of Rs Value 30

–

profit potential

–

sales or usage volume % of

–

stock-out penalties

0

Use

30

A B

C

60

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 4. PPC & PERT/CPM

Question Bowl The average cost of inventory in the United States is which of the following? a. 10 to 15 percent of its cost b. 15 to 20 percent of its cost c. 20 to 25 percent of its cost d. 25 to 30 percent of its cost 30 to 35 of percent of its cost e. Answer: 30 to 35e.percent its cost 4. PPC & PERT/CPM

112

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 above (Also can include to e. Answer: All of the above provide a safeguard for variation in raw material delivery time.) 4. PPC & PERT/CPM

113

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 e. None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

114

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 e. None of the above

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

4. PPC & PERT/CPM

115

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 above Answer: d. Containers of milk to a grocery store 4. PPC & PERT/CPM

116

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. Answer: P-model

b. Fixed-order quantity model 4. PPC & PERT/CPM

117

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. b. c. d. e.

5,000 units Rs5,000 500 units 316 units None of the above

Answer: d. 316 units (Sqrt[(2x1000x10 0)/10=316.2277) 4. PPC & PERT/CPM

118

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 e. None of the above

Answer: c. Pareto principle 4. PPC & PERT/CPM

119

Question Bowl

a. b. c. d. e.

A physical inventory-taking technique in which inventory is counted frequently rather than once or twice a year is which of the following? Cycle counting Mathematical programming Pareto principle ABC classification Stockkeeping unit (SKU)

Answer: a. Cycle counting 4. PPC & PERT/CPM

120

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

4. PPC & PERT/CPM

121

OBJECTIVES

• Material Requirements Planning (MRP) • MRP Logic and Product Structure Trees • Time Fences • MRP Example • MRP II and Lot Sizing 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 Given the product structure tree for “A” and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed Product Structure Tree for Assembly A

A B(4) D(2)

C(2) E(1)

D(3)

F(2) 4. PPC & PERT/CPM

Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day Total Unit Demand Day 10 50 A Day 8 20 B (Spares) Day 6 15 D (Spares)

First, the number of units of “A” are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of “A” on the 9th day to receive them on day 10. Day:

1

2

3

4

A Required Order Placement

5

6

7

8

9 50

LT = 1 day 4. PPC & PERT/CPM

10 50

Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time. Day: A

1

2

3

4

5

6

7

8

Required 50

Required

20

Order Placement

20

LT = 2 A B(4) D(2)

10 50

Order Placement B

9

200

Spares 4x50=200

C(2) E(1)

200

D(3) F(2) 4. PPC & PERT/CPM

Finally, repeating the process for all components, we have the final materials requirements plan: Day: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1

1

2

Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement

3

4

5

6

20

7

8

9

20

50 200

127

10 50

200 100

55 20

400

55

400

20

200

100 300

300

200 200 200

A B(4) D(2)

C(2) E(1)

Part D: Day 6 40 + 15 spares

4. PPC & PERT/CPM D(3) F(2)

©The McGraw-Hill Companies, Inc.

Master Production Schedule (MPS) • Time-phased plan specifying how many and when the firm plans to build each end item Aggregate Aggregate Plan Plan (Product (Product Groups) 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

Exhibit Exhibit15.5 15.5

Example of Time Fences Moderately Firm

Frozen

Flexible

Capacity

Forecast and available capacity Firm Customer Orders

8

15 Weeks 4. PPC & PERT/CPM

26

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

132

Aggregate product plan

Firm orders from known customers

Engineering design changes

Forecasts of demand from random customers

Master production Schedule (MPS)

Bill of material file

Primary reports Planned order schedule for inventory and production control

Material planning (MRP computer program)

Inventory transactions From FromExhibit Exhibit15.6 15.6

Inventory record file

Secondary reports Exception reports Planning reports Reports for performance 4. PPC & PERT/CPM control ©The McGraw-Hill Companies, Inc.,

Bill of Materials (BOM) File A 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 Item X A B C D

X A(2) C(3)

B(1) C(2)

On-Hand Lead Time (Weeks) 50 2 75 3 25 1 10 2 20 2

D(5)

Requirements Requirementsinclude include95 95units units(80 (80firm firmorders ordersand and15 15forecast) forecast)of ofXX in inweek week10 10 4. PPC & PERT/CPM

X

A(2)

ItIttakes takes 22A’s A’sfor for each eachXX

X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20

Day: Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release

1

2

3

4

5

6

7

8

9

10 95

50 50

50

50

50

50

50

50

50

50 45 45

45 90 75 75

75

75

75

75

75

75 15 15

15 45 25 25

25

25

25

25

20 40

45 10 10

10

10

35

25

10 35 35 40

40 40 100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20 80 80

25 20 20

X LT=2

X

A(2)

B(1)

ItIttakes takes 11BBfor for each eachXX

Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20

Day: Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release

1

2

3

4

5

6

7

8

9

10 95

50 50

50

50

50

50

50

50

50

50 45 45

45 90 75 75

75

75

75

75

75

75 15 15

15 45 25 25

25

25

25

25

20 40

45 10 10

10

10

35

25

10 35 35 40

40 40 100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20 80 80

25 20 20

X LT=2

X

A(2)

C(3)

ItIttakes takes33 C’s C’sfor for each eachAA

B(1)

Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20

Day: Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release

1

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10 95

50 50

50

50

50

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45 90 75 75

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75 15 15

15 45 25 25

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20 40

45 10 10

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35

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10 35 35 40

40 40 100

20 20

4. PPC & PERT/CPM

20

20

20

80

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20 80 80

25 20 20

X LT=2

X

A(2)

C(3)

B(1)

C(2)

ItIttakes takes22 C’s C’sfor for each eachBB

Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20

Day: Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release

1

2

3

4

5

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7

8

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10 95

50 50

50

50

50

50

50

50

50

50 45 45

45 90 75 75

75

75

75

75

75

75 15 15

15 45 25 25

25

25

25

25

20 40

45 10 10

10

10

35

25

10 35 35 40

40 40 100

20 20

4. PPC & PERT/CPM

20

20

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80

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20 80 80

25 20 20

X LT=2

X

A(2)

C(3)

B(1)

C(2)

ItIttakes takes55 D’s D’sfor for each eachBB

D(5)

Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20

Day: Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release

1

2

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10 95

50 50

50

50

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50 45 45

45 90 75 75

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75

75 15 15

15 45 25 25

25

25

25

25

20 40

45 10 10

10

10

35

25

10 35 35 40

40 40 100

20 20

4. PPC & PERT/CPM

20

20

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80

20

20 80 80

25 20 20

Closed Loop MRP Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning

No Feedback

Realistic?

Yes Execute: Capacity Plans Material Plans 4. PPC & PERT/CPM

Feedback

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! 4. PPC & PERT/CPM

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 4. PPC & PERT/CPM

147

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 above (Correct answer can also e.Answer: All of the above include objectively trade off manufacturing, marketing, and engineering conflicts and include all demands from product sales, warehouse replenishment, spares, and interplant requirements.) 4. PPC & PERT/CPM

148

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 e. None of the above

Answer: b. Control flow through the production system 4. PPC & PERT/CPM

149

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 e. None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

150

Question Bowl

a. b. c. d. e.

Which of the following is one of the three main inputs into an MRP system? BOM file Answer: a. BOM file Exception report (Correct answer can Planning report also include Master Schedule and All of the above Inventory Records None of the above File.) 4. PPC & PERT/CPM

151

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

e. None of the above

Answer: c. Time bucket 4. PPC & PERT/CPM

152

Question Bowl

a. b. c. d. e.

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? Work overtime Renegotiate the due date and reschedule Subcontract to an outside shop Answer: d. All of the above All of the above (Correct answer can also include None of the above selecting an alternative work center and rescheduling the work at a different time.) 4. PPC & PERT/CPM

153

Question Bowl Which of the following are reasons why a Lot-ForLot (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

Answer: e. All of the above 4. PPC & PERT/CPM

154

4e. Process Planning & Analysis

4. PPC & PERT/CPM

155

OBJECTIVES • Process Analysis • Process Flowcharting • Types of Processes • Process Performance Metrics

4. PPC & PERT/CPM

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

157

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 Purpose and Examples Tasks or operations

Decision Points

Examples: Examples: Giving Givingan an admission admissionticket ticket to toaa customer, customer, installing installingaa engine enginein inaacar, car, etc. etc. Examples: Examples: How Howmuch much change changeshould shouldbe be given givento toaacustomer, customer, which whichwrench wrenchshould should be be used, used, etc. etc.

4. PPC & PERT/CPM

Flowchart Symbols Purpose and Examples Storage areas or queues

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

Flows of materials or customers

Examples: Examples: Customers Customers moving moving to toaa seat, seat, mechanic mechanicgetting gettingaa tool, tool, etc. etc.

4. PPC & PERT/CPM

Example: Flowchart of Student Going to School Go to school today?

Yes

Drive to school

No Goof off 4. PPC & PERT/CPM

Walk to class

Types of Processes Single-stage Process Stage 1

Multi-stage Process Stage 1

Stage 2

4. PPC & PERT/CPM

Stage 3

Types of Processes (Continued) 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

Multi-stage Process with Buffer Buffer Stage 1

Stage 2

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 to move through the system • Velocity = Throughput time

Value-added time

4. PPC & PERT/CPM

Process Performance Metrics (Continued) • Cycle time = Average time between completion 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 Suppose you you had had to to produce produce 600 600 units units in in 80 80 hours hours to to meet meet the the demand demand requirements requirements of of aa product. product. What What is is the the cycle cycle time time to to meet meet this this demand demand requirement? requirement?

Answer: Answer: There There are are 4,800 4,800 minutes minutes (60 (60 minutes/hour minutes/hour xx 80 80 hours) hours) in in 80 80 hours. hours. So So the the average average time time between between completions completions would would have have to to be: be: Cycle Cycle time time == 4,800/600 4,800/600 units units == 88 minutes. minutes. 4. PPC & PERT/CPM

Process Throughput Time Reduction • Perform activities in parallel • Change the sequence of activities • Reduce interruptions

4. PPC & PERT/CPM

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 purchase c. Time it takes for an instructor to grade an exam d. Time it takes to build an automobile e. All of the above

Answer: e. All of the above 4. PPC & PERT/CPM

173

Question Bowl Which of the following are used as symbols in a Process Flowchart? a. Decision points Answer: a. Decision b. Blocking points (A diamond c. Starving shaped symbol.) d. Bottleneck e. All of the above

4. PPC & PERT/CPM

174

Question Bowl

Which type of process is configured as follows?

1

a. b. c. d. e.

2

3

Single-stage process Multi-stage process Make-to-order process Make-to-stock process All of the above

Answer: b. Multi-stage process 4. PPC & PERT/CPM

175

Question Bowl

a. b. c. d. e.

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? Buffering Blocking Starving Bottleneck All of the above

Answer: c. Starving 4. PPC & PERT/CPM

176

Question Bowl

a. b. c. d. e.

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? Single-stage process Answer: c. Make-toMulti-stage process Make-to-order process order process Make-to-stock process All of the above 4. PPC & PERT/CPM

177

Question Bowl

a. b. c. d. e.

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? 75 minutes 110 minutes Only 45 minutes 65/45 minutes or 1.44 hours 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) 4. PPC & PERT/CPM

178

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 Answer: c. 112.5% Efficiency? (Ratio of actual a. 88.8% performance/expected performance, b. 100% or (27/24) x 100 = 110 minutes) c. 112.5% d. Well over 150% e. Can not computed on the information given. 4. PPC & PERT/CPM

179

4e contd. Service Process Selection and Design

4. PPC & PERT/CPM

180

OBJECTIVES • 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 4. PPC & PERT/CPM

The Nature of Services 1. 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 A service business is the management of organizations whose primary business requires interaction with the customer to produce the service • 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 4. PPC & PERT/CPM

Internal Services Defined

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

Internal Supplier Internal Customer External Customer Internal Supplier 4. PPC & PERT/CPM

Exhibit Exhibit7.1 7.1

The Customer Centered View AAphilosophical philosophicalview viewthat that suggests suggeststhe theorganization organization exists existsto toserve servethe the customer, customer,and andthe the systems systemsand andthe the employees employeesexist existto to facilitate facilitatethe theprocess processof of service. service.

The Service Strategy

The Customer

The Systems 4. PPC & PERT/CPM

The People

Service Strategy: Focus and Advantage Performance 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 Degree of customer/server contact High

Buffered core (none)

Permeable system (some)

Reactive system (much)

Face-to-face loose specs

Sales Opportunity Phone Internet & Contact on-site Mail contacttechnology

Face-to-face tight specs

Low

Exhibit Exhibit7.6 7.6

Low

Face-to-face total customization

Production Efficiency

High 4. PPC & PERT/CPM

Example of Service Blueprinting Standard execution time 2 minutes

Brush shoes 30 secs

Total acceptable execution time 5 minutes Seen by customer

Line of visibility

Clean shoes

Apply polish 30 secs

Fail point

45 secs

Not seen by customer but necessary to performance

Buff

Collect payment

45 secs

15 secs

Wrong color wax Materials (e.g., polish, cloth)

Select and purchase supplies 4. PPC & PERT/CPM

Service Fail-safing Poka-Yokes (A Proactive Approach) • Keeping a mistake from becoming a service defect Treatment

• How can we fail-safe the three Ts? 4. PPC & PERT/CPM

Task

Tangibles

Have we compromised one of the 3 Ts? 1. 1. Task Task 2. 2. Treatment Treatment 3. 3. Tangible 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. RitzCarlton 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 4. PPC & PERT/CPM

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 4. PPC & PERT/CPM

196

Question Bowl

Which of the following are generalizations about the nature of services? a. Services contain tangible attributes b. Services are experienced c. Services often take the form of cycles of encounters involving face-to-face interactions d. All of the above e. None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

197

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 above

Answer: e. All of the above 4. PPC & PERT/CPM

198

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 e. None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

199

Question Bowl

a. b. c. d. e.

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? Flow of the service experience Flow of time Judging encounter performance All of the above None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

200

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

Answer: e. All of the above 4. PPC & PERT/CPM

201

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 customer

Answer: b. Accessibility (Had the highest mean rating at 4.02 on a 5 point scale.) 4. PPC & PERT/CPM

202

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 contact

Answer: a. Face-to-face loose specs 4. PPC & PERT/CPM

203

4f. Operations Scheduling

4. PPC & PERT/CPM

204

OBJECTIVES • 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 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 Type of Process

Typical Scheduling Approach

Continuous process

Finite forward of process, machine limited

High-volume manufacturing

Finite forward of line, machined limited

Med-volume manufacturing

Infinite forward of process, labor and machined limited

Low-volume manufacturing

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) (Due date - Current date)

CR =

Number of days remaining

7. Last come, first served (LCFS) 8. Random order or whim 4. PPC & PERT/CPM

Example of Job Sequencing: FirstCome First-Served Suppose Supposeyou youhave havethe thefour four jobs jobsto tothe theright rightarrive arrivefor for processing processingon onone onemachine machine

Jobs (in order of arrival) A B C D

What Whatisisthe theFCFS FCFSschedule? schedule?

Processing Due Date Time (days) (days hence) 4 5 7 10 3 6 1 4

Do Doall allthe thejobs jobsget getdone doneon ontime? time?

Answer: FCFS Schedule Jobs (in order of arrival) A B C D

Processing Time (days) 4 7 3 1

Due Date Flow Time (days hence) (days) 5 4 10 11 6 14 4 15 4. PPC & PERT/CPM

No, No,Jobs JobsB, B,C, C, and andDDare are going goingto tobe belate late

Example of Job Sequencing: Shortest Operating Time Suppose Supposeyou youhave havethe thefour four jobs jobsto tothe theright rightarrive arrivefor for processing processingon onone onemachine machine

What Whatis isthe theSOT SOTschedule? schedule?

Jobs (in order of arrival) A B C D

Processing Time (days) 4 7 3 1

Due Date (days hence) 5 10 6 4

Do Doall allthe thejobs jobsget getdone doneon ontime? time?

Answer: Shortest Operating Time Schedule Jobs (in order of arrival) D C A B

Processing Time (days) 1 3 4 7

Due Date Flow Time (days hence) (days) 4 1 6 4 5 8 10 15 4. PPC & PERT/CPM

No, No,Jobs JobsAA and andBBare are going goingto tobe be late late

Example of Job Sequencing: Earliest Due Date First Suppose Supposeyou youhave havethe thefour four jobs jobsto tothe theright rightarrive arrivefor for processing processingon onone onemachine machine What Whatis isthe theearliest earliestdue duedate date first firstschedule? schedule?

Jobs (in order of arrival) A B C D

Processing Time (days) 4 7 3 1

Due Date (days hence) 5 10 6 4

Do Doall allthe thejobs jobsget getdone doneon ontime? time?

Answer: Earliest Due Date First Jobs (in order of arrival) D A C B

Processing Time (days) 1 4 3 7

Due Date Flow Time (days hence) (days) 4 1 5 5 6 8 10 15 4. PPC & PERT/CPM

No, No,Jobs JobsCC and andBBare are going goingto tobe be late late

Example of Job Sequencing: Critical Ratio Method Suppose Supposeyou youhave havethe thefour four jobs jobsto tothe theright rightarrive arrivefor for processing processingon onone onemachine machine What Whatisisthe theCR CRschedule? schedule?

Jobs (in order of arrival) A B C D

Processing Time (days) 4 7 3 1

Due Date (days hence) 5 10 6 4

Do Doall allthe thejobs jobsget getdone doneon ontime? 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

No, No,but butsince since there thereis isthreethreeway waytie, tie,only only the thefirst firstjob jobor or two twowill willbe beon on time time

Example of Job Sequencing: Last-Come First-Served Suppose Supposeyou youhave havethe thefour four jobs jobsto tothe theright rightarrive arrivefor for processing processingon onone onemachine machine

What Whatis isthe theLCFS LCFSschedule? schedule?

Jobs (in order of arrival) A B C D

Processing Time (days) 4 7 3 1

Due Date (days hence) 5 10 6 4

Do Doall allthe thejobs jobsget getdone doneon ontime? time?

Answer: Last-Come First-Served Schedule Jobs (in order of arrival) D C B A

Processing Time (days) 1 3 7 4

Due Date Flow Time (days hence) (days) 4 1 6 4 10 11 5 15 4. PPC & PERT/CPM

No, No,Jobs JobsBB and andAAare are going goingto tobe be late late

Example of Job Sequencing: Johnson’s Rule (Part 1) Suppose Suppose you you have havethe thefollowing followingfive fivejobs jobswith withtime time requirements requirementsin intwo twostages stagesof ofproduction. production. What What is isthe the job jobsequence sequenceusing usingJohnson’s Johnson’sRule? Rule? Jobs A B C D

Time in Hours Stage 1 Stage 2 1.50 1.25 2.00 3.00 2.50 2.00 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.

Jobs A B C D

Time in Hours Stage 1 Stage 2 1.50 1.25 2.00 3.00 2.50 2.00 1.00 2.00

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 Job Assigned 4.DPPC & PERT/CPM B C

4 A

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

Work Center

Output

• Planned input should never exceed planned output

• Focuses attention on bottleneck work centers

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 backto-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

4. PPC & PERT/CPM

Question Bowl

a. b. c. d. e.

A Work Center may be which of the following? A single machine A group of machines An area where a particular type of work is performed Answer : d. All of the above All of the above None of the above 4. PPC & PERT/CPM

227

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 e. None of the above

Answer: b. An infinite loading of work 4. PPC & PERT/CPM

228

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 e. None of the above

Answer: d. All of the above

4. PPC & PERT/CPM

229

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 d. All of the above e. Answer: None of the above 4. PPC & PERT/CPM

230

Question Bowl

a. b. c. d. e.

Which of the following are standard measures of schedule performance used to evaluate priority rules? Meeting due dates Maximizing job flow time Maximizing work-in-process inventory All of the above Answer: a. Meeting due dates None of the above

(Correct answer can also include minimizing WIP inventory, idle time, and job flow time.)

4. PPC & PERT/CPM

231

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.)

e. None of the above 4. PPC & PERT/CPM

232

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

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

d. Maintaining WIP quantity information e. All of the above

4. PPC & PERT/CPM

233

Question Bowl

a. b. c. d. e.

Which of the following are Tools of Shop-Floor Control? Answer: d. All of the Daily dispatch lists above (Correct Scrap reports answer can also include all status and Rework reports exception reports All of the above and input/output None of the above control reports.) 4. PPC & PERT/CPM

234

Question Bowl Which of the following is a Principle of WorkCenter 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 e. None of the above

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

4. PPC & PERT/CPM

235

4g. Project Management (PERT / CPM) 4. PPC & PERT/CPM

236

OBJECTIVES • • • • •

Definition of Project Management Work Breakdown Structure Project Control Charts Structuring Projects Critical Path Scheduling

4. PPC & PERT/CPM

Project Management Defined • 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 4. PPC & PERT/CPM

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

239

Gantt Chart Vertical VerticalAxis: Axis: Always AlwaysActivities Activities or or Jobs Jobs

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

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

Horizontal HorizontalAxis: Axis: Always AlwaysTime Time

4. PPC & PERT/CPM

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

Structuring Projects Pure Project: Advantages • 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 A functional project is housed within a functional division President Research and Development

Engineering

Manufacturing

Project Project Project A B C

Project Project Project D E F

Project Project Project G H I

Example, Example, Project Project “B” “B” is is in in the the functional functional area and Development. area of of Research 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 and Engineering Manufacturing Marketing Development Manager Project A Manager Project B Manager Project 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 A work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages Level Program 1 2

Project 1

Project 2

Task 1.1

Task 1.2

3

Subtask 1.1.1

4

Work Package 1.1.1.1

Subtask 1.1.2

4. PPC & PERT/CPM

Work Package 1.1.1.2

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

4. PPC & PERT/CPM

Important terms Network

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

4. PPC & PERT/CPM

254

Four Types of Activity Float

4. PPC & PERT/CPM

255

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

4. PPC & PERT/CPM

256

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.

4. PPC & PERT/CPM

257

1

2

3

4

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. 4. PPC & PERT/CPM

258

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. 4. PPC & PERT/CPM

259

1

3

2

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. 4. PPC & PERT/CPM

260

1

2

3

4

•The network should be developed on the basis of logical, analytical and technical dependencies between various activities of the project.

4. PPC & PERT/CPM

261

The basic network construction – Terminology used. Network representation: There are two types of systems – AOA system (Activity AON system on Arrow system) (Activity on Node system ) In this activities are represented by an arrows.

In this method activities are represented in the circles.

4. PPC & PERT/CPM

262

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 4. PPC & PERT/CPM

263

E B G A F

C D

4. PPC & PERT/CPM

264

Problem 2. Construct an arrow diagram for the following project. Job

Immediate predecessor

Duration

A

-

14 Days

B

A

3 Days

C

A

7 Days

D

C

4 Days

E

B,D

10 Days

4. PPC & PERT/CPM

265

E 10

B

14

D

3

A

C

4

7

Key

4. PPC & PERT/CPM

Job Duration

266

Problem 3. Construct an arrow diagram for the following project. Job

Immediate predecessor

A

-

B

-

C

A,B

D

A

E

D

F

C,E 4. PPC & PERT/CPM

267

C

B

F A

E D

4. PPC & PERT/CPM

268

Problem 4. Construct an arrow diagram for the following project. Activity

Predecessor

A

-

B

-

C

-

D

A,B

E

B,C 4. PPC & PERT/CPM

269

D

A B C

E

4. PPC & PERT/CPM

270

Problem 5. Construct an arrow diagram for the following project. Activity Predecessor A

-

B

-

C

-

D

A,B

E

B,C

F

A,B,C 4. PPC & PERT/CPM

271

D

A B

F C

E

4. PPC & PERT/CPM

272

CPM with Single Time Estimate (AoN) Consider the following consulting project: Activity Assess customer's needs Write and submit proposal Obtain approval Develop service vision and goals Train employees Quality improvement pilot groups Write assessment report

Designation Immed. Pred. Time (Weeks) A None 2 B A 1 C B 1 D C 2 E C 5 F D, E 5 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

273

First draw the network Act.

Imed. Pred. Time

A B C

None A B

2 1 1

D E F

C C D,E

2 5 5

G

F

1

A(2)

B(1)

D(2)

C(1)

F(5)

E(5) 4. PPC & PERT/CPM

G(1)

Determine early starts and early finish times ES=4 EF=6 ES=0 EF=2

ES=2 EF=3

ES=3 EF=4

A(2)

B(1)

C(1)

Hint: Hint:Start Startwith withES=0 ES=0 and andgo goforward forwardininthe the network networkfrom fromAAtotoG. G.

D(2)

ES=4 EF=9 E(5)

4. PPC & PERT/CPM

ES=9 EF=14

ES=14 EF=15

F(5)

G(1)

Determine late starts and late finish times

ES=4 EF=6

ES=0 EF=2

ES=2 EF=3

ES=3 EF=4

A(2)

B(1)

C(1)

LS=0 LF=2

LS=2 LF=3

LS=3 LF=4

D(2) LS=7 LF=9 ES=4 EF=9 E(5) LS=4 LF=9

4. PPC & PERT/CPM

Hint: Hint:Start Startwith withLF=15 LF=15 or orthe thetotal totaltime timeof ofthe the project project and andgo go backward backwardin inthe the network networkfrom fromGGto toA. A. ES=9 ES=14 EF=14 EF=15 F(5)

G(1)

LS=9 LF=14

LS=14 LF=15

Critical Path & Slack ES=4 EF=6 ES=0 EF=2

ES=2 EF=3

ES=3 EF=4

A(2)

B(1)

C(1)

LS=0 LF=2

LS=2 LF=3

LS=3 LF=4

D(2) LS=7 LF=9 ES=4 EF=9 E(5) LS=4 LF=9

4. PPC & PERT/CPM

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

ES=9 EF=14

ES=14 EF=15

F(5)

G(1)

LS=9 LF=14

LS=14 LF=15

Duration=15 weeks

Example 2. CPM with Three Activity Time Estimates (AoN) Immediate Task Predecesors Optimistic Most Likely Pessimistic A None 3 6 15 B None 2 4 14 C A 6 12 30 D A 2 5 8 E C 5 11 17 F D 3 6 15 G B 3 9 27 H E,F 1 4 7 I G,H 4 19 28 4. PPC & PERT/CPM

278

Example 2. Expected Time Calculations ET(A)= ET(A)=3+4(6)+15 3+4(6)+15 Task A B C D E F G H I

Immediate Expected Predecesors Time None 7 None 5.333 A 14 A 5 C 11 D 7 B 11 E,F 4 G,H 18

66 ET(A)=42/6=7 ET(A)=42/6=7 Immediate Task Predecesors Optimistic Most Likely Pessimistic A None 3 6 15 B None 2 4 14 C A 6 12 30 D A 2 5 8 E C 5 11 17 F D 3 6 15 G B 3 9 27 H E,F 1 4 7 I G,H 4 19 28

Opt. Time + 4(Most Li kely Time) + Pess. Time Expected T ime = 4. PPC & PERT/CPM 6 279

Ex. 2. Expected Time Calculations

Task A B C D E F G H I

Immediate Expected Predecesors Time None 7 None 5.333 A 14 A 5 C 11 D 7 B 11 E,F 4 G,H 18

ET(B)= ET(B)=2+4(4)+14 2+4(4)+14 66 ET(B)=32/6=5.333 ET(B)=32/6=5.333 Immediate Task Predecesors Optimistic Most Likely Pessimistic A None 3 6 15 B None 2 4 14 C A 6 12 30 D A 2 5 8 E C 5 11 17 F D 3 6 15 G B 3 9 27 H E,F 1 4 7 I G,H 4 19 28

Opt. Time + 4(Most Li kely Time) + Pess. Time Expected T ime = 4. PPC & PERT/CPM 6 280

Ex 2. Expected Time Calculations Task A B C D E F G H I

Immediate Expected Predecesors Time None 7 None 5.333 A 14 A 5 C 11 D 7 B 11 E,F 4 G,H 18

ET(C)= ET(C)=6+4(12)+30 6+4(12)+30 66 ET(C)=84/6=14 ET(C)=84/6=14 Immediate Task Predecesors Optimistic Most Likely Pessimistic A None 3 6 15 B None 2 4 14 C A 6 12 30 D A 2 5 8 E C 5 11 17 F D 3 6 15 G B 3 9 27 H E,F 1 4 7 I G,H 4 19 28

Opt. Time + 4(Most Li kely Time) + Pess. Time Expected T ime = 4. PPC & PERT/CPM 6 281

Example 2. Network (AoN) Duration = 54 Days C(14)

E(11) H(4)

A(7) D(5)

F(7) I(18)

B (5.333)

G(11) 4. PPC & PERT/CPM

282

Example 2. Probability Exercise What What isis the theprobability probability of of finishing finishing this this project project in in less less than than 53 53 days? days?

p(t < D) D=53

t

TE = 54 Z = 4. PPC & PERT/CPM

D - TE

2 σ ∑ cp

283

Activity v ariance, Task A B C D E F G H I

σ = ( 2

Pessim.

- Optim. 2 ) 6

Optimistic Most Likely Pessimistic Variance 3 6 15 4 2 4 14 6 12 30 16 2 5 8 5 11 17 4 3 6 15 3 9 27 1 4 7 1 4 19 28 16

(Sum the variance along the critical 4. PPC & PERT/CPM path.)

2 σ ∑ = 41

284

p(t < D) TE = 54

D=53

Z =

D - TE

∑σ

2 cp

t

53 - 54 = = -.156 41

p(Z p(Z> .312) .312) == .378, .378, or or 37.8 37.8 % % (1-NORMSDIST(.312)) (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 4. PPC & PERT/CPM

Project Crashing The 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 anticipated The project has slipped considerably behind schedule There are contractual late penalties 4. PPC & PERT/CPM

290

Project Crashing Principal methods for crashing Improving existing resources’ productivity Changing work methods Increasing 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 4. PPC & PERT/CPM

291

Project Crashing Fully expedited (no expense is spared)

Crash Point Crashed

Cost Normal Point Normal

Crashed

Normal

Activity Duration

Time-Cost Trade-Offs for Crashing Activities 4. PPC & PERT/CPM

292

Project Crashing In 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 4. PPC & PERT/CPM

293

Example SUPPOSE: NORMAL ACTIVITY DURATION = 8 WEEKS NORMAL COST = Rs.14,000 CRASHED ACTIVITY DURATION = 5 WEEKS CRASHED COST = Rs.23,000 THE ACTIVITY COST SLOPE = 23,000 – 14,000 OR Rs.9,000 8–5

=

Rs. 3,000 per week

3

Cease crashing when the target completion time is reached the crash cost exceeds the penalty cost 4. PPC & PERT/CPM

294

Example Normal Activity Duration Cost (Rs) A 4 days 1,000 B 5 days 2,500 C 3 days 750 D 7 days 3,500 E 2 days 500 F 5 days 2,000 G 9 days 4,500

Crashed Duration Cost (Rs) 3 days 2,000 3 days 5,000 2 days 1,200 5 days 5,000 1 day 2,000 4 days 3,000 7 days 6,300

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

4. PPC & PERT/CPM

295

Example Activity A B C D E F G

Per Day Cost (Rs) 1,000 1,250 450 750 1,500 1,000 900

4. PPC & PERT/CPM

296

Resource Allocation Problem A 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.

4. PPC & PERT/CPM

297

Resource Allocation Problem Schedules 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?” 4. PPC & PERT/CPM

298

Resource Allocation Problem The 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 critical Resource Limited: The project must be finished as soon as possible, but without exceeding some specific level of resource usage or some general resource constraint

4. PPC & PERT/CPM

299

Resource Loading Resource 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 4. PPC & PERT/CPM

300

Resource Loading The 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.

4. PPC & PERT/CPM

301

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 4. PPC & PERT/CPM

302

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.

4. PPC & PERT/CPM

303

Resource Leveling Heuristics Prioritizing resource allocation include applying resources to activities: with the smallest amount of slack with the smallest duration that start earliest with the most successor tasks requiring the most resources

4. PPC & PERT/CPM

304

Resource Leveling Steps Create a project activity network diagram Create a table showing the resources required for each activity, durations, and the total float available Develop a time-phased resource loading table Identify any resource conflicts and begin to smooth the loading table using one or more heuristics

4. PPC & PERT/CPM

305

Resource Loading Chart Display the amount of resources required as a function of time. 4 B 5 Res = 2 0 A 4 Res = 6

5 D 9 Res = 7

9 E 11 Res = 3

1. Start with a network diagram 4 C 7 Res = 2 4. PPC & PERT/CPM

11 F 12 Res = 6

306

Resource Loading Charts Activity

A B C D E F

Resource

6 2 2 7 3 6

Duration

4 1 3 4 2 1

ES

Slack

LF

0 4 4 5 9 11

0 0 4 0 0 0

4 5 11 9 11 12

2. Produce a table that shows the duration, early start, late finish, slack, and resource(s) required for each activity. 4. PPC & PERT/CPM

307

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

Resources

8 6 4

A

D

B

2

E

C 2

4

F

Resource imbalance

6 8 10 12 Project Days 4. PPC & PERT/CPM

14 308

Resource Loading Charts 4. Rearrange activities within their slack to create a more level profile. Splitting C creates a more level project.

Resources

8 6 4

A

B

2 C 2

4

D

C

F

E 6 8 10 12 Project Days 4. PPC & PERT/CPM

14 309

Resource Loading Chart

4. PPC & PERT/CPM

310

Question Bowl

Which of the following are examples of Graphic Project Charts? a. Gantt b. Bar c. Milestone d. All of the above e. None of the above

Answer: d. All of the above 4. PPC & PERT/CPM

311

Question Bowl

Which of the following are one of the three organizational structures of projects? a. Pure b. Functional c. Matrix d. All of the above e.Answer: None of d. theAll above of the above 4. PPC & PERT/CPM

312

Question Bowl 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 e. None of the above

Answer: a. SOW (or Statement of Work) 4. PPC & PERT/CPM

313

Question Bowl

a. b. c. d. e.

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? Early start time Late start time Slack time All of the above None of the above

Answer: c. Slack time

4. PPC & PERT/CPM

314

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 permitted c. As much as the maximum activity time in the network d. As much as is necessary to add up to the total time of the project Answer: b. No slack time is permitted (All e. None of the above

critical path activities must have zero slack time, otherwise they would not be critical to the project completion time.) 4. PPC & PERT/CPM

315

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 time Answer: a. Crashing them c. Subtracting slack time (We “crash” the least-cost d. Adding project time activity times to seek a e. None of the above reduced total time for the entire project and we do it step-wise as inexpensively as possible.) 4. PPC & PERT/CPM

316

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 .

4. PPC & PERT/CPM

317

UNIVERSITY QUESTIONS …cont

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

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

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

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

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Write short notes on any three: a) Aggregate Planning b) Line Balancing c) Scheduling d) Critical Path Method. 4. PPC & PERT/CPM

318

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]

4. PPC & PERT/CPM

319

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]

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Write short notes (Any three) : a) Process.:-flow-chart. b) Control charts in Q.C. c) Spare- parts for maintenance. maintenance d) Despatching in Production Control.

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Distinguish between the following (any three) : a) Product and Services b) Routing and Scheduling. c) Statistical Quality Control and Statistical Process Control. d) Inspection and Quality Control. e) Method study and work measurement.

4. PPC & PERT/CPM

[14]

320

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)

4. PPC & PERT/CPM

321

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.

4. PPC & PERT/CPM

322

University Questions •

…contd

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

4. PPC & PERT/CPM

323