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Introduction to Production
Planning & Control (PPC)
Inputs from L C Jhamb
(especially chapter 5)
PPC - defined
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
Objectives of PPC
Produced to
order
Produced to
stock
OBJECTIVES
Demand Management
Qualitative Forecasting Methods
Simple & Weighted Moving Average Forecasts
Exponential Smoothing
Simple Linear Regression
Web-Based Forecasting
Demand Management
Independent Demand:
Finished Goods
Dependent Demand:
Raw Materials,
Component parts,
Sub-assemblies, etc.
C(2)
B(4)
D(2)
E(1)
D(3)
F(2)
Independent Demand:
What a firm can do to manage it?
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
Sales
x
x x
xx
x
x xx
x
x x
x
x
x
x
x
x
x
x
x
x
x
x
xxxx
x x
x
x
Year
4. PPC & PERT/CPM
x
x
x
x x
x
x
Linear
Linear
x
Trend
Trend
x
Qualitative Methods
Executive Judgment
Historical analogy
Grass Roots
Qualitative
Market Research
Methods
Delphi Method
Panel Consensus
15
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
A
+
A
+
A
+...+A
A
+
A
+
A
+...+A
t-1
t-2
t-3
t-t-nn
t-1
t-2
t-3
FFtt ==
nn
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
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
+
A
+
A
+...+A
A
+
A
+
A
+...+A
t-1
t-2
t-3
t-t-nn
t-1
t-2
t-3
FFtt ==
nn
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
Week
1
2
3
4
5
6
7
8
9
10
11
12
20
Plotting
Plottingthe
themoving
moving averages
averagesand
andcomparing
comparing
them
themshows
showshow
how the
thelines
linessmooth
smoothout
out to
to reveal
reveal
the
theoverall
overallupward
upwardtrend
trendin
inthis
this example
example
1000
Demand
900
Demand
800
3-Week
700
6-Week
600
500
1 2 3 4 5 6 7 8 9 10 11 12
Week
Note
Notehow
howthe
the
3-Week
3-Weekisis
smoother
smootherthan
than
the
theDemand,
Demand,
and
and6-Week
6-Weekisis
even
evensmoother
smoother
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
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
F6=(820+775+680
+655+620)/5
=710.00
710.00
666.00
FFtt == w
+ w A t-2 ++ w
+...+w A t-n
w11A
At-1
w33A
At-3
t-1 + w22 At-2
t-3 +...+wnn At-n
wwt ==weight
weightgiven
givento
totime
timeperiod
periodt
t
t
occurrence
occurrence(weights
(weightsmust
mustadd
addto
toone)
one)
4. PPC & PERT/CPM
nn
ww ==11
i=1
i=1
ii
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
periodt-1
t-1
4. PPC & PERT/CPM
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
Demand
820
775
680
655
4. PPC & PERT/CPM
Weights:
t-1 .7
t-2 .2
t-3 .1
Demand Forecast
820
775
680
655
672
F5 = (0.1)(755)+(0.2)(680)+(0.7)(655)= 672
4. PPC & PERT/CPM
FFtt == FFt-1
+
(A
F
)
+
(A
F
t-1
t-1
t-1
t-1
t-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
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
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
=0.10
=0.10 and
and =0.60?
=0.60?
Assume
Assume FF11=D
=D11
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.
Demand
900
800
Demand
700
0.1
600
0.6
500
1
Week
4. PPC & PERT/CPM
10
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
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
MAD
MAD ==
AA --FF
t=1
t=1
tt
tt
nn
Sales Forecast
220
n/a
250
255
210
205
300
320
325
315
4. PPC & PERT/CPM
Sales
220
250
210
300
325
40
nn
MAD
MAD==
AA --FF
t=1
t=1
tt
nn
tt
40
== 40 ==10
44 10
Note
Notethat
thatby
byitself,
itself,the
theMAD
MAD
only
onlylets
letsus
usknow
knowthe
themean
mean
error
errorin
inaaset
setof
offorecasts
forecasts
RSFE
RSFE Running
Running sum
sum of
of forecast
forecast errors
errors
TS
==
TS ==
MAD
Mean
MAD
Mean absolute
absolute deviation
deviation
4. PPC & PERT/CPM
Yt = a + bx
a
0 1 2 3 4 5
(Time)
Is
Isthe
thelinear
linearregression
regressionmodel
model
aa == yy-- bx
bx
-- n(y)(x)
xy
n(y)(x)
xy
bb ==
22
22
n(x))
xx -- n(x
Week
1
2
3
4
5
Sales
150
157
162
166
177
42
Answer:
Answer: First,
First, using
using the
the linear
linear regression
regressionformulas,
formulas, we
we
can
cancompute
computea
aand
andb
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
--5(162.4)(3)
63
xy--n(y)(x)
n(y)(x) 2499
2499
5(162.4)(3)
63= 6.3
bb==
=
=
10 = 6.3
22
22
55
5
(
9
)
x
n(x
)
55 5(9 )
10
x - n(x )
aa== yy--bx
==143.5
bx==162.4
162.4--(6.3)(3)
(6.3)(3)
143.5
4.
PPC & PERT/CPM
43
Yt = 143.5 + 6.3x
Sales
Web-Based Forecasting:
Steps in CPFR
1. Creation of a front-end partnership
agreement
2. Joint business planning
3. Development of demand forecasts
4. Sharing forecasts
5. Inventory replenishment
Question Bowl
Which of the following is a classification of a basic
type of forecasting?
a. Transportation method
b. Simulation
c. Linear programming
d. All of the above
e. None of the above
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
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
49
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
50
Question Bowl
Which of the following are reasons why the
Exponential Smoothing model has been a
a.
b.
c.
d.
e.
51
Question Bowl
a.
b.
c.
d.
e.
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. None of the above
53
Question Bowl
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
b. 75
Answer: b. 75 (Y=25+5(10)=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
56
57
OBJECTIVES
Sales and Operations Planning
The Aggregate Operations Plan
Examples: Chase and Level
strategies
Exhibit
Exhibit14.1
14.1
Process planning
Long
range
Intermediate Forecasting
& demand
range
management
Manufacturing
Services
Master scheduling
Material requirements planning
Short
range
Order scheduling
59
Medium-range planning
Short-range planning
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
Mar
Apr
May
Jun
Current
physical
capacity
Raw material
availability
Planning
for
production
Current
workforce
Inventory
levels
Market
demand
External
to firm
Economic
conditions
Activities
required
for
production
4. PPC & PERT/CPM
Internal
to firm
Chase
Level
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
Demand/mo
Jun
Jan
Feb
4500
5500
Productive hours/worker/day
6000
Paid straight hrs/day
22x8hrsxRs8=Rs1
Jan
408
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker
22
159.5
1063.33
1,408
Feb
19
137.75
918.33
1,216
Mar
Apr
May
7000
7.25
10000
8000
Mar
21
152.25
1015
1,344
7.25x0.15=48.33
&
Apr
May
Jun
84.33x22=1063.33
21
152.25
1015
1,344
7.25x2
2
22
159.5
1063.33
1,408
20
145
966.67
1,280
66
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
workforceisis77
workers.
workers.
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
Workforce
Ending inventory
Jan
22
159.5
1,063
1,408
Feb
19
137.75
918
1,216
Mar
21
152.25
1,015
1,344
Apr
21
152.25
1,015
1,344
May
22
159.5
1,063
1,408
Jun
20
145
967
1,280
Jan
4,500
250
4,250
3.997
Feb
5,500
Mar
7,000
Apr
10,000
May
8,000
Jun
6,000
5,500
5.989
2
7,000
6.897
1
10,000
9.852
3
8,000
7.524
6,000
6.207
2
8
0
1
7
0
3
4
0
6
7
0
0
4. PPC & PERT/CPM
10
0
Material
Labor
Hiring cost
Firing cost
Jan
4,500
250
4,250
3.997
3
4
0
Jan
21,250.00
5,627.59
Feb
5,500
Mar
7,000
Apr
10,000
May
8,000
Jun
6,000
5,500
5.989
2
7,000
6.897
1
10,000
9.852
3
8,000
7.524
6,000
6.207
2
8
0
1
7
0
6
0
7
0
10
0
Feb
27,500.00
7,282.76
400.00
Mar
35,000.00
9,268.97
200.00
Apr
50,000.00
13,241.38
600.00
750.00
May
Jun
40,000.00 30,000.00
10,593.10 7,944.83
500.00
250.00
Costs
203,750.00
53,958.62
1,200.00
1,500.00
260,408.62
Demand
Beg. inv.
Net req.
Workers
Production
Ending inventory
Surplus
Shortage
J an
4,500
250
4,250
6
6,380
2,130
2,130
Below
Below are
arethe
thecomplete
complete calculations
calculationsfor
for the
the remaining
remaining
months
monthsin
inthe
thesix
sixmonth
monthplanning
planninghorizon
horizon
Demand
Beg. inv.
Net req.
Workers
Production
Ending inventory
Surplus
Shortage
Jan
4,500
250
4,250
6
6,380
2,130
2,130
Feb
5,500
2,130
3,370
6
5,510
2,140
2,140
Mar
7,000
2,140
4,860
6
6,090
1,230
1,230
Apr
10,000
1,230
8,770
6
6,090
-2,680
May
8,000
-2,680
10,680
6
6,380
-1,300
Jun
6,000
-1,300
7,300
6
5,800
-1,500
2,680
1,300
1,500
Note,
Note, ifif we
we recalculate
recalculate this
this sheet
sheet with
with 77 workers
workers
we
we would
would have
have aa surplus
surplus
4. PPC & PERT/CPM
Below
Beloware
arethe
the complete
completecalculations
calculations for
forthe
theremaining
remaining
months
months in
in the
the six
six month
month planning
planning horizon
horizon with
with the
the
other
othercosts
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
Jun
6,000Note, total
Note, total
-1,620
costs under
7,300 costs under
6this
thisstrategy
strategy
5,800are less than
are less than
-1,500
2,680
1,300
Feb
Mar
Apr
7,296.00 8,064.00 8,064.00
27,550.00 30,450.00 30,450.00
2,140.00 1,230.00
3,350.00
May
8,448.00
31,900.00
Jun
7,680.00
29,000.00
1,625.00
1,875.00
Chase
Chaseat
at
1,500Rs260.408.62
Rs260.408.62
48,000.00 Labor
181,250.00 Material
5,500.00 Storage
6,850.00 Stockout
241,600.00
Question Bowl
a.
b.
c.
d.
e.
73
Question Bowl
a.
b.
c.
d.
e.
74
Question Bowl
Which of the following are considered relevant
a.
b.
c.
d.
e.
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
76
Question Bowl
a.
b.
c.
d.
e.
Answer: b. Yield
management
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
78
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
Finished
product
E(1
)
Component parts
Dependent
Demand
(Derived demand
items for
component
parts,
subassemblies,
raw materials,
4. PPC & PERT/CPM
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
C
Cuu
P
P
C
Coo C
Cuu
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 demand over estimated
Cu Cost per unit of demand under estimated
P Probability that the unit will be sold
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)
R = Reorder point
Q = Economic order quantity
L = Lead time
Time
L
3. When you reach down to
a level of inventory of R,
you place your next Q
sized order.
90
Holding
Costs
Annual Cost of
Items (DC)
Ordering Costs
QOPT
(Q)
4.Order
PPC Quantity
& PERT/CPM
Annual
Annual
Annual
Purchase + Ordering + Holding
Cost
Cost
Cost
D
Q
D
Q
TC
TC == DC
DC ++ SS++ H
H
Q
22
Q
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
2DS
2DS =
=
HH
We
Wealso
alsoneed
needaa
reorder
reorderpoint
pointto
to
tell
tellus
uswhen
whento
to
place
placean
anorder
order
2(Annual
2(AnnualDemand)(Order
Demand)(Orderor
orSetup
SetupCost)
Cost)
Annual
AnnualHolding
HoldingCost
Cost
__
Reorder
Reorder point,
point, R
R == ddLL
2DS
2DS =
=
H
H
2(1,000
2(1,000)(10)
)(10) = 89.443 units or 90 units
= 89.443 units or 90 units
2.50
2.50
1,000
units
//year
1,000
units
year = 2.74 units / day
dd ==
= 2.74 units / day
365
days
/
year
365 days / year
__
Reorder
Reorderpoint,
point, RR==dd LL==2.74units
2.74units//day
day(7days)
(7days)==19.18
19.18or
or 20
20units
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
10,000
units
//year
10,000
units
year = 27.397 units / day
dd==
= 27.397 units / day
365
days
/
year
365 days / year
__
R
R ==dd LL==27.397
27.397units
units//day
day(10
(10days)
days)==273.97
273.97or
or 274
274units
units
Place
Placean
anorder
orderfor
for366
366units.
units. When
Whenin
in the
thecourse
courseof
of
using
usingthe
theinventory
inventoryyou
you are
areleft
left with
with only
only274
274units,
units,
place
placethe
thenext
next order
orderof
of366
366units.
units.
4. PPC & PERT/CPM
II==current
currentinventory
inventorylevel
level(includes
(includesitems
itemson
onorder)
order)
4. PPC & PERT/CPM
T+T+LL ==
T+
L
T+L
i i 11
22
ddi
i
Since
Sinceeach
eachday
dayisisindependent
independentand
anddd isisconstant,
constant,
22
T+T+LL == (T
+
L)
(T + L)dd
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
(T
(T++ L)
L) ==
22
dd
30
30++10
10 44 == 25.298
25.298
22
Q OPT
2DS
2(Annual Demand)(Order or Setup Cost)
=
=
iC
Annual Holding Cost
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)
2DS
=
iC
2(10,000)(4)
= 2,020 units
0.02(0.98)
Total
annual
costs
So
So the
thecandidates
candidates
for
forthe
thepricepricebreaks
breaks are
are1826,
1826,
2500,
2500,and
and4000
4000
units
units
0
1826
2500 4. PPC
4000
Order Quantity
& PERT/CPM
D
Q
D
Q iC
TC
=
DC
+
S
+
TC = DC +
S+
iC
Q
2
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
Miscellaneous Systems:
Optional Replenishment System
Maximum Inventory Level, M
q=M-I
Actual Inventory Level, I
M
I
Miscellaneous Systems:
Bin Systems
Two-Bin System
Empty
One-Bin System
Order Enough to
Refill Bin
Periodic Check
Rupees invested
60
% of
Rs Value 30
profit potential
Use
30
A
B
60
stock-out penalties
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 provide
e. Answer:
All of the
above
a safeguard for variation in raw material delivery
time.)
4. PPC & PERT/CPM
113
Question Bowl
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
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. P-model
117
Question Bowl
a.
b.
c.
d.
e.
0)/10=316.2277)
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
119
Question Bowl
a.
b.
c.
d.
e.
120
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
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)
A Required
Order Placement
9
50
LT = 1 day
10
50
A Required
Order Placement
B Required
Order Placement
20
LT = 2
A
B(4)
D(2)
20
50
200
200
Spares
4x50=200
C(2)
E(1)
D(3)
F(2)
4. PPC & PERT/CPM
10
50
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
20
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
D(3)
F(2)
4. PPC & PERT/CPM
MPS
(Specific End Items)
4. PPC & PERT/CPM
Moderately Firm
Flexible
Exhibit
Exhibit15.5
15.5
Frozen
Flexible
Capacity
15
Weeks
4. PPC & PERT/CPM
26
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
control
4. PPC & PERT/CPM
The McGraw-Hill Companies, Inc.,
Subassemblies
Super BOM
Fractional options
Pegging
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)
D(5)
Requirements
Requirementsinclude
include95
95units
units(80
(80firm
firmorders
ordersand
and15
15forecast)
forecast)of
ofXX
in
inweek
week10
10
4. PPC & PERT/CPM
Day:
A(2)
ItIttakes
takes
22As
Asfor
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
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
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
Day:
X
LT=2
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
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
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
Day:
X
LT=2
A(2)
C(3)
ItIttakes
takes33
Cs
Csfor
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
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
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
Day:
X
LT=2
A(2)
C(3)
B(1)
C(2)
ItIttakes
takes22
Cs
Csfor
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
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
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
Day:
X
LT=2
A(2)
C(3)
B(1)
C(2)
D(5)
ItIttakes
takes55
Ds
Dsfor
foreach
each
BB
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
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
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
No
Feedback
Realistic?
Yes
Execute:
Capacity Plans
Material Plans
4. PPC & PERT/CPM
Feedback
manufacturing
marketing
finance
engineering
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. Allabove
of the above (Correct answer can also
e.Answer:
All of the
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 dont 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
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
150
Question Bowl
a.
b.
c.
d.
e.
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
152
Question Bowl
a.
b.
c.
d.
e.
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
154
155
OBJECTIVES
Process Analysis
Process Flowcharting
Types of Processes
Process Performance Metrics
157
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
How much
much
change
changeshould
shouldbe
be
given
givento
toaacustomer,
customer,
which
whichwrench
wrench should
should
be
be used,
used,etc.
etc.
Flowchart Symbols
Purpose and Examples
Storage areas or
queues
Examples:
Examples: Sheds,
Sheds,
lines
linesof
of people
peoplewaiting
waiting
for
for aaservice,
service,etc.
etc.
Flows of
materials or
customers
Examples:
Examples: Customers
Customers
moving
movingto
toaaseat,
seat,
mechanic
mechanicgetting
gettingaa
tool,
tool, etc.
etc.
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
Stage 3
Stage 2
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
Pacing
Refers to the fixed timing of the movement of
items through the process
4. PPC & PERT/CPM
Make-to-stock
Process activated to meet expected or
forecast demand
Customer orders are served from target
stocking level
4. PPC & PERT/CPM
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
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
173
Question Bowl
Which of the following are used as
symbols in a Process Flowchart?
a. Decision points
b. Blocking
Answer: a. Decision
c. Starving
points (A diamond
d. Bottleneck
e. All of the above shaped symbol.)
174
Question Bowl
Which type of process is configured as
follows?
a.
b.
c.
d.
e.
Single-stage process
Multi-stage process
Make-to-order process
Make-to-stock process
All of the above
175
Question Bowl
a.
b.
c.
d.
e.
Answer: c. Starving
4. PPC & PERT/CPM
176
Question Bowl
a.
b.
c.
d.
e.
177
Question Bowl
a.
b.
c.
d.
e.
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
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
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 customers environment
4. PPC & PERT/CPM
Internal
Services
Defined
Internal Supplier
Internal
Customer
External
Customer
Internal Supplier
4. PPC & PERT/CPM
Exhibit
Exhibit7.1
7.1
The Service
Strategy
The
Customer
The
Systems
4. PPC & PERT/CPM
The
People
Buffered
core (none)
Permeable
system (some)
Reactive
system (much)
Face-to-face
loose specs
Sales
Opportunity
Phone
Internet & Contact
on-site
Mail contacttechnology
Exhibit
Exhibit7.6
7.6
Low
Face-to-face
total
customization
Face-to-face
tight specs
Low
Production
Efficiency
High
4. PPC & PERT/CPM
Brush
shoes
30
secs
Total acceptable
execution time
5 minutes
Seen by
customer
Line of
visibility
Clean
shoes
Apply
polish
30
secs
Fail
point
Buff
Collect
payment
45
secs
15
secs
Wrong
color wax
45
secs
Not seen by
customer but
necessary to
performance
Materials
(e.g., polish, cloth)
Select and
purchase
supplies
Service Fail-safing
Poka-Yokes (A Proactive Approach)
Keeping a
mistake from
becoming a
service defect
Task
Treatment
How can we
fail-safe the
three Ts?
4. PPC & PERT/CPM
Tangibles
Have we
compromised
one of the
3 Ts?
1.
1. Task
Task
2.
2. Treatment
Treatment
3.
3. Tangible
Tangible
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
196
Question Bowl
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
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
199
Question Bowl
a.
b.
c.
d.
e.
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
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
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
203
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
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
Continuous
process
High-volume
manufacturing
Med-volume
manufacturing
Low-volume
manufacturing
What
Whatis
isthe
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?
Processing
Time (days)
4
7
3
1
No,
No,Jobs
JobsB,
B,C,
C,
and
andDDare
are
going
goingto
tobe
belate
late
What
Whatis
isthe
theSOT
SOTschedule?
schedule?
Processing
Time (days)
4
7
3
1
Due Date
(days hence)
5
10
6
4
Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?
Processing
Due Date Flow Time
Time (days) (days hence)
(days)
1
4
1
3
6
4
4
5
8
7
10
15
4. PPC & PERT/CPM
No,
No,Jobs
JobsAA
and
andBBare
are
going
goingto
tobe
be
late
late
Processing
Time (days)
4
7
3
1
Due Date
(days hence)
5
10
6
4
Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?
Processing
Due Date Flow Time
Time (days) (days hence)
(days)
1
4
1
4
5
5
3
6
8
7
10
15
4. PPC & PERT/CPM
No,
No,Jobs
JobsCC
and
andBBare
are
going
goingto
tobe
be
late
late
Processing
Time (days)
4
7
3
1
Due Date
(days hence)
5
10
6
4
Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?
No,
No,but
butsince
since
there
thereis
isthreethreeway
waytie,
tie,only
only
the
thefirst
firstjob
jobor
or
two
twowill
willbe
beon
on
time
time
What
Whatis
isthe
theLCFS
LCFSschedule?
schedule?
Processing
Time (days)
4
7
3
1
Due Date
(days hence)
5
10
6
4
Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?
Processing
Time (days)
1
3
7
4
No,
No,Jobs
JobsBB
and
andAAare
are
going
goingto
tobe
be
late
late
Time in Hours
Stage 1
Stage 2
1.50
1.25
2.00
3.00
2.50
2.00
1.00
2.00
Jobs
A
B
C
D
(Part 2)
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 &BPERT/CPM
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
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
Question Bowl
a.
b.
c.
d.
e.
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
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
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
e. Answer:
None of d.
theAll
above
of the above
4. PPC & PERT/CPM
230
Question Bowl
a.
b.
c.
d.
e.
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
e. None of the above
Answer: e. None of
the above (Correct
answer can is CR or
critical ratio.)
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
233
Question Bowl
a.
b.
c.
d.
e.
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
235
236
OBJECTIVES
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
239
Gantt Chart
Vertical
VerticalAxis:
Axis:
Always
AlwaysActivities
Activities
or
or Jobs
Jobs
Horizontal
Horizontalbars
barsused
usedtotodenote
denotelength
length
ofoftime
timefor
foreach
eachactivity
activityor
orjob.
job.
Activity 1
Activity 2
Activity 3
Activity 4
Activity 5
Activity 6
Time
Horizontal
HorizontalAxis:
Axis:Always
AlwaysTime
Time
Pure Project
A pure project is where a self-contained team
works full-time on the project
Functional Project
A functional project is housed within
a functional division
President
Research and
Development
Engineering
Manufacturing
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
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 managers
negotiating skills
Potential for sub-optimization
4. PPC & PERT/CPM
Project 1
Project 2
Task 1.1
Task 1.2
Subtask 1.1.1
Subtask 1.1.2
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
Important terms
Network
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
Dummy
activity
Activity time
Critical Path
The path that determines the duration / completion of the project, and
hence must the focus of attention. .
Slack
Float
254
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 Activity
oriented system
256
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
257
258
259
260
261
262
Problem 1.
Construct an arrow diagram for the following project.
Activities
Relationship
Precedes B,C
Precedes D,E
Precedes D
Precedes F
Precedes G
Precedes G
4. PPC & PERT/CPM
263
E
B
G
A
F
C
D
264
Problem 2.
Construct an arrow diagram for the following project.
Job
Immediate
predecessor
Duration
14 Days
3 Days
7 Days
4 Days
B,D
10 Days
265
E
10
14
Key
Job
Duration
266
Problem 3.
Construct an arrow diagram for the following project.
Job
Immediate predecessor
A,B
C,E
4. PPC & PERT/CPM
267
F
A
E
D
268
Problem 4.
Construct an arrow diagram for the following project.
Activity
Predecessor
A,B
B,C
4. PPC & PERT/CPM
269
A
B
C
270
Problem 5.
Construct an arrow diagram for the following project.
Activity
Predecessor
A,B
B,C
A,B,C
4. PPC & PERT/CPM
271
A
B
F
C
272
273
A
B
C
None
A
B
2
1
1
D
E
F
C
C
D,E
2
5
5
A(2)
B(1)
D(2)
C(1)
F(5)
E(5)
4. PPC & PERT/CPM
G(1)
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)
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
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
ES=4
EF=9
E(5)
LS=4
LF=9
F(5)
G(1)
LS=9
LF=14
LS=14
LF=15
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
Slack=(7-4)=(9-6)= 3 Wks
D(2)
LS=7
LF=9
ES=4
EF=9
E(5)
LS=4
LF=9
ES=9
EF=14
ES=14
EF=15
F(5)
G(1)
LS=9
LF=14
LS=14
LF=15
Duration=15 weeks
278
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
Likely
Time)
++ Pess.
Time
Opt.
Time
4(Most
Likely
Time)
Pess.
Time
Expected
ExpectedTime
Time ==
66
4. PPC & PERT/CPM
279
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
Likely
Time)
++ Pess.
Time
Opt.
Time
4(Most
Likely
Time)
Pess.
Time
Expected
ExpectedTime
Time ==
66
4. PPC & PERT/CPM
280
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
Likely
Time)
++ Pess.
Time
Opt.
Time
4(Most
Likely
Time)
Pess.
Time
Expected
ExpectedTime
Time ==
66
4. PPC & PERT/CPM
281
E(11)
H(4)
A(7)
D(5)
F(7)
I(18)
B
(5.333)
G(11)
4. PPC & PERT/CPM
282
p(t < D)
D=53
TE = 54
t
DD -- TTEE
ZZ ==
22
cpcp
283
Pessim.
-- Optim.
Pessim.
Optim.)22
Activity
variance,
=
(
Activity variance, = (
)
66
22
Task
A
B
C
D
E
F
G
H
I
22
41
== 41
284
p(t < D)
D=53
TE = 54
D
D -- TTEE 5353-54
54
ZZ ==
==
== -.156
-.156
22
41
41
cpcp
p(Z
p(Z <<-.156)
-.156) ==.438,
.438, or
or 43.8
43.8 %
% (NORMSDIST(-.156)
(NORMSDIST(-.156)
There
There isis aa 43.8%
43.8% probability
probability that
that this
this project
project will
will be
be
completed
weeks.
completed in
in less
less than
than4.53
53
weeks.
PPC & PERT/CPM
285
TE = 54
t
D=56
D
-- TTEE 56
--54
D
56
54
ZZ ==
=
== .312
.312
22 =
41
41
cp
cp
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
CPM Assumptions/Limitations
Project activities can be identified as entities
(There is a clear beginning and ending point
for each activity.)
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
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
85
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
295
Example
Activity
A
B
C
D
E
F
G
296
297
298
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 firms 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 managers responsibility to
ensure that the required resources, in the
required amounts, are available when and
where they are needed.
301
302
303
304
305
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
A
B
C
D
E
F
Resource
6
2
2
7
3
6
Duration
ES
Slack
LF
4
1
3
4
2
1
0
4
4
5
9
11
0
0
4
0
0
0
4
5
11
9
11
12
307
Resources
8
6
4
C
2
Resource
imbalance
6
8 10 12
Project Days
4. PPC & PERT/CPM
14
308
Resources
8
6
4
2
C
2
E
6
8 10 12
Project Days
4. PPC & PERT/CPM
14
309
310
Question Bowl
311
Question Bowl
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
313
Question Bowl
a.
b.
c.
d.
e.
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
e. Answer:
None of b.
the
above
No
slack time is permitted (All
315
Question Bowl
316
UNIVERSITY QUESTIONS
317
'Production, planning and control function involves balancing between Priority' (Demand) and
capacity (Resources)'. Discuss the statement.
Compare CPM and PERT method for project management. What do you understand by 'Network
crashing'?
Explain those functions of Production Planning & Control which enable a company to control cost
of Production & Capacity utilization.
318
UNIVERSITY QUESTIONScontd
319
UNIVERSITY QUESTIONScontd
[14]
320
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.
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.
322
University Questions
contd
323