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CH-407
Final Year Chemical Engineering
Department of Chemical Engineering
Reference Books:
• “Head First PMP: A Brain-Friendly Guide to Passing the
Project Management Professional Exam”,
Jennifer Greene, Andrew Stellman, O'Reilly Media, Inc.
• “Operations Management”, S. Anil Kumar, Kumar S.
Anil, Suresh N., N. Suresh
• “Project Management: A Systems Approach to Planning,
Scheduling, and Controlling”, Harold Kerzner
Industrial Organization & Management
Introduction
Organization
Distinct
Purpose
Deliberate
People
Structure
Industrial Organization & Management
Introduction
Organization:
An organization is a deliberate arrangement of
people to accomplish some specific purpose.
College
Universities
Hospitals
CNG Stations
Industrial Organization & Management
Introduction
Management Functions
The basic management functions that make up the management process are
described in the following sections:
Planning
Organizing
Staffing
Leading
Controlling
Industrial Organization & Management
Introduction
Top
Managers
First-line
managers /
Middle Managers
Top Manager
Responsible for making organization-wide
decisions and establishing policies and strategies
that affect the organization.
Vice Presidents, President, managing director,
Chief Operating officers, Chief Executive Officer
(CEO)
Industrial Organization & Management
Introduction
Skills needed at different management levels
Facilities:
• Fixed assets like building structures and inanimate resource
that support the operations of given activity.
• Facility put together with human and/or with material, energy
results in activity.
Example:
• (Production Facility)
• Health care, Education, Food, Commercial/Residential.
Chapter No. 1
FACILITY LOCATION AND LAYOUT
• Reason for New Facility??
The objective of location strategy is to maximize the benefits of location to the firm.
Chapter No. 1
FACILITY LOCATION AND LAYOUT
Factors Influencing Plant Location/Facility Location
• Facility location is the process of determining a geographic site for a firm’s operations.
• Managers of both service and manufacturing organizations must weigh many factors when
assessing the desirability of a particular site, including proximity to customers and suppliers,
labor costs, and transportation costs.
• Location conditions are hard to measure.
• It is appropriate to divide the factors, which influence the plant location or facility location on
the basis of the nature of the organization as:
• UNCONTROLLABLE FACTORS
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labor attitudes
12. Community Infrastructure.
Chapter No. 1
FACILITY LOCATION AND LAYOUT
LOCATION MODELS
Various models are available which help to identify the ideal location. Some of the popular
models are:
1. Factor rating method
2. Weighted factor rating method
3. Load-distance method
4. Centre of gravity method
5. Break-even analysis.
Problem 5: Potential locations X, Y and Z have the cost structures shown below. The ABC
company has a demand of 1,30,000 units of a new product. Three potential locations X, Y
and Z having following cost structures shown are available. Select which location is to be
selected and also identify the volume ranges where each location is suited?
LOCATION MODELS
5. Break-Even Analysis.
Example:
Example:
Solution:
Problem:
Problem:
PLANT LAYOUT
• Plant layout refers to the physical arrangement of production facilities.
• It is the configuration of departments, work centres and equipment in the
conversion process.
• It is a floor plan of the physical facilities, which are used in production.
• “Plant layout is a plan of an optimum arrangement of facilities including
personnel, operating equipment, storage space, material handling equipment
and all other supporting services along with the design of best structure to
contain all these facilities”. “Moore”
► Fixed-Position Layout
► Process-Oriented Layout
► Repetitive and Product-
Oriented Layout
Innovations at McDonald’s
Laboratories
Figure 9.3
Process-Oriented Layout
▶ Arrange work centers so as to minimize
the costs of material handling
▶ Basic cost elements are
▶ Number of loads (or people) moving
between centers
▶ Distance loads (or people) move between
centers
Process-Oriented Layout
n n
Minimize cost = åå X ijCij
i=1 j=1
Painting (2) 30 50 10 0
Receiving (4) 50 0
Shipping (5) 0
Testing (6)
Process Layout Example
Area A Area B Area C
40’
10
100
40’
50 100
Figure 9.11
Fixed-Position Layout
▶ Product remains in one place
▶ Workers and equipment come to site
▶ Complicating factors
▶ Limited space at site
▶ Different materials
required at different
stages of the project
▶ Volume of materials
needed is dynamic
PLANT LAYOUT
5. SERVICE LAYOUT
Project Management
Industrial Organization & Management
Project Management
What is a Project?
• A project is a temporary endeavour undertaken to create a unique product,
service, or result.
• The temporary nature of projects indicates a definite beginning and end.
• The end is reached when the project’s objectives have been achieved or when
the project is terminated because its objectives will not or cannot be met, or
when the need for the project no longer exists.
• Temporary does not necessarily mean short in duration.
• Temporary does not generally apply to the product, service, or result created by
the project; most projects are undertaken to create a lasting outcome.
• For example, a project to build a national monument will create a result
expected to last centuries.
• Projects can also have social, economic, and environmental impacts that far
outlast the projects themselves.
Industrial Organization & Management
Project Management
What is a Project?
• Every project creates a unique product, service, or result. Although repetitive
elements may be present in some project deliverables, this repetition does not
change the fundamental uniqueness of the project work.
• For example, office buildings are constructed with the same or similar materials
or by the same team, but each location is unique—with a different design,
different circumstances, different contractors, and so on.
A project can create:
• A product that can be either a component of another item or an end item in
itself,
• A capability to perform a service (e.g., a business function that supports
production or distribution), or
• A result such as an outcome or document (e.g., a research project that develops
knowledge that can be used to determine whether a trend is present or a new
process will benefit society).
Industrial Organization & Management
Project Management
Examples of projects include, but are not limited to:
• Developing a new product or service,
• Effecting a change in the structure, staffing, or style of an organization,
• Developing or acquiring a new or modified information system,
• Constructing a building or infrastructure, or
• Implementing a new business process or procedure.
Characteristics of a program
• Ongoing.
• Provides structure for project.
• Multiple projects, services and resources.
• A program can include a number of projects.
• Ex: A Construction Program might includes projects to develop new housing
and other projects to renovate existing homes.
Industrial Organization & Management
Project Management
Program management focuses on the project interdependencies and helps to
determine the optimal approach for managing them. Actions related to these
interdependencies may include:
• Resolving resource constraints and/or conflicts that affect multiple projects
within the program,
• Aligning organizational/strategic direction that affects project and program goals
and objectives, and
• Resolving issues and change management within a shared governance structure.
An example of a program is
A new communications satellite system with projects for design of the satellite and
the ground stations, the construction of each, the integration of the system, and the
launch of the satellite.
Industrial Organization & Management
Project Management
If a budget increase is not possible, the scope or targeted quality may be reduced to
deliver the project’s end result in less time within the same budget amount.
Project stakeholders may have differing ideas as to which factors are the most
important, creating an even greater challenge.
SCHEDULING
Routing planned work
Use of optimization techniques like Gantt
Use of Techniques like PERT/CPM
CONTROLLING
Tracking Progress
Compare actual with predicted
Analyzing impact
Make adjustments
Industrial Organization & Management
Project Management
Role of a Project Manager
The project manager is the person assigned by the performing organization to
achieve the project objectives.
The role of a project manager is distinct from a functional manager or
operations manager. Typically the functional manager is focused on providing
management oversight for an administrative area, and operations managers
are responsible for a facet of the core business.
Depending on the organizational structure, a project manager may report to a
functional manager.
Many of the tools and techniques for managing projects are specific to project
management. However, understanding and applying the knowledge, tools, and
techniques that are recognized as good practice is not sufficient for effective
project management.
Industrial Organization & Management
Project Management
Role of a Project Manager
1. Knowledge: This refers to what the project manager knows about project
management
2. Performances: This refers to what the project manager is able to do or
accomplish while applying their project management knowledge.
3. Personal: This refers to how the project manager behaves when performing the
project or related activity. Personal effectiveness encompasses attitudes, core
personality characteristics and leadership—the ability to guide the project team
while achieving project objectives and balancing the project constraints.
Industrial Organization & Management
Project Management
The Project Life Cycle “Overview”
A project life cycle is a collection of generally sequential and sometimes overlapping
project phases whose name and number are determined by the management and
control needs of the organization or organizations involved in the project, the nature
of the project itself, and its area of application.
Typical Cost and Staffing Levels across the Project Life Cycle
Industrial Organization & Management
Project Management
Project Management Techniques: PERT and CPM
Program Evaluation and Review Techniques (PERT):
A project Management Techniques that employs three times estimates for each
activity.
• Network techniques
• Developed in 1950’s
• CPM by DuPont for chemical plants (1957)
• PERT by Booz, Allen & Hamilton with the U.S. Navy, for Polaris missile (1958)
• Consider precedence relationships and interdependencies
• Each uses a different estimate of activity times
Industrial Organization & Management
Project Management
Project Management Techniques: PERT and CPM
Six Steps PERT & CPM
1. Define the project and prepare the work breakdown structure.
2. Develop relationships among the activities - decide which activities must
precede and which must follow others.
• After computing the ES, EF, LS, and LF times for all activities,
compute the slack or free time for each activity.
• Slack is the length of time an activity can be delayed without
delaying the entire project.
Slack = LS – ES or Slack = LF – EF
Industrial Organization & Management
Project Management Techniques: PERT and CPM
Determining the Project Schedule
Perform a Critical Path Analysis
Industrial Organization & Management
Project Management Techniques: PERT and CPM
ES/EF Network for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
ES/EF Network for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
ES/EF Network for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
ES/EF Network for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
LS/LF Time for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
LS/LF Time for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
LS/LF Time for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
LS/LF Time for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
LS/LF Time for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
Computing Slack Time
Industrial Organization & Management
Project Management Techniques: PERT and CPM
Critical path for Milwaukee Paper
Industrial Organization & Management
Project Management Techniques: PERT and CPM
Common PERT Network Sybolism
Industrial Organization & Management
Project Management Techniques: PERT and CPM
EXAMPLE:
Industrial Organization & Management
Project Management Techniques: PERT and CPM
EXAMPLE:
Industrial Organization & Management
Project Management Techniques: PERT and CPM
PERT Network is as follows:
Industrial Organization & Management
Project Management Techniques: PERT and CPM
1. What is the critical path for the small maintenance
project which consists of the following job activities?
Industrial Organization & Management
Project Management Techniques: PERT and CPM
2. What is the earliest project completion time for the
project listed below?
Industrial Organization & Management
Project Management Techniques: PERT and CPM
3. What is the critical path time for the following network?
Industrial Organization & Management
Project Management Techniques: PERT and CPM
4.
Industrial Organization & Management
Variability in Activity Times
CPM assumes we know a fixed time estimate for each
activity and there is no variability in activity times.
PERT uses a probability distribution for activity times to
allow for variability.
Project Crashing
It is not uncommon to face the following
situations:
The project is behind schedule
The completion time has been
moved forward
Shortening the duration of the project is
called project crashing
Industrial Organization & Management
Factors to Consider When Crashing A Project
The amount by which an activity
is crashed is, in fact, permissible.
Taken together, the shortened
activity durations will enable us
to finish the project by the due
date.
The total cost of crashing is as
small as possible
Industrial Organization & Management
Steps in Project Crashing
1.Compute the crash cost per time
period:
Management Engineering
Return on Aggregate Design
investment production completion
Capital plan
Change
production
Master production plan?
schedule
Figure 14.1
The Planning Process
Master production
schedule Change
master
Change production
requirements? Material schedule?
requirements plan
Change capacity?
Capacity
requirements plan
No Is capacity Is execution
Realistic? plan being meeting the
met? plan?
Yes
Execute capacity
plans
Execute
material plans
Figure 14.1
MPS Examples
For Nancy’s Specialty Foods
Table 14.1
Bills of Material
List of components, ingredients, and
materials needed to make product
Provides product structure
Items above given level are called
parents
Items below given level are called
children
Bill of materials
BOM Example
Level Product structure for “Awesome” (A)
0 A
Amp-booster
Amp-booster
1 2 3 4 5 6 7 8 Figure 14.4
Time in weeks
MRP Structure
Data Files Output Reports
MRP by period
BOM Master report
production schedule
MRP by date
report
Lead times
(Item master file) Planned order
report
Inventory data
Purchase advice
Material
requirement
planning
programs
(computer and Exception reports
Purchasing data software)
Order early or late or
not needed
Table 14.3
Net Requirements Plan
Net Requirements Plan
Determining Net Requirements
OK?
NO Priority Management Capacity Management
Figure 14.8
MRP in Services
Some services or service items are
directly linked to demand for other
services
These can be treated as dependent
demand services or items
Restaurants
Hospitals
Hotels
MRP in Services
(a) PRODUCT STRUCTURE TREE
Veal
picante
#10001 Chef;
Work
Center #1
Uncooked
Sauce Veal
linguini
#30006 #30005
#30004
Figure 14.10
In-Class Problems from the Lecture Guide
Practice Problems
Problem 1:
The Hunicut and Hallock Corporation makes two versions of the same basic file
cabinet, the TOL (Top-of-the-line) five drawer file cabinet and the HQ (High-
quality) five drawer filing cabinet.
The TOL and HQ use the same cabinet frame and locking mechanism. The
drawer assemblies are different although both use the same drawer frame
assembly. The drawer assemblies for the TOL cabinet use a sliding assembly
that requires four bearings per side whereas the HQ sliding assembly requires
only two bearings per side. (These bearings are identical for both cabinet
types.) 100 TOL and 300 HQ file cabinets need to be assembled in week #10.
No current stock exists.
Develop a material structure tree for the TOL and the HQ file cabinets.
In-Class Problems from the Lecture Guide
Practice Problems
In-Class Problems from the Lecture Guide
Practice Problems
Solve the product structure for Alpha in previous
problem, and the following lead times, quantity on
hand, master production schedule, prepare a net MRP
table for Alpha
In-Class Problems from the Lecture Guide
Practice Problems
CASE STUDIES
HILL’S AUTOMOTIVE INC
Industrial Organization & Management
CH-407
Final Year Chemical Engineering
Department of Chemical Engineering
• Continuous improvement
• Six Sigma
• Employee empowerment
• Benchmarking
• Just-in-time (JIT)
• Taguchi Concept
• Knowledge of TQM tools
Deming’s 14 points for Implementing
quality improvement
Industrial Organization & Management
• Traditional view:
– Quality cannot be improved without significant
losses in productivity.
• TQM view:
– Improved quality leads to improved productivity.
Industrial Organization & Management
Basic Tenets of TQM
Plan
Do
Act
Check
“Continuous”
improvement
Time
Industrial Organization & Management
Continuous Improvement
• Facilitator trains
& helps with
meetings
Bench Marking
Method Manpower
Tired Problem
Drill
Over
Slow Time
Too many
defects
Old
Wood
Steel Lathe
Material Machinery
Main Cause
Pareto Chart
• Vertical bar chart showing relative
importance of problems or defects
– Makes identifying & solving them easier
• Based on Pareto Principle
– Most effects have relatively few causes
– e.g., 80% of quality problems come from 20% of
machines, materials, or operators
• Focus on ‘vital few’ 20% causes
Cause
Process Chart
Produce Good
Start
Provide Service
No
Assign.
Take Sample Causes?
Yes
Inspect Sample
Stop Process
Create
Find Out Why
Control Chart
Control Chart Example
X UCL
80
60
40
20
0 LCL
11
1
9
Time
Inspection
Staff acquisition.
A number of questions arise when planning the
acquisition of project team members. For example,
whether the human resources come from within the
organization or from external, contracted sources;
whether the team members need to work in a central
location or may work from distant locations;
costs associated with each level of expertise needed
for the project; and level of assistance that the
organization’s human resource department and
functional managers are able to provide to the project
management team.
Industrial Organization & Management
Human Resource Management Plan
Resource calendars.
Calendars that identify the working days and shifts on which each
specific resource is available.
The staffing management plan describes necessary time frames for
project team members, either individually or collectively, as well as
when acquisition activities such as recruiting should start.
One tool for charting human resources is a resource histogram,
used by the project management team as a means of providing a
visual representation or resources allocation to all interested
parties. This chart illustrates the number of hours a person,
department, or entire project team that will be needed each week or
month over the course of the project.
The chart can include a horizontal line that represents the maximum
number of hours available from a particular resource. Bars that
extend beyond the maximum available hours identify the need for a
resource optimization strategy such as adding more resources or
modifying the schedule.
Resource Histogram
Industrial Organization & Management
Human Resource Management Plan
Training needs.
If it is expected that the team members to be
assigned will not have the required competencies,
a training plan can be developed as part of the
project.
The plan can also include ways to help team
members obtain certifications that would support
their ability to benefit the project.
Industrial Organization & Management
Human Resource Management Plan
Compliance.
The staffing management plan can include strategies
for complying with applicable government
regulations, union contracts, and other established
human resource policies.
Safety.
Policies and procedures that protect team members
from safety hazards can be included in the staffing
management plan as well as in the risk register.
Develop Project Team: Tools and
Techniques
Interpersonal Skills
Interpersonal skills, sometimes known as “soft skills,” are
behavioral competencies that include proficiencies such as
communication skills, emotional intelligence, conflict
resolution, negotiation, influence, team building, and group
facilitation.
These soft skills are valuable assets when developing the
project team. For example, the project management team
can use emotional intelligence to reduce tension and
increase cooperation by identifying, assessing, and
controlling the sentiments of project team members,
anticipating their actions, acknowledging their concerns,
and following up on their issues.
Develop Project Team: Tools and
Techniques
Training
Training includes all activities designed to enhance the competencies
of the project team members. Training can be formal or informal.
Examples of training methods include classroom, online, computer-
based, on-the-job training from another project team member,
mentoring, and coaching.
If project team members lack the necessary management or technical
skills, such skills can be developed as part of the project work.
Scheduled training takes place as stated in the human resource
management plan.
Unplanned training takes place as a result of observation,
conversation, and project performance appraisals conducted during
the controlling process of managing the project team.
Training costs could be included in the project budget, or supported by
performing organization if the added skills may be useful for future
projects. It could be performed by in-house or external trainers.
Develop Project Team: Tools and
Techniques
Team-Building Activities
As an ongoing process, team building is crucial to project
success. While team building is essential during the initial
stages of a project, it is a never-ending process.
Changes in a project environment are inevitable, and to
manage them effectively, a continued or a renewed team-
building effort should be applied. The project manager
should continually monitor team functionality and
performance to determine if any actions are needed to
prevent or correct various team problems.
Industrial Organization & Management
HRM Includes
Employment Issues
• Discrimination
• Equal Employment Opportunity
• Harassment
• Affirmative Action
• Diversity Management
• Occupational Health and Safety
• Industrial Relations
Industrial Organization & Management
Why is it Important?
• Staff are the largest revenue cost of any organization.
•Staff are a volatile resource, they can leave you any
time.
•Staff are a store of corporate knowledge and the means
of service delivery.
•Retaining and developing good staff allows you to use
skills and develop as a business.
•Individuals should contribute more than they cost.
•In the industry customer care critical and delivered by
staff as representatives.
Maintenance Management
Maintenance and Reliability
The objective of maintenance and
reliability is to maintain the capability
of the system while controlling costs
Maintenance is all activities involved in
keeping a system’s equipment in
working order
Reliability is the probability that a
machine will function properly for a
specified time
Important Tactics
Reliability
1. Improving individual components
2. Providing redundancy
Maintenance
1. Implementing or improving preventive
maintenance
2. Increasing repair capability or speed
Maintenance Strategy
Employee Involvement
Information sharing
Skill training
Reward system Results
Employee empowerment
Reduced inventory
Improved quality
Improved capacity
Reputation for quality
Maintenance and Reliability Continuous improvement
Procedures Reduced variability
Clean and lubricate
Monitor and adjust
Make minor repair
Keep computerized records
Reliability
Improving individual components
Rs = R 1 x R 2 x R 3 x … x R n
R1 R2 R3
1. Well-trained personnel
2. Adequate resources
3. Ability to establish repair plan and priorities
4. Ability and authority to do material planning
5. Ability to identify the cause of breakdowns
6. Ability to design ways to extend MTBF
Industrial Organization & Management
What is Maintenance?
• Maintenance is the actions associated with
equipment repair after it is broken.
• Maintenance involves actions taken to prevent a
device or component from failing or to repair
normal equipment degradation experienced
with the operation of the device to keep it in
proper working order.
Industrial Organization & Management
Equipment Malfunctions
• Equipment malfunctions have a direct
impact on:
• Production capacity
• Production costs
• Product and service quality
• Employee or customer safety
• Customer satisfaction
Industrial Organization & Management
Maintenance Departments
A maintenance manager typically is a
plant engineer who reports to a plant or
manufacturing manager
Maintenance departments are usually split into
two groups:
1. Buildings and Grounds
2. Equipment
Industrial Organization & Management
Types of Maintenance
1. Breakdown maintenance
It means that people waits until equipment fails and
repair it. Such a thing could be used when the
equipment failure does not significantly affect the
operation or production or generate any significant loss
other than repair cost.
Industrial Organization & Management
2. Preventive maintenance
It is a daily maintenance (cleaning, inspection, oiling
and re-tightening), design to retain the healthy
condition of equipment and prevent failure through
the prevention of deterioration, periodic inspection or
equipment condition diagnosis, to measure
deterioration. It is further divided into periodic
maintenance and predictive maintenance. Just like
human life is extended by preventive medicine, the
equipment service life can be prolonged by doing
preventive maintenance.
Industrial Organization & Management
i. Periodic maintenance ( Time based maintenance - TBM)
Time based maintenance consists of periodically inspecting,
servicing and cleaning equipment and replacing parts to prevent
sudden failure and process problems.
ii. Predictive maintenance
This is a method in which the service life of important part is
predicted based on inspection or diagnosis, in order to use the
parts to the limit of their service life. Compared to periodic
maintenance, predictive maintenance is condition based
maintenance. It manages trend values, by measuring and
analysing data about deterioration and employs a surveillance
system, designed to monitor conditions through an on-line system.
Industrial Organization & Management
3. Corrective maintenance
It improves equipment and its components so that
preventive maintenance can be carried out reliably.
Equipment with design weakness must be redesigned to
improve reliability or improving maintainability.
4. Maintenance prevention
It indicates the design of new equipment. Weakness of
current machines are sufficiently studied (on site
information leading to failure prevention, easier
maintenance and prevents of defects, safety
Industrial Organization & Management
and ease of manufacturing) and are incorporated before
commissioning a new equipment.
Based on a study, maintenance can be divided into
following types along with the usage ratio in the
industry
1) Reactive maintenance >55%
2) Preventive maintenance 31%
3) Predictive maintenance 12%
4) Others 2%
Industrial Organization & Management
REACTIVE MAINTENANCE
Run it till it breaks
Advantages
• Low cost.
• Less staff.
Disadvantages
• Increased cost due to unplanned downtime of
equipment.
• Increased labor cost, especially if overtime is needed.
Industrial Organization & Management
• Cost involved with repair or replacement of
equipment.
• Possible secondary equipment or process damage
from Equipment failure.
• Inefficient use of staff resources.
PREVENTIVE MAINTENANCE
Actions performed on a time- or machine-run-based
schedule that detect, prevent, or mitigate degradation of
a component or system with the aim of sustaining or
extending its useful life through controlling degradation
to an acceptable level
Industrial Organization & Management
Advantages
• Cost effective in many capital-intensive processes.
Flexibility allows for the adjustment of maintenance
periodicity.
• Increased component life cycle.
• Energy savings.
• Reduced equipment or process failure.
• Estimated 12% to 18% cost savings over reactive
maintenance program.
Industrial Organization & Management
Disadvantages
• Catastrophic failures still likely to occur.
• Includes performance of unneeded maintenance.
• Potential for incidental damage to components in
conducting unneeded maintenance.
Table C.1
Transportation Problem
Boston
Cleveland (200 units
(200 units required)
Des Moines required)
(100 units
capacity)
Albuquerque
(300 units
required) Evansville
(300 units
capacity)
Fort Lauderdale
(300 units
Figure C.1 capacity)
Transportation Matrix
Figure C.2
To Factory Des Moines
Albuquerque Boston Cleveland capacity capacity
From constraint
$5 $4 $3
Des Moines 100
Cell
representing a
$8 $4 $3 possible
Evansville 300 source-to-
destination
shipping
$9 $7 $5 assignment
Fort Lauderdale 300
(Evansville to
Cleveland)
Warehouse
requirement 300 200 200 700
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 200 100 300
$9 $7 $5
(F) Fort Lauderdale 100 200 300
Warehouse
requirement 300 200 200 700
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 300
$9 $7 $5
(F) Fort Lauderdale 300
Warehouse
requirement 300 200 200 700
First, $3 is the lowest cost cell so ship 100 units from Des Moines
to Cleveland and cross off the first row as Des Moines is satisfied
Figure C.4
Intuitive Lowest-Cost Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 100 300
$9 $7 $5
(F) Fort Lauderdale 300
Warehouse
requirement 300 200 200 700
Second, $3 is again the lowest cost cell so ship 100 units from
Evansville to Cleveland and cross off column C as Cleveland is
satisfied
Figure C.4
Intuitive Lowest-Cost Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 200 100 300
$9 $7 $5
(F) Fort Lauderdale 300
Warehouse
requirement 300 200 200 700
Third, $4 is the lowest cost cell so ship 200 units from Evansville to
Boston and cross off column B and row E as Evansville and Boston
are satisfied
Figure C.4
Intuitive Lowest-Cost Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 200 100 300
$9 $7 $5
(F) Fort Lauderdale 300 300
Warehouse
requirement 300 200 200 700
Figure C.4
Intuitive Lowest-Cost Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 200 100 300
$9 $7 $5
(F) Fort Lauderdale 300 300
Warehouse
requirement 300 200 200 700
This is Moines $5
a feasible solution, $4 $3
(D) Des 100 100
and an improvement over
the previous solution, but $8 $4 $3
necessarily the lowest 200
(E) Evansville
not 100 300
cost alternative $9 $7 $5
(F) Fort Lauderdale 300 300
Warehouse
requirement 300 200 200 700
$5 $4 $3
(D) Des Moines 100
- +
100 Des Moines-
(E) Evansville 200
$8
100
$4 $3
300 Boston index
+ -
(F) Fort Lauderdale
$9
100
$7
200
$5
300 = $4 - $5 + $8 - $4
Warehouse
requirement 300 200 200 700 = +$3
99 $5 1 $4
100
- +
+ -
201 $8 99 $4
Figure C.5 200 100
Stepping-Stone Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 Start $3
(D) Des Moines 100 100
- +
$8 $4 $3
(E) Evansville 200 100 300
+ -
$9 $7 $5
(F) Fort Lauderdale 100 200 300
+ -
Warehouse
requirement 300 200 200 700
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville Evansville-Cleveland
200 100 index 300
= $3 - $4$9+ $7 - $5
$7 = +$1 $5
(F) Fort Lauderdale 100 200 300
(Closed path = EC - EB + FB - FC)
Warehouse
requirement
Fort300
Lauderdale-Albuquerque
200 200 index
700
= $9 - $7 + $4 - $8 = -$1
(Closed path = FA - FB + EB - EA)
Stepping-Stone Method
1. If an improvement is possible, choose the
route (unused square) with the largest
negative improvement index
2. On the closed path for that route, select
the smallest number found in the squares
containing minus signs
3. Add this number to all squares on the
closed path with plus signs and subtract it
from all squares with a minus sign
Stepping-Stone Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 200 100 300
- +
$9 $7 $5
(F) Fort Lauderdale 100 200 300
+ -
Warehouse
requirement 300 200 200 700
1. Add 100 units on route FA
2. Subtract 100 from routes FB
3. Add 100 to route EB
Figure C.7 4. Subtract 100 from route EA
Stepping-Stone Method
To (A) (B) (C) Factory
From Albuquerque Boston Cleveland capacity
$5 $4 $3
(D) Des Moines 100 100
$8 $4 $3
(E) Evansville 100 200 300
$9 $7 $5
(F) Fort Lauderdale 100 200 300
Warehouse
requirement 300 200 200 700
$5 $4 $3 0
(D) Des Moines 250 250
$8 $4 $3 0
(E) Evansville 50 200 50 300
$9 $7 $5 0
(F) Fort Lauderdale 150 150 300
Warehouse
requirement 300 200 200 150 850
New
Figure C.9 Des Moines
capacity
Special Issues in Modeling
Degeneracy
To use the stepping-stone
methodology, the number of occupied
squares in any solution must be equal
to the number of rows in the table plus
the number of columns minus 1
If a solution does not satisfy this rule it
is called degenerate
Special Issues in Modeling
To Customer Customer Customer Warehouse
From 1 2 3 supply
$8 $2 $6
Warehouse 1 100 100
$10 $9 $9
Warehouse 2 0 100 20 120
$7 $10 $7
Warehouse 3 80 80
Customer
demand 100 100 100 300