Oprational Management (10me81)

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Operation Management
QUESTION BANK
1. Explain forecasting methods

2. Explain classification of inventory
3. Calculate a and b constants for the given no of births in previous years and cycles
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Year 1 2 3 4 5 6 7 8
No of births (*103) 40 48 66 78 92 105 125 140
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Cycles sold during the
30 32 40 52 79 79 90 100
year (* 102)
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6. The annual demand for the comp[any is 25,000 pcbs and each costing of pc bios
Rs 1000/- and ordering cost is of Rs 200/- and inventory cost is Rs 100/-.Calculate
Equivalent order quantity, no of order, duration of order, total annual cost of the
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inventory and total cost.
7. Calculate the forecasting for the month January and February from the given
below table
Month Jan Feb Mar April May June July August Sept Oct Nov Dec
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X Sales
90 111 99 89 87 54 104 102 95 114 103 113
in unit
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8. Explain classification of production systems

9. Define productivity and explain factors affecting productivity
10. With a neat sketch explain break even analysis concept
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11. Explain graphical linear analysis

12. the company old fashioned berry pies ltd have fixed cost of 3000/week and
variable cost of 60cents /pie and total sales revenue is of £1.60 lakh calculate the net
profit for £ 12.000 that the bakery should produce 15,000 pies /week
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13. The turner X and Y in a company produces 400 job/day and that no of defective
jobs is 40 find the jobs which are defective, Produced by turner Y, Defective and
produced by turner X
14. Explain historical approach of operation management
15. Using SES technique determine the forecast for period 2 through 12 for which the
actual figures are given below. Assume that the first period forecast is equal to actual
demand in that period given α=0.2
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Period 1 2 3 4 5 6 7 8 9 10 11 12
Actual
200 211 190 198 210 230 195 200 215 198 200 212
Demand
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16. Write a note on classification on forecasting methods
17. A manufacturer of children’s cycle believes that the demand for the cycle is
Year
1
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correlated to the birth of babies in the area during the previous year
No of Births in the
previous year
40,000
Cycles sold during
the year
3,000
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2 48,000 3,200
3 66,000 4,000
4 78,000 5,200
5 92,000 7,900
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6 1,05000 7,900
7 1,25000 9,000
8 1,40,000 1,0000
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Compute the probable sales of cycles in the 9 year given the no of births in the
previous year as 1, 66, 000
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18. List and explain classification of Inventory
19. What is material management and explain the major elements of Material
Management
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20. A television company uses 25,000 pcbs per year, each costing Rs 1000/-, it costs Rs
200/- for placing an order and the inventory costs is Rs 100/- per unit per year.
1. How many pcbs should be ordered at a time for maximum economy
2. How many orders should be placed per year
3. What is the duration between each order
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4. What is the total annual costs associated with inventory
21. The table below gives the sales record of a firm. Using regression analysis forecast
the sales in the month of January and February next year
Month Jan Feb Mar April May June July Aug Sept Oct Nov Dec
Sales in 90 111 99 89 87 84 104 102 95 114 103 113
units
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CHAPTER 1
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Operations Management
Introduction to Operations Management
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Create operational systems.
Manage (plan, organize, staff, direct and control) the activities relating to the
production of goods and/or services with maximum efficiency (at the lowest
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cost) and effectiveness (in the eyes of the customer). Improve those processes
continuously to create competitive advantage.
The Operations System
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The operations system transforms inputs into desired goods and services.
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Operations Management ~ The Context
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Types of Conversions
Physical
Chemical
Locational
Educational
Entertained
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Competitive Priorities for the Operational Function
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Price or Cost
Quality Short Run: Conformance, Design
Long Run: Continuous Improvement Thru the Learning Organization
- Dependability
Speed of Delivery io
Flexibility Product Mix: make various
Time
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(Lead Time)
Speed to Market (New Product Development Time)
Service Delivering a comprehensive solution – products & augmenting
services – to the customer’s needs
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Theory of Slack Ropes

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Interfunctional Strategies
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Where does price fit in this scenario?
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Process Choice, Design, & Analysis
Operational Design components

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People… following
Process and Procedures… applying
Technologies and Resources
Drivers of design choice
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Characteristics of the Product

Characteristics of Demand
Competitive Priorities driven by corporate strategic analysis
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No one best way to deliver a product.

Congruence about design elements is key.
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Process-Product Matrix
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Significant Developments
Division of Labor io
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Standardized Parts
Scientific Management
Time and Motion Study
Efficiency Improvement
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Wage Incentives
Assembly Lines
Motivation and Behavioral Issues
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Operations Research
Computers and Information Technology
– Computer Aided Design (CAD)
– Computer Aided Manufacture (CAM)
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– Computer Integrated Manufacture (CIM)

Flexible Manufacturing Systems (FMS)
Cellular Manufacturing
JIT, Lean Manufacturing
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Total Quality Management, Six Sigma

Mass Customization
The management of systems or processes that create goods and/or provide

services.
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Value-Added: The difference between the cost of inputs and the value or price of
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outputs.
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Production of Goods vs Delivery of Services
Production of goods results in a tangible output.

Government (federal, state, local).
Wholesale/retail (clothing, food, appliances, stationery, toys, etc.).
Financial services (banking, stock brokerages, insurance, etc.).
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Health care (doctors, dentists, hospitals, etc.).
Personal services (laundry, dry cleaning, hair/beauty, gardening, etc.).
Business services (data processing, e-business, delivery, employment
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agencies, etc.). Education (schools, colleges, etc.)
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Differences Between Goods & Service

Degree of customer contact.
Uniformity of input.
Labor content of jobs.
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Uniformity of output.
Measurement of productivity.
Production and delivery.
Quality assurance.
Amount of inventory.
Evaluation of work.
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Ability to patent design.
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CHAPTER 2
Operations Management models Decision making
Operations Management and Decision Making
Models
Quantitative Approaches
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Analysis of Trade-Offs
Systems Approach
Establishing Priorities (Pareto phenomenon)
n.
Ethics
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The Historical Evolution of OM
The Industrial Revolution

Craft production
Scientific Management
Mass production
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Interchangeable parts
Division of labor
The Human Relations Movement
n.
Theory X and Theory Y
Theory Z
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Trends in Business
The Internet, e-commerce, and e-business.

Management of technology.
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Globalization.
Management of supply chains.
Outsourcing.
Agility.
Ethical behavior.
Operations strategy.
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Working with fewer resources.
Revenue management.
Process analysis and improvement, and quality improvement.
n.
Increased regulation and product liability issues.
Lean production
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Competitiveness
• Identifying consumer wants and/or needs is a basic input in an

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organization’s decision making process, and central to competitiveness.

• Pricing is usually a key factor in consumer buying decisions.
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• Advertising and promotion are ways organizations can inform potential

customers about features of their products or services, and attract buyers.
• Product and service design
• Cost
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• Location
• Quality
• Quick response
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• Flexibility
Why Some Organizations Fail
Putting too much emphasis on short-term financial performance at the

expense of research and development.
Failing to take advantage of strengths and opportunities, and/or failing to
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recognize competitive threats.
Neglecting operations strategy.
Strategy
n.
Mission: Live a good life.
Goal: Successful career, good income.
Strategy: Obtain a college education.
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Tactics: Select a college and a major; decide how to finance college.
Operations: Register, buy books, take courses, study.
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Low cost. Outsource operations to third-world countries that have low labor
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costs.
Scale-based strategies. Use capital-intensive methods to achieve high output
volume and low unit costs.
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Specialization. Focus on narrow product lines or limited service to achieve

higher quality.
Flexible operations. Focus on quick response and/or customization.
High quality. Focus on achieving higher quality than competitors.
Service. Focus on various aspects of service (e.g., helpful, courteous,
reliable, etc.).
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Economic conditions. These include the general health and direction of the
economy, inflation and deflation, interest rates, tax laws, and tariffs.
Political conditions. These include favorable or unfavorable attitudes toward
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business, political stability or instability, and wars.
Legal environment. This includes antitrust laws, government regulations, trade
restrictions, minimum wage laws, product liability laws and recent court
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experience, labor laws, and patents.
Technology. This can include the rate at which product innovations are occurring,
current and future process technology (equipment, materials handling), and design
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technology.
Competition. This includes the number and strength of competitors, the basis of
competition (price, quality, special features), and the ease of market entry.
Markets. This includes size, location, brand loyalties, ease of entry, potential for
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growth, long-term stability, and demographics.

Human resources. These include the skills and abilities of managers and workers;
special talents (creativity, designing, problem solving); loyalty to the
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organization; expertise; dedication; and experience.

Facilities and equipment. Capacities, location, age, and cost to maintain or replace
can have a significant impact on operations.
Financial resources. Cash flow, access to additional funding, existing debt burden,
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and cost of capital are important considerations.

Customers. Loyalty, existing relationships, and understanding of wants and needs
are important.
Products and services. These include existing products and services, and the
potential for new products and services.
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Technology. This includes existing technology, the ability to integrate new

technology, and the probable impact of technology on current and future
operations.
Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility, and
service are typical considerations.
Other. Other factors include patents, labor relations, company or product
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image, distribution channels, relationships with distributors, maintenance
of facilities and equipment, access to resources, and access to markets.
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Operations Strategy
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Strategic OM Decision Areas

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Productivity
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Chapter 3
MPS, RCCP, MRP, CRP, & ERP
Manufacturing Resource Planning
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Core MRP
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Aggregate Versus Detailed Forecasts (Review)

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Use aggregate forecasts for planning medium-range overall production

levels.
High long-range forecast accuracy Detail not needed for planning long-
range resource use (labor, inventory, etc.)
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Use detailed forecasts for initial detailed short-range Master Production

Schedule (MPS) Detailed forecasts reasonably accurate for this time frame
Need product-specific detail for MPS
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Master Production Schedule

From The Aggregate Plan To The MPS
• Suppose that Export TVs, Inc. has the following production plan for
the next six months:
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Month J F M A M J
TVS 12000 12000 15000 15000 15000 18000
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• If they make three models, the MPS for January might look like:
MPS 1-Jan 8-Jan 15-Jan 22-Jan
31” 2000 1000 0 1000
Planning Horizon
33”
36”
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0
1000
1000
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3000
2000
0
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The Master Production Schedule
An MPS starts with a forecast and a beginning inventory balance.
Period 1 2 3 4 5 6
Product X
Forecast 5 10 8 5 6 8
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Projected Available Balance 20
Net Requirements
MPS
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Planned Order Release
Period 1 2 3 4 5 6
Product Y
Forecast
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7 2 10 13 5 5
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Net Requirements
MPS

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• Inventory is projected forward until a shortage, or “net requirement,”

occurs
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Period 1 2 3 4 5 6
Product X
Forecast 5 10 8 5 6 8
Projected Available Balance 20 15 5
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Net Requirements 3
MPS
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Period 1 2 3 4 5 6
Product Y
Forecast 7 2 10 13 5 5
Net Requirements
MPS
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• Production is scheduled to be completed (the MPS is a planned finish

time) to cover the shortfall
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Period 1 2 3 4 5 6
Product X
Forecast 5 10 8 5 6 8
Net Requirements
MPS
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Projected Available Balance 20 15 5 5
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Period 1 2 3 4 5 6
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Product Y
Forecast 7 2 10 13 5 5

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Net Requirements
MPS

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• A planned start time – the “planned order release” is determined based

on lead time (here it is one period)
Period 1 2 3 4 5 6
Product X
Forecast 5 10 8 5 6 8
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Net Requirements 3
MPS 8
Planned Order Release 8
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Period 1 2 3 4 5 6
Product Y
Forecast
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7 2 10 13 5 5
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Net Requirements
MPS
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• The process continues until the product is scheduled
Period 1 2 3 4 5 6
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Product X
Forecast 5 10 8 5 6 8
Projected Available Balance 20 15 5 5 0 8 0
Net Requirements 3 6
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MPS 8 14
Planned Order Release 8 14
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Period 1 2 3 4 5 6
Product Y
Forecast 7 2 10 13 5 5
Net Requirements
MPS
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• The other product is scheduled the same way
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Period 1 2 3 4 5 6
Product X
Forecast 5 10 8 5 6 8
Net Requirements io
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0 8
6
0
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MPS 8 14
Period 1 2 3 4 5 6
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Product Y
Forecast 7 2 10 13 5 5

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MPS 20 10

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• To check the feasibility of the MPS, we need to check the capacity

requirements
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Period 1 2 3 4 5 6
Product X
Forecast 5 10 8 5 6 8
MPS 8 14
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Period 1 2 3 4 5 6
Product Y
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Forecast 7 2 10 13 5 5
MPS 20 10
THE "ROUGH-CUT" ROUTING io

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Product Workcenter CLH/Setup DLH/Unit
X W1 10 1.00
W2 0 0.70
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Y W1 5 0.75

X W1 10 1.00
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W2 0 0.70
Y W1 5 0.75
Period 1 2 3 4 5 6
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Product X-planned Order Release 0 8 0 14 0 0

Product Y-planned Order Release 0 20 0 10 0 0
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Period
Workcentre Part 1 2 3 4 5 6
W1 X 0 18 0 24 0 0
Y 0 20 0 12.5 0 0
Total 0 38 0 36.5 0 0
W2 X 0 5.6 0 9.8 0 0
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Total 0 43.6 0 46.3 0 0
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Chapter 4- Material Requirements Planning
Master Schedule
o Master schedule: One of three primary inputs in MRP; states which end
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items are to be produced, when these are needed, and in what quantities.
o Cumulative lead time: The sum of the lead times that sequential
phases of a process require, from ordering of parts or raw materials to
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completion of final assembly.
Bill-of-Materials
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Bill of materials: One of the three primary inputs of MRP; a listing of
all of the raw materials, parts, subassemblies, and assemblies needed to
produce one unit of a product.
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• Product structure tree: Visual depiction of the requirements in a bill
of materials, where all components are listed by levels.
• BOM's show how parts are combined to create product
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Representation may be graphical or “indented text”
Low-level Coding
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Determines order of MRP calculations

• Each BOM level is assigned a number
• Products are at level 0
• Each part is assigned the number of the lowest level at
which it appears in any BOM
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• Calculate plans for level 0 first, then level 1, etc. . . .
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X Y LEVEL 0
A B (2) A LEVEL 1
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A LEVEL 2
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Inventory Records
Inventory Records: One of the three primary inputs of MRP; includes
information on the status of each item by time period
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Accuracy: is extremely important in that accuracy will determine the
success of the production runs.
Vertical Linkage Of MRP Records

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• Objective: find material plans [planned order releases] for all parts
• Data requirements
MPS
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BOMs
Inventory records file
• Gross requirements are ultimately derived from MPS
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– But in calculations, the gross requirements for a part depend only on

the planned order releases of the parent parts
MRP Processing
Gross requirements (demand)
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Schedule receipts (open orders)

Projected on hand
Net requirements
Planned-order receipts
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Planned-order releases
MRP Outputs
Planned orders - schedule indicating the amount and timing of future
orders.
Order releases - Authorization for the execution of planned orders.
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Changes - revisions of due dates or order quantities, or cancellations of
orders.
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The MRP Record
Objective is to determine future purchasing or production schedule for
component part Gross Requirements – demand for part
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Scheduled Receipts – planned completion times for batches of

parts which have been already ordered
Period 1 2 3 4 5 6
Gross Requirements 10 0 30 10 20 25
Scheduled Receipts 30
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Net Requirements 0 0 0
Planned Order Receipts 0 0 0
Planned Order Release 0 0 0
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Planned Order Receipt – planned completion times for batches of parts which
have not yet been ordered Planned Order Release– planned start times for
batches of parts which have not yet been ordered
Period 1 2 3 4 5 6
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Net Requirements 0 0 0 5 0 20
Planned Order Receipts 0 0 0 30 0 30
Planned Order Release 0 30 0 0 0 0
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• During Period 1:
– 10 units are disbursed
Gross Requirements
Scheduled Receipts io Period 2
30
3
30
4
10
5
20
6
25
7
5
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– The scheduled receipt is completed

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Period 2 3 4 5 6 7
Scheduled Receipts
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– The planned order release is released
Period 2 3 4 5 6 7
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MRP Example
–Start with MPS for products X and Y
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Product X: LT=1
Period 1 2 3 4 5 6
Master Production Schedule 8 14
Product Y: LT=1
Period
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Planned Order Release 0
1
8
2
0
3
14
4
0
5
0
6
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Planned order releases for X serve as basis for gross requirements for part B
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Product X: LT=1
Period 1 2 3 4 5 6
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Part B: LT=1; EOQ=25

Period 1 2 3 4 5 6
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Part B’s record is then completed

Period 1 2 3 4 5 6
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Scheduled Receipts
Planned Order Releases 0 0 0 0 0 0
Part A’s gross requirements depend on planned order releases for X, Y, and B
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Product X: LT=1
Period 1 2 3 4 5 6
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Product Y: LT=1
Period 1 2 3 4 5 6

Period
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0
2
0
3
25
4
0
5
0
6
0
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Part A: LT=1; EOQ=40
Period 1 2 3 4 5 6
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Part A’s record is then completed
Part A: LT=1; EOQ=40

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Period 1 2 3 4 5 6
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Planned Order Releases 0 0 40 0 0 0
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MRP Planning
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Benefits of MRP
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Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
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Means of allocating production time
Requirements of MRP
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Computer and necessary software

Accurate and up-to-date
Master schedules
Bills of materials
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Inventory records
MRP II
Expanded MRP with and emphasis placed on integration
Financial planning
Marketing
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Engineering
Purchasing
Manufacturing
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Capacity Requirements Planning
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• Capacity requirements planning: The process of determining short-
range capacity requirements.
• Load reports: Department or work center reports that compare known and
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expected future capacity requirements with projected capacity availability.

• Time fences: Series of time intervals during which order changes are
allowed or restricted.
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• Should be used as a final check on the MPS More accurate than RCCP
May be too expensive for routine "what-if" analysis
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• Determine incremental run times and setup times for each part in each
workcenter
• Apply incremental run times and setup times from (1) to planned order
releases to determine capacity requirements per period for each
workcenter
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The Routing
The routing for a product or part lists
• Where it is processed
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• Resources needed
−Per batch or per setup
−Per unit after workcenter is setup
Product
X
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Workcenter
W1
W2
Operation #
10
20
CLH/Setup
10
0
DLH/Unit
1.0
0.50
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Y W1 10 5 0.75
B W2 10 0 0.20
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The routing is applied to the planned order releases to obtain the capacity plan
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Product Workcenter Operation # CLH/Setup DLH/Unit

X W1 10 10 1.0
W2 20 0 0.50
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Y W1 10 5 0.75
B W2 10 0 0.20
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Period 1 2 3 4 5 6
Planned Order Release -Product X 0 8 0 14 0 0
Planned Order Release -Product Y 0 20 0 10 0 0
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Planned Order Release – Part B 0 0 25 0 0 0
W1 Capacity Required – Product X 0 18 0 24 0 0
W1 Capacity Required – Product Y 0 20 0 12.5 0 0
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W1 Capacity Required 0 38 0 36.5 0 0
W2 Capacity Required – Product X 0 4 0 7 0 0
W2 Capacity Required – Part B 0 0 5 0 0 0
W2 Capacity Required
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Total Capacity Required
0
0
4
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5
5 43.5
7 0
0
0
0
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Other Considerations
Safety Stock
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Lot sizing
• Lot-for-lot ordering
• Economic order quantity
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• Fixed-period ordering
• Part-period model
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Enterprise Resource Planning
Enterprise resource planning (ERP): An expanded effort to integrate

standardized recordkeeping that will permit information sharing throughout
the organization
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Enterprise resource planning
n.
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Kanban
Where did this come from and what is it?

Japanese word for “signal” or page 700
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Team Exercises
THE ROUGH-CUT PLAN
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The routing is applied to the planned order releases to obtain the capacity plan

X W1 10 1.0
W2 0 0.70
in
Y W1 5 0.75
Period 1 2 3 4 5 6
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Product X-planned Order Release 0 15 0 46 0 0
Product Y-planned Order Release 0 0 37 0 15 0
Workcentre io Part 1 2 3
Period
4 5 6
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W1 X
Y
Total
W2 X
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Total
The MRP Record

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Complete the following MRP Record and indicate in the record that the next
order has been released but not received.
Economic Order Quantity = ???
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Period 1 2 3 4 5 6
Scheduled Receipts
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Net Requirements
Planned Order Receipts
Planned Order Releases
MRP Exercise
Product X: LT = 3
Product Y: LT = 3
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Part A: LT = 1; EOQ = 40
Part B: LT = 1; EOQ = 25
Master Production Schedule
n.
Period 1 2 3 4 5 6
Product X 0 10 5
Product Y 0 30 10
Part A 70
Part B
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Beginning
Balance
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CRP Exercise
Using your answers form the MRP Exercise determine the CRP using the
figures below.
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Part Workcenter Operation # DLH/Setup DLH/Unit

X W1 10 10 1.00
W2 20 0 0.50
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Y W1 10 5 0.75
B W2 10 0 0.20
Period 1 2 3 4 5 6
Planned Order Release -Product X
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Planned Order Release -Product Y

Planned Order Release – Part B
W1 Capacity Required – Product X
W1 Capacity Required – Product Y
W2 Capacity Required – Product X
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W2 Capacity Required – Part B

Total Capacity Required
Further concepts in MRP, ERP and DRP
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Overview
n.
• Global Company Profile: Wheeled Coach
• Dependent Demand
• Dependent Inventory Model Requirements Master Production
Schedule Bills of Material Accurate Inventory Records Purchase
•
•
MRP Structure
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Orders Outstanding Lead Times for Components
MRP Management MRP Dynamics MRP and JIT

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• Lot-Sizing Techniques
• Extensions of MRP Material Requirements Planning II (MRP II)
Closed-Loop MRP
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Capacity Planning
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• MRP In Services Distribution

Resource Planning (DRP)
• Enterprise Resource Planning
(ERP) oAdvantages and
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Disadvantages of ERP Systems

ERP in the Service Sector
• MRP Structure
• MRP Management oMRP
Dynamics oMRP and JIT
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• Lot-Sizing Techniques
• Extensions of MRP oMaterial
Requirements Planning II (MRP
II) Closed-Loop MRP Capacity
Planning
• MRP In Services Distribution
in
Resource Planning (DRP)
• Enterprise Resource Planning
(ERP) Advantages and
n.
Learning Objectives
io
When you complete this chapter you should be able to:
1. Develop a product structure
ut
2. Build a gross requirements plan
3. Build a net requirements plan
4. Determine lot sizes for lot-for-lot, EOQ, and PPB
5. Describe MRP II
ol
6. Describe closed-loop MRP

7. Describe ERP
us
Wheeled Coach
• Largest manufacturer of ambulances in the world

• International competitor
vt
• 12 major ambulance designs o18,000 different inventory items

6,000 manufactured parts 12,000 purchased parts
• Four Key Tasks Material plan must meet both the requirements of
the master schedule and the capabilities of the production facility
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Plan must be executed as designed Minimize inventory

investment Maintain excellent record integrity
Benefits of MRP
1. Better response to customer orders
2. Faster response to market changes
in
3. Improved utilization of facilities and labor
4. Reduced inventory levels
n.
Dependent Demand
1. The demand for one item is related to the demand for another item
2. Given a quantity for the end item, the demand for all parts and
io
components can be calculated
3. In general, used whenever a schedule can be established for an item
4. MRP is the common technique
ut
Effective use of dependent demand inventory models requires the following
1. Master production schedule
2. Specifications or bill of material
ol
3. Inventory availability
4. Purchase orders outstanding
5. Lead times
us
Master Production Schedule (MPS)

• Specifies what is to be made and when
• Must be in accordance with the aggregate production plan
vt
• Inputs from financial plans, customer demand, engineering, supplier

performance
• As the process moves from planning to execution, each step must be
tested for feasibility
• The MPS is the result of the production planning process
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• MPS is established in terms of specific products

• Schedule must be followed for a reasonable length of time
• The MPS is quite often fixed or frozen in the near term part of the plan
• The MPS is a rolling schedule
• The MPS is a statement of what is to be produced, not a forecast of
demand
in
The Planning Process
n.
io
ut
ol
Aggregate Production Plan

us
vt
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Master Production Schedule (MPS)
Can be expressed in any of the following terms:

• A customer order in a job shop (make-to-order) company
• Modules in a repetitive (assemble-to-order or forecast) company
• An end item in a continuous (stock-to-forecast) company
in
Focus for Different Process Strategies
n.
io
ut
ol
MPS Example
us
For Nancy’s Specialty Foods

vt
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Bills of Material
• List of components, ingredients, and materials needed to make product
• Provides product structure Items above given level are called parents Items
in
below given level are called children
Bills of Material Example
n.
io
ut
ol
us
vt
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Bills of Material
• Modular Bills oModules are not final products but components that can be
assembled into multiple end items Can significantly simplify planning and
scheduling
in
• Planning Bills (Pseudo Bills) Created to assign an artificial parent to the BOM
Used to group subassemblies to reduce the number of items planned and
scheduled
n.
o Used to create standard “kits” for production
• Phantom Bills Describe subassemblies that exist only temporarily Are part of
another assembly and never go into inventory
• Low-Level Coding
io
o Item is coded at the lowest level
at which it occurs oBOMs are
ut
processed one level at a time
Accurate Records
ol
• Accurate inventory records are absolutely required for MRP (or any
dependent demand system) to operate correctly
• Generally MRP systems require 99% accuracy
us
• Outstanding purchase orders must accurately reflect quantities and

scheduled receipts
vt
Lead Times
•The time required to purchase, produce, or assemble an item For

production – the sum of the order, wait, move, setup, store, and run
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times oFor purchased items – the time between the recognition of a

need and the availability of the item for production
Time-Phased Product Structure
in
n.
io
ut
ol
MRP Structure
us
vt
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Determining Gross Requirements
• Starts with a production schedule for the end item – 50 units of Item A
in week 8
• Using the lead time for the item, determine the week in which the order
in
should be released – a 1 week lead time means the order for 50 units
should be released in week 7
• This step is often called “lead time offset” or “time phasing”
n.
• From the BOM, every Item A requires 2 Item Bs – 100 Item Bs are
required in week 7 to satisfy the order release for Item A
• The lead time for the Item B is 2 weeks – release an order for 100 units
•
of Item B in week 5
io
The timing and quantity for component requirements are determined
by the order release of the parent(s)
ut
• The process continues through the entire BOM one level at a time –
often called “explosion”
• By processing the BOM by level, items with multiple parents are only
processed once, saving time and resources and reducing confusion
ol
• Low-level coding ensures that each item appears at only one level in
the BOM
Gross Requirements Plan
us
vt
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Net Requirements Plants
in
n.
io
ut
ol
us
vt
Determining Net Requirements
• Starts with a production schedule for the end item – 50 units of Item A
in week 8
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• Because there are 10 Item As on hand, only 40 are actually required –

(net requirement) = (gross requirement - on- hand inventory)
• The planned order receipt for Item A in week 8 is 40 units – 40 = 50 -10
• Following the lead time offset procedure, the planned order release for
Item A is now 40 units in week 7
• The gross requirement for Item B is now 80 units in week 7
in
• There are 15 units of Item B on hand, so the net requirement is 65 units
in week 7
• A planned order receipt of 65 units in week 7 generates a planned
n.
order release of 65 units in week 5
• A planned order receipt of 65 units in week 7 generates a planned
order release of 65 units in week 5
•
• io
The on-hand inventory record for Item B is updated to reflect the use
of the 15 items in inventory and shows no on-hand inventory in week 8
This is referred to as the Gross-to-Net calculation and is the third basic
ut
function of the MRP process
ol
Net Requirements Plan
The logic of net requirements

us
vt
Gross Requirements Schedule
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in
n.
MRP Planning Sheet
io
ut
ol
us
Safety Stock
• BOMs, inventory records, purchase and production quantities may not
be perfect
vt
• Consideration of safety stock may be prudent

• Should be minimized and ultimately eliminated
• Typically built into projected on-hand inventory
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MRP Management
• MRP is a dynamic system
• Facilitates replanning when changes occur
• System nervousness can result from too many changes
• Time fences put limits on replanning
• Pegging links each item to its parent allowing effective analysis of
in
changes
MRP and JIT
n.
• MRP is a planning system that does not do detailed scheduling
• MRP requires fixed lead times which might actually vary with batch
size
•
io
JIT excels at rapidly moving small batches of material through the
system
ut
Finite Capacity Scheduling
• MRP systems do not consider capacity during normal planning cycles
• Finite capacity scheduling (FCS) recognizes actual capacity limits
• By merging MRP and FCS, a finite schedule is created with feasible
ol
capacities which facilitates rapid material movement
Small Bucket Approach

us
1. MRP “buckets” are reduced to daily or hourly oThe most common

planning period (time bucket) for MRP systems is weekly
2. Planned receipts are used internally to sequence production
3. Inventory is moved through the plant on a JIT basis
vt
4. Completed products are moved to finished goods inventory which

reduces required quantities for subsequent planned orders
5. Back flushing based on the BOM is used to deduct inventory that was
used in production
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Balanced Flow
• Used in repetitive operations
• MRP plans are executed using JIT techniques based on “pull”
principles
• Flows are carefully balanced with small lot sizes
in
Supermarket
• Items used by many products are held in a common area often called a
n.
supermarket
• Items are withdrawn as needed
• Inventory is maintained using JIT systems and procedures
•
io
Common items are not planned by the MRP system
ut
Lot-Sizing Techniques
• Lot-for-lot techniques order just what is required for production based
on net requirements May not always be feasible If setup costs are high,
lot-for-lot can be expensive
ol
• Economic order quantity (EOQ)EOQ expects a known constant

demand and MRP systems often deal with unknown and variable
demand
us
• Part Period Balancing (PPB) looks at future orders to determine most

economic lot size
• The Wagner-Whitin algorithm is a complex dynamic programming
technique Assumes a finite time horizon Effective, but computationally
vt
burdensome
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Lot-for-Lot Example
1 2 3 4 5 6 7 8 9 10
Gross requirements 35 30 40 0 10 40 30 0 30 55
Scheduled receipts
Projected on hand 35 35 0 0 0 0 0 0 0 0 0
in
Net requirements 0 30 40 0 10 40 30 0 30 55
Planned order receipts 30 40 10 40 30 30 55
Planned order releases 30 40 10 40 30 30 55
n.
Holding cost = $1/week; Setup cost = $100;
Lead time = 1 week
Total holding cost = $0

io
No on-hand inventory is carried through the system
There are seven setups for this item in this plan

ut
Total setup cost = 7 x $100 = $700
EOQ Lot Size Example

ol
1 2 3 4 5 6 7 8 9 10
us
Scheduled receipts
Planned order receipts 73 73 73 73
vt
Planned order releases 73 73 73 73
Holding cost = $1/week; Setup cost = $100; Lead time

= 1 week Average weekly gross requirements = 27;
EOQ = 73 units
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Annual demand = 1,404

Total cost = setup cost + holding cost
Total cost = (1,404/73) x $100 + (73/2) x ($1 x 52 weeks)
Total cost = $3,798
Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) = $730
in
PPB Example
n.
1 2 3 4 5 6 7 8 9 10
Scheduled receipts
Projected on hand
Net requirements
Planned order receipts
35
io
ut
Planned order releases
Holding cost = $1/week; Setup cost = $100; Lead time = 1 week EPP = 100 units
ol
us
vt
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in
n.
PPB Example io
ut
1 2 3 4 5 6 7 8 9 10
Scheduled receipts
ol
Planned order receipts 80 100 55
us
Planned order releases 80 100 55
Holding cost = $1/week; Setup cost = $100; Lead time = 1 week EPP = 100 units
Lot-Sizing Summary
vt
For these three examples
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Wagner-Whitin would have yielded a plan with a total cost of $455
• In theory, lot sizes should be recomputed whenever there is a lot size or

order quantity change
• In practice, this results in system nervousness and instability
• Lot-for-lot should be used when low-cost JIT can be achieved
in
• Lot sizes can be modified to allow for scrap, process constraints, and
purchase lots
• Use lot-sizing with care as it can cause considerable distortion of
n.
requirements at lower levels of the BOM
• When setup costs are significant and demand is reasonably smooth, PPB,
Wagner-Whitin, or EOQ should give reasonable results
Extensions of MRP
• io
Closed-Loop MRP oMRP system provides input to the
ut
capacity plan, MPS, and production planning process
• Capacity Planning oMRP system generates a load report
which details capacity requirements oThis is used to drive
the capacity planning process oChanges pass back through
ol
the MRP system for rescheduling
Material Requirements Planning II

us
• Once an MRP system is in place, inventory data can be augmented by

other useful information oLabor hours oMaterial costs oCapital costs
oVirtually any resource
• System is generally called MRP II or Material Resource Planning
vt
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in
n.
Closed-Loop MRP System
io
ut
ol
us
vt
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in
n.
io
ut
ol
us
vt
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Resource Requirements Profile
in
n.
io
ut
It is also possible to split lots 6 and 11 and move them earlier in the schedule.
This would avoid any potential problems with late orders but would increase
inventory holding cost.
ol
Smoothing Tactics
1. Overlapping Sends part of the work to following operations
us
before the entire lot is complete Reduces lead time

2. Operations splitting Sends the lot to two different machines for
the same operation Shorter throughput time but increased
setup costs
3. Order or lot splitting Breaking up the order into smaller lots
vt
and running part ahead of schedule
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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
in
Hotels
Smoothing Tactics
n.
(a) Product Structure Tree
io
ut
ol
us
MRP in Services
(b) Bill of Materials

vt
Part Description Quantity Unit of Unit cost

Number Measure
10001 Veal picante 1 Serving —
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20002 Cooked linguini 1 Serving —

20003 Prepared veal 1 Serving —
and sauce
20004 Spinach 0.1 Bag 0.94
30004 Uncooked linguini 0.5 Pound —
30005 Veal 1 Serving 2.15
in
30006 Sauce 1 Serving 0.80
(c) Bill of Labor for Veal Picante
n.
Work Center Operation Labor Type Labor Hours
Setup Time Run Time
1
2
3 io
Assemble dish
Cook linguini
Cook veal & sauce
Chef
Helper one
Assistant Chef
.0069
.0005
.0125
.0041
.0022
.0500
ut
Distribution Resource Planning (DRP)
Using dependent demand techniques through the
ol
supply chain Expected demand or sales
forecasts become gross requirements
Minimum levels of inventory to meet customer service levels
us
Accurate lead times

Definition of the distribution structure
Enterprise Resource Planning (ERP)

• An extension of the MRP system to tie in customers and
vt
suppliers
1. Allows automation and integration of many business processes
2. Shares common data bases and business practices
3. Produces information in real time
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• Coordinates business from supplier evaluation to customer invoicing

• ERP modules include
1. Basic MRP
2. Finance
3. Human resources
4. Supply chain management (SCM)
in
5. Customer relationship management (CRM)
ERP and MRP
n.
io
ut
ol
us
vt
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in
n.
io
ut
ol
us
vt
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n.
io
ut
ol
us
vt
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n.
io
ut
Enterprise Resource Planning (ERP)
• ERP can be highly customized to meet specific business requirements
• Enterprise application integration software (EAI) allows ERP systems
ol
to be integrated with oWarehouse management oLogistics oElectronic

catalogs oQuality management
• ERP systems have the potential to
us
• Reduce transaction costs

• Increase the speed and accuracy of information
• Facilitates a strategic emphasis on JIT systems and integration
vt
Advantages of ERP Systems

1. Provides integration of the supply chain, production, and
administration
2. Creates commonality of databases
3. Can incorporate improved best processes
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4. Increases communication and collaboration between business units and

sites
5. Has an off-the-shelf software database
6. May provide a strategic advantage
in
1. Is very expensive to purchase and even more so to customize
2. Implementation may require major changes in the company and its
processes
n.
3. Is so complex that many companies cannot adjust to it
4. Involves an ongoing, possibly never completed, process for
implementation
io
5. Expertise is limited with ongoing staffing problems
SAP’s ERP Modules

ut
ol
us
vt
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ERP systems have been developed for health care, government, retail
stores, hotels, and financial services
Also called efficient consumer response (ECR) systems
Objective is to tie sales to buying, inventory, logistics, and production
in
n.
io
ut
ol
us
vt
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Chapter 5-
Overview of Operations Planning
Overview
Production-Planning Hierarchy
in
Aggregate Planning
Master Production Scheduling
Types of Production-Planning and Control Systems
n.
Wrap-Up: What World-Class Companies Do
Production Planning Hierarchy
io
ut
ol
us
vt
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Production Planning: Units of Measure
in
n.
io
ut
ol
us
vt
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Capacity Planning, Aggregate Planning, Master Schedule, and Short-Term

Scheduling
in
n.
io
ut
Relationships Between OM Elements
ol
us
vt
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in
n.
io
ut
ol
us
vt
Why Aggregate Planning Is Necessary
• Fully load facilities and minimize overloading and underloading

• Make sure enough capacity available to satisfy expected demand
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• Plan for the orderly and systematic change of production capacity to meet the
peaks and valleys of expected customer demand
• Get the most output for the amount of resources available
Inputs
in
A forecast of aggregate demand covering the selected planning horizon (6-18
months)
The alternative means available to adjust short- to medium-term capacity, to
what extent each alternative could impact capacity and the related costs
n.
The current status of the system in terms of workforce level, inventory level and
production rate
Outputs
io
A production plan: aggregate decisions for each period in the planning horizon
ut
about Projected costs if the production plan was implemented
Medium-Term Capacity Adjustments

ol
Workforce level
Hire or layoff full-time workers
Hire or layoff part-time workers
us
Hire or layoff contract workers

Utilization of the work force
Overtime
Idle time (undertime)
vt
Reduce hours worked

Inventory level
Finished goods inventory
Backorders/lost sales
Subcontract
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Comparison of Aggregate Planning Methods
Method Advantages Limitations
Graphical • Simple, easy to use and understand • Many solutions; solution need not
be optimal
Linear Provides optimal solution • Mathematical functions must be
in
Programming •• Popular in many industries linear, and deterministic -- not
• Sensitivity & dual analysis provide useful necessarily a realistic assumption
information
•
n.
Sensitivity & dual analysis provide
• useful information Constraints

readily added
Linear •• Provide optimal solution Incorporates some non-standard

Decision
Rules
io
Handle non-deterministic demand costs
•• Skilled personal required
• Quadratic model not always

ut
realistic
• Values of variables are

unconstrained
ol
• Feasible solution is optimal if it
exists - not guaranteed
Management •• Simple, easy to use and understand •• Solution need not be optimal
us
Coefficients Attempts to duplicate manager’s decision- • Assumes past decisions are good
Model • making process Built on individual’s invalidate
Simplest, least disruptive, easiest to model
implement
vt
Simulation • Places no restrictions on mathematical •• No optimal solution guaranteed

structure or cost functions Can Often a long, costly, process
• test many relationships
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Pure Strategies for the Informal Approach
Matching Demand
Level Capacity
Buffering with inventory
Buffering with backlog
in
Buffering with overtime or subcontracting
Matching Demand Strategy
n.
Capacity (Production) in each time period is varied to exactly match the
forecasted aggregate demand in that time period
io
Capacity is varied by changing the workforce level
Finished-goods inventories are minimal
Labor and materials costs tend to be high due to the frequent changes
ut
Developing and Evaluating the Matching Production Plan
Production rate is dictated by the forecasted aggregate demand

ol
Convert the forecasted aggregate demand into the required workforce level
using production time information
The primary costs of this strategy are the costs of changing workforce levels
us
from period to period, i.e., hirings and layoffs
Level Capacity Strategy
Capacity (production rate) is held level (constant) over the planning horizon
vt
The difference between the constant production rate and the demand rate is
made up (buffered) by inventory, backlog, overtime, part-time labor and/or
subcontracting
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Developing and Evaluating the Level Production Plan
Assume that the amount produced each period is constant, no hirings or layoffs
The gap between the amount planned to be produced and the forecasted demand
is filled with either inventory or backorders, i.e., no overtime, no idle time, no
subcontracting
The primary costs of this strategy are inventory carrying and backlogging costs
in
Period-ending inventories or backlogs are determined using the inventory
balance equation:
n.
Aggregate Planning Example
io
A small manufacturing company with 200 employees produces umbrellas. The
company produces the following three product lines: 1) the Executive Line, 2) the
Durable Line and 3) the Compact line, as shown in the below
ut
ol
us
vt
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Aggregate Planning Example: Demand for Executive Umbrellas
10000
10000
8000
8000 7000
5500 6000
6000
4500
in
4000
2000
0
n.
Jan Feb Mar Apr May Jun
Number of working days:
Jan: 22
Feb: 19
Mar: 21
Apr: 21
May: 22
io
ut
Jun: 20
Aggregate Planning Example: Cost Information for Executive Umbrellas
Materials $5.00 /unit

ol
Holding costs $1.00 /unit/month
Marginal cost of stockout $1.25 /unit/month

us
Hiring & training cost $200.00 /worker
Layoff costs $250.00 /worker
Labor hours required 0.15 hrs/unit
Straight time labor cost $8.00 /hr

vt
Beginning inventory 250 units
Productive hours 7.25 hrs/worker/day
Paid straight hours 8 hrs/day
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Beginning # of workers 7 workers
Aggregate Planning Example:
Determining Straight Labor Costs and Output for Executive Umbrellas
in
n.
io
ut
Aggregate Planning Example - Chase Strategy for Executive Umbrellas
ol
• Objective: Adjust workforce level so as to
eliminate the need to carry inventory from
period to period
us
• 4,500 units is the demand in January (any

combination of firm orders and forecast
• 250 is the starting inventory position
• 4,250 = 4,500 – 250
vt
• 3.997 = 4,250 / 1,063.33

• 7 = workforce level at the beginning of
January
• 3 = 7 – 4 = workers fired
• 4 = workforce level at end of January
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Chase Strategy
Jan Feb Mar Apr May Jun
Demand 4,500 5,500 7,000 10,000 8,000 6,000

Beginning inventory 250 0 0 0 0 0
in
Net requirements 4,250 5,500 7,000 10,000 8,000 6,000
Beginning # of workers 7 4 6 7 10 8
Required workers 4 6 7 10 8 6
n.
Workforce adjustment -3 2 1 3 -2 -1
Production quantity 4,250 5,500 7,000 10,000 8,000 6,000
Ending inventory 0 0 0 0 0 0
io
ut
ol
us
vt
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Chapter – 6: LEAN SYSTEMS
The recent globalization of businesses has resulted in highly demanding customers. This
has created intense pressure on companies to meet and exceed customers’ expectations
more effectively and efficiently than their competitors, and still remain profitable to
in
survive and grow. We know that profit is a sales price minus cost. If companies believe
that the sales price of their product/service is broadly determined by the customers (or
market), then the only option to make profit is to reduce costs. However, the key
n.
ingredients of cost such as labour, material, etc are roughly comparable among all the
competitors aiming for a market. Hence, the excess cost that sabotages the prospects of a
company amidst competitors is due to the production method employed.
io
The Two Types of Production Systems:
1. Push production system –The system is based on sales forecasts. It relies upon batch
ut
production and holds finished goods inventory to respond to customers’ needs. This
system consumes a lot of space, involves high costs of overheads and wastes, and
invites risks of obsolescence.
• Demand forecasts are prepared using past data and available information about the
ol
future, and a multi-period schedule of sales forecast/plan is prepared. These

forecasts are compared with finished goods inventory available and a Master
Production Schedule (MPS) is developed. An MPS, and the outputs of MRP and
us
CRP, provide the basis for detailed schedules for all work-stations (to procure raw
materials or make items).
• Each work-station produces as per MPS. Queues and in-process/finished goods
inventory are a part of the system. MPS pushes forward the product through
vt
subsequent stages of manufacture and assembly regardless of sales. Hence the

name PUSH system
• A lot of planning is required in a push system to coordinate production of a large
number of parts (say, as in an automobile). Traditionally, large inventories of parts
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are maintained at all these stages to safeguard against the lapses in coordination
(Just In Case system)
• This approach involves guessing customer demand, duration for completing the
job, etc.
which, if goes wrong, results in excess or shortage of inventory. If the quality of
forecasts is good, Push system produces just right quantities of products at right
in
time
2. Pull production system - produces and moves one piece at a time, with production
volume, pace and mix derived from customer demand. This system aims for total
n.
elimination of different wastes, and full utilization of material, labour and equipment,
thus leading to lower production cost. This system is popular as Toyota Production
System (TPS)
•
io
Pull system works opposite to that of Push system. In Push system, the MPS
pushes the product down the production line (regardless of sales). In Pull system,
the customer demand pulls the product from upstream production line
ut
• It is an attempt to move the discrete units of solid products through the production
line in much the same way as liquid/gas flows in a continuous process industry,
although it is an ideal. The objective here is to achieve a flow of one-piece at a
time from one process to the next, that too when the next process asks for it (Just-
ol
In-Time concept). In effect, the batch quantity to be one. This system effectively
facilitates the journey towards the ultimate goals of a production system namely,
zero waste, lowest possible cost, shortest lead time and defect-free production
us
• This is what the Toyota Production System (TPS) has demonstrated to the world.
The system was earlier referred to as JIT system. Of late, together with many
more improvements, it is known as Lean system
vt
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Toyota Production System:
in
The primary goal of TPS house is the Simultaneous achievement of Highest quality
(perfection..!), Lowest cost and Shortest lead time. All issues relating to Quality, Cost
and Lead time are addressed through two powerful weapons namely JIT and Jidoka. They
n.
are also called as two pillars of TPS House.
• JIT consists of three main parts. They are known as JIT purchasing, JIT
manufacturing and JIT delivery. The aim of JIT is to produce and deliver finished
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goods just in time to be sold, subassemblies just in time to be assembled into
finished goods, fabricated parts just in time to go into final assemblies, and
purchase materials just in time to be transformed into fabricated parts.
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Each company has its own level of JIT, which also undergoes improvement over time
(monthly, weekly, daily or even hourly). Tighter JIT system spawns plenty of benefits
to the company. JIT approach creates a pull system, and kanban (signboard, card,
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chit, e-signal, message, etc.) constitutes an essential element in maintaining this pull
system.
• Jidoka or Autonomation (Intelligent Automation) aims to prevent defective items
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being passed onto next workstation. Humans make mistakes. But machines can be
designed to eliminate many of them.Devices namely Poka yoke (fool-proofing)
are mounted on machines for automatic shut-off and to notify the supervisor when
either the machine has completed its task or something abnormal (breakdown,
vt
defect production, tool ware-out,etc.) has happened in the production process.

With this system, in a single worker can supervise as many as 20-30 machines
simultaneously. These devices are used both in component production as well as
in automated assembly lines.
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In manual assembly (the most common mode) lines, every worker has the right (and
also obligation) to stop the production line when a problem is identified or even
suspected at his workstation. This helps fixing the problem at the source before a
defective is produced. Visual controls aid Jidoka (Target v/s actual production,
Yellow light to call for help, and Red light for line stop)
Foundation of TPS House is built with Heijunka, Standardization of components and
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work methods, and Kaizen.
• Heijunka - Consistency in volume, variety and sequence of items produced in a
given time period (say, daily). In other words, a leveled production schedule for a
n.
mix of products so that each product is available in some quantity all the time
• Standardization of components and methods - Use of value analysis, method study
and work measurement help to arrive at best design of products and work
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procedures which are standardized, so that every workers’ job is done in a
consistent and repeatable manner, and in tune with takt time
Kaizen implies Continuous improvement effort. Everyone in the company
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constantly strives to improve the system through his/her effort to eliminate Muri
(anything excess than necessary), Muda (any type of waste) and Mura (any
unevenness).Muda (non-value added) exists everywhere and the customer is not
willing to pay for it. Kaizen aims to eliminate all types of wastes (eg. transport,
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inventory, motion, waiting, overproduction, over processing and defects, etc.).

This calls for questioning all the assumptions behind the present way of
processing and striving to perfect them
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Stability - The Philosophy (the Guiding principles) that has provided the much needed
stability to TPS is two pronged.
• Continuous improvement: (i) Being aware of the challenges to realize long-term
vision (ii) Kaizen through constant innovations and (iii) Going to the workplace
vt
(Genchi Genbutsu) to see the facts for oneself and make right decisions and create
consensus
• Respect for people: (i) taking responsibility for other people in reaching their
objectives, and to build mutual trust (ii) Develop individuals through team
approach to problem solving
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How Pull method of material flow works?

The concepts of JIT and Jidoka developed during 1930s got dismantled due to WW-II.
Demand for goods in Japan’s post-war economy were low and the concept of economies
of scale through mass production (as was in the case of Ford Motors) had little relevance.
Following the WW-II, Taiichi Ohno, the then Ex-VP of Toyota revived, refined and
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rigorously implemented the concepts of JIT and Jidoka. Ohno, having visited the
American supermarkets, observed that shelves are refilled as items are withdrawn
(pulled) by customers. He realized that production scheduling can be better, if done in the
n.
way as the shelves are refilled in the supermarket, especially when overproduction was
not desirable. Thus the concept of Pull came into being in production areas. In a pull
system, a very small amount of inventory buffer is maintained between any two work
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stations for lead time usage at successor work station, or to cushion against any irregular
supply. The worker at the next work station goes back to the previous station and takes
only that many parts which he needs for then. The worker at the previous station now
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produces the exact number of parts for replenishing those that were taken away the next
station’s worker. Thus the previous station’s worker produced almost Just-In-Time when
the part was needed by the next workstation. If the output is not taken, the previous
station’s worker simply stops producing. He does not produce unnecessarily, i.e, neither
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over- nor under-production. Necessary quantity’ is not defined by the MPS, but by shop-
floor demands.
Conceptually, customer is linked to assembly to fabrication to suppliers with series of
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pull loops. As pull signals flow in one direction, product flows in the opposite direction.
Each operation that uses pull within the company becomes customer and supplier
respectively to its previous and next operations.
PUSH system PULL System
vt
Production: Approximate Production: Accurate and Precise

Anticipated Usages Actual Usages
Large lots production Small lot production
High inventories Low inventories
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Lot of waste, a lesser concern Elimination of waste, a serious concern

Management by firefight Management by sight
Poor communication Better communication
To work with smaller buffer inventories, the manufacturing system must be very
responsive and flexible, demand for end-products should be stabilized, concern to quality
should be utmost, and suppliers’ responsiveness is a must. Japanese (to be specific,
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Toyota) discovered that if they wanted to make their manufacturing system responsive,
they needed to cut lot sizes (relating to both production and procurement)
n.
Small Lot Size
But cutting lot sizes call for frequent change-over of setups (or orders) and result in
higher set-up (or ordering) costs. This conflict between carrying and set-up (or ordering)
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costs is resolved by classical Economic lot size (or EOQ) approach by the Western
industry.Before Japanese (especially, Toyota) questioned, the set-up time (or ordering
cost) was taken for granted as unalterable. They strived very hard to drive down the
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change-over (or purchase order) costs- We will discuss how Japanese did it later. This
enabled a significant reduction in lot sizes, and set the JIT into motion.
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vt
When lot size drops all the way to one-piece-at-a-time (however, any reduction in lot size
would be helpful) the scrap and quality improvements are maximum. If a worker makes
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only one part and passes it to the next worker immediately, the first worker soon hears if
the part does not fit in any of the next stations. Thus defects are discovered quickly and
their sources can be attacked before the next part is produced. Greater quality and less
scrap or rework saves material, rework-labour and time, etc. improving productivity. If
parts are made and moved in large lots, by the time the next workstation finds a defective,
several defectives could already be present in the lot. Hence less quality and more scrap.
in
The first worker who quickly learns about the effect of his workmanship will naturally
become motivated to improve. Worker’s awareness of defect causation is heightened.
This awareness of problems and their causes aid the workers, supervisors, engineers to
n.
generate ideas for:
• Controlling defects
• Improving JIT delivery performance (say, handling delays)
•
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Cutting setup time which helps reduction in lot size further
Often, even when lot size is reduced drastically, still some buffer inventory is maintained
between workstations to cushion the irregularities in the part-feeder processes. Japanese
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do not accept the buffer principle as they think buffer inventory hides all flow- and
quality-related problems. Instead of adding it at the point of irregularities, they
deliberately remove it to expose the work force to consequences. In response, workers
and supervisors rally to root out the causes of irregularity at its source so that it won’t
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recur. Each time the cause of irregularity is corrected, the Japanese production managers
remove some more buffer stock. Workers are never allowed to settle into a comfortable
pattern. Rather the pattern becomes one of continually perfecting the production process.
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Reduction in buffer, greater awareness of problem areas and correction lead to smoother
output rates.
The way MURI, MUDA and MURA (very popular in Japan for their significance and
symbolic brevity) are attacked can be seen in the above JIT cause-effect chain. MURI:
vt
Means Excess (Eg. Producing in large lot -EOQ- when it can be reduced to one-piece).
MUDA: Means Waste (Eg. Production of even one defective item is a waste, let alone %
defectives).MURA: Means Unevenness (Eg. Buffer stock implies unevenness in
production flow is accepted. The rational approach is to reduce buffer and expose the
systems to variability, and then deal with it)
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Quick Setups:
Several processes defy production in small lots. Large setups can be as long as a day or
more. Hence, companies are reluctant to change setup before they produce the part in a
big lot from the setup made. On the other hand, having several dedicated lines for each
part may be expensive. Hence, engineers at Toyota worked to simplify and quicken the
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die changing process. Shigeo Shingo, a consultant hired by Ohno was able to reduce the
setup time of a 1000-ton press from 6 hours to 3 minutes using the concept of SMED
Seven steps to SMED
n.
1. Observe the current method of changeover
2. Separate the INTERNAL and EXTERNAL activities: Internal activities are those that
can only be performed when the process is stopped, while External activities can be
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done when the operation is on. For example, fetch tools for next operation before the
machine stops, setup of fixture, centering dies
3. Convert (where possible) Internal activities into External ones : Eg. pre-heating of dies
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4. Streamline the remaining internal activities - Simplifying/ eliminating adjustments,
coding settings, standardizing tools and materials, using quick locating and clamping
devices, guides/rails to move heavy dies, simplified tools, etc. Shigeo Shingo rightly
observed that it's only the last turn of a bolt that tightens it - the rest is just movement.
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Apply motion and time study principles

5. Streamline the External activities, so that they are of a similar scale to the Internal ones
- properly organizing work place, locating items near to the point of use, keeping
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machines, tools and dies in good condition

6. Document the new procedure and actions so that they are repeatable. Videotaping the
process of setup with each improvement
7. Do it all again: Train the operators, add more people if needed. Practice and perfect.
vt
For each iteration of the above process, a 45% improvement in set-up times should be
expected, so it may take several iterations to be less than ten minute time
The aim is for Single digit setuptime (less than 10 minutes), and then One-touch setup.
This can be done through better planning, process redesign, and product redesign.
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To achieve smooth flow in lean system, many fundamental elements such as small lots,
flexible resources (people, machinery, layout), high quality, Jidoka, kanban, standardized
components and work methods, automated production must be in place.
Further to sustain the pull created in lean system, elements such as leveled production,
kaizen, close supplier ties, lean culture are needed
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Flexible resources:
Flexible resources allow the system to more readily adapt to unanticipated changes in
demand.Flexibility comes from Cellular layouts, Flexible machinery, and Multifunctional
n.
workers. Equipment and routines are organized to enable each operator to simultaneously
handle multiple machines. Use of limit switches, jigs and fixtures, special tools, fool-
proof devices, quickly changeable tools and dies, etc. with the machines enabled each
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worker in Toyota to handle as many as 17 machines (on an average of 5-10 machines)
Cellular Layout:The concept was pioneered by an US engineer in 1920s. But Ohno’s
inspired application not only improved flexibility but also greatly improved system
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effectiveness. A cell is a group of dissimilar machines arranged to process a family of
parts with similar processing requirements. Work is moved within the cell ideally one
unit at a time from one process to the next by a worker as he or she walks around the cell
in a prescribed path. Cell layouts are usually L or U shaped resembling a mini assembly
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line. Cellular layouts, especially U-shaped cells, are commonly used in lean
manufacturing environments to create workplace efficiency and flexibility. These layouts
ensure the shortest part movement distance, allow for sharing of work, provide a
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foundation for one piece flow, and reduce the amount of floor space required. The teams
in cells are motivated and highly productive. The cycle time in a cell is determined by the
time the worker takes to complete his path through the cell attending to various machines
. Hence, regardless of the variety of parts being produced in a cell the operator cycle time
vt
remains constant (as worker’s path remains the same). The operator cycle time is to be
synchronized with takt time (Takt time is the rate at which the production should take
place, which of course is matched with the rate of customer demand).Changes in takt
time (or production volume) can be affected by adding or subtracting the workers in the
cell or modifying their paths in the cell.
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Due to similarity of parts produced in a cell, setup changeover requirements are less, and
hence lot sizes that move downstream can be reduced
Flexible machinery: GPMs (rather than commercially available SPMs) are used with
necessary modification to suit the requirement. Often firms use their own tool makers to
build the needed machines. Such machines may be special purpose, light weight, easily
movable and low cost too. Eg. Small presses. The machines built in-house may also be fit
in
with necessary fixtures and dies so that there are no settings or adjustments
Multifunctional Workforce: Pull system runs only the parts that are needed, thus freeing
a good amount of time for constructive activities that will make the job and working
n.
conditions better. The shut down time is be spent on activities such as Preventive
maintenance, Quality improvements, House-keeping, Training, and Continuous
improvement.Job allotment to operators changes frequently (may be every week); so
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every operator is required to master multiple jobs. The flexibility available with resources
facilitates the Pull system.
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Consistent High Quality:
High quality is a must for lean systems to operate, because there is no extra inventory to
buffer against defectives. The system neither has any scope nor provide any room for
scrap or rework.Smaller lot - Increases awareness and early detection of quality
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problems. Unquality can be quickly detected when a worker inspects the first and last
pieces of a smaller batch, or makes a piece and uses it too for further operation. The
source of problems can be traced and remedied before producing many defectives.
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Philosophy - Do it Right at the First time, and Every time

Visual Control:Quality problems are made visible. Visible instruction for workers and
machine action and a direct feedback on the results of that action. Examples of visual
control include: kanban, tool boards, andons; process control charts, standard operation
vt
sheets; machines and stock points painted in different colours; clearly marked material
handling routes; demonstration and instructional stands near machines; display of quality
performance and awards; and on-going quality improvement projects.
Jidoka (Work/Line Stop): Jidoka is one of the two pillars of the Toyota Production
System along with just-in-time. Jidoka is enabling machines and authorizing operators to
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stop work or production line when they detect or suspect any abnormality in the work
centre or system. This enables operations to build-in quality at each process and to
separate men and machines for more efficient work. Ohno believed that ‘Never passing-
on’ a defective part to the next station is the key for ‘zero defects’. For this to happen: (i)
All equipment are fitted with fool-proofing devices called poka-yoke and (ii) workers (i.e
champions of quality) are assigned this responsibility and are given the appropriate
in
authority (Jidoka). Whenever there is abnormality in the functioning of an equipment
such as tool ware, chip clog, etc resulting in unquality product production, the poka yoke
senses it and stops the equipment. It can also stop production when the required quantity
n.
is produced. Flash lights (called Andons) are located at each work station and on Andon
boards that could be viewed from anywhere in the plant. Andon boards display (LED)
the daily target, actual achievement, serial numbers of work stations (yellow and red
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rows), etc. Whenever, a worker encounters a problem or even suspects one, he acts
(pressing a button/pulling a cord/thread, etc) which cause his workstation’s number to
flash on andon boards. Green light for normal operation, Yellow for calling help and Red
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for line stoppage. A flashing andon quickly summons supervisor, maintenance people,
engineers and even co-workers to solve the problem at its root-level.Jidoka is sometimes
called autonomation, meaning “automation with human intelligence” . In fact, the
production system is scheduled for less than its capacity to allow for such stoppages. All
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Jidoka drills are recorded and solutions for these problems are deliberated during the time
remaining after production
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Kanban:
The use of kanbans enable exercising
greater control over the pull process
in the shop floor. Kanban means
vt
‘Card’ (signaling card). A kanban is

attached to container that moves
back and forth between the source
and destination stations. There is
exactly one kanban per container. Containers for each specific part are standardized, and
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they are always filled with the same (ideally, small) quantity. Kanban card contains
information such as
Card number, Part number, Part name, Brief description of the part, Container type and
Capacity, Preceding (where it comes from) and Succeeding stations (where it goes to),
etc.
If the kanban is to move between supplier and customer companies, then additional
in
information such as supplier code, supplier name, number of trips/day, dock where the
goods are to be delivered, Group code, Route detail, etc, is indicated. The information on
kanban does not change. Kanban does not make the schedule of production. They only
n.
authorize the production or withdrawal of goods. Most sophisticated is Dual kanban
system:
Production kanban: authorizes production of goods (container quantity) and
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Withdrawal kanban: authorizes withdrawal of movement of container full of goods
No parts are made unless

ut
there is a production
kanban to authorize
production. If no
production kanban are in
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the “in box” at a work

center, the process remains
idle, and workers
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perform other assigned

activities. This rule enforces the “pull” nature of
the process control. When the processes are closely and tightly linked other types of
kanbans such as Kanban square area, Kanban rack, a
vt
flashing light, electronic or verbal message are used. Signal Kanbans are used when
inventory between the processes is still necessary.
Supplier kanban: The supplier brings the ordered material directly to the point of use and
then picks up the empty container with kanban (if any) to fill and return later. If there are
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more suppliers and large number of kanbans, then kanban mailbox can also be used. The
number of kanbans required to control production of an item can be calculated by:
No. of kanbans = (Ave. demand during lead time + safety stock)/ Container size
Problem 1. Masaru fills, caps and labels syrup bottles. He is to process an average of 160
bottles per hour through his cell. Every container attached with a kanban holds 10 bottles.
in
It takes 30 minutes to receive new bottles from the previous cell. The factory uses a
safety stock factor of 10%. How many kanbans should circulate between these cells
Solution: N = [(160 x 0.5) + 8] / 10 = 8.8 Kanbans
n.
Having 8 containers would result in lesser inventory at the cell and exposes problems in
the cell, thus forcing the cell to improve its processes.
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Standardized Components and Work methods:
Use of standardized component parts and methods of operation are encouraged. They
reduce the non-value adding design elements and process elements to a minimum, and
ut
improve the consistency and efficiency in operations. The applications of value analysis
and work-study techniques are widely seen in this effort.
Standardized Work: The Toyota Production System organizes all jobs around human
motion and creates an efficient production sequence without any "Muda." Work
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organized in such a way is called standardized work. It consists of three elements:

1. Takt-Time
2. Working Sequence and
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3. Standard In-Process Stock

Standardized work will define the most efficient methods to produce product using
available equipment, people and materials. It depicts the key process points, operator
procedures, production sequence, safety issues, and quality checks.
vt
Automated Production:
Effective lean production systems use both manual and automated processes - the task is
to determine the appropriate type of automation. The process industries are ultimate in
efficiency and productivity due to the: (i) continuous flow of products (gases, liquids,
paint, pallets, powder, petrochemicals, steel, etc) in the system; (ii) high degree of
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automation managed by a network of computers and (iii) minimum human

inconsistencies.
The output in nonprocess industries is discrete units which (unlike the stuff that flows)
can be produced, prioritized, inspected, counted, stored, etc. The production and
assembly system are generally labour intensive, often forced to use buffer inventory
between stations, and subject to human inconsistencies, all contributing to its lesser
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efficiency.It is the intention of lean management approach to make discrete unit
production (not only assembly stage but also all fabrication and subassembly stages) into
a continuous flow production system, i.e., much like continuous processing in process
n.
industry. This, often requires the discrete unit production shops to move stage-by-stage
through various plant configurations (before becoming continuous flow/repetitive
production system.) These stages are (stages may also be skipped):
•
•
•
Job-shop fabrication
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Dedicated production line
Physically merged production processes
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• Mixed-model processing
• Automated production lines
Automated dedicated assembly lines may be common (eg. automobile body welding).
But, automated mixed model assembly line, automated subassembly and fabrication
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shops/cells are not. Japanese extensively use psuedo-robots (less flexible-pick and place
type) that aid a lot when the buffer between the work stations is being reduced.
When all efficiency improvement aid are provided to the worker, but he still is unable to
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cope with problems, best option is to automate a part of his work.However, mixed model
production calls for flexible robots which can be programmed to change parameters
depending upon the next model.CAD/CAM compress planning lead time so that the
product quickly gets ready for manufacture. Robots and automated machine tools quickly
vt
make consistently good quality products, with no buffer or waste thus compressing
manufacturing lead time. Automatic quality control (poka yoke) is an aid towards JIT
system
Uniform Workstation Loads (heijunka):

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The flow of production created by pull system, kanban, small lots of high quality, flexible
resources and jidoka can be maintained only if the production is relatively steady. Hence,
there is a need to smoothen the production requirement at the final assembly. Otherwise,
kanbans of some parts will circulate very quickly at some times and very slowly at others.
Variations of ± 10% is can be absorbed.
How to reduce variability?
in
1. More accurate forecasts to guard against unexpected demand
• Sales division (eg. Toyota) conducts a survey twice a year
• Monthly production schedules are developed 2 months in advance
n.
• Review plans 1 month in advance and again 10 days in advance
• Daily production are finalized 4 days in advance (Freeze windows) of actual
production(by then orders from dealers are firm)
•
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Changes in model mix can be communicated to the assembly line just the previous
evening. Kanbans will take care this change in the rest of the system
2. Level the demand across planning horizon:
ut
• Demand is divided into small increments of time and spread out as evenly as
possible so that same amount of each item is produced each day and
• The item production is mixed throughout the day in very small quantities. Produce
roughly the same mix of products each day, using a repeating sequence
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• Daily production is arranged in the same ratio as monthly demand and jobs are
distributed as evenly as possible across a day’s schedule
• At least some quantity of every item is produced daily and some quantity is
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always available to meet variation in demand. Meet demand fluctuations through

end item inventory rather than through fluctuations in production level
Problem 2. SMS automobile company makes cars, SUVs and vans on a single assembly
line. December’s forecast is for 220 vehicles. SUVs sell at twice the rate of cars and
vt
thrice that of vans. Assuming 20 working days in the month, how should the vehicles be
produced to have smoother production?
Solution:
Daily breakdown = 220/20 = 11 vehicles
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Daily sequence (batched): S S S S S S C C C

V V Daily sequence (Mixed): S C S V S C S
VSCS
Continuous Improvement (Kaizen):
Kaizen – Change for the Better or Continuous improvement. It is associated with, among
others:
in
- Improve quality of product/service
- Eliminating waste (Muda)
- Improving process efficiency and effectiveness
n.
- Improving morale of employees
Quality is everybody’s responsibility, not just of QC dept. Every employee at every level
participates and contributes ideas to improve the processes and environment. Workers
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voluntarily spot quality problems, stop operation if needed, trace the source of unquality,
get together to analyze processes and generate ideas for improvement and adjust their
working routines(Upward communication). Kaizen can be better achieved by finding
ut
root causes of problems. To find root cause of a problem – Ask WHYs until the
underlying cause is identified
Anticipate/identify the problem, analyze the root causes, develop alternative solutions,
choose the best one, measure the work content, standardize the method and monitor
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adherence to it. The knowledge of industrial engineering (method study, work

measurement, value analysis, Quality management tools, etc) is very helpful in bringing
about kaizen. Conceptually kaizen focuses on small but continuous improvements. Easy
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to implement, Not a big change for people to resist, People enjoy the implementation as it
is their ideas. Kaizen relies on the human resource rather than capital investments.
Continuous improvement process will make sure the system is always getting updated
vt
Close Supplier Ties :

Lean Supplying :Suppliers’ support is essential for the success of lean. Suppliers need to
be not just reliable, but synchronized with their customers requirement too. Strong long-
term working relationships with a select group of suppliers located close-by to the
customer would enable delivering in smaller quantities several times a day.
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1. Long-term supply contracts (typically 3-5years or life of the product): Suppliers

are chosen based on their ability to meet delivery schedules with high quality and
reasonable cost, and willingness to adapt to customer’s requirement
2. Synchronized production: With longer-term contracts suppliers can focus on fewer
customers. Guaranteed steady demand allows supplier’ production system to
synchronize with that of customer. Customer may also provide engineering and
in
quality management help
3. Supplier certification: Several stages - Supplier’s products, production facilities,
quality systems, logistic resources are examined by the customer. Statistics of
n.
each shipment are checked. After about 6 months of no problems, the supplier is
certified. Only then the goods from the supplier is considered for exemption from
incoming quality inspection. However, any cost of line stop/product recall due to
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defective supply may also be recovered from supplier
4. Mixed loads and frequent deliveries: Smaller quantities of variety of goods from
several suppliers makeup a truck load and are delivered directly at the point of use
ut
in customer’s plant, several times a day. Several suppliers share local warehouses.
Precise delivery schedules are drawn and adhered to
5. Standardized, sequenced delivery: Using standardized containers, and exchanging
filled ones with empty ones speeds up the delivery. If deliveries are made directly
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to the assembly line, they are sequenced in the order of assembly

6. Locating in close proximity to the customer: For frequent deliveries, the suppliers
need to be closer to the customer. If the distance prohibits daily delivery, suppliers
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may establish small warehouses near to the customer, which they may also share
with other suppliers. These warehouses can also serve as load switching points for
JIT deliveries to different customers
7. Close relationships b/w buyers and suppliers' QC people. Suppliers helped to meet
vt
quality requirement
Suppliers with stringent quality standards could forego incoming inspection and goods
could be delivered right at the assembly line even without being counted, inspected,
tagged or stacked. Suppliers encouraged to package in exact quantities. No overage or
underage is acceptable. Suppliers who try to meet the increasing demands of lean
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customer without being themselves would have to overrun with inventory, very high
production and distribution costs. Suppliers are encouraged to reduce their production lot
sizes
Lean Purchasing: Japanese JIT buyers rely more on performance specifications and less
on design specifications, giving more room for supplier to innovate. Delay due to spec-
clarification is avoided. Japanese JIT purchase agreements involve minimum paper
in
work, and may specify (in addition to price and specifications) an overall quantity to be
delivered during a period of several months. Purchase agreement specifies that delivery is
to be made either as per the long-term production schedule or release of kanban (which
n.
may be directly from work centre to supplier). Quantities to be delivered may vary from
delivery to delivery, but fixed for whole contract term
Preventive Maintenance and TPM:
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Machines need maintenance. Maintenance is undertaken,
(i) when a machine breaks down (Breakdown maintenance): Breakdown can be very
ut
expensive due to lost production, idle workers and supervisors, damaged tools and
products, missed deadlines, accidents, etc. Often, cost of up-keeping a broken down
machine is much higher than preventing the breakdown.
(ii) at predetermined times to prevent equipment from breaking down (Preventive
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maintenance): The history of failures of a machine (type, frequency, time b/w

failures, repair time, cost, etc) can be used to mathematically workout a preventive
maintenance schedule. PM includes keeping records on each machine’s usage, careful
us
analysis to determine the frequency and schedule of PM, case reports after PM, etc.
But in spite of the PM, breakdown cannot fully prevented. Hence, what Lean system
needs is Total Productive Maintenance (TPM).
TPM is a combination of preventive maintenance and TQC (worker empowerment, zero
vt
defects, QC tools, etc). TPM requires management to take a broader and strategic view of
maintenance activities. Workers take daily care of their machines and the work
environment. They clean, oil and grease their machines, adjust the settings, do minor
repair, collect and interpret the maintenance and operating data, etc.
As a part of TPM, 5–S approach is also widely used.
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The S Goal Eliminate or Correct

SEIRI (Sort) Keep only what you Unwanted tools, inventory, supplies,
need parts, fixtures, displays, items blocking
aisles, stacked in corners, etc
SEITON (Set A place for Non-availability of an item when needed,
in order) everything and unsafe environment, pre-positioning tools
in
everything in its
place
SEISO (Shine Cleaning and looking Floors, walls, stairs, equipment, tool
n.
for ways to keep clean trays, display boards, tools and materials
and organized
SEIKETSU Maintaining and Unavailable information, check-lists,
(Standardize
three
S’s
io
monitoring the first standards, prescribed limits
ut
SHISUKE Sticking to the rules Number of workers without 5-S training,
(Sustain) inability to locate anything within 30
seconds, Number of 5-S inspections not
ol
performed
The Benefits of Lean Production:

us
Lean provides a wide range of benefits such as:

• Reduced inventory
• Improved quality
• Lower costs
vt
• Reduced space requirements

• Shorter lead times
• Increased productivity
• Greater flexibility
• Better relations with suppliers
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• Simplified scheduling and controlling activities

• Increased capacity
• Better use of human resources
• More product variety
Limitations of Lean:
in
• Not appropriate for all types of organizations
• Companies with high variability of demand (takt time breaks down), large variety
of lowvolume products (too many kanbans) or custom-engineered products (no
n.
kanbans) find serious deficiencies in this approach.
• Lean gets derailed when unexpected changes in demand or supply occur (eg. Fire,
strike, natural calamities, etc. at supplier’s place)
•
io
Hence, companies should assess risk and uncertainty in their businesses and adapt
lean practices accordingly
ut
\
ol
us
vt
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Oprational Management (10me81)

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Vtusolution.

1. Explain forecasting methods

No of births (*103) 40 48 66 78 92 105 125 140

8. Explain classification of production systems

11. Explain graphical linear analysis

18. List and explain classification of Inventory

4. What is the total annual costs associated with inventory

Introduction to Operations Management

The Operations System

Operations Management ~ The Context

Theory of Slack Ropes

Operational Design components

Characteristics of the Product

No one best way to deliver a product.

– Computer Integrated Manufacture (CIM)

Total Quality Management, Six Sigma

The management of systems or processes that create goods and/or provide

Production of Goods vs Delivery of Services

Production of goods results in a tangible output.

Differences Between Goods & Service

The Historical Evolution of OM

The Industrial Revolution

The Internet, e-commerce, and e-business.

• Identifying consumer wants and/or needs is a basic input in an

organization’s decision making process, and central to competitiveness.

• Advertising and promotion are ways organizations can inform potential

Putting too much emphasis on short-term financial performance at the

Specialization. Focus on narrow product lines or limited service to achieve

growth, long-term stability, and demographics.

organization; expertise; dedication; and experience.

and cost of capital are important considerations.

Technology. This includes existing technology, the ability to integrate new

Strategic OM Decision Areas

Manufacturing Resource Planning

Aggregate Versus Detailed Forecasts (Review)

Use aggregate forecasts for planning medium-range overall production

Use detailed forecasts for initial detailed short-range Master Production

Master Production Schedule

The Master Production Schedule

An MPS starts with a forecast and a beginning inventory balance.

Planned Order Release

• Inventory is projected forward until a shortage, or “net requirement,”

• Production is scheduled to be completed (the MPS is a planned finish

Projected Available Balance 12

Planned Order Release

• A planned start time – the “planned order release” is determined based

Projected Available Balance 20 15 5 5

Planned Order Release 8

• The process continues until the product is scheduled

Projected Available Balance 20 15 5 5 0 8 0

Planned Order Release 8 14

Projected Available Balance 12

• The other product is scheduled the same way

Planned Order Release 8 14

Projected Available Balance 12 5 3 13 0 5 0

Planned Order Release 20 10

• To check the feasibility of the MPS, we need to check the capacity

THE "ROUGH-CUT" ROUTING io

Product Workcenter CLH/Setup DLH/Unit

Product X-planned Order Release 0 8 0 14 0 0

Chapter 4- Material Requirements Planning

Determines order of MRP calculations

• Calculate plans for level 0 first, then level 1, etc. . . .