pom book -60 pages

Operations Management


1


Chapter-I : Introduction

Operations management is about the way organizations produce goods and services. Operations Management is the term that is used for the Activities, decision and responsibilities of operations Manager.

Operations function: arrangement of resources which are devoted to the production and the delivery of products and Service

Operations manager: staff of the organizations who have particular responsibility to managing some or all the resources which comprise the operations function

Engineering/technical function

Marketing function

Operationsfunction

Product/servicesDevelopment

function

Information/Technical(IT)

function

Others

Human Resources

function

Accounting And financed

function

Core functionsSupport functions

A broad definition of operationsmanagement

2


Inputtransformedresources

Materials information customers

Facilitiesstart

Inputtransforming

resources

Input resources

TheTransformation

Process

Output products and

servicesCustomers

Environment

Environment

The transformation process model

Operation Input resources Transformation Process Outputs

Airline

AircraftPilots and air crewGround crewPassengers and freight

Move passengers and freight around the world

Transported passengers and freight

Printer

Printers and designerPrinting pressPaper, ink, etc

Design PrintBind

Designed and printed material

Police

Police officersComputer systemsInformationPublic (law abiding and criminals

Prevent crimeSolve crimeApprehend criminals

Lawful societyPublic with feeling of security

Table:1 The activities of core functions in some organizations

Inputs to the transformation process1. Transformed resources: the resources that are treated , transformed, or convertedTransformed resources

A. MaterialB. InformationC. Customers

2. Transforming resources ; the resources that act upon the transformed resources

A. Facilities: the buildings, equipment, plant and process technologyB. Staff: Those who operate, maintain, plan and manage the operation

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Table-2 : Dominant transformed materials for various operations

PredominantlyMaterial processor

PredominantlyInformationprocessor

PredominantlyCustomerprocessor

All manufacturing operations

Accountants Hairdressers

Mining and extraction Bank headquarters Hotels

Retail operations Market research company Hospitals

Warehouse Financial analysts Mass transport

Postal services News service Theatres

Container shipping line Dentists

Physical Physical PropertiesProperties

PossessionPossession LocationLocation Storage/Storage/accommodationaccommodation

Materials Materials ProcessorsProcessors

•All manufacturing operations•Mining and extraction

Retail operations

•Postal service•Freight distribution•Port operations

Warehouse

Informational properties

Possession Location Storage/accommodation

Information Information ProcessorsProcessors

•Bank HQs•Accountants•Architect

•Financial analysis•Market research companies•Universities•Consultants

Telecom company Library archives

Physical Properties

Location Storage/accommodation

Physiological state

Psychological state

Customers Customers ProcessorsProcessors

•Hairdresser•Plastic surgeons

•Public transport•Taxis

Hotels •Hospital•Other health care

•Education•Psychoanalysts•Theme park

4


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The output from most operations is a mixture of goods and services

PURE GOODSTangible

Can be storedProduction precedes

consumptionLow customer

contactCan be transported

Quality is evident

PURE SERVICESQuality difficult to judgeCannot be transported

High customer contact

Production and consumption are simultaneous

Cannot be stored

Intangible

Low Volume High

Low repetitionEach staff memberPerforms more job Less systemizationHigh unit cost

High repetitionSpecializationSystemizationLow unit cost

FlexibleComplexMatch Customer needsHigh Unit cost

Well definedRoutineStandardizedLow unit cost

AnticipationFlexibilityIn touch with demandHigh Unit cost

StableRoutinePredictableLow Unit cost

ImplicationsImplications ImplicationsImplications

High Variety Variety Low

High Variation in demand Variation in demand Low

Short waitingtolerance

Satisfactiongoverned by customer perception

Customer contact Skills neededHigh unit cost

High VisibilityVisibility Low

Time lag betweenProduction and consumption

StandardizedLow contact skillsLow unit cost

5


VARIATION IN DEMANDHigh Low

EXAMPLES

A Typology of OperationsEXAMPLES

Television plant

Fast food restaurant

Routine surgery

Mass rapid transport

Electricity generator factoryGourmet restaurantPioneering surgeryTaxi service

Bespoke tailor

University tutorials

Corporate tax advice

Department store

Off-the-peg suit plant

University lectures

Financial audits

Jeans shop

Electricity utility

Financial audits

Emergency service

London underground

Bread bakery

Consultancy advice

Shopping mall security

Trucking operation

Health care "Cook at your table" restaurantDentistMusic teacher

Most manufacturingPrepackaged sandwichmakerDental techniciansDistance learning

High LowVISIBILITY

VARIETYHigh Low

VOLUMELow High

• What is operations Management: Operation management is the term used for activities, decisions, and responsibilities of operation manager who manage the production and delivery of products and services It is one of the core function of any business

• What is the similarities between all operations• All operations can be modeled as a process which transform input to out put• All have input transformed and transforming resources • Transform input to out put by acting on some aspect of their physical , informational, possession, location

etc state• All operations produce some mixture of tangible goods and less tangible services • All operations can be divided in to micro and macro operations

• How are the operations different from other • All operations differ in terms of volume of their out put• All operations differ in terms of variety of their out put• All operations differ in terms of variation in demand of their out put• All operations differ in terms of visibility of their out put

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Chapter- II Types of transformation processes

Project

Jobbing

Batch

Line (mass)

Continuous

Project Processes

One-off, complex, large scale, high work content “products”

Specially made, every one customized

Defined start and finish: time, quality and cost objectives

Many different skills have to be coordinated

Fixed position layout, resources brought to product

Jobbing Processes

Very small quantities: “one-offs”, or only a few required

Specially made. High variety, low repetition. “Strangers”

Skill requirements are usually very broad

Skilled jobber, or team of jobbers complete whole product

Fixed position or process layout (routing decided by jobbers)

Batch Processes

Higher volumes and lower variety than for jobbing

Standard products, repeating demand. But can make specials

Specialized, narrower skills

Set-ups (changeovers) at each stage of production

Process or cellular layout, predetermined planned routing

Mass (Line) Processes

Higher volumes than Batch

Standard, repeat products (“runners”)

Low and/or narrow skills

No set-ups, or almost instantaneous ones

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Cell or product layout: a fixed sequence of operations

Continuous Process

Extremely high volumes and low variety: often single product

Standard, repeat products (“runners”)

Highly captial-intensive and automated

Few changeovers required

Difficult and expensive to start and stop the process

Product layout: usually flow along conveyors or pipes

VolumeLow High VolumeLow High

Var

iety

Lo

w

Hig

h

Var

iety

Lo

w

Hig

hProject

Jobbing

Batch

Mass

Contin--uous

Professional service

Service shop

Mass service

Service process types

Manufacturing process types

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Project

Jobbing

Batch

Mass

Continuous

Professionalservice

ServiceShop

MassserviceNon

e

None

Less process flexibility

than is needed so high cost

More process flexibility

than is needed so high cost

Natural’ line of fit of process to volume/variety characteristics

Manufacturing operations process

types

Service operations process types

Variety

Volume

ProjectConstruction of the aircraft carrier USS Nimitz was a huge project that took almost 10 years to complete.

Batch ProductionAt Martin Guitars bindings on the guitar frame are installed by hand and are wrapped with a cloth webbing until glue is dried.

Mass Production Here in a clean room a worker performs quality checks on a computer assembly line.

Continuous ProductionA paper manufacturer produces a continuous sheet paper from wood pulp slurry, which is mixed, pressed, dried, and wound onto reels.

9

product-process matrix has consequences for cost and flexibility


Professional ServiceA doctor provides personal service to each patient based on extensive training in medicine.

Service ShopAlthough a lecture may be prepared in advance, its delivery is affected by students in each class.

Mass ServiceA retail store provides a standard array of products from

which customers may choose.

Service FactoryElectricity is a commodity available continuously to customers.

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Chapter-3 Lay out and FlowThe layout of an operation is concerned with the physical location of its transforming resources.

Layout is deciding where to put all the facilities , machines, equipments and staffs in the operation

Arrangement of areas within a facility to:

1. Minimize material-handling costs2. Utilize space efficiently3. Utilize labor efficiently4. Eliminate bottlenecks5. Facilitate communication and interaction6. Reduce manufacturing cycle time7. Reduce customer service time8. Eliminate wasted or redundant movement9. Increase capacity10. Facilitate entry, exit, and placement of material, products, and people11. Incorporate safety and security measures12. Promote product and service quality13. Encourage proper maintenance activities14. Provide a visual control of activities15. Provide flexibility to adapt to changing conditions

Basic layouts

Process layouts

Group similar activities together according to process or function they perform

Product layouts

Arrange activities in line according to sequence of operations for a particular product or

service

Fixed-position layouts

are used for projects in which product cannot be moved. Equipment, workers, materials,

other resources brought to the site. Highly skilled labor

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Process Layout in Services

Manufacturing Process Layout

L

L

L

L

L

L

L

L

L

LM

M

M

M

D

D

D

D

D

D

D

D

G

G

G

G

G

G

A A AReceiving andShipping

Assembly

Painting Department

Lathe DepartmentMilling

Department Drilling Department

Grinding Department

P

P

12

Women’s dresses

Women’s sportswear

Shoes

Cosmetics and jewelry

Entry and display area

Housewares

Children’s department

Men’s department


A Product Layout

Comparison of Productand Process Layouts

Chapter-4 Project Management

InIn

OutOut

Description

Type of process

Product

Demand

Volume

Equipment

Workers

Inventory

Storage space

Layout decision

Advantage

Description

Type of process

Product

Demand

Volume

Equipment

Workers

Inventory

Storage space

Layout decision

Advantage

Sequential arrangement of activities

Continuous, mass production, mainly assembly

Standardized, made to stock Stable

High

Special purpose

Limited skills

Low in process, High finished good

Small

Line balancing

Efficiency

Process

Functional grouping of activities

Intermittent, job shop, batch production, mainly fabrication

Varied, made to order

Fluctuating

Low

General purpose

Varied skills

High in process, Low finished good

Large

Machine location

Flexibility

Product

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Introduction:The program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) are two of the best known and most widely used techniques of management science. They are typically used in situations where managers have responsibilities for planning, scheduling and controlling large projects that are composed of many activities performed by a variety of people in various work areas.

PETT and CPM have been effective procedures for complex project management problems. Although PERT and CPM utilize the same terminology and have the same objectives, they were developed independently.

The program Evaluation and Review Technique (PERT) was developed in 1958 for the planning and control of the efforts involved in the development of the Fleet Ballistic Missile submarine. PERT is typically used for projects that involve research and development work in which the planning effort and the manufacturing of component parts is new and is usually being attempted for the first time. In using PERT, the time estimates that are made cannot be predicted with certainty and probabilistic concepts are employed.

The Critical Path Method (CPM) originated in 1957, when consultants from the Remington Rand UNIVAC division of Sperry Rand Corporation were asked by the DuPont Corporation of Wilmington, Delware, to help devise a scheduling technique to be used in the construction, maintenance and shutdown of chemical process plants. CPM is typically used for construction projects plants. CPM is typically used for construction projects in which a single , or deterministic , time estimate is made for each job or activity.

The framework of PERT/ CPM network analysis

A project is viewed as a group of jobs or operation that are performed in a certain sequence to reach an objective . Each one of the jobs or operations that is part of a project is time and resource consuming , incurs a cost and is referred to as an activity.Each activity has a beginning point and an ending point that are points in time. The points in time are known as events. A path for this project is a sequence of relate activities which is resource and time consuming.

A mathematical model satisfying the previous definition can be visualized as a network in which nodes , corresponding to events are joined by branches , corresponding to activities. This network becomes a convenient method for depicting the sequential nature of the project.

Example: Project: Build a wooden deck List of activities with predecessor information

Activity PredecessorDesign the deck -----

Purchase materials design deck

Construct deck Purchase materials

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Network

The first step in the PERT/CPM project scheduling process is to specify all of the jobs or activities that constitute the project. The development of a complete and accurate set of activities is the key step in the project scheduling process, since the entire scheduling process is based on the list of activities.

There are several important rules connected with the handling of events and activities in a network that should be followed in order to maintain the correct structure for the network. The following rules are most important

1. Each defined activity is shown by a unique branch2. Branches show only the relationship between different activities; the length of the branches

have no significance3. Branches direction indicates the general progression in time. The branch head represents the

point in time at which an “activity completion event” takes place. In a similar the branch tail represent the point in time at which an “activity start event” occurs

4. When a number of activities terminate at one event, this indicates that no activity starting from that event may start before all activities have been completed

5. Events are identified by numbers. An effort should be made to have each event identified by a number higher that the immediately preceding event.

6. Activities are identified by the numbers of their starting events and ending events, and are specified by capital letters

1 32 4

1

2

3

4 5

A

B

C

D

15

Design Deck Purchase material

Construction deck


7. Two or more activities are not allowed to share the same beginning and ending events. In a situation like this in which two or more activities can be done concurrently , a dummy activity is used to ensure that the proper activity relationship are depicted by the network. Dummy activities have no duration or costs.

Incorrect Correct

8. There should be one starting point and one finishing point for the entire network9. No looping is allowed

Incorrect network Correct network

3

A (1, 2 )

B (1, 2 )

A (1, 2 )

B (1, 3 )

Dummy activity

1 2

1 2 3

16

1

2

1

2

3

Start and finish Same event

Starting event End

event


Class Problems:

1. Activity Predecessor

A ----

B ----

C A, B

D B


A ----

B A

C A

D B, C


A ----

B ----

C A, B

D A, B


A ----

B ----

C A

D A, B


A ----

B A

C A

D C

E B, D


A ----

B ----

C A

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D B

E C, D

F C

G E, F

H G


A ----

B ----

C B

D A

E A, C

F B

G E, F


A ----

B A

C A

D B

E B

F B, C

G D, E

H F

I F

J G, H, I


A ----

B A

C A

D B, C

E D

F E

G E


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A ----

B ----

C A

D B, C

E B

F D

G E

H F, G


A ----

B ----

C ----

D ----

E A

F B, C, D

G E, F

H F

I G

J G

K H


A ----

B A

C B

D B

E D

F C, D

G F, E


A ----

B ----

C ----

D A, B

E B

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F D, C

G E, C

H F, G


A ----

B ----

C ----

D A

E B

F C

G D

H E, F, G


A ----

B ----

C A

D B

E C, D


A ----

B A

C B

D C

E C

F C

G F

H D, E, G


A ----

B ----

20


C A, B

D A, B

E A, B

F C, E

G C, D

H G

I F, G

J E, H

K I, J


A ----

B ----

C A

D B

E C, D

F D


A ----

B ----

C ----

D A

E B

F C, E

G D

H F

I G, H

J G


A ----

B ----

C ----

D A, B

E B, C

21


F A, C


A ----

B ----

C ----

D A, B

E B, C

F A, B, C


A ----

B ----

C A

D B

E A, D


A ----

B ----

C ----

D A

E B

F A

G C, D

H E

I G, H

J I, F

22



A ----

B ----

C ----

D A

E A

F B

G B

H C

I C

J D, F, H

K E, G, I


A ----

B ----

C ----

D A

E A

F B

G C

H C

I D

J F, G

K F, G

L H

M I, E, J

N K, L


A ----

B ----

C ----

D A

E A

23


F B

G C

H E, F, C

I E, F, C

J D

K G, I

L H, K


A ----

B ----

C A

D A

E B

F B

G C

H C, D, E

I C, D, E

J G, H, I, F

K G, H, I, F

L J

M I, F

N I, F

O K, M, N

24


Problem-6-9

4

2 2

2 5 3 1 1

1

4 3 3

*Slack = LF-EF or LS-ES

Activity Slack* Comments1-2

2-3

2-4

2-5

3-6

3-5

4-7

5-6

Activity Slack* Comments6-8

6-9

7-9

9-10

25

1 2

4

3

5

7

6

5

9

8

10


Example 6.1

*t = (a+4m +b) /6 **σ2 = [ (b-a) /6] 2

Activity Time estimates Mean time

Variance

a m b t* σ2 **

1-2 6 8 10 8 0.44

1-3 3 6 9

1-4 1 3 5

2-5 0 0 0

2-6 2 4 12

3-5 2 3 4

4-5 3 4 5

Activity Time estimates Mean time

Variance

a m b t* σ2 **

4-8 2 2 2

5-7 3 7 11

5-8 2 4 6

8-7 0 0 0

6-9 1 4 7

7-9 1 10 13

26

1 3

2

5

4

6

7

5 9

8


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Chapter 5 : Forecasting

Forecasting : A statement about the future.

Two use of forecast:

1. Plan the system

Long range plans about the types of

examples

Products and services to offer

What facilities and equipment to offer

Where to locate. e.t.c.

2. Planning the use of system:

Short range- intermediate range planning

examples

Planning inventory

Work force level

Planning purchasing and production

Budgeting

Scheduling

Forecasting are also used to predict:

Profit, revenues, costs, productivity changes price, availability of energy and raw materials.

There are six basic steps in the forecasting process:

1. Determine the purpose of the forecast

2. Establish the time horizon

3. Select a forecasting technique

4. Gather and analyze relevant data

5. Prepare the forecast

6. Monitor the forecast

Forecasting problems can be classified according to three time span

1. Short range : Current operations and the immediate future

2. Intermediate : Operations in the next one to three years

3. Long range : Operations beyond three years

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Type of forecast

Time span Use of forecast Forecasting method

Short range Less than 1 year • Production scheduling• Purchasing

Trend forecast, Moving average, Exponential smoothing

Intermediate range

1-3 year • Budgeting• Sales planning

Regression, Time series analysis

Long range 3 year or more • Capital budgeting• Plant location

Delphi method, Market research

Approaches to forecasting

A. Quantitative forecast

1. Time series analysis

a) Naïve method of forecast

b) Moving average

c) Weighted moving average

d) Exponential smoothing

e) Adjusted exponential smoothing

f) Linear trend

2. Casual method

a) Regression

b) Econometrics

B. Qualitative forecast

Quantitative forecasting methods

Quantitative forecasting methods are applicable when the following 3 conditions are met

1. Reliable information about the past

2. The set of information can be expressed in quantitative terms

3. Assumed that pattern of demand exhibit by the past will continue in to the future

Time Series: A time ordered sequence of observations taken at regular intervals over time. (e.g- hourly, daily, weekly, monthly, annually)

Assumption: Future values of the series can be estimated from the past values.

29


Time series and projection method

Forecasting technique Accuracy of forecast

Moving average Short term: Poor to goodIntermediate term: PoorLong term: Very poor

Exponential smoothing Short term: Fair to goodIntermediate term: Poor to goodLong term: Very poor

Box-Jenkins Short term: Very good to excellentIntermediate term: Poor to goodLong term: Very poor

Casual method


Regression model Short term: Good to Very goodIntermediate term: Good to Very goodLong term: Good

Econometric model Short term: Good to Very goodIntermediate term: Very Good to ExcellentLong term: Good to excellent

Input-output model Short term: not used in short termIntermediate term: Good to very goodLong term: Good to excellent

Qualitative forecast method


Delphi method Short term: Fair to very goodIntermediate term: Fair to very good Long term: Fair to very good

Market research Short term: ExcellentIntermediate term: GoodLong term: Fair to good

Panel consensus Short term: Poor to fairIntermediate term: Poor to fairLong term: Poor

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Naïve forecastPerhaps the simplest form of a univariate forecast model is the naïve model. This model uses the current time period’s value for the next time period

Yt+1 = Yt

The naïve forecast is useful when the observation remain relatively constant over time.

If Yt is always increasing then the forecast value of the naïve model is always below the actual value.

If the actual (Yt ) value is always decreasing the forecast value will always be above the actual value. The forecast will be an overestimate and each of the forecast will be negative ( forecast error = actual value – forecast value)

The simple Moving average forecast The simple moving average model uses a simple average of the n most resent values of the time –series variable

Yt+1 = (Yt + Yt-1 + Yt-2 + Yt-3+ Yt-4 + ……………….Yt- (k-1)) / n

The term moving average refers to an average that is updated each time period by deleting one observation at the beginning of the period and replacing it with another at the end of the period. It is also an univariate forecast model because all future values of the variable are determined by the past values. The moving average is only appropriate when there is considerable randomness in data series. Moving average is good for stable demand with no pronounced behavioral pattern ( Russell, page 365).

Exponential smoothing

1. α = Large value

Disadvantages: Emphasis on the recent value but the recent value change is due to the irregular variation

2. α = Small value

Disadvantages: Not reflect any change, very similar to the past forecast

α = Large value when response to recent change is desired

α = Small value lot of irregular movement throughout the entire series

But if the series is stable and definite change in the pattern of the data a large value of α is

appropriate

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Measuring forecasting error

Forecast error is defined to be the numerical difference between the forecasted value and the actual

value

Forecasted error = forecasted value – actual value

Obviously the forecaster would like the forecasting errors to be as small as possible, and would chose

a forecasting method to accomplish this objective.

Measuring Forecasting error

Absolute measure ( Page 379-381)

MAD( Mean Absolute Deviation) /Or MAE (Mean Absolute Error)

MSE (Mean Square Error)

RMSE (Root Mean Square Error)

Cumulative error

Average error

Relative measure ( Page 380)

MAPD (Mean Absolute Percent Deviation)

Note: ( Mad and MSE)

Comparisons of these forecast summary measures for alternative forecasting methods using different

transformations of the data are not permissible.

For example:

1. If a researcher were comparing two forecasts, one generated from a model using the actual

data and another from a model in which the data have been transformed to logarithms, then a

simple comparisons of the forecast summary statistics would not be correct.

2. Comparison of forecast summary statistics for variable expressed in different frequencies

(e.g., monthly versus quarterly ) is generally not appropriate. How ever the forecast measure

MAPE a unit free and could be used to make such comparisons.

An owner of a small business has been using two models to forecast annuals sales during the past

four years and now is interested in determining which of the two forecast models is better. The data

for annual revenues (in millions of dollars) and the forecasts generated by each models are given in

table below

Table-1: Comparison of MAE (MAD) and MSE for two models

Model-I Actual ( Yt ) Forecasted Error (Yt - Yt) I Error I Error 2

32


( Yt )

15 15.5 -0.5 0.5 0.25

20 20.0 0.0 0.0 0.00

19 18.5 +0.5 0.5 0.25

23 27 -4.0 4.0 16.00

MAE or MAD = 5/4 = 1.25 MSE = 16.5/ 4 = 4.125

Model-II Actual ( Yt ) Forecasted

( Yt )

Error (Yt - Yt) I Error I Error 2

15 14 1.0 1.0 1.0

20 18 +2.0 2.0 4.0

19 21 -2.0 2.0 4.0

23 24 -1.0 1.0 1.0

Problems

33


1.

The number of subassemblies used in a particular production process each week in the last 12 weeks

is as follows

Week Subassemblies used in production

6 450

7 480

8 520

9 580

10 600

The plant manager had originally forecast that 375 subassemblies would be used in week 7. using

the information just presented and exponential smoothing with α = 0.50 develop forecast for week 8-

10 . If the manager decide to forecast with 3 week moving average for the same period (9-10 week),

then suggest which method is better . Assume any reasonable assumption if required .

2.

ABC company has recently introduced 21 inch flat screen TV in their product line. Company is

forecasting with three period weighted moving average , forecast with weights of 0.5, 0.30 and 0.20

for the most recent demand values, in that order . If the company wants to change the present

forecasting techniques with naive. What is your opinion about company’s decision .The past six

month selling data are as follows .

Month Actual demand

February 520

March 490

April 550

May 580

June 600

July 420

August 510

3. Lee Ia Cocca Chairman and CEO of Chrysler Corporation found that high cost structure made small profits though sale was rising. He ordered company executives to undertake a concerned

34


study of Chrysler’s cost structure as it related to reported sales .If cost is a function of sales volume then forecast

Month Costs(000) Sales(000)1 15.8 232 12.3 183 14.5 214 15.7 235 12.7 186 13.5 19

A. Forecast for Cost when sales is 21,000B. What is the regression constant, what does it mean ( answer with respect to this question)

4. The following data are forecast errors for three different models

Calculate MAE, MSE for each models , explain which model is best by what criteria

5.The Victory plus Mutual fund of growth stocks has had the following average monthly price for the last 10 month.

Compute the exponentially smoothed forecast for the exponential smoothing constant α = 0.40 and then adjust the forecast with ß = 0.3.

6.

ErrorYear Quarter Model-I Model-II Model-III2005 I -2 3 15

II -1 -2 12III 0 -1 7IV 1 2 3

2006 I 2 1 0II 2 -2 -1III 3 -1 -3IV 5 1 -6

2007 I 1 4 2II 2 6 -3III 3 6 -2

IV 4 10 2

Month Fund price

January 60February 63

March 65April 70May 67June 74July 79

August 80September 85

35


The chairperson of the department of management at East West University wants to forecast the number of students who will enroll in production and operations management next semester in order to determine how many sections to schedule. The chair has accumulated the following enrollment data for the past eight semester:

Semester Student enrolled in POM

1 400

2 450

3 350

4 420

5 500

6 575

7 490

8 650

a. Compute a 3 semester moving average forecast for semester 4 through 8.

b. Compute the exponentially smoothed forecast for semester 4-8(α = 0.2) for the enrollment data. Use Naïve method of forecast to initialize the model.

c. Compare the two forecasts and indicate the most accurate.

7. The manager of Gilley’s Ice Cream parlor needs an accurate forecast of the demand for Ice cream. The store orders Ice Cream from a distributor a week ahead, and if too little is ordered the store loses business. If it orders too much, it must be thrown away. The manager believes that a major determinant of ice cream sales is temperature; that is, the hotter is the more ice cream people buy . Using an almanac, the manager has determined the average day time temperature for 10 weeks selected at random and then from store records, has determined the ice cream consumption the same week. The data are summarized follows

Week Temperature (Degree)

Gallons sold

1 73 110

2 65 95

3 81 135

4 90 160

5 75 97

6 77 105

7 82 120

8 93 175

36


9 86 140

10 79 121

a. Develop a linear regression model for this data .b. Forecast the ice cream consumption if the average weekly temperature is expected to be

85 degree.c. Compute the coefficient of determination for the data and explain its meaning

8.The manager of the Carpet city outlet needs to be able to forecast accurately the demand for Soft Shag carpet (its biggest seller). If the manager does not order enough carpet from the carpet mill, customers will buy their carpets from one of the Carpet city’s many competitors. The manager has collected the following demand for the past 5 months

Month Demand for Soft Shag Carpet (1000 Yd)

1 8

2 12

3 7

4 9

5 15

6 11

7 10

8 12

a. Compute a 3 month moving average forecast for month 4 to 9

b. Compute a weighted moving average forecast for month 4 to 9. Assign weights of 0.55, 0.33 and 0.12 to the month in sequence, starting with the most recent month.

9.

A computer software firm has experienced the following demand for its “Personal Finance” software package

Month UnitJanuary 56

February 61

March 55

April 70

May 66

37


a. Develop an exponential smoothing forecast (February- May) using α =0.4 andb. Develop an adjusted exponential smoothing forecast using α =0.4 and ß = 0.20.

10. RAP computers assembles minicomputers from generic parts it purchases at discount and sells the units via phone orders it receives from customers responding to their ads in trade journals. The business has developed an exponential smoothing forecast model to forecast future computer demand. Actual demand for their computers for the past five months is as follows

Month Demand ForecastMarch 120 -----

April 110 120

May 150 116.0

June 130 129.6

July 160 129.7

August 165 141.8

September 140 151.1

October 155 146.7

November ----- 150.0

Find out a. MAD b. MAPD c. Comments about the accuracy of the forecast

11.The EWU university athletic department wants to develop its budget for the coming year using

forecast for football attendance . Football attendance accounts for the largest portion of its revenues,

and the athletic director believes attendance =f ( number of wins). The business manager has

accumulated total annual attendance figurers for the past 8 years . Forecast the number attendance

for 7 wins .

Wins Attendance (1000s)

4 36.3

6 40.1

6 41.2

8 53

6 44

7 45.6

5 39

7 47.5

38


12.The Manufacturer of a new type women's lipstick "Fire and Ice" is trying to determine how

television advertising expenditures affect lipstick sales. lipstick sales , advertising

expenditure data indicate the following

Lipstick Sales($000) Advertising Expenditure($000)100 20110 30130 35180 40220 50

A. What level of lipstick sales would expect for an advertising expenditure of $ 200,000

Chapter : 6 Inventory Management

39


The Elements of Inventory Management

Inventory is a stock of items kept by an organization to meet internal or external customer demand.

Purpose of inventory management is to deter

A. How many units to order

B. When to order

Most people think of inventory as a final product waiting to be sold to a retail customer-a new car or a

can of tomatos. This is certainly one of its most important uses. However, especially in a

manufacturing firms carries different kind of inventories, including the followings

• Raw materials

• Purchased parts and supplies

• Work-in-process (partially completed) products (WIP)

• Items being transported

• Tools and equipment

• Goods-in transit to warehouse or customers (pipeline inventory)

Services firms do not carry these kinds of inventories, although they do carry inventories of supplies

and equipment.

Functions of Inventory

Inventories serve a number of functions. Among the most important are the following:

A. To meet anticipated demand

B. To smooth production requirements

C. To decouple components of the production-distribution system

D. To protect against stock out

E. To take advantage of order cycle

F. To hedge against price increase or to take advantage of quantity discounts

G. To permit operations

Objective of the Inventory Control

1. Level of Customer service:

( To have the right goods, in sufficient quantities, in the right place at the right time)

2. Cost of ordering and carrying inventories

Measure to test the effectiveness of inventory management

A. Inventory turnover: Ratio of average cost of goods sold to average inventory investment

B. Days of inventory on hand: A number that indicates the expected number of days of sales

that can be supplied from the existing inventory

Demand

In general, the demand for items in inventory is either dependent or independent

40


Dependent demand

Demand for items used to produce final products

Tires stored at a Goodyear plant are an example of a dependent demand item

Item

Discrete demand

Time

Independent demand

Demand for items used by external customers

Cars, appliances, computers, and houses are examples of independent demand

inventory

Item Continuous demand

Time

Inventory Control Systems

An inventory system controls the levels of inventory by determining how much to order (the level of replenishment) and when to order. There are two types of inventory systems: Continuous (fixed order quantity) system and a periodic (or fixed time period) system

A. Continuous system (fixed-order-quantity)

A constant amount is ordered when inventory declines to predetermined level

(reorder point) a new order is placed.

Advantage:

Control

(advantageous for critical items such as replacement parts or raw materials and supplies.)

Management can determine an optimal order quantity

Disadvantage

Costly

Example of Continuous system: Computerized checkout system with a laser scanner used by many super markets and retail store.

B. Periodic system (fixed-time-period)

41


Order placed for variable amount after fixed passage of time

Advantage:

Less direct control

(This typically results in larger inventory levels for a periodic inventory system than in a continuous system to guard against unexpected stock outs early in the fixed period..)

Management can determine an optimal order quantity

Disadvantage

A new order quantity be determined each time a periodic order is made

Example of Periodic system: College or University book store.

The A-B-C Classification System

• The A-B-C approach can be used to classify inventory items according to some measure of

importance.

• Very often that measure is annual dollar volume, which is the product of unit cost for an item

and its annual demand or usage.

• Generally there will be a small percentage of items (10% to 15%) with relatively high annual

volumes( 60-70 percent of the dollar) usage. These should be classified as A items, and

given disproportionately high attention by management.

• At the other end of the scale will be a large percentage of items (around 50% to 60%) that

have relatively low annual volume. These should be classified as C items and given

disproportionately low attention by management.

• The middle group in terms of annual volume (25% to 40%) should be classified as B items

and given moderate attention by management.

• Other factors taken in to account in making exception for certain items ( changing

classification from C to A item). Factors may include the risk of obsolescence, risk of stock

out, the distant of supplier, and so on)

Inventory Costs

A. Carrying cost

Cost of holding an item in inventory

Costs include Interest, Insurance, Taxes, depreciation, obsolescence, deterioration,

spoilage, Pilferage, breakage and warehousing cost like heat, light, rent security

The significance of the various components of holding cost depends on the type of

item involved.

Fresh seafood, meats and poultry baked goods are subject to rapid deterioration

and spoilage

Dairy products, medicines, batteries and film have limited shelf lives

Holding costs are stated in either of two ways : as a dollar amount per unit. Or as a

percentage of unit price.

42


Carrying Costs are linearly related to order size

Annual Cost (Q/2) Cc

Order quantity (Q)

B. Ordering cost

cost of ordering and receiving inventory

These include preparing invoice, shipping costs, inspecting goods upon arrival for

quality and quantity, and moving the goods to temporary storage.

Ordering costs are generally expressed as a fixed dollar amount per order regardless

of order size.

When a firm produces its own inventory instead of ordering it from a supplier, the cost

of machine set up, (preparing equipment for the job by adjusting machine, Changing

cutting tools) are analogous to order cost.

Ordering Costs are inversely and non- linearly related to order size

( D/Q) C0

Annual Cost

Order Quantity (Q)

C. Shortage cost

temporary or permanent loss of sales when demand cannot be met

Economic Order Quantity (EOQ) Models

Optimal order quantity that will minimize total inventory costs

• Basic EOQ model

43


Assumptions of Basic EOQ Model

Demand is known with certainty and is constant over time

No shortages are allowed

Lead time for the receipt of orders is constant

Order quantity is received all at once

Demand rate

TimeTimeLead time

Lead time

Order placed Order receiptOrder receipt

Inve

ntor

y Le

vel

Reorder point, R

Order quantity Q

00

Co - cost of placing order D - annual demandCc - annual per-unit carrying cost Q - order quantity

Annual Order cost = Co D /Q

Annual Carrying cost = CcQ/2

Total cost = Order Cost + Carrying Cost

Co D /Q + CcQ/2

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The pedal bicycle shop operates 365 days a year. The shop pays $ 300 for purchase a particular bicycle from the manufacturer. The shop sells an average of 25 bikes per week( 52 week =1 year). The order cost is $100 and Carrying cot is 25% of the dollar value of the inventory per unit per year. Lead time is 5 days

Find

A. Economic Order QuantityB. Total no of OrderC. Average InventoryD. Total Inventory CostE. Inventory CycleF. Reorder Quantity (Reorder Point)G. Draw the profile of the Inventory

Solution :

Here Order Cost C0 = $100Carrying Cost CC = 0.25* 300 = 75

Annual Demand D = 25 * 52 = 1300

A. EOQ = √2 * Co * D/ Cc = 58.8

B. Total No of Order = D/ EOQ = 1300 / 58.8 = 22.10

Fig: the EOQ cost model

Order Quantity, Q

Annual cost ($) Total Cost

Carrying Cost

Slope = 0

Minimum total cost

Optimal order Qopt

Ordering Cost

45


C. Average Inventory = EOQ / 2 = 58.8/ 2 = 29.4

D. Total Inventory Cost Minimum = Order Cost + Carrying Cost

Co( D/EOQ) + CC (EOQ/2 ) = 4415.88

E. Inventory Cycle (C) = EOQ/D year = 58.8 / 1300 = 0.045 year = 16.50 days

F. Reorder Quantity = D* L = 1300 * 5 / 365 = 17.80

Quantity Discounts

Quantity discounts occurs when suppliers choose to provide incentives for the purchase of large quantities of a good. Quantity discounts are often reflected by lower unit costs on items purchased in larger lots.

If the purchase price per unit be denoted by C, then C*D represents the total purchase price of the item purchased in a given time period. Total inventory cost is then

Total inventory cost = Order Cost+ Carrying cost+ total purchase price

Co D/Q + Cc Q/2 + CD

As CD is independent of Q, so relationship between holding cost, carrying cost and total cost is same as total cost of inventory (EOQ cost model)

46


EOQ = √ 2* Order Cost * Total demand/ carrying cost

Quantity Discounts problem

1. Carrying cost is fixed2. Carrying cost is function of price

1. Carrying cost is fixed

Problem: Comptek computers wants to reduce alarge stock of PC’s it is discounting. It has offered the university bookstores at tech a quantity discount pricing schedule as follows

Quantity Price

1-49 $140050-89 $ 1,100

90+ $900

Annual carrying cost is $190 and Order cost is $2500 and annual demand is 200 units. The book store wants to determine if it should take advantage of the discount or order the basic EOQ model?

Solution:

Step 1: Find the EOQ

EOQ = √2* Co*D/Cc

Fig: the EOQ cost model

Order Quantity, Q

Annual cost ($) Total Cost

Carrying Cost

Slope = 0

Minimum total cost

Optimal order Qopt

Ordering Cost

47


Here Order Cost = $ 2500, Carrying Cost = $ 190 , D =200

EOQ = 72.5

Step: 2: Identify the discount price for EOQ

If order quantity is 72.5 then the discount price is 1,100 per pc Then find the total cost

Step:3 : Find total cost

TCQ=EOQ = Co D/Q + Cc Q/2 + CD = $ 233784

Step: 4 : if the EOQ is not from the large discount, then find out the total cost for large discount

For this problem large discount for Q =90 so find out total cost considering Q =90

TCQ=90 = 194105

Answer

TCQ=90 < TCQ=EOQ so maximum discount price should be taken and 90 units should be ordered

2. Carrying cost is function of price

Problem: XYZ carpet ltd wants to reduce a large stock of carpet s it is discounting. It has offered a quantity discount pricing schedule as follows

Quantity Price 0 – 7449 $10.00 7500- 9999 $8.0010,000 and over $ 7.50

Annual carrying cost is 10% of the unit price and Order cost is $1000 and annual demand is 30,000 units. The carpet store wants to determine if it should take advantage of the discount or order the basic EOQ model?

Solution

Step: 1: Find out the EOQ for all the different carrying cost

Quantity Price Carrying cost 0 – 7449 $10.00 10% of 10 = 17500- 9999 $8.00 10% of 8 = 0.810,000 and over $ 7.50 10% of 7.5 = 0.75

EOQ Price = $10 = 7746

EOQ Price = $8 = 8660

48


EOQ Price = $7.50 = 8944

Step-2 : Identify the correct EOQ

EOQ Price = $10 = 7746 is not the correct one, because if the quantity is 7746(7746 > 7500) then price $10 is not applicable

EOQ Price = $8 = 8660 is correct one because for quantity 8600 price is $8

EOQ Price = $7.50 = 8944 is not correct one, because if the quantity is 8944(8944<10000) then price $7.50 is not applicable

Step: 3 : Find the TC with the correct EOQ (in this case it is 8660)

TC Q= 8660 = 246928

Step: 4 : if the EOQ is not from the large discount, then find out the total cost for large discount

For this problem large discount for Q =10,000 so find out total cost considering Q =10,000

TCQ=10000 = 231750

Answer

TCQ=10000 < TCQ= 8660 so maximum discount price should be taken and 10,000 units should be ordered

49


Inventory Problems

A. Discount Problems

1. Discounts information for the carpet division is summarized in the following table

If the yearly demand is 30,000 unit, Order costs is $ 1000 and holding cost per unit per year is 10%

of the unit cost. Compute

A. Economic order quantity

B. Total inventory cost

2. Manufacturing firm has been offered a particular component part it uses according to the following

discount pricing schedule provided by the supplier

Order size Price

1-199 $65

200-599 $59

600-over $56

The manufacturing company uses 700 of the components annually. The annual carrying cost is $14

per unit, and the ordering cost is $275. Determine the amount the firm should order. (10 Marks)

3. The book store at Havard University purchases sweatshirts emblazoned with the school name and logo from a vendor. The vendor sells the sweatshirts to the store for $38 a piece. The cost to the bookstore for placing an order is $120 and the annual carrying cost is 25 percent of the cost of a sweatshirt. The bookstore manager estimates that 1700 sweatshirts will be sold during the year. The vendor has offered the book store the following volume and price schedule. Determine the amount the bookstore should order.

Discount class Order size Unit Cost

1 0-7499 $ 10.00

2 7500-9999 $ 8.00

3 10,000 and over $ 7.50

Order size Price1-299 $38

300-499 $37500-799 $36

800+ 435

50


B. Basic EOQ problems

4. L Jones department store experiences an annual demand of 9000 super soft pillows. The fixed cost

associated with the placing an order is $200 and it costs $3 a years to hold a pillow in inventory.

Compute the economic order quantity, the minimum total annual inventory cost, the optimal number of

orders per year, and the optimal time between the orders. Provide a schematic representation of the

inventory system. If the lead time is 15 days what is the reorder point?

5. Hayes electronics stocks and sells a particular brand of microcomputer. Its costs the firm $ 450 each time it places an order with the manufacturer for the microcomputers. The costs of carrying one microcomputer in inventory for a month is $15 .The store manager estimates that total annual demand for the computers will be 1200 units with a constant demand rate throughout the year. The store is open for everyday of the year except two Eid holidays. Find out the following

A. Economic Order quantityB. Inventory cycles in daysC. Economic order quantity

(When Order and carrying cost is 10% less than the estimated)D. Total inventory cost (on the basis of C)

6. Hayes Electronics assumed with certainty that the ordering cost is $ 450 per order and the inventory carrying cost is $170 /unit/ year. The total estimates monthly demand is 100 unit. However the inventory model parameters are frequently only estimates that are subject to some degree of uncertainty. Consider two case of variation in the model parameters

1. Both the carrying cost and the order cost are 10% less than originally estimated2. Ordering cost is 10% higher and carrying cost is 10% lower than the originally estimated

Determine the optimal order quantity and total inventory cost for above two change situation and comment?

7. AV city stocks and sells a particular brand of laptop. It costs the firm $625 each time it places an

order with the manufacturer for the laptops. The cost of carrying one laptop in inventory is $ 0.357 per

unit per day. The store manager estimates that total monthly demand for the laptops will be 125 units.

A. Determine the optimal order quantity and total inventory cost

B. If the order quantity is 10% more and 10% less than the optimum order quantity. Then what is

the total inventory cost for both cases

C. Comments on the above finding (on diagram)

8. A company maintains a yearly inventory of 3 inventory items. The demand for item A is 3600, Item

B is 24,000 and Item C is 600. If the order cost is $12 for all the three items and carrying cost for item

A is $2.5, for B is $0.5 and for C is $2. The company’s presently orders quarterly for each of the three

items. Now the company is interested to adopt optimum order quantity (Basic EOQ model) for all the

three items. How much savings in total inventory cost if the optimum quantity is practiced for all the

three items?

51


9 . Find the amount (taka) of average inventory carried for a family against each of the following purchase for a period of one month. Make necessary assumptions, so all calculations.

A. The family requires 4 kg of onion @ taka 26. They purchase the required onion two times a month at equal gap, Draw the EOQ profile

B. The family consumes 10 kg of flour @ TK 18.00. They purchase the whole amount at the first day of the month, Draw the EOQ profile

C. The family purchases two litre bottles of soft drink exclusively for their weekend lunch @ TK 45 per bottle. The purchase is made from the local grocery before the lunch, Draw the EOQ profile

D. The family purchases 2 kg of meat every weekend. The monthly consumption for meat is TK 880.00

Draw the EOQ profile

10.Yellow pres inc., buys slick paper in 1500 –pound rolls for text book printing. Annual demand is 2,500 rolls. The cost per roll is $800, and annual holding cost is 15 percent of the cost. Each order cost is $50.

I. How many rolls should Yellow Press order at a time?II. What is the time (in days) between orders?III. If the manager of the Yellow press wants to use only one order per month to full fill the

annual demand then what is the order quantity and what is your suggestions for this case and why?

IV. What is the cost of average inventory for both cases (I and III)?

11.Electronic Village stocks and sells a particular brand of personal computer. It costs the store $450 each time it places an order with the manufacturer for the personal computers. The annual cost of carrying the PCs in inventory is $170. The store manager estimates annual demand for the PCs will be 1200 units. Determine the optimal order quantity, total inventory cost, total no of order, Inventory cycle in days and average inventory.

12. A large law firm uses an average 40 boxes of copier paper per day. The firm operates 260 days a year. Carrying costs for the paper are $2.5 a month per box, and it costs approximately $60 to order and receive a shipment of paper. The office manager is currently using an order size of 200 boxes. The partners of the firm expect the office to be managed in a “cost efficient manner”. Would you recommend that office manager use the optimal order size instead of 200 boxes? Justify your answer. Draw the profile of two cases (Optimum size and Present practice)

13.A Producer distributor uses 800 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annual carrying cost of 35 percent of the purchase price per crate. Ordering costs are $28. Currently the manager orders once a month. How much could the firm save annually in ordering and carrying cost by using EOQ?

52


ABC classification

14. The dynaco company stocks different parts and material it uses in its manufacturing processes.

Recently as demand for its finished goods increased, management has had difficulty managing parts

inventory; they frequently run out of some crucial parts and seem to have an endless supply of others.

In an effort to control inventory more effectively, they would like to classify their inventory of parts

according to the ABC approach. Following is a list selected parts and annual usage and unit value for

each. Classify the inventory items according to the ABC approach

Item name Annual use Unit cost Usage value(Annual use * Unit cost)

G-101 36 350 12600

H-102 400 30 12000

I-201 50 23 1150

J-202 300 45 13500

K-301 40 1000 40000

L-302 500 8 4000

M-201 710 4 2840

N-202 80 26 2080

O-401 344 28 9632

P-402 45 450 20250

15. The following table contains figures on the annual usage and unit costs for a random sample of 12 items. Develop an A-B-C classification for these items

Item Name Annual usage

Unit cost

1 1000 TK 4300

2 5000 720

3 1900 500

4 1000 710

5 2500 250

6 2500 192

7 400 200

8 500 100

9 200 210

10 1000 35

11 3000 10

12 9000 3

16. The maintenance department for a small manufacturing firm has responsibility for maintaining an inventory of spare parts for the machinery it receives. The parts inventory, unit cost and annual usage are as follows

53


Part Unit cost ($) Annual Usage

1 60 90

2 350 40

3 30 130

4 80 60

5 30 100

6 20 180

7 10 170

8 320 50

9 510 60

10 20 120

A. Classify the items in to ABC classes

17.The following table contains figures on the monthly volume and unit costs for a random sample of 12 items from a list of 2000 inventory items at a health care facility

a. If manager decides to place item M-10 in to “A” category what are the possible explanation

Item name Unit cost UsageK34 10 200

K35 25 600

K36 36 150

M10 16 25

M20 20 80

Z45 80 200

F14 20 300

F95 1200 130

F99 20 60

D45 10 550

D48 12 90

D52 15 110

54


MRP Problems

1.

Referring to the product structure diagram for product A determine

a. How many K, E, I are required for 10 unit of Ab. Construct a single level bills of material for product A

2.

A

B (2) D (3)

E (2) F (1)H (1) I (2)

E (4)

C (1)

G (4)

J (4) K (2)

K (1) L(1) W(1)

H(4) M(2) N(2) Z (3)

P

G(3)

55


3. Master Production Schedule

1 2 3 4 5 6 7P 100 100

Item Master File

P K GOn hand 0 0 40Schedule Receipt 0 10 (Period 3)

30 (Period 6)0

LLC 0 1 2Lot Size L4L L4L L4L Lead Time 1 2 1

Find out the MRP calculations for P, K and G

4.Given the following diagram for a product, determine the quantity of each component required to assemble 30 unit of finished good

( Inventory record : F = 20 units, G = 5 unit, H = 4 unit, D = 76 unit currently on hand)

E

F( 2) G (1) H (1)

J (2) D(4) L (2) J (2) A (4) D (2)

5.Use the bill of materials and inventory records to determine the quantity of purchased items necessary to assemble 20 end items if the manufacturer uses lot-for-lot ordering. There are no end items currently on hand.

Component On-hand Component On-handA 5 D 15B 75 E 3C 10 F 20

56


6.Product A consist of two units of subassembly B, three units of C and one unit of D. B is composed of four units of E and three units of F. C is made of two units of H and three units of D. H is made of five units of E and two units of G

A. Construct a product structure tree using low level coding

B. To produce 100 units of A determine the number of units of B, C, D, E, F, G

7.The Alpha beta company produces two products A and B. The product structure tree and master schedule, inventory information are given below. Determine when order should be released for A, B and D ( 2 + 3+ 5 = 10 marks)

On hand Schedule receipt Lot size MPSA 10 0 L4L 100, period 8B 5 0 L4L 200, period 6C 140 0 Multiple of 150D 200 250, period 2 Multiple of 250

Level 0

Level 1

A LT = 3

B LT = 2

D (3) LT= 2

D (2) LT = 2

C (3) LT = 4

57


8.Eighty units of end item E are needed at the beginning of week 6. Three cases ( 30 units per case) of J have been ordered and one case is scheduled to arrive in week 3, one in week 4 and one in week 5: Note : J must be ordered by the case, and B must be produced in multiples of 120 units. There are 60 units of B and 20 units of J now on hand. Lead times are two weeks each for E and B and one week for J

E

B (2) J (3)

J (4) F (2)

9.Complete the following MRP matrix for item X

Item: XLT: 2 Lot Size: Min 50LLC: 1

Period

1 2 3 4 5 6 7 8

Gross requirements

20 30 75 88 60 90 40 60

Scheduled receipt

50 12 14 17

Projected on hand ( 40)Net requirementsPlanned order receiptsPlanned order release

A. There are five manufacturing processes , in which manufacturing process you can apply MRP , answer with reasoning

58


10.The XYZ company is the producer of different saw. One of the popular brand is “ X” . The MRP department has a problem- its computer died just as it spit out the following information. Planned order release for the item E = 640 unit in week 2. the firm has been able to reconstruct all the they except the MPS for end item X, the firm is fortune because E is used only in X. Being an expert of MRP how you can help the firm to determine the master schedule for X, Given the following record information.

Item Lead time (weeks)

On hand

Schedule receipt Lot Components

X 1 0 L4L B(1), C(2), DB 1 60 20, week 2 120 -------------C 1 200 20, week 6 L4L E(4), BD 2 0 40, week 3 L4L -------------E 2 0 L4L -------------

11.Complete the following MRP matrix

Item = XLLC =1, LT=2Lot size= Min=50

1 2 3 4 5 6 7 8 9 10

Gross requirements 20 30 55 60 90 40 100 126 135 160

Scheduled receipt 10 15 20 30 50On hand (50)Net requirementsPlanned order receiptsPlanned order release

12.Consider the operation of emergency department and other specialized department of a hospital . Explain which department is belongs to which service process category and why

X

B(2) C(1)

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

E (4)

Determine the quantities ( X = 10 unit)if the inventory status is as follows ,

B = 4 unit, C = 5 unit, D = 8 unit, E = 60 unit

59


13. A table is assembled using three components as shown in the accompanying product structure tree. The company that makes the table wants to ship 100 units at the beginning of day 4, 150 units at the beginning of day 5, and 200 units at the beginning of day 7. Receipts of 100 wood section are scheduled at the beginning of day 2. There are 120 legs on hand. An additional 10 percent of the order size on legs is added for safety stock. There are 60 braces on hand with no safety stock requirement for braces. Lead times are days for all items are shown in the following table. Prepare a MRP plan using lot for lot ordering .Find MRP calculation for Table, Woo section, and Legs)

Table

Wood section (2) Braces (3) Legs (3)

Quantity Lead times 1-200 1 201-550 2551-999 3

14. End item P is composed of three subassemblies : K, L and W. K is assembled using 3 G’s and 4 Hs, L is made of 2 Ms and 2 Ns; and W is made of 3 Zs. On hand inventories are 20 Ls, 40 Gs and 200 Hs. Scheduled receipts are 10 Ks at the start of week 3, 30 Ks at the start of week 6 and 200 Ws at the start of week 3. One hundred Ps will be shipped at the start of week 6, and another 100 at the start of week 7. Lead times are two weeks for subassemblies and one week for components G,H, and M. Final assembly of P requires one week. Include an 10% scarp allowance in each planned order of G. the minimum order size for H is 200 units. Find MRP for P, K and G

15. Assume that you are the manager of a shop that assembles power tools . You have just received an order for 50 chain saws, which are to be shipped at the start of week 8. Pertinent information on the saw is

Item Lead time (weeks)

On hand

Schedule receipt Lot Components

Saw 2 15 Lot for Lot A (2), B(1), C(3)A 1 10 15 , week 7 Lot size=50 E(3), D(1)B 2 5 17, week 4 Lot for Lot D(2), F(3)C 1 30 10, week 8 Lot size =

multiple of 15E(2), D(2)

D 1 20E 1 10 10 , week 4

20, week 5200

F 2 30

B. Develop a product structure treeC. Develop the material requirements plan for component E

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