project and production management
DESCRIPTION
module 9:Tactical Decisions and Review Back to main index exit continue. Project and Production Management. Module 9 Tactical Decisions and Review. Prof Arun Kanda & Prof S.G. Deshmukh , Department of Mechanical Engineering, Indian Institute of Technology, Delhi. - PowerPoint PPT PresentationTRANSCRIPT
Project and Production Management
Module 9Tactical Decisions and Review
Prof Arun Kanda & Prof S.G. Deshmukh, Department of Mechanical Engineering,Indian Institute of Technology, Delhi
module 9:Tactical Decisions and Review
Back to main index exit continue
MODULE 9: Tactical Decisions and Review
1.Basic Inventory Principles
2.Inventory Modeling3.Material
Requirements Planning
4.Job shop scheduling
5.Course Summary and Review
6. Illustrative Examples 7. Self Evaluation Quiz 8. Problems for
Practice 9. Further exploration
module 9:Tactical Decisions and Review
Back to main index exit
1. Basic Inventory Principles
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
FUNCTIONS OF INVENTORIESInventories are Idle Resources maintained in various forms:
- Raw materials- Purchased & manufactured parts- Subassemblies- Finished productsSince inventories represent a sizable
investment in a logistic system, we must be aware of the functions they perform
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
FIVE CATEGORIES OF STOCKSPIPELINE stock (in process stock, in transit stock)
CYCLE stocks (batch production owing to - economies of scale - technological requirements)
SEASONAL stocks ( time varying requirements of an item)
SAFETY stocks (supply and demand uncertainties, lead time uncertainties)
Stocks held for OTHER REASONS (- decoupling stages of production - price, quantity discounts, - speculation)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
INVENTORY RELATED COSTS • Procurement cost
Cost/order generally fixed (not dependent on order qty)
• Costs associated with existence of inventories
(supply exceeds demand) Cost/unit/unit time i C (i = inventory carrying cost rate)
• Costs associated with stock outs (demand exceeds supply) (cost/unit) (cost/unit/unit time)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PROCUREMENT COSTSProcurement cost Cost of goods
Cost/order generally fixed Ordering cost(not dependent on order qty)
- Administrative component - Handling - Transportation - Inspection of arrivals
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
INVENTORY HOLDING COSTS
Costs associated with existence of inventories (supply exceeds demand) Cost/unit/unit time i C (i = inventory carrying cost rate)
- Storage and handling - Interest on tied up capital - Property taxes - Insurance - Spoilage - Obsolescence - Pilferage
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SHORTAGE COSTSCosts associated with stock outs
(demand exceeds supply) (cost/unit) (cost/unit/unit time)
- Additional costs of special order - Backorder, if possible - Loss of customer goodwill - Lost sales
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SELECTIVE INVENTORY CONTROL
In a large number there are
Typical organisations deal with a large variety of stocked items
PARETO’s Law
(10,000 – 100,000 …is not uncommon)Depending on rankings of• VALUE ((Annual demand X unit price)) ABC Analysis
(Always Better Control)• CRITICALITY (Vital, Essential, Desirable) VED Analysis
• USAGE FREQUENCY FSN Analysis(Fast moving, Slow moving, Non moving)
Based on product characteristics, suitable policies can be chosen
USAGE FREQUENCY
significant few insignificant many
A B C
NS
F
VED
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
ABC ANALYSIS
5-10% items account for about 75% value15-20% items account for about 15% valueBalance items account for about 10% value (or A class ≥ 6 items average annual usage C class ≤ 0.5 items average annual usage B in between)
Where, Average Annual usage= ofitemsoTotayeartialTotalMater
.ln/cos
25
50
75
90100
25 50 75 10010
Percent of number of inventory items
A
B
C
Perc
ent o
f ave
rage
inve
ntor
y in
vest
men
t
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
OBJECTIVE OF ABC ANALYSIS:Rationalization of Ordering Policies
EQUAL TREATMENT TO ALLItem no. Annual Consumption
Value (Rs.)Number of
OrdersValue per order Average inventory
123
60,000 4,000 1,000
444
15,000 1,000 250
7500 500 125
Total Inventory: Rs. 8125
PREFERENTIAL TREATMENT on basis of ABC analysis123
60,000 4,000 1,000
831
7,5001,3331,000
3750 667 500
Total Inventory Rs 4917
The optimum no of orders can be arrived at by using models of inventory control eg. EOQ
Q* =icdo2
time
inve
ntor
y
Ann
ual c
ost
Q*
Total cost
carriage
ordering
DETERMINATION OF REORDER POINTReorder point = Max. reasonable demand during lead time
= expected demand during lead time + safety stock
(usually pre specified by management)
K= 0; risk of shortage = 50% service level = 50%K= 0; risk of shortage = 15.87% service level = 84.13% K= 0; risk of shortage = 2.28% service level = 97.72% K= 0; risk of shortage = 0.13% service level = 99.87%
Higher safety stockA class items have relatively low service levels (0.8 or so)
- Lower safety stocks- Tighter control & efficient expediting
B class items handled routinely with service levels of 0.95 or so
C class items should be present in ample supply, minimum records, controls, procedure very high service levels (0.95 to 0.98)
Prob. of stockout
Total demand in lead timexL + kLxL
kL
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
POLICY IMPLICATIONS OF SELECTIVE INVENTORY CONTROL
ABC analysisA class items need continuous rigourous control
(use of mathematical models justified)B class items – relaxed control (periodic review)C class items – simple rules of thumb
V class items call for a high level of serviceE class items call for medium level of serviceD class items call for tolerable level of servicejointly determine service levels
FSN analysisFast most inventory models apply to this classSlow ( spare parts etc)Non – moving (dead stock) (optimal stock disposal rules)
VED analysis
% riskOf shortage
(min)
(max)
ABC
VED
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
A SAMPLE SET OF SERVICE LEVELS FORDIFFERENT CATEGORIES OF ITEMS
V E DA 0.80 0.75 0.6B 0.95 0.90 0.85C 0.99 0.97 0.95
V E DA 0.7 0.6 0.5B 0.9 0.8 0.7C 0.95 0.9 0.85
High cost ofstockout
Low cost ofstockout
decr
easi
ngde
crea
sing
decreasing
decreasing
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
OBJECTIVE OF INVENTORY MANAGEMENT SYSTEM
An inventory system consists of a set of rules and procedures that allow
for routine decisions on when & how much to order of each item needed
in the manufacturing or procurement process,
which call attention to the non-routine situations, the rules do not cover &
which provide managers with the necessary information to make these
decisions effectively.
The objective of a well designed procedure should be the minimization
of the costs incurred in the inventory system, attaining at the same time
the customer service level specified by the company policies.
1
2
3
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
STRUCTURE OF A TYPICAL COMPUTERISED
INVENTORY MANAGEMENT SYSTEM
Basic sub systems or modules:-• Transactions and file maintenance module
• Decision rules module
• System integrative module
• System-management interaction and evaluation module
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
TRANSACTIONS ANDFILE MAINTENANCE MODULE
Book keeping of inventory control – Entry, auditing, control and processing of inventory transactions
NECESSITY: Continuous updating to provide accurate information on -Available stock (on hand and on order)-Customer order status-Cost of items-Delivery lead times-Source of acquisition-Ordering restrictions- …
DEVELOPMENT: mainly the area of data processing.
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
THE DECISION RULES MODULEThis is concerned with the fundamental components of inventory planning and control procedures aimed at answering when and how much to order of each item to maintain inventories at the right level.
A forward looking system should include forecasting capabilities safety stocks (to account for unavoidable in accuracies) decision rules are needed to guarantee some desired level of customer service.
EOQ, q* =icdo2
Use EOQ and continuous monitoring
Order in lots of 3 months demand if stock at hand is less than ROP
Order in lots of 6 months demand if stock on hand is less than ROP
A-class C-classB-class
ITEM
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SYSTEM INTEGRATIVE MODULE
The various items being controlled, depending on their
inherent characteristics require specific degree of
management attention and service levels that can be
achieved by using some appropriate stock policy
Decision rules Distinct inventory policies
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SYSTEM MANAGEMENT INTERACTION AND EVALUATION MODULE
Intended to provide management with such information as to permit evaluation Evaluation of operating performance Identify problem areasAllow for management selection of policy
variables (system parameters)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SUMMARY & CONCLUSIONS
- Omnipresence of inventories (‘necessary evil’)
- Nature of inventory related costs
- Principles of selective inventory management
ABC analysis
VED analysis
FSN analysis
- Ordering rules and reorder point determination
- Policy implications of selective inventory management
- Features of a computerized inventory management system
- Relevance ? – independent vs. dependent demand systems
- MRP vs. conventional inventory management
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
2. Inventory Modelling
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
LOT SIZING- When to order ?- How much to order ?
Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV)
Reorder point
Lead time
Order qty., q
NO
BA
CK
LOG
GIN
GPURCHASE
Inv.
I
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PRODUCTION
q
Inv.
II
LOT SIZING- When to order ?- How much to order ?
Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
LOT SIZING- When to order ?- How much to order ?
Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV)
q
bBA
CK
LOG
GIN
GInv.
III
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
LOT SIZING- When to order ?- How much to order ?
Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV)
b
Inv.
IV
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
ANALYSIS
BROAD APPRAOCH(1) Identify the cost components in each cycle (of length t)
(2) Express costs in terms of decisions variables (order qty, q and backorder level, b)
(3) Develop annual cost by multiplying (1) by number of cycles/year
(4) Optimize to find q*, b*
Carrying cost Shortage cost Set up or order cost
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
VARIATIONS IN THE LOT-SIZE FORMULE
WITHOUT BACKLOGGING
021
3 *b,
CdC*q
C = unit cost (Rs/piece)C1 = i X C = carrying cost (Rs/unit/time)C2 = shortage/backlogging cost (Rs/unit/time)C3 = order cost (Rs/order)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
VARIATIONS IN THE LOT-SIZE FORMULE
C = unit cost (Rs/piece)C1 = i X C = carrying cost (Rs/unit/time)C2 = shortage/backlogging cost (Rs/unit/time)C3 = order cost (Rs/order)
012
1
3
*b,)p/d(C
dC*q
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
VARIATIONS IN THE LOT-SIZE FORMULE
C = unit cost (Rs/piece)C1 = i X C = carrying cost (Rs/unit/time)C2 = shortage/backlogging cost (Rs/unit/time)C3 = order cost (Rs/order)
b
WITH BACKLOGGING
2
21
1
32C
CCC
dC*q
21
1
CC*qC*b
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
VARIATIONS IN THE LOT-SIZE FORMULE
C = unit cost (Rs/piece)C1 = i X C = carrying cost (Rs/unit/time)C2 = shortage/backlogging cost (Rs/unit/time)C3 = order cost (Rs/order)
b
2
21
1
3
12
CCC
)p/d(CdC*q
21
1 1CC
)p/d(*qC*b
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
1. Demand fixed at constant rate of d units/unit time
2. Replenishments made when inventory reaches zero level so that no shortages occur.
3. Fixed lot size q.
4. Infinite replenishment rate
5. Lead time is known
6. The unit carrying cost, c, is constant Rs/unit/unit time.
7. The replenishment cost, C3 is constant Rs/Order.
ASSUMPTIONS inCLASSICAL LOT-SIZE SYSTEM
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SENSITIVITY STUDIES ON CLASSICAL LOT-SIZE MODEL
AN
NU
AL
CO
STS
LOT SIZE qq1
q*
q2
TC
TCmin
Total costCarrying cost
Order cost
221 iCqqC
qdC3
q
Inv.Level
Avg
. Inv
ento
ry =
q/2
qdCqC)q(K 31
2
1
32CdC*q
312 CdCTCmin
Sensitivity Q = bq*, b > 0
b 0.5 0.8 0.9 1.0 1.1 1.2 1.5 2.0TC/TCmin 1.250 1.025 1.006 1.000 1.005 1.017 1.083 1.29
bb)b(
TCTC
bmin 21
21 2
1
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EOQ WITH QUANTITY DISCOUNTS
Total annual cost = dCCqdqC 31
2Annual usage
ExampleAnnual demand = 5000 partsOrder cost = Rs 49Inventory carrying cost = Re 1 per part/year
7001
4950002 )(EOQ
Discount scheduleOrder quantity Unit cost/part
0 – 9991000 – 24992500 – over
Rs 5Rs 4.85Rs 4.75
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
TOTAL ANNUAL COSTS for THREE ORDERING POLICIESORDER
QTY.ANNUAL HOLDING
COSTANNUAL
ORDER COSTPURCHASE
COSTTOTAL
70010002500
350 5001250
350245 98
25,00024,25023,750
25,70024,99525,098
OPERATING AT A LOT-SIZE of 1000 rather than EOQ of 700 is WARRANTED HERE
ANNUALCOSTS
q700 2500
25,700
TAC(Rs 5)
1000
TAC(Rs 4.85)
TAC(Rs 4.75)
25,098
24,995
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
AN EXAMPLE ILLUSTRATING SHIFT OF EOQs
991Quantity
100 and over2Rs
tcosUnit
Re 1
D = 250/yrC3 = Rs 5/orderi = 20%
79220
525022 )(.XX)Rs(EOQ 112
120525021
)(.XX)Rs(EOQ
IN THIS CASE A LOT SIZE OF 112 RESULTS IN MINIMUM COST
ANNUALCOSTS
qEOQ=79 112100
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
DETERMINISTIC SINGLE ITEM MODEL
NOTATIONd = demand rate (units per unit time)P = production rate (unit per unit time)Q = order/production quantityT = cycle lengthB = maximum backorder level permittedImax = maximum on-hand inventory levelC = unit item costC1 = inventory carrying cost in Rs/unit/unit time = iCC2 = shortage cost in Rs/unit/unit time (back logged demand)C2 = shortage cost/unit short independent of time (lost sales)C3 = set up cost per order/batch
t1 t2
tp
t3 t4
t
Imax
0
-b
Rate of fall, dRate of rise p-d
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Cycle time t = q/d
Time to produce a lot, tp = q/p max. inventory, Imax =
t1 = time for backorder b to be cleared once production starts
t2 = time for inventory level to build up from zero to Imax
t3 = time for inventory level to drop to zero from Imax at constant demand, d
t4 = time for backlog b to buildup at a demand rate, d
dpb
dpImax
db
dImax
b)dp(pq b)
pd(q 1
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
COSTS/CYCLE
During (t2 + t3) there is inventory andcarrying costs = ½ Imax (t2 + t3) c1
During ( t1 + t4) there is shortage cost = ½ b (t1 + t4) C2 + C’2 b
Ordering / replenishment cost per cycle = C3
Notice that
)dp(dpb
ddpb)tt(
1141
)dp(dpI
ddpI)tt( axmaxm
11
32
bpdqI& axm
1
t1 t2 t3 t4
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
AVERAGE ANNUAL COSTS K (q, b)
K (b, q) = t
Ctb'C
tttbC
tttIC axm 3
241
232
122
Substituting for t, (t1 + t4), (t2 + t3) & Imax in terms of q, b we obtain
K (b, q) = qdC
qbd'C
)p/d(qbC
)p/d(qb)p/d(qC 32
221
12121 2
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
OPTIMAL RESULTSAnnual cost is K (b, q)
The solution of these simultaneous equations yields the optimum values q* and b* as follows:
0
bK
qK
2
21
2111
3
)()/1(2*
)'( 22
CCC
CCCpdCdCq
dC
21
21 1CC
)p/d)(d'C*qC(*b
and
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
FAST vs SLOW MOVING ITEMSSlow moving items• Low level of demand• Frequent periods of no usage
Likely to be between 50-100 units/yr
Peterson & Silver (1979) recommend classifying items according to demand over the replenishment lead time:
An expected lead time demand of 10 units or larger puts the item in the fast mover’s class, while an expected lead time demand of less than 10 units defines a slow mover
Thresholds difficult to define [ depend on item nature]
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
CONTINUOUS (PERPETUAL) REVIEW SYSTEM WITH REPLENISHMENT ORDER QTY. Q AND REORDER LEVEL R
Amt. of inventory on hand
Reorder level, R
Safety stock (s s)
Avg. lead time usage (U)
Amt. used during Lead time
Amt. of inventory on hand
Amt. of inventory on hand
Amt. of inventory on handAmt. of inventory on hand
Amt. of inventory on hand
Amt. of inventory on hand
U1 U2 U3
Q
LT1
LT2
LT3
QOrder qty, Q
Time
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
COMPUTATIONS FOR RU = Lead time demandLT = Lead time (working days)D = daily demand
Z is obtained from the NORMAL TABLES based on
• A pre specified stockout probability, P
• Optimal stockout frequency based on costs of shortage and carrying inventory
LT__
d_
U_
2)d_
)(VarLT(LT__
)Vard()U(Var
)U(Varu
uZUR
)u,U(N 2
Z Probability of stockout
either
or
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EXAMPLE (p305, ch. 10)Per unit holding cost = Re 1/yrOrdering policy : 4 times a yrPre specified service level : 1 stockout/3 yrs
SQ/yr = 0.33
LEAD Times from SUPPLIER
Orderplaced
1/7 2/3 3/16 4/6 5/2 6/2
Order received 1/18 2/21 4/20 4/28 5/20 6/23
Lead timesCalendar daysWorking days
117
1812
3525
2216
1814
2115
Month/day
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Similar data on demands for last six months yield
EXAMPLE (p305, ch. 10)
d = 40 units/day
Var (d) = 30 (units/day)2
LT = 7 + 12 +25 + 16 + 14 + 156
= 14.83 days
Var (LT) = (7 – 14.83)2 + (12 – 14.83)2 + …6 -1
= 34.97 (day)2
(contd.)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EXAMPLE (contd.)
3975640 29734831430 ,)().().)(()U(Var
08304330 ..
nyr/SO
3593831440 .).)((U Units demanded per lead time
523739756 .,u Units per lead time
Desired SO/yr = 0.33 (as stated earlier)
P = desired probability of stockout per order cycle
From tables Z = 1.39
SS = 1.39 (237.5) = 330.1
R = 593.3 + 330.1 = 923.4
Z
0.083
Order cycles/yr = 4 (given) = n
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
IMPROVING RELIABILITY OF LEAD TIME
Safety stock = 1.39 (21.09) = 29 ( compared to 330 earlier) R = 622 (compared to 923 earlier)
Inventory lowered by 301 units Annul savings = Rs 1 X 301 = Rs 301
Thus it is worthwhile to improve reliability of lead time
If var (LT) = 0Then var (U) = 30 X 14.83 = 444.9
u = 444.9 = 21.09 units per lead time
(compared to the original 237.5)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
OPTIMAL STOCKOUT FREQUENCY AND IMPLIED BACKORDER COSTS
Cost of shortage X Optimal SO/yr = Inventory carrying costShortage cost = Rs 10
Z = 1.96 (from normal tables)
R* = 593.3 + 1.96(237.5) = 593.3 + 465.5 = 1058.8For R = 926
SO/yr = C1/shortage cost0.33 = 1/shortage costCB = 1/0.33 = Rs 3 (implied shortage cost)
optimal SO/yr = 1/10 = 0.10
P* = SO/yr = 0.01 = 0.025n 4
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
INVENTORY CONTROL POLICIESCONTINUOUS REVIEW SYSTEMS
• (S, Q) policy – when available inventory reaches level s, order Q • (s, S) policy – when available inventory becomes equal to or less
than s, order upto level S
PERIODIC REVIEW SYSTEMS• (nQ, s, R) policy – If at a review time the available inv. < s, an amt. nQ is ordered (n=1,2,3) n is such that after the order is placed, the avail. Inv. Reaches a level
in (s, s+Q)• (S, R) policy – At each review time a sufficient qty. is ordered
to bring the level of ave. inv. upto S.• (s, S, R) policy – If at a review time, the available inv. < s a
sufficient qty. is ordered to bring level upto S, otherwise no order is placed
Available inventory = inventory on hand + amount on order - Units back ordered
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Lead time
Reorder point
Avg.Lead time consumption
Reserve stock
Safety stock
Demand uncertainties
Lead time uncertainties
Stoc
k
Avg. demand for maximum delay
Probability of delay
a) Avg. demand during avg. lead time (buffer)
b) Variations in demand during avg. lead time, depending on service level (reserve stock)
a) Avg. demand during delivery delays (safety stock)
)LXD(
)kx( LD
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EXAMPLEFor the following data work out the costs under both• A continuous review, fixed order qty (Q system)• A periodic review, variable order qty (P system)• Avg. annual demand = 20,000 units• Std. deviation of demand per week = 50 units• Unit price = Rs 10• Ordering cost = Rs 100• Inventory carrying cost rate = 20%• Avg. lead time = 4 weeks• Max. delay = 3 week• Probability of delay = 0.31• Service level = 95% (prob. Of stockout during lead
time = 5%)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Q systemunits 1414
x).(x,x qty Order
1020100000202
Safety Reserve Buffer point reorder
units 1540 4 x 52
20,000 time lead during demand avg. Buffer
time lead during demand of deviation std. x k stock Reserve units 164 50) x 4( 1.64
delay of yprobabilit x delay max during demand Avg. stock Safety
units .x.x)3 x 20,000( 358310115431052
units 2062 358 164 1540 point Reorder
time
S2062
Stock level
Q = 1414
Lead time = 4 weeks1.64
Mean,
0.95
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
P system
wks.3.7 weeks52 x,
years,Demand
EOQ periodReview 00020
141400020
1414
Can be rounded off to either 3 or 4 weeks depending on cost consideration
3 weeks1733 Rs 100 Rs x
352 cost ordering Annual
1,154 Rs .xxx17.3320,000 cost carrying inventory Annual 20010
21
Total inv. Cost = 1733 + 1154 = Rs 2887
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
4 weeks1300 Rs 100 x
452 cost ordering Annual
1,154 Rs .xxx13
20,000 cost carrying inventory Annual 2001021
Total inv. Cost = 1300 + 1154 = Rs 2840
Review period is 4 weeks
Desired inventory level = Buffer + Reserve + safety = 3668
units 3080 8 x52
20,000 Buffer
units 230 1.64 x 50 x 8 Reserve
units 350 0.31 x 3 x )(20,000/52 Safety
P system module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SAFETY STOCK DETERMINATIONIssues
1) What is the optimal level of protection ?How often do we tolerate running out of stock ?
Tradeoff between holding costs & shortages
2) What reorder level should we set to achieve to achieve this theoretically optimal protection ?
Practical question answered through statistics.
Chosen reorder level
Distribution of lead time demand
Prob. Of stockout
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SUMMARYThe EOQ formula with sensitivity analysis was discussedMany variations of the lot size formula with and without backlogging for purchase and production situations were consideredQuantity discounts were exploredThe P & Q policies for inventory control were comparedSafety stock determination in inventory systems was considered
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
3. Material Requirements Planning
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
WHAT MRP DOES ?
•Dependent demand•lumpy
MRP
DETAILED SCHEDULE FOR RAW MATERIALS &
COMPONENTS
USED IN THE END PRODUCTS
MASTER SCHEDULE
FOR END ITEMS
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Independent Demand:
• Demand unrelated to demand of other products (end products, spare parts)
• Usually forecast• Conventional inventory control (EOQ,
Wagner/Whitin) applicable.
INDEPENDENT VS DEPENDENT DEMAND
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
.Dependent Demand:Demand directly related to demand of some
other product (components, raw materials, subassemblies)
• Requirements derived from delivery schedule of end items.
• MRP is the appropriate tool for planning & control of manufacture inventories raw materialsWIPComponent partsSubassemblies
INDEPENDENT VS DEPENDENT DEMAND
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
LUMPY DEMANDCONTINUOUS DEMANDAssumed in economic lot size formula
LUMPY DEMANDTYPICAL OF MRP APPLICATIONS(raw materials, components sub-assemblies consumed in Large increments corresponding to a certain batch of final product)
TIME
Avg.rate ofdemand
Inv.LEVEL
TIME
Inv.LEVEL t1 t2 t3 t4 t5 t6
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
LEAD TIMES
In MRP, lead times are used to determine starting dates for assembling final products and subassemblies, for producing
component parts, and for ordering raw materials.
Ordering Lead Time:(for purchased parts)
Initiation of purchase requisition
Receipt of item from vendor(off shelf / fabricate)
Manufacturing Lead Time:
Place order Item deliveredProcess part through sequence of machines as given on route sheet (operation + non-productive times)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
• The master production schedule and other
order data.
• The bill of materials file. (The product
structure)
• The inventory record file.
INPUTS TO MRP module 9:Tactical Decisions and Review
Back to main index exit back to module contents
COMMON USE ITEMS
MRP collects the common use items from different products to effect economics in ordering the raw materials and manufacturing the components/sub assemblies
C1 C2 C3 Cn
P1 P2 P3 PN
BASIC RAW MATERIAL
COMPONENTS
PRODUCTS
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
STRUCTURE OF AN MRP SYSTEM
Gross &Net requirementsreport
Capacity vsLoad report
Shop floorPlanningreport
Production OrderStatus & exceptionsreport
ServiceParts
requirements
Salesforecasts
Customerorders
Inventorytransactions
MasterProductionschedule
Engg.changes
InventoryRecord
file
MRPPROCESSOR
Bill ofMaterials
file
OUT PUTREPORTS
…
Back to main index exit back to module contents
MASTER PRODUCTION SCHEDULE
(a) What end products are to be produced?
(b) How many of each product to be produced?
(c) When the products are to be ready for shipment?
TYPICAL INFORMATION IN MPS:
DEMANDOften excluded from MPS, since it does not include
end product demand.
Demand for individual component Parts (for repair and service)
Firms customer orders
Forecasted demand
Week no 6 7 8 9 10Product P1 50 100
Product P2 70 80 25
Etc.
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
BILL OF MATERIALS (BOM) FILE
C1 C2 C3 C4 C5 C6
S1 S2
P1
(1) (2)
(1) (4) (1) (2) (2) (1)
Level 0(product)
Level 1(sub-assemblies)
Level 2(raw materials)
Sub assembly S1 is the PARENT of components C1, C2 & C3. Any engg. Changes affecting product
structure must be fed to BOM file.
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
• Accurate current data on inventory status
• Generally computerized (item master file)
• Lead times must be established in inventory
Record file
INVENTORY RECORD FILE
• INVENTORY TRANSACTIONS (issue, arrivals, order placement/realization) MUST BE KEPT CURRENT
OrderingLead time
ManufacturingLead time
Purchasingrecords
ProcessRoutesheets
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
INPUTS FOR MRP EXAMPLE
C1 C2 C3 C4 C5 C6
S1 S2
P1
(1) (2)
(1) (4) (1) (2) (2) (1)C4 C6 C7 C2 C8
S3 S4
P2
(1) (1)
(1) (4) (2) (2) (1)M4
PRODUCT STRUCTURE FOR PRODUCTS P1 & P2
MasterProductionSchedule
Initial inventory status for M4
Assembly Manufacturing Ordering
P1 = 1P2 = 1S2 = 1S3 = 1
C4 = 2 M4 = 3
Lead times (in weeks)
258070P2
10050P1
109876Week
PLANNED ORDER RELEASESNET REQUIREMENTS
90ON HAND40SCHEDULED RECEIPTS
GROSS REQUIREMENTSITEM RAW MATERIAL M4
654321PERIOD
50
BASIC MRP LOGICInput MPS, BOM, Inventory Status, Lead timesDo Parts ExplosionOffset requirements by lead timesNetting of requirements from Gross by considering availabilitiesLot sizing of net requirements for procurement or production
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PERIOD 1 2 3 4 5 6 7 8 9 10
ITEM PRODUCT P150 100GROSS REQUIREMENTS
SCHEDULED RECEIPTS
ON HAND 0
NET REQUIREMENTS 50 100
PLANNED ORDER RELEASES 50 100
ITEM PRODUCT P270 80 25GROSS REQUIREMENTS
SCHEDULED RECEIPTS
ON HAND 0
NET REQUIREMENTS 70 80 25
PLANNED ORDER RELEASES 70 80 25
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PERIOD 1 2 3 4 5 6 7 8 9 10
ITEM SUB ASSEMBLY S2100 200GROSS REQUIREMENTS
SCHEDULED RECEIPTS
ON HAND
NET REQUIREMENTS 100 200
PLANNED ORDER RELEASES 100 200
ITEM SUB ASSEMBLY S370 80 25GROSS REQUIREMENTS
SCHEDULED RECEIPTS
ON HAND
NET REQUIREMENTS 70 80 25
PLANNED ORDER RELEASES 70 80 25
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PERIOD 1 2 3 4 5 6 7 8 9 10
ITEM COMPONENT C470 280 25 400GROSS REQUIREMENTS
SCHEDULED RECEIPTS
ON HAND
NET REQUIREMENTS 70 280 25 400
PLANNED ORDER RELEASES 70 280 25 400
ITEM RAW MATERIAL M470 280 25 400GROSS REQUIREMENTS
SCHEDULED RECEIPTS 40
ON HAND 50 90 20
NET REQUIREMENTS -20 260 25 400
PLANNED ORDER RELEASES 260 25 400
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
1. Order release notice, to place orders that have been
planned by the MRP system
2. Reports showing planned orders to be released in future
periods.
3. Rescheduling notices, indicating changes in due dates for
open orders.
4. Cancellation notices, including cancellation of open orders
because of changes in the master schedule
5. Reports on inventory status.
MRP OUTPUT REPORTSPrimary Outputs:
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
1. Performance reports of various types – costs, item usage,
actual vs planned lead times and other measures of
performance.
2. Exceptions reports showing – deviations from schedule,
overdue orders, scrap, and so on.
3. Inventory forecasts indicating projected inventory levels
(both aggregate inventory as well as item inventory) in
future periods.
MRP OUTPUT REPORTSSecondary Outputs
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
1. Reduction in inventory (30-50% in WIP)
2. Improved customer service (late orders reduced by 90%)3. Quicker response to changes in demand and master
schedule.
4. Greater productivity
5. Reduced set up and product changeover costs
6. Better machine utilization
7. Increased sales and reductions in sales price.
BENEFITS OF MRP module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EVOLUTION OF MRP
Manufacturing ResourcePlanning
• Links up the closed loop MRP system with the financial systems of the company
(Links functions-Capacity planning-Inventory management-Shop floor control-MRP)
Improved computational efficiency of computers
Unrealistic M/c schedules, ignoring plant capacities
Not only plans priorities but provides feedback to executing the priority plan
AN IMPROVED ORDERING METHOD
PRIORITY PLANNING
CLOSED LOOP MRP
MRP II
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Uses closed loop MRP Integrated System has MRP, Capacity planning, shop
floor, control, vendor scheduling etc. MRP system used to help plan sales, engg, production,
purchasing, etc
No shortage lists of override the production schedules.
System has MRP, capacity planning shop floor control, but no vendor scheduling
Used as a production control system
Needs help from shortage list
Inventory higher than need be
FOR CLASSES OF MRP USERSClass A (most advanced)
Class B
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
System used for inventory Ordering rather than scheduling
Scheduling by shortage list
Master schedule over loaded
MRP working in the data processing department only
Inventory records are poor
Master schedule, if it exists at all is overstated and
mismanaged
Relies on shortage list & expediting rather than MRP
FOR CLASSES OF MRP USERSClass C
Class D (beginner)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
IT IS AN OPERATIONAL & FINANCIAL SYSTEM Company wide, Sales, Production, Engineering,
inventories, cash flows
All operating data expressed in money terms
IT IS A SIMULATOR “What if” questions Simulate probable outcomes of alternative production
plans and management decisions.
ADDITIONAL FUNCTIONS OF MRP II
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SUMMARYDependent vs Independent DemandMRP is useful for planning requirements of components and parts knowing end item demandMajor inputs to MRP include Master Production Schedule, BOM, Inventory and Lead TimesThe MRP logic goes through Explosion, Offsetting, Netting and Lot sizing
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SUMMARY (Contd)Major benefits of MRP include improved planning, lesser inventories, shorter lead timesHowever MRP does not integrate cost functions in different departmentsMRPII (Manufacturing Resource Planning)
links the financial functions across the organization
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
4. Job Shop Scheduling
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
NATURE OF JOB PRODUCTION
Variety of jobs producedBoth nature and demand of jobs is unpredictableConsists of general purpose machinesEach job depending on its technological requirements, demands processing on machines in a certain orderJobs queue before machines or there may be idle machines
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
OBJECTIVES IN JOB SHOP SCHEDULING
Minimize total processing time or makespanMinimize mean flow timeMinimize idle time of machinesMinimize mean lateness/earlinessMinimize mean tardinessMinimize number of tardy jobs Minimize mean queue time Minimize the number of jobs in the system
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
COMPLEXITY OF THE PROBLEM
With n jobs to be processed on m machines the number of possible sequences is (n!)mn 5 10 15 20
m 2 4 5 5
(n!)m 14400 1,73x1026 3.8x1060 8.5x1091
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PRELIMINARY DEFINITIONSA job shop is characterised byNo of jobs (n)Number of Machines (m)Pattern of arrival of jobs (static/dynamic)Objective of scheduling(minimise
inventory, makespan, maximum tardiness, lateness…)
Sequencing rule (FCFS, LIFO, SPT, LPT, EDD ...)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
DEFINITIONS-I
Job arrivaltime, ai
Start ofprocessing
Completiontime ,Ci
Waiting time, wi
Processing time, ti
Flow time, Fi = wi + ti = Ci - ai = Time job spends on the shop floor, waiting and being processed
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
DEFINITIONS II
Job arrivaltime, ti
Start ofProcessing
Completiontime, Ci
Due Date, di
Job lateness, Li = Ci- di (could be positive or negative)Job earliness, Ei = max (0, -Li)Job tardiness, Ti = max (0, Li)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
N/1 PROBLEMAll sequences for the n/1 problem have the same makespanTherefore other objectives are relevantmean flowtimeaverage inventorymean latenessmean completion time
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
RELATIONSHIP BETWEEN F AND OTHER VARIABLES
Fi = Ci -ai = wi + tiLi = Ci - diFrom these equations it is easy to see that a sequence that minimises mean F also simultaneously minimisesmean Completion timesmean Waiting timesmean Lateness
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
INVENTORY VARIATION FOR AN ARBITRARY N/1 SEQUENCE
Inventory
1 2 3 n-1 n
Job under process (Total Time T)
nn-1 n-2
21
Avg inventory = [nt1+ (n-1)t2 + … 1 tn]/TAvg inventory I = Area /TSumming horizontal strips:Area = F1 + F2 + … +Fn= n avg Flow timeThus T(avg inventory) = n (avg flow time)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SPT vs LPT
n
T
LPT
SPT
LPT maximizes what SPT minimises
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SPT RULEThus the rule that minimizes mean flow time also minimises the mean inventoryIt is seen that the SPT (Shortest Processing Time Rule) minimisesmean inventory mean flow timemean waiting timemean completion timemean lateness
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
AN EXAMPLESix jobs with processing times4, 8 5, 9, 2 and 6 respectivelyDue dates 10, 8, 12, 15, 9 and 20 respectivelySolutionThe SPT sequence is 5(2), 1(4), 3(5), 6(6), 2(8) , 4(9)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EXAMPLE (Contd)The SPT sequence is 5(2), 1(4), 3(5), 6(6), 2(8) , 4(9)Completion (Flow Times) are 2, 6, 11, 17, 25, 34Due Dates are job (due date)5(9), 1(10), 3(12), 6(20), 2(8) , 4(15)Lateness values are-7, -4, -1, -3, 17, 19
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
RESULTSSPT sequence: 5 1 3 6 2 4 Mean Flow time: 95/6 =15.833Average Inventory : (6*95)/(6*34)= 2.794Mean Lateness: 21/6 =3.5Mean Tardiness: 36/6 =6Mean Earliness: 15/6 =2.5
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Task Processing time
Due date
Slack time
1 5 15 102 8 10 23 6 15 94 3 25 225 10 20 106 14 40 267 7 45 388 3 50 47
EXAMPLE 2 module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Rule Objective
Mean Flow Time
Weighted Mean Flow time
Mean Lateness
Maximum Tardiness
No of Tardy jobs
Mean Tardiness
SPT MFT,AVG INV,
23.9 29.0 -3.6 22 4 7.8
WSPT WMFT 27.0 27.5 -0.5 36 4 10.6
EDD Max job lateness/tardiness
32.0 31.7 4.5 9 6 5. 0
Hodgson No of tardy jobs
29.1 29.9 1.6 36 2 9.0
SLACK Mean tardiness (heuristic)
32.1 31,1 4.6 9 6 5,0
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
n/2 PROBLEMn job 2 machine Flowshop Different sequences now have different completion times (makespan)Therefore unlike the n/1 problem minimizing the makespan is a legitimate objectiveJohnson’s Rule is commonly used to solve the problem
A B
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
AN EXAMPLETime on M/c A Time on M/c B
Job1 10 2
Job2 5 7
Job3 4 10
Job 4 12 8
Job 5 9 6
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
JOHNSON’S SEQUENCE
M/c AM/c B
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
n/3 FLOWSHOPNotion of dominance
M/c A
M/c B
M/c C
1 10 4 5
2 12 6 2
3 8 8 5
4 9 7 4
5 14 3 8
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
n/3 FLOWSHOPWhen Dominance does not exist
M/c A
M/cB
M/cC
1 10 8 6
2 4 6 9
3 8 4 4
4 6 2 8
5 5 8 3
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
COMPUTATIONSM/c A+B M/c B+C
1
2
3
4
5
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
COMPUTATIONSM/c A+B M/c B+C
1
2
3
4
5
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
2/m/JJOBSHOP module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PRACTICAL SOLUTIONS TO JOBSHOP TRAINING
Priority Dispatching Rules FCFS SPT EDD SLACK RANDOM LRPT (Least Remaining Processing Time) S/OPR (Min Ratio oof job slack time to the number of operations
remaining LCFS DS (Least Dynamic Slack) DS/PT Minimum ratio of Dynamic Slack to remaining Processing
Time
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
SUMMARY AND CONCLUSIONS
The complexity of Job Shop Schedulingn/1 problem n/2 flow shop problemn/ 3 problem2/m/job shopGeneral job shops Simulation
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
5. Course Summary and Review
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PROJCT MANAGEMENT (CONTENTS)
A. PROJECT MANAGEMENT (19 Lectures)a.1 Project conception and appraisal ( 5 lectures)Concept of a project, historical perspective, various issues: Time, cost, Quality, Project Identification and Screening: Various methods and frameworks, Factors for project appraisal, Criteria for project selection, Financial measures, some examplesa.2 Project Planning ( 4 lectures)Project representation, network concepts, Consistency and Redundancy in Project Networks, Activity on arc representation, concept of scheduling, Critical Path Method, Basic Scheduling with A-O-A, Activity on node representation, Basic Scheduling with A-O-N Networksa.3 Project crashing and Resource considerations ( 5 lectures )Probabilistic Scheduling: Uncertainty and probabilistic considerations in project, PERT, Three-estimate approach, Project Scheduling with Probabilistic Activity Times, Heuristic approach for Linear Time-Cost Tradeoffs in Projects, Resource Profiles and leveling, Limited Resource Allocationa.4 Project Implementation:( 5 lectures ) Considerations in implementation, Project Monitoring and Control with PERT / Cost, Behavioral and human issues, Team Building, Desirable attributes of project leader, computers in project management , Project Completion, Review
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PRODUCTION MANAGEMENT(CONTENTS)b.1 Strategic decisions in production management (5 lectures )
Concept of a production system, historical perspectives on production system, a generalized model of production system, Concept of a life cycle, various stages in life cycle, implications for managerial decision making vis-à-vis life cycle, Financial Evaluation Of Production Related Decisions: Typical Performance Measures of a Production System, Criteria such as net present value, rate of return, Financial Evaluation of Capital Decisions, concept of a decision tree, evaluation of riskb.2 Product and process selection ( 4 lectures )Designing Products and Services: Factors for New product/service introduction, product mix decisions using linear programming approach, stochastic product mix decisionsb.3 Facility Location and Layout ( 4 lectures )Considerations in Plant Location, various models for location (gravity etc.), Process Layouts, Product Layouts, comparison of process and product layout, concept of Assembly Line Balancing, heuristic approaches for assembly line balancing (rank position weight etc.), Cellular Layoutsb.4 Production planning over the short Term Horizon ( 4 lectures )Demand Forecasting, various methods for forecasting (qualitative and quantitative), Aggregate Production Planning (APP), models for APPb.5 Tactical decisions and review (5 lectures )Inventory: necessity, and costs involved, deterministic inventory models, Dependant demand systems, Material Requirements Planning, Scheduling of Job Shops, various heuristics for scheduling, course review
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Project and Production Management
Project Conception and AppraisalProject Management: An OverviewProject Identification and ScreeningProject Appraisal: Part IProject Appraisal: Part IIProject Selection
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Project ManagementProject PlanningProject RepresentationConsistency and Redundancy in Project NetworksBasic Scheduling with A-O-A NetworksBasic Scheduling with A-O-N Networks
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Project Management
Project Crashing and ResourcesProject Scheduling with Probabilistic Activity TimesLinear Time-Cost Tradeoffs in Projects: A Heuristic ApproachResource Profiles and levelingProject crashing with multiple objectivesLimited Resource Allocation
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Project ManagementProject ImplementationProject Monitoring and Control with PERT / CostTeam Building and Leadership in ProjectsOrganizational and behavioral issuesComputers in project managementProject Completion and Review
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Project & Production Management
Project Conception and AppraisalProject Management: An OverviewProject Identification and ScreeningProject Appraisal: Part IProject Appraisal: Part IIProject SelectionProject PlanningProject RepresentationConsistency and Redundancy in Project NetworksBasic Scheduling with A-O-A NetworksBasic Scheduling with A-O-N NetworksProject Crashing and ResourcesProject Scheduling with Probabilistic Activity TimesLinear Time-Cost Tradeoffs in Projects: A Heuristic ApproachResource Profiles and levelingProject crashing with multiple objectivesLimited Resource AllocationProject ImplementationProject Monitoring and Control with PERT / CostTeam Building and Leadership in ProjectsOrganizational and behavioral issuesComputers in project managementProject Completion and Review
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Production ManagementStrategic Decisions in Production ManagementIntroduction to Production Systems and a Generalized Model of ProductionLife cycle of a Production System and Major managerial DecisionsPerformance Measures of a Production SystemFinancial Evaluation of Capital Decisions Decision Trees and evaluation of risk
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Production ManagementProduct and Process SelectionIntroducing New Products and Services I Introducing new products and services IIProduct Mix Decisions
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Production ManagementFacility Location and LayoutPlant LocationProcess LayoutsProduct Layouts and Assembly Line BalancingCellular Layouts
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Production ManagementProduction Over the Medium Term HorizonDemand Forecasting: General considerationsModels for forecasting Aggregate Production Planning IAggregate Production Planning II
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Production ManagementProduction Over the Medium Term HorizonDemand Forecasting: General considerationsModels for forecasting Aggregate Production Planning IAggregate Production Planning II
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Production ManagementTactical Decisions over the Short Term HorizonInventory considerations and various factors Inventory modelingMaterial Requirements Planning`Scheduling of Job ShopsCourse summary and review
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
WHAT IS A PROJECT?PURPOSE
An undertaking or venture to accomplish some objective or goal
STRUCTURE A set of interrelated jobs whose accomplishment leads to the completion of the project
COMPONENTSJobs or activities consume time and resources and are governed by precedence relations
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PROJECTS AS AGENTS OF CHANGE
State A
State B
Alternative Projects(Paths)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
FEATURES OF PROJECTS
Well defined collection of jobs
Generally non-repetitive, one time effort
Jobs interrelated through precedence
Jobs otherwise independent
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PROJECT FEATURES (Continued)
Jobs consume time and resources
Coordination needed between individuals, groups & organisations
Constant pressure of conformance to time/cost /performance goals
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
A Project as a Production SystemMass production
Batch Production
Job Production
QQuantity
to be Made
P (No. of Products or “VARIETY”)
Projects
1
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
LIFE CYCLE OF A PROJECTSelection of the projectProject Planning Scope of work & network development
Basic Scheduling Time Cost tradeoffs Resource Considerations in projects
Project ImplementationProject Completion and Audit
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Motivation in Introducing New Products
To satisfy need
For profit
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
CONTRIBUTION TO NEW PRODUCT IDEAS
Sales and Marketing (close touch with customer)Top management (Active listener to visitor and customer feedback)Production department (limited to production ease and economics)Research and Development (prompted by new developments in materials & technology)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
GENERATION OF NEW PRODUCT IDEAS
Brain storming (preferably by interdisciplinary team)
Team apprised of Company objectives & long term goals Current economic scenario Preferred field of activity (expertise) Approximate budget for new product
Each one generates ideas which are recorded without criticism or evaluation
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
EVALUATION OF NEW PRODUCT IDEAS
The evaluation of the new product ideas could be done on a number of criteria Likely demand and pattern of growth Ease of raw material availability Availability of Production technology Competition and likely market share Likely revenues and costs of operation The product life cycle
An example to illustrate this process is taken up next
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
AN EXAMPLE OF SCREENING OF IDEAS
Idea/ factor
Demand Competition
Ease of Raw Mtl
Cost of processing
Likely profit
Score
Computer peripherals
6 3 6 5 6 26
Fast food 8 6 9 7 5 35Fashion clothing
4 5 7 4 4 24
Soaps and detergents
9 2 7 6 4 28Each factor evaluated on a scale of 1(least desirable) – 10 (most desirable)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Undesirable outputs
Economic/Social/Political
Environment -dynamic -uncertain
Transformation
FEED BACK
INPUT(S) OUTPUT(S)
-Men -Machines
-Materials
-Money
-Information -Energy ----------
Useful Goods or Services
(Effluents, Fumes etc.)
A PRODUCTION SYSTEM AS AN INPUT-OUTPUT SYSTEM
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
AN EXAMPLE OF SCREENING OF IDEAS
Idea/ factor
Demand Competition
Ease of Raw Mtl
Cost of processing
Likely profit
Score
Computer peripherals
6 3 6 5 6 26
Fast food 8 6 9 7 5 35Fashion clothing
4 5 7 4 4 24
Soaps and detergents
9 2 7 6 4 28Each factor evaluated on a scale of 1(least desirable) – 10 (most desirable)
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
CUSTOMER NEEDS AND DESIRES
Desires Natural, as hunger,
shelter, love and security
Generated by exposure to circumstances and temptations(as in advertisements on media, TV,neighbour)
Needs When a desire becomes
strong enough and warrants fulfilment, it becomes a need.
Customer demand is based on real or artificially generated needs
Needs are constantly changing
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
MORTALITY OF IDEASScreening Economic evaluation Development Testing Commercialization Number
of ideas
Time
35-40 ?
3-24 months ?
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
Price Quality
COMPETITION
Reduced Customerlead times satisfaction
NEW CHALLENGES IN PRODUCTION
• More producers• Demanding customers
Greater variety
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
PRODUCTION AS A PART OF THE SUPPLY CHAIN
Transformation process
Vendors Warehouses Retailers
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
CONCLUSIONSThis course has focussed on the Life Cycle issues in Projects and Production SystemsThe Strategic, Operational and Tactical Issues in Projects and Production Systems have been discussedThe approach has been on conceptual issues as well as modelling of key processes and decisions
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
module 9:Tactical Decisions and Review
Back to main index exit back to module contents
module 9:Tactical Decisions and Review
Back to main index exit back to module contents