Chapter 13 Resource Management Aggregate Planning Process• Aggregate planning is the development of a long- term output and resource plan in aggregate units of measure.• These typically define output levels over a planning horizon of 1 to 2 years, focusing on product families or total capacity requirements.• Aggregate planning later translates into monthly or quarterly production plans, taking into account capacity limitations such as supply availability, equipment, and labour.
Stages in Operations Planning Process.• Level 2 planning, or disaggregation, is the process of translating aggregate plans into short-term operational plans that provide the basis for weekly and daily schedules and detailed resource requirements.• Level 3 focuses on execution, moving work from one workstation to another, assigning people to tasks, setting priorities for jobs, scheduling equipment, and controlling processes.
Required Inputs to the Production Planning System
t Aggregate Planning Decisions and Strategies • Demand Management:Management The cooperation between marketing and manufacturing to create more feasible aggregate demands. • Production-Rate Changes: Utilizing overtime, subcontracting during peak months. • Work-Force Changes: Hiring and firing employees—often not a feasible alternative. • Inventory Smoothing: Building inventories or carrying back orders. • Facilities and Equipment, Typically a long-term investment, although companies can rent equipment for peak seasons.
Aggregate Planning Process1. Chase Approach: The capacities and output levels are adjusted to match demand requirements over the planning horizon• Advantages: Investment in inventory is low and Labour utilization is high Disadvantage: The cost adjusting output and capacities2. Level Approach: Capacities are kept constant over the planning horizon.• Advantages:Stable output rate and work force levels Disadvantage: Greater inventory cost, Increased overtime and idle time and varying resource utilization
Relevant Costs1. Basic production costs • The fixed and variable costs incurred in producing a given product type in a given time period2. Costs associated with changes in the production rate • Hiring, training, and laying off personnel3. Inventory holding costs4. Backorder costs
General Procedure for Aggregate Planning1. Determine the demand for each period2. Determine the capacities (regular time, overtime, subcontracting) for each period3. Identify pertinent company policies such as level of safety stock, stable workforce etc.4. Determine unit costs for regular time, overtime, subcontracting, holding inventories, back orders, layoffs etc.5. Develop alternative plans and compute the cost of each6. If satisfactory plans emerge, select the one that best satisfies the objectives. Otherwise, return to step 5
Techniques• Trial and error Techniques using graphs and spreadsheets• Linear Programming: Transportation model• Simulation Models
Yield Management• Yield management: the process of allocating the right type of capacity to the right type of customer at the right price and time to maximize revenue or yield – Can be a powerful approach to making demand more predictable• Has existed as long as there has been limited capacity for serving customers• Its widespread scientific application began with American Airlines’ computerized reservation system (SABRE)
Yield Management Most Effective When1. Demand can be segmented by customer2. Fixed costs are high and variable costs are low3. Inventory is perishable4. Product can be sold in advance5. Demand is highly variable
Chapter 13 Resource ManagementDisaggregation in Manufacturing• Disaggregation (Level 2) provides the link between aggregate plans developed at Level 1 and detailed execution at Level 3• This provides the basis for detailed purchasing and production schedules for all of the components that comprise the finished good or support service delivery.• There are three major components for disaggregating aggregate plans into Level 2 plans. Master production scheduling (MPS) Materials requirement planning (MRP) Capacity requirement planning (CRP)
Material Requirements Planning (MRP)• MRP is a technique that has been employed since the 1940s and 1950s.• Joe Orlicky is known as the Father of MRP• The use and application of MRP grew through the 1970s and 1980s as the power of computer hardware and software increased.• MRP gradually evolved into a broader system called manufacturing resource planning (MRP II).
What is MRP?• MRP: a computer-based system that develops plans for ordering and producing dependent demand items.• Material requirements plan: a plan that specifies the timing and size of new production orders, adjustments to existing order quantities, and expediting or delay of late/early orders
MRP InputsMRP utilizes two basic principles: 1. Requirements for dependent demand items are derived from the production schedule for their parents the items that are assembled from component parts). 2. The production order is offset to account for the lead time.• Developed through a combination of three inputs: 1. The Master Production Schedule 2. The Bill of Materials 3. Inventory Records
Master Production Schedule for a Family of Bicycles
Key Aspects of Master Production Scheduling• The sums of the quantities in the MPS must equal those in the aggregate production plan.• Aggregate production quantities should be planned efficiently over time in order to minimize setup, production, and inventory costs.• Capacity limitations must be considered before finalizing the MPS, including labour and machine capacity, storage space, transportation equipment, and other factors.
The Bill of Materials• Bill of materials (BOM): a document that specifies all assemblies, subassemblies, parts, and raw materials that are required to produce one unit of the finished product. It is also called the Product Structure
Inventory Records• Inventory record: a document that specifies order/lot size policy and lead time and records all transactions made for parts, assemblies, and components – Includes: transactions made for parts, assemblies, and components both from manufacturing within an organization and from purchasing items from external suppliers
MRP Terminology• Gross requirements: the total number of units of a part or material derived from all parent production plans• Scheduled receipts: orders that have been placed but not yet received or completed• Projected on-hand inventory: the estimated inventory that will be available after the gross requirements have been satisfied, plus any planned or scheduled receipts for that time bucket
MRP Terminology• Planned order receipts: future orders that which have not yet been released but are planned in order to avoid a shortage or backlog of inventory• Planned order release: when an order must be released in order to offset for the lead time so that the order will be received when planned• The difference between a planned and a scheduled receipt: a planned receipt is not firmly committed to and can be changed relatively easily up until the time the order is released.• As soon as the order is released, it becomes a scheduled order, which is much harder to change.
MRP Computer Program• Begins with number of end items needed• Add service parts not included in MPS• Explode MPS into gross requirements by consulting bill of materials file• Modify gross requirements to get net requirements:• Net Requirements = Gross Requirements + Allocated Inventory (scheduled receipts) + Safety Stock - Inventory On Hand• Offset orders to allow for lead time
Outputs of MRP• Planned order schedule - quantity of material to be ordered in each time period• Changes to planned orders - modifications to previous planned orders• Secondary outputs: – Exception reports – Performance reports – Planning reports
Lot Size• Lot size rules determine: – the size of the order placed, and by extension the timing of orders, – the frequency of set-ups, and – the inventory holding costs for an item.• Three types: – Fixed order quantity – Periodic order quantity – Lot for lot
MRP Lots• Fixed order quantity (FOQ): a lot size rule with a constant order size where the same quantity is ordered every time• Periodic order quantity (POQ): a lot size rule with a variable lot size designed to order exactly the amount required for a specified period of time• Lot for lot (L4L): a lot size rule that is a special case of the periodic order quantity with the period equal to 1
MRP Record for Item C Usingthe Lot-for-Lot (LFL) Rule
Capacity Requirements Planning (CRP)• Tests MPS for feasibility• Utilizes routings to determine labour/machine loads• If schedule feasible, recommends freezing• If schedule overloads resources, points out processes that are overscheduled
MRP to MRP II• MRP simply exploded demand (MPS) into required materials• MRP II became Manufacturing Resource Planning which provides a closed-loop business management system that integrates the material database with other functions
Evolution of MRP to Enterprise Resource Planning• Manufacturing resource planning (MRP II): a system that links the basic MRP system to other company systems, including finance, accounting, purchasing, and logistics• Enterprise resource planning (ERP): a system that provides a complete linkage of all functional areas of a business – Allows manufacturing to see new orders as soon as marketing or sales enters them into the system.
Enterprise Resource Planning• Integration of all aspects of a business – accounting, customer relationship management, SCM, manufacturing, sales, human resources – into a unified information system.• Principal vendors: SAP, Oracle, i2 Technologies
Sequencing & Scheduling• Sequencing refers to determining the order in which jobs or tasks are processed• Scheduling refers to the assignment of start and completion times to particular jobs, people, or equipment.
Work-Center Scheduling Objectives• Meet due dates• Minimize lead time• Minimize setup time or cost• Minimize work-in-process inventory• Maximize machine utilization
Lateness & Tardiness• Lateness and tardiness measure performance related to customer-focused due-date criteria.• Lateness is the difference between the completion time and the due date (either positive or negative).• Tardiness is the amount of time by which the completion time exceeds the due date. (Tardiness is defined as zero if the job is completed before the due date, and therefore no credit is given for completing a job early). Li = Ci - Di Ti = Max (0, Li)where Li = lateness of job i Ti = tardiness of job i Di = due date of job i.
Chapter 14 Operations Scheduling and SequencingSingle-Resource Sequencing Problem• In a serial manufacturing process, a bottleneck workstation controls the output of the entire process. Therefore, it is critical to schedule it efficiently.• With different processing times, SPT sequencing maximizes workstation utilization and minimizes average job flow time.• When processing times are relatively equal, first-come- first-serve sequencing is applied.• Using Earliest Due Date (EDD), the maximum job tardiness and lateness are minimized.
Example of Job Sequencing: First-Come First-Served Jobs (in order Processing Due DateSuppose you have the four jobs of arrival) Time (days) (days hence)to the right arrive for processing A 4 5on one machine B 7 10 C 3 6 D 1 4What is the FCFS schedule? Do all the jobs get done on time? Answer: FCFS Schedule No, Jobs B, C, and D are going to be Jobs (in order Processing Due Date Flow Time late of arrival) Time (days) (days hence) (days) A 4 5 4 B 7 10 11 C 3 6 14 D 1 4 15
Example of Job Sequencing: Shortest Operating Time Jobs (in order Processing Due DateSuppose you have the four jobs of arrival) Time (days) (days hence)to the right arrive for processing A 4 5on one machine B 7 10 C 3 6 D 1 4What is the SOT schedule? Do all the jobs get done on time? Answer: Shortest Processing Time Schedule Jobs (in order Processing Due Date Flow Time No, Jobs A and B of arrival) Time (days) (days hence) (days) are going to be D 1 4 1 late C 3 6 4 A 4 5 8 B 7 10 15
Example of Job Sequencing: Earliest Due Date First Jobs (in order Processing Due DateSuppose you have the four jobs of arrival) Time (days) (days hence)to the right arrive for processing A 4 5on one machine B 7 10 C 3 6 D 1 4What is the earliest due date firstschedule? Do all the jobs get done on time? Answer: Earliest Due Date FirstJobs (in order Processing Due Date Flow Time No, Jobs C and B of arrival) Time (days) (days hence) (days) are going to be D 1 4 1 late A 4 5 5 C 3 6 8 B 7 10 15
Example of Job Sequencing: Johnson’s Rule (Part 1)Suppose you have the following five jobs with time requirementsin two stages of production. What is the job sequence usingJohnson’s Rule? Time in Hours Jobs Stage 1 Stage 2 A 1.50 1.25 B 2.00 3.00 C 2.50 2.00 D 1.00 2.00
Example of Job Sequencing: Johnson’s Rule (Part 2)First, select the job with the Time in Hourssmallest time in either stage. Jobs Stage 1 Stage 2That is Job D with the smallest time A 1.50 1.25in the first stage. Place that job as B 2.00 3.00early as possible in the unfilled job C 2.50 2.00sequence below. D 1.00 2.00Drop D out, select the next smallest time (Job A), and place it 4th in the jobsequence.Drop A out, select the next smallest time. There is a tie in two stages for twodifferent jobs. In this case, place the job with the smallest time in the first stageas early as possible in the unfilled job sequence.Then place the job with the smallest time in the second stage as late as possiblein the unfilled sequence. Job Sequence 1 2 3 4 Job Assigned D B C A
Make Span Time• Make span time is the time needed to process a given set of jobs; a short make span aims to achieve high equipment utilization. M= C -SwhereM = makespan time of a group of jobs,C = completion time of last job i in the group,S = start time of first job i in the group.
Chapter 14 Operations Scheduling and SequencingJohnson’s Rule Exercise• In the following example, we assume that each job must be processed first on Resource #1 and then on Resource #2.• Hirsch Products manufactures custom parts that first require a shearing operation and then a punch-press operation. Order information is provided below. Shear Punch Job (days) (days) 1 4 5 2 4 1 3 10 4 4 6 10 5 2 3
Gantt Chart for Hirsch Product Sequence By- the-Numbers Rule 1-2-3-4-5If jobs are completed by order number, the punch pressoftentimes experiences idle time awaiting the next job as shownbelow The makespan is 37 days.
Gantt Chart for Hirsch Product Sequence 5-1-4-3-2 UsingJohnson’s Rule Johnson’s Rule results in a reduction in makespan from 37 days to 27 days, as shown in the Gantt chart below.
Jobs A, B, C, D and E must go through Processes 1 and 2 in that sequence. Use Johnson’s ruleto determine the optimal sequence in which to schedulethe jobs so as to minimize the total time required. Jobs Process 1 time Process 2 time A 4 5 B 16 14 C 8 7 D 12 11 E 3 9