1. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Twelve Capacity Planning Operations Management Contemporary Concepts and Cases 5/e

2. 12-2 Hierarchy of Capacity Decisions Facilities decisions Aggregate planning Scheduling 06121824 Months Planning Horizon Scheduling Facilities decisions Aggregate Planning

3. 12-3 Facilities Decisions How much total capacity is needed? How large should each unit of capacity be? When is the capacity needed? Where should the facilities be located?.What type of facilities/capacity are needed?

4. 12-4 When? Timing of Facility Additions Preempt the competition –Build capacity ahead of need –Positive capacity cushion Wait-and-see strategy –Small or negative capacity cushion –Lower risk strategy

5. 12-5 Sales & Operations Planning Definition Matching supply & demand over period of 12 months For an aggregated level of demand for a few categories of product. (Sargenta-ag. products pg 284 19,000 emp 90 countries-utilize web collaboration) Coordinates budgets, personnel & marketing Is ‘key’ to ERP – enterprise resource planning system and ‘what if’ considerations.Facilities are considered fixed & cannot be quickly expanded

6. 12-6 Cross Functional Nature of S&OP Engineering: product definition HR: workforce availability Operations: capacity Management: business plan Materials: master schedule Finance: capital Marketing: product demand Sales: forecast.What are ‘WAYS’ of MANAGING DEMAND?

7. 12-7 Options for Influencing (Managing) Demand Pricing Advertising and promotion Backlog or reservations (shifting demand).Development of complementary products

8. 12-8 Options for Influencing (managing) Supply Hiring and layoff of employees Using overtime and undertime Using part-time or temporary labor Carrying inventory Outsourcing or Subcontracting.Making cooperative arrangements

9. 12-9 Basic Production Strategies “Level” strategy (constant work force, use inventory as buffer) “Chase” strategy (produce to demand, vary workforce)

10. 12-10 Aggregate Planning Costs Hiring and firing costs (chase) Overtime and undertime costs (chase) Subcontracting costs (chase) Part-time labor costs (chase) Inventory-carrying costs (level).Cost of stockout or back order (level)

11. 12-11 Chapter Thirteen Scheduling Operations Operations Management Contemporary Concepts and Cases 5/e

12. 12-12 Chapter 13 Outline Batch Scheduling Gantt Charting Finite Capacity Scheduling Theory of Constraints Priority Dispatching Rules.Planning and Control Systems

13. 12-13 Batch Scheduling Very complex scheduling environment Can be thought of as “Network of Queues” Customers or jobs spend most of their time at work stations waiting to be processed Typical for actual work to be 20 percent or less of the total throughput time.Closely related to MRP (see Chapter 16)

14. 12-14 Batch Processing Move-queue-work-wait-move WS 1WS 2 Work is done according to work orders wait move queue move waitqueue move

15. 12-15 Difficulties Of Batch/Job Shop Scheduling Variety of jobs processed Different routing and processing for each Number of different orders in the facility at any one time Competition for common resources.Bottlenecks

16. 12-16 Job Data for Scheduling Example 13-16

17. 12-17 Scheduling Example Process AProcess C Job 1 A C B Process B Job 3 5 jobs-3 processes: In what sequence should the jobs be done ? Job 5 Job 2Job 4

18. 12-18 Where is the bottleneck? Total machine times for the five jobs: –Machine A: 15 hours –Machine B: 12 hours –Machine C: 16 hours C appears to be the bottleneck. But! A is used for every job; C is not.

19. 12-19 Gantt Chart for Example

20. 12-20 Finite Capacity Scheduling (1) Finite capacity scheduling loads jobs onto work stations being careful not to exceed the capacity of any given station. Done at the detailed planning and scheduling (DPS) level..Part of the loading responsibility for executing the production plan.

21. 12-21 Finite Capacity Scheduling (2) Can be used to identify bottlenecks. A bottleneck is a work center whose capacity is less than the demand placed on it, and is less than the capacities of all other resources..A bottleneck will constrain the capacity of the entire shop (or office).

22. 12-22 TOC – “The Goal” by Goldratt The bottleneck should be scheduled to achieve maximum throughput. Non-bottlenecks should be scheduled to keep the bottleneck busy. A work-in-process queue should be in front of the bottleneck. Non-bottleneck resources may be idle..Find ways to relieve or reduce the bottleneck.

23. 12-23 Priority Dispatching Rules What are priority dispatching rules? –If you have more than one job waiting at a work station, how do you select which one to process next? The criterion you use for selecting the next job is your dispatching rule. In front office services, the most common rule is “first come, first served” (except for emergency services).Part of the sequencing responsibility

24. 12-24 Priority Dispatching Rules Commonly used in services: –FCFS (First Come, First Served) Commonly used in manufacturing: –CR (Critical Ratio, Minimizes average lateness) –.Minimum Processing Time or Shortest Processing Time This rule minimizes total waiting time.

25. 12-25 Chapter Fourteen Project Planning and Scheduling Operations Management Contemporary Concepts and Cases 5/e

26. 12-26 Chapter 14 Outline What is a “Project”? Objectives and Tradeoffs Planning and Control in Projects Scheduling Methods Constant-Time Networks PERT Method CPM Method.Use of Project Management Concepts

27. 12-27 What is a “Project”? Unique item or event - often a single unit. Often located on one place. The unit does not move during production. Resources are brought to the project..May be of any size, although we focus on large projects.

28. 12-28 Objectives and Tradeoffs Meet the specifications Stay within the budget

29. 12-29 Planning Activities & Decisions Identify the project customer Establish the end product or service Set project objectives Estimate total resources and time required Decide on the form of project organization Make key personnel appointments Define major tasks required.Establish a budget

30. 12-30 Scheduling Activities & Decisions Develop a detailed work-breakdown structure Estimated time required for each task Sequence tasks in proper order Develop a start/stop time for each task Develop detailed budget for each task.Assign people to tasks

31. 12-31 Control & Scheduling Monitor actual time, cost, and performance Compare planned to actual figures Determine whether corrective action is needed Take appropriate corrective actions Gantt Charts -Shown as a bar charts Network Methods -Shown as networks w/ precedence relationships

32. 12-32 Gantt Chart Project Example (Figure 14.2) Week No.12345678 1Lease the site 2Hire the workers 3 Arrange for the Furnishings 4Install the furnishings 5Arrange for the phones 6Install the phones 7Move into the office

33. 12-33 Constant-Time Networks Activity times are assumed to be constant Activities are represented by nodes in the network Arrows show the precedence relationships Notations used in calculating start and finish times: –ES(a) =Early Start of activity a –EF(a) =Early Finish of activity a –LS(a) =Late Start of activity a –LF(a) =Late Finish of activity a

34. 12-34 Critical Path Critical Path = longest path in the network –All activities for which ES=LS and EF=LF –Length of critical path is equal to the project completion time –If there is any delay on the critical path, the project will be delayed (unless one takes ‘corrective actions’) –Critical path in example is A-C-D

35. 12-35 Slack Times Slack time equals amount of time a path may be delayed without delaying the project Critical Chain -- more Goldratt

36. 12-36 Precedence and Times for Opening a New Office (Table 14.5) ImmediateActivityComputed ActivityDescriptionPredecessorsTimeSlack 1Lease the siteNone10 2Hire the workers150 3Arrange for the furnishings111 4Install the furnishings321 5Arrange for the phones113 6Install the phones4,511 7Move into the office2,6,420

37. 12-37 Network for ‘Open a New Office’ (Figure 14.6) 1 2 43 ES EF LS LF 7 65 1 6 0 1 1 2 4 5 1 2 2 3 6 8 3 5 4 5 5 6 2 4

38. 12-38PERT Program Evaluation Review Technique Developed in 1950’s for missile firing nuclear submarine project Used under conditions of uncertainty in activity times Requires three time estimates for each activity –Optimistic –Most likely –Pessimistic Time estimates have beta distribution

39. 12-39 PERT Activity Times Estimate three times for each activity Compute mean completion time for each activity:

40. 12-40 PERT Activity Times Compute the variance for each activity: Assumes pessimistic and optimistic times cover six standard deviations

41. 12-41 PERT Activity Times If T = total completion time of the project, then and

42. 12-42 Time-Cost Relationship in CPM (Fig. 14.9) Crash Cost Cost Normal Cost Crash Time Normal Time

43. 12-43 Use of Project Management Concepts Scheduling is only part of a complete approach to project management Trade-off between sophistication and cost of methods Choice between constant time, PERT, CPM or more advanced techniques Choice of project management software packages, e.g., Microsoft Project

44. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Sixteen Material Requirements Planning and ERP Operations Management Contemporary Concepts and Cases 5/e

45. 12-45 Firm orders from Customers Sister plants Stock replenishment Engineering Design changes BOM Forecast of Demand Purchase Orders Vendors MRP Parts Explosion Rough-cut capacity planning Capacity planning Shop Orders Shop-floor control Master schedule S & OP Closed Loop MRP System (Fig. 16.1) Operations Product Raw Materials Inventory Records Inv. Transactions

46. 12-46 ERP Model Adapted from Langenwalter, Gary A. Enterprise Resources Planning and Beyond (St Lucie Press/APICS Series on Resource Management, 2000) MATERIAL REQUIREMENTS PLANNING (MRP) Inventory Mgt Production Activity Control Accounting A/P, A/R, GL MANUFACTURING RESOURCE PLANNING (MRP II) CRP Master Scheduling Customer Service Order Entry Forecasting Std Costing Purchasing Product Engineering ENTERPRISE RESOURCES PLANNING (ERP) Human Resources Manufacturing Engineering Maintenance Management Quality Management Advanced Costing Environmental Manufacturing Execution System Advanced Planning and Scheduling Full JIT Support Field Service Logistics and Distribution Full Sales Support Supply Chain Exec. Decision Support Enterprise Production Systems Sales and Operations Planning R&D Financial Planning Customer Relationship Management Demand Management Marketing Strategic Plan Supply Chain Execution

47. 12-47 Enterprise Resource Planning (ERP) Systems Integration of all functions through a common database - MRP, AR, A/P, Costs, G/L, Purchasing, HR, Sales, Mktg, PR, QC - MRP, AR, A/P, Costs, G/L, Purchasing, HR, Sales, Mktg, PR, QC Enforces standard systems throughout the organization ERP used to coordinate decisions along the supply chain Expensive and time-consuming to implement-requires extensive training of users & strong project mgmt, thorough testing before ‘going live’ Major ERP software vendors: SAP, Oracle, Epicor -See: www.erpfans.com -See: www.erpfans.comwww.erpfans.com