1. 1 OPERATIONS MANAGEMENT for MBAs Second Edition Prepared by Scott M. Shafer Wake Forest University Meredith and Shafer John Wiley and Sons, Inc.

2. Chapter 7: Schedule Management2 Chapter 7 Schedule Management

3. 3 Chapter 7: Schedule Management

4. 4 Introduction

5. Chapter 7: Schedule Management5 Henry Ford Clinic 4 Aggregate planning involves matching hospital’s available capital, workers, and supplies to a highly variable customer demand pattern 4 903 beds arranged into 30 nursing units 4 Each nursing unit contains 8 to 44 beds 4 Each nursing unit treated as independent production facility

6. Chapter 7: Schedule Management6 Factors Complicating Aggregate Planning at Henry Ford Clinic 4 High degree of demand variability –average number of occupied beds in 1991 was 770 –in one 8-week period an average of 861 beds was occupied –in another 8-week period an average of 660 beds were occupied –number of beds occupied could change by as may as 146 beds in less than two weeks

7. Chapter 7: Schedule Management7 Complicating Factors continued 4 Large penalty for not being able to admit HMO patients –lost revenue –must pay other hospital for patient’s stay –a simple obstetrics case cost $5,000 4 Tight labor market for RNs –12 to 16 weeks to recruit and train nurses at cost of $7,600 4 Cost of 8-bed modules exceeds $35,000/ month

8. Chapter 7: Schedule Management8 Importance of Aggregate Planning 4 Without sufficiently long-term view may make short-term decisions that hurt the organization in the long-term 4 For example, shortly after Henry Ford Hospital reduced staff, it determined the staff was needed 4 New staff was recruited 4 Both staff reduction and recruiting costs incurred

9. Chapter 7: Schedule Management9 Extremely Difficult Decision 4 Demand can shift by more than 16% in a two-week period 4 Takes 12 - 16 weeks and costs $7,600 a piece to recruit new nurses 4 By time staff hired, demand may have shifted again

10. Chapter 7: Schedule Management10 Extremely Difficult Decision continued 4 If don’t have enough staff, cost $5,000 per patient turned away (simple cases) 4 Cost of one idle 8-bed module is $35,000/month or $420,000/year

11. Chapter 7: Schedule Management11 Package Products Inc. 4 Folding Carton Packing for baker and deli industry 4 Significant growth during 1990s 4 More demanding customers 4 Needed to do better job of managing operations

12. Chapter 7: Schedule Management12 Producing Folding Cartons 4 Four to eleven steps –rolls of pulpboard cut into sheets –sheets run through printing presses to add four color images –sheets dried and die cut –cellophane window added –cartons glued –product prepared for shipping

13. Chapter 7: Schedule Management13 Scheduling at Package Products 4 Initially used Gantt chart –manually schedule jobs using a board and magnetic strips –capacity shortage problems –critical information scattered throughout organization 4 Acquired finite capacity scheduling (FCS) software package

14. Chapter 7: Schedule Management14 Using the FCS Package 4 Runs on PC 4 Updates previous day’s schedule 4 Allows performing what-if analysis 4 Used to generate schedules for next 3 to 6 months 4 Overtime reduced by 300% 4 On-time delivery performance improved by 32% 4 Backorders reduced by 53% 4 Respond to customer inquiries in 22 seconds

15. Chapter 7: Schedule Management15 Scheduling 4 Ensuring the right tasks are conducted at the right time on the right items 4 Productivity problems often attributable to poor schedule management 4 Scheduling not anywhere as difficult for continuous flow and processing organizations as it is for job shops

16. Chapter 7: Schedule Management16 The Sequence of Scheduling Activities

17. Chapter 7: Schedule Management17 Scheduling Activities

18. Chapter 7: Schedule Management18 Demand Forecast 4 Forecast supports entire scheduling process 4 May not need forecast if customers place orders far in advance 4 Forecast used for different purposes –Long-range forecasts used for capacity planning –Forecast in range of 9 to 18 months used for aggregate planning –Short-range forecasts used for loading and sequencing

19. Chapter 7: Schedule Management19 The Aggregate Plan 4 Approximate schedule of overall operations that will satisfy demand forecast at minimum cost 4 Planning horizon often a year or more and broken into monthly or quarterly periods 4 Purpose is to minimize short-sighted effects 4 Work with aggregate units and resources

20. Chapter 7: Schedule Management20 The Aggregate Plan continued 4 Equivalent units 4 Relevant costs –hiring and layoff costs –inventory and backorder costs –wages and overtime charges –subcontracting costs

21. Chapter 7: Schedule Management21 The Production Plan 4 Result of managerial iteration and changes to aggregate plan 4 Often disaggregated one level into major output groups –Aggregate Plan: number of automobiles to be produced in each of the upcoming 12 months –Production Plan: number of compacts, mid- size, full-size, light trucks, and minivans to produce in each of the upcoming 12 months

22. Chapter 7: Schedule Management22 The Master Schedule 4 Point where actual orders incorporated into scheduling system 4 Aggregate outputs broken down into individual end items

23. Chapter 7: Schedule Management23 Check for the Following Problems 4 Does schedule meet production plan? 4 Does schedule meet demand forecasts? 4 Are there priority or capacity conflicts? 4 Are other constraints violated? 4 Does schedule conform to policy? 4 Does schedule conform to laws and rules? 4 Does schedule provide flexibility?

24. Chapter 7: Schedule Management24 Rough-Cut Capacity Planning 4 Feasibility check of master production schedule 4 Historical ratios of loads placed on workcenters used 4 Workloads assumed to fall in period end items demanded

25. Chapter 7: Schedule Management25 Priority Planning 4 What materials are needed when 4 Feasibility check of master production schedule to make sure all materials will be available when needed 4 Determine when order is needed and schedule backwards from that date 4 Material Requirements Planning (MRP) systems often used

26. Chapter 7: Schedule Management26 Capacity Planning 4 Inventory control system and master schedule used to determine required capacity over planning horizon 4 Load reports generated for each work center 4 Inventory and lead times considered

27. Chapter 7: Schedule Management27 Loading 4 Deciding which jobs to assign to which work centers 4 Often some equipment or workers better for certain jobs

28. Chapter 7: Schedule Management28 Sequencing 4 After jobs assigned to work centers, order in which to process the jobs must be decided 4 Sequencing can have impact on timeliness of job completions 4 Priority rules often used

29. Chapter 7: Schedule Management29 Detailed (Short-Term) Scheduling 4 Detailed schedules itemizing specific jobs, times, materials developed 4 Typically done for only a few days in advance

30. Chapter 7: Schedule Management30 Dispatching 4 All previous activities are planning activities 4 Dispatching is the physical release of a work order from production planning

31. Chapter 7: Schedule Management31 Expediting 4 Task of getting job done on time once it is released to the shop floor 4 Special tags used to identify hot jobs

32. Chapter 7: Schedule Management32 Aggregate Planning

33. Chapter 7: Schedule Management33 Capacity Options 4 Overtime 4 Additional or fewer shifts 4 Hiring or laying off workers 4 Subcontracting 4 Building up inventories 4 Leasing facilities 4 Backlogging demand 4 Changing demand 4 Undersupplying the market

34. Chapter 7: Schedule Management34 Pure Aggregate Planning Strategies 4 Level Production –Equal amount produced each period –Steady employment –Inventory costs and risks 4 Chase Demand –Production matched to demand for the period –Minimal inventory –High overtime or hire/fire costs

35. Chapter 7: Schedule Management35 Personnel Needed by Rap-X- Press

36. Chapter 7: Schedule Management36 Level Production at 40 Workers

37. Chapter 7: Schedule Management37 Cost of Chase Demand with 40 Workers

38. Chapter 7: Schedule Management38 Master Scheduling

39. Chapter 7: Schedule Management39 Master Production Schedule 4 Production plan disaggregated into individual end items 4 Final word about what will be built and when 4 Altering the master schedule can alter inventory levels, lead times, capacity requirements and so on 4 Should not be a “wish list”

40. Chapter 7: Schedule Management40 Master Production Schedule 4 Sales and operations key players in developing master schedule 4 MPS usually stated in terms of weekly periods (buckets) 4 Rolling schedule 4 Four periods –frozen period –firm period –full –open

41. Chapter 7: Schedule Management41 Orders Replacing the Forecast in the Master Schedule

42. Chapter 7: Schedule Management42 Master and Final Assembly Schedules

43. Chapter 7: Schedule Management43 Four Periods in the Rolling MPS

44. Chapter 7: Schedule Management44 Scheduling Services

45. Chapter 7: Schedule Management45 Hospitals 4 Patient arrivals somewhat uncontrollable 4 Specialized and expensive equipment 4 Nurses must always be available 4 Nurses represent large expense 4 Constraints associated with scheduling nurses

46. Chapter 7: Schedule Management46 Urban Alarm Services 4 Quick response required 4 Personnel is a major expense 4 Use of duty tours can complicate scheduling

47. Chapter 7: Schedule Management47 Educational Services 4 Scheduling of classes 4 Assignment of classes to students 4 Allocation of faculty to classes 4 Allocation of facilities to classes

48. Chapter 7: Schedule Management48 Yield/Revenue Management and Overbooking 4 Attempt to allocate the fixed capacity of a service to match the revenue demand in the market place

49. Chapter 7: Schedule Management49 When is yield management appropriate? 4 Fixed Capacity 4 Perishable Capacity 4 Segmentable Market 4 Capacity Sold in Advance 4 Uncertain Demand 4 Low Marginal Sales Cost, High Marginal Capacity Addition Cost

50. Chapter 7: Schedule Management50 Overbooking 4 An attempt to reduce costs through better schedule management. 4 Based on inventory solution for the “newsboy problem.”

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