1. Review for Exam II This exam will be administered Monday, Mar. 29, 2004, beginning at 4:30 p.m.

2. Exam Format  45 multiple choice  3 problems  Closed-book  Closed-notes  Closed-neighbor  BRING---pencil, calculator, scantron

3. Exam details  Mar. 29, 2004  Will start the exam at 4:30 p.m. exactly

4. Exam Coverage  Chapters 9, 10, 11, 12, 13  NO CHAPTER SUPPLEMENTS  No linear programming  No simulation  No transportation, assignment, etc.

5. Typical problems—see Practice Exam II  Aggregate production planning  Inventory with Independent Demand  Material Requirements Planning  Otherwise known as dependent demand  Capacity Requirements Planning

6. Chapter 9 -- Capacity Planning and Aggregate Production Planning  Long Range Planning  Medium Range Planning  Aggregate Production Planning

7. What are the inputs to the aggregate planning system??  Demand forecasts  Capacity constraints  Strategic objectives  Company policies  Financial constraints  NOT…  Size of workforce  Inventory levels  Units subcontracted  Overtime scheduled

8. Capacity planning is….  Long-term strategic decision-making  What facilities located where, built exactly when????  NOT Capacity requirements planning

9. When doing capacity planning, which of the following steps is accomplished first?  a. Resource requirements plan  b. Rough-cut capacity plan  c. Capacity requirements plan  d. Input/output control 

10. Hierarchical Planning ProcessItems Product lines or families Individual products Components Manufacturing operations Resource Level Plants Individual machines Critical work centers Production Planning Capacity Planning Resource requirements plan Rough-cut capacity plan Capacity requirements plan Input/ output control Aggregate production plan Master production schedule Material requirements plan Shop floor schedule All work centers

11. Aggregate Production Planning Strategies are….  Pure (Trial-and-error)  Chase Demand  Level production  Mixed (optimal)  Linear programming  Simulation

12. Which of the following strategies matches production to demand by hiring and firing workers?  Chase demand strategies  Level production strategies  Strategies that use subcontracting and overtime

13. Which of the following is not a strategy for managing demand  Shifting demand into other time periods with incentives, sales promotions and advertising campaigns  Offering products or services with counter- cyclical demand patterns  Partnering with suppliers to reduce information distortion along the supply chain  Increasing inventories and laying off workers when demand is soft

14. Aggregate production planning provides input to which of the other process?  Input/Output Control  Shop flow schedule  Material requirements plan  Master production schedule  Capacity requirements plan

15. Hierarchical Planning ProcessItems Product lines or families Individual products Components Manufacturing operations Resource Level Plants Individual machines Critical work centers Production Planning Capacity Planning Resource requirements plan Rough-cut capacity plan Capacity requirements plan Input/ output control Aggregate production plan Master production schedule Material requirements plan Shop floor schedule All work centers

16. The master production schedule provides input to what other process?  Input/Output Control  Shop flow schedule  Material requirements plan  Master production schedule  Capacity requirements plan

17. Hierarchical Planning ProcessItems Product lines or families Individual products Components Manufacturing operations Resource Level Plants Individual machines Critical work centers Production Planning Capacity Planning Resource requirements plan Rough-cut capacity plan Capacity requirements plan Input/ output control Aggregate production plan Master production schedule Material requirements plan Shop floor schedule All work centers

18. Terms  Aggregate production planning  Best operating level  Capacity planning  Capacity cushion  Chase demand Pure strategy  Level production Pure strategy  Mixed strategy  Disaggregation  Diseconomies of scale  Yield management

19. Chapter 10 – Inventory Management  Inventory for Independent demand

20. Carrying costs  Rent  Lighting/heating  Security  Interest (on borrowed capital tied up in inventory)  Taxes  Shrink/obsolescence/theft Can also be expressed as a % of product cost A rule of thumb is 30%

21. Ordering costs—costs related to Transportation Shipping Receiving Inspection

22. Continuous Inventory Systems  Constant order amount, called the EOQ  Fixed annual deterministic demand  Minimizes  Holding (carrying) costs  Ordering costs  Uses re-order point to determine when to order  Time between orders is not fixed

23. EOQ models also have  No shortages  Constant lead time  Instantaneous or finite replenishment  Can take into consideration price discounting  When doing so, three costs are minimized jointly: Ordering costs, holding costs and purchase costs taken over a year’s time

24. ABC Classification—what is the point??  To concentrate, focus on the those items in inventory that constitute the highest dollar value to the firm  Class A items constitute 5-15% of the items and 70 to 80% of the total dollar value to the firm  Class B items constitute 30% of the inventory items but only 15% of the dollar value  Class C items constitute 50 to 60% of the items but only 5 to 10% of the dollar value

25. ABC Classification..  Class A items are tightly controlled  Class B items less so  Class C items even less  Dollar values are computed by multiplying the dollar cost by the annual demand for the item  This technique is used in all auto parts inventory control systems and has been for 15 years

26. Periodic inventory systems are….  Fixed Time period systems  NOT  EOQ Models  The time between orders is fixed, the re-order point is fixed, but the order amount is not

27. Which gives you lowest holding cost?  Instantaneous replenishment  Finite (non-instantaneous) replenishment  Quantity discounts  WHICH OF THE ABOVE GIVES YOU LOWEST TOTAL ORDERING COST?

28. How do we calculate a re- order point?  Lead time in days times the daily demand plus the safety stock  Safety stock equals the service level (usually 3 for z) * the standard deviation of daily demand times the sq. rt. of lead time.  (You will be given the formulas)

29. How do we calculate…  Time between orders?  Production days / # of orders  Run length  EOQ or order quantity / daily Production rate

30. Safety Stocks and Service Levels  Safety stock = Z value * std. dev. of daily demand * sqrt(lead time)  For 95% service level, use Z value of 1.65  For 99% service level, use Z value of 3

31. Terms ABC system Carrying costs Continuous inventory system Dependent demand EOQ Fixed-order quantity system Fixed time period system  Independent demand  Inventory  In-process inventory  Non-instantaneous receipt  Order cycle  Quantity discount  Stockout  Service level

32. Chapter 12 – ERP & Material Requirements Planning  Inventory for Dependent Demand

33. What were four motivations for transitioning from mainframes  36 month backlogs at centralized MIS shops  Absence of data integration  Idle CPU cycles on desktops  Mainframes were expensive bottlenecks  Support for Internet and thin clients  Quicker, cheaper development times through REUSE

34. What is the architecture modern ERP systems are currently based on?

35. Every application software package consists of  Presentation management component  Business logic management component  Data management component

36. MRP is applied mostly to  Project operations  Batch operations  Assembly line operations  Continuous operations

37. Material requirements planning is a system for  Computing EOQ’s  Determining when to release orders  Computing safety stocks  Determining service levels WHICH????

38. Formulas/Rules  Projected on-hand = prev projected on-hand + scheduled receipts + planned order receipts – gross requirements  Is really the on-hand amount at the end of the period  Net requirements = gross requirements – previous projected on-hand  If less than zero, set to zero  Planned order receipts must be sufficient to accommodate the net requirements  Why don’t we just use net requirements for this??  Planned order releases are the same in amount as planned order receipts, just offset one or more periods by the lead time

39. MRP led to….. MRP II, which led to…. which let to…. which is where we are today

40. ERP  Large caps have been there and done that  Mid and small caps are getting there  Read the book NECESSARY BUT NOT SUFFICIENT by Eli Goldratt if interested

41. More ERP  Based on an N-tier distributed architecture  Not on mainframe glasshouse

42. Advantages of N-tier architecture  Provides for Data integration  Better usage of MIPS on both PCs and servers  Solves the 36 month backlog of the centralized MIS shop  Leads to the decentralization of MIS

43. ERP Modules  Sales & distribution  Production & Materials Management  Quality management  Human resource management  Project management  Accounting and controlling/finance

44. Terms Capacity Efficiency Bill of Material Product structure File  Master Production File  Explosion  Expediting  netting

45. More terms  Load profile  MRP II  CRP  ERP  Modular BOM  Utilization  Time bucket  Time fence  Order splitting

46. Chapter 13 – Detailed Scheduling  Scheduling = assignment (loading) and sequencing and monitoring  Assignment algorithm – won’t test you on this  Sequencing – must know EDD, SPT, FCFS, LCLS, etc.

47. Ch 14 - 24 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Sequencing rules FCFS 18.60 9.6 323 DDATE 15.00 5.6 316 SLACK 16.40 6.8 416 CR 20.80 11.2 426 SPT 14.80 6.0 316 * best values Average Average No. of Maximum Rule Completion Time Tardiness Jobs Tardy Tardiness * * * * * * * *

48. Johnson’s two-machine scheduling  Know how to calculate the optimal sequence of jobs  Know how to determine the make-span of all jobs completed through the two work centers

49. Terms Sequencing Loading Assigning SPT EDD (DDATE) CR SLACK FCFS (FIFO) LCLS (LIFO)