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Review for Exam II
This exam will be administered Monday, Mar. 29, 2004, beginning at 4:30 p.m.
Exam Format45 multiple choice3 problemsClosed-bookClosed-notesClosed-neighborBRING---pencil, calculator, scantron
Exam detailsMar. 29, 2004Will start the exam at 4:30 p.m. exactly
Exam CoverageChapters 9, 10, 11, 12, 13NO CHAPTER SUPPLEMENTS
No linear programming No simulation No transportation, assignment, etc.
Typical problems—see Practice Exam IIAggregate production planning Inventory with Independent DemandMaterial Requirements Planning
Otherwise known as dependent demandCapacity Requirements Planning
Chapter 9 -- Capacity Planning and Aggregate Production Planning
Long Range PlanningMedium Range PlanningAggregate Production Planning
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
Capacity planning is….Long-term strategic decision-makingWhat facilities located where, built
exactly when????NOT Capacity requirements planning
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
Hierarchical Planning ProcessItemsItems
Product lines or Product lines or familiesfamilies
Individual Individual productsproducts
ComponentsComponents
Manufacturing Manufacturing operationsoperations
Resource Resource LevelLevel
PlantsPlants
Individual Individual machinesmachines
Critical work Critical work centerscenters
Production Production PlanningPlanning
Capacity Capacity PlanningPlanning
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 All work centerscenters
Aggregate Production Planning Strategies are….Pure (Trial-and-error)
Chase Demand Level production
Mixed (optimal) Linear programming Simulation
Which of the following strategies matches production to demand by hiring and firing workers?
Chase demand strategiesLevel production strategiesStrategies that use subcontracting and
overtime
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
Aggregate production planning provides input to which of the other process?
Input/Output ControlShop flow scheduleMaterial requirements planMaster production scheduleCapacity requirements plan
Hierarchical Planning ProcessItemsItems
Product lines or Product lines or familiesfamilies
Individual Individual productsproducts
ComponentsComponents
Manufacturing Manufacturing operationsoperations
Resource Resource LevelLevel
PlantsPlants
Individual Individual machinesmachines
Critical work Critical work centerscenters
Production Production PlanningPlanning
Capacity Capacity PlanningPlanning
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 All work centerscenters
The master production schedule provides input to what other process?
Input/Output ControlShop flow scheduleMaterial requirements planMaster production scheduleCapacity requirements plan
Hierarchical Planning ProcessItemsItems
Product lines or Product lines or familiesfamilies
Individual Individual productsproducts
ComponentsComponents
Manufacturing Manufacturing operationsoperations
Resource Resource LevelLevel
PlantsPlants
Individual Individual machinesmachines
Critical work Critical work centerscenters
Production Production PlanningPlanning
Capacity Capacity PlanningPlanning
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 All work centerscenters
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
Chapter 10 – Inventory Management Inventory for Independent demand
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 costA rule of thumb is 30%
Ordering costs—costs related to
Transportation
Shipping
Receiving
Inspection
Continuous Inventory SystemsConstant order amount, called the EOQFixed annual deterministic demandMinimizes
Holding (carrying) costs Ordering costs
Uses re-order point to determine when to order
Time between orders is not fixed
EOQ models also haveNo shortagesConstant lead time Instantaneous or finite replenishmentCan 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
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
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
Periodic inventory systems are….Fixed Time period systemsNOT
EOQ ModelsThe time between orders is fixed, the
re-order point is fixed, but the order amount is not
Which gives you lowest holding cost? Instantaneous replenishmentFinite (non-instantaneous)
replenishmentQuantity discounts
WHICH OF THE ABOVE GIVES YOU LOWEST TOTAL ORDERING COST?
How do we calculate a re-order point?Lead time in days times the daily
demand plus the safety stockSafety 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)
How do we calculate…Time between orders?
Production days / # of ordersRun length
EOQ or order quantity / daily Production rate
Safety Stocks and Service LevelsSafety 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
TermsABC 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
Chapter 12 – ERP & Material Requirements Planning Inventory for Dependent Demand
What were four motivations for transitioning from mainframes36 month backlogs at centralized MIS
shopsAbsence of data integration Idle CPU cycles on desktopsMainframes were expensive bottlenecksSupport for Internet and thin clientsQuicker, cheaper development times
through REUSE
What is the architecture modern ERP systems are currently based on?
Every application software package consists ofPresentation management componentBusiness logic management componentData management component
MRP is applied mostly toProject operations
Batch operationsAssembly line operationsContinuous operations
Material requirements planning is a system forComputing EOQ’sDetermining when to release ordersComputing safety stocksDetermining service levels
WHICH????
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
MRP led to…..MRP II, which led to….
which let to….
which is where we are today
ERPLarge caps have been there and
done thatMid and small caps are getting
thereRead the book NECESSARY BUT
NOT SUFFICIENT by Eli Goldratt if interested
More ERPBased on an N-tier distributed
architectureNot on mainframe glasshouse
•Advantages of N-tier architectureProvides for Data integrationBetter usage of MIPS on both
PCs and serversSolves the 36 month backlog of
the centralized MIS shopLeads to the decentralization of
MIS
ERP Modules Sales &
distribution Production &
Materials Management
Quality management
Human resource management
Project management
Accounting and controlling/finance
TermsCapacity
Efficiency
Bill of Material
Product structure File
Master Production File
ExplosionExpeditingnetting
More terms Load profile MRP II CRP ERP Modular BOM
Utilization Time bucket Time fence Order splitting
Chapter 13 – Detailed SchedulingScheduling = assignment (loading) and
sequencing and monitoringAssignment algorithm – won’t test you
on thisSequencing – must know EDD, SPT,
FCFS, LCLS, etc.
Ch 14 - 24© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e
Sequencing rules
FCFS 18.60 9.6 3 23DDATE 15.00 5.6 3 16SLACK 16.40 6.8 4 16CR 20.80 11.2 4 26SPT 14.80 6.0 3 16
* best values
Average Average No. of MaximumRule Completion Time Tardiness Jobs Tardy Tardiness
*
* **
**
*
*
Johnson’s two-machine schedulingKnow how to calculate the optimal
sequence of jobsKnow how to determine the make-span
of all jobs completed through the two work centers
TermsSequencingLoadingAssigningSPTEDD (DDATE)CRSLACKFCFS (FIFO)LCLS (LIFO)
