Economic Administration University of China

Production Management

CHAPTER 1  Overview of Planning and Control
中國經濟管理大學  Production Management

Learning Goals
(1) Distinguish manufacturing and service operations and the principles applying to them.
(2) Learn the customer influence in design: production environmental choices.
(3) Explain the five categories given to describe the process used in production, although in practice there are several combinations of these basic types.
(4) Discuss the business environment issues which may appear on the surface to be a fairly basic and simple approach.
(5) Describe the structure of his book in order to provide a general mind.
Chapter Highlights
1. While the major focus for the book is manufacturing, the same principles also apply to service organizations. There are clearly some differences do impact the formality and approach taken in the application of these principles, but often the principles do still apply.
2. The design of the planning and control system will be impacted by several factors. Among the most critical of these factors are the volume and variety of the expected output, and those issues in turn tend to be largely driven by the amount of influence the customer has in the design of the product or service delivered to them from the organization’s process. In some case the issue of customer design influence is a part of the firm’s basic strategy, but in some cases it is a reaction to market drivers.
3. The nature of the customer influence issue not only impacts the design of the product or service, but also has a profound impact on the design of the process used to deliver the product or service. There are essentially five categories given to describe the process used in production.
4. Another aspect of the business environment that will impact the design and management of the planning and control system is the market drivers for the product or service. It must be recognized that there are several dimensions by which customers in the market may evaluate the desirability of buying a certain product or service from a given producer.
5. There are several issues that must be determined with respect to the analysis of the internal processes used to deliver goods and services to the customer. The first issues is one if the process analysis and improvement.
6. The center part of the general flow for planning and control are the major planning activities, while the sides show supply and demand flows. Note that many of the arrows are double-headed, meaning that information flows back and forth in what is sometimes called “closed loop” planning. The very bottom of the chart indicates execution activities, meaning these activities control the actual activities after the planning is complete and production has actually started.
Main Contents
1. Manufacturing versus service operations (question)
There are four issues that generally provide the major influence on the way that planning and control approached.
(1) Timing. In service organizations there us often little time between the recognition of demand and the expected delivery of the process output.
(2) Customer contact. The contact point is often the person who will be delivering the service. In that respect the service worker can be thought of as both a sales person and an operation worker.
(3) Quality. A key dimension of quality in service organizations is that much of the quality may be intangible, making it much more difficult to effectively measure.
(4) Inventory. “pure” service organizations often have the luxury of inventorying their output.
2. Customer influence in design: production environmental choices (question)
The extent of customer influence tends to be described by the following categories, listed here in the order of influence.
(1) Make-to-Stock (MTS). As the time implies, these are products that are completely made into their final form and stocked as finished goods. The collective customer base may design phase, but an individual customer has essentially only to make once the product is made.
(2) Assemble-to-Order (ATO). In this case the customer has some more influence on the design, in that they can often select various options from predesigned subassemblies. The producer will then assemble these options into the final product for the customer.
(3) Make-to-Order. This environment allows the customer to specify the exact design of the final product or service, as long as they use standard raw materials and components.
(4) Engineer-to-Order (ETO). In this case the customer has almost complete say in the design of the product or service.
3. Process categories
The five categories typically given are: (blackboard)
(1) Project. A project-based process typically assumes a one-of-a-kind production output, such as building or developing a new soft-ware application. Projects are typically large in scope and will often be managed by teams of individuals brought together for this one-time activity based on their particular skills.
(2) Job process. Job process is typical designed for flexibility.
(3) Batch or Intermittent Processing. Many of the production facilities in the word today fall into this “middle of the road” category. the equipment tends to be more specialized than equipment in job shops, but still flexible enough to produce some variety in design.
(4) Repetitive or Flow Processing. Repetitive processing is typically used for make-to-stock designs, such as refrigerators and other appliances.
(5) Continuous. As with project processing, this type of process is at the far extreme of the processing types, again making it focus on highly specialized applications.
4. Business environment issues. They include: (blackboard)
(1) Customer “learning”. Competitors often attempt to approach the market in the same way as each other, but from time to time a competitor may attempt to gain market share by emphasizing they are the “best” at it.
(2) Competitor moves. Some competitor moves may disqualify order winners, turning them into qualifiers, and thereby establishing new order winners.
(3) Multiple markets. It is likely that most companies have numerous products or services serving numerous markets.
(4) Product design changes. New products and changes in product design, especially as technology impacts customer expectations, will also often change order winners and qualifiers.
5. Process analysis and information flows
There are several aspects to process analysis and improvement, including:
(1) Control and reporting points. They often require formal, structured process transitions, and many times also represent points where formal scheduling of production activity is required.
(2) Process analysis and improvement. As production and production processes change in response to the conditions, the change in processes needs to be improved systematically to ensure it matches the needs of the business in the best manner possible.
 
CHAPTER 2  Aggregate Planning and Scheduling
Learning Goals
1. Identify the dimensions on which aggregation is done and explain why aggregation helps in the planning process.
2. List the different types of reactive and aggressive alternatives and discuss the advantages and limitations of each.
3. Use a spreadsheet approach to evaluate different level, chase, and missed strategies for both service providers and manufactures.
4. Describe how the transportation method can be applied to aggregate planning problems.
5. Distinguish between the ways that service managers schedule customers to provide timely service and utilize fixed capacity.
6. Schedule a workforce to allow each employee to have two consecutive days off.
Chapter Highlights
1. Aggregate plans (production plans or staffing plans) are statements of strategy that specify time-phased production or service rates workforce levels, and (in manufacturing) inventory investment. These plans show how the organization will work toward longer-term objectives while considering the demand and capacity that are likely to exist during a planning horizon of only a year or two. In manufacturing organizations, the plan linking strategic goals to the master production schedule is called the production plan. In service organizations, the staffing plan links strategic goals to the workforce schedule.
2. To reduce the level of detail required in the planning process products or services are aggregated into families, and labor is aggregated along product family lines or according to the general skills or services provided. Time is aggregated into periods of months or quarters.
3. Managerial inputs are required from the various functional areas in the organization. This approach typically raises conflicting objectives, such as high customer service, a stable workforce, and low inventory investment. Creativity and cross-functional compromise are required to reconcile these conflicts.
4. The two basic types of alternatives are reactive and aggressive. Reactive alternative take customer demand as a given. Aggressive alternatives attempt to change the timing or quantity of customer demand to stabilize production or service rates and reduce inventory requirements.
5. Four pure, but generally high-cost planning strategies are the two level strategies, which maintain a constant workforce size or production rate, and the two chase strategies, which vary workforce level or production rate to match fluctuations in demand.
6. Developing aggregate plans is an iterative process of determining demand requirements; identifying relevant constraints, alternatives, and costs; preparing and approving a plan; and implementing and updating the plan.
7. Although spreadsheets, the transportation method, and linear programming can help analyze complicated alternatives, aggregate planning is primarily an exercise in conflict resolution and compromise. Ultimately, decisions are made by managers, not by quantitative methods,
8. Scheduling is the allocation of resources over a period of time to accomplish a specific set of tasks. Two basic types of scheduling are workforce scheduling and operations scheduling. Scheduling applications are becoming more common in ERP systems.
Main Contents
1. The purpose of aggregate plan (question)
The aggregate plan is useful because it focuses n a general course of action, consistent with the company’s strategic goals and objectives, without getting bogged down in details. In general, companies aggregate products or services, labor, and time.
2. Managerial importance of aggregate plans (blackboard)
In this section, we concentrate on the managerial inputs, objectives, alternatives, and strategies associated with aggregate plans. The inputs include operations, distribution and marketing, materials, engineering, human resources, and accounting and finance. The objectives are considered during development of a production or staffing plan, and conflicts among them may have to be resolved:
(1) Minimize cost/maximize profiles.
(2) Maximize customer service.
(3) Minimize inventory investment.
(4) Minimize changes in production rates.
(5) Minimize changes in workforce levels.
(6) Maximize utilization of plant and equipment.
3. The planning process
The process is dynamic and continuing, as aspects of the plan are updated periodically when new information becomes available and new opportunities emerge. The steps are to determine requirements for planning horizon, to identify alternatives, constraints, and costs, to prepare prospective plan for planning horizon, to implement and update the aggregate plan.
4. Aggregate planning with spreadsheets
Here we use a spreadsheet approach of stating a strategy, developing a plan, comparing the developed plan to other plans, and finally modifying the plan or strategy as necessary, until we are satisfied with the results. We demonstrate this approach by developing two staffing plans, the first plans, the first based on level strategy and the second on a chase strategy. We then consider a mixed strategy for a manufacturer facing a different demand pattern and cost structure. 

CHAPTER 3  The Master Schedule
中國經濟管理大學  Production Management
Learning Goals
1. Study the background and links to the Sale and Operations (S&OP).
2. Explain the steps of constructing a master schedule horizon which needs to have a planning horizon equal to or longer than the cumulative lead time of the product or service being planned.
3. Learn to know time fences which are used to establish rules for managing the master schedule.
4. Describe the two sources of demand for the master schedule: forecast and customer orders as well as the basic methodology using the demand as input.
5. Identify the impact of product environment which may influence the master schedule.
6. Learn to know the general approach to master schedule development.
Chapter Highlights
1. In order to be effective, it is extremely important that the master schedule needs to have a planning horizon equal to or longer than the cumulative lead time of the product or service being planned.
2. Inside the demand time fence, the forecast data is often ignored, and only customer order quantities are used to make master schedule computations. Planning time fence is usually set equal to or slightly larger than the cumulative lead time for the product. Between the demand time fence and the planning time fence, there may be time to react in small ways to customer orders, change both quantities and timing to a small extent based on the nature of the product and the environment.
3. Usually what happens is that the master schedule is developed some-aggregated back to S&OP, but once developed it should be able to be aggregated back to S&OP values. This means that it is important that the master schedule numbers were agreed to at the high level during the S&OP process.
4. The master schedule may need to be developed and managed very differently depending on the product environment, or to be more specific, based on the amount of the influence the customer has on the final design of the product or service: Make-to-Stock, Assemble-TO-Order, Make-to-Order.
5. The indication is that every time a master schedule is developed, a forecast is required and a formal schedule for the final product is developed. In some environment that complete approach is not practical.
6. One approach to master scheduling that can be very powerful in its service to the firm is the available-to-promise (ATP) logic. It will allow the firm to every quickly and realistically promise delivery of product to customers, which is for many companies an increasingly important competitive imperative.
7. The forecasts are typically made at the end product level, yet we are suggesting the master scheduling be done at the option level. In order to accomplish this, a special type of planning bill of materials often caked a super bill is developed.
8. The top level of a two level master schedule is where the projected demand forecast for the final product is input, and is also the source of MPS requirements for the common assemblies for the product, since the demand for those common assemblies equal the production of the product itself.
9. An operation cannot simply become a passive order-take, merely taking every order that any customer wants and promising delivery whenever the customer wants it. There must be coordination between marketing, sale, and operations beyond the S&OP and more than just making a master schedule.
Main Contents
1. Background and links to the S&OP
The master schedule typically has a great deal more detail than does the S&OP, and will typically have a shorter time horizon than does the S&OP. As stated in the S&OP chapter, the S&OP must extend far enough into the future to adequately address the resource issues for production, based on the lead times to obtain those resources. In addition, the master schedule values should add up to the values developed in the S&OP, since the S&OP was the agreed-upon plan developed at the high level to reflect the business strategy and business plan. The master schedule, on the other hand, only has to extend far enough into the future to address the cumulative lead time of the product or service being scheduled. The resources, assuming the S&OP has been managed properly, can be expected to be available already, at least in the aggregate. One way to view the relationship between S&OP and master scheduling is that the S&OP activity develops capacity constraints that serve as bound-aries for master schedule planning.
2. Master schedule horizon (question)
In order to establish the planning horizon, we first need to look at a bill of material. The bill of material shows all the components used to assemble a product. It typically shows not only the relationships between all components, but will also show quantities needed for each component.
3. Sources of demand (question)
The forecasting methods used for demand forecasting are often different for the master schedule when compared to the S&OP. S&OP are long-range, aggregate forecasts, often generated from causal methods. Another major source of demand numbers for the master schedule is the actual customer orders. This is an issue that substantially sets the master schedule apart from other planning approaches, and also makes it a planning toll of critical importance for the firm.
4. Basic methodology (blackboard)
The master schedule has to accommodate additional constraints as seen in the S&OP, but a different level of detail:
(1) Meeting the customer needs for delivery as established in the S&OP.
(2) Balancing the preliminary master schedule numbers against available capacity.
(3) Establishing inventory levels according to the S&OP
5. General approach to master schedule development (blackboard)
An example, take a make-to-order bakery .
6. Available-to-promise logic
The ATP value is not a projected inventory balance. The projected inventory balance is given by the projected available balance row. The ATP, on the other hand, really reflects the following: for any MPS quantity, how many items are not promised to specific customer orders.
7. Planning option in an ATO environment (blackboard)
Take a bicycle as an example of a planning bill.
8. The two-level master schedule (blackboard)
An example.
9. Some notes on the master scheduling responsibility (question)
(1) The master schedule is the major link to customer orders.
(2) The master schedule should basically reflect the policy issues and constraints developed in the S&OP, including chase, level, or combination approaches to demand.
(1) MPS values are a reflection of the completion of the order.
(2) If the company is to operate effectively, the master schedule must be developed in a realistic manner.
 
CHAPTER 4  Inventory Management
Learning Goals
(1) Describe the cost and service trade-offs involved in inventory decisions.
(2) Distinguish between the different types of inventory and know how to manage their quantities.
(3) Compute the economic order quantity and apply it in various situations.
(4) Develop policies for both continuous review and periodic review inventory control systems.
(5) Identify ways to maintain accurate inventory records.
Chapter Highlights
1. Inventory investment decisions involve trade-offs among the conflicting objectives of low inventory investment, good customer service and high resource utilization. Benefits of good customer service and high resource utilization may be out-weighted by the cost of carrying large service and high resource utilization may be out-weighed by the cost of carrying large inventories, including interest or opportunity costs, storage and handing custom taxes, insurance, shrinkage, and obsolescence. Order quantity decisions are guided by a trade-off between the cost of holding inventories and the combined costs of ordering, setup, transportation, and purchased materials.
2. Cycle, safety, stock, anticipation, and pipeline inventories vary in size with order quantity, uncertainty, production rate flexibility, and lead time, respectively.
3. Inventory placement at the plant level depends on whether an item is a standard or a special and on the trade-off between short customer response time and low inventory costs.
4. ABC analysis helps managers focus on the few significant items that account for the bulk of investment in inventory. Class A items deserve the most attention, with less attention justified for class Band class C items.
5. Independent demand inventory management methods are appropriate for wholesale and retail merchandise, service industry supplies, finished goods and service parts replenishment, and maintenance, repair and operating supplies.
6. A basic inventory management question is whether to order large quantities infrequently or to order small quantities frequently. The EOQ provides guidance for this choice by indicating the lot size that minimizes (subject to several assumptions) the sum of holding and ordering costs over some period of time, such as a year.
7. In the continuous review (Q) system, the buyer places orders of a fixed lot size Q when the inventory position drops to the reorder pint. In the periodic review (P) system, every P fixed time interval the buyer places an order to replenish the quantity consumed since the last order.
8. The base-stock system minimizes cycle inventory by maintaining the inventory position at the base-stock level. Visual systems, such as single-bin and two-bin systems, are adaptations of the P and Q systems that eliminate the need for records.
Equation summary
1. Cycle inventory 
2. Pipeline inventory 
3. Total annual cost = Annual holding cost + Annual ordering or setup cost
 
4. Economic order quantity: 
5. Time between orders, expressed in weeks: 
6. Inventory position = On-hand inventory + Scheduled receipts – Backorders
 
7. Continuous review system:
       Reorder point (R) = Average demand during the protection interval + Safety stock
                      
       Protection interval = Lead time (l)
       Standard deviation of demand during the lead time = 
       Order quantity = EOQ
       Replenishment rule: Order EOQ units then 
       Total Q system cost: 
8. Periodic review system
       Target inventory level (T) = Average demand during the protection interval + Safety stock
                            =
       Protection interval = Time between orders +Lead time =  
       Review interval = Time between orders= p
       Standard deviation of demand during the protection interval = 
       Order quantity = target inventory level – inventory position = T – IP
       Replenishment rule: Every P time periods order T – IP units
       Total P system cost: 
Main Contents
1. Inventory concepts (question)
In this section, we identify the pressures for high and low inventories, define the different types of inventory, discuss tactics that can be used to reduce inventories when appropriate, identify the trade-offs involved in making manufacturing inventory placement decisions, and how to identify the inventory items needing the most attention.
2. Economic order quantity(EOQ) (blackboard)
The approach to determine EOQ is based on the following assumptions:
(1) The demand rate for the item is constant and known with certainty.
(2) There are no constraints (e.g., truck capacity or materials handing limitations) on the size of each lot.
(3) The only two relevant costs are the inventory holding cost and the fixed cost per lot for ordering or setup.
(4) Decisions for one item can be made independently of decisions for each other item.
(5) There is no uncertainty in lead time or supply. The lead time is constant and known with certainty. The amount received is exactly what was ordered and it arrives all at once rather than piecemeal.
3. Inventory control systems (blackboard)
In this section, we discuss and compare two inventory control systems: the continuous review system and the periodic review system. We close a look at hybrid systems, which incorporate features of both the two systems.
(1) A continuous review (Q) system sometime called a reorder point (ROP) system or fixed order-quantity system, tracks the remaining inventory of an item each time a withdrawal is made to determine whether it is time to reorder. In practice, these reviews are done frequently and often continuously. The steps are selecting the recorder point, choosing an appropriate service-level policy, finding the safety stock.
(2) A periodic review (P) system, sometimes called a fixed interval reorder system or periodic reorder system, in which an item’s inventory position is reviewed periodically rather than continuously. Such a system can simplify delivery scheduling because it establishes a routine. The steps is selecting the time between reviews, selecting the target inventory level, calculating total P system costs.
4. inventory management across the organization
Inventories are important to all types of organizations and their employees. Inventories affect everyday operations because they must be counted, paid for, used in operation, used to satisfy customers, and managed, inventories require an investment of funds, as does the purchase of a new machine.
CHAPTER 5  Material Requirements Planning
Learning Goals
(1) Distinguish between independent and dependent demand and their differences when planning for the replenishment of materials.
(2) Explain the logic of material requirements planning, how it can be used to plan distribution inventories, and how to schedule the receipt of materials to meet promised delivery dates.
(3) Identify the key outputs from the resource planning process and how they are used.
(4) Provide examples of the effective use of manufacturing resource planning and its benefits to various functional areas of the firm.
(5) Discuss resource planning for service providers and how it can be accomplished.
Chapter Highlights
1. Development demand for component items can be calculated from production schedules of parent items in a manufacturing company. Dependent demands can be calculated from forecasts and other resource plans in a service company.
2. Material requirements planning (MRP) is a computerized scheduling and information system that offers benefits in managing dependent demand inventories because it (1) recognizes the relationship between production schedules and the demand for component items, (2) provides forward visibility for planning and problem solving, and (3) provides a way to change material plans in concert with production schedule changes. MRP has three basic inputs: bills of materials, the master production schedule, and inventory records.
3. A bill material is diagram or structured list of all components of an item, the parent-component relationships, and usage quantities.
4. A master production schedule (MPS) states the number of end items to be produced during specific time periods within an intermediate planning horizon. The MPS is developed within the overall guidelines of the production plan.
5. The MRP is prepared from the most recent inventory records for all items, the basic elements in each record are gross requirements, scheduled receipts, projected on-hand inventory, planned receipts, and planed order releases. Several quantities must be determined for each inventory record, including lot size, lead time, and safety stock.
6. The MRP explosion procedure determines the production schedules of the components that are needed to support the master production schedule. The planned order releases of a parent, modified by usage quantities shown in the bill of materials, become the gross requirements of its components.
7. MRP systems provide outputs such as the material requirements plan, action notices, capacity reports, and performance reports. Action notices bring to a planner’s attention new orders that need to be released or items that have open orders with misaligned due dates.
8. Capacity requirements planning (CRP) is a technique for estimating the workload required by a master schedule. CRP uses routing information to identify the workstations involved and MRP information about existing inventory, lead-time offset, and replacement part requirements to calculate accurate workload projections. Finite capacity scheduling (FCS) determines a schedule for production orders that recognizes resource constrains.
9. Manufacturing resource planning (MRP II) ties the basic MRP system to the financial and accounting systems, advanced systems integrate management decision support for all business functions.
10. Service providers can take advantage of MRP principles by developing bills of resources that include requirements for materials, labor, and equipment.
Main Contents
1. Overview of material requirements planning (question)
MRP was developed specifically to aid companies manage dependent demand inventory and schedule replenishment orders. The MRP system enables businesses to reduce inventory levels, utilize labor and facilities better, and improve customer service. These successes are due to three advantages of material requirements planning.
(1) Statistical forecasting for components with lumpy demand results in large forecasting errors. Compensating for such error by increasing safety stock is costly, with no guarantee that stock outs can be avoided. MRP calculates the dependent demand of components from the production schedules of their parents thereby providing a better forecast of component requirements.
(2) MRP systems provide managers with information useful for planning capacities and estimating financial requirements. Production schedules and materials purchases projected in the time periods when they will appear. Planers can use the information on parent item schedules to identify times when needed components may be unavailable because of capacity shortages, supplier delivery delays, and the like.
(3) MRP systems automatically update the dependent demand and inventory replenishment schedules of components when the production schedules of parent items change. The MRP system alters the planners whenever action is needed on any component.
2. Inputs to material requirements planning (blackboard)
The key inputs of an MRP system are a bill of materials database, master production schedules, and an inventory record database. Using this information, the MRP system identifies actions that operations must take to stay on schedule, such as releasing new production orders, adjusting order quantities, and expediting late orders.
3. Outputs from material requirements planning (blackboard)
Material requirements planning systems provide many reports, schedules, and notices to help managers control dependent demand inventories. In this section, we discuss the MRP explosion process, action notices that alert managers to items needing attention, and capacity reports that project the capacity requirements implied by the material requirements plan.
4. Service resource planning
We have seen how the manufacturing companies can disaggregate a master production schedule of finished products into the plans for assemblies. Service providers must plan for the same resources; however, the focus is on maintaining the capacity to serve as opposed to producing a product to stock. Utilization of resource is important because materials are only a fraction of a typical service provider’s investment in capital and people. We will discuss the concept of dependent demands for service providers and the use of a bill of resources.
 
CHAPTER 6  Capacity Planning
Learning Goals  
After reading this chapter, you will be able to
(1) Describe different ways to measure capacity, establish maximum capacity, and calculate capacity utilization.
(2) Discuss long –and short-term strategies to ease bottlenecks and the concept of the theory-of-constraints approach.
(3) Explain the reasons for economics and diseconomies of scale.
(4) Discuss strategic issues such as capacity cushion, timing and sizing options, and linkage with other decisions.
(5) Calculate capacity gaps and then evaluate plans for filling them.
(6) Describe how waiting-line models, simulation, and decision trees can assist capacity decisions.
Chapter Highlights
1. Operations managers plan for timely acquisition, use, and dispositions of capacity.
2. Long-term capacity planning is crucial to an organization’s success because it often involves large investment in facilities and equipment and because such decisions are not easily reversed.
3. Capacity can be stated in terms of either input or output measure. Output measures giving the name of products or services completed in a time period are useful when a film provides standardized products or services. However, a statement of the number of customized products or services completed in a time period is meaningless because the work content per unit varies.
4. The desirable amount of capacity cushion varies, depending on competitive priorities, cost of unused capacity, resource flexibility, supply uncertainties, shelf life, variability and uncertainly of demand, and other factors.
5. Three capacity strategies are expansionist, wait and see, and follow the leader. The expansionist strategy is attractive when there are economics of scale, learning effects, and chance for preemptive marketing.    
6. Capacity choices must be linked to other operations management decisions.
7. The four steps in capacity planning are estimate capacity requirements, identify gaps, develop alternatives, and evaluate the alternatives.
8. Waiting-line model help the manager choose the capacity level the best balances customs services and cost of adding more capacity. As waiting-line problems involved more servers, mathematical models quickly become very complex.
Main Contents
(1) Capacity planning (blackboard)
Capacity planning is central to long-term success of an organization. Too much capacity can be as agonizing as too little, as the Managerial Practice demonstrates. When choosing a capacity strategy, mangers have to consider question such as the following: How much of a cushion is needing to handle variable, uncertain demand? A systematic approach is needed to answer these and these and similar questions and to develop a capacity strategy appropriate for each situation.
(1) Measures of capacity
In general, capacity can be expressed in one of two ways: output measure or input measure. Output measures are the usual choice for high-volume processes that produce only one type of products. Input measures are the usual choice for low-volume, flexible processes. For example, in a photocopy shop, capacity can be measured in machine hours or number of machines.
(2) Theory of constrains
Developing schedules that focus on bottlenecks has great potential for improving a firm’s financial performance. The theory of constraints (TOC), sometimes referred to as the drum-buffer-rope method, is an approach management that focuses on whatever impedes progress toward the goal of maximizing the flowing of total value-added funds or sales less sales discounts and variable costs.
(2) A systematic approach to capacity decisions (question)
Although each situation is somewhat different, a four-step procedure generally can help managers make sound capacity decisions. In describing this procedure, we assume that management has already performed the preliminary step of determining existing capacity.
STEP1: Estimate capacity requirements
STEP2: Identify gaps
STEP3: Develop alternatives
STEP4: Evaluate the alternatives
(3) Tool for capacity planning (blackboard)
Long-term capacity planning requires demands forecasts for an extended period of time. Unfortunately, forecast accuracy declines as the forecasting horizon lengthens. In addition, anticipating what competitors will do increases the uncertainty of demand forecasts. Finally, demand during any period of time is not evenly distribute. In this section, we introduce three tools that deal more formally with demand uncertainty and variability: waiting-line models, simulation, and decision trees.
1. Waiting model
Waiting-line models often are useful in capacity planning. Waiting lines tend to develop in front of a work center, such as an airport ticket counter, a machine center, or a central computer. Waiting-line model use probability distributions to provide estimates of average customers delay time, average length of waiting lines, and utilization of the work center. Manger can use this information to choose the most cost-effective capacity, balancing customs service and the cost of adding capacity.
2. Simulation
More complex waiting-line problems must be analyzed with simulation. It can identify the process’s bottlenecks and appropriate capacity cushions.
3. Decision tree
A decision tree can be particular valuable for evaluating different capacity expansion alternatives when demand is uncertain and sequential decision are involved.
(4) Management capacity across the organization
Manager make capacity choices at the organization level, They also must make capacity decisions at the individual-process level in accounting, finance, human resource, information technology, marketing, and operations. Capacity issue can cut across departmental lines, because relieving a bottleneck in one part of an organization does not have the desirable affect unless a bottleneck in another part of the organization does not have the desired.
 
CHAPTER 7  Scheduling
Learning Goals
(1) Identify the overview of the m sot important results for sequence scheduling.
(2) List the different type of scheduling problems faced by the firm.
(3) Learn to know the objectives of Job Shop Management and the relationship between them.
(4) Describe four specific sequencing rules with a comparison in order to illustrate how these sequencing rules affect various measures of a system performance.
(5) Present sequencing algorithms for multiple machines with respect to different scheduling rules.
(6) Discuss the static and dynamic analysis of stochastic scheduling with respect to both single machine and multiple machines.
Chapter Highlights
(1) Scheduling is an important aspect of operations control in both manufacturing and service industries. With increased emphasis on time to market and time to volume as well as improved customer satisfaction, efficient scheduling will gain increasing emphasis in the operations function in the coming years.
(2) Shop floor control means scheduling personnel and equipment in a work center to meet the due dates for a collection of jobs. Often, jobs must be processed through the machines in the work center in a unique order or sequence.
(3) In general, a job shop scheduling problem is one in which n jobs must be processed through m machines. The complexity of the problem depends upon a variety of factors, such as what job sequences are permissible and what optimization criteria are chosen.
(4) Assume that n jobs are to be processed through m machines. The number of possible schedules is staggering, even for moderate values of both n and m. For each machine, there are n! different orderings of the jobs.  If the jobs may be processed on the machine in any order, it follows that there are a total of (n!).
(5) An issue we have mot yet addressed is uncertainty of the processing time. In practice it is possible and even likely that the exact completion time of one or more jobs may not be predictable. It is of interest to know whether or nor there are some results concerning the optimal sequencing rules when processing times are uncertain. We assume that processing times are independent.
(6) In practice, scheduling jobs on machine is a dynamic problem. We use the term dynamic here to means that jobs are arriving randomly over time, and decisions must be made on an ongoing basis as to how to schedule those jobs.
(7) The problem of balancing an assembly line is a classic industrial engineering problem. The problem is characterized by a set of n distinct tasks that must be completed on each item. The time required to complete task I is a known constant ti,. The goal is to organize the tasks into groups, with each group of tasks being performed at a single workstation.
(8) Real-word scheduling problems are often too complex to be amenable to mathematical analysis. Computer-based simulation is a valuable tool for comparing various scheduling strategies and scenarios. A simulation is a model or a re-creation of a real situation that allows the user to examine different scenarios in a laboratory environment.
(9) An important distinction between planners and schedulers is the length of planning horizon. According to Sanjev Gupta, planning is done over a six-to-nine-month period, while finite capacity scheduling looks at a two- to-three-month period.
Main Contents
1. The purpose of aggregate plans
There are many different types of scheduling problems faced by the firm. A partial list includes:
(1) Job shop scheduling. Job shop scheduling is the set of activities in the shop that transform inputs to outputs.
(2) Personnel scheduling. Scheduling personnel is an important problem for both manufacturing and service industries.
(3) Facilities scheduling. This problem is particularly important when facilities become a bottleneck resource.
(4) Vehicle scheduling. Manufacturing firms must distribute their products in a cost-efficient and timely manner. Some service operations such as dial-a-ride systems.
(5) Vendor scheduling. For firms with just-in-time systems, scheduling deliveries from vendors is an important logistics issue.
(6) Project scheduling. A project may be broken down into a set of interrelated tasks. Complex projects may involve thousands of individual tasks that must be coordinated for the project to be completed on time ad with budget.
(7) Dynamic versus static scheduling. Many scheduling problems are dynamic in the sense that jobs arrive continuously over time.
2. Production scheduling and the hierarchy of production decision
We view the production function in a company as a hierarchical process. First, the firm must forecast demand for aggregate sales over some predetermined planning horizon. These forecasts provide the input for determining the aggregate production and workforce levels for the planning horizon. The aggregate plan then must be translated into the master production schedule. Finally, the planned order releases must be translated into a set of tasks and the due date associated with those tasks.
3. Important characteristics of job shop scheduling problems
(1) The job arrival pattern.
(2) Number and variety of machines in the shop
(3) Number of works in the shop
(4) Particular flow patterns
(5) Evaluation of alternative rules
4. Objectives of job shop management
Some of the common objectives are
(1) Meet due dates
(2) Minimize work-in-process (WIP) inventory
(3) Minimize the average flow time through the system
(4) Provide for high machine/worker time utilization
(5) Provide for accurate job status information
(6) Reduce setup times
(7) Minimize production and worker cost
5. Job shop scheduling terminology (blackboard)
In this section, we define some of the terms that must be processed.
(1) Flow shop. In a flow shop each of the n jobs must be processed through the m machines in the same order, and each job is processed exactly once in each machine.
(2) Job shop. A general job shop differs from a flow shop in that not all jobs are assumed to require exactly m operations, and some jobs may require multiple operations on a single machine.
(3) Parallel processing versus sequential processing. In parallel processingwe assume that the machines are identical, and any job can be processed on any machine.
(4) Flow time. The flow time of job i is the time that elapses from the initiation of the first job on the first machine to the completion of job i.
(5) Makespan. The makespan is the flow time of the job that is completed last.
(6) Tardiness and lateness. Tardiness is the positive difference between the completion time and the due date of a job. A tardy job is one that is completed after its due date.
6. A comparison of specific sequencing rules (blackboard)
Four sequencing rules:
(1) FCFS (first-come, first-served). Jobs are processed in the sequence in which they entered the shop.
(2) SPT (shortest processing time). Jobs are sequenced in increasing order of their processing times.
(3) EDD (earliest due date). Jobs are sequenced in increasing order their due dates. The job with the earliest due date is first, the job with the next earliest due date is second, and so on.
(4) CR (critical ratio). Critical ratio scheduling requires forming the ratio of the processing time of the job, divided by the remaining time until the due date.
7. Objectives in job shop management
An example.
8. An introduction to sequencing theory for a single machine (blackboard)
Theorem 8.1
The scheduling rule that minimizes the mean flow time F’ is SPT.
Corollary 8.1
The following measures are equivalent.
(1) Mean flow time
(2) Mean waiting time
(3) Mean lateness
9. Sequencing algorithms for multiple machines (blackboard)
Theorem 8.2
The optimal solution for scheduling n jobs on two machines is always a permutation schedule.
10. Stochastic scheduling: static analysis (question)
(1) Single machine
Suppose that n jobs are to be processed through a single machine. Assume that the job times,  , are random variables with known distribution functions.the goal is to minimize the expected average weighted flow time; that is
                     
Where  are the weights and   is the flow time of job i.
(2) Multiple machines
Considering the following problem: n jobs are to be processed through two identical parallel machines. Each job needs to be processed only once on either machine. The objective is to minimize the expected time that elapses from time zero until the last job has completed processing. We assume that the n jobs have processing time  , which are exponential random variables with rates  . This means that the expected time requires do complete job i,  is  .
11. Stochastic scheduling: dynamic analysis (question)
Queuing theory provides a means of modeling some dynamic scheduling problems. Consider the following problem. Jobs arrive completely at random to a single machine. Assume that the mean arrival time rate is  . We initially will assume that processing times are exponentially distributed with mean  . We assume that jobs are processed on a first-come, first-served basis.
12. Assembly line balancing (question)
Assembly line balancing is traditionally thought of as a facilities design and layout problem. However, in new plant environment, line balancing is more like a dynamic scheduling problem than a one shot facilities layout problem.
Finding the optimal balance of an assembly line is a difficult combinatorial problem. let  be the time required to complete the respective tasks. The total work content associated with the production of an item, say T, is given by  . For a cycle time of C, the minimum number of workstations possible is [T/C]. Because of the discrete and indivisible nature of the tasks and the precedence constrains, it is often true that more stations are required than this ideal minimum value. If there is leeway in the choice of the cycle time, it is advisable to experiment with different values of C to see if a more efficient balance can be obtained.
13. Simulation: a valuable scheduling tool
Production planning applications utilize computer-based simulators. Spreadsheets include random number generators, allowing one to construct simple simulators. More sophisticated spreadsheet models can be created with third-party add-in products (such as ＠Risk for Lotus 1-2-3 and Excel). While most simulation programs can easily be written in a source language (such as Basic or C), many dedicated simulation packages are available. Examples of early products are SLAM and GPSS.
 
CHAPTER 8  Managing Project Progress
Learning Goals
1. Identify the three major activities associate with successful project processes.
2. Diagram the network of interrelated activities in a project.
3. Identify the sequence of critical activities that determinates the duration of a project.
4. Compute the probability of completing a project on time.
5. Understand how to monitor and control projects.
Chapter Highlights
1. A project is an interrelated set of activities that often transcends functions boundaries. A project process is the organization and management of the resource dedicated to completing a project, planning and monitoring and controlling the project.
2. Project planning involves defining the work breakdown structure, diagramming the network, developing a scheduling, analyzing cost-time trade-offs, and assessing risks.
3. Project planning and scheduling focus on the critical path: the sequence of activities requiring the greatest cumulative amount of time foe completion. Delay the critical will delay the entire project.
4. Risks associated with the completion of activities on scheduling can be incorporate in project network by reconfiguring the time estimates for each activity and then calculating expected activity times and variances. The probability of completing the scheduled by a certain date can be compute by this information.
5. Monitoring and control the project involves the use of the activity-time slack reports and reports the actual resource usage. Overloads on certain resource can be rectified by resource leveling, allocation, or acquisition.
Main Contents
(1) Defining and organizing project (question)
(1) Selecting the project manager and term
Project manager should be a good monitor, teacher, and communicators. They should be able to organize a set of disparate activities and work with personal from a variety of discipline. the project team is a group of people led by the project manager. Members of the project term may represent entities internal to the films, such as marking, finance accounting, or operations. Everyone performs work for the project as a part of the project team. Consequently, the size and makeup of the team may fluctuate during the life of the project.
(2) Defining the scope and objectives
A thorough statement of project scope, time frame, and allocated resource is essential to managing the project progress. The scope provides a succinct statement of project objectives and captures the essence of the desired project outcome.
(2) Planning projects (blackboard)
(1) Defining the work breakdown structure
The work breakdown structure is a statement of all work that has to be completed. Perhaps the single most important contributor to delay is the omission of work that is perhaps the successful completion of the project. The project manager work closely with the term to identify all work tasks.
(2) Diagramming the network
The critical path method was developed as a means of scheduling shutdowns at chemical-processing plants. These methods offer several benefit to project managers.
(3) Analyzing cost-time trade-offs
Keeping cost at acceptable levels is almost always as important as meeting schedule dates. The reliability of the project management is that there are always time-cost trade-offs. The project costs dependent either on activity times or on project completion time.
(4) Assessing the risk
Risk is measure of the probability and consequence of not reaching a defined project goal. Risk involves the notion of uncertainty as it relates to project timing and costs. Often project teams must deal with uncertainty caused by the labor shortages, weather, supply delays, or the outcomes of critical tests.
(3) Monitoring and controlling projects (blackboard)
(1) Monitoring project status
A good tracking system will help the project team accomplish its project goals. Often the very task of monitoring project progress motivates the teams as it sees the benefits of its planning efforts come to fruition. It also focuses on the decisions that must be made as the project unfolds. Effective tracking systems collect information on three topics: open issues, risks, and schedule status.
Open issues and risks. One of the project manager is to make sure that issue that have been raised during the project actually get resolved is a timely a timely fashion.
Schedule status. Even the best laid project plans can go awry. Monitoring slack time is the project schedule can help the project manager control activities along the critical path.
(2) Monitoring project resources
The resources allocated to a project are consumed at an uneven rate is a function of the timing of schedules for the project’s activities. Project has a life cycle consists of four major phases: definition and organization, planning, execution, and closeout.
(3) Project management software
Project software is accessible to most organizations and is being used extensively in government, services, and manufacturing.
 
CHAPTER 9  Lean Production
Learning Goals
(1) Identify the characteristics of lean systems that enable the realization of the lean system philosophy.
(2) Describe how lean system can facilitate the continuous improvement of operations.
(3) Calculate the number of containers of a special part required for a system.
(4) Explain how the principle of a lean system philosophy can be applied by service providers.
(5) Discuss the strategic advantages of lean system and implementation issues associated with the application of these systems.
Chapter Highlights
1. Lean system focus on the efficient delivery of products or services. A just-in-time system, a popular lean system, is designed to produce or deliver just the right products or services in just the right quantities just in time to serve subsequent processes or customs.
2. Some of the key of elements of JIT system are a pull method to manage material flow, consistently high quality, small lot sizes, uniform workstation loads, standardized components and work methods, close supplier ties, flexible workforce, line flow strategy, automated production, preventive maintenance, and continuous improvement.
3. A single-card JIT system uses a kanban to control production flow. The authorized inventory of a part is a function of the number is authorized cards for that item. The number of cards depends on average demand during manufacturing lead time. The container size and a policy variable to adjust for unexpected occurrences. Many other methods may be used to signal the need for material replenishment and production.
4. The JIT II system provides an organization structure for improved supplier coordination by integrating the logistics, production, and purchasing processes.
5. Just-in-time concepts can be applied to the production of services. Service organizations that have repetitive operations, maintain reasonably high volume, and deal with some tangible item are most likely to benefit from JIT practices.
6. For operations competing on the basis of low cost and consistent quality, JIT system advantages include reductions in inventory, space requirements, and paperwork and increases in productivity, employee participation, and quality.
7. The just-in-time system, a primary example of lean systems, focus on reducing inefficiency and unproductive time in processes to improve continuously the process and the quality of the products or services they produce. In this section, we discuss the following characteristics of JIT system: pull method of material flow, consistently and work method, close supplier, flexible workforce, line flows, automates production, and preventive maintenance.
Main Contents
1. Characteristic of lean systems: Just-In-Time operation (blackboard)
(1) Pull method of material flow
Just-in-time systems utilize the pull method of materials flow. However, another popular method is the push method.
(2) Consistently high quality
Just-in-time systems seek to eliminate scrap and rework in order to achieve a uniform flow of materials. Efficient JIT operation require conformance to product pr service specifications and implementation of the behavioral and statistical methods of total quality management. JIT systems control quality at the source, with worker acting as their own quality inspectors.
(3) Small lot sizes
Rather than building up a cushion of inventory, users of JIT systems maintains inventory with lot sizes that are as small as possible. Small lot sizes have three benefits. First small lot size reduce cycle inventory. Second, small lot size help cut lead times. Finally, small lots help achieve a uniform operating system workload.  
(4) Uniform workstation loads
The JIT system work best if the daily load on individual workstations is a relatively uniform. Uniform loads can be achieved by assembling the same type and number of units each day, thus creating a uniform daily demand at all workstations. The standardized of components, called part commonly or modularity, increases repeatability.
(5) Close supplier ties
Because JIT systems operator with very levels of inventory, close relationship with suppliers are necessary. User of JIT systems also find that a cooperative orientation with suppliers is essential. The JIT philosophy is to look for ways to improve efficient and reduce inventories throughout the supply chain. Workers in flexible workforces can be trained to perform more than one job. When the skill levels required to perform most tasks are low.
(6) Continuous improvement
By spotlighting areas that need improvement, lean systems lead to continuous improvement in quality and productivity. In manufacturing, the water surface represents product and component inventory levels. In services, the water surface represents the service system capacity.
2. Strategic implications of lean systems (question)
(1) Competitive priorities
Low cost and consistent quality are the priorities emphasized most often in JIT systems. Superior features and volume flexibility are emphasized less often. The ability to provide product or service variety depends on the degree of flexibility designed into the production system.
(2) Flows
A JIT system involved line flow to achieve high-volume, low-cost production of products or services. Workers and machines are organized around product or service flows and arranged to conform to the sequence of the work operation. With the flows, a unit of work finished at one station goes almost immediately to the next station, thereby, reducing lead time and inventory.
3. Implementation issues (question)
(1) Organizational considerations
Implementing a JIT system requires management to consider issues of worker stress. Cooperation and trust among worker and management, and reward systems and labor classification.
(2) Process considerations
Firms using JIT systems typically have some dominant workflows. To take advantage of JIT practices, firms might have to change their existing layouts. Certain workstations might have to be moved closer together, and cells machines devoted to particular family of components may have to be established.
(3) Inventory and scheduling
Firms need to have stable master production schedules, short setups, and frequent, reliable supplies of materials and components to achieve the full potential of the JIT concept.
CHAPTER 10  Fundamental of the Theory of Constraints
Learning Goals
(1) Identify the fundamental principle of the theory of constraints. 
(2) Understand and manage the constrains
(3) Improve the process using TOC principle
(4) Distinguish the impacts on the operations strategy
(5) Understand the logistics and theory of constrain
(6) Identify the multiple time buffer
(7) Learn to know the control points and batches
Chapter Highlights
1. TOC can provide the approaches to design, manage, schedule, and improve virtually any production system. Still others believe it can be either just a process improvement approaches or a complete system approach, depending on the extend of the implementation taken.
2. A constraint, in its most general form, is anything that limits the firm from meeting its goal. For most firms, that goal is to make money, which manifests itself by increasing throughput- as measures by sales, not just production.
3. If a TOC approach is deemed appropriate to help improve a business system, there is a five-step process that is recommended to help improve the performance of the business. Those five steps are summarized below:
(1) Identify the constraint.
(2) Exploit the constraint
(3) Subordinate the constraint
(4) Elevate the constrain
(5) Once the constraint is a constraint no longer, find the new one and repeat the step.
4. The sources of constrains can be classified in several ways, the most of  common ways are constraint, capacity constraints, and marketing constrains:
Policy:
(6) Principle policies that may affect demand
(1) Incorrect focus on sales commissions
(2) Production measure inhibiting good production performance.
Capacity:
(1) Investment policies, including methods of justification, planning horizon, and fund availability.
(2) Human resource policies
(3) Governmental regulations
(4) Product development process
Marketing constrains:
(10) Product “niche” policies
(11) Distribution systems.
(12) Perceived capacity versus demand
Main Contents
5. Fundamental principles of the theory of constraints
The fundamental concept behind the theory of constrains (as it impacts planning and control) is that every operation producing a product or services is primarily a services of linked processes. Each process has a special capacity to produce the given defined output for the operation, and that in virtually every case there is one process that limits or constrains the throughput from the entire operation.
6. Understand and managing the constraints (blackboard)
There are several fundamental guidelines developed for understanding the TOC principles and how to manage a constraining process. Some of the more noteworthy guidelines including:
(1) Systems are like chains
(2) Knowing what to change required a complete understanding of the system and the system goal.
(3) Most undesirable system effects are caused by a few core problems.
(4) Core problem are almost never obvious.
(5) Eliminating the undesirable effects provides a false sense of security
(6) System constraints can be either physical constraints or policy constrains.
(7) Ideals are not solution
(8) The focus should be on balancing flow through the shop.
7. Improving the process using principle (question)
If a TOC approach is deemed appropriate to help improve a business system, there is five steps are summarized below:
(1) Identify the constraint.
(2) Exploit the constraint
(3) Subordinate the constraint
(4) Elevate the constrain
(5) Once the constraint is a constraint no longer, find the new one and repeat the step.
8. Logistics and the theory of constraint (question)
Often there are three reasons given for a loss of throughout, and again these reasons are focus on the constraints in the systems. The three reasons are given here, together with the topical approach suggested for minimizing or eliminating the potential loss of throughout:
(7) The constraint is “broken”
(8) The constraint is starved
(9) The constraint is blocked
9. Control points and batches
A control point is a point in the process where measures are taken and decisions made based on those measures. Typical control points for TOC include:
(3) The constraint
(4) The first operation
(5) Diverging point
(6) Converging points
(7) The buffers
10. Major steps in using the drum-buffer-rope method (blackboard)
The following steps are generally given as a summary of how to use the drum-buffer-rope method to plan and control an operation under TOC principles:
(5) Identify the constraints
(6) Examine options and select the preferable method to exploit the constraints.
(7) Develop a Gantt schedule for constraint operation
(8) Calculate the appropriate size fir the buffers based on the time it takes to move material through the operation to those buffer areas.
(9) Develop a raw material release schedule to support the constraints schedule and also to support the assembly of other nonconstraint parts.
(10) For work centers that have not been identified as a control point, work can be done as it becomes available. 
中國經濟管理大學  Production Management