Review for Exam II—Mar 20, 2002

Dr. Burns

Exam Format45-55 multiple choice3 problemsClosed-bookClosed-notesClosed-neighborBRING---pencil, calculator, scantron

Exam CoverageChapters 11, 12, 13, 14NO CHAPTER SUPPLEMENTS

No linear programming No simulation

Typical problems—see Practice Exam IIAggregate production planning Inventory with Independent DemandMaterial Requirements PlanningCapacity Requirements Planning

Chapter 11 -- 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

Capacity planning is….Long-term strategic decision-makingNOTCapacity 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  

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 the 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 countercyclical demand patterns

Partnering with suppliers to reduce information distortion along the supply chain

Increasing inventories and laying off workers when demand is soft

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 12 – Inventory Management Inventory for Independent demand

Carrying costs Rent Lighting/heating Security Interest Taxes

Can also be expressed as a % of product cost

A rule of thumb is 30%

Ordering costs—costs related to

Transportation

Shipping

Receiving

Inspection

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 not at all

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 have been for 15 years

Periodic inventory systems are….Fixed Time period systemsNOTEOQ Models

EOQ models have A fixed order quantity Deterministic demand No shortages Constant lead time Instantaneous or finite replenishment

EOQ models minimize ordering and holding costs

Which gives you lowest holding cost? Instantaneous replenishmentFinite replenishmentQuantity discounts

WHICH OF THE ABOVE GIVES YOU LOWEST TOTAL ORDERING COST?

How do we calculate a re-order point?

TermsABC system

Carrying costs

Continuous inventory system

Dependent demand

EOQ

Fixed-order quantity system

Fixed time period system

Independent demand Inventory In-process inventory Noninstantaneous

receipt Order cycle Quantity discount Stockout Service level

Chapter 13 – Material Requirements Planning Inventory for Dependent Demand

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

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 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 architectureData 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

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 14 – Detailed SchedulingScheduling = assignment and

sequencingAssignment 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

*

* **

**

*

*

TermsSequencingLoadingAssigningSPTEDD (DDATE)CRSLACKFCFS (FIFO)LCLS (LIFO)

See you Mon. morning, Mar 25, 8:00 a.m.