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4.

Production Planning & Control


&
PERT / CPM

4. PPC & PERT/CPM

Introduction to Production
Planning & Control (PPC)
Inputs from L C Jhamb
(especially chapter 5)

4. PPC & PERT/CPM

PPC - defined

Production is manufacturing of goods and / or services

Planning is the series of related & co-ordinated activities demand management,


aggregate sales & operations planning, process planning, materials management
(incl. MRP & Inventory control), Operations scheduling, and others; designed to
systematize in advance the manufacturing efforts. Planning aims to utilize resources
most effectively, to provide the right goods, at the right time, in the right quantity

Control is the review of work progress, make corrections where required; thus
ensuring that the actual is as per plan. Control includes activities such as dispatching,
progressing & expediting

Overall PPC is thus:


Planning production in advance
Setting the run-rate for each item
Fixing starting & end dates for each item
Authorizing shop floor activity by release of production orders
Follow-up, inspect & expedite to stay on course (as per plan)

4. PPC & PERT/CPM

Objectives of PPC

Meet targets of production, as aligned with demand, with available


resources

Provide resources (men, material, machines) of the right quantity, quality at


right time.

Optimum scheduling of facilities

To achieve balanced flow of production, with co-ordination between all


departments

Ensure conformance to delivery commitments, and make sales aware of


any potential difficulties

Inform all concerned, especially management, well in time, re: difficulties


which may crop up
4. PPC & PERT/CPM

Regular (essential) Functions of PPC (IMP)


ORDER PREPARATION: includes preparation of work orders, converting them to shop
orders & auxiliary orders, release of such orders to appropriate entities
MATERIAL CONTROL: includes making material estimates, indenting, purchasing,
follow-up, allocating material to shop orders
PROCESS PLANNING (or ROUTING): includes method of manufacture, operations &
their sequences, machine & tool requirements for each activity, defining requirements of
supporting equipment i.e. jigs & fixtures, measuring instruments,
TOOLS CONTROL: estimating requirement & specifications of tools (e.g. cutting tools),
jigs & fixtures, measuring instruments,. Replenishment of non consumable tools due to
wear & tear (e.g. allen keys, spanners, ..)
SCHEDULING: fixing calendar dates of various operations for various job-orders,
committing delivery dates to sales & despatch schedules
DISPATCHING: preparation & distribution of shop orders & manufacturing instructions;
assigning responsibilities to appropriate persons; authorizing them to perform the work at
respective work-centres as per the predefined schedule; authorize them to draw the
necessary resources (tools, consumables, material, etc);
PROGRESSING: recording progress of work & comparing with plan
EXPEDITING: identify (and anticipate) delays & interruptions: take corrective actions;
inform relevant stake-holders of potential & actual deviations from planned schedules

4. PPC & PERT/CPM

Optional Functions of PPC (IMP)


COST ESTIMATION: pre-production cost estimates used for budgeting, pricing &
profitability management. Alternatively this could the responsibility of Costing dept. or
Industrial Engineering
WORK MEASUREMENT: to estimate the time taken by a qualified worker to perform a
task, under given conditions, and at the desired level of performance. Techniques like
time & methods study, work sampling, etc. Alternatively this could the responsibility of
Industrial Engineering
SUB-CONTRACT: outsourcing work for various reasons! Alternatively this could the
responsibility of Materials / Purchase depts.
CAPACITY PLANNING: Estimation of requirements of men & machines to meet the firms
planned level of business over the short / medium & long term. Alternatively this could
the responsibility of the Engineering dept.
DEMAND MANAGEMENT: making projections of demand for various products, which
can become a basis for production planning. Various demand forecasting techniques are
used to forecast demand. For the medium term (6-18 months) an Aggregate Sales &
Operations plan is prepared. Thereon a firm schedule is created (Master Production
Schedule). Normally the sales / marketing / product management departments will do
this.

4. PPC & PERT/CPM

The Order Preparation process a block diagram


MANUFACTURING
METHODS

Order Acceptance (OA)

Receive Sales Program

Entry of OA into the system


(say ERP)

Prepare Production Program

Raise Work Order

Produced to
order

Produced to
stock

Check on-hand availability

Convert Work order into


Shop Order

Issue Shop orders

Shop order part A

Shop order Part B

4. PPC & PERT/CPM

4a. Demand Management

4. PPC & PERT/CPM

OBJECTIVES
Demand Management
Qualitative Forecasting Methods
Simple & Weighted Moving Average Forecasts
Exponential Smoothing
Simple Linear Regression
Web-Based Forecasting

4. PPC & PERT/CPM

Demand Management
Independent Demand:
Finished Goods
Dependent Demand:
Raw Materials,
Component parts,
Sub-assemblies, etc.

C(2)

B(4)

D(2)

E(1)

D(3)

F(2)

4. PPC & PERT/CPM

Independent Demand:
What a firm can do to manage it?

Can take an active role to influence demand

Can take a passive role and simply respond


to demand

4. PPC & PERT/CPM

Types of Forecasts

Qualitative (Judgmental)
Quantitative
Time Series Analysis
Causal Relationships
Simulation
4. PPC & PERT/CPM

Components of Demand
Average demand for a period of time
Trend
Seasonal element
Cyclical elements
Random variation
Autocorrelation
4. PPC & PERT/CPM

Finding Components of Demand


Seasonal
Seasonalvariation
variation

Sales

x
x x

xx
x
x xx
x
x x
x
x
x
x
x
x
x
x
x
x
x
x
xxxx

x x

x
x

Year
4. PPC & PERT/CPM

x
x

x
x x
x
x

Linear
Linear
x

Trend
Trend
x

Qualitative Methods
Executive Judgment

Historical analogy

Grass Roots

Qualitative

Market Research

Methods

Delphi Method

Panel Consensus

4. PPC & PERT/CPM

15

Delphi Method
l. Choose the experts to participate representing a variety
of knowledgeable people in different areas
2. Through a questionnaire (or E-mail), obtain forecasts
(and any premises or qualifications for the forecasts)
from all participants
3. Summarize the results and redistribute them to the
participants along with appropriate new questions
4. Summarize again, refining forecasts and conditions, and
again develop new questions
5. Repeat Step 4 as necessary and distribute the final
results to all participants
4. PPC & PERT/CPM

Time Series Analysis


Time series forecasting models try to predict
the future based on past data
You can pick models based on:
1. Time horizon to forecast
2. Data availability
3. Accuracy required
4. Size of forecasting budget
5. Availability of qualified personnel
4. PPC & PERT/CPM

Simple Moving Average Formula


The simple moving average model assumes an
average is a good estimator of future behavior
The formula for the simple moving average is:

A
+
A
+
A
+...+A
A
+
A
+
A
+...+A
t-1
t-2
t-3
t-t-nn
t-1
t-2
t-3
FFtt ==
nn
Ft = Forecast for the coming period
N = Number of periods to be averaged
A t-1 = Actual occurrence in the past period for up to n periods

4. PPC & PERT/CPM

Simple Moving Average Problem (1)

Week
1
2
3
4
5
6
7
8
9
10
11
12

Demand
650
678
720
785
859
920
850
758
892
920
789
844

A
+
A
+
A
+...+A
A
+
A
+
A
+...+A
t-1
t-2
t-3
t-t-nn
t-1
t-2
t-3
FFtt ==
nn
Question:
Question: What
What are
are the
the 33week
week and
and 6-week
6-week moving
moving
average
average forecasts
forecasts for
for
demand?
demand?
Assume
Assume you
you only
only have
have 33
weeks
weeks and
and 66 weeks
weeks of
of
actual
actual demand
demand data
data for
for the
the
respective
respective forecasts
forecasts

4. PPC & PERT/CPM

Calculating the moving averages gives us:

Week
1
2
3
4
5
6
7
8
9
10
11
12

20

Demand 3-Week 6-Week


650 F4=(650+678+720)/3
678
=682.67
720
F7=(650+678+720
785
682.67
+785+859+920)/6
859
727.67
=768.67
920
788.00
850
854.67
768.67
758
876.33
802.00
892
842.67
815.33
920
833.33
844.00
789
856.67
866.50
844
867.00
854.83
4. PPC & PERT/CPM

The McGraw-Hill Companies, Inc.,

Plotting
Plottingthe
themoving
moving averages
averagesand
andcomparing
comparing
them
themshows
showshow
how the
thelines
linessmooth
smoothout
out to
to reveal
reveal
the
theoverall
overallupward
upwardtrend
trendin
inthis
this example
example
1000

Demand

900
Demand

800

3-Week

700

6-Week

600
500
1 2 3 4 5 6 7 8 9 10 11 12
Week

4. PPC & PERT/CPM

Note
Notehow
howthe
the
3-Week
3-Weekisis
smoother
smootherthan
than
the
theDemand,
Demand,
and
and6-Week
6-Weekisis
even
evensmoother
smoother

Simple Moving Average Problem (2) Data

Week
1
2
3
4
5
6
7

Demand
820
775
680
655
620
600
575

Question:
Question: What
What is
is the
the 33
week
week moving
moving average
average
forecast
forecast for
for this
this data?
data?
Assume
Assume you
you only
only have
have 33
weeks
weeks and
and 55 weeks
weeks of
of
actual
actual demand
demand data
data
for
for the
the respective
respective
forecasts
forecasts
4. PPC & PERT/CPM

Simple Moving Average Problem (2)


Solution
Week
1
2
3
4
5
6
7

Demand
820
775
680
655
620
600
575

3-Week

5-Week

F4=(820+775+680)/3
=758.33

758.33
703.33
651.67
625.00

4. PPC & PERT/CPM

F6=(820+775+680
+655+620)/5
=710.00

710.00
666.00

Weighted Moving Average Formula


While
While the
the moving
moving average
average formula
formula implies
implies an
an equal
equal
weight
weight being
being placed
placed on
on each
each value
value that
that isis being
being averaged,
averaged,
the
the weighted
weighted moving
moving average
average permits
permits an
an unequal
unequal
weighting
weighting on
on prior
prior time
time periods
periods
The
The formula
formula for
for the
the moving
moving average
average is:
is:

FFtt == w
+ w A t-2 ++ w
+...+w A t-n
w11A
At-1
w33A
At-3
t-1 + w22 At-2
t-3 +...+wnn At-n
wwt ==weight
weightgiven
givento
totime
timeperiod
periodt
t
t
occurrence
occurrence(weights
(weightsmust
mustadd
addto
toone)
one)
4. PPC & PERT/CPM

nn

ww ==11
i=1
i=1

ii

Weighted Moving Average Problem (1)


Data
Question:
Question:Given
Giventhe
theweekly
weeklydemand
demandand
andweights,
weights,what
whatisis
th
the
theforecast
forecastfor
forthe
the44thperiod
periodor
orWeek
Week4?
4?
Week
1
2
3
4

Demand
650
678
720

Weights:
t-1 .5
t-2 .3
t-3 .2

Note
Notethat
thatthe
theweights
weightsplace
placemore
moreemphasis
emphasison
onthe
the
most
mostrecent
recentdata,
data,that
thatisistime
timeperiod
periodt-1
t-1
4. PPC & PERT/CPM

Weighted Moving Average Problem (1)


Solution

Week
1
2
3
4

Demand Forecast
650
678
720
693.4

F4 = 0.5(720)+0.3(678)+0.2(650)=693.4
4. PPC & PERT/CPM

Weighted Moving Average Problem (2) Data


Question:
Question:Given
Giventhe
theweekly
weeklydemand
demandinformation
informationand
and
weights,
weights,what
whatisisthe
theweighted
weightedmoving
movingaverage
averageforecast
forecast
th
of
ofthe
the55thperiod
periodor
orweek?
week?
Week
1
2
3
4

Demand
820
775
680
655
4. PPC & PERT/CPM

Weights:
t-1 .7
t-2 .2
t-3 .1

Weighted Moving Average Problem (2)


Solution
Week
1
2
3
4
5

Demand Forecast
820
775
680
655
672

F5 = (0.1)(755)+(0.2)(680)+(0.7)(655)= 672
4. PPC & PERT/CPM

Exponential Smoothing Model

FFtt == FFt-1
+
(A
F
)
+
(A
F
t-1
t-1
t-1
t-1
t-1)

Where :
Ft Forcast value for the coming t time period
Ft - 1 Forecast value in 1 past time period
At - 1 Actual occurance in the past t time period
Alpha smoothing constant
Premise: The most recent observations might
have the highest predictive value
Therefore, we should give more weight to the
more recent time periods when forecasting
4. PPC & PERT/CPM

Exponential Smoothing Problem (1) Data

Week
1
2
3
4
5
6
7
8
9
10

Demand
820
775
680
655
750
802
798
689
775

Question:
Question: Given
Given the
the weekly
weekly
demand
demand data,
data, what
what are
are
the
the exponential
exponential
smoothing
smoothing forecasts
forecasts for
for
periods
periods 2-10
2-10 using
using
=0.10
=0.10 and
and =0.60?
=0.60?
Assume
Assume FF11=D
=D11

4. PPC & PERT/CPM

Answer:
Answer:The
Therespective
respectivealphas
alphascolumns
columnsdenote
denotethe
theforecast
forecastvalues.
values. Note
Note
that
thatyou
youcan
canonly
onlyforecast
forecastone
onetime
timeperiod
periodinto
intothe
thefuture.
future.

4. PPC & PERT/CPM

Exponential Smoothing Problem (1)


Plotting
Note
Notehow
howthat
thatthe
thesmaller
smalleralpha
alpharesults
resultsin
inaa smoother
smootherline
linein
in
this
thisexample
example

Demand

900
800

Demand

700

0.1

600

0.6

500
1

Week
4. PPC & PERT/CPM

10

Exponential Smoothing Problem (2)


Data
Week
1
2
3
4
5

Question:
What
are
the
Question:
What
are
the
Demand
exponential
smoothing
exponential
smoothing
820
forecasts
forecasts for
for periods
periods 2-5
2-5
775 using a =0.5?
using a =0.5?
680
655
Assume
Assume FF11=D
=D11
4. PPC & PERT/CPM

Exponential Smoothing Problem (2)


Solution
F1=820+(0.5)(820-820)=820

Week
1
2
3
4
5

Demand
820
775
680
655

F3=820+(0.5)(775-820)=797.75

0.5
820.00
820.00
797.50
738.75
696.88

4. PPC & PERT/CPM

The MAD Statistic to Determine


Forecasting Error
nn

MAD
MAD ==

AA --FF
t=1
t=1

tt

tt

1 MAD 0.8 standard deviation


1 standard deviation 1.25 MAD

nn

The ideal MAD is zero which would mean


there is no forecasting error
The larger the MAD, the less the
accurate the resulting model
4. PPC & PERT/CPM

MAD Problem Data


Question:
Question: What
What isis the
the MAD
MAD value
value given
given
the
the forecast
forecast values
values in
in the
the table
table below?
below?
Month
1
2
3
4
5

Sales Forecast
220
n/a
250
255
210
205
300
320
325
315
4. PPC & PERT/CPM

MAD Problem Solution


Month
1
2
3
4
5

Sales
220
250
210
300
325

Forecast Abs Error


n/a
255
5
205
5
320
20
315
10

40
nn

MAD
MAD==

AA --FF
t=1
t=1

tt

nn

tt

40
== 40 ==10
44 10

Note
Notethat
thatby
byitself,
itself,the
theMAD
MAD
only
onlylets
letsus
usknow
knowthe
themean
mean
error
errorin
inaaset
setof
offorecasts
forecasts

4. PPC & PERT/CPM

Tracking Signal Formula


The Tracking Signal or TS is a measure that
indicates whether the forecast average is keeping
pace with any genuine upward or downward
changes in demand.
Depending on the number of MADs selected, the TS
can be used like a quality control chart indicating
when the model is generating too much error in its
forecasts.
The TS formula is:

RSFE
RSFE Running
Running sum
sum of
of forecast
forecast errors
errors
TS
==
TS ==
MAD
Mean
MAD
Mean absolute
absolute deviation
deviation
4. PPC & PERT/CPM

Simple Linear Regression Model


The
Thesimple
simplelinear
linearregression
regression
model
modelseeks
seeksto
tofit
fitaaline
line
through
throughvarious
variousdata
dataover
over
time
time

Yt = a + bx

a
0 1 2 3 4 5

(Time)

Is
Isthe
thelinear
linearregression
regressionmodel
model

Yt is the regressed forecast value or dependent


variable in the model, a is the intercept value of the the
regression line, and b is similar to the slope of the
regression line. However, since it is calculated with the
variability of the data in mind, its formulation is not as
straight forward as our usual notion of slope.
4. PPC & PERT/CPM

Simple Linear Regression Formulas for


Calculating a and b

aa == yy-- bx
bx
-- n(y)(x)

xy
n(y)(x)
xy
bb ==
22
22

n(x))
xx -- n(x

4. PPC & PERT/CPM

Simple Linear Regression Problem Data


Question:
Question:Given
Giventhe
thedata
databelow,
below,what
whatisisthe
thesimple
simplelinear
linear
regression
regressionmodel
modelthat
thatcan
canbe
beused
usedto
topredict
predictsales
salesin
infuture
future
weeks?
weeks?

Week
1
2
3
4
5

Sales
150
157
162
166
177

4. PPC & PERT/CPM

42

Answer:
Answer: First,
First, using
using the
the linear
linear regression
regressionformulas,
formulas, we
we
can
cancompute
computea
aand
andb
b

Week Week*Week
Sales Week*Sales
1
1
150
150
2
4
157
314
3
9
162
486
4
16
166
664
5
25
177
885
3
55
162.4
2499
Average
Sum Average
Sum
xy
--5(162.4)(3)
63

xy--n(y)(x)
n(y)(x) 2499
2499
5(162.4)(3)
63= 6.3

bb==
=

=
10 = 6.3
22
22
55

5
(
9
)
x
n(x
)

55 5(9 )
10
x - n(x )
aa== yy--bx
==143.5
bx==162.4
162.4--(6.3)(3)
(6.3)(3)
143.5
4.
PPC & PERT/CPM

43

The resulting regression model


is:

Yt = 143.5 + 6.3x

Sales

Now if we plot the regression generated forecasts against the


actual sales we obtain the following chart:
180
175
170
165
Sales
160
155
Forecast
150
145
140
135
1
2
3
4
5
Period
4. PPC & PERT/CPM

Web-Based Forecasting: CPFR

Collaborative Planning, Forecasting, and Replenishment


(CPFR) a Web-based tool used to coordinate demand
forecasting, production and purchase planning, and inventory
replenishment between supply chain trading partners.

Used to integrate the multi-tier or n-Tier supply chain,


including manufacturers, distributors and retailers.

CPFRs objective is to exchange selected internal information


to provide for a reliable, longer term future views of demand
in the supply chain.

CPFR uses a cyclic and iterative approach to derive


consensus forecasts.
4. PPC & PERT/CPM

Web-Based Forecasting:
Steps in CPFR
1. Creation of a front-end partnership
agreement
2. Joint business planning
3. Development of demand forecasts
4. Sharing forecasts
5. Inventory replenishment

4. PPC & PERT/CPM

Question Bowl
Which of the following is a classification of a basic
type of forecasting?
a. Transportation method
b. Simulation
c. Linear programming
d. All of the above
e. None of the above

Answer: b. Simulation (There are four types including


Qualitative, Time Series Analysis, Causal
Relationships, and Simulation.)
4. PPC & PERT/CPM

46

Question Bowl
Which of the following is an example of a
Qualitative type of forecasting technique or
a.
b.
c.
d.
e.

model?
Grass roots
Market research
Panel consensus
All of the above
None of the above

Answer: d. All of the above (Also includes


Historical Analogy and Delphi Method.)
4. PPC & PERT/CPM

47

Question Bowl
Which of the following is an example of a Time
Series Analysis type of forecasting technique or
model?
a. Simulation
b. Exponential smoothing
c. Panel consensus
d. All of the above
e. None of the above
Answer: b. Exponential smoothing (Also includes Simple Moving
Average, Weighted Moving Average, Regression Analysis, Box
Jenkins, Shiskin Time Series, and Trend Projections.)
4. PPC & PERT/CPM

48

Question Bowl
Which of the following is a reason why a firm
should choose a particular forecasting model?
a. Time horizon to forecast
b. Data availability
c. Accuracy required
d. Size of forecasting budget
e. All of the above

Answer: e. All of the above (Also should include


availability of qualified personnel .)
4. PPC & PERT/CPM

49

Question Bowl
Which of the following are ways to choose
weights in a Weighted Moving Average
a.
b.
c.
d.
e.

forecasting model?
Cost
Experience
Trial and error
Only b and c above
None of the above

Answer: d. Only b and c above


4. PPC & PERT/CPM

50

Question Bowl
Which of the following are reasons why the
Exponential Smoothing model has been a
a.
b.
c.
d.
e.

well accepted forecasting methodology?


It is accurate
It is easy to use
Computer storage requirements are small
All of the above
None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

51

Question Bowl

a.
b.
c.
d.
e.

The value for alpha or must be between


which of the following when used in an
Exponential Smoothing model?
1 to 10
1 to 2
0 to 1
-1 to 1
Any number at all

Answer: c. 0 to 1
4. PPC & PERT/CPM

52

Question Bowl
Which of the following are sources of error in
forecasts?
a. Bias
b. Random
c. Employing the wrong trend line
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

53

Question Bowl

Which of the following would be the best MAD


values in an analysis of the accuracy of a
forecasting model?
a. 1000
b. 100
c. 10
d. 1
e. 0

Answer: e. 0
4. PPC & PERT/CPM

54

Question Bowl
If a Least Squares model is: Y=25+5x, and x is
equal to 10, what is the forecast value using
this model?
a. 100
b. 75

Answer: b. 75 (Y=25+5(10)=75)

c. 50
d. 25
e. None of the above
4. PPC & PERT/CPM

55

Question Bowl
Which of the following are examples of
seasonal variation?
a. Additive
b. Least squares
c. Standard error of the estimate
d. Decomposition
e. None of the above
Answer: a. Additive (The other type is of seasonal variation is
Multiplicative.)
4. PPC & PERT/CPM

56

4b. Aggregate Sales and Operations Planning

4. PPC & PERT/CPM

57

OBJECTIVES
Sales and Operations Planning
The Aggregate Operations Plan
Examples: Chase and Level
strategies

4. PPC & PERT/CPM

Exhibit
Exhibit14.1
14.1

Process planning

Long
range

Strategic capacity planning

Intermediate Forecasting
& demand
range
management
Manufacturing

Sales and operations (aggregate) planning


Sales plan

Aggregate operations plan

Services

Master scheduling
Material requirements planning

Short
range

Weekly workforce and


customer scheduling

Order scheduling

Daily workforce and customer scheduling

4. PPC & PERT/CPM

59

Sales and Operations Planning Activities


Long-range planning

Greater than one year planning horizon


Usually performed in annual increments

Medium-range planning

Six to eighteen months


Usually with weekly, monthly or quarterly increments

Short-range planning

One day to less than six months


Usually with weekly or daily increments
4. PPC & PERT/CPM

The Aggregate Operations Plan


Main purpose: Specify the optimal combination
of

production rate (units completed per unit of


time)

workforce level (number of workers)

inventory on hand (inventory carried from


previous period)

Product group or broad category (Aggregation)


This planning is done over an intermediate-range
planning period of 3 to18 months

4. PPC & PERT/CPM

Balancing Aggregate Demand


and Aggregate Production Capacity
Suppose
Supposethe
thefigure
figureto
to
the
theright
rightrepresents
represents
forecast
forecastdemand
demandin
in
units
units
Now
Nowsuppose
supposethis
this
lower
lowerfigure
figurerepresents
represents
the
theaggregate
aggregatecapacity
capacity
of
ofthe
thecompany
companyto
to
meet
meetdemand
demand

10000

10000

8000

8000
6000

7000
6000

5500
4500

4000
2000
0
Jan

Feb

Mar
9000

10000

Apr

May

Jun

8000

8000

What
Whatwe
wewant
wantto
todo
doisis
balance
balanceout
outthe
the
production
productionrate,
rate,
workforce
workforcelevels,
levels,and
and
inventory
inventoryto
tomake
make
these
figures
these figuresmatch
matchup
up

6000

6000
4500

4000

Jan

Feb

4000

4000
2000
0
Mar

4. PPC & PERT/CPM

Apr

May

Jun

Required Inputs to the Production Planning


System
Competitors
behavior
External
capacity

Current
physical
capacity

Raw material
availability

Planning
for
production

Current
workforce

Inventory
levels

Market
demand

External
to firm

Economic
conditions

Activities
required
for
production
4. PPC & PERT/CPM

Internal
to firm

Key Strategies for Meeting Demand

Chase

Level

Some combination of the two


4. PPC & PERT/CPM

Aggregate Planning Examples: Unit Demand


and Cost Data
Suppose
Supposewe
wehave
havethe
thefollowing
followingunit
unit
demand
demandand
andcost
costinformation:
information:
Demand/mo

Jan

Feb

Mar

Apr

May

Jun

4500

5500

7000

10000

8000

6000

Materials
Rs5/unit
Holding costs
Rs1/unit per mo.
Marginal cost of stockout
Rs1.25/unit per mo.
Hiring and training cost
Rs200/worker
Layoff costs
Rs250/worker
Labor hours required
.15 hrs/unit
Straight time labor cost
Rs8/hour
Beginning inventory
250 units
Productive hours/worker/day
7.25
Paid straight hrs/day
8
4. PPC & PERT/CPM

Cut-and-Try Example: Determining


Straight Labor Costs and Output
Given
Giventhe
thedemand
demandand
andcost
costinformation
informationbelow,
below,what
what
are
arethe
theaggregate
aggregatehours/worker/month,
hours/worker/month,units/worker,
units/worker,and
and
dollars/worker?
dollars/worker?

Demand/mo
Jun

Jan

Feb

4500
5500
Productive hours/worker/day
6000
Paid straight hrs/day

22x8hrsxRs8=Rs1
Jan
408
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker

22
159.5
1063.33
1,408

Feb
19
137.75
918.33
1,216

Mar

Apr

May

7000
7.25

10000

8000

Mar
21
152.25
1015
1,344

7.25x0.15=48.33
&
Apr
May
Jun
84.33x22=1063.33

21
152.25
1015
1,344

4. PPC & PERT/CPM

7.25x2
2

22
159.5
1063.33
1,408

20
145
966.67
1,280
66

Chase Strategy
(Hiring & Firing to meet demand)
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker

Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory

Jan
22
159.5
1,063.33
1,408

Jan
4,500
250
4,250
3.997
3
4
0

Lets
Letsassume
assumeour
ourcurrent
currentworkforce
workforceisis77
workers.
workers.

First, calculate net requirements for


production, or 4500-250=4250 units
Then, calculate number of workers
needed to produce the net
requirements, or
4250/1063.33=3.997 or 4 workers
Finally, determine the number of
workers to hire/fire. In this case we
only need 4 workers, we have 7, so
3 can be fired.
4. PPC & PERT/CPM

Below
Beloware
arethe
thecomplete
completecalculations
calculationsfor
forthe
theremaining
remaining
months
monthsin
inthe
thesix
sixmonth
monthplanning
planninghorizon
horizon
Days/mo
Hrs/worker/mo
Units/worker
Rs/worker

Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory

Jan
22
159.5
1,063
1,408

Feb
19
137.75
918
1,216

Mar
21
152.25
1,015
1,344

Apr
21
152.25
1,015
1,344

May
22
159.5
1,063
1,408

Jun
20
145
967
1,280

Jan
4,500
250
4,250
3.997

Feb
5,500

Mar
7,000

Apr
10,000

May
8,000

Jun
6,000

5,500
5.989
2

7,000
6.897
1

10,000
9.852
3

8,000
7.524

6,000
6.207

2
8
0

1
7
0

3
4
0

6
7
0
0
4. PPC & PERT/CPM

10
0

Below are the complete calculations for the remaining months in


the six month planning horizon with the other costs included
Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory

Material
Labor
Hiring cost
Firing cost

Jan
4,500
250
4,250
3.997
3
4
0

Jan
21,250.00
5,627.59

Feb
5,500

Mar
7,000

Apr
10,000

May
8,000

Jun
6,000

5,500
5.989
2

7,000
6.897
1

10,000
9.852
3

8,000
7.524

6,000
6.207

2
8
0

1
7
0

6
0

7
0

10
0

Feb
27,500.00
7,282.76
400.00

Mar
35,000.00
9,268.97
200.00

Apr
50,000.00
13,241.38
600.00

750.00

May
Jun
40,000.00 30,000.00
10,593.10 7,944.83
500.00

4. PPC & PERT/CPM

250.00

Costs
203,750.00
53,958.62
1,200.00
1,500.00
260,408.62

Level Workforce Strategy (Surplus and


Shortage Allowed)
Lets
Letstake
takethe
thesame
sameproblem
problemas
as
before
beforebut
butthis
thistime
timeuse
usethe
the
Level
LevelWorkforce
Workforcestrategy
strategy
This
Thistime
timewe
wewill
willseek
seekto
touse
use
aaworkforce
workforcelevel
levelof
of66workers
workers

Demand
Beg. inv.
Net req.
Workers
Production
Ending inventory
Surplus
Shortage

4. PPC & PERT/CPM

J an
4,500
250
4,250
6
6,380
2,130
2,130

Below
Below are
arethe
thecomplete
complete calculations
calculationsfor
for the
the remaining
remaining
months
monthsin
inthe
thesix
sixmonth
monthplanning
planninghorizon
horizon

Demand
Beg. inv.
Net req.
Workers
Production
Ending inventory
Surplus
Shortage

Jan
4,500
250
4,250
6
6,380
2,130
2,130

Feb
5,500
2,130
3,370
6
5,510
2,140
2,140

Mar
7,000
2,140
4,860
6
6,090
1,230
1,230

Apr
10,000
1,230
8,770
6
6,090
-2,680

May
8,000
-2,680
10,680
6
6,380
-1,300

Jun
6,000
-1,300
7,300
6
5,800
-1,500

2,680

1,300

1,500

Note,
Note, ifif we
we recalculate
recalculate this
this sheet
sheet with
with 77 workers
workers
we
we would
would have
have aa surplus
surplus
4. PPC & PERT/CPM

Below
Beloware
arethe
the complete
completecalculations
calculations for
forthe
theremaining
remaining
months
months in
in the
the six
six month
month planning
planning horizon
horizon with
with the
the
other
othercosts
costs included
included
Jan
4,500
250
4,250
6
6,380
2,130
2,130

Jan
8,448.00
31,900.00
2,130.00

Feb
5,500
2,130
3,370
6
5,510
2,140
2,140

Mar
7,000
10
4,860
6
6,090
1,230
1,230

Apr
10,000
-910
8,770
6
6,090
-2,680

May
8,000
-3,910
10,680
6
6,380
-1,300

Jun
6,000Note, total
Note, total
-1,620
costs under
7,300 costs under
6this
thisstrategy
strategy
5,800are less than
are less than
-1,500

2,680

1,300

Feb
Mar
Apr
7,296.00 8,064.00 8,064.00
27,550.00 30,450.00 30,450.00
2,140.00 1,230.00
3,350.00

May
8,448.00
31,900.00

Jun
7,680.00
29,000.00

1,625.00

1,875.00

Chase
Chaseat
at
1,500Rs260.408.62
Rs260.408.62

4. PPC & PERT/CPM

48,000.00 Labor
181,250.00 Material
5,500.00 Storage
6,850.00 Stockout
241,600.00

Question Bowl

a.
b.
c.
d.
e.

Sales and Operations Planning activities


are usually conducted during which
planning time horizon?
Long-range
Intermediate-range
Answer: b.
Short-range
Intermediate-range
Really short-range
None of the above
(i.e., 6 to 18 months)
4. PPC & PERT/CPM

73

Question Bowl

a.
b.
c.
d.
e.

Which of the following are Production Planning


Strategies can involve trade-offs among the
workforce size, work hours, inventory, and
backlogs?
Chase strategy
Stable workforce-variable work hours
Level strategy
All of the above
Answer: d. All of the above
None of the above

4. PPC & PERT/CPM

74

Question Bowl
Which of the following are considered relevant
a.
b.
c.
d.
e.

costs in the Aggregate Production Plan?


Costs associated with changes in the
production rate
Inventory holding costs
Backordering costs
Basic production costs
All of the above

Answer: e. All of the above


4. PPC & PERT/CPM

75

Question Bowl
Which of the following Aggregate Planning
Techniques can be performed using simple
a.
b.
c.
d.
e.

spreadsheets?
Cut-and-try
Linear programming
Transportation method
All of the above
None of the above

Answer: a. Cut-and-try (The


other two involve more complex
computational effort than simple
spreadsheets.)

4. PPC & PERT/CPM

76

Question Bowl

a.
b.
c.
d.
e.

Which of the following methods can be used to


allocate the right type of capacity to the right
type of customer at the right price and in time to
maximize revenue?
Cut-and-try
Yield management
Transportation method
All of the above
None of the above

Answer: b. Yield
management

4. PPC & PERT/CPM

77

Question Bowl
From an operational perspective Yield
Management is most effective as a capacity
technique, when which of the following happens?
a. Demand can not be segmented by customer
b. Variable costs are high
c. Fixed costs are low
d. Demand is highly variable
e. All of the above

Answer: d. Demand is
highly variable

4. PPC & PERT/CPM

78

4c. Inventory Control


(A Part of Material Planning)
4. PPC & PERT/CPM

79

OBJECTIVES
Inventory System Defined
Inventory Costs
Independent vs. Dependent Demand
Single-Period Inventory Model
Multi-Period Inventory Models: Basic Fixed-Order
Quantity Models
Multi-Period Inventory Models: Basic Fixed-Time
Period Model
Miscellaneous Systems and Issues
4. PPC & PERT/CPM

Inventory System
Inventory is the stock of any item or resource
used in an organization and can include: raw
materials, finished products, component parts,
supplies, and work-in-process
An inventory system is the set of policies and
controls that monitor levels of inventory and
determines what levels should be maintained,
when stock should be replenished, and how
large orders should be
4. PPC & PERT/CPM

Purposes of Inventory
1. To maintain independence of operations
2. To meet variation in product demand
3. To allow flexibility in production scheduling
4. To provide a safeguard for variation in raw
material delivery time
5. To take advantage of economic purchase-order
size
4. PPC & PERT/CPM

Inventory Costs
Holding (or carrying) costs
Costs for storage, handling, insurance, etc
Setup (or production change) costs
Costs for arranging specific equipment
setups, etc
Ordering costs
Costs of someone placing an order, etc
Shortage costs
Costs of canceling an order, etc
4. PPC & PERT/CPM

Independent vs. Dependent Demand


Independent Demand (Demand for the final endproduct or demand not related to other items)

Finished
product

E(1
)

Component parts

Dependent
Demand
(Derived demand
items for
component
parts,
subassemblies,
raw materials,
4. PPC & PERT/CPM
etc)

Inventory Systems
Single-Period Inventory Model
One time purchasing decision (Example:
vendor selling t-shirts at a football game)
Seeks to balance the costs of inventory
overstock and under stock
Multi-Period Inventory Models
Fixed-Order Quantity Models
Event triggered (Example: running out of
stock)
Fixed-Time Period Models
Time triggered (Example: Monthly sales call
by sales representative)
4. PPC & PERT/CPM

Single-Period Inventory Model

C
Cuu
P
P
C
Coo C
Cuu

This
Thismodel
modelstates
statesthat
thatwe
we
should
shouldcontinue
continueto
toincrease
increase
the
thesize
sizeof
ofthe
theinventory
inventoryso
so
long
longas
asthe
theprobability
probabilityof
of
selling
sellingthe
thelast
lastunit
unitadded
addedisis
equal
equalto
toor
orgreater
greaterthan
thanthe
the
ratio
ratioof:
of:Cu/Co+Cu
Cu/Co+Cu

Where :
Co Cost per unit of demand over estimated
Cu Cost per unit of demand under estimated
P Probability that the unit will be sold
4. PPC & PERT/CPM

Single Period Model Example

Our college basketball team is playing in a tournament


game this weekend. Based on our past experience we
sell on average 2,400 shirts with a standard deviation
of 350. We make Rs100 on every shirt we sell at the
game, but lose Rs50 on every shirt not sold. How
many shirts should we make for the game?
Cu = Rs100 and Co = Rs50; P 100 / (100 + 50) = .667
Z.667 = .432 (use NORMSDIST(.667) or Appendix E)
therefore we need 2,400 + .432(350) = 2,551 shirts

4. PPC & PERT/CPM

87

Multi-Period Models:
Fixed-Order Quantity Model Model
Assumptions (Part 1)
Demand for the product is constant and
uniform throughout the period
Lead time (time from ordering to receipt) is
constant
Price per unit of product is constant
4. PPC & PERT/CPM

88

Multi-Period Models:
Fixed-Order Quantity Model Model Assumptions
(Part 2)

Inventory holding cost is based on


average inventory
Ordering or setup costs are constant
All demands for the product will be
satisfied (No back orders are allowed)
4. PPC & PERT/CPM

Basic Fixed-Order Quantity Model and


Reorder Point Behavior
4. The cycle then repeats.

1. You receive an order quantity Q.


Number
of units
on hand

2. Your start using


them up over time.

R = Reorder point
Q = Economic order quantity
L = Lead time

Time

L
3. When you reach down to
a level of inventory of R,
you place your next Q
sized order.

4. PPC & PERT/CPM

90

Cost Minimization Goal


By
Byadding
addingthe
theitem,
item,holding,
holding,and
andordering
orderingcosts
costs
together,
together,we
wedetermine
determinethe
thetotal
totalcost
costcurve,
curve,which
whichin
in
turn
inventory order point that
turnis
isused
usedto
tofind
findthe
theQ
Qopt
opt inventory order point that
minimizes
minimizestotal
totalcosts
costs
Total Cost
C
O
S
T

Holding
Costs
Annual Cost of
Items (DC)
Ordering Costs
QOPT
(Q)
4.Order
PPC Quantity
& PERT/CPM

Basic Fixed-Order Quantity (EOQ)


Model Formula
Total
Annual =
Cost

Annual
Annual
Annual
Purchase + Ordering + Holding
Cost
Cost
Cost

D
Q
D
Q
TC
TC == DC
DC ++ SS++ H
H
Q
22
Q
4. PPC & PERT/CPM

TC=Total
TC=Totalannual
annual
cost
cost
DD=Demand
=Demand
CC=Cost
=Costper
perunit
unit
QQ=Order
=Orderquantity
quantity
SS=Cost
=Costof
ofplacing
placing
an
anorder
orderor
orsetup
setup
cost
cost
RR=Reorder
=Reorderpoint
point
LL=Lead
=Leadtime
time
H=Annual
H=Annualholding
holding
and
andstorage
storagecost
cost
per
perunit
unitof
ofinventory
inventory

Deriving the EOQ


Using
Using calculus,
calculus, we
we take
take the
the first
first derivative
derivative of
of the
the
total
total cost
cost function
function with
with respect
respect to
to Q,
Q, and
and set
set
the
the derivative
derivative (slope)
(slope) equal
equal to
to zero,
zero, solving
solving for
for
the
the optimized
optimized (cost
(cost minimized)
minimized) value
value of
of Q
Qopt
opt
QQOPT
=
OPT =

2DS
2DS =
=
HH

We
Wealso
alsoneed
needaa
reorder
reorderpoint
pointto
to
tell
tellus
uswhen
whento
to
place
placean
anorder
order

2(Annual
2(AnnualDemand)(Order
Demand)(Orderor
orSetup
SetupCost)
Cost)
Annual
AnnualHolding
HoldingCost
Cost
__

Reorder
Reorder point,
point, R
R == ddLL

d = average daily demand (constant)


L = Lead time (constant)
4. PPC & PERT/CPM

EOQ Example (1) Problem Data


Given
Giventhe
theinformation
informationbelow,
below,what
what are
arethe
theEOQ
EOQ and
and
reorder
reorderpoint?
point?

Annual Demand = 1,000 units


Days per year considered in average
daily demand = 365
Cost to place an order = Rs10
Holding cost per unit per year = Rs2.50
Lead time = 7 days
Cost per unit = Rs15
4. PPC & PERT/CPM

EOQ Example (1) Solution


Q
=
QOPT
OPT =

2DS
2DS =
=
H
H

2(1,000
2(1,000)(10)
)(10) = 89.443 units or 90 units
= 89.443 units or 90 units
2.50
2.50

1,000
units
//year
1,000
units
year = 2.74 units / day
dd ==
= 2.74 units / day
365
days
/
year
365 days / year
__

Reorder
Reorderpoint,
point, RR==dd LL==2.74units
2.74units//day
day(7days)
(7days)==19.18
19.18or
or 20
20units
units

In
Insummary,
summary,you
youplace
placean
anoptimal
optimalorder
orderof
of90
90units.
units. In
In
the
thecourse
courseof
ofusing
usingthe
theunits
unitsto
tomeet
meetdemand,
demand,when
when
you
youonly
onlyhave
have20
20units
unitsleft,
left,place
placethe
thenext
nextorder
orderof
of90
90
units.
units.
4. PPC & PERT/CPM

EOQ Example (2) Problem Data


Determine
Determine the
the economic
economic order
order quantity
quantity
and
and the
the reorder
reorder point
point given
given the
the following
following

Annual Demand = 10,000 units


Days per year considered in average daily
demand = 365
Cost to place an order = Rs10
Holding cost per unit per year = 10% of cost
per unit
Lead time = 10 days
Cost per unit = Rs15
4. PPC & PERT/CPM

EOQ Example (2) Solution


2DS
2(10,000
)(10)
2DS
2(10,000
)(10) = 365.148 units, or 366 units
Q
=
=
QOPT
=
= 365.148 units, or 366 units
OPT =
H
1.50
H
1.50

10,000
units
//year
10,000
units
year = 27.397 units / day
dd==
= 27.397 units / day
365
days
/
year
365 days / year
__

R
R ==dd LL==27.397
27.397units
units//day
day(10
(10days)
days)==273.97
273.97or
or 274
274units
units

Place
Placean
anorder
orderfor
for366
366units.
units. When
Whenin
in the
thecourse
courseof
of
using
usingthe
theinventory
inventoryyou
you are
areleft
left with
with only
only274
274units,
units,
place
placethe
thenext
next order
orderof
of366
366units.
units.
4. PPC & PERT/CPM

Fixed-Time Period Model with Safety Stock


Formula
qq==Average
Averagedemand
demand++Safety
Safetystock
stockInventory
Inventorycurrently
currentlyon
onhand
hand
qq==dd(T
(T++L)
L)++ZZTT++LL--II
Where
Where::
qq==quantitiy
quantitiyto
tobe
beordered
ordered
TT==the
thenumber
numberof
ofdays
daysbetween
betweenreviews
reviews
LL==lead
leadtime
timein
indays
days
dd==forecast
forecast average
averagedaily
dailydemand
demand
zz==the
thenumber
numberof
ofstandard
standarddeviations
deviationsfor
foraaspecified
specifiedservice
serviceprobabilit
probabilityy
T + L ==standard
standarddeviation
deviationof
ofdemand
demandover
overthe
thereview
reviewand
andlead
leadtime
time
T+L

II==current
currentinventory
inventorylevel
level(includes
(includesitems
itemson
onorder)
order)
4. PPC & PERT/CPM

Multi-Period Models: Fixed-Time Period Model:


Determining the Value of T+L

T+T+LL ==

T+
L
T+L
i i 11

22

ddi
i

Since
Sinceeach
eachday
dayisisindependent
independentand
anddd isisconstant,
constant,
22
T+T+LL == (T
+
L)

(T + L)dd

The standard deviation of a sequence of


random events equals the square root of
the sum of the variances
4. PPC & PERT/CPM

Example of the Fixed-Time Period Model

Given
Given the
the information
information below,
below, how
how many
many units
units
should
should be
be ordered?
ordered?
Average daily demand for a product is
20 units. The review period is 30 days,
and lead time is 10 days. Management
has set a policy of satisfying 96 percent
of demand from items in stock. At the
beginning of the review period there are
200 units in inventory. The daily
demand standard deviation is 4 units.
4. PPC & PERT/CPM

Example of the Fixed-Time Period Model:


Solution (Part 1)
T+T+LL ==

(T
(T++ L)
L) ==
22
dd

30
30++10
10 44 == 25.298
25.298
22

The value for z is found by using the Excel


NORMSINV function, or as we will do here, using
Appendix D. By adding 0.5 to all the values in
Appendix D and finding the value in the table that
comes closest to the service probability, the z
value can be read by adding the column heading
label to the row label.
So, by adding 0.5 to the value from Appendix D of 0.4599,
we have a probability of 0.9599, which is given by a z = 1.75
4. PPC & PERT/CPM

Example of the Fixed-Time Period Model:


Solution (Part 2)
q = d(T + L) + Z T + L - I
q = 20(30 + 10) + (1.75)(25.298) - 200
q = 800 44.272 - 200 = 644.272, or 645 units

So, to satisfy 96 percent of the demand,


you should place an order of 645 units at
this review period
4. PPC & PERT/CPM

Price-Break Model Formula


Based on the same assumptions as the EOQ model,
the price-break model has a similar Qopt formula:

Q OPT

2DS
2(Annual Demand)(Order or Setup Cost)
=
=
iC
Annual Holding Cost

i = percentage of unit cost attributed to carrying inventory


C = cost per unit
Since C changes for each price-break, the formula
above will have to be used with each price-break cost
value
4. PPC & PERT/CPM

Price-Break Example Problem Data


(Part 1)
A
Acompany
company has
has aa chance
chance to
to reduce
reduce their
theirinventory
inventory
ordering
ordering costs
costs by
by placing
placing larger
largerquantity
quantity orders
orders using
using
the
the price-break
price-breakorder
orderquantity
quantity schedule
schedule below.
below. What
What
should
should their
theiroptimal
optimal order
orderquantity
quantity be
be ifif this
this company
company
purchases
purchases this
this single
single inventory
inventoryitem
item with
with an
an e-mail
e-mail
ordering
ordering cost
cost of
of Rs4,
Rs4, aa carrying
carrying cost
cost rate
rate of
of 2%
2%of
of the
the
inventory
inventory cost
cost of
of the
the item,
item, and
and an
an annual
annual demand
demand of
of
10,000
10,000 units?
units?
Order Quantity(units) Price/unit(Rs)
0 to 2,499
Rs1.20
2,500 to 3,999 1.00
4,000 or more .98

4. PPC & PERT/CPM

Price-Break Example Solution (Part 2)


First, plug data into formula for each price-break value of C
Annual Demand (D)= 10,000 units
Cost to place an order (S)= Rs4

Carrying cost % of total cost (i)= 2%


Cost per unit (C) = $1.20, $1.00, $0.98

Next, determine if the computed Qopt values are feasible or not


Interval from 0 to 2499, the
Qopt value is feasible

Q OPT =

2DS
=
iC

2(10,000)(4)
= 1,826 units
0.02(1.20)

Q OPT =

2DS
=
iC

2(10,000)(4)
= 2,000 units
0.02(1.00)

Interval from 4000 & more, the


Q OPT =
Qopt value is not feasible

2DS
=
iC

2(10,000)(4)
= 2,020 units
0.02(0.98)

Interval from 2500-3999, the


Qopt value is not feasible

4. PPC & PERT/CPM

Price-Break Example Solution (Part 3)


Since
Sincethe
thefeasible
feasiblesolution
solution occurred
occurredin
inthe
thefirst
firstpricepricebreak,
values occur
break,itit means
means that
thatall
all the
theother
othertrue
trueQ
Qopt
opt values occur
at
at the
thebeginnings
beginningsof
ofeach
eachprice-break
price-breakinterval.
interval. Why?
Why?
Because
Becausethe
thetotal
total annual
annualcost
costfunction
functionis
is
aau
ushaped
shapedfunction
function

Total
annual
costs

So
So the
thecandidates
candidates
for
forthe
thepricepricebreaks
breaks are
are1826,
1826,
2500,
2500,and
and4000
4000
units
units
0

1826

2500 4. PPC
4000
Order Quantity
& PERT/CPM

Price-Break Example Solution (Part 4)


Next, we plug the true Qopt values into the total cost
annual cost function to determine the total cost under
each price-break

D
Q
D
Q iC
TC
=
DC
+
S
+
TC = DC +
S+
iC
Q
2
Q
2
TC(0-2499)=(10000*1.20)+(10000/1826)*4+(1826/2)(0.02*1.20)
TC(0-2499)=(10000*1.20)+(10000/1826)*4+(1826/2)(0.02*1.20)
==Rs12,043.82
Rs12,043.82
TC(2500-3999)=
TC(2500-3999)=Rs10,041
Rs10,041
TC(4000&more)=
TC(4000&more)=Rs9,949.20
Rs9,949.20

Finally, we select the least costly Qopt, which is this


problem occurs in the 4000 & more interval. In summary,
our optimal order quantity is 4000 units
4. PPC & PERT/CPM

Miscellaneous Systems:
Optional Replenishment System
Maximum Inventory Level, M

q=M-I
Actual Inventory Level, I

M
I

Q = minimum acceptable order quantity

If q > Q, order q, otherwise do not order any.


4. PPC & PERT/CPM

Miscellaneous Systems:
Bin Systems
Two-Bin System

Order One Bin of


Inventory
Full

Empty

One-Bin System

Order Enough to
Refill Bin
Periodic Check

4. PPC & PERT/CPM

ABC Classification System


Items kept in inventory are not of equal
importance in terms of:

Rupees invested

60

% of
Rs Value 30

profit potential

sales or usage volume % of

Use

30

A
B

60

stock-out penalties

So, identify inventory items based on percentage of total


dollar value, where A items are roughly top 15 %, B
items as next 35 %, and the lower 65% are the C items
4. PPC & PERT/CPM

Inventory Accuracy and Cycle Counting

Inventory accuracy refers to how well


the inventory records agree with
physical count
Cycle Counting is a physical
inventory-taking technique in which
inventory is counted on a frequent
basis rather than once or twice a year
4. PPC & PERT/CPM

Question Bowl
The average cost of inventory in the
United States is which of the
following?
a. 10 to 15 percent of its cost
b. 15 to 20 percent of its cost
c. 20 to 25 percent of its cost
d. 25 to 30 percent of its cost
30 to 35 of
percent
of its cost
e. Answer:
30 to 35e.percent
its cost
4. PPC & PERT/CPM

112

Question Bowl
Which of the following is a reason why firms
keep a supply of inventory?
a. To maintain independence of operations
b. To meet variation in product demand
c. To allow flexibility in production scheduling
d. To take advantage of economic purchase
order size
e. All
of the above (Also can include to provide
e. Answer:
All of the
above
a safeguard for variation in raw material delivery
time.)
4. PPC & PERT/CPM

113

Question Bowl

An Inventory System should include policies


that are related to which of the following?
a. How large inventory purchase orders should be
b. Monitoring levels of inventory
c. Stating when stock should be replenished
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

114

Question Bowl
Which of the following is an Inventory Cost item
that is related to the managerial and clerical
costs to prepare a purchase or production order?
a. Holding costs
b. Setup costs
c. Carrying costs
d. Shortage costs
e. None of the above

Answer: e. None of the


above (Correct answer
is Ordering Costs.)

4. PPC & PERT/CPM

115

Question Bowl
Which of the following is considered a
Independent Demand inventory item?
a. Bolts to a automobile manufacturer
b. Timber to a home builder
c. Windows to a home builder
d. Containers of milk to a grocery store
e. None of the above
Answer: d. Containers of milk to a grocery store
4. PPC & PERT/CPM

116

Question Bowl
If you are marketing a more expensive
independent demand inventory item, which
inventory model should you use?
a. Fixed-time period model
b. Fixed-order quantity model
c. Periodic system
d. Periodic review system
e. P-model

Answer: b. Fixed-order quantity model


4. PPC & PERT/CPM

117

Question Bowl

a.
b.
c.
d.
e.

If the annual demand for an inventory item is 5,000


units, the ordering costs are Rs100 per order, and
the cost of holding a unit is stock for a year is Rs10,
which of the following is approximately the Q opt?
5,000 units
Rs5,000
Answer: d. 316
500 units
units
316 units
(Sqrt[(2x1000x10
None of the above

0)/10=316.2277)

4. PPC & PERT/CPM

118

Question Bowl
The basic logic behind the ABC Classification
system for inventory management is which of the
following?
a. Two-bin logic
b. One-bin logic
c. Pareto principle
d. All of the above
e. None of the above

Answer: c. Pareto principle


4. PPC & PERT/CPM

119

Question Bowl

a.
b.
c.
d.
e.

A physical inventory-taking technique in


which inventory is counted frequently
rather than once or twice a year is which of
the following?
Cycle counting
Mathematical programming
Pareto principle
ABC classification
Stockkeeping unit (SKU)

Answer: a. Cycle counting

4. PPC & PERT/CPM

120

4d. Materials Requirements Planning


( a Part of MATERIALS PLANNING)

4. PPC & PERT/CPM

121

OBJECTIVES
Material Requirements Planning (MRP)
MRP Logic and Product Structure Trees
Time Fences
MRP Example
MRP II and Lot Sizing
4. PPC & PERT/CPM

Material Requirements Planning

Materials requirements planning (MRP) is a


means for determining the number of parts,
components, and materials needed to produce a
product
MRP provides time scheduling information
specifying when each of the materials, parts,
and components should be ordered or produced
Dependent demand drives MRP
MRP is a software system
4. PPC & PERT/CPM

Example of MRP Logic and Product


Structure Tree
Given the product structure tree for A and the lead time and
demand information below, provide a materials requirements
plan that defines the number of units of each component and
when they will be needed
Product Structure Tree for Assembly A

A
B(4)
D(2)

C(2)
E(1)

D(3)

F(2)
4. PPC & PERT/CPM

Lead Times
A
1 day
B
2 days
C
1 day
D
3 days
E
4 days
F
1 day
Total Unit Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6
15 D (Spares)

First, the number of units of A are scheduled


backwards to allow for their lead time. So, in the
materials requirement plan below, we have to place
an order for 50 units of A on the 9th day to receive
them on day 10.
Day:

A Required
Order Placement

9
50

LT = 1 day

4. PPC & PERT/CPM

10
50

Next, we need to start scheduling the components that make up


A. In the case of component B we need 4 Bs for each A.
Since we need 50 As, that means 200 Bs. And again, we back
the schedule up for the necessary 2 days of lead time.
Day:

A Required
Order Placement
B Required
Order Placement

20

LT = 2
A
B(4)
D(2)

20

50
200

200

Spares
4x50=200

C(2)
E(1)

D(3)
F(2)
4. PPC & PERT/CPM

10
50

Finally, repeating the process for all components, we have the


final materials requirements plan:
Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1

Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement

20

20

50
200

127

10
50

200
100

55
20

400

55

400

20

200

100
300

300

200
200
200

A
B(4)
D(2)

C(2)
E(1)

Part D: Day 6
40 + 15 spares

D(3)
F(2)
4. PPC & PERT/CPM

The McGraw-Hill Companies, Inc.

Master Production Schedule (MPS)


Time-phased plan specifying how
many and when the firm plans to build
each end item
Aggregate
Aggregate Plan
Plan
(Product
(Product Groups)
Groups)

MPS
(Specific End Items)
4. PPC & PERT/CPM

Types of Time Fences


Frozen

No schedule changes allowed within this


window

Moderately Firm

Specific changes allowed within product


groups as long as parts are available

Flexible

Significant variation allowed as long as overall


capacity requirements remain at the same
levels
4. PPC & PERT/CPM

Exhibit
Exhibit15.5
15.5

Example of Time Fences


Moderately
Firm

Frozen

Flexible

Capacity

Forecast and available


capacity
Firm Customer Orders

15
Weeks
4. PPC & PERT/CPM

26

Material Requirements Planning System


Based on a master production schedule, a
material requirements planning system:

Creates schedules identifying the specific


parts and materials required to produce
end items

Determines exact unit numbers needed

Determines the dates when orders for


those materials should be released, based
on lead times
4. PPC & PERT/CPM

132

Aggregate
product
plan

Firm orders
from known
customers

Engineering
design
changes

Forecasts
of demand
from random
customers

Master production
Schedule (MPS)

Bill of
material
file

Primary reports
Planned order schedule for
inventory and production
control

Material
planning
(MRP
computer
program)

Inventory
transactions
From
FromExhibit
Exhibit15.6
15.6

Inventory
record file

Secondary reports
Exception reports
Planning reports
Reports for performance
control
4. PPC & PERT/CPM
The McGraw-Hill Companies, Inc.,

Bill of Materials (BOM) File


A Complete Product Description
Materials
Parts
Components
Production sequence
Modular BOM

Subassemblies

Super BOM

Fractional options

4. PPC & PERT/CPM

Inventory Records File


Each inventory item carried as a
separate file

Status according to time buckets

Pegging

Identify each parent item that created


demand
4. PPC & PERT/CPM

Primary MRP Reports


Planned orders to be released at a future time
Order release notices to execute the planned
orders
Changes in due dates of open orders due to
rescheduling
Cancellations or suspensions of open orders
due to cancellation or suspension of orders on
the master production schedule
Inventory status data
4. PPC & PERT/CPM

Secondary MRP Reports


Planning reports, for example, forecasting
inventory requirements over a period of
time
Performance reports used to determine
agreement between actual and
programmed usage and costs
Exception reports used to point out
serious discrepancies, such as late or
overdue orders
4. PPC & PERT/CPM

Additional MRP Scheduling Terminology

Gross Requirements
Scheduled receipts
Projected available balance
Net requirements
Planned order receipt
Planned order release
4. PPC & PERT/CPM

MRP Example
Item
X
A
B
C
D

X
A(2)
C(3)

B(1)
C(2)

On-Hand Lead Time (Weeks)


50
2
75
3
25
1
10
2
20
2

D(5)

Requirements
Requirementsinclude
include95
95units
units(80
(80firm
firmorders
ordersand
and15
15forecast)
forecast)of
ofXX
in
inweek
week10
10
4. PPC & PERT/CPM

Day:

A(2)

ItIttakes
takes
22As
Asfor
for
each
eachXX

X
LT=2
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20
80
80

25
20
20

Day:
X
LT=2

A(2)

B(1)

ItIttakes
takes
11BBfor
for
each
eachXX

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20
80
80

25
20
20

Day:
X
LT=2

A(2)

C(3)

ItIttakes
takes33
Cs
Csfor
for
each
eachAA

B(1)

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20
80
80

25
20
20

Day:
X
LT=2

A(2)

C(3)

B(1)

C(2)

ItIttakes
takes22
Cs
Csfor
for
each
eachBB

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20
80
80

25
20
20

Day:
X
LT=2

A(2)

C(3)

B(1)

C(2)

D(5)

ItIttakes
takes55
Ds
Dsfor
foreach
each
BB

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

4. PPC & PERT/CPM

20

20

20

80

20

20
80
80

25
20
20

Closed Loop MRP


Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning

No
Feedback

Realistic?

Yes
Execute:
Capacity Plans
Material Plans
4. PPC & PERT/CPM

Feedback

Manufacturing Resource Planning


(MRP II)
Goal: Plan and monitor all resources of
a manufacturing firm (closed loop):

manufacturing

marketing

finance

engineering

Simulate the manufacturing system


4. PPC & PERT/CPM

Lot Sizing in MRP Programs


Lot-for-lot (L4L)
Economic order quantity (EOQ)
Least total cost (LTC)
Least unit cost (LUC)
Which one to use?
The one that is least costly!

4. PPC & PERT/CPM

Question Bowl
Which type of industry has only medium
expected benefits from the use of MRP?
a. Assemble-to-stock
b. Fabricate-to-stock
c. Assemble-to-order
d. Fabricate-to-order
e. Process

Answer: e. Process
4. PPC & PERT/CPM

147

Question Bowl
To ensure good master scheduling, a master
scheduler must do which of the following?
a. Never lose sight of the aggregate plan
b. Identify and communicate all problems
c. Be involved with customer order promising
d. Be visible to all levels of management
e. Allabove
of the above (Correct answer can also
e.Answer:
All of the
include objectively trade off manufacturing, marketing,
and engineering conflicts and include all demands from
product sales, warehouse replenishment, spares, and
interplant requirements.)
4. PPC & PERT/CPM

148

Question Bowl
The purpose of a time fence is which of the
following?
a. Make sure the cows dont get out of the barn
b. Control flow through the production system
c. Maximize sales to retailers
d. All of the above
e. None of the above

Answer: b. Control flow through the


production system
4. PPC & PERT/CPM

149

Question Bowl
Which of the following is an objective under an
MRP system?
a. To improve customer service
b. Minimize inventory investment
c. Maximize production operating efficiency
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

150

Question Bowl

a.
b.
c.
d.
e.

Which of the following is one of the three


main inputs into an MRP system?
BOM file
Exception report
Planning report
All of the above
Answer: a. BOM file
None of the above
(Correct answer can
also include Master
Schedule and
4. PPC & PERT/CPM
Inventory Records 151

Question Bowl
An MRP program accesses the status of a job
according to specific time periods called which
of the following?
a. Peg record
b. Time fence
c. Time bucket
d. Time clock

e. None of the above

Answer: c. Time bucket


4. PPC & PERT/CPM

152

Question Bowl

a.
b.
c.
d.
e.

In MRP, workload per work center can be


determined. When the work capacity is
exceeded, which of the following options can be
implemented to correct the imbalance of
workload?
Work overtime
Renegotiate the due date and reschedule
Subcontract to an outside shop
Answer: d. All of the above (Correct
All of the above
answer can also include selecting an
None of the above
alternative work center and
rescheduling the work at a different
time.)
4. PPC & PERT/CPM
153

Question Bowl
Which of the following are reasons why a Lot-ForLot (L4L) method of lot sizing can be used in an
MRP application?
a. Minimizes carrying costs
b. Sets planned orders to exactly match the net
requirements
c. Produces exactly what is needed
d. Does not carry any units over into future periods
e. All of the above

Answer: e. All of the above


4. PPC & PERT/CPM

154

4e. Process Planning & Analysis

4. PPC & PERT/CPM

155

OBJECTIVES
Process Analysis
Process Flowcharting
Types of Processes
Process Performance Metrics

4. PPC & PERT/CPM

Process Planning as defined by L C Jhamb


Process planning is the establishment of shortest
(normally time) & most economical (cost) path for a
manufactured item, from the start (say a raw material) up
to being a finished good.
Process planning indicates operations to be performed & their
sequence;
Specifies the machines / equipment required
The tooling required (e.g. jigs, fixtures, ) for each operation;
Provides data (e.g. speeds, feeds;
Indicates processing times (such as set-up time, operations time;
Specifies the skill requirements for each operation

Documents that incorporate such information are:


Process Sheets or Route Sheets
Service Blue-prints

4. PPC & PERT/CPM

157

Process Analysis Terms


Process: Is any part of an organization that
takes inputs and transforms them into outputs
Cycle Time: Is the average successive time
between completions of successive units
Utilization: Is the ratio of the time that a
resource is actually activated relative to the
time that it is available for use

4. PPC & PERT/CPM

Process Flowcharting Defined


Process flowcharting is the use of a diagram
to present the major elements of a process
The basic elements can include tasks or
operations, flows of materials or customers,
decision points, and storage areas or queues
It is an ideal methodology by which to begin
analyzing a process
4. PPC & PERT/CPM

Flowchart Symbols
Purpose and Examples
Tasks or operations

Decision Points

Examples:
Examples: Giving
Givingan
an
admission
admissionticket
ticket to
toaa
customer,
customer,installing
installingaa
engine
enginein
inaacar,
car,etc.
etc.
Examples:
Examples: How
How much
much
change
changeshould
shouldbe
be
given
givento
toaacustomer,
customer,
which
whichwrench
wrench should
should
be
be used,
used,etc.
etc.

4. PPC & PERT/CPM

Flowchart Symbols
Purpose and Examples
Storage areas or
queues

Examples:
Examples: Sheds,
Sheds,
lines
linesof
of people
peoplewaiting
waiting
for
for aaservice,
service,etc.
etc.

Flows of
materials or
customers

Examples:
Examples: Customers
Customers
moving
movingto
toaaseat,
seat,
mechanic
mechanicgetting
gettingaa
tool,
tool, etc.
etc.

4. PPC & PERT/CPM

Example: Flowchart of Student Going


to School
Go to
school
today?

Yes

Drive to
school

No
Goof
off
4. PPC & PERT/CPM

Walk to
class

Types of Processes
Single-stage Process
Stage 1

Multi-stage Process
Stage 1

Stage 2

4. PPC & PERT/CPM

Stage 3

Types of Processes (Continued)


A buffer refers to a storage area between
stages where the output of a stage is
placed prior to being used in a downstream
stage

Multi-stage Process with Buffer


Buffer
Stage 1

Stage 2

4. PPC & PERT/CPM

Other Process Terminology


Blocking
Occurs when the activities in a stage must stop
because there is no place to deposit the item just
completed
If there is no room for an employee to place a unit of
work down, the employee will hold on to it not able
to continue working on the next unit

Starving
Occurs when the activities in a stage must stop
because there is no work
If an employee is waiting at a work station and no
work is coming to the employee to process, the
employee will remain idle until the next unit of work
comes
4. PPC & PERT/CPM

Other Process Terminology


(Continued)
Bottleneck
Occurs when the limited capacity of a process
causes work to pile up or become unevenly
distributed in the flow of a process
If an employee works too slow in a multi-stage
process, work will begin to pile up in front of
that employee. In this is case the employee
represents the limited capacity causing the
bottleneck.

Pacing
Refers to the fixed timing of the movement of
items through the process
4. PPC & PERT/CPM

Other Types of Processes


Make-to-order
Only activated in response to an actual order
Both work-in-process and finished goods
inventory kept to a minimum

Make-to-stock
Process activated to meet expected or
forecast demand
Customer orders are served from target
stocking level
4. PPC & PERT/CPM

Process Performance Metrics


Operation time = Setup time + Run time
Throughput time = Average time for a unit to
move through the system
Velocity = Throughput time
Value-added time

4. PPC & PERT/CPM

Process Performance Metrics


(Continued)
Cycle time = Average time between
completion of units
Throughput rate =
1
.
Cycle time
Efficiency = Actual output
Standard Output
4. PPC & PERT/CPM

Process Performance Metrics


(Continued)
Productivity = Output
Input
Utilization = Time Activated
Time Available

4. PPC & PERT/CPM

Cycle Time Example


Suppose
Suppose you
you had
had to
to produce
produce 600
600 units
units in
in 80
80 hours
hours
to
to meet
meet the
the demand
demand requirements
requirements of
of aa product.
product.
What
What is
is the
the cycle
cycle time
time to
to meet
meet this
this demand
demand
requirement?
requirement?

Answer:
Answer: There
There are
are 4,800
4,800 minutes
minutes (60
(60
minutes/hour
minutes/hour xx 80
80 hours)
hours) in
in 80
80 hours.
hours. So
So the
the
average
average time
time between
between completions
completions would
would have
have
to
to be:
be: Cycle
Cycle time
time == 4,800/600
4,800/600 units
units == 88 minutes.
minutes.
4. PPC & PERT/CPM

Process Throughput Time Reduction


Perform activities in parallel
Change the sequence of activities
Reduce interruptions

4. PPC & PERT/CPM

Question Bowl
Which of the following are possible
examples of cycle times?
a. Time for each television to come off an
assembly line.
b. Time it takes for a stock purchase
c. Time it takes for an instructor to grade
an exam
d. Time it takes to build an automobile
e. All of the above

Answer: e. All of the above


4. PPC & PERT/CPM

173

Question Bowl
Which of the following are used as
symbols in a Process Flowchart?
a. Decision points
b. Blocking
Answer: a. Decision
c. Starving
points (A diamond
d. Bottleneck
e. All of the above shaped symbol.)

4. PPC & PERT/CPM

174

Question Bowl
Which type of process is configured as
follows?

a.
b.
c.
d.
e.

Single-stage process
Multi-stage process
Make-to-order process
Make-to-stock process
All of the above

Answer: b. Multi-stage process


4. PPC & PERT/CPM

175

Question Bowl

a.
b.
c.
d.
e.

When an assembly line employee is waiting


for a unit of work to come down the line so
they can stop being idle and get back to
work, it is an example of which of the
following process terms?
Buffering
Blocking
Starving
Bottleneck
All of the above

Answer: c. Starving
4. PPC & PERT/CPM

176

Question Bowl

a.
b.
c.
d.
e.

When a company waits until they have an


order for their product in hand before
beginning any production for that order, we
can characterize their operation as which of
the following processes?
Single-stage process
Answer:
c.
Make-toMulti-stage process
Make-to-order process order process
Make-to-stock process
All of the above
4. PPC & PERT/CPM

177

Question Bowl

a.
b.
c.
d.
e.

If the Run Time for a batch of parts is 45 minutes


on a machine, and the Setup Time is 65 minutes,
which of the following is the Operation Time?
75 minutes
110 minutes
Only 45 minutes
65/45 minutes or 1.44 hours
Can not be computed on the data above
Answer: b. 110 minutes ( Operation Time is the sum of
Run Time and Setup Time, or 65 + 45 = 110 minutes)
4. PPC & PERT/CPM

178

Question Bowl
If the standard expected phone calls for a
telephone marketers is 24 per hour, and one
telephone marketer did 27 per hour, which of
the following can be used to describe their
Answer: c. 112.5%
Efficiency?
(Ratio of actual
a. 88.8%
performance/expected performance,
b. 100%
or (27/24) x 100 = 110 minutes)
c. 112.5%
d. Well over 150%
e. Can not computed on the information given.
4. PPC & PERT/CPM

179

4e contd. Service Process Selection and Design

4. PPC & PERT/CPM

180

OBJECTIVES
The Nature of Services
Service Strategy: Focus &
Advantage
Service-System Design Matrix
Service Blueprinting
Service Fail-safing
Characteristics of a Well-Designed
Service Delivery System
4. PPC & PERT/CPM

The Nature of Services


1. Everyone is an expert on services
2. Services are idiosyncratic
3. Quality of work is not quality of
service
4. Most services contain a mix of
tangible and intangible attributes
4. PPC & PERT/CPM

Service Generalizations (Continued)


5. High-contact services are experienced,
whereas goods are consumed
6. Effective management of services requires an
understanding of marketing and personnel,
as well as operations
7. Services often take the form of cycles of
encounters involving face-to-face, phone,
Internet, electromechanical, and/or mail
interactions
4. PPC & PERT/CPM

Service Businesses
A service business is the management of
organizations whose primary business
requires interaction with the customer to
produce the service
Facilities-based services: Where the customer
must go to the service facility
Field-based services: Where the production
and consumption of the service takes place in
the customers environment
4. PPC & PERT/CPM

Internal
Services
Defined

Internal services is the


management of services
required to support the
activities of the larger
organization. Services
including data processing,
accounting, etc

Internal Supplier
Internal
Customer
External
Customer
Internal Supplier
4. PPC & PERT/CPM

Exhibit
Exhibit7.1
7.1

The Customer Centered View


AAphilosophical
philosophicalview
viewthat
that
suggests
suggeststhe
theorganization
organization
exists
existsto
toserve
servethe
the
customer,
customer,and
andthe
the
systems
systemsand
andthe
the
employees
employeesexist
existto
to
facilitate
facilitatethe
theprocess
processof
of
service.
service.

The Service
Strategy

The
Customer

The
Systems
4. PPC & PERT/CPM

The
People

Service Strategy: Focus and Advantage


Performance Priorities
Treatment of the customer
Speed and convenience of service delivery
Price
Variety
Quality of the tangible goods
Unique skills that constitute the service
offering
4. PPC & PERT/CPM

Service-System Design Matrix


Degree of customer/server contact
High

Buffered
core (none)

Permeable
system (some)

Reactive
system (much)

Face-to-face
loose specs

Sales
Opportunity
Phone
Internet & Contact
on-site
Mail contacttechnology

Exhibit
Exhibit7.6
7.6

Low

Face-to-face
total
customization

Face-to-face
tight specs

Low

Production
Efficiency

High
4. PPC & PERT/CPM

Example of Service Blueprinting


Standard
execution time
2 minutes

Brush
shoes
30
secs

Total acceptable
execution time
5 minutes
Seen by
customer

Line of
visibility

Clean
shoes

Apply
polish
30
secs

Fail
point

Buff

Collect
payment

45
secs

15
secs

Wrong
color wax

45
secs

Not seen by
customer but
necessary to
performance

Materials
(e.g., polish, cloth)

Select and
purchase
supplies

4. PPC & PERT/CPM

Service Fail-safing
Poka-Yokes (A Proactive Approach)
Keeping a
mistake from
becoming a
service defect

Task

Treatment

How can we
fail-safe the
three Ts?
4. PPC & PERT/CPM

Tangibles

Have we
compromised
one of the
3 Ts?
1.
1. Task
Task
2.
2. Treatment
Treatment
3.
3. Tangible
Tangible

4. PPC & PERT/CPM

Three Contrasting Service Designs

The production line approach (ex. McDonalds)

The self-service approach (ex. automatic teller


machines)

The personal attention approach (ex. RitzCarlton Hotel Company)

4. PPC & PERT/CPM

Characteristics of a Well-Designed
Service System
1. Each element of the service system is consistent
with the operating focus of the firm
2. It is user-friendly
3. It is robust
4. It is structured so that consistent performance by
its people and systems is easily maintained
4. PPC & PERT/CPM

Characteristics of a Well-Designed Service


System (Continued)
5. It provides effective links between the back
office and the front office so that nothing falls
between the cracks
6. It manages the evidence of service quality in
such a way that customers see the value of
the service provided
7. It is cost-effective
4. PPC & PERT/CPM

Applying Behavioral Science to


Service Encounters
1. The front-end and back-end of the encounter are
not created equal
2. Segment the pleasure, combine the pain
3. Let the customer control the process
4. Pay attention to norms and rituals
5. People are easier to blame than systems
6. Let the punishment fit the crime in service
recovery
4. PPC & PERT/CPM

Service Guarantees as Design


Drivers
Recent research suggests:
Any guarantee is better than no guarantee
Involve the customer as well as employees
in the design
Avoid complexity or legalistic language
Do not quibble or wriggle when a customer
invokes a guarantee
Make it clear that you are happy for
customers to invoke the guarantee
4. PPC & PERT/CPM

196

Question Bowl

Which of the following are generalizations about


the nature of services?
a. Services contain tangible attributes
b. Services are experienced
c. Services often take the form of cycles of
encounters involving face-to-face
interactions
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

197

Question Bowl
Which of the following is an example
of a Service Business?
a. Law firm
b. Hospital
c. Bank
d. Retail store
e. All of the above

Answer: e. All of the above


4. PPC & PERT/CPM

198

Question Bowl
Which of the following is an example of
Internal Services?
a. Finance department
b. Marketing department
c. Operations department
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

199

Question Bowl

a.
b.
c.
d.
e.

According to the Chase and Dasu (2001) study


which of the following are behavioral concepts that
should be applied to enhance customer
perceptions of a service encounter?
Flow of the service experience
Flow of time
Judging encounter performance
All of the above
None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

200

Question Bowl
Service strategy development begins by selecting
which of the following as an operating focus or
performance priority?
a. Price
b. Quality
c. Variety
d. Treatment
e. All of the above

Answer: e. All of the above


4. PPC & PERT/CPM

201

Question Bowl
Which of the following best practices emphasized
by service executives had the highest mean
emphasize rating?
a. Leadership
b. Accessibility
c. Quality values
d. Customer orientation
e. Listening to the customer

Answer: b. Accessibility (Had the highest


mean rating at 4.02 on a 5 point scale.)
4. PPC & PERT/CPM

202

Question Bowl
Based on the Service-System Design Matrix,
which of the following has a lower level of
production efficiency?
a. Face-to-face loose specs
b. Phone contact
c. Internet and on-site technology
d. Face-to-face tight specs
e. Mail contact

Answer: a. Face-to-face loose specs


4. PPC & PERT/CPM

203

4f. Operations Scheduling

4. PPC & PERT/CPM

204

OBJECTIVES
Work Center Defined
Typical Scheduling and Control Functions
Job-shop Scheduling
Examples of Scheduling Rules
Shop-floor Control
Principles of Work Center Scheduling
Issues in Scheduling Service Personnel

4. PPC & PERT/CPM

Work Center
A work center is an area in a
business in which productive
resources are organized and work
is completed
Can be a single machine, a group
of machines, or an area where a
particular type of work is done
4. PPC & PERT/CPM

Capacity and Scheduling


Infinite loading (Example: MRP)
Finite loading
Forward scheduling
Backward scheduling (Example:
MRP)
4. PPC & PERT/CPM

Types of Manufacturing Scheduling Processes


and Scheduling Approaches
Type of Process

Typical Scheduling Approach

Continuous
process

Finite forward of process,


machine limited

High-volume
manufacturing

Finite forward of line,


machined limited

Med-volume
manufacturing

Infinite forward of process,


labor and machined limited

Low-volume
manufacturing

Infinite forward of jobs, labor


and some machine limited
4. PPC & PERT/CPM

Typical Scheduling and Control Functions

Allocating orders, equipment, and


personnel
Determining the sequence of order
performance
Initiating performance of the
scheduled work
Shop-floor control
4. PPC & PERT/CPM

Work-Center Scheduling Objectives


Meet due dates
Minimize lead time
Minimize setup time or cost
Minimize work-in-process inventory
Maximize machine utilization
4. PPC & PERT/CPM

Priority Rules for Job Sequencing


1. First-come, first-served (FCFS)
2. Shortest operating time (SOT)
3. Earliest due date first (DDate)
4. Slack time remaining (STR) first
5. Slack time remaining per operation (STR/OP)
4. PPC & PERT/CPM

Priority Rules for Job Sequencing


(Continued)
6. Critical ratio (CR)

(Due date - Current date)


CR
Number of days remaining

7. Last come, first served (LCFS)


8. Random order or whim
4. PPC & PERT/CPM

Example of Job Sequencing: FirstCome First-Served


Suppose
Supposeyou
youhave
havethe
thefour
four
jobs
jobsto
tothe
theright
rightarrive
arrivefor
for
processing
processingon
onone
onemachine
machine

Jobs (in order


of arrival)
A
B
C
D

What
Whatis
isthe
theFCFS
FCFSschedule?
schedule?

Processing
Due Date
Time (days) (days hence)
4
5
7
10
3
6
1
4

Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?

Answer: FCFS Schedule


Jobs (in order
of arrival)
A
B
C
D

Processing
Time (days)
4
7
3
1

Due Date Flow Time


(days hence)
(days)
5
4
10
11
6
14
4
15
4. PPC & PERT/CPM

No,
No,Jobs
JobsB,
B,C,
C,
and
andDDare
are
going
goingto
tobe
belate
late

Example of Job Sequencing: Shortest


Operating Time
Suppose
Supposeyou
youhave
havethe
thefour
four
jobs
jobsto
tothe
theright
rightarrive
arrivefor
for
processing
processingon
onone
onemachine
machine

What
Whatis
isthe
theSOT
SOTschedule?
schedule?

Jobs (in order


of arrival)
A
B
C
D

Processing
Time (days)
4
7
3
1

Due Date
(days hence)
5
10
6
4

Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?

Answer: Shortest Operating Time Schedule


Jobs (in order
of arrival)
D
C
A
B

Processing
Due Date Flow Time
Time (days) (days hence)
(days)
1
4
1
3
6
4
4
5
8
7
10
15
4. PPC & PERT/CPM

No,
No,Jobs
JobsAA
and
andBBare
are
going
goingto
tobe
be
late
late

Example of Job Sequencing: Earliest Due


Date First
Suppose
Supposeyou
youhave
havethe
thefour
four
jobs
jobsto
tothe
theright
rightarrive
arrivefor
for
processing
processingon
onone
onemachine
machine
What
Whatis
isthe
theearliest
earliestdue
duedate
date
first
firstschedule?
schedule?

Jobs (in order


of arrival)
A
B
C
D

Processing
Time (days)
4
7
3
1

Due Date
(days hence)
5
10
6
4

Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?

Answer: Earliest Due Date First


Jobs (in order
of arrival)
D
A
C
B

Processing
Due Date Flow Time
Time (days) (days hence)
(days)
1
4
1
4
5
5
3
6
8
7
10
15
4. PPC & PERT/CPM

No,
No,Jobs
JobsCC
and
andBBare
are
going
goingto
tobe
be
late
late

Example of Job Sequencing: Critical Ratio


Method
Suppose
Supposeyou
youhave
havethe
thefour
four
jobs
jobsto
tothe
theright
rightarrive
arrivefor
for
processing
processingon
onone
onemachine
machine
What
Whatis
isthe
theCR
CRschedule?
schedule?

Jobs (in order


of arrival)
A
B
C
D

Processing
Time (days)
4
7
3
1

Due Date
(days hence)
5
10
6
4

Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?

In order to do this schedule the CRs have be calculated


for each job. If we let today be Day 1 and allow a total of
15 days to do the work. The resulting CRs and order
schedule are:
CR(A)=(5-4)/15=0.06 (Do this job last)
CR(B)=(10-7)/15=0.20 (Do this job first, tied with C and D)
CR(C)=(6-3)/15=0.20 (Do this job first, tied with B and D)
CR(D)=(4-1)/15=0.20 (Do this job first, tied with B and C)
4. PPC & PERT/CPM

No,
No,but
butsince
since
there
thereis
isthreethreeway
waytie,
tie,only
only
the
thefirst
firstjob
jobor
or
two
twowill
willbe
beon
on
time
time

Example of Job Sequencing:


Last-Come First-Served
Suppose
Supposeyou
youhave
havethe
thefour
four
jobs
jobsto
tothe
theright
rightarrive
arrivefor
for
processing
processingon
onone
onemachine
machine

What
Whatis
isthe
theLCFS
LCFSschedule?
schedule?

Jobs (in order


of arrival)
A
B
C
D

Processing
Time (days)
4
7
3
1

Due Date
(days hence)
5
10
6
4

Do
Doall
allthe
thejobs
jobsget
getdone
doneon
ontime?
time?

Answer: Last-Come First-Served Schedule


Jobs (in order
of arrival)
D
C
B
A

Processing
Time (days)
1
3
7
4

Due Date Flow Time


(days hence)
(days)
4
1
6
4
10
11
5
15
4. PPC & PERT/CPM

No,
No,Jobs
JobsBB
and
andAAare
are
going
goingto
tobe
be
late
late

Example of Job Sequencing: Johnsons


Rule (Part 1)
Suppose
Supposeyou
youhave
havethe
thefollowing
followingfive
fivejobs
jobswith
withtime
time
requirements
requirementsin
intwo
two stages
stagesof
ofproduction.
production. What
What is
isthe
the
job
jobsequence
sequenceusing
usingJohnsons
JohnsonsRule?
Rule?
Jobs
A
B
C
D

Time in Hours
Stage 1
Stage 2
1.50
1.25
2.00
3.00
2.50
2.00
1.00
2.00

4. PPC & PERT/CPM

Example of Job Sequencing: Johnsons Rule


First, select the job with the
smallest time in either stage.
That is Job D with the smallest
time in the first stage. Place that
job as early as possible in the
unfilled job sequence below.

Jobs
A
B
C
D

(Part 2)

Time in Hours
Stage 1
Stage 2
1.50
1.25
2.00
3.00
2.50
2.00
1.00
2.00

Drop D out, select the next smallest time (Job A), and place it 4th in the job
sequence.

Drop A out, select the next smallest time. There is a tie in two stages for
two different jobs. In this case, place the job with the smallest time in the
first stage as early as possible in the unfilled job sequence.
Then place the job with the smallest time in the second stage as late as
possible in the unfilled sequence.
Job Sequence 1
2
3
Job Assigned 4.DPPC &BPERT/CPM
C

4
A

Shop-Floor Control:
Major Functions
1. Assigning priority of each shop order
2. Maintaining work-in-process quantity
information
3. Conveying shop-order status information
to the office

4. PPC & PERT/CPM

Shop-Floor Control:
Major Functions (Continued)
4. Providing actual output data for capacity
control purposes
5. Providing quantity by location by shop order
for WIP inventory and accounting purposes
6. Providing measurement of efficiency,
utilization, and productivity of manpower and
machines
4. PPC & PERT/CPM

Input/Output Control
Input

Work
Center

Output

Planned input should never exceed planned


output

Focuses attention on bottleneck work centers

4. PPC & PERT/CPM

Principles of Work Center Scheduling


1. There is a direct equivalence between work
flow and cash flow
2. The effectiveness of any job shop should be
measured by speed of flow through the shop
3. Schedule jobs as a string, with process
steps back-to-back
4. A job once started should not be interrupted
4. PPC & PERT/CPM

Principles of Job Shop Scheduling


(Continued)
5. Speed of flow is most efficiently achieved
by focusing on bottleneck work centers
and jobs
6. Reschedule every day
7. Obtain feedback each day on jobs that are
not completed at each work center
8. Match work center input information to
what the worker can actually do
4. PPC & PERT/CPM

Principles of Job Shop Scheduling


(Continued)
9. When seeking improvement in output,
look for incompatibility between
engineering design and process
execution
10. Certainty of standards, routings, and so
forth is not possible in a job shop, but
always work towards achieving it
4. PPC & PERT/CPM

Personnel Scheduling in Services


Scheduling consecutive days off
Scheduling daily work times
Scheduling hourly work times

4. PPC & PERT/CPM

Question Bowl

a.
b.
c.
d.
e.

A Work Center may be which of the


following?
A single machine
A group of machines
An area where a particular type of work
is performed
All of the above Answer: d. All of the above
None of the above
4. PPC & PERT/CPM

227

Question Bowl
When work is assigned to a work center simply
based on what is needed over time, we would
refer to this as which of the following scheduling
systems?
a. A finite loading of work
b. An infinite loading of work
c. Forward scheduling
d. All of the above
e. None of the above

Answer: b. An infinite loading of work


4. PPC & PERT/CPM

228

Question Bowl
Typical scheduling and controlling of operations
include which of the following functions?
a. Allocating orders at work centers
b. Allocating equipment at work centers
c. Allocating personnel at work centers
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

229

Question Bowl
Typical scheduling and controlling of
operations include which of the following
functions?
a. Determining the job sequences
b. Dispatching
c. Expediting late and critical orders
d. All of the above
e. Answer:
None of d.
theAll
above
of the above
4. PPC & PERT/CPM

230

Question Bowl

a.
b.
c.
d.
e.

Which of the following are standard measures


of schedule performance used to evaluate
priority rules?
Meeting due dates
Maximizing job flow time
Maximizing work-in-process inventory
All of the above
Answer: a. Meeting due dates
None of the above

(Correct answer can also include


minimizing WIP inventory, idle time,
and job flow time.)

4. PPC & PERT/CPM

231

Question Bowl
Which priority rule uses the calculation of the
difference between the due date and the current
date divided by the number of work days
remaining?
a. STR
b. SOT
c. DDate
d. FCFS
e. None of the above

Answer: e. None of
the above (Correct
answer can is CR or
critical ratio.)

4. PPC & PERT/CPM

232

Question Bowl
The major functions of a shop-floor control are
which of the following?
a. Conveying shop-order status
b. Measuring efficiency
c. Assigning priorities

Answer: e. All of the above


(Correct answer can also
include providing quantity by
location and actual output
data.)

d. Maintaining WIP quantity information


e. All of the above

4. PPC & PERT/CPM

233

Question Bowl

a.
b.
c.
d.
e.

Which of the following are Tools of ShopFloor Control?


Daily dispatch lists
Scrap reports
Rework reports
Answer: d. All of the
All of the above
above (Correct
None of the above
answer can also
include all status and
exception reports
4. PPC & PERT/CPM
234
and input/output

Question Bowl
Which of the following is a Principle of WorkCenter Scheduling?
a. There is a direct equivalence between work flow
and cash flow
b. Certainty of routings are very possible in a shop
c. Reschedule only once a week
d. All of the above
e. None of the above

Answer: a. There is a direct


equivalence between work flow
and cash flow (There are nine
other principles.)

4. PPC & PERT/CPM

235

4g. Project Management


(PERT / CPM)
4. PPC & PERT/CPM

236

OBJECTIVES

Definition of Project Management


Work Breakdown Structure
Project Control Charts
Structuring Projects
Critical Path Scheduling

4. PPC & PERT/CPM

Project Management
Defined
Project is a series of related jobs usually
directed toward some major output and
requiring a significant period of time to
perform
Project Management are the management
activities of planning, directing, and
controlling resources (people, equipment,
material) to meet the technical, cost, and time
constraints of a project
4. PPC & PERT/CPM

Characteristics of projects

Non-routine

Have a specific objective to achieve

Identifiable Start & Finish

Consist of a number of inter-related activities. Each activity in


turn requires time & resources for its completion.

The resources and skills required are multi-faceted.


Sometimes, they are unique to the specific project.

Co-ordination of the efforts of multiple agencies (departments,


external organizations, individuals) is required

4. PPC & PERT/CPM

239

Gantt Chart
Vertical
VerticalAxis:
Axis:
Always
AlwaysActivities
Activities
or
or Jobs
Jobs

Horizontal
Horizontalbars
barsused
usedtotodenote
denotelength
length
ofoftime
timefor
foreach
eachactivity
activityor
orjob.
job.

Activity 1
Activity 2
Activity 3
Activity 4
Activity 5
Activity 6
Time

Horizontal
HorizontalAxis:
Axis:Always
AlwaysTime
Time

4. PPC & PERT/CPM

Pure Project
A pure project is where a self-contained team
works full-time on the project

Structuring Projects Pure Project: Advantages


The project manager has full authority
over the project
Team members report to one boss
Shortened communication lines
Team pride, motivation, and commitment
are high
4. PPC & PERT/CPM

Structuring Projects Pure Project:


Disadvantages
Duplication of resources
Organizational goals and policies
are ignored
Lack of technology transfer
Team members have no functional
area "home"
4. PPC & PERT/CPM

Functional Project
A functional project is housed within
a functional division
President
Research and
Development

Engineering

Manufacturing

Project Project Project


A
B
C

Project Project Project


D
E
F

Project Project Project


G
H
I

Example,
Example, Project
Project B
B is
is in
in the
the functional
functional
area
and
Development.
area of
of Research
Research
and
Development.
4. PPC & PERT/CPM

Structuring Projects
Functional Project: Advantages
A team member can work on
several projects
Technical expertise is maintained
within the functional area
The functional area is a home
after the project is completed
Critical mass of specialized
knowledge
4. PPC & PERT/CPM

Structuring Projects
Functional Project: Disadvantages
Aspects of the project that are not
directly related to the functional
area get short-changed
Motivation of team members is
often weak
Needs of the client are secondary
and are responded to slowly
4. PPC & PERT/CPM

Matrix Project Organization Structure


President
Research and
Engineering Manufacturing Marketing
Development
Manager
Project A
Manager
Project B
Manager
Project C
4. PPC & PERT/CPM

Structuring Projects
Matrix: Advantages
Enhanced communications between functional
areas
Pinpointed responsibility
Duplication of resources is minimized
Functional home for team members
Policies of the parent organization are followed
4. PPC & PERT/CPM

Structuring Projects
Matrix: Disadvantages
Too many bosses
Depends on project managers
negotiating skills
Potential for sub-optimization
4. PPC & PERT/CPM

Work Breakdown Structure


A work breakdown structure defines the hierarchy of
project tasks, subtasks, and work packages
Level Program
1
2

Project 1

Project 2

Task 1.1

Task 1.2

Subtask 1.1.1

Work Package 1.1.1.1

Subtask 1.1.2
Work Package 1.1.1.2

4. PPC & PERT/CPM

Network-Planning Models
A project is made up of a sequence of activities that
form a network representing a project
The path taking longest time through this network of
activities is called the critical path
The critical path provides a wide range of scheduling
information useful in managing a project
Critical Path Method (CPM) helps to identify the
critical path(s) in the project networks
4. PPC & PERT/CPM

Prerequisites for Critical Path


Methodology
A project must have:
well-defined jobs or tasks whose
completion marks the end of the project;
independent jobs or tasks;
and tasks that follow a given sequence.
4. PPC & PERT/CPM

Types of Critical Path Methods


CPM with a Single Time Estimate
Used when activity times are known with certainty
Used to determine timing estimates for the project,
each activity in the project, and slack time for
activities
PERT is CPM with Three Activity Time Estimates
Used when activity times are uncertain
Used to obtain the same information as the Single
Time Estimate model and probability information
Time-Cost Models
Used when cost trade-off information is a major
consideration in planning
Used to determine the least cost in reducing total
project time
4. PPC & PERT/CPM

Steps in the CPM with Single Time


Estimate
1. Activity Identification - requires knowledge & experience.
2. Activity Sequencing and Network Construction
The network may be denoted with Activity on Arrow (AoA)
or Precedence Network

3. Determine the critical path


From the critical path all of the project and activity timing
information can be obtained

4. PPC & PERT/CPM

Important terms
Network

The diagram that depicts all activities & their inter-relationships

Activity

Has a duration, a start time and an end time. Can shown on arrow or on
node

Events

Represent the start & finish of activities, projects, etc. All activities have
Early Start (ES) Early Finish (EF), Late Start (LS) & Late Finish (LF)

Activity
relationships

Two or more activities can be concurrent, preceding or succeeding; w.r.t.


each other

Dummy
activity

Used to break ambiguity. Has zero duration.

Activity time

In PERT there is concept of optimistic (O), most likely (M), pessimistic


(P) and expected times (E). E = [ (O+4M+P) / 6 ]

Critical Path

The path that determines the duration / completion of the project, and
hence must the focus of attention. .

Slack

When an activity can be delayed, without affecting project completion


time.. Activities on the critical path have no slack.

Float

Is the amount of slack available. There are 4 types of float i.e.


TOTAL FLOAT, FREE FLOAT, INTERFERING FLOAT & INDEPENDENT
FLOAT

4. PPC & PERT/CPM

254

Four Types of Activity Float

4. PPC & PERT/CPM

255

PERT

CPM

1. It is a technique for
planning scheduling &
controlling of projects
whose activities are
subject to uncertainty in
the performance time.
Hence it is a
probabilistic model

1. It is a technique for
planning scheduling &
controlling of projects
whose activities not
subjected to any
uncertainty and the
performance times are
fixed. Hence it is a
deterministic model

2.It is an Event oriented


system

2. It is an Activity
oriented system

4. PPC & PERT/CPM

256

3.Basically does not


differentiate critical and
non-critical activities

Differentiates clearly the


critical activities from
the other activities.

4. Used in projects
where resources (men,
materials, money) are
always available when
required.

4. Used in projects
where overall costs is of
primarily important.
Therefore better utilized
resources

5. Suitable for Research


and Development
projects where times
cannot be predicted

5.Suitable for civil


constructions,
installation, ship
building etc.

4. PPC & PERT/CPM

257

Rules for drawing the network diagrams (AoA)


In a network diagram, arrows represent the
activities and circles represent the events.
The tail of an arrow represents the start of an
activity and the head represent the completion
of the activity.

4. PPC & PERT/CPM

258

The event numbered 1 denotes the start of the


project and is called initial event.
Event carrying the highest number in the network
denotes the completion of the project and is called
terminal event.
4. PPC & PERT/CPM

259

Each defined activity is represented by one and only


arrow in the network.
Determine which operation must be completed
immediately before other can start.
Determine which other operation must follow the
other given operation.
4. PPC & PERT/CPM

260

The network should be developed on the basis of


logical, analytical and technical dependencies
between various activities of the project.

4. PPC & PERT/CPM

261

The basic network construction Terminology used.


Network representation: There are two types of
systems
AOA system
(Activity AON system
on Arrow system)
(Activity on Node
system )
In this activities are
represented by an
arrows.

In this method activities


are represented in the
circles.

4. PPC & PERT/CPM

262

Problem 1.
Construct an arrow diagram for the following project.
Activities

Relationship

Precedes B,C

Precedes D,E

Precedes D

Precedes F

Precedes G

Precedes G
4. PPC & PERT/CPM

263

E
B
G
A
F

C
D

4. PPC & PERT/CPM

264

Problem 2.
Construct an arrow diagram for the following project.
Job

Immediate
predecessor

Duration

14 Days

3 Days

7 Days

4 Days

B,D

10 Days

4. PPC & PERT/CPM

265

E
10

14

Key

4. PPC & PERT/CPM

Job
Duration

266

Problem 3.
Construct an arrow diagram for the following project.
Job

Immediate predecessor

A,B

C,E
4. PPC & PERT/CPM

267

F
A

E
D

4. PPC & PERT/CPM

268

Problem 4.
Construct an arrow diagram for the following project.
Activity

Predecessor

A,B

B,C
4. PPC & PERT/CPM

269

A
B
C

4. PPC & PERT/CPM

270

Problem 5.
Construct an arrow diagram for the following project.
Activity

Predecessor

A,B

B,C

A,B,C
4. PPC & PERT/CPM

271

A
B

F
C

4. PPC & PERT/CPM

272

CPM with Single Time Estimate (AoN)


Consider the following consulting project :
Activity
Assess customer's needs
Write and submit proposal
Obtain approval
Develop service vision and goals
Train employees
Quality improvement pilot groups
Write assessment report

Designation Immed. Pred. Time (Weeks)


A
None
2
B
A
1
C
B
1
D
C
2
E
C
5
F
D, E
5
G
F
1

Develop a critical path diagram and determine


the duration of the critical path and slack times
for all activities.
4. PPC & PERT/CPM

273

First draw the network


Act.

Imed. Pred. Time

A
B
C

None
A
B

2
1
1

D
E
F

C
C
D,E

2
5
5

A(2)

B(1)

D(2)

C(1)

F(5)

E(5)
4. PPC & PERT/CPM

G(1)

Determine early starts and early finish times


ES=4
EF=6
ES=0
EF=2

ES=2
EF=3

ES=3
EF=4

A(2)

B(1)

C(1)

Hint:
Hint:Start
Startwith
withES=0
ES=0
and
andgo
goforward
forwardininthe
the
network
networkfrom
fromAAtotoG.
G.

D(2)

ES=4
EF=9
E(5)

4. PPC & PERT/CPM

ES=9
EF=14

ES=14
EF=15

F(5)

G(1)

Determine late
starts and late
finish times

ES=4
EF=6

ES=0
EF=2

ES=2
EF=3

ES=3
EF=4

A(2)

B(1)

C(1)

LS=0
LF=2

LS=2
LF=3

LS=3
LF=4

D(2)
LS=7
LF=9

Hint:
Hint:Start
Startwith
withLF=15
LF=15
or
orthe
thetotal
totaltime
timeof
ofthe
the
project
project and
andgo
go
backward
backwardin
inthe
the
network
networkfrom
fromGGto
toA.
A.
ES=9
ES=14
EF=14 EF=15

ES=4
EF=9
E(5)
LS=4
LF=9

4. PPC & PERT/CPM

F(5)

G(1)

LS=9
LF=14

LS=14
LF=15

Critical Path & Slack


ES=4
EF=6
ES=0
EF=2

ES=2
EF=3

ES=3
EF=4

A(2)

B(1)

C(1)

LS=0
LF=2

LS=2
LF=3

LS=3
LF=4

Slack=(7-4)=(9-6)= 3 Wks

D(2)
LS=7
LF=9
ES=4
EF=9
E(5)
LS=4
LF=9

ES=9
EF=14

ES=14
EF=15

F(5)

G(1)

LS=9
LF=14

LS=14
LF=15

Duration=15 weeks

4. PPC & PERT/CPM

Example 2. CPM with Three Activity


Time Estimates (AoN)
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28
4. PPC & PERT/CPM

278

Example 2. Expected Time


Calculations
ET(A)=
ET(A)=3+4(6)+15
3+4(6)+15
Task
A
B
C
D
E
F
G
H
I

Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18

66
ET(A)=42/6=7
ET(A)=42/6=7
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28

Opt.
Time
++ 4(Most
Likely
Time)
++ Pess.
Time
Opt.
Time
4(Most
Likely
Time)
Pess.
Time
Expected
ExpectedTime
Time ==
66
4. PPC & PERT/CPM
279

Ex. 2. Expected Time Calculations

Task
A
B
C
D
E
F
G
H
I

Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18

ET(B)=
ET(B)=2+4(4)+14
2+4(4)+14
66
ET(B)=32/6=5.333
ET(B)=32/6=5.333
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28

Opt.
Time
++ 4(Most
Likely
Time)
++ Pess.
Time
Opt.
Time
4(Most
Likely
Time)
Pess.
Time
Expected
ExpectedTime
Time ==
66
4. PPC & PERT/CPM
280

Ex 2. Expected Time Calculations


Task
A
B
C
D
E
F
G
H
I

Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18

ET(C)=
ET(C)=6+4(12)+30
6+4(12)+30
66
ET(C)=84/6=14
ET(C)=84/6=14
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28

Opt.
Time
++ 4(Most
Likely
Time)
++ Pess.
Time
Opt.
Time
4(Most
Likely
Time)
Pess.
Time
Expected
ExpectedTime
Time ==
66
4. PPC & PERT/CPM
281

Example 2. Network (AoN)


Duration = 54 Days
C(14)

E(11)
H(4)

A(7)
D(5)

F(7)
I(18)

B
(5.333)

G(11)
4. PPC & PERT/CPM

282

Example 2. Probability Exercise


What
What isis the
the probability
probability of
of finishing
finishing this
this project
project in
in
less
less than
than 53
53 days?
days?

p(t < D)
D=53
TE = 54

t
DD -- TTEE
ZZ ==
22

cpcp

4. PPC & PERT/CPM

283

Pessim.
-- Optim.
Pessim.
Optim.)22
Activity
variance,

=
(
Activity variance, = (
)
66
22

Task
A
B
C
D
E
F
G
H
I

Optimistic Most Likely Pessimistic Variance


3
6
15
4
2
4
14
6
12
30
16
2
5
8
5
11
17
4
3
6
15
3
9
27
1
4
7
1
4
19
28
16

(Sum the variance along the critical


4. PPC & PERT/CPM
path.)

22

41
== 41
284

p(t < D)
D=53

TE = 54

D
D -- TTEE 5353-54
54
ZZ ==
==
== -.156
-.156
22
41
41

cpcp
p(Z
p(Z <<-.156)
-.156) ==.438,
.438, or
or 43.8
43.8 %
% (NORMSDIST(-.156)
(NORMSDIST(-.156)
There
There isis aa 43.8%
43.8% probability
probability that
that this
this project
project will
will be
be
completed
weeks.
completed in
in less
less than
than4.53
53
weeks.
PPC & PERT/CPM
285

Ex 2. Additional Probability Exercise


What
What is
is the
the probability
probability that
that the
the
project
project duration
duration will
will exceed
exceed 56
56
weeks?
weeks?

4. PPC & PERT/CPM

Example 2. Additional Exercise


Solution
p(t < D)

TE = 54

t
D=56

D
-- TTEE 56
--54
D
56
54
ZZ ==
=
== .312
.312
22 =
41
41

cp
cp
p(Z
p(Z>>.312)
.312) == .378,
.378, or
or 37.8
37.8 %
%(1-NORMSDIST(.312))
(1-NORMSDIST(.312))
4. PPC & PERT/CPM

Time-Cost Models

Basic Assumption: Relationship


between activity completion time and
project cost
Time Cost Models: Determine the
optimum point in time-cost tradeoffs

Activity direct costs


Project indirect costs
Activity completion times
4. PPC & PERT/CPM

CPM Assumptions/Limitations
Project activities can be identified as entities
(There is a clear beginning and ending point
for each activity.)

Project activity sequence relationships can be


specified and networked
Project control should focus on the critical
path
The activity times follow the beta distribution,
with the variance of the project assumed to
equal the sum of the variances along the
critical path
Project control should focus on the critical
path
4. PPC & PERT/CPM

Project Crashing
The process of accelerating a project is
referred as crashing.
Crashing a project relates to resource
commitment; the more resources expended, the
faster the project will finish.
There are several reasons to crash a project:
Initial schedule was too optimistic
Market needs change and the project is in demand
earlier than anticipated
The project has slipped considerably behind
schedule
There are contractual late penalties
4. PPC & PERT/CPM

290

Project Crashing
Principal methods for crashing
Improving existing resources productivity
Changing work methods
Increasing the quantity of resources
Increasing the quantity of resources is the
most commonly used method for project
crashing. There are 2 approaches:
Working current resources for longer hours
(overtime, weekend work)
Adding more personnel
4. PPC & PERT/CPM

291

Project Crashing
Fully expedited (no expense is spared)

Crash
Point
Crashed

Cost
Normal
Point
Normal

Crashed

Normal

Activity Duration

Time-Cost Trade-Offs for Crashing Activities


4. PPC & PERT/CPM

292

Project Crashing
In analyzing crash options, the goal is to find
the point at which time and cost trade-offs are
optimized.
Various combinations of time-cost trade-offs
for crash options can be determined by using
the following formula:
Slope = crash cost normal cost
normal time crash time
4. PPC & PERT/CPM

293

Example
SUPPOSE:
NORMAL ACTIVITY DURATION = 8 WEEKS
NORMAL COST = Rs.14,000
CRASHED ACTIVITY DURATION = 5 WEEKS
CRASHED COST = Rs.23,000
THE ACTIVITY COST SLOPE =
23,000 14,000 OR
Rs.9,000
85

Rs. 3,000 per week

Cease crashing when


the target completion time is reached
the crash cost exceeds the penalty cost
4. PPC & PERT/CPM

294

Example
Normal
Activity Duration Cost (Rs)
A
4 days 1,000
B
5 days 2,500
C
3 days 750
D
7 days 3,500
E
2 days 500
F
5 days 2,000
G
9 days 4,500

Crashed
Duration Cost (Rs)
3 days 2,000
3 days 5,000
2 days 1,200
5 days 5,000
1 day
2,000
4 days 3,000
7 days 6,300

a) Calculate the per day costs for crashing each activity


b) Which are the most attractive candidates for crashing?
Why?

4. PPC & PERT/CPM

295

Example
Activity
A
B
C
D
E
F
G

Per Day Cost (Rs)


1,000
1,250
450
750
1,500
1,000
900

4. PPC & PERT/CPM

296

Resource Allocation Problem


A shortcoming of most scheduling procedures
is that they do not address the issues of
resource utilization and availability.
Scheduling procedures tend to focus on time
rather than physical resources.

4. PPC & PERT/CPM

297

Resource Allocation Problem


Schedules should be evaluated not merely in
terms of meeting project milestones, but also in
terms of the timing and use of scarce
resources.
A fundamental measure of the project
managers success in project management is
the skill with which the trade-offs among
performance, time, and cost are managed.
I can shorten this project by 1 day at a cost of
$400. Should I do it?
4. PPC & PERT/CPM

298

Resource Allocation Problem


The extreme points of the relationship between
time use and resource use are the following:
Time Limited: The project must be finished
by a certain time, using as few resources as
possible. But it is time, not resource usage,
that is critical
Resource Limited: The project must be
finished as soon as possible, but without
exceeding some specific level of resource
usage or some general resource constraint

4. PPC & PERT/CPM

299

Resource Loading
Resource loading describes the amounts of
individual resources an existing schedule
requires during specific time periods
The loads (requirements) of each resource
type are listed as a function of time period
Resource loading gives a general
understanding of the demands a project or set
of projects will make on a firms resources
4. PPC & PERT/CPM

300

Resource Loading
The project manager must be aware of the
ebbs and flows of usage for each input resource
throughout the life of the project.
It is the project managers responsibility to
ensure that the required resources, in the
required amounts, are available when and
where they are needed.

4. PPC & PERT/CPM

301

Resource Leveling (Smooting)


Resource leveling aims to minimize the
period-by-period variations in resource loading
by shifting tasks within their slack allowances.
The purpose is to create a smoother
distribution of resource usage.
Resource leveling, referred to as resource
smoothing, has two objectives:
To determine the resource requirements so that
they will be available at the right time,
To allow each activity to be scheduled with the
smoothest possible transition across usage levels
4. PPC & PERT/CPM

302

Resource Leveling (Smooting)


Resource management is a multivariate,
combinatorial problem, i.e. multiple solutions
with many variables, the mathematically optimal
solution may be difficult or infeasible.
More common approach to analyzing
resource leveling problems is to apply some
resource leveling heuristics.

4. PPC & PERT/CPM

303

Resource Leveling Heuristics


Prioritizing resource allocation include
applying resources to activities:
with the smallest amount of slack
with the smallest duration
that start earliest
with the most successor tasks
requiring the most resources

4. PPC & PERT/CPM

304

Resource Leveling Steps


Create a project activity network diagram
Create a table showing the resources required
for each activity, durations, and the total float
available
Develop a time-phased resource loading table
Identify any resource conflicts and begin to
smooth the loading table using one or more
heuristics

4. PPC & PERT/CPM

305

Resource Loading Chart


Display the amount of resources required as a
function of time.
4 B 5
Res = 2
0 A 4
Res = 6

5 D 9
Res = 7

9 E 11
Res = 3

1. Start with a
network diagram
4 C 7
Res = 2
4. PPC & PERT/CPM

11 F 12
Res = 6

306

Resource Loading Charts


Activity

A
B
C
D
E
F

Resource

6
2
2
7
3
6

Duration

ES

Slack

LF

4
1
3
4
2
1

0
4
4
5
9
11

0
0
4
0
0
0

4
5
11
9
11
12

2. Produce a table that shows the


duration, early start, late finish,
slack, and resource(s) required for
each activity.
4. PPC & PERT/CPM

307

Resource Loading Charts


3. Draw an initial loading chart with
each activity scheduled at its ES.

Resources

8
6
4

C
2

Resource
imbalance

6
8 10 12
Project Days
4. PPC & PERT/CPM

14
308

Resource Loading Charts


4. Rearrange activities within their slack
to create a more level profile. Splitting
C creates a more level project.

Resources

8
6
4

2
C
2

E
6
8 10 12
Project Days
4. PPC & PERT/CPM

14
309

Resource Loading Chart

4. PPC & PERT/CPM

310

Question Bowl

Which of the following are examples of


Graphic Project Charts?
a. Gantt
b. Bar
c. Milestone
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

311

Question Bowl

Which of the following are one of the


three organizational structures of
projects?
a. Pure
b. Functional
c. Matrix
d. All of the above
e. None of the above

Answer: d. All of the above


4. PPC & PERT/CPM

312

Question Bowl
A project starts with a written description of the
objectives to be achieved, with a brief statement
of the work to be done and a proposed schedule
all contained in which of the following?
a.
SOW
b. WBS
c.
Early Start Schedule
d. Late Start Schedule
e.
None of the above

Answer: a. SOW (or Statement of Work)


4. PPC & PERT/CPM

313

Question Bowl

a.
b.
c.
d.
e.

For some activities in a project there may be


some leeway from when an activity can start
and when it must finish. What is this period of
time called when using the Critical Path
Method?
Early start time
Late start time
Slack time
All of the above
None of the above

Answer: c. Slack time

4. PPC & PERT/CPM

314

Question Bowl
How much slack time is permitted in the critical
path activity times?
a. Only one unit of time per activity
b. No slack time is permitted
c. As much as the maximum activity time in the
network
d. As much as is necessary to add up to the total
time of the project
e. Answer:
None of b.
the
above
No
slack time is permitted (All

critical path activities must have zero slack


time, otherwise they would not be critical to
the project completion time.)
4. PPC & PERT/CPM

315

Question Bowl

When looking at the Time-Cost Trade Offs in the


Minimum-Cost Scheduling time-cost model, we
seek to reduce the total time of a project by
doing what to the least-cost activity choices?
a. Crashing them
b. Adding slack time
Answer: a. Crashing them
c. Subtracting slack time
(We crash the least-cost
activity times to seek a
d. Adding project time
reduced total time for the
e. None of the above
entire project and we do it
step-wise as inexpensively as
possible.)
4. PPC & PERT/CPM

316

UNIVERSITY QUESTIONS

Given data for a project

Draw the network diagram and identify critical path.

Calculate project duration and total float for each activity.

Calculate standard deviation for critical path.


'Production Planning and Control is the key to the success of a business organisation'. Discuss
the statement listing the various functions carried out under production planning & control and
their purpose in brief.
Given data for a project

Draw Network Diagram

Calculate project duration & determine critical path

Determine slack for each activity.


Explain how production control functions are carried out in Mass Production (Give examples).
Given data for a project

a) Draw the Network Diagram for the Project.

b) Determine the critical path and its duration.

c) Compute slack, earliest start time & earliest finish time.


Narrate the functions of production Planning and control. Explain their objective clearly .

4. PPC & PERT/CPM

317

UNIVERSITY QUESTIONS cont

Given data for a project


Draw a network diagram.
Compute project completion time.
Identify critical path.

'Production, planning and control function involves balancing between Priority' (Demand) and
capacity (Resources)'. Discuss the statement.

Compare CPM and PERT method for project management. What do you understand by 'Network
crashing'?

Explain those functions of Production Planning & Control which enable a company to control cost
of Production & Capacity utilization.

Write short notes on any three:


a) Aggregate Planning
b) Line Balancing
c) Scheduling
d) Critical Path Method.

4. PPC & PERT/CPM

318

UNIVERSITY QUESTIONScontd

Following are the activities of a project:


Activity
Immediate
Activity time in weeks
Predecessor
Most
Most Most
Activity
Optimistic
Likely Pessimistic
A
None
4
7
13
B
A
6
9
11
C
A
5
7
09
D
B
3
5
07
E
C
7
8
10
F
D
2
3
05
G
E
6
7
08
H
F&G
2
3
04
a) Calculate the expected time of each activity
[3]
b) Draw the network and indicate the expected time on each activity. [7]
c) Compute the earliest completion time of the project.
[2]
d) Identify the critical path in the diagram.
[2]

4. PPC & PERT/CPM

319

UNIVERSITY QUESTIONScontd

a) Explain the term scheduling in Production Planning.


[4]
b) What are the different types of scheduling?
[4]
c) What considerations will you apply in "Scheduling" the jobs in Job-Production.
[6]

Write short notes (Any three) :


a) Process.:-flow-chart.
b) Control charts in Q.C.
c) Spare- parts for maintenance.
maintenance
d) Despatching in Production Control.

Distinguish between the following (any three) :


a) Product and Services
b) Routing and Scheduling.
c) Statistical Quality Control and Statistical Process Control.
d) Inspection and Quality Control.
e) Method study and work measurement.

4. PPC & PERT/CPM

[14]

320

UNIVERSITY QUESTIONS contd

What are the objectives of Production Planning and control. Enlist functions of Production
Planning and Control.
"Project control should always focus on critical path" comment.

Q4) The following information has been gathered for a project:


Activity
Activity Duration in Days
Immediate Predecessor/s
A
12
-B.
9
-C
10
A
D
10
B
E
24
B
F
10
A
G
35
C
H
40
D
I
4
E, G, H
J
7
F, I
a) Draw the Network Diagram for the project
b) Determine critical path for the project and compute project duration.
c) Compute slack, EST (Earliest Start Time), EFT (Earliest Finish Time)

4. PPC & PERT/CPM

321

University Questions

contd

The activities of a project and estimated time in days for each activity are given
below:
Activity
Optimistic
Most Likely
Pessimistic
Time
Time
Time
1-2
2
5
8
1-4
4
19
28
1-5
5
11
17
2-3
3
9
27
2-6
3
9
15
3-6
2
5
14
4-6
3
6
15
5-7
1
4
7
5-8
2
5
14
6-8
6
12
30
7-8
2
5
8
a) Determine expected time for each activity.
b) Draw Network Diagram and determine critical path.
c) Calculate project duration and slack for each activity.

4. PPC & PERT/CPM

322

University Questions

contd

Distinguish between following (ant three):


(a) Job production and batch production.
(b) Process Layout and Product Layout.
(c) Product and service.
(d) Production planning and Production control.
(e) Statistical Quality Control and statistical process control.

4. PPC & PERT/CPM

323

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