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Project and Production Management Module 9 Tactical Decisions and Review Prof Arun Kanda & Prof S.G. Deshmukh, Department of Mechanical Engineering, Indian.

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Presentation on theme: "Project and Production Management Module 9 Tactical Decisions and Review Prof Arun Kanda & Prof S.G. Deshmukh, Department of Mechanical Engineering, Indian."— Presentation transcript:

1 Project and Production Management Module 9 Tactical Decisions and Review Prof Arun Kanda & Prof S.G. Deshmukh, Department of Mechanical Engineering, Indian Institute of Technology, Delhi module 9:Tactical Decisions and Review Back to main indexBack to main index exit continueexit continue

2 MODULE 9: Tactical Decisions and Review 1.Basic Inventory PrinciplesBasic Inventory Principles 2.Inventory ModelingInventory Modeling 3.Material Requirements PlanningMaterial Requirements Planning 4.Job shop schedulingJob shop scheduling 5.Course Summary and ReviewCourse Summary and Review 6. Illustrative ExamplesIllustrative Examples 7. Self Evaluation QuizSelf Evaluation Quiz 8. Problems for PracticeProblems for Practice 9. Further explorationFurther exploration module 9:Tactical Decisions and Review Back to main indexBack to main index exitexit

3 1. Basic Inventory Principles module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

4 FUNCTIONS OF INVENTORIES Inventories are Idle Resources maintained in various forms: - Raw materials - Purchased & manufactured parts - Subassemblies - Finished products Since inventories represent a sizable investment in a logistic system, we must be aware of the functions they perform module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

5 FIVE CATEGORIES OF STOCKS PIPELINE stock (in process stock, in transit stock) CYCLE stocks (batch production owing to - economies of scale - technological requirements) SEASONAL stocks ( time varying requirements of an item) SAFETY stocks (supply and demand uncertainties, lead time uncertainties) Stocks held for OTHER REASONS (- decoupling stages of production - price, quantity discounts, - speculation) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

6 INVENTORY RELATED COSTS Procurement cost Cost/order generally fixed (not dependent on order qty) Costs associated with existence of inventories (supply exceeds demand) Cost/unit/unit time i C (i = inventory carrying cost rate) Costs associated with stock outs (demand exceeds supply) (cost/unit) (cost/unit/unit time) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

7 PROCUREMENT COSTS Procurement cost Cost of goods Cost/order generally fixed Ordering cost (not dependent on order qty) - Administrative component - Handling - Transportation - Inspection of arrivals module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

8 INVENTORY HOLDING COSTS Costs associated with existence of inventories (supply exceeds demand) Cost/unit/unit time i C (i = inventory carrying cost rate) - Storage and handling - Interest on tied up capital - Property taxes - Insurance - Spoilage - Obsolescence - Pilferage module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

9 SHORTAGE COSTS Costs associated with stock outs (demand exceeds supply) (cost/unit) (cost/unit/unit time) - Additional costs of special order - Backorder, if possible - Loss of customer goodwill - Lost sales module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

10 SELECTIVE INVENTORY CONTROL In a large number there are Typical organisations deal with a large variety of stocked items PARETOs Law (10,000 – 100,000 …is not uncommon) Depending on rankings of VALUE ( ( Annual demand X unit price )) ABC Analysis (Always Better Control) CRITICALITY ( Vital, Essential, Desirable ) VED Analysis USAGE FREQUENCY FSN Analysis (Fast moving, Slow moving, Non moving) Based on product characteristics, suitable policies can be chosen USAGE FREQUENCY significant few insignificant many ABC N S F V E D module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

11 ABC ANALYSIS 5-10% items account for about 75% value 15-20% items account for about 15% value Balance items account for about 10% value (or A class 6 items average annual usage C class 0.5 items average annual usage B in between) Where, Average Annual usage= Percent of number of inventory items A B C Percent of average inventory investment module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

12 OBJECTIVE OF ABC ANALYSIS: Rationalization of Ordering Policies EQUAL TREATMENT TO ALL Item no.Annual Consumption Value (Rs.) Number of Orders Value per orderAverage inventory ,000 4,000 1, ,000 1, Total Inventory: Rs PREFERENTIAL TREATMENT on basis of ABC analysis ,000 4,000 1, ,500 1,333 1, Total Inventory Rs 4917 The optimum no of orders can be arrived at by using models of inventory control eg. EOQ Q* = time inventory Annual cost Q* Total cost carriage ordering

13 DETERMINATION OF REORDER POINT Reorder point = Max. reasonable demand during lead time = expected demand during lead time + safety stock (usually pre specified by management) K= 0; risk of shortage = 50% service level = 50% K= 0; risk of shortage = 15.87% service level = 84.13% K= 0; risk of shortage = 2.28% service level = 97.72% K= 0; risk of shortage = 0.13% service level = 99.87% Higher safety stock A class items have relatively low service levels (0.8 or so) - Lower safety stocks - Tighter control & efficient expediting B class items handled routinely with service levels of 0.95 or so C class items should be present in ample supply, minimum records, controls, procedure very high service levels (0.95 to 0.98) Prob. of stockout Total demand in lead time xLxL + k L xLxL k L module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

14 POLICY IMPLICATIONS OF SELECTIVE INVENTORY CONTROL ABC analysis A class items need continuous rigourous control (use of mathematical models justified) B class items – relaxed control (periodic review) C class items – simple rules of thumb V class items call for a high level of service E class items call for medium level of service D class items call for tolerable level of service jointly determine service levels FSN analysis Fast most inventory models apply to this class Slow ( spare parts etc) Non – moving (dead stock) (optimal stock disposal rules) VED analysis % risk Of shortage (min) (max) ABC VED module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

15 A SAMPLE SET OF SERVICE LEVELS FOR DIFFERENT CATEGORIES OF ITEMS VED A B C VED A B C High cost of stockout Low cost of stockout decreasing module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

16 OBJECTIVE OF INVENTORY MANAGEMENT SYSTEM An inventory system consists of a set of rules and procedures that allow for routine decisions on when & how much to order of each item needed in the manufacturing or procurement process, which call attention to the non-routine situations, the rules do not cover & which provide managers with the necessary information to make these decisions effectively. The objective of a well designed procedure should be the minimization of the costs incurred in the inventory system, attaining at the same time the customer service level specified by the company policies module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

17 STRUCTURE OF A TYPICAL COMPUTERISED INVENTORY MANAGEMENT SYSTEM Basic sub systems or modules:- Transactions and file maintenance module Decision rules module System integrative module System-management interaction and evaluation module module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

18 TRANSACTIONS AND FILE MAINTENANCE MODULE Book keeping of inventory control – Entry, auditing, control and processing of inventory transactions NECESSITY: Continuous updating to provide accurate information on -Available stock (on hand and on order) -Customer order status -Cost of items -Delivery lead times -Source of acquisition -Ordering restrictions - … DEVELOPMENT: mainly the area of data processing. module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

19 THE DECISION RULES MODULE This is concerned with the fundamental components of inventory planning and control procedures aimed at answering when and how much to order of each item to maintain inventories at the right level. A forward looking system should include forecasting capabilities safety stocks (to account for unavoidable in accuracies) decision rules are needed to guarantee some desired level of customer service. EOQ, q* = Use EOQ and continuous monitoring Order in lots of 3 months demand if stock at hand is less than ROP Order in lots of 6 months demand if stock on hand is less than ROP A-class C-class B-class ITEM module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

20 SYSTEM INTEGRATIVE MODULE The various items being controlled, depending on their inherent characteristics require specific degree of management attention and service levels that can be achieved by using some appropriate stock policy Decision rules Distinct inventory policies module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

21 SYSTEM MANAGEMENT INTERACTION AND EVALUATION MODULE Intended to provide management with such information as to permit evaluation Evaluation of operating performance Identify problem areas Allow for management selection of policy variables (system parameters) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

22 SUMMARY & CONCLUSIONS -Omnipresence of inventories (necessary evil) -Nature of inventory related costs -Principles of selective inventory management ABC analysis VED analysis FSN analysis -Ordering rules and reorder point determination -Policy implications of selective inventory management -Features of a computerized inventory management system -Relevance ? – independent vs. dependent demand systems -MRP vs. conventional inventory management module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

23 2. Inventory Modelling module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

24 LOT SIZING -When to order ? -How much to order ? Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV) Reorder point Lead time Order qty., q NO BACKLOGGING PURCHASE Inv. I module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

25 PRODUCTION q Inv. II LOT SIZING -When to order ? -How much to order ? Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

26 LOT SIZING -When to order ? -How much to order ? Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV) q b BACKLOGGING Inv. III module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

27 LOT SIZING -When to order ? -How much to order ? Decision variables are Order quantity, q per lot Maximum backorder level, b (in class III, IV) b Inv. IV module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

28 ANALYSIS BROAD APPRAOCH (1) Identify the cost components in each cycle (of length t) (2) Express costs in terms of decisions variables (order qty, q and backorder level, b) (3) Develop annual cost by multiplying (1) by number of cycles/year (4) Optimize to find q*, b* Carrying cost Shortage cost Set up or order cost module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

29 VARIATIONS IN THE LOT-SIZE FORMULE WITHOUT BACKLOGGING C = unit cost (Rs/piece) C 1 = i X C = carrying cost (Rs/unit/time) C 2 = shortage/backlogging cost (Rs/unit/time) C 3 = order cost (Rs/order) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

30 VARIATIONS IN THE LOT-SIZE FORMULE C = unit cost (Rs/piece) C 1 = i X C = carrying cost (Rs/unit/time) C 2 = shortage/backlogging cost (Rs/unit/time) C 3 = order cost (Rs/order) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

31 VARIATIONS IN THE LOT-SIZE FORMULE C = unit cost (Rs/piece) C 1 = i X C = carrying cost (Rs/unit/time) C 2 = shortage/backlogging cost (Rs/unit/time) C 3 = order cost (Rs/order) b WITH BACKLOGGING module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

32 VARIATIONS IN THE LOT-SIZE FORMULE C = unit cost (Rs/piece) C 1 = i X C = carrying cost (Rs/unit/time) C 2 = shortage/backlogging cost (Rs/unit/time) C 3 = order cost (Rs/order) b module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

33 1.Demand fixed at constant rate of d units/unit time 2.Replenishments made when inventory reaches zero level so that no shortages occur. 3.Fixed lot size q. 4.Infinite replenishment rate 5.Lead time is known 6.The unit carrying cost, c, is constant Rs/unit/unit time. 7.The replenishment cost, C 3 is constant Rs/Order. ASSUMPTIONS in CLASSICAL LOT-SIZE SYSTEM module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

34 SENSITIVITY STUDIES ON CLASSICAL LOT-SIZE MODEL ANNUAL COSTS LOT SIZE q q1q1 q*q* q2q2 TC TC min Total cost Carrying cost Order cost q Inv. Level Avg. Inventory = q/2 Sensitivity Q = bq*, b > 0 b TC/TC min module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

35 EOQ WITH QUANTITY DISCOUNTS Total annual cost = Annual usage Example Annual demand = 5000 parts Order cost = Rs 49 Inventory carrying cost = Re 1 per part/year Discount schedule Order quantityUnit cost/part 0 – – – over Rs 5 Rs 4.85 Rs 4.75 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

36 TOTAL ANNUAL COSTS for THREE ORDERING POLICIES ORDER QTY. ANNUAL HOLDING COST ANNUAL ORDER COST PURCHASE COST TOTAL ,000 24,250 23,750 25,700 24,995 25,098 OPERATING AT A LOT- SIZE of 1000 rather than EOQ of 700 is WARRANTED HERE ANNUAL COSTS q ,700 TAC(Rs 5) 1000 TAC(Rs 4.85) TAC(Rs 4.75) 25,098 24,995 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

37 AN EXAMPLE ILLUSTRATING SHIFT OF EOQs 100 and overRe 1 D = 250/yr C3 = Rs 5/order i = 20% IN THIS CASE A LOT SIZE OF 112 RESULTS IN MINIMUM COST ANNUAL COSTS q EOQ= module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

38 DETERMINISTIC SINGLE ITEM MODEL NOTATION d = demand rate (units per unit time) P = production rate (unit per unit time) Q = order/production quantity T = cycle length B = maximum backorder level permitted Imax = maximum on-hand inventory level C = unit item cost C1 = inventory carrying cost in Rs/unit/unit time = iC C2 = shortage cost in Rs/unit/unit time (back logged demand) C2 = shortage cost/unit short independent of time (lost sales) C3 = set up cost per order/batch t1t1 t2t2 tptp t3t3 t4t4 t I max 0 -b Rate of fall, d Rate of rise p-d module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

39 Cycle time t = q/d Time to produce a lot, t p = q/p max. inventory, I max = t 1 = time for backorder b to be cleared once production starts t 2 = time for inventory level to build up from zero to I max t 3 = time for inventory level to drop to zero from I max at constant demand, d t 4 = time for backlog b to buildup at a demand rate, d module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

40 COSTS/CYCLE During (t 2 + t 3 ) there is inventory and carrying costs = ½ I max (t 2 + t 3 ) c 1 During ( t 1 + t 4 ) there is shortage cost = ½ b (t 1 + t 4 ) C 2 + C 2 b Ordering / replenishment cost per cycle = C 3 Notice that t1t1 t2t2 t3t3 t4t4 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

41 AVERAGE ANNUAL COSTS K (q, b) K (b, q) = Substituting for t, (t 1 + t 4 ), (t 2 + t 3 ) & I max in terms of q, b we obtain K (b, q) = module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

42 OPTIMAL RESULTS Annual cost is K (b, q) The solution of these simultaneous equations yields the optimum values q* and b* as follows: and module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

43 FAST vs SLOW MOVING ITEMS Slow moving items Low level of demand Frequent periods of no usage Likely to be between units/yr Peterson & Silver (1979) recommend classifying items according to demand over the replenishment lead time: An expected lead time demand of 10 units or larger puts the item in the fast movers class, while an expected lead time demand of less than 10 units defines a slow mover Thresholds difficult to define [ depend on item nature] module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

44 CONTINUOUS (PERPETUAL) REVIEW SYSTEM WITH REPLENISHMENT ORDER QTY. Q AND REORDER LEVEL R Amt. of inventory on hand Reorder level, R Safety stock (s s) Avg. lead time usage (U) Amt. used during Lead time Amt. of inventory on hand U1U1 U2U2 U3U3 Q LT 1 LT 2 LT 3 Q Order qty, Q Time module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

45 COMPUTATIONS FOR R U = Lead time demand LT = Lead time (working days) D = daily demand Z is obtained from the NORMAL TABLES based on A pre specified stockout probability, P Optimal stockout frequency based on costs of shortage and carrying inventory Z Probability of stockout either or module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

46 EXAMPLE (p305, ch. 10) Per unit holding cost = Re 1/yr Ordering policy : 4 times a yr Pre specified service level : 1 stockout/3 yrs SQ/yr = 0.33 LEAD Times from SUPPLIER Order placed 1/72/33/164/65/26/2 Order received1/182/214/204/285/206/23 Lead times Calendar days Working days Month/ day module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

47 Similar data on demands for last six months yield EXAMPLE (p305, ch. 10) d = 40 units/day Var (d) = 30 (units/day) 2 LT = = days Var (LT) = (7 – 14.83) 2 + (12 – 14.83) 2 + … 6 -1 = (day) 2 (contd.) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

48 EXAMPLE (contd.) Units demanded per lead time Units per lead time Desired SO/yr = 0.33 (as stated earlier) P = desired probability of stockout per order cycle From tables Z = 1.39 SS = 1.39 (237.5) = R = = Z Order cycles/yr = 4 (given) = n module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

49 IMPROVING RELIABILITY OF LEAD TIME Safety stock = 1.39 (21.09) = 29 ( compared to 330 earlier) R = 622 (compared to 923 earlier) Inventory lowered by 301 units Annul savings = Rs 1 X 301 = Rs 301 Thus it is worthwhile to improve reliability of lead time If var (LT) = 0 Then var (U) = 30 X = u = = units per lead time (compared to the original 237.5) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

50 OPTIMAL STOCKOUT FREQUENCY AND IMPLIED BACKORDER COSTS Cost of shortage X Optimal SO/yr = Inventory carrying cost Shortage cost = Rs 10 Z = 1.96 (from normal tables) R* = (237.5) = = For R = 926 SO/yr = C1/shortage cost 0.33 = 1/shortage cost CB = 1/0.33 = Rs 3 (implied shortage cost) optimal SO/yr = 1/10 = 0.10 P* = SO/yr = 0.01 = n 4 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

51 INVENTORY CONTROL POLICIES CONTINUOUS REVIEW SYSTEMS (S, Q) policy – when available inventory reaches level s, order Q (s, S) policy – when available inventory becomes equal to or less than s, order upto level S PERIODIC REVIEW SYSTEMS (nQ, s, R) policy – If at a review time the available inv. < s, an amt. nQ is ordered (n=1,2,3) n is such that after the order is placed, the avail. Inv. Reaches a level in (s, s+Q) (S, R) policy – At each review time a sufficient qty. is ordered to bring the level of ave. inv. upto S. (s, S, R) policy – If at a review time, the available inv. < s a sufficient qty. is ordered to bring level upto S, otherwise no order is placed Available inventory = inventory on hand + amount on order - Units back ordered module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

52 Lead time Reorder point Avg. Lead time consumption Reserve stock Safety stock Demand uncertainties Lead time uncertainties Stock Avg. demand for maximum delay Probability of delay a)Avg. demand during avg. lead time (buffer) b)Variations in demand during avg. lead time, depending on service level(reserve stock) a)Avg. demand during delivery delays (safety stock) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

53 EXAMPLE For the following data work out the costs under both A continuous review, fixed order qty (Q system) A periodic review, variable order qty (P system) Avg. annual demand = 20,000 units Std. deviation of demand per week = 50 units Unit price = Rs 10 Ordering cost = Rs 100 Inventory carrying cost rate = 20% Avg. lead time = 4 weeks Max. delay = 3 week Probability of delay = 0.31 Service level = 95% (prob. Of stockout during lead time = 5%) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

54 Q system time S 2062 Stock level Q = 1414 Lead time = 4 weeks 1.64 Mean, 0.95 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

55 P system Can be rounded off to either 3 or 4 weeks depending on cost consideration 3 weeks Total inv. Cost = = Rs 2887 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

56 4 weeks Total inv. Cost = = Rs 2840 Review period is 4 weeks Desired inventory level = Buffer + Reserve + safety = 3668 P system module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

57 SAFETY STOCK DETERMINATION Issues 1)What is the optimal level of protection ? How often do we tolerate running out of stock ? Tradeoff between holding costs & shortages 2) What reorder level should we set to achieve to achieve this theoretically optimal protection ? Practical question answered through statistics. Chosen reorder level Distribution of lead time demand Prob. Of stockout module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

58 SUMMARY The EOQ formula with sensitivity analysis was discussed Many variations of the lot size formula with and without backlogging for purchase and production situations were considered Quantity discounts were explored The P & Q policies for inventory control were compared Safety stock determination in inventory systems was considered module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

59 3. Material Requirements Planning module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

60 WHAT MRP DOES ? Dependent demand lumpy MRP DETAILED SCHEDULE FOR RAW MATERIALS & COMPONENTS USED IN THE END PRODUCTS MASTER SCHEDULE FOR END ITEMS module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

61 Independent Demand: Demand unrelated to demand of other products (end products, spare parts) Usually forecast Conventional inventory control (EOQ, Wagner/Whitin) applicable. INDEPENDENT VS DEPENDENT DEMAND module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

62 . Dependent Demand: Demand directly related to demand of some other product (components, raw materials, subassemblies) Requirements derived from delivery schedule of end items. MRP is the appropriate tool for planning & control of manufacture inventories raw materials WIP Component parts Subassemblies INDEPENDENT VS DEPENDENT DEMAND module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

63 LUMPY DEMAND CONTINUOUS DEMAND Assumed in economic lot size formula LUMPY DEMAND TYPICAL OF MRP APPLICATIONS (raw materials, components sub-assemblies consumed in Large increments corresponding to a certain batch of final product) TIME Avg. rate of demand Inv. LEVEL TIME Inv. LEVEL t1t1 t2t2 t3t3 t4t4 t5t5 t6t6 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

64 LEAD TIMES In MRP, lead times are used to determine starting dates for assembling final products and subassemblies, for producing component parts, and for ordering raw materials. Ordering Lead Time: (for purchased parts) Initiation of purchase requisition Receipt of item from vendor (off shelf / fabricate) Manufacturing Lead Time: Place orderItem delivered Process part through sequence of machines as given on route sheet (operation + non-productive times) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

65 The master production schedule and other order data. The bill of materials file. (The product structure) The inventory record file. INPUTS TO MRP module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

66 COMMON USE ITEMS MRP collects the common use items from different products to effect economics in ordering the raw materials and manufacturing the components/sub assemblies C1C1 C2C2 C3C3 CnCn P1P1 P2P2 P3P3 PNPN BASIC RAW MATERIAL COMPONENTS PRODUCTS module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

67 STRUCTURE OF AN MRP SYSTEM Gross & Net requirements report Capacity vs Load report Shop floor Planning report Production Order Status & exceptions report Service Parts requirements Sales forecasts Customer orders Inventory transactions Master Production schedule Engg. changes Inventory Record file MRP PROCESSOR Bill of Materials file OUT PUT REPORTS … Back to main indexBack to main index exit back to module contentsexitback to module contents

68 MASTER PRODUCTION SCHEDULE (a) What end products are to be produced? (b) How many of each product to be produced? (c) When the products are to be ready for shipment? TYPICAL INFORMATION IN MPS: DEMAND Often excluded from MPS, since it does not include end product demand. Demand for individual component Parts (for repair and service) Firms customer orders Forecasted demand Week no Product P Product P Etc. module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

69 BILL OF MATERIALS (BOM) FILE C1C1 C2C2 C3C3 C4C4 C5C5 C6C6 S1S1 S2S2 P1P1 (1)(2) (1)(4)(1)(2) (1) Level 0 (product) Level 1 (sub-assemblies) Level 2 (raw materials) Sub assembly S1 is the PARENT of components C1, C2 & C3. Any engg. Changes affecting product structure must be fed to BOM file. module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

70 Accurate current data on inventory status Generally computerized (item master file) Lead times must be established in inventory Record file INVENTORY RECORD FILE INVENTORY TRANSACTIONS (issue, arrivals, order placement/realization) MUST BE KEPT CURRENT Ordering Lead time Manufacturing Lead time Purchasing records Process Route sheets module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

71 INPUTS FOR MRP EXAMPLE C1C1 C2C2 C3C3 C4C4 C5C5 C6C6 S1S1 S2S2 P1P1 (1)(2) (1)(4)(1)(2) (1) C4C4 C6C6 C7C7 C2C2 C8C8 S3S3 S4S4 P2P2 (4) (2) (1) M4M4 PRODUCT STRUCTURE FOR PRODUCTS P1 & P2 Master Production Schedule Initial inventory status for M4 AssemblyManufacturingOrdering P1 = 1 P2 = 1 S2 = 1 S3 = 1 C4 = 2M4 = 3 Lead times (in weeks) P2P P1P Week PLANNED ORDER RELEASES NET REQUIREMENTS 90ON HAND 40SCHEDULED RECEIPTS GROSS REQUIREMENTS ITEM RAW MATERIAL M PERIOD 50

72 BASIC MRP LOGIC Input MPS, BOM, Inventory Status, Lead times Do Parts Explosion Offset requirements by lead times Netting of requirements from Gross by considering availabilities Lot sizing of net requirements for procurement or production module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

73 PERIOD ITEM PRODUCT P GROSS REQUIREMENTS SCHEDULED RECEIPTS ON HAND0 NET REQUIREMENTS50100 PLANNED ORDER RELEASES50100 ITEM PRODUCT P GROSS REQUIREMENTS SCHEDULED RECEIPTS ON HAND0 NET REQUIREMENTS PLANNED ORDER RELEASES module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

74 PERIOD ITEM SUB ASSEMBLY S GROSS REQUIREMENTS SCHEDULED RECEIPTS ON HAND NET REQUIREMENTS PLANNED ORDER RELEASES ITEM SUB ASSEMBLY S GROSS REQUIREMENTS SCHEDULED RECEIPTS ON HAND NET REQUIREMENTS PLANNED ORDER RELEASES module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

75 PERIOD ITEM COMPONENT C GROSS REQUIREMENTS SCHEDULED RECEIPTS ON HAND NET REQUIREMENTS PLANNED ORDER RELEASES ITEM RAW MATERIAL M GROSS REQUIREMENTS SCHEDULED RECEIPTS40 ON HAND NET REQUIREMENTS PLANNED ORDER RELEASES module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

76 1.Order release notice, to place orders that have been planned by the MRP system 2.Reports showing planned orders to be released in future periods. 3.Rescheduling notices, indicating changes in due dates for open orders. 4.Cancellation notices, including cancellation of open orders because of changes in the master schedule 5.Reports on inventory status. MRP OUTPUT REPORTS Primary Outputs: module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

77 1.Performance reports of various types – costs, item usage, actual vs planned lead times and other measures of performance. 2.Exceptions reports showing – deviations from schedule, overdue orders, scrap, and so on. 3.Inventory forecasts indicating projected inventory levels (both aggregate inventory as well as item inventory) in future periods. MRP OUTPUT REPORTS Secondary Outputs module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

78 1.Reduction in inventory (30-50% in WIP) 2.Improved customer service (late orders reduced by 90%) 3.Quicker response to changes in demand and master schedule. 4.Greater productivity 5.Reduced set up and product changeover costs 6.Better machine utilization 7.Increased sales and reductions in sales price. BENEFITS OF MRP module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

79 EVOLUTION OF MRP Manufacturing Resource Planning Links up the closed loop MRP system with the financial systems of the company (Links functions -Capacity planning -Inventory management -Shop floor control -MRP) Improved computational efficiency of computers Unrealistic M/c schedules, ignoring plant capacities Not only plans priorities but provides feedback to executing the priority plan AN IMPROVED ORDERING METHOD PRIORITY PLANNING CLOSED LOOP MRP MRP II module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

80 Uses closed loop MRP Integrated System has MRP, Capacity planning, shop floor, control, vendor scheduling etc. MRP system used to help plan sales, engg, production, purchasing, etc No shortage lists of override the production schedules. System has MRP, capacity planning shop floor control, but no vendor scheduling Used as a production control system Needs help from shortage list Inventory higher than need be FOR CLASSES OF MRP USERS Class A (most advanced) Class B module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

81 System used for inventory Ordering rather than scheduling Scheduling by shortage list Master schedule over loaded MRP working in the data processing department only Inventory records are poor Master schedule, if it exists at all is overstated and mismanaged Relies on shortage list & expediting rather than MRP FOR CLASSES OF MRP USERS Class C Class D (beginner) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

82 IT IS AN OPERATIONAL & FINANCIAL SYSTEM Company wide, Sales, Production, Engineering, inventories, cash flows All operating data expressed in money terms IT IS A SIMULATOR What if questions Simulate probable outcomes of alternative production plans and management decisions. ADDITIONAL FUNCTIONS OF MRP II module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

83 SUMMARY Dependent vs Independent Demand MRP is useful for planning requirements of components and parts knowing end item demand Major inputs to MRP include Master Production Schedule, BOM, Inventory and Lead Times The MRP logic goes through Explosion, Offsetting, Netting and Lot sizing module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

84 SUMMARY (Contd) Major benefits of MRP include improved planning, lesser inventories, shorter lead times However MRP does not integrate cost functions in different departments MRPII (Manufacturing Resource Planning) links the financial functions across the organization module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

85 4. Job Shop Scheduling module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

86 NATURE OF JOB PRODUCTION Variety of jobs produced Both nature and demand of jobs is unpredictable Consists of general purpose machines Each job depending on its technological requirements, demands processing on machines in a certain order Jobs queue before machines or there may be idle machines module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

87 OBJECTIVES IN JOB SHOP SCHEDULING Minimize total processing time or makespan Minimize mean flow time Minimize idle time of machines Minimize mean lateness/earliness Minimize mean tardiness Minimize number of tardy jobs Minimize mean queue time Minimize the number of jobs in the system module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

88 COMPLEXITY OF THE PROBLEM With n jobs to be processed on m machines the number of possible sequences is (n!) m n m2455 (n!) m ,73x x x10 91 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

89 PRELIMINARY DEFINITIONS A job shop is characterised by No of jobs (n) Number of Machines (m) Pattern of arrival of jobs (static/dynamic) Objective of scheduling(minimise inventory, makespan, maximum tardiness, lateness…) Sequencing rule (FCFS, LIFO, SPT, LPT, EDD...) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

90 DEFINITIONS-I Job arrival time, ai Start of processing Completion time,Ci Waiting time, wi Processing time, ti Flow time, Fi = wi + ti = Ci - ai = Time job spends on the shop floor, waiting and being processed module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

91 DEFINITIONS II Job arrival time, ti Start of Processing Completion time, Ci Due Date, di Job lateness, Li = Ci- di (could be positive or negative) Job earliness, Ei = max (0, -Li) Job tardiness, Ti = max (0, Li) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

92 N/1 PROBLEM All sequences for the n/1 problem have the same makespan Therefore other objectives are relevant mean flowtime average inventory mean lateness mean completion time module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

93 RELATIONSHIP BETWEEN F AND OTHER VARIABLES Fi = Ci -ai = wi + ti Li = Ci - di From these equations it is easy to see that a sequence that minimises mean F also simultaneously minimises mean Completion times mean Waiting times mean Lateness module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

94 INVENTORY VARIATION FOR AN ARBITRARY N/1 SEQUENCE Inventory n-1 n Job under process (Total Time T) n n-1 n Avg inventory = [nt1+ (n-1)t2 + … 1 tn]/T Avg inventory I = Area /T Summing horizontal strips: Area = F1 + F2 + … +Fn = n avg Flow time Thus T(avg inventory) = n (avg flow time) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

95 SPT vs LPT n T LPT SPT LPT maximizes what SPT minimises module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

96 SPT RULE Thus the rule that minimizes mean flow time also minimises the mean inventory It is seen that the SPT (Shortest Processing Time Rule) minimises mean inventory mean flow time mean waiting time mean completion time mean lateness module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

97 AN EXAMPLE Six jobs with processing times 4, 8 5, 9, 2 and 6 respectively Due dates 10, 8, 12, 15, 9 and 20 respectively Solution The SPT sequence is 5(2), 1(4), 3(5), 6(6), 2(8), 4(9) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

98 EXAMPLE (Contd) The SPT sequence is 5(2), 1(4), 3(5), 6(6), 2(8), 4(9) Completion (Flow Times) are 2, 6, 11, 17, 25, 34 Due Dates are job (due date) 5(9), 1(10), 3(12), 6(20), 2(8), 4(15) Lateness values are -7, -4, -1, -3, 17, 19 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

99 RESULTS SPT sequence: Mean Flow time: 95/6 = Average Inventory : (6*95)/(6*34)= Mean Lateness: 21/6 =3.5 Mean Tardiness: 36/6 =6 Mean Earliness: 15/6 =2.5 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

100 TaskProcess ing time Due date Slack time EXAMPLE 2 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

101 RuleObjectiv e Mean Flow Time Weighte d Mean Flow time Mean Lateness Maximu m Tardines s No of Tardy jobs Mean Tardines s SPTMFT,AV G INV, WSPTWMFT EDDMax job lateness/ tardiness HodgsonNo of tardy jobs SLACKMean tardiness (heuristic ) , ,0 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

102 n/2 PROBLEM n job 2 machine Flowshop Different sequences now have different completion times (makespan) Therefore unlike the n/1 problem minimizing the makespan is a legitimate objective Johnsons Rule is commonly used to solve the problem AB module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

103 AN EXAMPLE Time on M/c ATime on M/c B Job1102 Job257 Job3410 Job 4128 Job 596 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

104 JOHNSONS SEQUENCE M/c A M/c B module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

105 n/3 FLOWSHOP Notion of dominance M/c A M/c B M/c C module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

106 n/3 FLOWSHOP When Dominance does not exist M/c A M/c B M/c C module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

107 COMPUTATIONS M/c A+BM/c B+C module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

108 COMPUTATIONS M/c A+BM/c B+C module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

109 2/m/JJOBSHOP module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

110 PRACTICAL SOLUTIONS TO JOBSHOP TRAINING Priority Dispatching Rules FCFS SPT EDD SLACK RANDOM LRPT (Least Remaining Processing Time) S/OPR (Min Ratio oof job slack time to the number of operations remaining LCFS DS (Least Dynamic Slack) DS/PT Minimum ratio of Dynamic Slack to remaining Processing Time module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

111 SUMMARY AND CONCLUSIONS The complexity of Job Shop Scheduling n/1 problem n/2 flow shop problem n/ 3 problem 2/m/job shop General job shops Simulation module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

112 5. Course Summary and Review module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

113 PROJCT MANAGEMENT (CONTENTS) A.PROJECT MANAGEMENT (19 Lectures) a.1Project conception and appraisal ( 5 lectures) Concept of a project, historical perspective, various issues: Time, cost, Quality, Project Identification and Screening: Various methods and frameworks, Factors for project appraisal, Criteria for project selection, Financial measures, some examples a.2Project Planning ( 4 lectures) Project representation, network concepts, Consistency and Redundancy in Project Networks, Activity on arc representation, concept of scheduling, Critical Path Method, Basic Scheduling with A-O-A, Activity on node representation, Basic Scheduling with A-O-N Networks a.3Project crashing and Resource considerations ( 5 lectures ) Probabilistic Scheduling: Uncertainty and probabilistic considerations in project, PERT, Three-estimate approach, Project Scheduling with Probabilistic Activity Times, Heuristic approach for Linear Time-Cost Tradeoffs in Projects, Resource Profiles and leveling, Limited Resource Allocation a.4Project Implementation:( 5 lectures ) Considerations in implementation, Project Monitoring and Control with PERT / Cost, Behavioral and human issues, Team Building, Desirable attributes of project leader, computers in project management, Project Completion, Review module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

114 PRODUCTION MANAGEMENT(CONTENTS ) b.1 Strategic decisions in production management (5 lectures ) Concept of a production system, historical perspectives on production system, a generalized model of production system, Concept of a life cycle, various stages in life cycle, implications for managerial decision making vis-à-vis life cycle, Financial Evaluation Of Production Related Decisions: Typical Performance Measures of a Production System, Criteria such as net present value, rate of return, Financial Evaluation of Capital Decisions, concept of a decision tree, evaluation of risk b.2Product and process selection ( 4 lectures ) Designing Products and Services: Factors for New product/service introduction, product mix decisions using linear programming approach, stochastic product mix decisions b.3Facility Location and Layout ( 4 lectures ) Considerations in Plant Location, various models for location (gravity etc.), Process Layouts, Product Layouts, comparison of process and product layout, concept of Assembly Line Balancing, heuristic approaches for assembly line balancing (rank position weight etc.), Cellular Layouts b.4Production planning over the short Term Horizon ( 4 lectures ) Demand Forecasting, various methods for forecasting (qualitative and quantitative), Aggregate Production Planning (APP), models for APP b.5Tactical decisions and review (5 lectures ) Inventory: necessity, and costs involved, deterministic inventory models, Dependant demand systems, Material Requirements Planning, Scheduling of Job Shops, various heuristics for scheduling, course review module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

115 Project and Production Management Project Conception and Appraisal Project Management: An Overview Project Identification and Screening Project Appraisal: Part I Project Appraisal: Part II Project Selection module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

116 Project Management Project Planning Project Representation Consistency and Redundancy in Project Networks Basic Scheduling with A-O-A Networks Basic Scheduling with A-O-N Networks module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

117 Project Management Project Crashing and Resources Project Scheduling with Probabilistic Activity Times Linear Time-Cost Tradeoffs in Projects: A Heuristic Approach Resource Profiles and leveling Project crashing with multiple objectives Limited Resource Allocation module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

118 Project Management Project Implementation Project Monitoring and Control with PERT / Cost Team Building and Leadership in Projects Organizational and behavioral issues Computers in project management Project Completion and Review module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

119 Project & Production Management Project Conception and Appraisal Project Management: An Overview Project Identification and Screening Project Appraisal: Part I Project Appraisal: Part II Project Selection Project Planning Project Representation Consistency and Redundancy in Project Networks Basic Scheduling with A-O-A Networks Basic Scheduling with A-O-N Networks Project Crashing and Resources Project Scheduling with Probabilistic Activity Times Linear Time-Cost Tradeoffs in Projects: A Heuristic Approach Resource Profiles and leveling Project crashing with multiple objectives Limited Resource Allocation Project Implementation Project Monitoring and Control with PERT / Cost Team Building and Leadership in Projects Organizational and behavioral issues Computers in project management Project Completion and Review module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

120 Production Management Strategic Decisions in Production Management Introduction to Production Systems and a Generalized Model of Production Life cycle of a Production System and Major managerial Decisions Performance Measures of a Production System Financial Evaluation of Capital Decisions Decision Trees and evaluation of risk module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

121 Production Management Product and Process Selection Introducing New Products and Services I Introducing new products and services II Product Mix Decisions module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

122 Production Management Facility Location and Layout Plant Location Process Layouts Product Layouts and Assembly Line Balancing Cellular Layouts module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

123 Production Management Production Over the Medium Term Horizon Demand Forecasting: General considerations Models for forecasting Aggregate Production Planning I Aggregate Production Planning II module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

124 Production Management Production Over the Medium Term Horizon Demand Forecasting: General considerations Models for forecasting Aggregate Production Planning I Aggregate Production Planning II module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

125 Production Management Tactical Decisions over the Short Term Horizon Inventory considerations and various factors Inventory modeling Material Requirements Planning` Scheduling of Job Shops Course summary and review module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

126 WHAT IS A PROJECT? PURPOSE An undertaking or venture to accomplish some objective or goal STRUCTURE A set of interrelated jobs whose accomplishment leads to the completion of the project COMPONENTS Jobs or activities consume time and resources and are governed by precedence relations module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

127 PROJECTS AS AGENTS OF CHANGE State A State B Alternative Projects (Paths) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

128 FEATURES OF PROJECTS Well defined collection of jobs Generally non-repetitive, one time effort Jobs interrelated through precedence Jobs otherwise independent module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

129 PROJECT FEATURES (Continued) Jobs consume time and resources Coordination needed between individuals, groups & organisations Constant pressure of conformance to time/cost /performance goals module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

130 A Project as a Production System Mass production Batch Production Job Production Q Quantity to be Made P (No. of Products or VARIETY) Projects 1 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

131 LIFE CYCLE OF A PROJECT Selection of the project Project Planning Scope of work & network development Basic Scheduling Time Cost tradeoffs Resource Considerations in projects Project Implementation Project Completion and Audit module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

132 Motivation in Introducing New Products To satisfy need For profit module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

133 CONTRIBUTION TO NEW PRODUCT IDEAS Sales and Marketing (close touch with customer) Top management (Active listener to visitor and customer feedback) Production department (limited to production ease and economics) Research and Development (prompted by new developments in materials & technology) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

134 GENERATION OF NEW PRODUCT IDEAS Brain storming (preferably by interdisciplinary team) Team apprised of Company objectives & long term goals Current economic scenario Preferred field of activity (expertise) Approximate budget for new product Each one generates ideas which are recorded without criticism or evaluation module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

135 EVALUATION OF NEW PRODUCT IDEAS The evaluation of the new product ideas could be done on a number of criteria Likely demand and pattern of growth Ease of raw material availability Availability of Production technology Competition and likely market share Likely revenues and costs of operation The product life cycle An example to illustrate this process is taken up next module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

136 AN EXAMPLE OF SCREENING OF IDEAS Idea/ factor DemandComp etition Ease of Raw Mtl Cost of process ing Likely profit Scor e Computer peripheral s Fast food Fashion clothing Soaps and detergents Each factor evaluated on a scale of 1(least desirable) – 10 (most desirable) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

137 module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

138 AN EXAMPLE OF SCREENING OF IDEAS Idea/ factor DemandComp etition Ease of Raw Mtl Cost of process ing Likely profit Scor e Computer peripheral s Fast food Fashion clothing Soaps and detergents Each factor evaluated on a scale of 1(least desirable) – 10 (most desirable) module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

139 CUSTOMER NEEDS AND DESIRES Desires Natural, as hunger, shelter, love and security Generated by exposure to circumstances and temptations (as in advertisements on media, TV,neighbour) Needs When a desire becomes strong enough and warrants fulfilment, it becomes a need. Customer demand is based on real or artificially generated needs Needs are constantly changing module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

140 MORTALITY OF IDEAS Screening Economic evaluation Development Testing Commercialization Number of ideas Time ? 3-24 months ? module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

141 Price Quality COMPETITION Reduced Customer lead times satisfaction NEW CHALLENGES IN PRODUCTION More producers Demanding customers Greater variety module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

142 PRODUCTION AS A PART OF THE SUPPLY CHAIN Transformatio n process Vendors Warehouses Retailers module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents

143 CONCLUSIONS This course has focussed on the Life Cycle issues in Projects and Production Systems The Strategic, Operational and Tactical Issues in Projects and Production Systems have been discussed The approach has been on conceptual issues as well as modelling of key processes and decisions module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents module 9:Tactical Decisions and Review Back to main indexBack to main index exit back to module contentsexitback to module contents


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