Review for Exam II—Mar 20, 2002 Dr. Burns

Exam Format  multiple choice  3 problems  Closed-book  Closed-notes  Closed-neighbor  BRING---pencil, calculator, scantron

Exam Coverage  Chapters 11, 12, 13, 14  NO CHAPTER SUPPLEMENTS  No linear programming  No simulation

Typical problems—see Practice Exam II  Aggregate production planning  Inventory with Independent Demand  Material Requirements Planning  Capacity Requirements Planning

Chapter Capacity Planning and Aggregate Production Planning  Long Range Planning  Medium Range Planning  Aggregate Production Planning

What are the inputs to the aggregate planning system??  Demand forecasts  Capacity constraints  Strategic objectives  Company policies  Financial constraints  NOT  Size of workforce  Inventory levels  Units subcontracted

Capacity planning is….  Long-term strategic decision-making  NOT  Capacity requirements planning

When doing capacity planning, which of the following steps is accomplished first?  a. Resource requirements plan  b. Rough-cut capacity plan  c. Capacity requirements plan  d. Input/output control 

Aggregate Production Planning Strategies are….  Pure (Trial-and-error)  Chase Demand  Level production  Mixed (optimal)  Linear programming  Simulation

Which of the following strategies matches production to demand by hiring and firing workers?  Chase demand strategies  Level production strategies  Strategies the use subcontracting and overtime

Which of the following is not a strategy for managing demand  Shifting demand into other time periods with incentives, sales promotions and advertising campaigns  Offering products or services with countercyclical demand patterns  Partnering with suppliers to reduce information distortion along the supply chain  Increasing inventories and laying off workers when demand is soft

Terms  Aggregate production planning  Best operating level  Capacity planning  Capacity cushion  Chase demand Pure strategy  Level production Pure strategy  Mixed strategy  Disaggregation  Diseconomies of scale  Yield management

Chapter 12 – Inventory Management  Inventory for Independent demand

Carrying costs  Rent  Lighting/heating  Security  Interest  Taxes Can also be expressed as a % of product cost A rule of thumb is 30%

Ordering costs—costs related to Transportation Shipping Receiving Inspection

ABC Classification—what is the point??  To concentrate, focus on the those items in inventory that constitute the highest dollar value to the firm  Class A items constitute 5-15% of the items and 70 to 80% of the total dollar value to the firm  Class B items constitute 30% of the inventory items but only 15% of the dollar value  Class C items constitute 50 to 60% of the items but only 5 to 10% of the dollar value

ABC Classification..  Class A items are tightly controlled  Class B items less so  Class C items not at all  Dollar values are computed by multiplying the dollar cost by the annual demand for the item  This technique is used in all auto parts inventory control systems and have been for 15 years

Periodic inventory systems are….  Fixed Time period systems  NOT  EOQ Models

EOQ models have  A fixed order quantity  Deterministic demand  No shortages  Constant lead time  Instantaneous or finite replenishment  EOQ models minimize ordering and holding costs

Which gives you lowest holding cost?  Instantaneous replenishment  Finite replenishment  Quantity discounts  WHICH OF THE ABOVE GIVES YOU LOWEST TOTAL ORDERING COST?

How do we calculate a re- order point?

Terms ABC system Carrying costs Continuous inventory system Dependent demand EOQ Fixed-order quantity system Fixed time period system  Independent demand  Inventory  In-process inventory  Noninstantaneous receipt  Order cycle  Quantity discount  Stockout  Service level

Chapter 13 – Material Requirements Planning  Inventory for Dependent Demand

MRP is applied mostly to  Project operations  Batch operations  Assembly line operations  Continuous operations

Material requirements planning is a system for  Computing EOQ’s  Determining when to release orders  Computing safety stocks  Determining service levels WHICH????

Formulas/Rules  Projected on-hand = prev projected on-hand + scheduled receipts + planned order receipts – gross requirements  Is really the on-hand amount at the end of the period  Net requirements = gross requirements – previous projected on-hand  If less than zero, set to zero  Planned order receipts must be sufficient to accommodate the net requirements  Planned order releases are the same in amount as planned order receipts, just offset one or more periods by the lead time

MRP led to….. MRP II, which led to…. ???, which is where we are today

ERP  Large caps have been there and done that  Mid and small caps are getting there  Read the book NECESSARY BUT NOT SUFFICIENT by Eli Goldratt if interested

More ERP  Based on an N-tier distributed architecture  Not on mainframe glasshouse

Advantages of N-tier architecture  Data integration  Better usage of MIPS on both PCs and servers  Solves the 36 month backlog of the centralized MIS shop  Leads to the decentralization of MIS

ERP Modules  Sales & distribution  Production & Materials Management  Quality management  Human resource management  Project management  Accounting and controlling

Terms Capacity Efficiency Bill of Material Product structure File  Master Production File  Explosion  Expediting  netting

More terms  Load profile  MRP II  CRP  ERP  Modular BOM  Utilization  Time bucket  Time fence  Order splitting

Chapter 14 – Detailed Scheduling  Scheduling = assignment and sequencing  Assignment algorithm – won’t test you on this  Sequencing – must know EDD, SPT, FCFS, LCLS, etc.

Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Sequencing rules FCFS DDATE SLACK CR SPT * best values Average Average No. of Maximum Rule Completion Time Tardiness Jobs Tardy Tardiness * * * * * * * *

Terms Sequencing Loading Assigning SPT EDD (DDATE) CR SLACK FCFS (FIFO) LCLS (LIFO)

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