Lecture 3 – PRODUCTION

PLANNING AND CONTROL

Prepared By:

Prof. Rene D. Estember

PRODUCTION PLANNING AND CONTROL

a. Materials Requirements Planning

b. Scheduling
 Materials Requirements Planning

Benefits of MRP
1. Better response to customer orders
2. Faster response to market changes
3. Improved utilization of facilities and
labor
4. Reduced inventory levels
 Dependent Demand
• The demand for one item is related to
the demand for another item
• Given a quantity for the end item, the
demand for all parts and components
can be calculated
• In general, used whenever a schedule
can be established for an item
• MRP is the common technique
 Dependent Demand
Effective use of dependent demand
inventory models requires the following

1. Master production schedule

2. Specifications or bill of material
3. Inventory availability
4. Purchase orders outstanding
5. Lead times
 Master Production Schedule
(MPS)
• Specifies what is to be made and when
• Must be in accordance with the aggregate
production plan
• Aggregate production plan sets the overall
level of output in broad terms
• As the process moves from planning to
execution, each step must be tested for
feasibility
• The MPS is the result of the production
planning process
 Master Production Schedule
(MPS)
• MPS is established in terms of specific
products
• Schedule must be followed for a reasonable
length of time
• The MPS is quite often fixed or frozen in the
near term part of the plan
• The MPS is a rolling schedule
• The MPS is a statement of what is to be
produced, not a forecast of demand
 Master Production Schedule
(MPS)
Can be expressed in any of the
following terms:
• A customer order in a job shop (make-to-
order) company
• Modules in a repetitive (assemble-to-
stock) company
• An end item in a continuous (make-to-
stock) company
 Aggregate
Production Plan
Months January February
Aggregate Production Plan 1,500 1,200
(shows the total
quantity of amplifiers)
Weeks 1 2 3 4 5 6 7 8
Master Production Schedule
(shows the specific type and
quantity of amplifier to be
produced
240 watt amplifier 100 100 100 100
150 watt amplifier 500 500 450 450
75 watt amplifier 300 100
 MPS Examples
For Nancy’s Specialty Foods

Gross Requirements for Crabmeat Quiche

Day 6 7 8 9 10 11 12 13 14 and so on
Amount 50 100 47 60 110 75

Gross Requirements for Spinach Quiche

Day 7 8 9 10 11 12 13 14 15 16 and so on
Amount 100 200 150 60 75 100
 Bills of Material

 List of components, ingredients, and

materials needed to make product
 Provides product structure
 Items above given level are called
parents
 Items below given level are called
children
 BOM Example
Level Product structure for “Awesome” (A)
0 A

1 B(2) Std. 12” Speaker kit C(3) Std. 12” Speaker kit w/
amp-booster

2 E(2) E(2) F(2) Std. 12” Speaker

booster assembly

Packing box and

3 D(2) installation kit of wire, G(1) D(2)
bolts, and screws

Amp-booster

12” Speaker 12” Speaker

 BOM Example
Level Product structure for “Awesome” (A)
0 A
Part B: 2 x number of As = (2)(50) = 100
Std. 12” Speaker 300
kit w/
1 BPart
(2)
C:
Std. 12” 3 x number
Speaker kit of As = (3)(50)
C =
(3) amp-booster
Part D: 2 x number of Bs
+ 2 x number of Fs = (2)(100) + (2)(300) = 800
2 Part E: E(2) 2 x number of Bs E(2) F(2) Std. 12” Speaker
+ 2 x number of Cs = (2)(100) + (2)(150) booster
= assembly
500
Part F: 2 x number of Cs =
Packing box and
(2)(150) = 300
3 D(2) Part G: 1 xinstallation
numberkitofofFs =
wire, (1)(300)
G(1) = D(2) 300
bolts, and screws

Amp-booster

12” Speaker 12” Speaker

 Bills of Material

 Modular Bills
 Modules are not final products but
components that can be assembled
into multiple end items
 Can significantly simplify planning and
scheduling
 Bills of Material

 Planning Bills
 Created to assign an artificial parent to
the BOM
 Used to group subassemblies to
reduce the number of items planned
and scheduled
 Used to create standard “kits” for
production
 Bills of Material

 Phantom Bills
 Describe subassemblies that exist only
temporarily
 Are part of another assembly and never
go into inventory
 Low-Level Coding
 Item is coded at the lowest level at which it
occurs
 BOMs are processed one level at a time
 Accurate Records
 Accurate inventory records are
absolutely required for MRP (or any
dependent demand system) to
operate correctly
 Generally MRP systems require 99%
accuracy
 Outstanding purchase orders must
accurately reflect quantities and
schedule receipts
 Lead Times

 The time required to purchase,

produce, or assemble an item
 For purchased items – the time
between the recognition of a need
and the availability of the item for
production
 For production – the sum of the
order, wait, move, setup, store, and
run times
 Time-Phased Product
Structure
Must have D and E
Start production of D completed here so
production can begin
on B
1 week
2 weeks to
D produce
B
2 weeks
E
A
2 weeks 1 week
E
2 weeks 1 week
G C
3 weeks
F
1 week
D
| | | | | | | |

1 2 3 4 5 6 7 8
Time in weeks
 Determining Gross
Requirements
 Starts with a production schedule for the end
item – 50 units of Item A in week 8
 Using the lead time for the item, determine
the week in which the order should be
released – a 1 week lead time means the
order for 50 units should be released in
week 7
 This step is often called “lead time offset” or
“time phasing”
 Determining Gross
Requirements
 From the BOM, every Item A requires 2 Item
Bs – 100 Item Bs are required in week 7 to
satisfy the order release for Item A
 The lead time for the Item B is 2 weeks –
release an order for 100 units of Item B in
week 5
 The timing and quantity for component
requirements are determined by the order
release of the parent(s)
 Determining Gross
Requirements
 The process continues through the entire
BOM one level at a time – often called
“explosion”
 By processing the BOM by level, items with
multiple parents are only processed once,
saving time and resources and reducing
confusion
 Low-level coding ensures that each item
appears at only one level in the BOM
 Gross Requirements Plan
Week
1 2 3 4 5 6 7 8 Lead Time
A. Required date 50
Order release date 50 1 week
B. Required date 100
Order release date 100 2 weeks
C. Required date 150
Order release date 150 1 week
E. Required date 200 300
Order release date 200 300 1 week
F. Required date 300
Order release date 300 3 weeks
D. Required date 600 200
Order release date 600 200 1 week
G. Required date 300
Order release date 300 1 week

Table 14.3
Net Requirements Plan
Net Requirements Plan
 Determining Net
Requirements
 Starts with a production schedule for the end
item – 50 units of Item A in week 8
 Because there are 10 Item As on hand, only
40 are actually required – (net requirement)
= (gross requirement - on- hand inventory)
 The planned order receipt for Item A in week
8 is 40 units – 40 = 50 - 10
 Determining Net
Requirements
 Following the lead time offset procedure, the
planned order release for Item A is now 40
units in week 7
 The gross requirement for Item B is now 80
units in week 7
 There are 15 units of Item B on hand, so the
net requirement is 65 units in week 7
 A planned order receipt of 65 units in week 7
generates a planned order release of 65
units in week 5
 Determining Net
Requirements
 A planned order receipt of 65 units in week 7
generates a planned order release of 65
units in week 5
 The on-hand inventory record for Item B is
updated to reflect the use of the 15 items in
inventory and shows no on-hand inventory in
week 8
 This is referred to as the Gross-to-Net
calculation and is the third basic function of
the MRP process
 Gross Requirements
Schedule
Figure 14.6
A S

B C B C
Master schedule
Lead time = 4 for A Lead time = 6 for S for B
Master schedule for A Master schedule for S sold directly

Periods 5 6 7 8 9 10 11 8 9 10 11 12 13 1 2 3
40 50 15 40 20 30 10 10

Periods 1 2 3 4 5 6 7 8
Therefore, these are
40+10 15+30
Gross requirements: B 10 40 50 20 the gross
=50 =45
requirements for B
MRP Planning Sheet
 Net Requirements Plan
The logic of net requirements

gross
requirements + allocations

total requirements

on scheduled net requirements

– hand + receipts =

available inventory
 Lot-Sizing Techniques
• Lot-for-lot techniques order just what is
required for production based on net
requirements
• May not always be feasible
• If setup costs are high, costs may be high
as well
• Economic order quantity (EOQ)
• EOQ expects a known constant demand
and MRP systems often deal with
unknown and variable demand
 Lot-Sizing Techniques

• Part Period Balancing (PPB) looks at

future orders to determine most
economic lot size
• The Wagner-Whitin algorithm is a
complex dynamic programming
technique
• Assumes a finite time horizon
• Effective, but computationally
burdensome
 Lot-for-Lot Example
1 2 3 4 5 6 7 8 9 10
Gross
35 30 40 0 10 40 30 0 30 55
requirements
Scheduled
receipts
Projected on
35 35 0 0 0 0 0 0 0 0 0
hand
Net
0 30 40 0 10 40 30 0 30 55
requirements
Planned order
30 40 10 40 30 30 55
receipts
Planned order
30 40 10 40 30 30 55
releases

Holding cost = $1/week; Setup cost = $100

 Lot-for-Lot Example
No on-hand inventory is carried through the system
Total holding cost = $0
1 2 3 4 5 6 7 8 9 10
There
Gross are seven setups for this item in this plan
Total setup cost = 7 x35
requirements $10030= $700
40 0 10 40 30 0 30 55

Scheduled
receipts
Projected on
35 35 0 0 0 0 0 0 0 0 0
hand
Net
0 30 40 0 10 40 30 0 30 55
requirements
Planned order
30 40 10 40 30 30 55
receipts
Planned order
30 40 10 40 30 30 55
releases

Holding cost = $1/week; Setup cost = $100

 EOQ Lot Size Example
1 2 3 4 5 6 7 8 9 10
Gross
35 30 40 0 10 40 30 0 30 55
requirements
Scheduled
receipts
Projected on
35 35 0 0 0 0 0 0 0 0 0
hand
Net
0 30 0 0 7 0 4 0 0 16
requirements
Planned order
73 73 73 73
receipts
Planned order
73 73 73 73
releases

Holding cost = $1/week; Setup cost = $100;

Average weekly gross requirements = 27; EOQ = 73 units
 EOQ Lot
Annual demand = 1,404
Size Example
Total cost = setup cost + holding cost
Total cost = (1,404/73)1x $100
2 + 3(73/2)
4 x ($1
5 x 52
6 weeks)
7 8 9 10
Total cost = $3,798
Gross
Cost for 10 weeks = $3,798
requirements
35 30x (10
40 weeks/52
0 10 weeks)
40 = $730
30 0 30 55

Scheduled
receipts
Projected on
35 35 0 0 0 0 0 0 0 0 0
hand
Net
0 30 0 0 7 0 4 0 0 16
requirements
Planned order
73 73 73 73
receipts
Planned order
73 73 73 73
releases

Holding cost = $1/week; Setup cost = $100;

Average weekly gross requirements = 27; EOQ = 73 units
 PPB Example
1 2 3 4 5 6 7 8 9 10
Gross
35 30 40 0 10 40 30 0 30 55
requirements
Scheduled
receipts
Projected on
35
hand
Net
requirements
Planned order
receipts
Planned order
releases

Holding cost = $1/week; Setup cost = $100;

EPP = 100 units
 Periods PPB Example
Trial Lot Size
(cumulative net Costs
Combined requirements) Part Periods Setup Holding Total
2 30 0
2, 3 70 1 2 40 =3 40 x41 5 6 7 8 9 10
2, 3, 4
Gross 70 40
35 30 40 0 10 40 30 0 30 55
requirements
2, 3, 4, 5 80 70 = 40 x 1 + 10 x 3 100 + 70 = 170
2, 3, 4, 5, 6
Scheduled 120 230 = 40 x 1 + 10 x 3
receipts + 40 x 4
Combine
Projected on periods 2 - 5 as this results in the Part Period
35
hand closest to the EPP
6
Net 40 0
requirements
6, 7 70 30 = 30 x 1
6, 7, 8 order
Planned 70 30 = 30 x 1 + 0 x 2
6, 7, 8, 9
receipts 100 120 = 30 x 1 + 30 x 3 100 + 120 = 220
PlannedCombine
order periods 6 - 9 as this results in the Part Period
releases
closest to the EPP
10 55 0 100 + 0 = 100
Holding cost = $1/week;
Total cost Setup cost = $100;
300 + 190 = 490
EPP = 100 units
 Lot-Sizing Summary
For these three examples

Lot-for-lot $700
EOQ $730
PPB $490

Wagner-Whitin would have yielded a plan

with a total cost of $455 for this example
 Lot-Sizing Summary
• In theory, lot sizes should be recomputed
whenever there is a lot size or order quantity
change
• In practice, this results in system
nervousness and instability
• Lot-for-lot should be used when economical
• Lot sizes can be modified to allow for scrap,
process constraints, and purchase lots
 Lot-Sizing Summary

• Use lot-sizing with care as it can cause

considerable distortion of requirements at
lower levels of the BOM
• When setup costs are significant and
demand is reasonably smooth, PPB,
Wagner-Whitin, or EOQ should give
reasonable results
 Smoothing Tactics
1. Overlapping
• Sends part of the work to following operations before the
entire lot is complete
• Reduces lead time

2. Operations splitting
• Sends the lot to two different machines for the same
operation
• Shorter throughput time but increased setup costs
3. Lot splitting
• Breaking up the order into smaller lots and running part
ahead of schedule
 MRP in Services
• Some services or service items are
directly linked to demand for other
services
• These can be treated as dependent
demand services or items
• Restaurants
• Hospitals
• Hotels
 MRP in Services
(a) PRODUCT STRUCTURE TREE
Veal
picante
#10001 Chef;
Work
Center #1

Cooked Prepared veal

linguini Spinach and sauce
#200002 #20004 #20003
Helper one; Asst. Chef;
Work Work
Center #2 Center #3

Uncooked
Sauce Veal
linguini
#30006 #30005
#30004
 MRP in Services
(b) BILL OF MATERIALS

Part Unit of Unit

Number Description Quantity Measure cost
10001 Veal picante 1 Serving —
20002 Cooked linguini 1 Serving —
20003 Prepared veal and sauce 1 Serving —
20004 Spinach 0.1 Bag 0.94
30004 Uncooked linguini 0.5 Pound —
30005 Veal 1 Serving 2.15
30006 Sauce 1 Serving 0.80
 MRP in Services
(c) BILL OF LABOR FOR VEAL PICANTE

Labor Hours
Work Center Operation Labor Type Setup Time Run Time
1 Assemble dish Chef .0069 .0041
2 Cook linguini Helper one .0005 .0022
3 Cook veal Assistant Chef
and sauce .0125 .0500
 Distribution Resource Planning
(DRP)
Using dependent demand techniques
through the supply chain
• Gross requirements, which are the same
as expected demand or sales forecasts
• Minimum levels of inventory to meet
customer service levels
• Accurate lead times
• Definition of the distribution structure
 Enterprise Resource Planning
(ERP)
• An extension of the MRP system to
tie in customers and suppliers
1. Allows automation and integration of
many business processes
2. Shares common data bases and
business practices
3. Produces information in real time
• Coordinates business from supplier
evaluation to customer invoicing
 Enterprise Resource Planning
(ERP)
• ERP modules include
• Basic MRP
• Finance
• Human resources
• Supply chain management (SCM)
• Customer relationship management
(CRM)
 Enterprise Resource Planning
(ERP)

• ERP can be highly customized to meet

specific business requirements
• ERP systems can be integrated with
• Warehouse management
• Logistics
• Electronic catalogs
• Quality management
 Enterprise Resource Planning
(ERP)

• ERP systems have the potential to

• Reduce transaction costs
• Increase the speed and accuracy of
information
• Facilitates a strategic emphasis on JIT
systems and integration
 ERP in the Service Sector

• ERP systems have been developed

for health care, government, retail
stores, hotels, and financial services
• Also called efficient consumer
response (ECR) systems
• Objective is to tie sales to buying,
inventory, logistics, and production
 Sample Problem
1) The demand for subassembly S is 100 units in week 7. Each unit of
S requires 1 unit of T and 2 units of U. Each unit of T requires 1 unit
of V, 2 units of W, and 1 unit of X. Finally, each unit of U requires 2
units of Y and 3 units of Z. One firm manufactures all items. It
takes 2 weeks to make S, 1 week to make T, 2 weeks to make U, 2
weeks to make V, 3 weeks to make W, 1 week to make X, 2 weeks to
make Y, and 1 week to make Z.

a) Construct a product structure. Identify all levels, parents, and

components.
b) Prepare a time-phased product structure.
 Problem 1
Solution:
(a) Product structure:

(b)
 Sample Problem
2) Using the information in Problem 2,
a) construct a gross material requirements plan.
b) Construct a net material requirements plan using the following on-
hand inventory.
Item On-Hand Item On-hand
Inventory Inventory
S 20 W 30
T 20 X 25
U 40 Y 240
V 30 Z 40
 Problem 2
a) Gross material requirements plan:
Week Lead Time
Item 1 2 3 4 5 6 7 8 (weeks)
S Gross req 100
Order release 100 2
T Gross req 100
Order release 100 1
U Gross req 200
Order release 200 2
V Gross req 100
Order release 100 2
W Gross req 200
Order release 200 3
X Gross req 100
Order release 100 1
Y Gross req 400
Order release 400 2
Z Gross req 600
Order release 600 1
 Module 6 – Problem 2
(b) Net material requirements plan:
Week Lead Time
Item 1 2 3 4 5 6 7 8 (weeks)
S Gross Requirement 100
On Hand 20
Net Requiement 80 2
Order Receipt 80
Order Release 80

T Gross Requirement 80
On Hand 20
Net Requiement 60 1
Order Receipt 60
Order Release 60

U Gross Requirement 160

On Hand 40
Net Requiement 120 2
Order Receipt 120
Order Release 120

V Gross Requirement 60
On Hand 30
Net Requiement 30 2
Order Receipt 30
Order Release 30

W Gross Requirement 120

On Hand 30
Net Requiement 90 3
Order Receipt 90
Order Release 90

X Gross Requirement 60
On Hand 25
Net Requiement 35 1
Order Receipt 35
Order Release 35

Y Gross Requirement 240

On Hand 240
Net Requiement 0 2
Order Receipt 0
Order Release

Z Gross Requirement 360

On Hand 40
Net Requiement 320 1
Order Receipt 320
Order Release 320
 Sample Problem
3) Below is the gross requirements of a certain product:
Period 1 2 3 4 5 6 7 8 9 10 11 12
Gross
Require 30 40 30 70 20 10 80 50
ments
a) Develop
a) Develop aa lot-for-lot
lot-for-lotsolution and calculate total relevant costs for the data in the
above table.

b) Develop an EOQ solution and calculate total relevant costs for the data in the
preceding table. Stockout costs equal $10 per unit.

c) Develop a PBB solution and calculate total relevant costs for the data in the
preceding table.
 Problem 3
a) Lot-for-Lot Ordering Policy:

Week
1 2 3 4 5 6 7 8 9 10 11 12
Gr req 30 40 30 70 20 10 80 50
Beg inv 40 10 10 0 0 0 0 0 0 0 0 0
End inv 10 10 0 0 0 0 0 0 0 0 0 0
Ord rcpt 30 30 70 20 10 80 50
Ord rel 30 30 70 20 10 80 50

CT = Order cost + holding cost = 7 orders  $150/order + 60 units 

$2.50/unit/period = $1,200
 Problem 3
a) Lot-for-Lot Ordering Policy:

Week
1 2 3 4 5 6 7 8 9 10 11 12
Gr req 30 40 30 70 20 10 80 50
Beg inv 40 10 10 0 0 0 0 0 0 0 0 0
End inv 10 10 0 0 0 0 0 0 0 0 0 0
Ord rcpt 30 30 70 20 10 80 50
Ord rel 30 30 70 20 10 80 50

CT = Order cost + holding cost = 7 orders  $150/order + 60 units 

$2.50/unit/period = $1,200
 Problem 3
a) Lot-for-Lot Ordering Policy:

Week
1 2 3 4 5 6 7 8 9 10 11 12
Gr req 30 40 30 70 20 10 80 50
Beg inv 40 10 10 0 0 0 0 0 0 0 0 0
End inv 10 10 0 0 0 0 0 0 0 0 0 0
Ord rcpt 30 30 70 20 10 80 50
Ord rel 30 30 70 20 10 80 50

CT = Order cost + holding cost = 7 orders  $150/order + 60 units 

$2.50/unit/period = $1,200
 Problem 3
b) Economic order quantity:
2 DS 2  330  150
Q= = = 57.4, or 57 units
H 2.50  12

where D = period demand, S = setup or order cost, H = holding cos

330
Reorder point = Demand during lead time = units week  1 week
12
= 27.5, or 28 units
Level: Parent: Quantity:
Item: Lead Time: 1 Lot Size: EOQ
Week No. 1 2 3 4 5 6 7 8 9 10 11 12
Gross requirement 30 40 30 70 20 10 80 50
Scheduled receipt
On hand 40 40 10 10 27 27 54 41 21 21 11 45 45 52
Net requirement 0 30 3 16 69 5
Planned order
receipt 57 57 57 114 57
Planned order
release 57 57 57 114 57

Setups: 5  150 = $750

Holding: (allowing for 12 time periods) 2.50  352 = $880
Setup + holding = total cost = $1,630
 Problem 3
DS QH
Theoretical total cost: CT = Order cost + Holding cost = +
Q 2
330  150 57  (12  2.50)
= +
57 2
= 868.42 + 855.00 = $1,723.42

EOQ ordering policy, modified for delayed order placement:

Week Total inventory = 10 + 10 + 27 + 27 + 54 +
1 2 3 4 5 6 7 8 9 10 11 12
Gross require- 30 40 30 70 20 10 80 50
21 + 21 + 68 = 238
ment Actual total cost:
Beginning inven- 40 0 67 27 84 54 –16 21 78 68 –12 –12
tory CT = Order cost + Holding cost + Stockout cost
Ending inventory 10 10 27 27 54 – 21 21 68 – –12 –
16* 12* 5* = 6 orders  $150 order + 238 units
Order receipts 57 57 57 57 57  $2.50 unit period + 33 units  $10 unit stockout
Order release 57 57 57 57 57 57
= 900.00 + 595.00 + 330.00 = $1,825.00
* Stockouts = 16 + 12 + 5 = 33
 Problem 3
c) PBB ordering policy:
Solution with lead time = 1: Holding cost = $2.50; Setup cost =
$150. Setup cost 150
Calculating EPP: EPP = = = 60
Holding cost 2.50

Periods Cumulative Costs * The part periods for an order

Combined Net Req. Part Periods Order Hold
encompassing periods 1, 2, 3, 4, and 5
1 0 0 + 25
1, 2 0 0 + 25 most nearly approximates the EPP of 60.
1, 2, 3 30 150 + 75
1, 2, 3, 4 30 150 + 75
1, 2, 3, 4, 5* 60 30  0 + 30  2 = 60 150
1, 2, 3, 4, 5, 6 130 30  0 + 30  2 + 70  3 = 270 150

Periods Cumulative Costs

Combined Net Req. Part Periods Order Hold * The part periods for an order
6 70 70  0 = 0 150 + 0 encompassing periods 6, 7, 8,
6, 7 90 70  0 + 20  1 = 20 50 and 9 most nearly approximates
6, 7, 8 90 70  0 + 20  1 = 20 50
6, 7, 8, 9* 100 70  0 + 20  1 + 10  3 = 50 125
the EPP of 60
6, 7, 8, 9, 10 180 70  0 + 20  1 + 10  3 + 80  4 = 370
 Problem 3
Periods Cumulative Costs
Combined Net Req. Part Periods Order Hold
10 80 80  0 = 0 150 + 0
10, 11 80 80  0 = 0 0
10, 11, 12* 130 80  0 + 50  2 = 100 250
* The part periods for an order encompassing periods 10, 11, 12 most
nearly approximates the EPP of 60.
Week CT = Order cost + Holding cost
1 2 3 4 5 6 7 8 9 10 11 12
= 3 orders  $150 order + 230 units
Gr req 30 40 30 70 20 10 80 50
Beg inv 40 10 10 30 30 0 30 10 10 0 50 50  $2.50 unit period
End inv 10 10 30 30 0 30 10 10 0 50 50 0 = $1,025.00
Ord rcpt 60 100 130
Ord rel 60 100 130
 Sample Problem

4) You are scheduling production of your popular Rustic Coffee Table.

The table requires a top, four legs, 1/8 gallon of stain , 1/16 gallon of
glue, 2 short braces between the legs and 2 long braces between the
legs, and a brass cap that goes on the bottom of each leg. You have
100 gallons of glue in inventory, but none of the other components.
All items except the brass caps, stain, and glue are ordered on a lot-
for-lot basis. The caps are purchased in quantities of 1,000 stain and
glue by the gallon. Lead time is 1 day for each item. Schedule the
order releases necessary to produce 649 coffee tables on days 5 and
6, and 128 on days 7 and 8.
 Sample Problem
Coffee Table

Top Stain Glue Base Assembly

Short Braces Long Braces Legs

Brass
Caps
 Problem 4
Lead
Time Low-
Lot (# of Safety Allo- Level
Size periods) On Hand Stock cated Code Item ID Period (day)
1 2 3 4 5 6 7 8
Lot for 1 — — — 0 Table Gross requirement 640 640 128 128
Lot Scheduled receipt
Projected on hand
Net requirement 640 640 128 128
Planned order receipt 640 640 128 128
Planned order release 640 640 128 128

Lot for 1 — — — 1 Top Gross requirement 640 640 128 128

Lot Scheduled receipt
Projected on hand
Net requirement 640 640 128 128
Planned order receipt 640 640 128 128
Planned order release 640 640 128 128

Lot for 1 — — — 1 Stain Gross requirement 80 80 16 16

Lot (gal.) Scheduled receipt
Projected on hand
gallons Net requirement 80 80 16 16
Planned order receipt 80 80 16 16
Planned order release 80 80 16 16

Lot for 1 — — — 1 Glue Gross requirement 40 40 8 8

Lot (gal.) Scheduled receipt
Projected on hand 100 100 100 100 100 60 20 12 4
gallons 100 Net requirement
Planned order receipt
Planned order release

Lot for 1 — — — 1 Base Gross requirement 640 640 128 128

Lot Scheduled receipt
Projected on hand
Net requirement 640 640 128 128
Planned order receipt 640 640 128 128
Planned order release 640 640 128 128

Lot for 1 — — — 2 Short Gross requirement 1,280 1,280 256 256

Lot Brace Scheduled receipt
Projected on hand
Net requirement 1,280 1,280 256 256
Planned order receipt 1,280 1,280 256 256
Planned order release 1,280 1,280 256 256
 Sample Problem
5) Using the data for the coffee table in Problem 4, build a labor
schedule when the labor standard for each top is 2 labor hours; each
leg including brass cap installation requires ¼ hour, as does each
cross brace. Base assembly requires 1 labor-hour, and final assembly
requires 2 labor-hours. What is the total number of labor-hours
required each day, and how many employees are needed each day at
8 hours per day?
 Problem 5
Coffee Table Hrs
Master Schedule Required Lead Time Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8
640 640 128 128
Table Assembly 2 1 1,280 1,280 256 256
Top Preparation 2 1 1,280 1,280 256 256
Assemble Base 1 1 640 640 128 128
Long Brace (2) 0.25 1 320 320 64 64
Short Brace (2) 0.25 1 320 320 64 64
Leg (4) 0.25 1 640 640 128 128
Total Hours 0 1,280 3,200 3,456 1,920 640 256
Employees need @ 8 hrs. each 0 160 400 432 240 80 32
 Short- Term Scheduling

Strategic Importance of Short-Term Scheduling

• Effective and efficient scheduling can be a
competitive advantage
• Faster movement of goods through a facility
means better use of assets and lower costs
• Additional capacity resulting from faster
throughput improves customer service through
faster delivery
• Good schedules result in more reliable
deliveries
 Scheduling Issues

• Scheduling deals with the timing of

operations
• The task is the allocation and
prioritization of demand
• Significant issues are
• The type of scheduling, forward or
backward
• The criteria for priorities
 Scheduling Criteria

1. Minimize completion time

2. Maximize utilization of facilities
3. Minimize work-in-process (WIP)
inventory
4. Minimize customer waiting time

Optimize the use of resources so that

production objectives are met
 Assignment Method

• A special class of linear programming

models that assign tasks or jobs to
resources
• Objective is to minimize cost or time
• Only one job (or worker) is assigned
to one machine (or project)
 Sequencing Jobs

• Specifies the order in which jobs should

be performed at work centers
• Priority rules are used to dispatch or
sequence jobs
• FCFS: First come, first served
• SPT: Shortest processing time
• EDD: Earliest due date
• LPT: Longest processing time
 Sequencing Example
Apply the four popular sequencing rules to
these five jobs
Job Work Job Due
(Processing) Time Date
Job (Days) (Days)
A 6 8
B 2 6
C 8 18
D 3 15
E 9 23
 Sequencing Example
FCFS: Sequence A-B-C-D-E
Job Work
Job (Processing) Flow Job Due Job
Sequence Time Time Date Lateness
A 6 6 8 0
B 2 8 6 2
C 8 16 18 0
D 3 19 15 4
E 9 28 23 5
28 77 11
 Sequencing Example
FCFS: Sequence A-B-C-D-E
Job Work Total flow time
Average completion time = = 77/5 = 15.4 days
Job (Processing) Number Flowof jobs
Job Due Job
Sequence Time Time Date Lateness
Total job work time
A Utilization = 6 Total flow time6 = 28/778 = 36.4% 0
B 2 8 6 2
Average number of Total flow time
in the system =8 Total job work
jobs C 16 time 18
= 77/28 = 2.75 jobs
0
D 3 19 days 15
Total late 4
Average job lateness = Number28of jobs= 11/5 = 2.2 days
E 9 23 5
28 77 11
 Sequencing Example
SPT: Sequence B-D-A-C-E
Job Work
Job (Processing) Flow Job Due Job
Sequence Time Time Date Lateness
B 2 2 6 0
D 3 5 15 0
A 6 11 8 3
C 8 19 18 1
E 9 28 23 5
28 65 9
 Sequencing Example

SPT: Sequence B-D-A-C-E

Jobtime
Work Total flow time
Average completion = = 65/5 = 13 days
Job (Processing) Number Flow of jobs
Job Due Job
Sequence Time Time Date Lateness
Total job work time
B Utilization = 2 Total flow time2 = 28/656 = 43.1% 0
D 3 5 15 0
Average number of Total flow time
in the system =6 Total job work
jobs A 11 time
= 65/28 = 2.32 jobs
8 3
C 8 19 days 18
Total late 1
Average job lateness = Number of jobs = 9/5 = 1.8 days
E 9 28 23 5
28 65 9
 Sequencing Example

EDD: Sequence B-A-D-C-E

Job Work
Job (Processing) Flow Job Due Job
Sequence Time Time Date Lateness
B 2 2 6 0
A 6 8 8 0
D 3 11 15 0
C 8 19 18 1
E 9 28 23 5
28 68 6
 Sequencing Example

EDD: Sequence B-A-D-C-E

Job Work Total flow time
Average completion time = = 68/5 = 13.6 days
Job (Processing) Number Flowof jobs
Job Due Job
Sequence Time Time Date Lateness
Total job work time
B Utilization = 2 Total flow time2 = 28/686 = 41.2% 0
A 6 8 8 0
Average number of Total flow time
in the system =3 Total job work
jobs D 11 time 15
= 68/28 = 2.43 jobs
0
C 8 19 days 18
Total late 1
Average job lateness = Number of jobs = 6/5 = 1.2 days
E 9 28 23 5
28 68 6
 Sequencing Example

LPT: Sequence E-C-A-D-B

Job Work
Job (Processing) Flow Job Due Job
Sequence Time Time Date Lateness
E 9 9 23 0
C 8 17 18 0
A 6 23 8 15
D 3 26 15 11
B 2 28 6 22
28 103 48
 Sequencing Example

LPT: Sequence E-C-A-D-B

Total flow time
Average completionJob timeWork
= = 103/5 = 20.6 days
Job (Processing) Number Flowof jobs
Job Due Job
Sequence Time Time Date Lateness
Total job work time
EUtilization = 9Total flow time9 = 28/103 23 = 27.2% 0
C 8 17 18 0
Average number of Total flow time
jobs in = = 103/28 = 3.68 jobs
A the system 6 Total job work
23 time 8 15
D 3 26 days 15
Total late 11
Average job lateness = Number28of jobs= 48/5 = 9.6 days
B 2 6 22
28 103 48
 Sequencing Example

Summary of Rules

Average Average Number Average

Completion Utilization of Jobs in Lateness
Rule Time (Days) (%) System (Days)
FCFS 15.4 36.4 2.75 2.2

SPT 13.0 43.1 2.32 1.8

EDD 13.6 41.2 2.43 1.2

LPT 20.6 27.2 3.68 9.6

 Comparison of
Sequencing Rules

• No one sequencing rule excels on all criteria

• SPT does well on minimizing flow time and
number of jobs in the system
• But SPT moves long jobs to the end which
may result in dissatisfied customers
• FCFS does not do especially well (or poorly)
on any criteria but is perceived as fair by
customers
• EDD minimizes lateness
 Critical Ratio (CR)

• An index number found by dividing the time

remaining until the due date by the work
time remaining on the job
• Jobs with low critical ratios are scheduled
ahead of jobs with higher critical ratios
• Performs well on average job lateness
criteria

Time remaining Due date - Today’s date

CR = =
Workdays remaining Work (lead) time remaining
 Critical Ratio Example

Currently Day 25

Due Workdays Priority

Job Date Remaining Critical Ratio Order

A 30 4 (30 - 25)/4 = 1.25 3

B 28 5 (28 - 25)/5 = .60 1

C 27 2 (27 - 25)/2 = 1.00 2

With CR < 1, Job B is late. Job C is just on schedule and Job A has
some slack time.
 Critical Ratio Technique

1. Helps determine the status of specific jobs

2. Establishes relative priorities among jobs
on a common basis
3. Relates both stock and make-to-order jobs
on a common basis
4. Adjusts priorities automatically for changes
in both demand and job progress
5. Dynamically tracks job progress
 Sequencing N Jobs on Two Machines:
Johnson’s Rule

• Works with two or more jobs that pass

through the same two machines or
work centers
• Minimizes total production time and
idle time
 Johnson’s Rule

1. List all jobs and times for each work center

2. Choose the job with the shortest activity time.
If that time is in the first work center, schedule
the job first. If it is in the second work center,
schedule the job last.
3. Once a job is scheduled, it is eliminated from
the list
4. Repeat steps 2 and 3 working toward the
center of the sequence
 Johnson’s Rule Example

Work Center 1 Work Center 2

Job (Drill Press) (Lathe)
A 5 2
B 3 6
C 8 4
D 10 7
E 7 12
 Johnson’s Rule Example

Work Center 1 Work Center 2

Job (Drill Press) (Lathe)
A 5 2
B 3 6
C 8 4 B E D C A
D 10 7
E 7 12
 Johnson’s Rule Example

Work Center 1 Work Center 2

Job (Drill Press) (Lathe)
A 5 2
B 3 6
C 8 4 B E D C A
D 10 7
E 7 12

Machine B E D C A
WC1 3 10 20 28 33
WC2 3+6 = 9 10+12 = 22+7 = 29 29+4 = 33 33+2 = 35
22

Choose the longer time as basis of computing the cumulative time

of the next job.
 Johnson’s Rule Example

Processing time of WC1 = 33; WC2 = 31; Throughput time = 35

1) Computation of utilization per machine based on the individual

completion time
a) Utilization of WC1 = 33/33x 100% = 100% (% idle time = 0%)
b) Utilization oof WC2 = 31/35 x 100% = 88.57% (% Idle time =
11.43%)

2) Computation of utilization per machine based on the completion time

of the task throughput time of the last machine).
a) Utilization of WC1 = 33/35x 100% = 94.29% (% Idle time =
5.71%)
b) Utilization of WC2 = 31/35 x 100% = 88.57% (% idle time =
11.43%)
 N Jobs, Three Machines

Johnson’s algorithm for the two-machine case may be extended to the three-
machine case under certain circumstances. If either of the following two
conditions are true, then Johnson’s method is applicable:

Either min {pi1} > max {pi2}

or min {pi3} > max {pi2}

That is, Johnson’s method is applicable if machine 2 is completely dominated

by either the first or third machine. The working procedure involves defining
two dummy machines, say 1’ and 2’, with processing times
pi1’ = pi1 + pi2
pi2’ = pi2 + pi3

and applying Johnson’s algorithm to this new two-machine problem.

 Johnson’s Rule N Jobs, 3 Machines
Example
Work Center 1 Work Center 2 Work Center 3
Job (Drill Press) (Lathe) (Cutting)
A 9 2 9
B 10 6 9
C 8 4 7
D 10 7 5
E 8 7 4

Test: Either min {pi1} > max {pi2} or min {pi3} > max {pi2}

min time of WC1(8) > max time of WC2 (7) =➔ TRUE

So you can use Johnson’s Rule. (No need to test the second condition)
So use this formula so the there will be only 2 columns.
pi1’ = pi1 + pi2; pi2’ = pi2 + pi3

Work Center 1 Work Center 2 Work Center 3

Job (Drill Press) (Lathe) (Cutting)
A 9 2 9
B 10 6 9
C 8 4 7
D 10 7 5
E 8 7 4

Job WC 1 + WC2 WC2 + WC3

Revised table to
A 11 11 comply with the
B 16 15 requirements of
Johnson’s Rule of N
C 12 11
jobs, 2 machines
D 17 12
E 15 11
 Johnson’s Rule N Jobs, 3 Machines
Example
Job WC 1 + WC2 WC2 + WC3 B D E C A
A 11 11
B 16 15
B D C E A
C 12 11
D 17 12
E 15 11 B D E A C

B D A E C

Note: There are multiple

arrangements of sequence of jobs. B D C A E

B D A C E
Johnson’s Rule N Jobs, 3 Machines Example
Work
Center 1 Work Work
Jo (Drill Center 2 Center 3
b Press) (Lathe) (Cutting)
A 9 2 9
B D E C A
B 10 6 9
C 8 4 7
We will use this sequence
D 10 7 5
E 8 7 4

Machine B D E C A
WC1 10 20 28 36 45
WC2 10+6 = 16 20+7 = 27 28+7 = 35 36+4 = 40 45+2 = 47
WC3 16+ 9 = 25 27+5 = 32 35+4 = 39 40+7 = 47 47+9 = 56

Throughput time = 56
 Johnson’s Rule Example

Work Center 1 Work Center 2

Job (Drill Press) (Lathe)
A 5 2
B 3 6
C 8 4 B E D C A
D 10 7
E 7 12
Time 0 3 10 20 28 33

WC
1 B E D C A

WC
2 B E D C A

Time➔ 0 1 3 5 7 9 10 11 12 13 17 19 21 22 23 25 27 29 31 33 35

B E D C A
 N Jobs, Three Machines

Johnson’s algorithm for the two-machine case may be extended to the three-
machine case under certain circumstances. If either of the following two
conditions are true, then Johnson’s method is applicable:

Either min {pi1} > max {pi2}

or min {pi3} > max {pi2}

That is, Johnson’s method is applicable if machine 2 is completely dominated

by either the first or third machine. The working procedure involves defining
two dummy machines, say 1’ and 2’, with processing times
pi1’ = pi1 + pi2
pi2’ = pi2 + pi3

and applying Johnson’s algorithm to this new two-machine problem.

 Scheduling Service Employees
With Cyclical Scheduling
• Objective is to meet staffing
requirements with the minimum
number of workers
• Schedules need to be smooth and
keep personnel happy
• Many techniques exist from simple
algorithms to complex linear
programming solutions
 Cyclical Scheduling Example

1. Determine the staffing requirements

2. Identify two consecutive days with the
lowest total requirements and assign these
as days off
3. Make a new set of requirements subtracting
the days worked by the first employee
4. Apply step 2 to the new row
5. Repeat steps 3 and 4 until all requirements
have been met
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3
Employee 3 3 3 4 3 2 3 3

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3
Employee 3 3 3 4 3 2 3 3
Employee 4 2 2 3 2 2 3 2

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3
Employee 3 3 3 4 3 2 3 3
Employee 4 2 2 3 2 2 3 2
Employee 5 1 1 2 2 2 2 1

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3
Employee 3 3 3 4 3 2 3 3
Employee 4 2 2 3 2 2 3 2
Employee 5 1 1 2 2 2 2 1
Employee 6 1 1 1 1 1 1 0

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3
Employee 3 3 3 4 3 2 3 3
Employee 4 2 2 3 2 2 3 2
Employee 5 1 1 2 2 2 2 1
Employee 6 1 1 1 1 1 1 0
Employee 7 1

Capacity
Excess Capacity
 Cyclical Scheduling Example

M T W T F S S
Employee 1 5 5 6 5 4 3 3
Employee 2 4 4 5 4 3 3 3
Employee 3 3 3 4 3 2 3 3
Employee 4 2 2 3 2 2 3 2
Employee 5 1 1 2 2 2 2 1
Employee 6 1 1 1 1 1 1 0
Employee 7 1

Capacity 5 5 6 5 4 4 3
Excess Capacity 0 0 0 0 0 1 0
 Sample Problems
1) The MGE Company has a taxi waiting at each of four
cabstands in SM North EDSA. Four customers have called and
requested service. The distances, in kilometers, from the
waiting taxis to the customers are given in the following table.
Find the optimal assignment of taxis to customers so as to
minimize total driving distances to the customers.
Customer
Cab Site A B C D
Stand 1 7 3 4 8
Stand 2 5 4 6 5
Stand 3 6 7 9 6
Stand 4 8 6 7 4
 Site/Customer A B C
Problem 1
D
1 7 3 4 8
2 5 4 6 5
3 6 7 9 6
4 8 6 7 4 Optimal assignment:
Row subtraction is done next:
Taxi at post 1 to customer C
Site/Customer A B C D
Taxi at post 2 to customer B
1 4 0 1 5 Taxi at post 3 to customer A
2 1 0 2 1
3 0 1 3 0
Taxi at post 4 to customer D
4 4 2 3 0 Total distance traveled = 4 + 4 + 6 + 4 =
Column subtraction is done next: 18 miles.
Site/Customer A B C D
1 4 0 0 5
2 1 0 1 1
3 0 1 2 0
4 4 2 2 0

Cover zeros with lines:

 Sample Problems
2) Prof. Milagros I. Tanchengco, chairman of the College of Industrial Engineering,
needs to assign professors to courses next term. As a criterion for judging who
should teach each course, Professor Tanchengco reviews the past 2 year’s teaching
evaluation. Since each of the four professors taught each of the four courses at one
time or another during he two year period, Prof. Tanchengco is able to record a
course rating to each instructor. These ratings are shown in the following table.
a) Find the assignment of professors to course to maximize the overall teaching
rating.
b) Assign the professors to the courses with the exception that Professor Albano
cannot teach Statistics.

Course
Professor
Statistics Mgt. Finance Economics
Albano 90 65 95 40
Ulgado 70 60 80 75
Prada 85 40 80 60
Martinez 55 80 65 55
 Problem 2
Because this is a maximization problem, each number is subtracted from 95.
The problem is then solved using the minimization algorithm.

a) Assignment Rating
Albano—finance 95
Ulgado—economics 75
Prada—statistics 85
Martinez—management 80
Total rating 335

b) Since Albano is not teaching statistics; the answer does not

change. Total rating remains 335.
 Sample Problems
3) The Goodwill Lumberyard has four jobs on order, as shown in
the following table. Today is day 205 on the yard’s schedule.
In what sequence would the jobs be ranked according to the
following decision rules:
a) FCFS ; b) SPT c) LPT
d) EDD e) critical ratio.

Job Due date Remaining Time

(days)
A 212 6
B 209 3
C 208 3
D 210 8

Which is best and why? Which has the minimum lateness.

 Problem 3
Remaining

Job Due date Processing Time

A 212 6

B 209 3

C 208 3

D 210 8

(a) First come, first served (FCFS):

Processing Due
Job Time Date Start End Days Late
A 6 212 205 210 0
B 3 209 211 213 4
C 3 208 214 216 8
D 8 210 217 224 14
Total: 26 days
 Problem 3
(b) Shortest Processing Time (SPT)
Processing Due
Job Time Date Start End Days Late
B 3 209 205 207 0
C 3 208 208 210 2
A 6 212 211 216 4
D 8 210 217 224 14
Total: 20 days

(c) Longest Processing Time (LPT)

Processing Due
Job Time Date Start End Days Late
D 8 210 205 212 2
A 6 212 213 218 6
C 3 208 219 221 13
B 3 209 222 224 15
Total: 36 days
 Problem 3
(d) Earliest Due Date (EDD)
Processing Due
Job Time Date Start End Days Late
C 3 208 205 207 0
B 3 209 208 210 1
D 8 210 211 218 8
A 6 212 219 224 12
Total: 21 days
(e) Critical ratio:
Remaining
Due Processing
Job Date Time Critical Ratio
A 212 6 (212 – 205)/6 = 1.17
B 209 3 (209 – 205)/3 = 1.33
C 208 3 (208 – 205)/3 = 1.00
D 210 8 (210 – 205)/8 = 0.63
 Problem 3
Need date − today s date
Critical ratio =
Days required to complete job
Job Sequence Critical Ratio
D 0.63
C 1.00
A 1.17
B 1.33

Critical ratio:
Processing Due
Job Time Date Start End Days Late
D 8 210 205 212 2
C 3 208 213 215 7
A 6 212 216 221 9
B 3 209 222 224 15
Total: 33 days
 Problem 3
A minimum total lateness of 20 days seems to be about the least we may
achieve.
Average
Number
Scheduling Average Average of Jobs in
Rule Lateness Flow Time System
FCFS 6.5 11.8 2.4
SPT 5.0 10.25 2.1
LPT 9.0 14.8 3.0
EDD 5.25 10.8 2.2
Critical ratio 8.3 14.0 2.8

SPT is best on all criteria.

 Sample Problems

4) Six jobs are to be processed through a two-step operations.

The first operation involves sanding, and the second involves
painting. Processing times are as follows:
Job Operation 1 (hours) Operation 2 (hours)
A 10 5
B 7 4
C 5 7
D 3 8
E 2 6
F 4 3

Determine a sequence that will minimize the total completion

time for these jobs. Illustrate graphically.
 Problem 4
Job Operation 1 (Hours) Operation 2 (Hours)
A 10 5
B 7 4
C 5 7
D 3 8
E 2 6
F 4 3

Using Johnson’s rule, the optimal sequence is:

 Sample Problems

5) Find the optimal sequence for the following six jobs on M1,
M2, and M3.
Processing Time (in minutes)
Job M1 M2 M3
1 5 3 9
2 7 2 5
3 4 3 7
4 8 4 3
5 6 3 2
6 7 0 8
 Sample Problems

6) Given the following demand for waiters and waitresses at

Bozza’s Bar, determine the minimum wait staff needed with a
policy of 2 consecutive days off.
Day
Mon. Tue. Wed. Thu. Fri. Sat. Sun.
Wait
staff 3 4 4 5 6 7 4
needed
 Problem 6
Monday Tuesday Wednesday Thursday Friday Saturday Sunday
Worker 1 3 4 4 5 6 7 4
Worker 2 3 3 3 4 5 6 4
Worker 3 3 3 2 3 4 5 3
Worker 4 2 3 2 2 3 4 2
Worker 5 1 2 2 2 2 3 1
Worker 6 1 1 1 1 1 2 1
Worker 7 1 0 0 0 0 1 1

Note: Seven employees are needed: six have two consecutive days off.
The 7th worker has 4 days off and only works 3.