Operations Management

Question # 01
Line Balancing
A company operates 7½ hours per day with a demand of 1,000 units per day, and it sets up its
assembly line as presented in the table below:
Task Preceding Task Preceding
Task Task
Time(seconds) Tasks Time(seconds) Tasks
A 15 G 11 C
B 24 A H 9 D
C 6 A I 14 E
D 12 B J 6 F,G
E 18 B K 15 H,I
F 7 C L 10 J,K

Based on the above information, answer the following questions:

a) Draw the precedence diagram of this assembly line.
b) Calculate the workstation cycle time and the estimated number of workstations
required to achieve the demand.
c) Balance the assembly line using the longest-task-time rule as the primary rule and the
most following tasks as the secondary rule to achieve the demand. Use a table to construct the
workstations and calculate the total amount of idle time and the efficiency of the assembly line.
d) Is it possible for the assembly line of c) to produce extra outputs within normal
operating hours? If yes, how many?
e) If the demand increases by 8%, calculate the amount of overtime that is required to
meet the demand based on the assembly line of c).
f) Rebalance the assembly line using the most followers as the primary rule and the
longest task time as the secondary rule to achieve the new demand of e) within the normal
operating hours. Use a table to construct the workstations, and calculate the total amount of idle
time and the efficiency of the assembly line.
a) Precedence Diagram
Using Microsoft Excel, I drew the precedence diagram using given details.

b) Workstation Cycle Time

and Estimated no. of Workstations

Production Time = 7.5 hours = 7.5*60*60 = 27000 seconds

Production Demand = 1000 units

Workstation Cycle Time = Production Time / Production Demand

= 27000/1000 = 27 seconds

No. of Workstations = Total Task Time / Workstation Cycle Time

= 147/27 = 5.44 which is approximately 6

So,
Estimated no. of workstation = 6

c) Primary Rule: Longest Task Time

Secondary Rule: Most following task
Before start line balancing, I will sort the data according to longest task time, and then I will
check the followers of individual activities.
Task
Precedi
Time Rankin Followe
Task ng
(Second g rs
Tasks
s)
A 15 3 7
B 24 A 1 6
C 6 A 11 4
D 12 B 6 3
E 18 B 2 3
F 7 C 10 2
G 11 C 7 2
H 9 D 9 2
I 14 E 5 2
J 6 F,G 11 1
K 15 H,I 3 1
L 10 J, K 8 0

I applied ranking formula in excel to check the position of every task according to the task time
and also, I wrote no. of following of every individual activity.
Line Balancing

Task Total Task

Workstation Idle Time
Assignment Time
1 A,C 21 6
2 B 24 3
3 E,F 25 2
4 I,D 26 1
5 G,H,J 26 1
6 K,L 25 2

By following the conditions, I assigned activities to workstations.

Total Idle Time = 6+3+2+1+1+2 = 15 seconds

Efficiency of Assembly Line = Required Time / (Actual Workstation)*Cycle time

= 147/(6*27)

= 90.7%
d) We can check the maximum units produced by line

We have a formula,

Maximum units produced = Available Time/Cyle time

= (7.5*60*60)/27
= 1000 units
It means at current conditions; it can produce exactly 1000 units in a shift of 7.5 hours.

e) Demand is increased by 8%

New demand = 1000*1.08

= 1080 units

Our cycle time is 27 sec

Required time for new demand = 1080 * 27 = 29160 seconds
Time for current demand = 2700 seconds
Overtime = Time for new demand – Time for current demand
= 29160 – 2700
Overtime = 2160 seconds = 0.6 hours
It means the overtime of 0.6 hour is required to meet the new demand.

f) Rebalancing according to new demand

New demand = 1080 units
Workstation cycle time = Production time/production demand
= 27000/1080
=25 seconds

No. of Workstations = Total Task Time / Workstation Cycle Time

 = 147/25 = 5.88 which is approximately 6

Primary Rule: Most following task

Secondary Rule: Longest Task Time

Task
Precedi
Time Rankin Followe
Task ng
(Second g rs
Tasks
s)
A 15 3 7
B 24 A 1 6
C 6 A 11 4
D 12 B 6 3
E 18 B 2 3
F 7 C 10 2
G 11 C 7 2
H 9 D 9 2
I 14 E 5 2
J 6 F,G 11 1
K 15 H, I 3 1
L 10 J, K 8 0
Revised Line Balancing
As the demand increased from 1000 to 1080 units, we need an additional workstation

Task Total Task

Workstation Idle Time
Assignment Time
1 A,C 21 4
2 B 24 1
3 E, F 25 0
4 D, G 23 2
5 I, H 23 2
6 K, J 21 4
7 L 10 15

The activity L is not adjusted, that’s why 1 extra station was required.
Efficiency
Efficiency of Assembly Line = Required Time / (Actual Workstation) *Cycle time

= 147/(7*25)
=84%
Total Idle time = 4+1+0+2+2+2+15 =26 sec
Question # 02
Given Data
Duration of season = 60 days
Hours/Day = 8
Total hours of season = 60*8 = 480 hours
Productivity = 0.5 units/hour
Workers at fall = 30
Workers for temporary = 10 (in summer)
Inventory at beginning of fall = 1000 units
Overtime allowed in winter = 6000 hours
Season and demand forecast is given below;

Season Demand Forecast

Fall 10,000
Winter 8,000
Spring 7,000
Summer 10,000
Straight time salary = $5/hour
Overtime salary = $8/hour
Holding Cost = $5/unit/season
Backorder Cost = $10/unit/season

a) Cost of Production Plan

Seasonal Output;
Working hour/season = 480
Productivity = 0.5/hour
Workers = 30
Output per season = 30*0.5*480 = 7200 units

Considering overtime;
 Allowed overtime = 6000 hours
Overtime Output = 6000*0.5 = 3000 units
Total output (current+overtime) =7200 + 3000 = 10,200 units

Temporary workers;
Temporary workers in summer = 10
Output of workers = 10*480*0.5 = 2400 units

Inventory and Backorder;

Beginning inventory = 1000 units
Demand must be met for each season, there shouldn’t be any backorder and extra inventory
at the end of the season. I made production plan as below.

Production Plan

Ending
Starting Total Overtime Overtim Temporary
Season Demand Inventor Workers
Inventory Production Hours e Output Output
y

Fall +1000 10,000 7200 1800 0 0 0 30

=7200+3000
Winter -1800 8,000 400 6,000 3,000 0 30
10,200

Spring +400 7,000 7200 600 0 0 30

Summe 7200+2200
+600 10,000 0 0 0 2200 40
r =9400
 Overtime
Cost Components Fall Winter Spring Summer
Hours
Regular Salary
$72,000 $72,000 $72,000 $96,000 $312,000
$5/hr
Overtime Salary
$48,000 $48,000
$8/hr
Back Order
$18,000 $18,000
$10/hr
Inventory
$2,000 $3,000 $5,000
$5/hr
Total Cost per
$90,000 $122,000 $75,000 $96,000 $383,000
Season

b) By keeping Constant Workforce = 35

Total Production = 480*38*0.5 =8400 units

Ending
Starting Total Overtime Overtim Temporary Workers
Season Demand Inventor
Inventory Output Hours e Output Output
y

Fall 1000 10,000 8,400 -600 35

8,400+400
Winter -600 8,000 200 800 400 35
=8,800

Spring 200 7,000 8,400 +1,600 35

Summe
+1,600 10,000 8,400 0 35
r

Overtime
Cost Components Fall Winter Spring Summer
Hours
Regular Salary
$84,000 $84,000 $84,000 $84,000 $336,000
$5/hr
Overtime Salary
$6,400 $6,400
$8/hr
Back Order
$6,000 $6,000
$10/hr
Inventory
$2,000 $16,000 $18,000
$5/hr
Total Cost per
$90,000 $92,400 $100,000 $84,000 $366,400
Season
Question # 03

Material Requirement Planning

a) Low-level coded Bill of Materials

A company manufactures product A which is composed of one unit of B, two units of C, and one
unit of D. Item C is composed of two units of D and three units of E.
Using the given data in the question, the low level coded BOM is following,

B(1) C(2) D(1)

D(2) E(3)

b) MRP

Data Given;
Lead Time
A,B and C = 1 week
And for D, E = 2 weeks

On hand Inventory
A = 20 units
C = 10 units
 D = 20 units

Scheduled Receipts
B: 10 units in Week 1
C: 50 units in Week 1

Customer Orders
30 units of A in Week 4
30 units of A in Week 7
40 units of A in Week 10

The above is actually the gross requirement of A. Similary we will calculate the gross
requirement of other acitvities depending on their no.of units required for making its parent
item.
Gross requirement of B and D will be equal to Plan order release of A
Gross requirement of C will (Plan order release of A*2)
Similary D and E are dependent on C.

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 30 30 40
Item: A Schedule Receipts
OH=20
Project available balance 20 20 20 20
LT =1
Net Requirement 10 30 40
SS:0
Planned order receipts 10 30 40
Planned order release 10 30 40

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 10 30 40
Item: B Schedule Receipts 10
OH=0
Project available balance 10 10 10
LT =1
Net Requirement 0 30 40
SS=10
Planned order receipts
Planned order release 30 40

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Item: C Gross Requirement 20 60 80
OH=10 Schedule Receipts 50
 Project available balance 10 60 60 40 40 40 30 30 30
Net Requirement 20 50
LT =1 Planned order receipts 50 50
SS=50 Planned order release 50 50

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 10 100 30 100 40
Item: D Schedule Receipts
OH=20 20 20 20 10 10 10 80 80 80 40
Project available balance
LT=2
SS=0 Net Requirement 90 20 20
Planned order receipts 100 100 100
Planned order release 100 100 100

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 150 150
Item: E Schedule Receipts
OH=0
Project available balance
LT=2
SS=10 Net Requirement 150 150
Planned order receipts 150 150
Planned order release 150 150

c) If no On-Hand Inventory and Schedule Receipts

The same format will be applied. In this case we have no inventory and schedule receipts.

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 30 30 40
Schedule Receipts
Item: A
Project available balance
LT =1
Net Requirement 30 30 40
Planned order receipts 30 30 40
Planned order release 30 30 40

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Item: B Gross Requirement 30 30 40
LT =1 Schedule Receipts
 Project available balance
Net Requirement 30 30 40
Planned order receipts 30 30 40
Planned order release 30 30 40

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 60 60 80
Schedule Receipts
Item: C 40 40 40 30 30 30
Project available balance
LT =1
Net Requirement 60 20 50
Planned order receipts 100 50 50
Planned order release 100 50 50

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 200 30 100 30 100 40
Schedule Receipts
Item: D 70 70 70 40 40 40
Project available balance
LT=2
Net Requirement 200 30 30 60
Planned order receipts 200 100 100 100
Planned order release 100 100 100

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 300 150 150
Schedule Receipts
Item: E
Project available balance
LT=2
Net Requirement 300 150 150
Planned order receipts 300 150 150
Planned order release 300 150 150

Here we got a problem, the quantity red highlighted should be released two week earlier but we
cannot.

Summary: There are no instances where the net requirements exceed the planned order releases,
and the lead times are respected, so the manufacturer can fulfill the order for 30 units in Week 4,
30 units in Week 7, and 40 units in Week 10.
 Thus, the manufacturer can meet the required demand as long as the orders are placed according
to the MRP schedule.

d) Production capacities for items C, D, and E are limited to a maximum of 100 units per
week.

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 30 30 40
Schedule Receipts
Item: A
Project available balance
LT =1
Net Requirement 30 30 40
Planned order receipts 30 30 40
Planned order release 30 30 40

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 30 30 40
Schedule Receipts
Item: B
Project available balance
LT =1
Net Requirement 30 30 40
Planned order receipts 30 30 40
Planned order release 30 30 40

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 60 60 80
Schedule Receipts
Item: C 40 40 40 110 110 110 30
Project available balance
LT =1
Net Requirement 60 20
Planned order receipts 100 100
Planned order release 100 100

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Item: D Gross Requirement 200 30 200 30 40
 Schedule Receipts
Project available balance 70 70 70 40 40 40
LT=2
Net Requirement 200 30 130
Planned order receipts 200 100 200
Planned order release 100 200

Week Week Wee Week Week Week Week Wee Week Week
Item Week
1 2 k3 4 5 6 7 k8 9 10
Gross Requirement 300 300
Schedule Receipts
Item: E
Project available balance
LT=2
Net Requirement 300 300
Planned order receipts 300 300
Planned order release 300

Summary;

Yes, the manufacturer can execute the request based on the following considerations:

1. The production capacity of C, D, and E is limited to 100 units per week, however scheduled
receipts and planned order releases meet customer demand for 30 units in Week 4, 30 units in
Week 7, and 40 units in Week 10.
2. The minimum scheduled receipts for D and E are correctly positioned, ensuring that the limits
are met while not exceeding production capacity.
Question #04

Using the data given in the question

Optimal Order Quantity = Q* = µ + z.ϭ

Where z = critical ration
CR = Cu /(Cu + Co)
Where,
Cu = cost of understocking
Co = cost of overstocking

Selling Price = $1.50

Purchase Price = $0.50
Cu = cost of understocking = Selling price – Purchase price
= 1.50 – 0.5 = $1.0
Co = cost of overstocking = purchase price = $0.5

CR = (1.0)/(1.0+0.5)
CR = 0.6667
We will check the value of z-score from standard table which is 0.43
Average daily demand = 250
Standard deviation = 25
Putting the values in formula,

Q* = 250 + 0.43.25 = 260.75 which mean approximately 261 units

b) Percentage of Demand
The percentage of demand that can cannot be served is equal to the probability of stockout.

Using the formula and the area left to the optimal order quantity,
 z = (Q - µ)/ϭ

z = (261-250)/25
z = 0.44
using the standard normal distribution table, the commutative probability against z value is 67%.
We know that total probability is = 100%
Probability of demand served = 67%
Probability of demand unserved =33%
c) No. of Newspapers to serve 90% demand
We have formula
Q* = µ + z.ϭ

We have to find the value of z???

Using the standard normal distribution table, the value of z score for cumulative 0.9 probability is 1.28

Q = 250 + 1.28*25
Q = 250 + 32 = 282 units
d) Percentage of demand if 300 newspapers are carried

Using the formula of Z score,

z = (Q - µ)/ϭ
z = (300 -250)/25
z=2
using standard table of normal distribution, the commutative probability for z = 2 is 0.9772
It means if the shop carries 300 newspapers, it can serve 97.72% of demand.

e) Selling Price to make 300 newspapers as Optimal Quantity

Calculating the value of z

z = (300-250)/25 = 2

The critical ratio against z value = 0.9772

Simplifying the formula of critical ratio

0.9972 = (P – 0.5)/(P-0.5+0.5)

P = 0.50/0.0228

P = $21.93 (approx.)

To make 300 newspapers the optimal quantity, the shop must sell newspapers for $21.93 each