OPRATIN management assignment ( uploaded all related chapters ) &
Learning Outcome:
· Understand the concept of process selection, forecasting, capacity planning, production forecast methods and schedule operations.
· Apply knowledge and skills to optimize production objective of maximizing profits using qualitative and quantitative techniques in related areas of operations management.
· Exhibit the knowledge of lean system, quality controls and green systems
Assignment Question(s): (Marks 10)
Question 1:
Workers should be given more control over the inspection for their own work. Discuss the pros and cons of this situation? (Marks 2)
Question 2:
A. What are the advantages of Exponential smoothing over the Moving average and the Weighted moving average? (Marks 2)
B. Explain the aggregate planning strategy? (Marks 2)
Question 3:
Sequence the jobs shown below by using a Gantt chart. Sequence the jobs in priority order 1, 2, 3, 4.
Job Work Center/Machine Hours Due Date (days)
1
A/3, B/2, C/2
3
2
C/2, A/4
2
3
B/6, A/1, C/3
4
4
C/4, A/1, B/2
3
a) Using finite capacity scheduling, draw a Gantt chart for the schedule (Marks 1)
b) What is the makespan? (Marks 0.5)
c) How much machine idle time is there? (Marks 0.5)
d) How much idle time (waiting time) is there for each job? (Marks 0.5)
e) When is each job delivered? (Marks 0.5)
f) Which department is the bottleneck? (Marks 0.5)
g) Calculate the machine utilization? (Marks 0.5)
Operations Management in the
Supply Chain
Decisions and Cases
Seventh Edition
Chapter 13
Project Planning
and Scheduling
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
13-2© McGraw-Hill Education.
13.1 Explain the nature of tradeoffs among the
three objectives of project management
13.2 Describe the four activities included in project
management
13.3 Distinguish the advantages and
disadvantages of a network over a Gantt
chart for project scheduling
13.4 Calculate the ES,EF, LS, LF for an example
network
13-3© McGraw-Hill Education.
13.5 Explain the significance of the critical path
and slack.
13.6 Calculate the cost of crashing a network by
one or two days.
13.7 Contrast and compare the use of constant-
time and CPM networks.
13-4© McGraw-Hill Education.
• “A temporary endeavor undertaken to create
a unique product/service/result.” – Project
Mgmt Institute (PMI)
• Unique item or event; often a single unit.
• Begins and ends; not ongoing activity.
• Work often done on-site.
• Resources (materials, labor) are brought to
the project.
13-5© McGraw-Hill Education.
• Building construction
• Bridge construction
• Aircraft carrier
• R&D project
• Audit
• Equipment installation
• New product introduction
• Opening/closing a facility
• Making a movie
• Fund-raising campaign
• Ad campaign
• Software installation
13-6© McGraw-Hill Education.
13-7© McGraw-Hill Education.
Project Management Activities &
Decisions
• Control
– Planning
– Scheduling
– Closing
13-8© McGraw-Hill Education.
• Identify the project customer
• Establish the end product/service
• Set project objectives
• Estimate total resources and time required
• Decide on the form of project organization
• Make key personnel appointments
• Define major tasks required
• Establish a budget
13-9© McGraw-Hill Education.
• Develop a detailed work-breakdown
structure
• Estimated time required for each task
• Sequence tasks in proper order
• Develop a start/stop time for each task
• Develop detailed budget for each task
• Assign tasks to people, subcontractors, etc.
13-10© McGraw-Hill Education.
• Monitor actual time, cost, and performance
• Compare planned to actual figures
• Determine whether corrective action is
needed
• Evaluate alternative corrective actions
• Take appropriate corrective actions
13-11© McGraw-Hill Education.
• Finish all work
• Close contracts
• Pay all accounts payable
• Turn the project over to the owners
• Reassign personnel and equipment
13-12© McGraw-Hill Education.
• Integration
• Scope
• Time management
• Costs
• Quality management
• Human resources
• Communications
• Risk
• Procurement
Project Management Institute’s required areas of
knowledge for certification as a Project Manager.
13-13© McGraw-Hill Education.
• Gantt Chart
– Bar charts
– Does not show interdependencies of activities
– Visual & easy to understand
• Network Method
– Graphs or networks
– Shows precedence relations
– More complex, difficult to understand, and
costly than Gantt charts
13-14© McGraw-Hill Education.
Gantt Chart Project Example
(Figure 13.2)
13-15© McGraw-Hill Education.
• Activity times assumed to be constant
• Activities represented by nodes
• Arrows show precedence relationships
• Notation used to calculate start and finish times:
– ES(a) = early start of activity A (constrained by
predecessors)
– EF(a) = early finish of activity A (constrained by
early start time)
– LS(a) = late start of activity A (constrained by late
finish time)
– LF(a) = late finish of activity A (without delaying
successors)
13-16© McGraw-Hill Education.
Example: Write a Business Report
(Table 13.4)
Activity Description
Immediate
Predecessors
Duration in Days
A Decide on topic None 1
B Collect data A 2
C Search the Internet A 3
D Write the report B and C 5
13-17© McGraw-Hill Education.
Network Diagram: Write a Business
Plan (Figure 13.3)
13-18© McGraw-Hill Education.
Forward Pass: Write a Business Plan
(Figure 13.4)
13-19© McGraw-Hill Education.
Calculating ES, EF, LS, LF,
Completion Time
• Forward Pass:
• ES (a) = 0 for the starting activities
• EF (a) = ES(a) + t(a)*
• ES (a) = Max [EF(all predecessors of a)]
• Project completion time = Max [EF(all ending
activities)]
• Backward pass:
• LF (a) = Min [LS(all successors of a)]
• LS (a) = LF(a) – t(a)*
• * t(a) denotes the duration of activity a
13-20© McGraw-Hill Education.
Forward and Backward Pass: Write a
Business Plan (Figure 13.5)
13-21© McGraw-Hill Education.
• Critical Path = longest path in the network
– All activities for which ES = LS and EF = LF
– Length of critical path is equal to the project
completion time
– Any delay on critical path delays the project
(unless ‘corrective actions’ are taken)
– Critical path in example (above) is A-C-D
13-22© McGraw-Hill Education.
• Slack time is the time a path may be delayed
without delaying the project.
• Paths not on the critical path have slack.
• Slack = LS – ES = LF – EF
13-23© McGraw-Hill Education.
Precedence and Times for Opening a
New Office (Table 13.5)
Activity Description
Immediate
Predecessors
Activity
Time
Computed
Slack
1 Lease the site None 1 0
2 Hire the workers 1 5 0
3 Arrange the furnishings 1 1 1
4 Install the furnishings 3 2 1
5 Arrange for phones 1 1 3
6 Install the phones 4, 5 1 1
7 Move into the office 2, 6, 4 2 0
13-24© McGraw-Hill Education.
Network: Open a New Office
(Figure 13.6)
13-25© McGraw-Hill Education.
• Critical Path Method (CPM)
• Developed to start-up/shutdown plants
• Activity times can be compressed by spending
more $
• Requires single time estimate for each activity
• Looks at time/cost trade-offs
– Normal activity time
– Normal cost
– Crash time
– Crash cost
13-26© McGraw-Hill Education.
Time-Cost Relationship in CPM
(Fig. 13.8)
13-27© McGraw-Hill Education.
• Scheduling is only part of a complete
approach to project management
• Trade-off between sophistication and cost of
methods
• Choice between constant-time, CPM or more
advanced techniques
• Choice of project management software
packages
– e.g., Microsoft Project
13-28© McGraw-Hill Education.
13.1 Explain the nature of tradeoffs among the
three objectives of project management
13.2 Describe the four activities included in project
management
13.3 Distinguish the advantages and
disadvantages of a network over a Gantt
chart for project scheduling
13.4 Calculate the ES,EF, LS, LF for an example
network
13-29© McGraw-Hill Education.
13.5 Explain the significance of the critical path
and slack.
13.6 Calculate the cost of crashing a network by
one or two days.
13.7 Contrast and compare the use of constant-
time and CPM networks.
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
13-30
- Operations Management in the Supply Chain�Decisions and Cases
- Project Management Activities & Decisions
- Gantt Chart Project Example (Figure 13.2)
- Example: Write a Business Report (Table 13.4)
- Network Diagram: Write a Business Plan (Figure 13.3)
- Forward Pass: Write a Business Plan (Figure 13.4)
- Calculating ES, EF, LS, LF, Completion Time
- Forward and Backward Pass: Write a Business Plan (Figure 13.5)
- Precedence and Times for Opening a New Office (Table 13.5)
- Network: Open a New Office (Figure 13.6)
- Time-Cost Relationship in CPM (Fig. 13.8)
Learning Objectives (1 of 2)
Learning Objectives (2 of 2)
What is a Project?
Examples of Projects
Objectives and Tradeoffs
Planning Activities & Decisions
Scheduling Activities & Decisions
Control Activities and Decisions
Closing Activities and Decisions
PMI Body of Knowledge
Scheduling Methods
Constant-Time Networks
Critical Path
Slack
Critical Path Method
Use of Project Management Concepts
Summary (1 of 2)
Summary (2 of 2)
End of Presentation
Operations Management in the
Supply Chain
Decisions and Cases
Seventh Edition
Chapter 12
Scheduling
Operations
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
12-2© McGraw-Hill Education.
12.1 Describe the concept of batch scheduling.
12.2 Construct a Gantt chart.
12.3 Create work schedules using forward and
backward scheduling.
12.4 Explain the implications of the theory of
constraints for scheduling.
12.5 Compare various dispatching rules.
12.6 Describe the important factors to consider
when designing a scheduling system.
12-3© McGraw-Hill Education.
• Most detailed and most constrained decisions
in capacity planning hierarchy
• Results in a time-phased plan (by hour, week)
• Allocation of resources (workers, machines)
to tasks
• Trade-offs (conflicting objectives)
– High efficiency
– Low inventories
– Good customer service
12-4© McGraw-Hill Education.
• Network of queues, as job moves from work
station to work station
– job = manufacturing parts, customer,
paperwork
– work station = machine, room, facility, worker
• Customers or jobs spend most of their time at
work stations waiting to be processed
• Typical for actual work to be 5-20% of total
throughput time
12-5© McGraw-Hill Education.
move queue process wait move…
WS = work station
“move” = movement of work: parts, customers,
paperwork, etc.
12-6© McGraw-Hill Education.
Challenges of Batch/Job Shop
Scheduling
• Variety of jobs processed
• Different routing and processing requirements
of each job
• Number of different job orders in the facility
at any one time
• Competition for common (constrained)
resources
12-7© McGraw-Hill Education.
• Scheduling multiple jobs thru a set of work
centers, minimizing completion time
• Machine performance measures:
– Makespan = total time to complete a set of
jobs
– Machine utilization = percent of makespan
time machine (or person) is used.
• Used to monitor progress of jobs
• Optimal schedule can be computationally
intensive for multiple jobs/multiple machines
12-8© McGraw-Hill Education.
Job Data for
Job Work center / Machine hours Due date
1 A/2, B/3, C/4 3
2 C/6, A/4 2
3 B/3, C/2, A/1 4
4 C/4, B/3, A/3 4
5 A/5, B/3 2
12-9© McGraw-Hill Education.
Scheduling Example
In what sequence should the jobs be done?
12-10© McGraw-Hill Education.
12-11© McGraw-Hill Education.
Machine idle (hr)
A 5
B 8
C 4
17
Makespan = 20 hr
Job Job waiting time (hr) Delivery time (hr)
1 0 9
2 9 19
3 14 20
4 1 11
5 3 11
12-12© McGraw-Hill Education.
• Machine Efficiency: Makespan or machine
utilization
• Customer: Delivery times of the jobs (minimizing
job waiting time is complementary measure)
Change the job sequence from 1, 4, 5, 2, 3 to
improve efficiency and/or delivery times to the
customer.
Machine(s) could be added to improve both
efficiency and delivery times.
12-13© McGraw-Hill Education.
• Performance is highly sequence dependent.
• Waiting time depends upon job interference
in the schedule and available capacity.
• Finding optimal schedules is challenging, but
good heuristics are available.
12-14© McGraw-Hill Education.
• Scheduling jobs onto workstations, but not
exceeding the capacity of any given resource.
• Used to identify bottlenecks.
• Forward scheduling
– To determine completion date for all orders.
• Backward scheduling
– Work backward from due date to determine
start dates for orders.
12-15© McGraw-Hill Education.
• Proposed by Goldratt in The Goal (1983)
• Goal is to make money from operations
• Production does not have value until it is sold!
• Key elements:
– Throughput = sales minus cost of raw
materials
– Inventory = raw materials value
– Operating expenses = cost of labor and
overhead
12-16© McGraw-Hill Education.
• Constraint is anything slowing down production …
a bottleneck.
– Machine or workstation
– Market
– Procurement system
• The bottleneck determines the capacity of the
system.
• Implication: Operations manager should focus on
bottleneck to increase capacity and throughput
(and make more money).
12-17© McGraw-Hill Education.
• The bottleneck should be scheduled to
achieve maximum throughput.
• Non-bottlenecks should be scheduled to keep
the bottleneck busy.
• A work-in-process queue should always be in
front of the bottleneck.
• Non-bottleneck resources may be idle.
• Find ways to relieve or reduce the
bottleneck.
12-18© McGraw-Hill Education.
• Which job should be processed next?
– Rule for selecting the next job from the queue
• Common in services:
– First come, first served
– Priority rule (first-class customers first)
– Preemptive rule (most severe patient treated next)
• Common in manufacturing:
timeprocessingremaining
datedueuntiltimeremaining
=ratioCritical
– Shortest processing time (quickest job)
12-19© McGraw-Hill Education.
• What delivery date should be promised?
• Where is the bottleneck?
• When should each activity or task be started?
• How is on-time job completion ensured?
• Sometimes referred to as:
– Advanced Planning & Scheduling (APS)
12-20© McGraw-Hill Education.
12.1 Describe the concept of batch scheduling.
12.2 Construct a Gantt chart.
12.3 Create work schedules using forward and
backward scheduling.
12.4 Explain the implications of the theory of
constraints for scheduling.
12.5 Compare various dispatching rules.
12.6 Describe the important factors to consider
when designing a scheduling system.
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
12-21
- Operations Management in the Supply Chain�Decisions and Cases
- Challenges of Batch/Job Shop Scheduling
- Job Data for Scheduling Example
Learning Objectives
Scheduling Operations
Batch Scheduling
Batch Processing
Gantt Charting
Scheduling Example
Gantt Chart for Example (1 of 2)
Gantt Chart for Example (2 of 2)
Shop Performance Measures
Conclusions About Batch Scheduling
Finite Capacity Scheduling
Theory of Constraints (TOC) (1 of 3)
Theory of Constraints (TOC) (2 of 3)
Theory of Constraints (TOC) (3 of 3)
Priority Dispatching Rules
Planning and Control Systems
Summary
End of Presentation
Operations Management in the
Supply Chain
Decisions and Cases
Seventh Edition
Chapter 11
Capacity Planning
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
11-2© McGraw-Hill Education.
11.1 Define capacity and utilization
11.2 Illustrate with an example a facilities strategy that
considers: amount, size, timing, location and
type.
11.3 Explain how S&OP is done.
11.4 Identify the demand and supply options that are
available for S&OP
11.5 Contrast and compare the chase and level
strategies
11.6 Define the various costs associated with
aggregate planning
11.7 Create an alternative strategy for the Hefty Beer
Company example
11-3© McGraw-Hill Education.
Months Planning Horizon
11-4© McGraw-Hill Education.
Maximum output that can be produced
over a given period of time.
• Theoretical capacity
– Labor availability and overtime
– Physical assets, delayed maintenance, etc.
– Can be used for short-term demand spikes
• Effective capacity
– Used for planning
– Subtracts maintenance downtime, shift breaks,
absenteeism, etc.
11-5© McGraw-Hill Education.
100%
Capacity
outputActual
×=nUtilizatio
→ Utilization is seldom 100%.
→ Estimates capacity usage and ‘busyness.’
A production facility that builds 1000 cars during
the time it can actually produce 1200 cars has
utilization = 1000/1200 = 83%
A doctor who is busy working for 6 hours during
an 8 hour shift has utilization = 6/8 = 75%
11-6© McGraw-Hill Education.
• How much capacity is needed?
• How large should each facility be?
• When is the capacity needed?
• Where should the facilities be located?
• What type of facilities/capacity are needed?
11-7© McGraw-Hill Education.
• How much? Amount of capacity
– Size of capacity cushion
• How large? Size of facilities
– Economies/diseconomies of scale
• When? Timing of facility decisions
– Preemptive, wait-and-see
• Where? Location of facilities
– Variety of factors to consider
• What type? Types of facilities
– Product-focused, market-focused, process-
focused, general-purpose
11-8© McGraw-Hill Education.
• Predicted demand
• Cost of facilities
• Likely behavior of competitors
• Business strategy
• Global considerations
11-9© McGraw-Hill Education.
How Much? Strategies for Capacity
Cushion
• Capacity cushion = 100% – utilization
• Three strategies:
– Large cushion (e.g., make-to-order)
– Moderate cushion (cost of running out
balanced with cost of excess capacity)
– Small cushion (e.g., make-to-stock)
11-10© McGraw-Hill Education.
• Economies of scale
– Production costs are not linear
– Overhead costs spread over more units
• Diseconomies of scale
– Increased transportation costs
– Cost of more bureaucracy
– Increased organizational complexity
11-11© McGraw-Hill Education.
• Preemptive Strategy
– Build capacity ahead of need
– Positive capacity cushion
• Wait-and-see Strategy
– Small or negative capacity cushion
– Lower-risk strategy
11-12© McGraw-Hill Education.
• Quantitative Factors
– ROI, NPV
– Transportation, Taxes
– Lead times
• Qualitative Factors
– Language, norms
– Worker and customer attitudes
– Proximity to customers, suppliers, competitors
11-13© McGraw-Hill Education.
• Product-focused (55%)
– One family of products/services (e.g.,
computers)
• Market-focused (30%)
– Located near sales (e.g., electricity, bakeries)
• Process-focused (10%)
– Few technologies (e.g., computer chips, MRI
center)
• General purpose (5%)
– Several products/services (e.g., furniture,
banking)
11-14© McGraw-Hill Education.
• Matching supply & demand over a medium
time range
• Time horizon of about 12 months
• Aggregated demand for one or few categories
of product. Demand may fluctuate or be
uncertain.
• Possible to change both supply and demand
• Variety of management objectives
• Facilities are fixed (cannot be expanded or
reduced) during this timeframe
11-15© McGraw-Hill Education.
• Budgeting: closely tied to aggregate plan
• HR: workforce availability
• Operations: capacity/inventory planning
• Accounting: cost analysis
• Finance: capital investments
• Marketing: sales plan
11-16© McGraw-Hill Education.
• Influence demand through:
– Pricing
– Advertising and promotion
– Backlogs or reservations (shift demand)
– Development of complementary offerings
Seasonal products/service spread demand
o Lawn mower, snow blower
o Ski resort, mountain biking
11-17© McGraw-Hill Education.
• Influence (control) supply through:
– Hiring and layoff of employees
– Using overtime and undertime
– Using part-time or temporary labor
– Carrying inventory
– Outsourcing/subcontracting
– Cooperative arrangements
Share capacity during demand peaks
e.g., airlines, hotels, utilities
11-18© McGraw-Hill Education.
• Level Strategy
– Constant workforce size
– Inventory as buffer
• Chase Strategy
– Vary workforce size
– Produce to meet demand
– Typical for services
11-19© McGraw-Hill Education.
Aggregate Planning
Costs
• Hiring and firing costs (Chase Strategy)
• Overtime and undertime costs (Chase)
• Subcontracting costs (Chase)
• Part-time labor costs (Chase)
• Inventory-carrying costs (Level Strategy)
• Cost of stockout or back order (Level)
11-20© McGraw-Hill Education.
:
Level Workforce
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total
Resources
Regular workers 45 45 45 45 45 45 45 45 45 45 45 45
Overtime (%) 0 0 0 0 0 0 0 0 0 0 0 0
Units Produced 450 450 450 450 450 450 450 450 450 450 450 450 5400
Sales Forecast 300 300 350 400 450 500 650 600 475 475 450 450 5400
Inventory
(end of month)
200 350 450 500 500 450 250 100 75 50 50 50
Costs
Regular time $180 ### ### ### ### ### ### ### ### ### ### ### $2,160
Overtime 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Hire/Layoff 25 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25
Inventory
carrying
24 42 54 60 60 54 30 12 9 6 6 6 363
Total Cost $229 ### ### ### ### ### ### ### ### ### ### ### $2,548
11-21© McGraw-Hill Education.
Aggregate Planning Costs:
Chase Demand
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total
Resources
Regular workers 30 30 35 40 45 50 65 60 48 47 45 45
Overtime (%) 0 0 0 0 0 0 0 0 0 0 0 0
Units Produced 300 300 350 400 450 500 650 600 480 470 450 450 5400
Sales Forecast 300 300 350 400 450 500 650 600 475 475 450 450 5400
Inventory
(end of month)
50 50 50 50 50 50 50 50 55 50 50 50
Costs
Regular time $120 ### ### ### ### ### ### ### ### ### ### ### $2,160
Overtime 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Hire/Layoff 40.0 0.0 25.0 25.0 25.0 25.0 75.0 20.0 48.0 4.0 8.0 0.0 295
Inventory
carrying
6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.6 6.0 6.0 6.0 72.60
Total Cost $166 ### ### ### ### ### ### ### ### ### ### ### $2,527.60
11-22© McGraw-Hill Education.
11.1 Define capacity and utilization
11.2 Illustrate with an example a facilities strategy that
considers: amount, size, timing, location and
type.
11.3 Explain how S&OP is done.
11.4 Identify the demand and supply options that are
available for S&OP
11.5 Contrast and compare the chase and level
strategies
11.6 Define the various costs associated with
aggregate planning
11.7 Create an alternative strategy for the Hefty Beer
Company example
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
11-23
- Operations Management in the Supply Chain�Decisions and Cases
- How Much? Strategies for Capacity Cushion
Learning Objectives
Hierarchy of Capacity Decisions
Definition of Capacity
Capacity Utilization
Facilities Decisions
Facilities Strategy
Factors Affecting Facilities Strategy
How Large? Selecting Facility Size
When? Timing of Facility Additions
Where? Facility Location
What Type? Types of Facilities
Sales & Operations Planning (S&OP)
Cross-Functional Nature of S&OP
Demand Management
Supply Management
Aggregate Planning Strategies
Aggregate Planning Costs
Aggregate Planning – Level Strategy
Aggregate Planning – Chase Strategy
Summary
End of Presentation
Operations Management in th
e
Supply Chai
n
Decisions and Cases
Seventh Edition
Chapter 10
Forecasting
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
10-2© McGraw-Hill Education.
10.1 Describe why forecasting is important.
10.2 Describe the four common methods of qualitative
forecasting.
10.3 Calculate a moving average and exponential
smoothing forecast, and explain when they
should be used.
10.4 Evaluate forecast accuracy using a variety of
methods.
10.5 Carry out causal forecasting.
10.6 Evaluate factors that impact forecasting method
selection.
10.7 Explain the benefits and costs of CPFR
10-3© McGraw-Hill Education.
• Forecasting demand for operations outpu
t
– Forecasting: what we think demand will be
– Planning: what we think demand should be
– Demand: may differ from sales
• Forecasts are used in all functional areas:
marketing, finance, human resources, etc.
• Forecasts are necessary for operations
decision areas: process design, capacity
planning, inventory management, scheduling
10-4© McGraw-Hill Education.
Use of Forecasting: Operations
Decisions
Time
Horizon
Accuracy
Required
Number of
Forecasts
Management
Level
Forecasting
Method
Process design
Long Medium
Single or
few
Top
Qualitative
or causal
Capacity
planning,
facilities
Long Medium
Single or
few
Top
Qualitative
or causal
Aggregate
planning
Medium High Few Middle
Causal and
time series
Scheduling
Short Highest Many Lower Time series
Inventory
management
Short Highest Many Lower Time series
10-5© McGraw-Hill Education.
Use of Forecasting: Marketing,
Finance, & HR
Time
Horizon
Accuracy
Required
Number of
Forecasts
Management
Level
Forecasting
Method
Long-range
marketing
programs
Long Medium
Single or
few
Top Qualitative
Pricing decisions Short High Many Middle Time series
New product
introduction
Medium Medium Single Top
Qualitative
and causal
Cost estimating Short High Many Lower Time series
Capital budgeting Medium Highest Few Top
Causal and
time series
Labor planning Medium Medium Few Lower
Qualitative
and time
series
10-6© McGraw-Hill Education.
• Based on managerial judgment when there is
a lack of data available. No specific model.
• Major methods:
– Delphi technique
– Market surveys
– Life-cycles analogy
– Informed judgment (naïve models)
10-7© McGraw-Hill Education.
• Components of data:
– Level – average
– Trend – general direction (increasing/descreasing)
– Seasonality – short term recurring cycles
– Cycle – long term business cycle
– Error – random or irregular component
10-8© McGraw-Hill Education.
• Assumes no trend, seasonality, or cycle
• Simple moving average:
tt
Ntt
t
t
AF
N
DD
D
A
=
++
+
=
+
+−−
1
11 ……
• Weighted moving average:
11211 …… +−−+ ++== NtNtttt DWDWDWAF
10-9© McGraw-Hill Education.
Period Actual Demand Forecast
1 10
2 18
3 29
4 – 19
• Compute three period moving average for
Period 4 (number of periods is forecaster’s
decision)
( )
( ) 318294F
193101829AF
5
34
+
+=
=++==
periodfordemandactual
10-10© McGraw-Hill Education.
Note: The forecast is smoother as the number of periods
in the moving average increases.
10-11© McGraw-Hill Education.
• The new average is computed from the old
average:
( ) 11 -tt AA ααDt
−+=
• The value of the smoothing constant (α) is a
choice. It determines the extent to which the
new forecast weights recent demand (smooths
random variation).
( ) 0.2.-0.1usuallyisand1,and0betweenrangesAlpha α
10-12© McGraw-Hill Education.
• Forecast:
( )ttt FDαF −+=+1tF
F = forecast of demand
D = actual demand
t = time period
• Assumes no trend, seasonality, or cycle
• Note: we are adjusting 1tt FgettoF +
10-13© McGraw-Hill Education.
• The Sept. forecast was 15, but Sept. actual
sales were 13. ( ) 0.2.ofalphaUse α
– What is the October forecast?
( )
( )
14.6
forecastOctober
=−=
−+=
−α
+
=
4.015
15132.015
forecastSept.
actualSept.
forecastSept.
10-14© McGraw-Hill Education.
( ) reduced.isalphaofvalue
theassmootherisforecastThe
:Note
α
10-15© McGraw-Hill Education.
In addition to the forecast, firms should
estimate forecast accuracy:
• To monitor erratic demand observations or
“outliers”
• To determine when the forecasting method is
no longer tracking actual demand
• To determine the parameter values that
provide the forecast with the least error
10-16© McGraw-Hill Education.
• Cumulative sum of forecast errors (CFE)
• Mean square error (MSE)
• Mean absolute deviation (MAD)
• Mean absolute percentage errors (MAPE)
• Tracking Signal (TS)
10-17© McGraw-Hill Education.
t
n
t t
t
n
t
t
n
t
t
n
t
t
n
D
e
n
e
n
e
e
MAD
CFE
TSsignalTracking
100
MAPEerrorspercentageabsoluteMean
MADdeviationabsoluteMean
MSEerrorsquareMean
CFEerrorsforecastofsumCumulative
1
1
1
2
1
=
=
=
=
=
∑
∑
∑
∑
=
=
=
=
10-18© McGraw-Hill Education.
• Adaptive exponential smoothing
– ( ) variedistcoefficienSmoothing α
• Mathematical models
– Linear or nonlinear
• Box-Jenkins method
– Requires about 60 periods of past data
10-19© McGraw-Hill Education.
• Cause-and-effect model, using a data set of
other variables to predict demand (forecast).
• Examples:
– Use population and location characteristics to
forecast restaurant sales.
– Use supply chain data on inventory levels to
forecast sales of new generation products such
as cell phones.
10-20© McGraw-Hill Education.
• The general regression model:
bxay +=
∧
• Other forms of causal model:
– Econometric
– Input-output
– Simulation models
10-21© McGraw-Hill Education.
( )
( )
( )
( )
( ) 7Periodforforecast128.3472.39738.23F
s000’incomefamilymedianI
salesforecastedF
tyearinsalesactualD
2.3965142bSlope
38.230937aIntercept
128.3437.6
125.46413036.4
123.78612535.
7
122.58812435.2
125.22411936.3
123.78612435.7
121.1512034.6
tbaY
7
t
t
t
t
==+=
=
=
=
+=
ttt FDI
10-22© McGraw-Hill Education.
• Use or decision characteristics
– Scheduling decision? Facility expansion?
– Short range? Long range?
• Data availability
– Quantity and quality
• Data pattern
– Level? Unstable?
10-23© McGraw-Hill Education.
Collaborative Planning, Forecasting,
and Replenishment (CPFR)
• Aim is to achieve more accurate forecasts
• Share information across supply chain with
customers and suppliers
• Compare forecasts
– If discrepancy, look for reason
– Reach a consensus forecast
• Works best in B2B with few customers (e.g., a
small number of large retailers)
10-24© McGraw-Hill Education.
10.1 Describe why forecasting is important.
10.2 Describe the four common methods of qualitative
forecasting.
10.3 Calculate a moving average and exponential
smoothing forecast, and explain when they
should be used.
10.4 Evaluate forecast accuracy using a variety of
methods.
10.5 Carry out causal forecasting.
10.6 Evaluate factors that impact forecasting method
selection.
10.7 Explain the benefits and costs of CPFR
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
10-25
- Operations Management in the Supply Chain�Decisions and Cases
- Use of Forecasting: Operations Decisions
- Use of Forecasting: Marketing, Finance, & HR
- Collaborative Planning, Forecasting, and Replenishment (CPFR)
Learning Objectives
Forecasting for Decision Making
‘Qualitative’ Forecasting Methods
Time-Series Forecasting
Moving Average
Moving Average Example
Time-Series Data (Figure 10.2)
Exponential Smoothing
Simple Exponential Smoothing
Exponential Smoothing Example
Time-Series Data (Figure 10.3)
Forecast Accuracy
Measures of Forecast Accuracy
Forecast Accuracy: Formulas
Advanced Time-Series Forecasting
Causal Forecasting Methods
Causal Forecasting Models
Example of Causal Model
Selecting a Forecasting Method
Summary
End of Presentation
007A
College of Administrative and Financial Sciences
Assignment 2
Deadline: 04/12/2020 @ 23:59
Course Name:
Student’s Name:
Course Code:
Student’s ID Number:
Semester: I
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name: Dr Ganesh Dash
Students’ Grade: Marks Obtained/Out of
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
· The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
· Assignments submitted through email will not be accepted.
· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
· Students must mention question number clearly in their answer.
· Late submission will NOT be accepted.
· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
· Submissions without this cover page will NOT be accepted.
Deadline: 04/12/2020 @ 23:59
Learning Outcome:
· Understand the concept of process selection, forecasting, capacity planning, production forecast methods and schedule operations.
· Apply knowledge and skills to optimize production objective of maximizing profits using qualitative and quantitative techniques in related areas of operations management.
· Exhibit the knowledge of lean system, quality controls and green systems
Assignment Question(s): (Marks 10)
Question 1:
Workers should be given more control over the inspection for their own work. Discuss the pros and cons of this situation? (Marks 2)
Question 2:
A. What are the advantages of Exponential smoothing over the Moving average and the Weighted moving average? (Marks 2)
B. Explain the aggregate planning strategy? (Marks 2)
Question 3:
Sequence the jobs shown below by using a Gantt chart. Sequence the jobs in priority order 1, 2, 3, 4.
Job Work Center/Machine Hours Due Date (days)
1
A/3, B/2, C/2
3
2
C/2, A/4
2
3
B/6, A/1, C/3
4
4
C/4, A/1, B/2
3
a) Using finite capacity scheduling, draw a Gantt chart for the schedule (Marks 1)
b) What is the makespan? (Marks 0.5)
c) How much machine idle time is there? (Marks 0.5)
d) How much idle time (waiting time) is there for each job? (Marks 0.5)
e) When is each job delivered? (Marks 0.5)
f) Which department is the bottleneck? (Marks 0.5)
g) Calculate the machine utilization? (Marks 0.5)
Answer: