Posted: April 24th, 2023

Operation Week 6 Discussion 2: Materials Requirement Planning

563
CHAPTER
O U T L I N E
14
◆ Dependent Demand 566
◆ Dependent Inventory Model
Requirements 566
◆ MRP Structure 571
◆ MRP Management 575
GLOBAL COMPANY PROFILE: Wheeled Coach
C H A P T E R
10
OM
STRATEGY
DECISIONS
• Design of Goods and Services
• Managing Quality
• Process Strategy
• Location Strategies
• Layout Strategies
• Human Resources
• Supply-Chain Management
• Inventory Management
· Independent Demand ( Ch. 12 )
· Dependent Demand ( Ch. 14 )
· Lean Operations ( Ch. 16 )
• Scheduling
• Maintenance
CHAPTER GLOBAL COMPANY PROFILE Wheeled Coach
Material Requirements
Planning (MRP) and ERP

◆ Lot-Sizing Techniques 576
◆ Extensions of MRP 580
◆ MRP in Services 583
◆ Enterprise Resource Planning (ERP) 584
Alaska Airlines
M18_HEIZ0422_12_SE_C14.indd 563 05/11/15 5:36 PM
W
heeled Coach, headquartered in Winter Park, Florida, is the largest manufacturer of
ambulances in the world. The $200 million firm is an international competitor that sells more
than 25% of its vehicles to markets outside the U.S. Twelve major ambulance designs are
produced on assembly lines (i.e., a repetitive process) at the Florida plant, using 18,000 different
MRP Provides a Competitive
Advantage for Wheeled Coach
GLOBAL COMPANY PROFILE
Wheeled Coach
CHAPTER 1 4
564
This cutaway of one
ambulance interior
indicates the complexity
of the product, which for
some rural locations may
be the equivalent of a
hospital emergency room
in miniature. To complicate
production, virtually every
ambulance is custom
ordered. This customization
necessitates precise
orders, excellent bills of
materials, exceptional
inventory control from
supplier to assembly, and
an MRP system that works.
Wheeled Coach Industries Incorporated
Wheeled Coach uses work cells to feed
the assembly line. It maintains a complete
carpentry shop (to provide interior cabinetry),
a paint shop (to prepare, paint, and detail
each vehicle), an electrical shop (to provide
for the complex electronics in a modern
ambulance), an upholstery shop (to make
interior seats and benches), and as shown
here, a metal fabrication shop (to construct
the shell of the ambulance).
Wheeled Coach Industries Incorporated
M18_HEIZ0422_12_SE_C14.indd 564 05/11/15 5:36 PM
565
inventory items, of which 6,000 are manufactured and 12,000
purchased. Most of the product line is custom designed and
assembled to meet the specific and often unique requirements demanded by the ambulance’s application and
customer preferences.
This variety of products and the nature of the process
demand good material requirements planning (MRP). Effective use
of an MRP system requires accurate bills of material and inventory
records. The Wheeled Coach system provides daily updates and
has reduced inventory by more than 30% in just two years.
Wheeled Coach insists that four key tasks be performed
properly. First, the material plan must meet both the requirements of the master schedule and the capabilities of the
production facility. Second, the plan must be executed as
designed. Third, inventory investment must be minimized
through effective “time-phased” material deliveries, consignment inventories, and a constant review of purchase methods. Finally, excellent record integrity must be maintained.
Record accuracy is recognized as a fundamental ingredient of
Wheeled Coach’s successful MRP program. Its cycle counters are charged with material audits that not only correct
errors but also investigate and correct problems.
Wheeled Coach Industries uses MRP as the catalyst for
low inventory, high quality, tight schedules, and accurate
records. Wheeled Coach has found competitive advantage
via MRP.
565
On five parallel lines, ambulances
move forward each day to the next
workstation. The MRP system makes
certain that just the materials needed
at each station arrive overnight for
assembly the next day.
Wheeled Coach Industries Incorporated
Here an employee is installing the wiring for an ambulance. There are an average of 15 miles
of wire in a Wheeled Coach vehicle. This compares to 17 miles of wire in a sophisticated F-16
fighter jet.
Wheeled Coach Industries Incorporated
M18_HEIZ0422_12_SE_C14.indd 565 05/11/15 5:36 PM
566
Dependent Demand
Wheeled Coach, the subject of the Global Company Profile , and many other firms have found
important benefits in material requirements planning (MRP). These benefits include (1) better response to customer orders as the result of improved adherence to schedules, (2) faster
response to market changes, (3) improved utilization of facilities and labor, and (4) reduced
inventory levels. Better response to customer orders and to the market wins orders and market share. Better utilization of facilities and labor yields higher productivity and return on
investment. Less inventory frees up capital and floor space for other uses. These benefits are
the result of a strategic decision to use a dependent inventory scheduling system. Demand for
every component of an ambulance is dependent.
Demand for items is dependent when the relationship between the items can be determined.
Therefore, once management receives an order or makes a forecast for the final product, quantities for all components can be computed. All components are dependent items. The Boeing
Aircraft operations manager who schedules production of one plane per week, for example,
knows the requirements down to the last rivet. For any product, all components of that product are dependent demand items. More generally, for any product for which a schedule can be
established, dependent techniques should be used.
When the requirements of MRP are met, dependent models are preferable to the models
for independent demand (EOQ) described in Chapter 12 . 1 Dependent models are better not
only for manufacturers and distributors but also for a wide variety of firms from restaurants to
hospitals. The dependent technique used in a production environment is called material requirements planning (MRP) .
Because MRP provides such a clean structure for dependent demand, it has evolved as the
basis for Enterprise Resource Planning (ERP). ERP is an information system for identifying
and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders. We will discuss ERP in the latter part of this chapter.
Dependent Inventory Model Requirements
Effective use of dependent inventory models requires that the operations manager know the
following:
1. Master production schedule (what is to be made and when)
2. Specifications or bill of material (materials and parts required to make the product)
3. Inventory availability (what is in stock)
4. Purchase orders outstanding (what is on order, also called expected receipts)
5. Lead times (how long it takes to get various components)
We now discuss each of these requirements in the context of material requirements
planning.
L E A R N I N G
OBJECTIVES
LO 14.1 Develop a product structure 569
LO 14.2 Build a gross requirements plan 572
LO 14.3 Build a net requirements plan 573
LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ 577
LO 14.5 Describe MRP II 580
LO 14.6 Describe closed-loop MRP 582
LO 14.7 Describe ERP 584
STUDENT TIP
“Dependent demand” means
the demand for one item is
related to the demand for
another item.
Material requirements
planning (MRP)
A dependent demand technique
that uses a bill-of-material,
inventory, expected receipts, and
a master production schedule to
determine material requirements.
M18_HEIZ0422_12_SE_C14.indd 566 05/11/15 5:36 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 567
Master Production Schedule
A master production schedule (MPS) specifies what is to be made (e.g., the number of finished products or items) and when. The schedule must be in accordance with an aggregate plan. The
aggregate plan sets the overall level of output in broad terms (e.g., product families, standard
hours, or dollar volume). The plan, usually developed by the sales and operations planning
team, includes a variety of inputs, including financial data, customer demand, engineering
capabilities, labor availability, inventory fluctuations, supplier performance, and other considerations. Each of these inputs contributes in its own way to the aggregate plan, as shown in
Figure 14.1 .
As the planning process moves from the aggregate plan to execution, each of the lower-level
plans must be feasible. When one is not, feedback to the next higher level is required to make
the necessary adjustment. One of the major strengths of MRP is its ability to determine precisely the feasibility of a schedule within aggregate capacity constraints. This planning process
can yield excellent results. The aggregate plan sets the upper and lower bounds on the master
production schedule.
The master production schedule tells us how to satisfy demand by specifying what items
to make and when. It disaggregates the aggregate plan. While the aggregate plan (as discussed
in Chapter 13 ) is established in gross terms such as families of products or tons of steel, the
master production schedule is established in terms of specific products. Figure 14.2 shows the
master production schedules for three stereo models that flow from the aggregate plan for a
family of stereo amplifiers.
Sales & Operations Planning
Generates an aggregate plan
Human Resources
Staff planning
Finance
Cash flow
Marketing
Customer demand
Production
Capacity
Inventory
Supply Chain
Procurement
Supplier performance
Master production
schedule
Material
requirements plan
Schedule and
execute plan
Change master
production
schedule?
Figure 14.1
The Planning Process
Master production
schedule (MPS)
A timetable that specifies what
is to be made (usually finished
goods) and when.
Aggregate Plan Months
(Shows the total
quantity of amplifiers) 1,500 1,200
Master Production
Schedule
(Shows the specific type and
quantity of amplifier to be
produced)
240-watt amplifier
150-watt amplifier
75-watt amplifier
100
500
100
500
100
450
100
450
300 100
Weeks 1
January February
2 3 4 5 6 7 8
Figure 14.2
The Aggregate Plan Is the Basis for Development of the Master Production Schedule
M18_HEIZ0422_12_SE_C14.indd 567 05/11/15 5:36 PM
568 PART 3 | MANAGING OPERATIONS
Managers must adhere to the schedule for a reasonable length of time (usually a major
portion of the production cycle—the time it takes to produce a product). Many organizations
establish a master production schedule and establish a policy of not changing (“fixing”) the
near-term portion of the plan. This near-term portion of the plan is then referred to as the
“fixed,” “firm,” or “frozen” schedule. Wheeled Coach, the subject of the Global Company Profile
for this chapter, fixes the last 14 days of its schedule. Only changes farther out, beyond the fixed
schedule, are permitted. The master production schedule is a “rolling” production schedule.
For example, a fixed 7-week plan has an additional week added to it as each week is completed,
so a 7-week fixed schedule is maintained. Note that the master production schedule is a statement of what is to be produced; it is not a forecast. The master schedule can be expressed in the
following terms:
◆ A customer order in a job shop (make-to-order) company (examples: print shops, machine
shops, fine-dining restaurants)
◆ Modules in a repetitive (assemble-to-order or forecast) company (examples: Harley-Davidson
motorcycles, TVs, fast-food restaurant)
◆ An end item in a continuous (stock-to-forecast) company (examples: steel, beer, bread, light
bulbs, paper)
A master production schedule for Chef John’s “Buffalo Chicken Mac & Cheese” at the
Orlando Magic’s Amway Center is shown in Table 14.1 .
Bills of Material
Defining what goes into a product may seem simple, but it can be difficult in practice. As we
noted in Chapter 5 , to aid this process, manufactured items are defined via a bill of material.
A bill of material (BOM) is a list of quantities of components, ingredients, and materials required
to make a product. Individual drawings describe not only physical dimensions but also any
special processing as well as the raw material from which each part is made. Chef John’s recipe
for Buffalo Chicken Mac & Cheese specifies ingredients and quantities, just as Wheeled Coach
has a full set of drawings for an ambulance. Both are bills of material (although we call one a
recipe, and they do vary somewhat in scope).
One way a bill of material defines a product is by providing a product structure. Example 1
shows how to develop the product structure and “explode” it to reveal the requirements for
each component. A bill of material for item A in Example 1 consists of items B and C. Items
above any level are called parents ; items below any level are called components or children . By
convention, the top level in a BOM is the 0 level.
TABLE 14.1 Master Production Schedule for Chef John’s Buffalo Chicken Mac & Cheese
GROSS REQUIREMENTS FOR CHEF JOHN’S BUFFALO CHICKEN MAC & CHEESE
Day 6 7 8 9 10 11 12 13 14 and so on
Quantity 450 200 350 525 235 375
VIDEO 14.1
When 18,500 Orlando Magic Fans
Come to Dinner
Bill of material (BOM)
A listing of the components, their
description, and the quantity of
each required to make one unit of
a product.
VIDEO 14.2
MRP at Wheeled Coach
Ambulances
Example 1 DEVELOPING A PRODUCT STRUCTURE AND GROSS REQUIREMENTS
Speaker Kits, Inc., packages high-fidelity components for mail order. Components for the top-of-theline speaker kit, “Awesome” (A), include 2 Bs and 3 Cs.
Each B consists of 2 Ds and 2 Es. Each of the Cs has 2 Fs and 2 Es. Each F includes 2 Ds and 1 G.
It is an awesome sound system. (Most purchasers require hearing aids within 3 years, and at least one
court case is pending because of structural damage to a men’s dormitory.) As we can see, the demand for
B, C, D, E, F, and G is completely dependent on the master production schedule for A—the Awesome
speaker kits.
M18_HEIZ0422_12_SE_C14.indd 568 05/11/15 5:36 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 569
APPROACH c Given the preceding information, we construct a product structure and “explode” the
requirements.
SOLUTION c This structure has four levels: 0, 1, 2, and 3. There are four parents: A, B, C, and F.
Each parent item has at least one level below it. Items B, C, D, E, F, and G are components because each
item has at least one level above it. In this structure, B, C, and F are both parents and components. The
number in parentheses indicates how many units of that particular item are needed to make the item
immediately above it. Thus, B(2) means that it takes two units of B for every unit of A, and F(2) means
that it takes two units of F for every unit of C.
LO 14.1 Develop a
product structure
0 A
1
2
3
Level Product structure for “Awesome” (A)
B(2) C(3)
E(2) F(2)
D(2) G(1) D(2)
E(2)
Dragon_Fang/Shutterstock
Once we have developed the product structure, we can determine the number of units of each item
required to satisfy demand for a new order of 50 Awesome speaker kits. We “explode” the requirements
as shown:
Part B: 2 * number of As = (2)(50) = 100
Part C: 3 * number of As = (3)(50) = 150
Part D: 2 * number of Bs + 2 * number of Fs = (2)(100) + (2)(300) = 800
Part E: 2 * number of Bs + 2 * number of Cs = (2)(100) + (2)(150) = 500
Part F: 2 * number of Cs = (2)(150) = 300
Part G: 1 * number of Fs = (1)(300) = 300
INSIGHT c We now have a visual picture of the Awesome speaker kit requirements and knowledge of
the quantities required. Thus, for 50 units of A, we will need 100 units of B, 150 units of C, 800 units
of D, 500 units of E, 300 units of F, and 300 units of G.
LEARNING EXERCISE c If there are 100 Fs in stock, how many Ds do you need? [Answer: 600.]
RELATED PROBLEMS c 14.1–14.4, 14.5a,b, 14.13a,b, 14.17a,b (14.20a,b are available in MyOMLab)
Bills of material not only specify requirements but also are useful for costing, and they can serve as a list
of items to be issued to production or assembly personnel. When bills of material are used in this way,
they are usually called pick lists .
Modular Bills Bills of material may be organized around product modules (see Chapter 5 ).
Modules are not final products to be sold, but are components that can be produced and
assembled into units. They are often major components of the final product or product
options. Bills of material for modules are called modular bills . Modular bills are convenient
because production scheduling and production are often facilitated by organizing around
relatively few modules rather than a multitude of final assemblies. For instance, a firm may
make 138,000 different final products but may have only 40 modules that are mixed and
matched to produce those 138,000 final products. The firm builds an aggregate production plan and prepares its master production schedule for the 40 modules, not the 138,000
Modular bills
Bills of material organized by
major subassemblies or by
product options.
M18_HEIZ0422_12_SE_C14.indd 569 05/11/15 5:36 PM
570 PART 3 | MANAGING OPERATIONS
configurations of the final product. This approach allows the MPS to be prepared for a
reasonable number of items. The 40 modules can then be configured for specific orders at
final assembly.
Planning Bills and Phantom Bills Two other special kinds of bills of material are
planning bills and phantom bills. Planning bills (sometimes called “pseudo” bills, or super bills)
are created in order to assign an artificial parent to the bill of material. Such bills are used
(1) when we want to group subassemblies so the number of items to be scheduled is reduced
and (2) when we want to issue “kits” to the production department. For instance, it may not
be efficient to issue inexpensive items such as washers and cotter pins with each of numerous
subassemblies, so we call this a kit and generate a planning bill. The planning bill specifies
the kit to be issued. Consequently, a planning bill may also be known as kitted material, or
kit . Phantom bills of material are bills of material for components, usually subassemblies, that
exist only temporarily. These components go directly into another assembly and are never
inventoried. Therefore, components of phantom bills of material are coded to receive special
treatment; lead times are zero, and they are handled as an integral part of their parent item.
An example is a transmission shaft with gears and bearings assembly that is placed directly
into a transmission.
Low-Level Coding Low-level coding of an item in a BOM is necessary when
identical items exist at various levels in the BOM. Low-level coding means that the item is
coded at the lowest level at which it occurs. For example, item D in Example 1 is coded
at the lowest level at which it is used. Item D could be coded as part of B and occur at
level 2. However, because D is also part of F, and F is level 2, item D becomes a level-3
item. Low-level coding is a convention to allow easy computing of the requirements of
an item.
Accurate Inventory Records
As we saw in Chapter 12 , knowledge of what is in stock is the result of good inventory management. Good inventory management is an absolute necessity for an MRP system to work.
If the firm does not exceed 99% record accuracy, then material requirements planning will
not work. 2
Purchase Orders Outstanding
Knowledge of outstanding orders exists as a by-product of well-managed purchasing and
inventory-control departments. When purchase orders are executed, records of those orders
and their scheduled delivery dates must be available to production personnel. Only with good
purchasing data can managers prepare meaningful production plans and effectively execute
an MRP system.
Lead Times for Components
Once managers determine when products are needed, they determine when to
acquire them. The time required to acquire (that is, purchase, produce, or assemble) an
item is known as lead time . Lead time for a manufactured item consists of move , setup ,
and assembly or run times for each component. For a purchased item, the lead time
includes the time between recognition of need for an order and when it is available for
production.
When the bill of material for Awesome speaker kits (As), in Example 1 , is turned on its side
and modified by adding lead times for each component (see Table 14.2 ), we then have a timephased product structure . Time in this structure is shown on the horizontal axis of Figure 14.3
with item A due for completion in week 8. Each component is then offset to accommodate lead
times.
Planning bills (or kits)
Material groupings created in
order to assign an artificial parent
to a bill of material; also called
“pseudo” bills.
Phantom bills of material
Bills of material for components,
usually assemblies, that exist
only temporarily; they are never
inventoried.
Low-level coding
A number that identifies items
at the lowest level at which they
occur.
Lead time
In purchasing systems, the time
between recognition of the need
for an order and receiving it; in
production systems, it is the order,
wait, move, queue, setup, and run
times for each component.
TABLE 14.2
Lead Times for Awesome
Speaker Kits (As)
COMPONENT LEAD TIME
A 1 week
B 2 weeks
C 1 week
D 1 week
E 2 weeks
F 3 weeks
G 2 weeks
M18_HEIZ0422_12_SE_C14.indd 570 05/11/15 5:36 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 571
MRP Structure
Although most MRP systems are computerized, the MRP procedure is straightforward,
and we can illustrate a small one by hand. A master production schedule, a bill of material,
inventory and purchase records, and lead times for each item are the ingredients of a material
requirements planning system (see Figure 14.4 ).
Once these ingredients are available and accurate, the next step is to construct a gross material requirements plan. The gross material requirements plan is a schedule, as shown in Example 2 .
It combines a master production schedule (that requires one unit of A in week 8) and the timephased schedule ( Figure 14.3 ). It shows when an item must be ordered from suppliers if there
is no inventory on hand or when the production of an item must be started to satisfy demand
for the finished product by a particular date.
Time in weeks
12345678
D
G
F
E
C
B
A
E
D
2 weeks
2 weeks
2 weeks
2 weeks to
produce
1 week
1 week
1 week
1 week
3 weeks
Must have D and E
completed here so
production can
begin on B
Start production of D
STUDENT TIP
This is a product structure on
its side, with lead times.
Gross material requirements
plan
A schedule that shows the total
demand for an item (prior to subtraction of on-hand inventory and
scheduled receipts) and (1) when
it must be ordered from suppliers,
or (2) when production must be
started to meet its demand by a
particular date.
STUDENT TIP
MRP software programs are
popular because manual
approaches are slow and error
prone.
Figure 14.3
Time-Phased Product
Structure
MRP by
period report
Planned order
report
Purchase advice
MRP by
date report
Order early or late
or not needed
Order quantity too
small or too large
Data Files
Material
requirements
planning
programs
(computer and
software)
Master
production schedule
Output Reports
Bill of material
Lead times
Inventory data
Purchasing data
(Item master file)
Exception reports
Figure 14.4
Structure of the MRP System
M18_HEIZ0422_12_SE_C14.indd 571 05/11/15 5:36 PM
572 PART 3 | MANAGING OPERATIONS
Example 2 BUILDING A GROSS REQUIREMENTS PLAN
Each Awesome speaker kit (item A of Example 1 ) requires all the items in the product structure for A.
Lead times are shown in Table 14.2 .
APPROACH c Using the information in Example 1 and Table 14.2 , we construct the gross material
requirements plan with a production schedule that will satisfy the demand of 50 units of A by week 8.
SOLUTION c We prepare a schedule as shown in Table 14.3 .
TABLE 14.3 Gross Material Requirements Plan for 50 Awesome Speaker Kits (As)
with Order Release Dates Also Shown
WEEK
12345678 LEAD TIME
A. Required date
Order release date 50
50
1 week
B. Required date
Order release date 100
100
2 weeks
C. Required date
Order release date 150
150
1 week
E. Required date
Order release date 200 300
200 300
2 weeks
F. Required date
Order release date 300
300
3 weeks
D. Required date
Order release date 600
600
200
200
1 week
G. Required date
Order release date 300
300
2 weeks
You can interpret the gross material requirements shown in Table 14.3 as follows: If you want 50 units
of A at week 8, you must start assembling A in week 7. Thus, in week 7, you will need 100 units of B
and 150 units of C. These two items take 2 weeks and 1 week, respectively, to produce. Production of B,
therefore, should start in week 5, and production of C should start in week 6 (lead time subtracted from
the required date for these items). Working backward, we can perform the same computations for all
of the other items. Because D and E are used in two different places in Awesome speaker kits, there are
two entries in each data record.
INSIGHT c The gross material requirements plan shows when production of each item should begin
and end in order to have 50 units of A at week 8. Management now has an initial plan.
LEARNING EXERCISE c If the lead time for G decreases from 2 weeks to 1 week, what is the new
order release date for G? [Answer: 300 in week 2.]
RELATED PROBLEMS c 14.6, 14.8, 14.10a, 14.11a
EXCEL OM Data File Ch14Ex2.xls can be found in MyOMLab.
LO 14.2 Build a gross
requirements plan
So far, we have considered gross material requirements , which assumes that there is no
inventory on hand. A net requirements plan adjusts for on-hand inventory. When considering
on-hand inventory, we must realize that many items in inventory contain subassemblies
or parts. If the gross requirement for Awesome speaker kits (As) is 100 and there are 20 of
those speakers on hand, the net requirement for As is 80 (that is, 100 – 20). However, each
Awesome speaker kit on hand contains 2 Bs. As a result, the requirement for Bs drops by
40 Bs (20 A kits on hand × 2 Bs per A). Therefore, if inventory is on hand for a parent
item, the requirements for the parent item and all its components decrease because each
Awesome kit contains the components for lower-level items. Example 3 shows how to create a net requirements plan.
Net requirements plan
The result of adjusting gross
requirements for inventory on
hand and scheduled receipts.
M18_HEIZ0422_12_SE_C14.indd 572 05/11/15 5:36 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 573
Example 3 DETERMINING NET REQUIREMENTS
Speaker Kits, Inc., developed a product structure from a bill of material in Example 1 . Example 2 developed a gross requirements plan. Given the following on-hand inventory, Speaker Kits, Inc., now wants
to construct a net requirements plan. The gross requirement remains 50 units in week 8, and component
requirements are as shown in the product structure in Example 1 .
ITEM ON HAND ITEM ON HAND
A 10E10
B 15F 5
C 20G 0
D 10
LO 14.3 Build a net
requirements plan
1
15 15 15 15 15 15 15 15
80A
120A
65
65
65
Lot- 101 — A0— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
2345
Week
678
Lot
Size
Lead
Time
(weeks)
On
Hand
Safety
Stock
Allocated
LowLevel
Code
Item
Identification
200
120
120
120
195
195
195
20 20 20 20 20 20 20 20
100
100
100
Lot- 152 — B1— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
10 10 10 10 10 10 10 10 10
50
40
40
40
Lot- 201 — C1— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
10 10 10 10 10 10
130B
130B 390F
195F
200C
200C
200
200
Lot- 102 — E2— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
5 5 5 5 5 5 5
195
195
195
Lot- —53 F2— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
10 10 10 10
130
130
130
Lot- 101 — D3— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
380
380
380
0
Lot- —02 G3— Gross Requirements
forLot
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
2 * number of As = 80
3 * number of As = 120
2 * number of Bs = 130
2 * number of Cs = 200
2 * number of Cs = 200
2 * number of Bs = 130
2 * number of Fs = 390
1 * number of Fs = 195
Net Material Requirements Plan for 50 Units of Product A in Week 8. ( The superscript is the source of the demand )
M18_HEIZ0422_12_SE_C14.indd 573 05/11/15 5:36 PM
574 PART 3 | MANAGING OPERATIONS
APPROACH c A net material requirements plan includes gross requirements, on-hand inventory, net
requirements, planned order receipt, and planned order release for each item. We begin with A and work
backward through the components.
SOLUTION c Shown in the MRP format on the previous page is the net material requirements plan
for product A.
Constructing a net requirements plan is similar to constructing a gross requirements plan. Starting
with item A, we work backward to determine net requirements for all items. To do these computations,
we refer to the product structure, on-hand inventory, and lead times. The gross requirement for A is
50 units in week 8. Ten items are on hand; therefore, the net requirements and the scheduled planned
order receipt are both 40 items in week 8. Because of the one-week lead time, the planned order release is
40 items in week 7 (see the arrow connecting the order receipt and order release). Referring to week 7 and
the product structure in Example 1 , we can see that 80 (2 × 40) items of B and 120 (3 × 40) items of C are
required in week 7 to have a total for 50 items of A in week 8. The letter superscripted A to the right of
the gross figure for items B and C was generated as a result of the demand for the parent, A. Performing
the same type of analysis for B and C yields the net requirements for D, E, F, and G. Note the on-hand
inventory in row E in week 6 is zero. It is zero because the on-hand inventory (10 units) was used to make
B in week 5. By the same token, the inventory for D was used to make F in week 3.
INSIGHT c Once a net requirement plan is completed, management knows the quantities needed, an
ordering schedule, and a production schedule for each component.
LEARNING EXERCISE c If the on-hand inventory quantity of component F is 95 rather than 5, how
many units of G will need to be ordered in week 1? [Answer: 105 units.]
RELATED PROBLEMS c 14.9, 14.10b, 14.11b, 14.12, 14.13c, 14.14b, 14.15a,b,c, 14.16a,b, 14.17c
(14.18–14.21 are available in MyOMLab)
ACTIVE MODEL 14.1 This example is further illustrated in Active Model 14.1 in MyOMLab.
EXCEL OM Data File Ch14Ex3.xls can be found in MyOMLab.
Planned order receipt
The quantity planned to be
received at a future date.
Planned order release
The scheduled date for an order
to be released.
Examples 2 and 3 considered only product A, the Awesome speaker kit, and its completion
only in week 8. Fifty units of A were required in week 8. Normally, however, there is a demand
for many products over time. For each product, management must prepare a master production schedule (as we saw earlier, in Table 14.1 ). Scheduled production of each product is added
to the master schedule and ultimately to the net material requirements plan. Figure 14.5 shows
how several product schedules, including requirements for components sold directly, can contribute to one gross material requirements plan.
Most inventory systems also note the number of units in inventory that have been assigned to
specific future production but not yet used or issued from the stockroom. Such items are often
STUDENT TIP
MRP gross requirements
can combine multiple
products, spare parts, and
items sold directly.
A
B C B C
S
5 6 7 8 9 10 11
40 50 15
8 9 10 11
40
12 13
3020
1
10
2
10
3
Master schedule
for B
sold directly
Lead time = 6 for S
Master schedule for S
Lead time = 4 for A
Master schedule for A
654321 7 8
15+30
=45
40+10
=50 10 205040
Therefore, these
are the gross
requirements for B
Gross requirements: B
Periods
Periods
Figure 14.5
Several Schedules
Contributing to a Gross
Requirements Schedule for B
One B is in each A, and one B is
in each S; in addition, 10 Bs sold
directly are scheduled in week 1,
and 10 more that are sold directly
are scheduled in week 2.
M18_HEIZ0422_12_SE_C14.indd 574 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 575
referred to as allocated items. Allocated items increase requirements as shown in Figure 14.6 ,
where gross requirements have been increased from 80 to 90 to reflect the 10 allocated items.
Safety Stock The continuing task of operations managers is to remove variability. This is
the case in MRP systems as in other operations systems. Realistically, however, managers need
to realize that bills of material and inventory records, like purchase and production quantities,
as well as lead times, may not be perfect. This means that some consideration of safety stock
may be prudent. Because of the significant domino effect of any change in requirements, safety
stock should be minimized, with a goal of ultimate elimination. When safety stock is deemed
absolutely necessary, the usual policy is to build it into (increase) the inventory requirement of
the MRP logic. Distortion can be minimized when safety stock is held at the finished goods or
module level and at the purchased component or raw material level.
MRP Management
Now let’s look at the dynamics and limitations of MRP.
MRP Dynamics
The inputs to MRP (the master schedule, BOM, lead times, purchasing, and inventory) frequently change. Conveniently, a central strength of MRP systems is timely and accurate
replanning. However, many firms find they do not want to respond to minor scheduling or
quantity changes even if they are aware of them. These frequent changes generate what is
called system nervousness and can create havoc in purchasing and production departments if
implemented. Consequently, OM personnel reduce such nervousness by evaluating the need
and impact of changes prior to disseminating requests to other departments. Two tools are
particularly helpful when trying to reduce MRP system nervousness.
The first is time fences. Time fences allow a segment of the master schedule to be designated
as “not to be rescheduled.” This segment of the master schedule is therefore not changed during the periodic regeneration of schedules. The second tool is pegging. Pegging means tracing
upward in the BOM from the component to the parent item. By pegging upward, the production planner can determine the cause for the requirement and make a judgment about the
necessity for a change in the schedule.
With MRP, the operations manager can react to the dynamics of the real world. If the
nervousness is caused by legitimate changes, then the proper response may be to investigate the
production environment—not adjust via MRP.
MRP Limitations
MRP does not do detailed scheduling—it plans. MRP is an excellent tool for product-focused
and repetitive facilities, but it has limitations in process (make-to-order) environments. MRP
will tell you that a job needs to be completed on a certain week or day but does not tell you
Lot
Size
Lead
Time
On
Hand
Safety
Stock Allocated
LowLevel
Code
Item
ID
12345678
Period
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Figure 14.6
Sample MRP Planning Sheet for Item Z
System nervousness
Frequent changes in an MRP
system.
Time fences
A means for allowing a segment of
the master schedule to be designated as “not to be rescheduled.”
Pegging
In material requirements planning
systems, tracing upward the bill
of material from the component to
the parent item.
M18_HEIZ0422_12_SE_C14.indd 575 05/11/15 5:37 PM
576 PART 3 | MANAGING OPERATIONS
that Job X needs to run on Machine A at 10:30 a.m. and be completed by 11:30 a.m. so that
Job X can then run on Machine B. MRP is also a planning technique with fixed lead times
that loads work into infinite size “buckets.” The buckets are time units, usually one week. MRP
puts work into these buckets without regard to capacity. Consequently, MRP is considered an
infinite scheduling technique. Techniques for the alternative, finite scheduling, are discussed in
Chapter 15 .
Lot-Sizing Techniques
An MRP system is an excellent way to do production planning and determine net requirements. But net requirements still demand a decision about how much and when to order. This
decision is called a lot-sizing decision . There are a variety of ways to determine lot sizes in an
MRP system; commercial MRP software usually includes the choice of several lot-sizing techniques. We now review a few of them.
Lot-for-Lot In Example 3 , we used a lot-sizing technique known as lot-for-lot , which produced exactly what was required. This decision is consistent with the objective of an MRP
system, which is to meet the requirements of dependent demand. Thus, an MRP system should
produce units only as needed, with no safety stock and no anticipation of further orders. When
frequent orders are economical (i.e., when setup costs are low) and just-in-time inventory techniques implemented, lot-for-lot can be very efficient. However, when setup costs are significant, lot-for-lot can be expensive. Example 4 uses the lot-for-lot criteria and determines cost
for 10 weeks of demand.
Buckets
Time units in a material
requirements planning
system.
Lot-sizing decision
The process of, or techniques
used in, determining lot size.
Lot-for-lot
A lot-sizing technique that
generates exactly what is
required to meet the plan.
Example 4 LOT SIZING WITH LOT-FOR-LOT
Speaker Kits, Inc., wants to compute its ordering and carrying cost of inventory on lot-for-lot criteria.
APPROACH c With lot-for-lot, we order material only as it is needed. Once we have the cost of ordering (setting up), the cost of holding each unit for a given time period, and the production schedule, we
can assign orders to our net requirements plan.
SOLUTION c Speaker Kits has determined that, for component B, setup cost is $100 and holding cost
is $1 per period. The production schedule, as reflected in net requirements for assemblies, is as follows:
MRP Lot Sizing: Lot-for-Lot Technique*
WEEK 1 2 3 4 5 6 7 8 9 10
Gross requirements 35 30 40 0 10 40 30 0 30 55
Scheduled receipts
Projected on hand 35 35 000000000
Net requirements 0 30 40 0 10 40 30 0 30 55
Planned order receipts 30 40 10 40 30 30 55
Planned order releases 30 40 10 40 30 30 55
* Holding costs = $1/unit/week; setup cost = $100; gross requirements average per week = 27; lead time = 1 week.
The lot-sizing solution using the lot-for-lot technique is shown in the table. The holding cost is zero as
there is never any end-of-period inventory. (Inventory in the first period is used immediately and therefore has no holding cost.) But seven separate setups (one associated with each order) yield a total cost of
$700. (Holding cost = 0 × 1 = 0; ordering cost = 7 × 100 = 700.)
INSIGHT c When supply is reliable and frequent orders are inexpensive, but holding cost or obsolescence is high, lot-for-lot ordering can be very efficient.
LEARNING EXERCISE c What is the impact on total cost if holding cost is $2 per period rather than $1?
[Answer: Total holding cost remains zero, as no units are held from one period to the next with lot-for-lot.]
RELATED PROBLEMS c 14.22, 14.25, 14.26a, 14.27a (14.28b is available in MyOMLab)
M18_HEIZ0422_12_SE_C14.indd 576 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 577
Economic Order Quantity (EOQ) We now extend our discussion of EOQ in
Chapter 12 to use it as a lot-sizing technique for MRP systems. As we indicated there, EOQ
is useful when we have relatively constant demand. However, demand may change every
period in MRP systems. Therefore, EOQ lot sizing often does not perform well in MRP.
Operations managers should take advantage of demand information when it is known,
rather than assuming a constant demand. EOQ is used to do lot sizing in Example 5 for
comparison purposes.
LO 14.4 Determine lot
sizes for lot-for-lot, EOQ,
and POQ
This Nissan line in Smyrna,
Tennessee, has little inventory
because Nissan schedules to a
razor’s edge. At Nissan, MRP
helps reduce inventory to worldclass standards. World-class
automobile assembly requires that
purchased parts have a turnover of
slightly more than once a day and
that overall turnover approaches
150 times per year.
John Russell/AP Images
Example 5 LOT SIZING WITH EOQ
With a setup cost of $100 and a holding cost per week of $1, Speaker Kits, Inc., wants to examine its cost
for component B, with lot sizes based on an EOQ criteria.
APPROACH c Using the same cost and production schedule as in Example 4 , we determine net
requirements and EOQ lot sizes.
SOLUTION c Ten-week usage equals a gross requirement of 270 units; therefore, weekly usage equals
27, and 52 weeks (annual usage) equals 1,404 units. From Chapter 12 , the EOQ model is:
Q* = A
2DS
H
where D = annual usage = 1,404
S = setup cost = $100
H = holding (carrying) cost, on an annual basis per unit
= $1 * 52 weeks = $52
Q* = 73 units
M18_HEIZ0422_12_SE_C14.indd 577 05/11/15 5:37 PM
578 PART 3 | MANAGING OPERATIONS
Therefore, place an order of 73 units, as necessary, to avoid a stockout.
MRP Lot Sizing: EOQ Technique*
WEEK 1 2 3 4 5 6 7 8 9 10
Gross requirements 35 30 40 0 10 40 30 0 30 55
Scheduled receipts
Projected on hand 35 35 0 43 3 3 66 26 69 69 39
Net requirements 0 30 0 0 7 0 4 0 0 16
Planned order receipts 73 73 73 73
Planned order releases 73 73 73 73
* Holding costs = $1/unit/week; setup cost = $100; gross requirements average per week = 27; lead time = 1 week.
For the 10-week planning period:
Holding cost = 375 units * $1 = $375 (includes 57 remaining at the end of week 10)
Ordering cost = 4 * $100 = $400
Total = $375 + $400 = $775
INSIGHT c EOQ can be a reasonable lot-sizing technique when demand is relatively constant.
However, notice that actual holding cost will vary substantially depending on the rate of actual
usage. If any stockouts had occurred, these costs too would need to be added to our actual EOQ
cost of $775.
LEARNING EXERCISE c What is the impact on total cost if holding cost is $2 per period rather than
$1? [Answer: The EOQ quantity becomes 52, the theoretical annual total cost becomes $5,404, and the
10-week cost is $1,039 ($5,404 × (10>52).]
RELATED PROBLEMS c 14.23, 14.25, 14.26b, 14.27c (14.28a is available in MyOMLab)
Periodic Order Quantity Periodic order quantity (POQ) is a lot-sizing technique that orders
the quantity needed during a predetermined time between orders, such as every 3 weeks. We
define the POQ interval as the EOQ divided by the average demand per period (e.g., one
week). 3 The POQ is the order quantity that covers the specific demand for that interval. Each
order quantity is recalculated at the time of the order release , never leaving extra inventory. An
application of POQ is shown in Example 6 .
Periodic order quantity (POQ)
An inventory ordering technique
that issues orders on a predetermined time interval, with the order
quantity covering the total of the
interval’s requirements.
Example 6 LOT SIZING WITH POQ
With a setup cost of $100 and a holding cost per week of $1, Speaker Kits, Inc., wants to examine its cost
for component B, with lot sizes based on POQ.
APPROACH c Using the same cost and production schedule as in Example 5 , we determine net
requirements and POQ lot sizes.
SOLUTION c Ten-week usage equals a gross requirement of 270 units; therefore, average weekly
usage equals 27, and from Example 5 , we know the EOQ is 73 units.
We set the POQ interval equal to the EOQ divided by the average weekly usage.
Therefore:
POQ interval = EOQ/Average weekly usage = 73/27 = 2.7, or 3 weeks.
The POQ order size will vary by the quantities required in the respective weeks, as shown in the following
table, with first planned order release in week 1.
M18_HEIZ0422_12_SE_C14.indd 578 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 579
Note : Orders are postponed if no demand exists, which is why week 7’s order is postponed until week 8.
MRP Lot Sizing: POQ Technique*
WEEK 1 2 3 4 5 6 7 8 9 10
Gross requirements 35 30 40 0 10 40 30 0 30 55
Scheduled receipts
Projected on hand 35 35 0 40 0 0 70 30 0 0 55
Net requirements 0 30 0 0 10 0 0 0 55 0
Planned order receipts 70 80 0 85 0
Planned order releases 70 80 85
* Holding costs = $1/unit/week; setup cost = $100; gross requirements average per week = 27; lead time = 1 week.
Setups = 3 * $100 = $300
Holding cost = (40 + 70 + 30 + 55) units * $1 each = $195
The POQ solution yields a computed 10@week cost of $300 + $195 = $495
INSIGHT c Because POQ tends to produce a balance between holding and ordering costs with no
excess inventory, POQ typically performs much better than EOQ. Notice that even with frequent recalculations, actual holding cost can vary substantially, depending on the demand fluctuations. We are
assuming no stockouts. In this and similar examples, we are also assuming no safety stock; such costs
would need to be added to our actual cost.
LEARNING EXERCISE c What is the impact on total cost if holding cost is $2 per period rather than
$1? [Answer: EOQ = 52; POQ interval = 52/27 = 1.93 ≈ 2 weeks; holding cost = $270; setups = $400.
The POQ total cost becomes $670.]
RELATED PROBLEMS c 14.24, 14.25, 14.26c, 14.27b (14.28c is available in MyOMLab)
Other lot-sizing techniques, known as dynamic lot-sizing , are similar to periodic order
quantity as they attempt to balance the lot size against the setup cost. These are part period balancing (also called least total cost ), least unit cost, and least period cost (also called Silver-Meal ).
Another technique, Wagner-Whitin , takes a different approach by using dynamic programming
to optimize ordering over a finite time horizon. 4
Lot-Sizing Summary In the three speaker kits lot-sizing examples, we found the following costs:
COSTS
SETUP HOLDING TOTAL
Lot-for-lot $700 $0 $700
Economic order quantity (EOQ) $400 $375 $775
Periodic order quantity (POQ) $300 $195 $495
These examples should not, however, lead operations personnel to hasty conclusions about
the preferred lot-sizing technique. In theory, new lot sizes should be computed whenever there
is a schedule or lot-size change anywhere in the MRP hierarchy. In practice, such changes
cause the instability and system nervousness referred to earlier in this chapter. Consequently,
such frequent changes are not made. This means that all lot sizes are wrong because the production system cannot and should not respond to frequent changes. Note that there are no
“shortage” (out of stock) charges in any of these lot-sizing techniques. This limitation places
added demands on accurate forecasts and “time fences.”
In general, the lot-for-lot approach should be used whenever low-cost setup can be
achieved. Lot-for-lot is the goal. Lots can be modified as necessary for scrap allowances, process
constraints (for example, a heat-treating process may require a lot of a given size), or raw
M18_HEIZ0422_12_SE_C14.indd 579 05/11/15 5:37 PM
580 PART 3 | MANAGING OPERATIONS
material purchase lots (for example, a truckload of chemicals may be available in only one lot
size). However, caution should be exercised prior to any modification of lot size because the
modification can cause substantial distortion of actual requirements at lower levels in the MRP
hierarchy. When setup costs are significant and demand is reasonably smooth, POQ or even
EOQ should provide satisfactory results. Too much concern with lot sizing yields false accuracy
because of MRP dynamics. A correct lot size can be determined only after the fact, based on
what actually happened in terms of requirements.
Extensions of MRP
In this section, we review three extensions of MRP .
Material Requirements Planning II (MRP II)
Material requirements planning II is an extremely powerful technique. Once a firm has MRP in
place, requirements data can be enriched by resources other than just components. When
MRP is used this way, resource is usually substituted for requirements , and MRP becomes
MRP II . It then stands for material resource planning.
So far in our discussion of MRP, we have scheduled products and their components. However, products require many resources, such as energy and money, beyond the product’s tangible
components. In addition to these resource inputs, outputs can be generated as well. Outputs can
include such things as scrap, packaging waste, effluent, and carbon emissions. As OM becomes
increasingly sensitive to environmental and sustainability issues, identifying and managing byproducts takes on more significance. MRP II provides a vehicle for doing so. Table 14.4 provides an example of labor-hours, machine-hours, grams of greenhouse gas emissions, pounds
of scrap, and cash, in the format of a gross requirements plan. With MRP II, management can
identify both the inputs and outputs as well as the relevant schedule. MRP II provides another
tool in OM’s battle for sustainable operations.
Material requirements
planning II (MRP II)
A system that allows, with MRP
in place, inventory data to be
augmented by other resource variables; in this case, MRP becomes
material resource planning .
LO 14.5 Describe MRP II
Many MRP programs, such as
Resource Manager for Excel , are
commercially available. Resource
Manager’s initial menu screen is
shown here.
A demo program is available for
student use at
www.usersolutions.com .
Jim Convis, User Solutions, Inc.
M18_HEIZ0422_12_SE_C14.indd 580 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 581
MRP II systems are seldom stand-alone programs. Most are tied into other computer
software. Purchasing, production scheduling, capacity planning, inventory, and warehouse
management systems are a few examples of this data integration.
Closed-Loop MRP
Closed-loop material requirements planning implies an MRP system that provides feedback
to scheduling from the inventory control system. Specifically, a closed-loop MRP system provides
information to the capacity plan, master production schedule, and ultimately to the production plan (as shown in Figure 14.7 ). Virtually all commercial MRP systems are closed-loop.
Capacity Planning
In keeping with the definition of closed-loop MRP, feedback about workload is obtained
from each work center. Load reports show the resource requirements in a work center for
all work currently assigned to the work center, all work planned, and expected orders.
TABLE 14.4 Material Resource Planning (MRP II)
Weeks
LEAD TIME 5 6 7 8
Computer
Labor-hours: .2 each
Machine-hours: .2 each
GHG Emissions : .25 each
Scrap: 1 ounce fi berglass each
Payables: $0
1 100
20
20
25 grams
6.25 lb
$0
PC board (1 each)
Labor-hours: .15 each
Machine-hours: .1 each
GHG Emissions : 2.5 each
Scrap: .5 ounces copper each
Payables: raw material at $5 each
2 100
15
10
250 grams
3.125 lb
$500
Processors (5 each)
Labor-hours: .2 each
Machine-hours: .2 each
GHG Emissions: .50 each
Scrap: .01 ounces of acid waste each
Payables: processor components at $10 each
4 500
100
100
25,000 grams
0.3125 lb
$5,000
By utilizing the logic of MRP,
resources such as labor, machinehours, greenhouse gas emissions,
scrap, and cost can be accurately
determined and scheduled.
Weekly demand for labor,
machine-hours, greenhouse gas
emissions, scrap, and payables for
100 computers are shown.
Priority Management
Develop Master Production Schedule
Prepare Materials Requirements Plan
Detailed Production Activity Control
(Shop Scheduling/Dispatching)
OK? YES
OK? YES
Capacity Management
Planning
(see this chapter)
(see Chapter 13)
Execution (see Chapter 15)
(in repetitive systems
JIT techniques are used)
Evaluate Resource Availability
(Rough Cut)
Determine Capacity Availability
Implement Input/Output Control
OK? NO
OK? NO
Aggregate Plan
Figure 14.7
Closed-Loop Material Requirements Planning
Closed-loop MRP system
A system that provides feedback
to the capacity plan, master production schedule, and production
plan so planning can be kept valid
at all times.
Load report
A report showing the resource
requirements in a work center
for all work currently assigned
there as well as all planned and
expected orders.
M18_HEIZ0422_12_SE_C14.indd 581 05/11/15 5:37 PM
582 PART 3 | MANAGING OPERATIONS
Figure 14.8 (a) shows that the initial load in the milling center exceeds capacity on days 2, 3,
and 5. Closed-loop MRP systems allow production planners to move the work between time
periods to smooth the load or at least bring it within capacity. (This is the “capacity planning”
part of Figure 14.7 .) The closed-loop MRP system can then reschedule all items in the net
requirements plan (see Figure 14.8 [b]).
Tactics for smoothing the load and minimizing the impact of changed lead time include
the following:
1. Overlapping, which reduces the lead time, sends pieces to the second operation before the
entire lot is completed on the first operation.
2. Operations splitting sends the lot to two different machines for the same operation. This
involves an additional setup, but results in shorter throughput times because only part of
the lot is processed on each machine.
3. Order splitting, or lot splitting , involves breaking up the order and running part of it earlier (or later) in the schedule.
Example 7 shows a brief detailed capacity scheduling example using order splitting to improve
utilization.
Capacity exceeded
on days 2, 3, and 5
1 23 5 4
Days
14
8
6
4
2
0
10
12
Standard Labor-Hours
Available
capacity
Days
(a) (b)
2 orders moved to day 1 from day 2 (a day early)
1 order forced to overtime or to day 6
2 orders moved to day 4 (a day early)
1 23 5 4
14
8
6
4
2
0
10
12
Standard Labor-Hours
Figure 14.8
(a) Initial Resource
Requirements Profile for a
Work Center
(b) Smoothed Resource
Requirements Profile for
a Work Center
LO 14.6 Describe
closed-loop MRP
Example 7 ORDER SPLITTING
Kevin Watson, the production planner at Wiz Products, needs to develop a capacity plan for a work
center. He has the production orders shown below for the next 5 days. There are 12 hours available in the
work cell each day. The parts being produced require 1 hour each.
Day 1 2 3 4 5
Orders 10 14 13 10 14
APPROACH c Compute the time available in the work center and the time necessary to complete the
production requirements.
SOLUTION c
DAY
UNITS
ORDERED
CAPACITY
REQUIRED
(HOURS)
CAPACITY
AVAILABLE
(HOURS)
UTILIZATION:
OVER/
(UNDER)
(HOURS)
PRODUCTION
PLANNER’S ACTION
NEW
PRODUCTION
SCHEDULE
1 10 10 12 (2) 12
2 14 14 12 2 Split order: move 2 units to day 1 12
3 13 13 12 1 Split order: move 1 unit to day 6
or request overtime
13
4 10 10 12 (2) 12
5 14 14 12 2 Split order: move 2 units to day 4 12
61
M18_HEIZ0422_12_SE_C14.indd 582 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 583
INSIGHT c By moving orders, the production planner is able to utilize capacity more effectively and
still meet the order requirements, with only 1 order produced on overtime in day 3.
LEARNING EXERCISE c If the units ordered for day 5 increase to 16, what are the production planner’s options? [Answer: In addition to moving 2 units to day 4, move 2 units of production to day 6, or
request overtime.]
RELATED PROBLEMS c 14.29, 14.30
When the workload consistently exceeds work-center capacity, the tactics just discussed
are not adequate. This may mean adding capacity via personnel, machinery, overtime, or
subcontracting.
MRP in Services
The demand for many services or service items is classified as dependent demand when it is
directly related to or derived from the demand for other services. Such services often require
product-structure trees, bills of material and labor, and scheduling. Variations of MRP systems can make a major contribution to operational performance in such services. Examples
from restaurants, hospitals, and hotels follow.
Restaurants In restaurants, ingredients and side dishes (bread, vegetables, and condiments)
are typically meal components. These components are dependent on the demand for meals. The
meal is an end item in the master schedule. Figure 14.9 shows (a) a product-structure tree and
Alpha
Garnish with Buffalo Chicken
mix, Blue Cheese, Scallions
Baked Buffalo Chicken Mac
& Cheese
Unbaked Buffalo Chicken
Mac & Cheese Mix
Buffalo Chicken Mac & Cheese
Buffalo
Sauce
Elbow Macaroni (large, uncooked)
Cheese—Pepper Jack (grated)
Mac and Cheese Base (from refrigerator)
Milk
Smoked Pulled Chicken
Buffalo Sauce
Blue Cheese Crumbles
Scallions
20.00
10.00
32.00
4.00
2.00
8.00
4.00
2.00
oz.
oz.
oz.
oz.
lb.
oz.
oz.
oz.
$ 0.09
0.17
0.80
0.03
2.90
0.09
0.19
0.18
$ 1.80
1.70
25.60
0.12
5.80
0.72
0.76
0.36
Total Labor Hours 0.2 hrs
Ingredients Quantity Measure Unit Cost Total Cost Labor Hrs.
Production Specification Buffalo Chicken Mac & Cheese (6 portions)
Smoked
Pulled
Chicken
Blue
Cheese
Crumbles
Cooked
Elbow
Macaroni
Grated
Pepper Jack
Cheese
Chopped
Scallions
Mac & Cheese
Base Milk
Buffalo Chicken Mix
(a) PRODUCT STRUCTURE TREE
(b) BILL OF MATERIALS
Figure 14.9
Product Structure Tree and
Bill of Material for Chef John’s
Buffalo Chicken Mac & Cheese
M18_HEIZ0422_12_SE_C14.indd 583 05/11/15 5:37 PM
584 PART 3 | MANAGING OPERATIONS
(b) bill of material (here called a product specification ) for 6 portions of Buffalo Chicken Mac &
Cheese, a popular dish prepared by Chef John for Orlando Magic fans at the Amway Center.
Hospitals MRP is also applied in hospitals, especially when dealing with surgeries that
require known equipment, materials, and supplies. Houston’s Park Plaza Hospital and many
hospital suppliers, for example, use the technique to improve the scheduling and management
of expensive surgical inventory.
Hotels Marriott develops a bill of material and a bill of labor when it renovates each of
its hotel rooms. Marriott managers explode the BOM to compute requirements for materials,
furniture, and decorations. MRP then provides net requirements and a schedule for use by
purchasing and contractors.
Distribution Resource Planning (DRP)
When dependent techniques are used in the supply chain, they are called distribution resource
planning (DRP). Distribution resource planning (DRP) is a time-phased stock-replenishment plan for
all levels of the supply chain.
DRP procedures and logic are analogous to MRP. With DRP, expected demand becomes
gross requirements. Net requirements are determined by allocating available inventory to gross
requirements. The DRP procedure starts with the forecast at the retail level (or the most distant
point of the distribution network being supplied). All other levels are computed. As is the case
with MRP, inventory is then reviewed with an aim to satisfying demand. So that stock will
arrive when it is needed, net requirements are offset by the necessary lead time. A planned order
release quantity becomes the gross requirement at the next level down the distribution chain.
DRP pulls inventory through the system. Pulls are initiated when the retail level orders more
stock. Allocations are made to the retail level from available inventory and production after being
adjusted to obtain shipping economies. Effective use of DRP requires an integrated information
system to rapidly convey planned order releases from one level to the next. The goal of the DRP
system is small and frequent replenishment within the bounds of economical ordering and shipping.
Enterprise Resource Planning (ERP)
Advances in MRP II systems that tie customers and suppliers to MRP II have led to the development of enterprise resource planning (ERP) systems. Enterprise resource planning (ERP) is software that allows companies to (1) automate and integrate many of their business processes,
(2) share a common database and business practices throughout the enterprise, and (3) produce
information in real time. A schematic showing some of these relationships for a manufacturing firm appears in Figure 14.10 .
The objective of an ERP system is to coordinate a firm’s entire business, from supplier
Assessment to customer invoicing. This objective is seldom achieved, but ERP systems are umbrella systems that tie together a variety of specialized systems. This is accomplished by using a
centralized database to Help the flow of information among business functions. Exactly what
is tied together, and how, varies on a case-by-case basis. In addition to the traditional components of MRP, ERP systems usually provide financial and human resource (HR) management
information. ERP systems may also include:
◆ Supply-chain management (SCM) software to support sophisticated vendor communication, e-commerce, and those activities necessary for efficient warehousing and logistics. The
idea is to tie operations (MRP) to procurement, to materials management, and to suppliers,
providing the tools necessary for effective management of all four areas.
◆ Customer relationship management (CRM) software for the incoming side of the business.
CRM is designed to aid analysis of sales, target the most profitable customers, and manage
the sales force.
◆ Sustainability software to tie together sustainable workforce issues and provide transparency for
supply-chain sustainability issues, as well as monitor health and safety activities, energy use and
efficiency, emissions (carbon footprint, greenhouse gases), and environmental compliance.
Distribution resource
planning (DRP)
A time-phased stockreplenishment plan for all
levels of a distribution
network.
Enterprise resource
planning (ERP)
An information system for identifying and planning the enterprisewide resources needed to take,
make, ship, and account for
customer orders.
LO 14.7 Describe ERP
M18_HEIZ0422_12_SE_C14.indd 584 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 585
In addition to data integration, ERP software promises reduced transaction costs and fast,
accurate information. A strategic emphasis on just-in-time systems and supply chain integration
drives the desire for enterprise-wide software. The OM in Action box “Managing Benetton with
ERP Software” provides an example of how ERP software helps integrate company operations.
Inventory
Management
Bills of
Material
Routings
and
Lead Times
Master
Production
Schedule
Sales Order
(order entry, product configuration,
sales management)
Shipping
Distributors,
retailers,
and end users
General
Ledger
Payroll
Accounts
Payable
Invoicing
Supply-Chain Management
Vendor Communication
(schedules, EDI, advanced shipping notice,
e-commerce, etc.)
Accounts
Receivable
MRP ERP
Purchasing
and
Lead Times
Work
Orders
Customer Relationship Management
Finance/
Accounting
STUDENT TIP
ERP tries to integrate all of a
firm’s information to ensure
data integrity.
Figure 14.10
MRP and ERP Information
Flows, Showing Customer
Relationship Management
(CRM), Supply-Chain
Management (SCM), and
Finance/Accounting
Other functions such as human
resources and sustainability
are often also included in ERP
systems.
OM in Action Managing Benetton with ERP Software
Thanks to ERP, the Italian sportswear company Benetton can probably claim to
have the world’s fastest factory and the most efficient distribution in the garment industry. Located in Ponzano, Italy, Benetton makes and ships 50 million
pieces of clothing each year. That is 30,000 boxes every day—boxes that must
be filled with exactly the items ordered going to the correct store of the 5,000
Benetton outlets in 60 countries. This highly automated distribution center uses
only 19 people. Without ERP, hundreds of people would be needed.
Here is how ERP software works:
1. Ordering: A salesperson in the south Boston store fi nds that she is
running out of a best-selling blue sweater. Using a laptop PC, her local
Benetton sales agent taps into the ERP sales module.
2. Availability: ERP’s inventory software simultaneously forwards the order
to the mainframe in Italy and fi nds that half the order can be fi lled immediately from the Italian warehouse. The rest will be manufactured and
shipped in 4 weeks.
3. Production: Because the blue sweater was originally created by computeraided design (CAD), ERP manufacturing software passes the specifi cations to a knitting machine. The knitting machine makes the sweaters.
4. Warehousing: The blue sweaters are boxed with a radio frequency ID
(RFID) tag addressed to the Boston store and placed in one of the 300,000
slots in the Italian warehouse. A robot fl ies by, reading RFID tags, picks out
any and all boxes ready for the Boston store, and loads them for shipment.
5. Order tracking: The Boston salesperson logs onto the ERP system
through the Internet and sees that the sweater (and other items) are
completed and being shipped.
6. Planning: Based on data from ERP’s forecasting and fi nancial modules,
Benetton’s chief buyer decides that blue sweaters are in high demand
and quite profi table. She decides to add three new hues.
Sources: Forbes (December 2, 2011); The Wall Street Journal (April 10, 2007);
Information Week (June 13, 2005); and MIT Sloan Management Review (Fall 2001).
M18_HEIZ0422_12_SE_C14.indd 585 05/11/15 5:37 PM
586 PART 3 | MANAGING OPERATIONS
In an ERP system, data are entered only once into a common, complete, and consistent
database shared by all applications. For example, when a Nike salesperson enters an order into
his ERP system for 20,000 pairs of sneakers for Foot Locker, the data are instantly available on
the manufacturing floor. Production crews start filling the order if it is not in stock, accounting prints Foot Locker’s invoice, and shipping notifies Foot Locker of the future delivery date.
The salesperson, or even the customer, can check the progress of the order at any point. This
is all accomplished using the same data and common applications. To reach this consistency,
however, the data fields must be defined identically across the entire enterprise. In Nike’s case,
this means integrating operations at production sites from Vietnam to China to Mexico, at
business units across the globe, in many currencies, and with reports in a variety of languages.
Each ERP vendor produces unique products. The major vendors, SAP AG (a German
firm), BEA (Canada), SSAGlobal, American Software, PeopleSoft/Oracle, and CMS Software
(all U.S. firms), sell software or modules designed for specific industries (a set of SAP’s modules is shown in Figure 14.11 ). However, companies must determine if their way of doing
business will fit the standard ERP module. If they determine that the product will not fit
the standard ERP product, they can change the way they do business to accommodate the
software. But such a change can have an adverse impact on their business process, reducing a
competitive advantage.
Alternatively, ERP software can be customized to meet their specific process requirements.
Although the vendors build the software to keep the customization process simple, many
companies spend up to five times the cost of the software to customize it. In addition to the
expense, the major downside of customization is that when ERP vendors provide an upgrade
or enhancement to the software, the customized part of the code must be rewritten to fit into
the new version. ERP programs cost from a minimum of $300,000 for a small company to
Covers all financial related activity:
Covers internal inventory management:
PROMOTE TO DELIVER
Covers front-end
customer-oriented activities:
DESIGN TO MANUFACTURE
Covers internal production activities:
PROCURE TO PAY
Covers sourcing activities:
RECRUIT TO RETIRE
Covers all HR- and payroll-oriented activity:

Accounts receivable
Accounts payable
General ledger
Treasury
Cash management
Asset management
Shop floor reporting
Warehousing
Distribution planning
Forecasting
Replenishment planning
Physical inventory
Material handling
Marketing
Quote and order processing
Transportation
Documentation and labeling
After sales service
Warranty and guarantees
Design engineering
Production engineering
Plant maintenance
Contract/project
management
Subcontractor
management
Vendor sourcing
Purchase requisitioning
Purchase ordering
Purchase contracts
Inbound logistics
Supplier invoicing/matching
Supplier payment/
settlement
Time and attendance Payroll Supplier performance
Travel and expenses
CASH TO CASH
DOCK TO DISPATCH
Figure 14.11
SAP’s Modules for ERP
Source: www.sap.com .
M18_HEIZ0422_12_SE_C14.indd 586 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 587
hundreds of millions of dollars for global giants like Ford and Coca-Cola. It is easy to see,
then, that ERP systems are expensive, full of hidden issues, and time-consuming to install.
ERP in the Service Sector
ERP vendors have developed a series of service modules for such markets as health care,
government, retail stores, and financial services. Springer-Miller Systems, for example, has
created an ERP package for the hotel market with software that handles all front- and backoffice functions. This system integrates tasks such as maintaining guest histories, booking
room and dinner reservations, scheduling golf tee times, and managing multiple properties
in a chain. PeopleSoft/Oracle combines ERP with supply chain management to coordinate
airline meal preparation. In the grocery industry, these supply chain systems are known as
efficient consumer response (ECR) systems. Efficient consumer response systems tie sales to buying, to inventory, to logistics, and to production.
Efficient consumer response
(ECR)
Supply chain management systems in the grocery industry that
tie sales to buying, to inventory, to
logistics, and to production.
Summary
Material requirements planning (MRP) schedules production and inventory when demand is dependent. For MRP
to work, management must have a master schedule, precise
requirements for all components, accurate inventory and
purchasing records, and accurate lead times.
When properly implemented, MRP can contribute in a
major way to reduction in inventory while improving customer service levels. MRP techniques allow the operations
manager to schedule and replenish stock on a “need-toorder” basis rather than simply a “time-to-order” basis.
Many firms using MRP systems find that lot-for-lot can be
the low-cost lot-sizing option.
The continuing development of MRP systems has led
to its use with lean manufacturing techniques. In addition,
MRP can integrate production data with a variety of other
activities, including the supply chain and sales. As a result,
we now have integrated database-oriented enterprise
resource planning (ERP) systems. These expensive and
difficult-to-install ERP systems, when successful, support
strategies of differentiation, response, and cost leadership.
Key Terms
Material requirements planning
(MRP) (p. 566 )
Master production schedule
(MPS) (p. 567 )
Bill of material (BOM) (p. 568 )
Modular bills (p. 569 )
Planning bills (or kits) (p. 570 )
Phantom bills of material (p. 570 )
Low-level coding (p. 570 )
Lead time (p. 570 )
Gross material requirements plan (p. 571 )
Net requirements plan (p. 572 )
Planned order receipt (p. 574 )
Planned order release (p. 574 )
System nervousness (p. 575 )
Time fences (p. 575 )
Pegging (p. 575 )
Buckets (p. 576 )
Lot-sizing decision (p. 576 )
Lot-for-lot (p. 576 )
Periodic order quantity (POQ) (p. 578 )
Material requirements planning II
(MRP II) (p. 580 )
Closed-loop MRP system (p. 581 )
Load report (p. 581 )
Distribution resource planning (DRP) (p. 584 )
Enterprise resource planning (ERP)
(p. 584 )
Efficient consumer response (ECR)
(p. 587 )
Ethical Dilemma
For many months your prospective ERP customer has been
analyzing the hundreds of assumptions built into the $900,000
ERP software you are selling. So far, you have knocked yourself
out to try to make this sale. If the sale goes through, you will
reach your yearly quota and get a nice bonus. On the other
hand, loss of this sale may mean you start looking for other
employment.
The accounting, human resource, supply chain, and marketing
teams put together by the client have reviewed the specifi cations
and fi nally recommended purchase of the software. However, as
you looked over their shoulders and helped them through the
Assessment process, you began to realize that their purchasing
procedures—with much of the purchasing being done at
hundreds of regional stores—were not a good fit for the
software. At the very least, the customizing will add $250,000
to the implementation and training cost. The team is not aware
of the issue, and you know that the necessary $250,000 is not in
the budget.
What do you do?
M18_HEIZ0422_12_SE_C14.indd 587 05/11/15 5:37 PM
588 PART 3 | MANAGING OPERATIONS
Discussion Questions
1. What is the difference between a gross requirements plan and
a net requirements plan?
2. Once a material requirements plan (MRP) has been established, what other managerial applications might be found
for the technique?
3. What are the similarities between MRP and DRP?
4. How does MRP II differ from MRP?
5. Which is the best lot-sizing policy for manufacturing organizations?
6. What impact does ignoring carrying cost in the allocation of
stock in a DRP system have on lot sizes?
7. MRP is more than an inventory system; what additional
capabilities does MRP possess?
8. What are the options for the production planner who has:
a) scheduled more than capacity in a work center next
week?
b) a consistent lack of capacity in that work center?
9. Master schedules are expressed in three different ways
depending on whether the process is continuous, a job shop,
or repetitive. What are these three ways?
10. What functions of the firm affect an MRP system? How?
11. What is the rationale for (a) a phantom bill of material, (b) a
planning bill of material, and (c) a pseudo bill of material?
12. Identify five specific requirements of an effective MRP system.
13. What are the typical benefits of ERP?
14. What are the distinctions between MRP, DRP, and ERP?
15. As an approach to inventory management, how does MRP
differ from the approach taken in Chapter 12 , dealing with
economic order quantities (EOQ)?
16. What are the disadvantages of ERP?
17. Use the Web or other sources to:
a) Find stories that highlight the advantages of an ERP system.
b) Find stories that highlight the difficulties of purchasing,
installing, or failure of an ERP system.
18. Use the Web or other sources to identify what an ERP vendor
(SAP, PeopleSoft/Oracle, American Software, etc.) includes
in these software modules:
a) Customer relationship management.
b) Supply-chain management.
c) Product life cycle management.
19. The structure of MRP systems suggests “buckets” and infinite loading. What is meant by these two terms?
Using Software to Solve MRP Problems
There are many commercial MRP software packages, for companies of all sizes. MRP software for small and medium-size
companies includes User Solutions, Inc., a demo of which is
available at www.usersolutions.com , and MAX, from Exact
Software North America, Inc. Software for larger systems is
available from SAP, CMS, BEA, Oracle, i2 Technologies, and
many others. The Excel OM software that accompanies this
text includes an MRP module, as does POM for Windows. The
use of both is explained in the following sections.
X USING EXCEL OM
Using Excel OM’s MRP module requires the careful entry
of several pieces of data. The initial MRP screen is where we
enter (1) the total number of occurrences of items in the BOM
(including the top item), (2) what we want the BOM items to be
called (e.g., Item no., Part), (3) total number of periods to be
scheduled, and (4) what we want the periods called (e.g., days,
weeks).
Excel OM’s second MRP screen provides the data entry for
an indented bill of material. Here we enter (1) the name of each
item in the BOM, (2) the quantity of that item in the assembly, and (3) the correct indent (e.g., parent/child relationship)
for each item. The indentations are critical, as they provide the
logic for the BOM explosion. The indentations should follow
the logic of the product structure tree with indents for each
assembly item in that assembly.
Excel OM’s third MRP screen repeats the indented BOM
and provides the standard MRP tableau for entries. This
is shown in Program 14.1 using the data from Examples 1, 2,
and 3.
P USING POM FOR WINDOWS
The POM for Windows MRP module can also solve Examples
1 to 3. Up to 18 periods can be analyzed. Here are the inputs
required:
1. Item names: The item names are entered in the left column.
The same item name will appear in more than one row if
the item is used by two parent items. Each item must follow
its parents.
2. Item level: The level in the indented BOM must be given
here. The item cannot be placed at a level more than one
below the item immediately above.
3. Lead time: The lead time for an item is entered here. The
default is 1 week.
4. Number per parent: The number of units of this subassembly needed for its parent is entered here. The default is 1.
5. On hand: List current inventory on hand once, even if the
subassembly is listed twice.
6. Lot size: The lot size can be specifi ed here. A 0 or 1 will
perform lot-for-lot ordering. If another number is placed
here, then all orders for that item will be in integer multiples
of that number.
7. Demands: The demands are entered in the end item row in
the period in which the items are demanded.
8. Scheduled receipts: If units are scheduled to be received
in the future, they should be listed in the appropriate time
period (column) and item (row). (An entry here in level 1 is
a demand; all other levels are receipts.)
Further details regarding POM for Windows are seen in
Appendix IV .
M18_HEIZ0422_12_SE_C14.indd 588 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 589
Solved Problems Virtual Office Hours help is available in MyOMLab.
Enter the quantity on hand.
Enter the lead time.
The data in columns A, B, C, D (down to row 15) are entered
on the second screen and automatically transferred here.
Lot size must be ≥1.
Program 14.1
Using Excel OM’s MRP Module
to Solve Examples 1, 2, and 3
SOLVED PROBLEM 14.1
Determine the low-level coding and the quantity of each component necessary to produce 10 units of an assembly we will
call Alpha. The product structure and quantities of each component needed for each assembly are noted in parentheses.
SOLUTION
Redraw the product structure with low-level coding. Then multiply down the structure until the requirements of each branch
are determined. Then add across the structure until the total for
each is determined.
B(1)
Alpha
B C(1) (1)
D(2) C(2)
Alpha
C(1)
E(1) F(1)
E(1) F(1)
B(1)
D(2) C(2)
Alpha
C(1)
E(1) F(1) E(1) F(1)
Level 0
Level 1
Level 2
Level 3
Alpha = 1
B = 1
D = 2
F = 3
C = 3
E = 3
M18_HEIZ0422_12_SE_C14.indd 589 05/11/15 5:37 PM
590 PART 3 | MANAGING OPERATIONS
Es required for left branch:
(1alpha * 1B * 2C * 1E) = 2 Es
and Es required for right branch:
(1alpha * 1C * 1E) = 1 E 3 Es required in total
Then “explode” the requirement by multiplying each by 10, as
shown in the table to the right:
LEVEL ITEM
QUANTITY
PER UNIT
TOTAL REQUIREMENTS
FOR 10 ALPHA
0 Alpha 1 10
1 B 1 10
2 C 3 30
2 D 2 20
3 E 3 30
3 F 3 30
SOLVED PROBLEM 14.2
Using the product structure for Alpha in Solved Problem 14.1,
and the following lead times, quantity on hand, and master
production schedule, prepare a net MRP table for Alphas.
ITEM
LEAD
TIME
QUANTITY
ON HAND
Alpha 1 10
B 2 20
C3 0
D 1 100
E 1 10
F 1 50
Master Production Schedule for Alpha
PERIOD 6 7 8 9 10 11 12 13
Gross requirements 50 50 100
SOLUTION
See the chart on following page.
SOLVED PROBLEM 14.3
Hip Replacements, Inc., has a master production schedule for
its newest model, as shown below, a setup cost of $50, a holding
cost per week of $2, beginning inventory of 0, and lead time of
1 week. What are the costs of using lot-for-lot for this l0-week
period?
WEEK 1 2 3 4 5 6 7 8 9 10
Gross requirements 0 0 50 0 0 35 15 0 100 0
Scheduled receipts
Projected on hand 0 0 0 0 0 0 0 0 0 00
Net requirements 0 0 50 0 0 35 15 0 100
Planned order receipts 50 35 15 100
Planned order releases 50 35 15 100
SOLUTION
Holding cost = $0 (as there is never any end-of-period
inventory)
Ordering costs = 4 orders * $50 = $200
Total cost for lot@for@lot = $0 + $200 = $200
SOLVED PROBLEM 14.4
Hip Replacements, Inc., has a master production schedule for
its newest model, as shown on page 592 , a setup cost of $50, a
holding cost per week of $2, beginning inventory of 0, and lead
time of 1 week. What are the costs of using (a) EOQ and (b)
POQ for this 10-week period?
SOLUTION
a) For the EOQ lot size, first determine the EOQ.
Annual usage = 200 units for 10 weeks; weekly usage =
200/10 weeks = 20 per week. Therefore, 20 units × 52 weeks
(annual demand) = 1,040 units. From Chapter 12 , the EOQ
model is:
Q * = A
2DS
H
where D = annual demand = 1,040
S = Setup cost = $50
H = holding (carrying) cost, on an annual basis per
unit = $2 × 52 = $104
Q * = 31.62 ≈ 32 units (order the EOQ or in multiples
of the EOQ)
(Continued on page 592)
M18_HEIZ0422_12_SE_C14.indd 590 09/11/15 5:16 PM
591
Gross Requirements 50 50 100
10 10
40
40 50 100 100
40(A) 50(A) 100(A)
40(A) 40(B) 200(B) + 50(A) 100(A) 100(B)
40(B) 100(B) 200(B)
100 100 60
0 40 200
0 40 200
200 40 0
0
40(C) 40(C) 100(C) 100(C) 250(C)
10 10
30 40 100 100 250
30 40 100 100 250
30 40 100 100 250
40(C) 40(C) 100(C) 100(C) 250(C)
50 50 10 —
0 30 100 100 250
30 100 100 250
30 100 100 250
40 250 100 100
40
40
40
10040 40
250 100 100
250 100
20 20
20 50 100
20 50 100
50 20 100
50
40 50
100
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
12345
Period (week, day)
6 7 8 9 10 11 12 13
Lot
Size
Lead
Time (# of
Periods)
On
Hand
Safety
Stock
Allocated Low- Level Code ItemID
Alpha
(A)
0 — — 10 1
LotforLot
B 1 — — 20 2
LotforLot
C 2 — — 03
LotforLot
D 2 — — 100 1
LotforLot
E 3 — — 10 1
LotforLot
F 3 — — 50 1
LotforLot
Net Material Requirements Planning Sheet for Alpha for Solved Problem 14.2
The letter in parentheses (A) is the source of the demand.
M18_HEIZ0422_12_SE_C14.indd 591 05/11/15 5:37 PM
592 PART 3 | MANAGING OPERATIONS
WEEK 1 2 3 4 5 6 7 8 9 10
Gross requirements 0 0 50 0 0 35 15 0 100 0
Scheduled receipts
Projected on hand 0 0 0 0 14 14 14 11 28 28 24 24
Net requirements 0 0 50 0 0 21 0 0 72 0
Planned order receipts 64 32 32 96
Planned order releases 64 32 32 96
Holding cost = 157 units * $2 = $314 (note the 24 units available in period 11, for which there
is an inventory charge as they are in on-hand inventory at the end of period 10)
Ordering costs = 4 orders * $50 = $200
Total cost for EOQ lot sizing = $314 + $200 = $514
b) For the POQ lot size we use the EOQ computed above to find the time period between orders:
Period interval = EOQ/average weekly usage = 32/20 = 1.6 ≈ 2 periods
POQ order size = Demand required in the 2 periods, postponing orders in periods with no demand.
WEEK 1 2 3 4 5 6 7 8 9 10
Gross requirements 0 0 50 0 0 35 15 0 100 0
Scheduled receipts
Projected on hand 0 0 0 0 0 0 0 15 0 0
Net requirements 0 0 50 0 0 50 0 0 100 0
Planned order receipts 50 50 100
Planned order releases 50 50 100
Holding cost = 15 units * $2 = $30
Ordering costs = 3 orders * $50 = $150
Total cost for POQ lot sizing = $30 + $150 = $180
Problems* Note: PX means the problem may be solved with POM for Windows and/or Excel OM. Many of the exercises in this
chapter (14.1 through 14.16 and 14.29 through 14.32) can be done on Resource Manager for Excel, a commercial system
made available by User Solutions, Inc. Access to a trial version of the software and a set of notes for the user are available at
www.usersolutions.com.
Problems 14.1–14.4 relate to Dependent Inventory Model Requirements
• 14.1 You have developed the following simple product structure of items needed for your gift bag for a rush party
for prospective pledges in your organization. You forecast 200
attendees. Assume that there is no inventory on hand of any of
the items. Explode the bill of material. (Subscripts indicate the
number of units required.)
K(1)
L(4) M(2)
J
• • 14.2 You are expected to have the gift bags in Problem 14.1
ready at 5 p.m. However, you need to personalize the items (monogrammed pens, note pads, literature from the printer, etc.). The
lead time is 1 hour to assemble 200 Js once the other items are
prepared. The other items will take a while as well. Given the volunteers you have, the other time estimates are item K (2 hours),
item L (1 hour), and item M (4 hours). Develop a time-phased
assembly plan to prepare the gift bags.
• • 14.3 As the production planner for Xiangling Hu Products,
Inc., you have been given a bill of material for a bracket that is
made up of a base, two springs, and four clamps. The base is
assembled from one clamp and two housings. Each clamp has one
handle and one casting. Each housing has two bearings and one
shaft. There is no inventory on hand.
a) Design a product structure noting the quantities for each item
and show the low-level coding.
b) Determine the gross quantities needed of each item if you are
to assemble 50 brackets.
c) Compute the net quantities needed if there are 25 of the base
and 100 of the clamp in stock. PX
• • 14.4 Your boss at Xiangling Hu Products, Inc., has just
provided you with the schedule and lead times for the bracket in
Problem 14.3. The unit is to be prepared in week 10. The lead
times for the components are bracket (1 week), base (1 week),
spring (1 week), clamp (1 week), housing (2 weeks), handle
(1 week), casting (3 weeks), bearing (1 week), and shaft (1 week).
a) Prepare the time-phased product structure for the bracket.
b) In what week do you need to start the castings? PX
Problems 14.5–14.21 relate to MRP Structure
• • 14.5 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,
M18_HEIZ0422_12_SE_C14.indd 592 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 593
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.
• • 14.6 Using the information in Problem 14.5, construct a
gross material requirements plan. PX
• • 14.7 Using the information in Problem 14.5, construct a net
material requirements plan using the following on-hand inventory.
ITEM
ON-HAND
INVENTORY ITEM
ON-HAND
INVENTORY
S 20W 30
T 20X 25
U 40 Y 240
V 30 Z 40 PX
• • 14.8 Refer again to Problems 14.5 and 14.6. In addition to
100 units of S, there is also a demand for 20 units of U, which is
a component of S. The 20 units of U are needed for maintenance
purposes. These units are needed in week 6. Modify the gross
material requirements plan to reflect this change. PX
• • 14.9 Refer again to Problems 14.5 and 14.7. In addition to
100 units of S, there is also a demand for 20 units of U, which is
a component of S. The 20 units of U are needed for maintenance
purposes. These units are needed in week 6. Modify the net material requirements plan to reflect this change. PX
• • 14.10
a) Given the product structure and master production schedule
( Figure 14.12 below), develop a gross requirements plan for all items.
b) Given the preceding product structure, master production
schedule, and inventory status ( Figure 14.12 ), develop a net
materials requirements (planned order release) for all items. PX
••• 14.11 Given the product structure, master production
schedule, and inventory status in Figure 14.13 on the next page
and assuming the requirements for each BOM item is 1:
a) develop a gross requirements plan for Item C;
b) develop a net requirements plan for Item C. PX
•••• 14.12 Based on the data in Figure 14.13 , complete a net
material requirements schedule for:
a) All items (10 schedules in all), assuming the requirement for
each BOM item is 1.
b) All 10 items, assuming the requirement for all items is 1, except
B, C, and F, which require 2 each . PX
••• 14.13 Electro Fans has just received an order for one thousand 20-inch fans due week 7. Each fan consists of a housing
assembly, two grills, a fan assembly, and an electrical unit. The
housing assembly consists of a frame, two supports, and a handle.
The fan assembly consists of a hub and five blades. The electrical unit consists of a motor, a switch, and a knob. The following
table gives lead times, on-hand inventory, and scheduled receipts.
a) Construct a product structure.
b) Construct a time-phased product structure.
c) Prepare a net material requirements plan. PX
Data Table for Problem 14.13
COMPONENT
LEAD
TIME
ON-HAND
INVENTORY
LOT
SIZE*
SCHEDULED
RECEIPT
20” Fan 1 100 —
Housing
Frame
Supports (2)
Handle
1
2
1
1
100
—
50
400
—
—
100
500
Grills (2) 2 200 500
Fan Assembly
Hub
Blades (5)
3
1
2
150
—
—
—
—
100
Electrical Unit
Motor
Switch
Knob
1
1
1
1
—
—
20
—
—
—
12
25 200 knobs
in week 2
* Lot-for-lot unless otherwise noted.
••• 14.14 A part structure, lead time (weeks), and on-hand
quantities for product A are shown in Figure 14.14 . From the
information shown, generate:
a) An indented bill of material for product A (see Figure 5.9 in
Chapter 5 as an example of a BOM).
b) Net requirements for each part to produce 10 As in week 8
using lot-for-lot. PX
••• 14.15 You are product planner for product A (in Problem
14.14 and Figure 14.14 ). The field service manager, Al Trostel, has
just called and told you that the requirements for B and F should
each be increased by 10 units for his repair requirements in the field.
a) Prepare a list showing the quantity of each part required to
produce the requirements for the service manager and the production request of 10 Bs and Fs.
b) Prepare a net requirement plan by date for the new requirements (for both production and field service), assuming that
the field service manager wants his 10 units of B and F in week
6 and the 10 production units of A in week 8. PX
B1(1)
A1(1)
Subassembly
X1
B2(2)
E(1) C(2) D(1)
E(2)
PERIOD 7 8 9 10 11 12
Gross requirements 50 20 100
LEAD ON LEAD ON
ITEM TIME HAND ITEM TIME HAND
X1 1 50 C 1 0
B1 2 20 D 1 0
B2 2 20 E 3 10
A1 1 5
Master Production Schedule for X1
Figure 14.12
Information for Problem 14.10
M18_HEIZ0422_12_SE_C14.indd 593 05/11/15 5:37 PM
594 PART 3 | MANAGING OPERATIONS
••• 14.16 You have just been notified via fax that the lead time
for component G of product A (Problem 14.15 and Figure 14.14 )
has been increased to 4 weeks.
a) Which items have changed, and why?
b) What are the implications for the production plan?
c) As production planner, what can you do? PX
• • 14.17 Heather Adams, production manager for a Colorado
exercise equipment manufacturer, needs to schedule an order for
50 UltimaSteppers, which are to be shipped in week 8. Subscripts
indicate quantity required for each parent. Assume lot-for-lot
ordering. Below is information about the steppers:
ITEM LEAD TIME ON-HAND INVENTORY COMPONENTS
Stepper 2 20 A (1), B (3), C (2)
A 1 10 D (1), F (2)
B 2 30 E (1), F (3)
C 3 10 D (2), E (3)
D1 15
E2 5
F2 20
a) Develop a product structure for Heather.
b) Develop a time-phased structure.
c) Develop a net material requirements plan for F. PX
Additional problems 14.18–14.21 are available in MyOMLab.
Problems 14.22–14.28 relate to Lot-Sizing Techniques
PERIOD 8 9 10 11 12
Gross requirements: A 100 50 150
Gross requirements: H 100 50
ON LEAD ON LEAD
ITEM HAND TIME ITEM HAND TIME
A 0 1 F 75 2
B 100 2 G 75 1
C 50 2 H 0 1
D 50 1 J 100 2
E 75 2 K 100 2
E(1) C(1)
H(1)
LT = 1 LT = 2
G(1) LT = 3 LT = 1
F(1) LT = 1
C(1) LT = 2 D(1) LT = 1
B(1) LT = 1
A LT = 1 LT = lead time in weeks
(1) = All quantities = 1
E(1) LT = 1
PART PART STRUCTURE TREE
INVENTORY
ON HAND
A
B
C
D
E
F
G
H
0
2
10
5
4
5
1
10
Figure 14.14
Information for Problems
14.14, 14.15, and 14.16
Data Table for Problems 14.22 through 14.25*
PERIOD 1 2 3 4 5 6 7 8 9 10 11 12
Gross
requirements 30 40 30 70 20 10 80 50
* Holding cost = $2.50/unit/week; setup cost = $150; lead time = 1 week;
beginning inventory = 40; stockout cost = $10.
••• 14.22 Develop a lot-for-lot solution and calculate total relevant costs for the data in the preceding table. PX
••• 14.23 Develop an EOQ solution and calculate total relevant
costs for the data in the preceding table. PX
••• 14.24 Develop a POQ solution and calculate total relevant
costs for the data in the preceding table. PX
••• 14.25 Using your answers for the lot sizes computed in
Problems 14.22, 14.23, and 14.24, which is the best technique and
why?
• • 14.26 M. de Koster, of Rene Enterprises, has the master
production plan shown below:
Period (weeks) 123456789
Gross requirements 15 20 10 25
Lead time = 1 period; setup cost = $200; holding cost = $10 per
week; stockout cost = $10 per week. Your job is to develop an
ordering plan and costs for:
a) Lot-for-lot. b) EOQ.
c) POQ. d) Which plan has the lowest cost? PX
14.27 Grace Greenberg, production planner for Science and
Technology Labs, in New Jersey, has the master production plan
shown below:
Period (weeks) 1 2 3 4 5 6 7 8 9 10 11 12
Gross requirements 35 40 10 25 10 45
Lead time = 1 period; setup costs = $200; holding cost = $10 per
week; stockout cost = $10 per week. Develop an ordering plan
and costs for Grace, using these techniques:
a) Lot-for-lot. b) EOQ.
c) POQ. d) Which plan has the lowest cost? PX
D E F G E F E G F G
B C J K C
A H
Figure 14.13
Information for Problems 14.11 and 14.12
M18_HEIZ0422_12_SE_C14.indd 594 05/11/15 5:37 PM
CHAPTER 14 | MATERIAL REQUIREMENTS PLANNING (MRP) AND ERP 595
Additional problem 14.28 is available in MyOMLab.
Problems 14.29–14.32 relate to Extensions of MRP
••• 14.29 Karl Knapps, Inc., has received the following orders:
Period 1 2 3 4 5 6 7 8 9 10
Order size 0 40 30 40 10 70 40 10 30 60
The entire fabrication for these units is scheduled on one machine.
There are 2,250 usable minutes in a week, and each unit will take
65 minutes to complete. Develop a capacity plan, using lot splitting, for the 10-week time period.
••• 14.30 Coleman Rich, Ltd., has received the following
orders:
Period 1 2 3 4 5 6 7 8 9 10
Order size 60 30 10 40 70 10 40 30 40 0
The entire fabrication for these units is scheduled on one machine.
There are 2,250 usable minutes in a week, and each unit will take
65 minutes to complete. Develop a capacity plan, using lot splitting, for the 10-week time period.
••• 14.31 Courtney Kamauf schedules production of a popular
Rustic Coffee Table at Kamauf Enterprises, Inc. 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. She has 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 640 coffee tables on days 5 and 6, and 128 on days 7 and 8. PX
Stain Glue Base Assembly
COFFEE TABLE
Brass Caps
Top
Short Legs
Braces
Long
Braces
•••• 14.32 Using the data for the coffee table in Problem 14.31,
build a labor schedule when the labor standard for each top is
2 labor-hours; each leg including brass cap installation requires
1
4 hour, as does each pair of braces. 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?
CASE STUDIES
When 18,500 Orlando Magic Fans Come to Dinner Video Case
With vast experience at venues such as the American Airlines Arena (in
Miami), the Kentucky Derby, and Super Bowls, Chef John Nicely now
also plans huge culinary events at Orlando’s Amway Center, home of
the Orlando Magic basketball team. With his unique talent and exceptional operations skills, Nicely serves tens of thousands of cheering
fans at some of the world’s largest events. And when more than 18,500
basketball fans show up for a game, expecting great food and great
basketball, he puts his creative as well as operations talent to work.
Chef John must be prepared. This means determining not
only a total demand for all 18,500 fans, but also translating that
demand into specific menu items and beverages. He prepares
a forecast from current ticket sales, history of similar events at
other venues, and his own records, which reflect the demand with
this particular opponent, night of week, time of year, and even
time of day. He then breaks the demand for specific menu items
and quantities into items to be available at each of the 22 concession stands, 7 restaurants, and 68 suites. He must also be prepared
to accommodate individual requests from players on both teams.
Chef John frequently changes the menu to keep it interesting
for the fans who attend many of the 41 regular season home games
each season. Even the culinary preference of the opponent’s fans
who may be attending influences the menu. Additionally, when
entertainment other than the Magic is using the Amway Center,
the demographic mix is likely to be different, requiring additional
tweaking of the menu. The size of the wait staff and the kitchen staff
change to reflect the size of the crowd; Chef John may be supervising as many as 90 people working in the kitchen. Similarly, the
concessions stands, 40% of which have their own grills and fryers,
present another challenge, as they are managed by volunteers from
nonprofit organizations. The use of these volunteers adds the need
for special training and extra enforcement of strict quality standards.
Once deciding on the overall demand and the menu, Chef John
must prepare the production specifications (a bill of material) for
each item. For the evening game with the Celtics, Chef John is preparing his unique Cheeto Crusted Mac & Cheese dish. The ingredients, quantity, costs, and labor requirements are shown below:
Production Specifi cations
CHEETO CRUSTED MAC & CHEESE (6 PORTIONS)
INGREDIENTS QUANTITY MEASURE UNIT COST TOTAL COST LABOR-HOURS
Elbow macaroni (large, uncooked) 20.00 oz. $0.09 $1.80
Cheese—cheddar shredded 10.00 oz. 0.16 1.60
Mac and cheese base (see recipe) 44.00 oz. 0.80 35.20
Milk 4.00 oz. 0.03 0.12
Cheetos, crushed 6.00 oz. 0.27 1.62
Sliced green onion—garnish 0.50 oz. 0.18 0.09
Whole Cheetos—garnish 2.00 oz. 0.27 0.54
Total labor hours 0.2 hours
M18_HEIZ0422_12_SE_C14.indd 595 05/11/15 5:37 PM
596 PART 3 | MANAGING OPERATIONS
The yield on this dish is 6 portions, and labor cost is $15 per
hour, with fringes. The entire quantity required for the evening
is prepared prior to the game and kept in warming ovens until
needed. Demand for each basketball game is divided into 5 periods:
prior to the game, first quarter, second quarter, half-time, and
second half. At the Magic vs. Celtics game next week, the demand
(number of portions) in each period is 60, 36, 48, 60, and 12 for
the Cheeto Crusted Mac & Cheese dish, respectively.
Discussion Questions *
1. Prepare a bill of material explosion and total cost for the 216
portions of Cheeto Crusted Mac & Cheese.
2. What is the cost per portion? How much less expensive is the
Cheeto Crusted Mac & Cheese than Chef John’s alternative
creation, the Buffalo Chicken Mac & Cheese, shown in Figure 14.9
of this chapter?
3. Assuming that there is no beginning inventory of the Cheeto
Crusted Mac & Cheese and cooking time for the entire 216
portions is 0.6 hours, when must preparation begin?
• Additional Case Studies: Visit MyOMLab for these free case studies:
Ikon’s attempt at ERP: The giant offi ce technology fi rm faces hurdles with ERP implementation.
Hill’s Automotive, Inc.: An after-market producer and distributor of auto replacement parts has trouble making MRP work.
Endnotes
* You may wish to view the video that accompanies this case before
answering the questions.
MRP at Wheeled Coach Video Case
Wheeled Coach, the world’s largest manufacturer of ambulances,
builds thousands of different and constantly changing configurations of its products. The custom nature of its business means
lots of options and special designs—and a potential scheduling
and inventory nightmare. Wheeled Coach addressed such problems, and succeeded in solving a lot of them, with an MRP system
(described in the Global Company Profile that opens this chapter). As with most MRP installations, however, solving one set of
problems uncovers a new set.
One of the new issues that had to be addressed by plant
manager Lynn Whalen was newly discovered excess inventory.
Managers discovered a substantial amount of inventory that was
not called for in any finished products. Excess inventory was evident because of the new level of inventory accuracy required by
the MRP system. The other reason was a new series of inventory
reports generated by the IBM MAPICS MRP system purchased
by Wheeled Coach. One of those reports indicates where items
are used and is known as the “Where Used” report. Interestingly,
many inventory items were not called out on bills of material
(BOMs) for any current products. In some cases, the reason some
parts were in the stockroom remained a mystery.
The discovery of this excess inventory led to renewed efforts
to ensure that the BOMs were accurate. With substantial work,
BOM accuracy increased and the number of engineering change
notices (ECNs) decreased. Similarly, purchase-order accuracy,
with regard to both part numbers and quantities ordered, was
improved. Additionally, receiving department and stockroom
accuracy went up, all helping to maintain schedule, costs, and
ultimately, shipping dates and quality.
Eventually, Lynn Whalen concluded that the residual amounts
of excess inventory were the result, at least in part, of rapid changes
in ambulance design and technology. Another source was customer changes made after specifications had been determined and
materials ordered. This latter excess occurs because, even though
Wheeled Coach’s own throughput time is only 17 days, many of
the items that it purchases require much longer lead times.
Discussion Questions *
1. Why is accurate inventory such an important issue at Wheeled
Coach?
2. Why does Wheeled Coach have excess inventory, and what kind
of a plan would you suggest for dealing with it?
3. Be specific in your suggestions for reducing inventory and how
to implement them.
* You may wish to view the video that accompanies this case before
answering the questions.
1. The inventory models (EOQ) discussed in Chapter 12 assumed
that the demand for one item was independent of the demand
for another item. For example, EOQ assumes the demand for
refrigerator parts is independent of the demand for refrigerators
and that demand for parts is constant. MRP makes neither of
these assumptions.
2. Record accuracy of 99% may sound good, but note that even
when each component has an availability of 99% and a product
3. Using EOQ is a convenient approach for determining the time
between orders, but other rules can be used.
4. Part period balancing, Silver-Meal, and Wagner-Whitin are
included in the software POM for Windows and ExcelOM ,
available with this text.
has only seven components, the likelihood of a product being
completed is only .932 (because .99 7 = .932).
M18_HEIZ0422_12_SE_C14.indd 596 05/11/15 5:37 PM
Chapter 14 Rapid Review 14Rapid Review
Main Heading Review Material MyOMLab
DEPENDENT DEMAND
(p. 566)
Demand for items is dependent when the relationship between the items can be
determined. For any product, all components of that product are dependent
demand items.
j Material requirements planning (MRP) —A dependent demand technique that
uses a bill-of-material, inventory, expected receipts, and a master production
schedule to determine material requirements.
Concept Questions:
1.1–1.4
DEPENDENT
INVENTORY MODEL
REQUIREMENTS
(pp. 566–571)
Dependent inventory models require that the operations manager know the:
(1) Master production schedule; (2) Specifications or bill of material; (3) Inventory
availability; (4) Purchase orders outstanding; and (5) Lead times.
j Master production schedule (MPS) —A timetable that specifies what is to be
made and when.
The MPS is a statement of what is to be produced , not a forecast of demand.
j Bill of material (BOM) —A listing of the components, their description, and the
quantity of each required to make one unit of a product.
Items above any level in a BOM are called parents ; items below any level are called
components , or children . The top level in a BOM is the 0 level.
j Modular bills —Bills of material organized by major subassemblies or by product
options.
j Planning bills (or kits) —Material groupings created in order to assign an artificial parent to a bill of material; also called “pseudo” bills.
j Phantom bills of material —Bills of material for components, usually subassemblies, that exist only temporarily; they are never inventoried.
j Low-level coding —A number that identifies items at the lowest level at which
they occur.
j Lead time —In purchasing systems, the time between recognition of the need
for an order and receiving it; in production systems, it is the order, wait, move,
queue, setup, and run times for each component.
When a bill of material is turned on its side and modified by adding lead times for
each component, it is called a time-phased product structure .
Concept Questions:
2.1–2.4
Problems: 14.1–14.4
Virtual Office Hours for
Solved Problem: 14.1
VIDEO 14.1
When 18,500 Orlando
Magic Fans Come to
Dinner
VIDEO 14.2
MRP at Wheeled
Coach Ambulances
MRP STRUCTURE
(pp. 571–575)
j Gross material requirements plan —A schedule that shows the total demand for
an item (prior to subtraction of on-hand inventory and scheduled receipts) and
(1) when it must be ordered from suppliers, or (2) when production must be
started to meet its demand by a particular date.
j Net material requirements —The result of adjusting gross requirements for inventory on hand and scheduled receipts.
j Planned order receipt —The quantity planned to be received at a future date.
j Planned order release —The scheduled date for an order to be released.
Net requirements = Gross requirements + Allocations – (On hand
+ Scheduled receipts)
Concept Questions:
3.1–3.4
Problems: 14.5–14.9,
14.11, 14.16–14.21
Virtual Office Hours for
Solved Problem: 14.2
ACTIVE MODEL 14.1
MRP MANAGEMENT
(pp. 575–576)
j System nervousness —Frequent changes in an MRP system.
j Time fences —A means for allowing a segment of the master schedule to be designated as “not to be rescheduled.”
j Pegging —In material requirements planning systems, tracing upward the bill of
material from the component to the parent item.
Four approaches for integrating MRP and JIT are (1) finite capacity scheduling,
(2) small buckets, (3) balanced flow, and (4) supermarkets.
j Buckets —Time units in a material requirements planning system.
Finite capacity scheduling (FCS) considers department and machine capacity. FCS
provides the precise scheduling needed for rapid material movement.
Concept Questions:
4.1–4.4
LOT-SIZING
TECHNIQUES
(pp. 576–580)
j Lot-sizing decision —The process of, or techniques used in, determining lot size.
j Lot-for-lot —A lot-sizing technique that generates exactly what is required to
meet the plan.
j Periodic order quantity (POQ) —A lot-sizing technique that issues orders on a
predetermined time interval with an order quantity equal to all of the interval’s
requirements.
In general, the lot-for-lot approach should be used whenever low-cost deliveries
setup can be achieved.
Concept Questions:
5.1–5.4
Problems: 14.22, 14.26,
14.28
M18_HEIZ0422_12_SE_C14.indd 597 05/11/15 5:37 PM
Main Heading Review Material MyOMLab
EXTENSIONS OF MRP
(pp. 580–583)
j Material requirements planning II (MRP II) —A system that allows, with MRP in
place, inventory data to be augmented by other resource variables; in this case,
MRP becomes material resource planning .
j Closed-loop MRP system —A system that provides feedback to the capacity plan,
master production schedule, and production plan so planning can be kept valid
at all times.
j Load report —A report for showing the resource requirements in a work center
for all work currently assigned there as well as all planned and expected orders.
Tactics for smoothing the load and minimizing the impact of changed lead time
include: overlapping , operations splitting , and order splitting, or lot splitting .
Concept Questions:
6.1–6.4
Problem: 14.32
MRP IN SERVICES
(pp. 583–584)
j Distribution resource planning (DRP) —A time-phased stock-replenishment plan
for all levels of a distribution network.
Concept Questions:
7.1–7.4
ENTERPRISE
RESOURCE PLANNING
(ERP)
(pp. 584–587)
j Enterprise resource planning (ERP) —An information system for identifying and
planning the enterprise-wide resources needed to take, make, ship, and account
for customer orders.
In an ERP system, data are entered only once into a common, complete, and consistent database shared by all applications.
j Efficient consumer response (ECR) —Supply-chain management systems in the
grocery industry that tie sales to buying, to inventory, to logistics, and to
production.
Concept Questions:
8.1–8.4
14Rapid Review
Chapter 14 Rapid Review continued
Self Test
j Before taking the self-test, refer to the learning objectives listed at the beginning of the chapter and the key terms listed at the end of the chapter.
LO 14.1 In a product structure diagram:
a) parents are found only at the top level of the diagram.
b) parents are found at every level in the diagram.
c) children are found at every level of the diagram except
the top level.
d) all items in the diagrams are both parents and children.
e) all of the above.
LO 14.2 The difference between a gross material requirements
plan (gross MRP) and a net material requirements plan
(net MRP) is:
a) the gross MRP may not be computerized, but the net
MRP must be computerized.
b) the gross MRP includes consideration of the inventory
on hand, whereas the net MRP doesn’t include the
inventory consideration.
c) the net MRP includes consideration of the inventory
on hand, whereas the gross MRP doesn’t include the
inventory consideration.
d) the gross MRP doesn’t take taxes into account, whereas
the net MRP includes the tax considerations.
e) the net MRP is only an estimate, whereas the gross MRP
is used for actual production scheduling.
LO 14.3 Net requirements =
a) Gross requirements + Allocations − On-hand inventory
+ Scheduled receipts.
b) Gross requirements − Allocations − On-hand inventory −
Scheduled receipts.
c) Gross requirements − Allocations − On-hand inventory
+ Scheduled receipts.
d) Gross requirements + Allocations − On-hand inventory −
Scheduled receipts.
LO 14.4 A lot-sizing procedure that orders on a predetermined time
interval with the order quantity equal to the total of the
interval’s requirement is:
a) periodic order quantity.
b) part period balancing.
c) economic order quantity.
d) all of the above.
LO 14.5 MRP II stands for:
a) material resource planning.
b) management requirements planning.
c) management resource planning.
d) material revenue planning.
e) material risk planning.
LO 14.6 A(n) ______ MRP system provides information to the
capacity plan, to the master production schedule, and
ultimately to the production plan.
a) dynamic
b) closed-loop
c) continuous
d) retrospective
e) introspective
LO 14.7 Which system extends MRP II to tie in customers and
suppliers?
a) MRP III
b) JIT
c) IRP
d) ERP
e) Enhanced MRP II
Answers: LO 14.1. c; LO 14.2. c; LO 14.3. d; LO 14.4. a; LO 14.5. a; LO 14.6. b; LO 14.7. d.
M18_HEIZ0422_12_SE_C14.indd 598 05/11/15 5:37 PM
599
CHAPTER
O U T L I N E
15
◆ The Importance of Short-Term
Scheduling 602
◆ Scheduling Issues 602
◆ Scheduling Process-Focused Facilities 605
GLOBAL COMPANY PROFILE: Alaska Airlines
C H A P T E R
10
OM
STRATEGY
DECISIONS
• Design of Goods and Services
• Managing Quality
• Process Strategy
• Location Strategies
• Layout Strategies
• Human Resources
• Supply-Chain Management
• Inventory Management
• Scheduling
· Aggregate/S&OP ( Ch. 13 )
· Short-Term ( Ch. 15 )
• Maintenance
CHAPTER GLOBAL COMPANY PROFILE Alaska Airlines
Short-Term Scheduling
◆ Loading Jobs 605
◆ Sequencing Jobs 611
◆ Finite Capacity Scheduling (FCS) 617
◆ Scheduling Services 618
Alaska Airlines
M19_HEIZ0422_12_SE_C15.indd 599 05/11/15 5:57 PM
S
eattle–Tacoma International Airport (SEA) is the 15th busiest in the U.S. in passenger traffic.
Served by 24 airlines that fly non-stop to 76 domestic and 19 international destinations, it is
a weather forecaster’s nightmare, raining 5 inches a month in the winter season. But it is also
the top-ranked U.S. airport in on-time departures, at 85.8%. Much of the credit goes to Alaska
Airlines, which dominates traffic at SEA with over 50% of all domestic flights. Alaska’s scheduling
is critical to efficiency and passenger service.
Scheduling Flights When Weather
Is the Enemy
GLOBAL COMPANY PROFILE
Alaska Airlines
CHAPTER 1 5
600
12
6
3
1
2
11
10
5
4
7
8
12
3
1
10 2
5
4
7
8
9
6
3
11 1
10
5
4
7
8
9
4 A.M.
FORECAST:
Rain with a
chance of light
snow for Seattle.
ACTION:
Discuss status of
planes and
possible need for
cancellations.
10 A.M.
FORECAST:
Freezing rain
after 5 P.M.
ACTION:
Ready deicing
trucks; develop
plans to cancel
50% to 80% of
flights after 6 P.M.
1:30 P.M.
FORECAST:
Rain changing to
snow.
ACTION:
Cancel half the
flights from
6 P.M. to 10 A.M.;
notify passengers
and reroute
planes.
5 P.M.
FORECAST:
Less snow than
expected.
ACTION:
Continue calling
passengers and
arrange
alternate flights.
10 P.M.
FORECAST:
Snow tapering
off.
ACTION:
Find hotels for
600
passengers
stranded by the
storm.
12
6
3
1
2
11
10
5
4
7
9
8
12
6
3
1
2
11
10
5
4
7
8
6
11
2
12
9 9
This is typical of what Alaska Air officials had to do one December day when a storm bore down on Seattle.
Managers at airlines, such as Alaska,
learn to expect the unexpected. Events that
require rapid rescheduling are a regular part
of life. Throughout the ordeals of hurricanes,
tornadoes, ice storms, snow storms, and
more, airlines around the globe struggle to
cope with delays, cancellations, and furious passengers. The inevitable schedule
changes often create a ripple effect that
impacts passengers at dozens of airports.
To improve flight rescheduling efforts, Alaska Air employees monitor numerous screens that display flights in progress, meteorological charts,
and weather patterns at its Flight Operations Department in Seattle. Note the many andon signal lights used to indicate “status OK” (green),
“needs attention” (yellow), or “major issue—emergency” (red).
Alaska Airlines
M19_HEIZ0422_12_SE_C15.indd 600 05/11/15 5:57 PM
601
Alaska Air’s quest to provide
passenger and freight service to
the state of Alaska complicates its
scheduling even more than that of
other airlines. Here are just three
examples: (1) Juneau’s airport
is surrounded by mountains, so
the approach is often buffeted by
treacherous wind shears; (2) Sitka’s
one small runway is on a narrow
strip of land surrounded by water;
and (3) in Kodiak, the landing strip ends abruptly at a mountainside. The airport approach is so tricky that first officers are
not allowed to land there—only captains are trusted to do so.
Alaska Air takes the sting out of the scheduling nightmares that come from weather-related problems by using
the latest technology on its planes and in its Flight Operations Department, located near the Seattle airport. From
computers to telecommunications systems to deicers, the
department reroutes flights, gets its jets in the air, and quickly
notifies customers of schedule changes. The department’s
job is to keep flights flowing despite the disruptions. Alaska
estimates that it saves $18 million a year by using its technology to reduce cancellations and delays.
With mathematical scheduling models such as the ones
described in this text, Alaska quickly develops alternate
schedules and route changes. This may mean coordinating
incoming and outgoing aircraft, ensuring crews are on hand,
and making sure information gets to passengers as soon as
possible. Weather may be the enemy, but Alaska Airlines has
learned how to manage it.
Mike Segar/Corbis
Weather-related disruptions can
create major scheduling and
expensive snow removal issues
for airlines (left), just as they
create major inconveniences for
passengers (right).
J. David Ake/AP Images
To maintain schedules, Alaska Airlines
uses elaborate equipment and motivated
personnel for snow and ice removal.
shipfactory/Shutterstock
M19_HEIZ0422_12_SE_C15.indd 601 05/11/15 5:57 PM
602
The Importance of Short-Term Scheduling
Alaska Airlines doesn’t just schedule its 150 aircraft every day; it also schedules over 4,500
pilots and flight attendants to accommodate passengers seeking timely arrival at their destinations. This schedule, developed with huge computer programs, plays a major role in meeting
customer expectations. Alaska finds competitive advantage with its ability to make lastminute adjustments to demand fluctuations and weather disruptions.
Scheduling decisions for five organizations—an airline, a hospital, a college, a sports arena,
and a manufacturer—are shown in Table 15.1 . These decisions all deal with the timing of
operations.
When manufacturing firms make schedules that match resources to customer demands,
scheduling competence focuses on making parts on a just-in-time basis, with low setup times,
little work-in-process, and high facility utilization. Efficient scheduling is how manufacturing
companies drive down costs and meet promised due dates.
The strategic importance of scheduling is clear:
◆ Internally effective scheduling means faster movement of goods and services through a
facility and greater use of assets. The result is greater capacity per dollar invested, which
translates into lower costs.
◆ Externally good scheduling provides faster throughput, added flexibility, and more dependable delivery, improving customer service.
Scheduling Issues
Figure 15.1 shows that a series of decisions affects scheduling. Schedule decisions begin with
planning capacity, which defines the facility and equipment resources available (discussed
in Supplement 7) . Capacity plans are usually made over a period of years as new equipment
L E A R N I N G
OBJECTIVES
LO 15.1 Explain the relationship between short-term scheduling, capacity planning, aggregate planning,
and a master schedule 603
LO 15.2 Draw Gantt loading and scheduling charts 607
LO 15.3 Apply the assignment method for loading jobs 608
LO 15.4 Name and describe each of the priority sequencing rules 613
LO 15.5 Use Johnson’s rule 616
LO 15.6 Defi ne fi nite capacity scheduling 617
LO 15.7 Use the cyclical scheduling technique 620
STUDENT TIP
Scheduling decisions range
from years, for capacity
planning, to minutes/hours/
days, called short-term
scheduling. This chapter
focuses on the latter.
VIDEO 15.1
From the Eagles to the Magic:
Converting the Amway Center
TABLE 15.1 Scheduling Decisions
ORGANIZATION MANAGERS SCHEDULE THE FOLLOWING
Alaska Airlines Maintenance of aircraft
Departure timetables
Flight crews, catering, gate, and ticketing personnel
Arnold Palmer Hospital Operating room use
Patient admissions
Nursing, security, maintenance staffs
Outpatient treatments
University of Alabama Classrooms and audiovisual equipment
Student and instructor schedules
Graduate and undergraduate courses
Amway Center Ushers, ticket takers, food servers, security personnel
Delivery of fresh foods and meal preparation
Orlando Magic games, concerts, arena football
Lockheed Martin factory Production of goods
Purchases of materials
Workers
M19_HEIZ0422_12_SE_C15.indd 602 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 603
and facilities are designed, built, purchased, or shut down. Aggregate plans ( Chapter 13 ) are
the result of a Sales and Operating Planning team that makes decisions regarding the use of
facilities, inventory, people, and outside contractors. Aggregate plans are typically for 3 to
18 months, and resources are allocated in terms of an aggregate measure such as total units,
tons, or shop hours. The master schedule breaks down the aggregate plan and develops weekly
schedules for specific products or product lines. Short-term schedules then translate capacity
decisions, aggregate (intermediate) plans, and master schedules into job sequences and specific
assignments of personnel, materials, and machinery. In this chapter, we focus on this last
step, scheduling goods and services in the short run (that is, matching daily or hourly demands
to specific personnel and equipment capacity). See the OM in Action box “Prepping for the
Orlando Magic Basketball Game.”
The objective of scheduling is to allocate and prioritize demand (generated by either forecasts
or customer orders) to available facilities. Three factors are pervasive in scheduling: (1) generating the schedule forward or backward, (2) finite and infinite loading, and (3) the criteria
(priorities) for sequencing jobs. We discuss these topics next.
Forward and Backward Scheduling
Scheduling can be initiated forward or backward. Forward scheduling starts the schedule as
soon as the job requirements are known . Forward scheduling is used in organizations such as
hospitals, clinics, restaurants, and machine tool manufacturers. In these facilities, jobs are
performed to customer order, and delivery is typically scheduled at the earliest possible date.
Capacity Plan for New Facilities
Adjust capacity to the demand suggested by strategic plan
Aggregate Production Plan for All Bikes
(Determine personnel or subcontracting necessary to
match aggregate demand to existing facilities/capacity)
Master Production Schedule for Bike Models
Work Assigned to Specific Personnel and Work Centers
(Determine weekly capacity schedule)
Make finite capacity schedule by matching specific
tasks to specific people and machines
Capacity Planning
(Long term; years)
Changes in facilities
Changes in equipment
See Chapter 7 and Supplement 7
Aggregate Planning
(Intermediate term; quarterly or monthly)
Facility utilization
Personnel changes
Subcontracting
See Chapter 13
Master Schedule
(Intermediate term; weekly)
Material requirements planning
Disaggregate the aggregate plan
See Chapters 13 and 14
Month 1 2
Bike Production 800 850
1
100
100
2
200
Month 1
3
100
100
Week
Model 22
Model 24
Model 26
4
200
5
150
100
6
200
7
100
100
8
200
Assemble
Model 22 in
work center 6
Month 2
Short-Term Scheduling
(Short term; days, hours, minutes)
Work center loading
Job sequencing/dispatching
See this chapter
LO 15.1 Explain the
relationship between
short-term scheduling,
capacity planning,
aggregate planning,
and a master schedule
Figure 15.1
The Relationship Between
Capacity Planning, Aggregate
Planning, Master Schedule,
and Short-Term Scheduling for
a Bike Company
Myrleen Pearson/Alamy Peter Endig/dpa/Landov
Now Due
date
Forward Scheduling
M19_HEIZ0422_12_SE_C15.indd 603 05/11/15 5:57 PM
604 PART 3 | MANAGING OPERATIONS
Backward scheduling begins with the due date, scheduling the final operation first. Steps
within the job are then scheduled, one at a time, in reverse order. By subtracting the time
needed for each item, the start time is obtained. Backward scheduling is used in manufacturing
environments, as well as service environments such as catering a banquet or scheduling surgery.
In practice, a combination of forward and backward scheduling is often used to find a reasonable trade-off between capacity constraints and customer expectations.
Finite and Infinite Loading
Loading is the process of assigning jobs to work stations or processes. Scheduling techniques
that load (or assign) work only up to the capacity of the process are called finite loading. The
advantage of finite loading is that, in theory, all of the work assigned can be accomplished.
However, because only work that can be accomplished is loaded into workstations—when in
fact there may be more work than capacity—the due dates may be pushed out to an unacceptable future time.
Techniques that load work without regard for the capacity of the process are infinite
loading . All the work that needs to be accomplished in a given time period is assigned. The
capacity of the process is not considered. Most material requirements planning (MRP) systems
(discussed in Chapter 14 ) are infinite loading systems. The advantage of infinite loading is an
initial schedule that meets due dates. Of course, when the workload exceeds capacity, either the
capacity or the schedule must be adjusted.
Scheduling Criteria
The correct scheduling technique depends on the volume of orders, the nature of operations,
and the overall complexity of jobs, as well as the importance placed on each of four criteria:
1. Minimize completion time: Evaluated by determining the average completion time.
2. Maximize utilization: Evaluated by determining the percent of the time the facility is utilized.
3. Minimize work-in-process (WIP) inventory: Evaluated by determining the average number of jobs in the system. The relationship between the number of jobs in the system and
OM in Action Prepping for the Orlando Magic Basketball Game
Tuesday. It’s time for John Nicely to make a grocery list. He is serving dinner
on Sunday, so he will need a few things . . . 200 pounds of chicken and
steak, ingredients for 800 servings of mac ’n’ cheese, 500 spring rolls, and
75 pounds of shrimp. Plus a couple hundred pizzas and a couple thousand
hot dogs—just enough to feed the Orlando Magic basketball players and the
18,500 guests expected. You see, Nicely is the executive chef of the Amway
Center in Orlando, and on Sunday the Magic are hosting the Boston Celtics.
How do you feed huge crowds good food in a short time? It takes good
scheduling, combined with creativity and improvisation. With 42 facilities serving food and beverages, “the Amway Center,” Nicely says, “is its own beast.”
Wednesday. Shopping Day.
Thursday–Saturday . The staff prepares whatever it can. Chopping vegetables, marinating meats, mixing salad dressings—everything but cooking the
food. Nicely also begins his shopping lists for next Tuesday’s game against the
Miami Heat and for a Lady Gaga concert 3 days later.
Sunday . 4 P.M. Crunch time. Suddenly the kitchen is a joke-free zone. In
20 minutes, Nicely’s first clients, 120 elite ticket holders who belong to the
Ritz Carlton Club, expect their meals—from a unique menu created for each
game.
5 P.M. As the Magic and Celtics start warming up, the chefs move their
operation in a brisk procession of hot boxes and cold-food racks to the
satellite kitchens.
6:12 P.M. Nicely faces
surprises at three concession stands: a shortage
of cashiers and a broken
cash register.
Halftime . There is
a run on rice pilaf in
the upscale Jernigan’s
restaurant. But Nicely has
thought ahead and has
anticipated. The backup
dishes arrive before
customers even notice.
For Nicely, successful scheduling means
happy guests as a result
of a thousand details
having been identified, planned, and executed. Just another night of delivering
restaurant-quality meals and top-grade fast food to a sold-out arena crowd in
a span of a few hours.
Source: Interview with Chef John Nicely and Orlando Magic executives.
Now Due
date
Backward Scheduling
Fernando Medina
Loading
The assigning of jobs to work or
processing centers.
M19_HEIZ0422_12_SE_C15.indd 604 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 605
WIP inventory will be high. Therefore, the fewer the number of jobs that are in the system, the lower the inventory.
4. Minimize customer waiting time: Evaluated by determining the average number of late
periods (e.g., days or hours).
These four criteria are used in this chapter, as they are in industry, to evaluate scheduling
performance. In addition, good scheduling techniques should be simple, clear, easily understood, easy to carry out, flexible, and realistic.
Scheduling is further complicated by machine breakdowns, absenteeism, quality problems,
shortages, and other factors. Consequently, assignment of a date does not ensure that the work
will be performed according to the schedule. Many specialized techniques have been developed
to aid in preparing reliable schedules. Table 15.2 provides an overview of approaches to scheduling for three different processes.
In this chapter, we first examine the scheduling of process-focused facilities and then the
challenge of scheduling employees in the service sector.
Scheduling Process-Focused Facilities
Process-focused facilities (also known as intermittent , or job-shop, facilities ) are common in
high-variety, low-volume manufacturing and service organizations. These facilities produce
make-to-order products or services and include everything from auto repair garages and hospitals to beauty salons. The production items themselves differ considerably, as do the talents,
material, and equipment required to make them. Scheduling requires that the sequence of
work (its routing), time required for each item, and the capacity and availability of each work
center be known. The variety of products and unique requirements means that scheduling is
often complex. In this section we look at some of the tools available to managers for loading
and sequencing work for these facilities.
Loading Jobs
Operations managers assign jobs to work centers so that costs, idle time, or completion times
are kept to a minimum. “Loading” work centers takes two forms. One is oriented to capacity;
the second is related to assigning specific jobs to work centers.
First, we examine loading from the perspective of capacity via a technique known as
input–output control. Then, we present two approaches used for loading: Gantt charts and the
assignment method of linear programming.
TABLE 15.2 Different Processes Suggest Different Approaches to Scheduling
Process-focused facilities (job shops)
◆ Scheduling to customer orders where changes in both volume and variety of jobs/clients/patients are frequent.
◆ Schedules are often due-date focused, with loading refi ned by fi nite loading techniques.
◆ Examples: foundries, machine shops, cabinet shops, print shops, many restaurants, and the fashion industry.
Repetitive facilities (assembly lines)
◆ Schedule module production and product assembly based on frequent forecasts.
◆ Finite loading with a focus on generating a forward-looking schedule.
◆ JIT techniques are used to schedule components that feed the assembly line.
◆ Examples: assembly lines for washing machines at Whirlpool and automobiles at Ford.
Product-focused facilities (continuous)
◆ Schedule high-volume fi nished products of limited variety to meet a reasonably stable demand within
existing fi xed capacity.
◆ Finite loading with a focus on generating a forward-looking schedule that can meet known setup and
run times for the limited range of products.
◆ Examples: huge paper machines at International Paper, beer in a brewery at Anheuser-Busch, and potato
chips at Frito-Lay.
M19_HEIZ0422_12_SE_C15.indd 605 05/11/15 5:57 PM
606 PART 3 | MANAGING OPERATIONS
Input–Output Control
Many firms have difficulty scheduling (that is, achieving effective throughput) because they
overload the production processes. This often occurs because they do not know actual performance in the work centers. Effective scheduling depends on matching the schedule to performance. Lack of knowledge about capacity and performance causes reduced throughput.
Input–output control is a technique that allows operations personnel to manage facility work
flows. If the work is arriving faster than it is being processed, the facility is overloaded, and
a backlog develops. Overloading causes crowding in the facility, leading to inefficiencies and
quality problems. If the work is arriving at a slower rate than jobs are being performed, the
facility is underloaded, and the work center may run out of work. Underloading the facility results in idle capacity and wasted resources. Example 1 shows the use of input–output controls.
Input–output control
A system that allows operations
personnel to manage facility work
flows.
Example 1 INPUT–OUTPUT CONTROL
Bronson Machining, Inc., manufactures driveway security fences and gates. It wants to develop an
input–output control report for its welding work center for 5 weeks (weeks 6/6 through 7/4). The planned
input is 280 standard hours per week. The actual input is close to this figure, varying between 250 and
285. Output is scheduled at 320 standard hours, which is the assumed capacity. A backlog exists in the
work center.
APPROACH c Bronson uses schedule information to create Figure 15.2 , which monitors the
workload–capacity relationship at the work center.
Week
Ending
Planned
Input
Actual
Input
Planned
Output
Actual
Output
*Sum of actual inputs minus sum of actual outputs = cumulative change in backlog
6/6 6/13 6/20 6/27 7/4
280
270 250 280 285 280
280 280 280 280
320 320 320 320
270270 270 270
Explanation:
270 input,
270 output, implies
0 change.
7/11
Explanation: 250 input,
270 output, implies –20
change. (20 standard
hours less work in the
work center)
Welding Work Center (In standard hours)
–10 –40 –40 –35 Cumulative
Deviation
Cumulative
Deviation –50 –100 –150 –200
Cumulative
Change
in Backlog* 0 –20 –10 +5
Figure 15.2
Input–Output Control
SOLUTION c The deviations between scheduled input and actual output are shown in Figure 15.2 .
Actual output (270 hours) is substantially less than planned. Therefore, neither the input plan nor the
output plan is being achieved.
INSIGHT c The backlog of work in this work center has actually increased by 5 hours by week 6/27.
This increases work-in-process inventory, complicating the scheduling task and indicating the need for
manager action.
LEARNING EXERCISE c If actual output for the week of 6/27 was 275 (instead of 270), what changes?
[Answer: Output cumulative deviation now is −195, and cumulative change in backlog is 0.]
RELATED PROBLEM c 15.10
ConWIP cards
Cards that control the amount
of work in a work center, aiding
input–output control.
Input–output control can be maintained by a system of ConWIP cards , which control the
amount of work in a work center. ConWIP is an acronym for constant work-in-process . The
ConWIP card travels with a job (or batch) through the work center. When the job is finished,
the card is released and returned to the initial workstation, authorizing the entry of a new
M19_HEIZ0422_12_SE_C15.indd 606 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 607
batch into the work center. The ConWIP card effectively limits the amount of work in the work
center, controls lead time, and monitors the backlog.
Gantt Charts
Gantt charts are visual aids that are useful in loading and scheduling. The name is derived from
Henry Gantt, who developed them in the late 1800s. The charts show the use of resources,
such as work centers and labor.
When used in loading , Gantt charts show the loading and idle times of several departments,
machines, or facilities. They display the relative workloads in the system so that the manager
knows what adjustments are appropriate. For example, when one work center becomes overloaded, employees from a low-load center can be transferred temporarily to increase the workforce. Or if waiting jobs can be processed at different work centers, some jobs at high-load
centers can be transferred to low-load centers. Versatile equipment may also be transferred
among centers. Example 2 illustrates a simple Gantt load chart.
Gantt charts
Planning charts used to schedule
resources and allocate time.
Example 2 GANTT LOAD CHART
A New Orleans washing machine manufacturer accepts special orders for machines to be used in such
unique facilities as submarines, hospitals, and large industrial laundries. The production of each machine
requires varying tasks and durations. The company wants to build a load chart for the week of March 8.
APPROACH c The Gantt chart is selected as the appropriate graphical tool.
SOLUTION c Figure 15.3 shows the completed Gantt chart.
Processing
Work
Center
Day
Metalworks
Mechanical
Electronics
Painting
Job 408
Job 295 Job 408 Job 349
Job 349
Job 349 Job 350
Job 349 Job 408
Monday Tuesday Wednesday Thursday Friday
Center not available
(e.g., maintenance
time, repairs, shortages)
Unscheduled
Figure 15.3
Gantt Load Chart for the Week
of March 8
INSIGHT c The four work centers process several jobs during the week. This particular chart indicates
that the metalworks and painting centers are completely loaded for the entire week. The mechanical and
electronic centers have some idle time scattered during the week. We also note that the metalworks center
is unavailable on Tuesday, and the painting center is unavailable on Thursday, perhaps for preventive
maintenance.
LEARNING EXERCISE c What impact results from the electronics work center closing on Tuesday
for preventive maintenance? [Answer: None.]
RELATED PROBLEM c 15.1b
The Gantt load chart has a major limitation: it does not account for production variability
such as unexpected breakdowns or human errors that require reworking a job. Consequently,
the chart must also be updated regularly to account for new jobs and revised time estimates.
A Gantt schedule chart is used to monitor jobs in progress (and is also used for project
scheduling). It indicates which jobs are on schedule and which are ahead of or behind schedule.
In practice, many versions of the chart are found. The schedule chart in Example 3 places jobs
in progress on the vertical axis and time on the horizontal axis.
LO 15.2 Draw Gantt
loading and scheduling
charts
M19_HEIZ0422_12_SE_C15.indd 607 05/11/15 5:57 PM
608 PART 3 | MANAGING OPERATIONS
Assignment Method
The assignment method involves assigning tasks or jobs to resources. Examples include assigning jobs to machines, contracts to bidders, people to projects, and salespeople to territories.
The objective is most often to minimize total costs or time required to perform the tasks at
hand. One important characteristic of assignment problems is that only one job (or worker) is
assigned to one machine (or project).
Each assignment problem uses a table. The numbers in the table will be the costs or times
associated with each particular assignment. For example, if First Printing has three available
typesetters (A, B, and C) and three new jobs to be completed, its table might appear as follows.
The dollar entries represent the firm’s estimate of what it will cost for each job to be completed
by each typesetter.
JOB
TYPESETTER
ABC
R-34 $11 $14 $ 6
S-66 $ 8 $10 $11
T-50 $ 9 $12 $ 7
The assignment method involves adding and subtracting appropriate numbers in the table
to find the lowest opportunity cost 1 for each assignment. There are four steps to follow:
1. Subtract the smallest number in each row from every number in that row and then, from
the resulting matrix, subtract the smallest number in each column from every number in
that column. This step has the effect of reducing the numbers in the table until a series
Example 3 GANTT SCHEDULING CHART
First Printing in Winter Park, Florida, wants to use a Gantt chart to show the scheduling of three orders,
jobs A, B, and C.
APPROACH c In Figure 15.4 , each pair of brackets on the time axis denotes the estimated starting
and finishing of a job enclosed within it. The solid bars reflect the actual status or progress of the job.
We are just finishing day 5.
SOLUTION c
Job Day
1
Day
2
Day
3
Day
4
Day
5
Day
6
Day
7
Day
8
A
B
C
Now
Maintenance
Start of an
activity
End of an
activity
Scheduled
activity time
allowed
Actual work
progress
Nonproduction
time
Point in time
when chart is
reviewed
Gantt scheduling
chart symbols:
Figure 15.4
Gantt Scheduling Chart for
Jobs A, B, and C at First
Printing
INSIGHT c Figure 15.4 illustrates that job A is about a half-day behind schedule at the end of day 5.
Job B was completed after equipment maintenance. We also see that job C is ahead of schedule.
LEARNING EXERCISE c Redraw the Gantt chart to show that job A is a half-day ahead of schedule.
[Answer: The orangish bar now extends all the way to the end of the activity.]
RELATED PROBLEMS c 15.1a, 15.2
Assignment method
A special class of linear
programming models that
involves assigning tasks or
jobs to resources.
LO 15.3 Apply the
assignment method for
loading jobs
M19_HEIZ0422_12_SE_C15.indd 608 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 609
of zeros, meaning zero opportunity costs , appear. Even though the numbers change, this
reduced problem is equivalent to the original one, and the same solution will be optimal.
2. Draw the minimum number of vertical and horizontal straight lines necessary to cover all
zeros in the table. If the number of lines equals either the number of rows or the number of
columns in the table, then we can make an optimal assignment (see Step 4). If the number
of lines is less than the number of rows or columns, we proceed to Step 3.
3. Subtract the smallest number not covered by a line from every other uncovered number.
Add the same number to any number(s) lying at the intersection of any two lines. Do not
change the value of the numbers that are covered by only one line. Return to Step 2 and
continue until an optimal assignment is possible.
4. Optimal assignments will always be at zero locations in the table. One systematic way of
making a valid assignment is first to select a row or column that contains only one zero
square. We can make an assignment to that square and then draw lines through its row
and column. From the uncovered rows and columns, we choose another row or column in
which there is only one zero square. We make that assignment and continue the procedure
until we have assigned each person or machine to one task.
Example 4 shows how to use the assignment method.
Example 4 ASSIGNMENT METHOD
First Printing wants to find the minimum total cost assignment of 3 jobs to 3 typesetters.
APPROACH c The cost table shown earlier in this section is repeated here, and steps 1 through 4 are
applied.
STUDENT TIP
You can also tackle assignment
problems with our Excel OM or
POM software or with Excel’s
Solver add-in.
TYPESETTER
ABC
JOB
R-34 $11 $14 $ 6
S-66 $ 8 $10 $11
T-50 $ 9 $12 $ 7
SOLUTION c
Step 1A: Using the previous table, subtract the smallest number in each row from every number in the
row. The result is shown in the table on the left.
TYPESETTER
ABC
JOB
R-34 5 8 0
S-66 0 2 3
T-50 2 5 0
TYPESETTER
A B C
JOB
R-34 5 6 0
S-66 0 0 3
T-50 2 3 0
Step 1B: Using the above left table, subtract the smallest number in each column from every number in
the column. The result is shown in the table on the right.
Step 2: Draw the minimum number of vertical and horizontal straight lines needed to cover all zeros.
Because two lines suffice, the solution is not optimal.
TYPESETTER
ABC
JOB
R-34 5 6 0
S-66 0 0 3
T-50 2 3 0
Smallest uncovered number
M19_HEIZ0422_12_SE_C15.indd 609 05/11/15 5:57 PM
610 PART 3 | MANAGING OPERATIONS
Step 3: Subtract the smallest uncovered number (2 in this table) from every other uncovered number
and add it to numbers at the intersection of two lines.
TYPESETTER
ABC
JOB
R-34 3 4 0
S-66 0 0 5
T-50 0 1 0
Return to step 2. Cover the zeros with straight lines again.
TYPESETTER
ABC
JOB
R-34 3 4 0
S-66 0 0
T-50 010
Because three lines are necessary, an optimal assignment can be made (see Step 4). Assign R-34 to
person C, S-66 to person B, and T-50 to person A. Referring to the original cost table, we see that:
Minimum cost = $6 + $10 + $9 = $25
INSIGHT c If we had assigned S-66 to typesetter A, we could not assign T-50 to a zero location.
LEARNING EXERCISE c If it costs $10 for Typesetter C to complete Job R-34 (instead of $6), how
does the solution change? [Answer: R-34 to A, S-66 to B, T-50 to C; cost = $28.]
RELATED PROBLEMS c 15.3–15.9 (15.11–15.14 are available in MyOMLab)
EXCEL OM Data File Ch15Ex4.xls can be found in MyOMLab.
Some assignment problems entail maximizing profit, effectiveness, or payoff of an assignment of people to tasks or of jobs to machines. An equivalent minimization problem can be
obtained by converting every number in the table to an opportunity loss . To convert a maximizing problem to an equivalent minimization problem, we create a minimizing table by subtracting every number in the original payoff table from the largest single number in that table.
We then proceed to step 1 of the four-step assignment method. Minimizing the opportunity
loss produces the same assignment solution as the original maximization problem.
The problem of scheduling major league baseball
umpiring crews from one series of games to the
next is complicated by many restrictions on travel.
The league strives to achieve two conflicting
objectives: (1) balance crew assignments relatively
evenly among all teams over the course of a season
and (2) minimize travel costs. Using the assignment
method, the time it takes the league to generate a
schedule has been significantly decreased, and the
quality of the schedule has improved.
Nicholas D. Cacchione/Shutterstock
M19_HEIZ0422_12_SE_C15.indd 610 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 611
Sequencing Jobs
Once jobs are loaded in a work center, as we just discussed, managers decide the sequence in
which they are to be completed. Sequencing (often called dispatching ) is accomplished by specifying the priority rules to use to release (dispatch) jobs to each work center.
Priority Rules for Sequencing Jobs
Priority rules are especially applicable for process-focused facilities such as clinics, print shops,
and manufacturing job shops. The most popular priority rules are:
◆ FCFS: first come, first served . Jobs are completed in the order they arrived.
◆ SPT: shortest processing time . Jobs with the shortest processing times are assigned first.
◆ EDD: earliest due date . Earliest due date jobs are assigned first.
◆ LPT: longest processing time . Jobs with the longest processing time are assigned first.
Performance Criteria The choice of which priority rule to choose depends in part
on how each rule performs on four criteria: the priority rules try to minimize completion
time, maximize facility utilization, minimize number of jobs in the system , and minimize job
lateness . These performance criteria incorporate the concept of flow time , which measures the
time each job spends waiting plus time being processed. For example, if Job B waits 6 days for
Job A to be processed and then takes 2 more days of operation time itself, its flow time would
be 6 + 2 = 8 days. The performance criteria are measured as:
Average completion time = Sum of total flow time
Number of jobs (15-1)
Utilization metric = Total job work (processing) time
Sum of total flow time (15-2)
Average number of jobs in the system = Sum of total flow time
Total job work (processing) time (15-3)
Average job lateness = Total late days
Number of jobs (15-4)
Computing the lateness of a particular job involves assumptions about the start time during the day and the timing of delivering a completed job. Equation (15-5) assumes that today
is a work day, work has not yet begun today, and a job finished by the end of a day can be
delivered to the customer that same day.
Job lateness = Max{0, yesterday + flow time – due date} (15-5)
For example, suppose that today is day 20 (thus yesterday was day 19). Job A is due tomorrow (day 21) and has a flow time of 1 day. That job would be considered to be completed on
time, i.e., not late:
Max{0, 19 + 1 – 21} = Max{0, -1} = 0 days late.
Meanwhile, Job B is due on day 32 and has a flow time of 15 days. The lateness of Job B
would be:
Max{0, 19 + 15 – 32} = Max{0, 2} = 2 days late.
We will examine four of the most popular priority rules in Example 5 .
Sequencing
Determining the order in which
jobs should be done at each work
center.
Priority rules
Rules used to determine the
sequence of jobs in processoriented facilities.
Flow time
The time between the release of a
job to a work center until the job
is finished.
Example 5 PRIORITY RULES FOR DISPATCHING
Five architectural rendering jobs are waiting to be assigned at Avanti Sethi Architects. Their work (processing) times and due dates are given in the following table. The firm wants to determine the sequence
of processing according to (1) FCFS, (2) SPT, (3) EDD, and (4) LPT rules. Jobs were assigned a letter in
the order they arrived. Today is day 1, and work begins today.
M19_HEIZ0422_12_SE_C15.indd 611 05/11/15 5:57 PM
612 PART 3 | MANAGING OPERATIONS
JOB WORK JOB DUE
(PROCESSING) TIME DATE
JOB (DAYS) (DAYS)
A6 8
B2 6
C8 18
D3 15
E9 23
APPROACH c Each of the four priority rules is examined in turn. Four measures of effectiveness can
be computed for each rule and then compared to see which rule is best for the company.
SOLUTION c
1. The FCFS sequence shown in the next table is simply A–B–C–D–E.
JOB WORK FLOW JOB DUE JOB
JOB SEQUENCE (PROCESSING) TIME TIME DATE LATENESS
A 6 68 0
B 2 86 2
C 8 16 18 0
D 3 19 15 4
E 9 28 23 5
28 77 11
The FCFS rule results in the following measures of eff ectiveness:
a. Average completion time = Sum of total flow time
Number of jobs
= 77 days
5 = 15.4 days
b. Utilization metric = Total job work (processing) time
Sum of total flow time
= 28
77 = 36.4,
c. Average number of jobs in the system = Sum of total flow time
Total job work (processing) time
= 77 days
28 days = 2.75 jobs
d. Average job lateness = Total late days
Number of jobs = 11
5 = 2.2 days
2. The SPT rule shown in the next table results in the sequence B–D–A–C–E. Orders are sequenced
according to processing time, with the highest priority given to the shortest job.
JOB WORK FLOW JOB DUE JOB
JOB SEQUENCE (PROCESSING) TIME TIME DATE LATENESS
B 2 2 6 0
D 3 5
A 6118 3
C 8 19 18 1
E 9 28 23 5
28 65 9
15 0
Measurements of eff ectiveness for SPT are:
a. Average completion time = 65
5 = 13 days
b. Utilization metric = 28
65 = 43.1,
c. Average number of jobs in the system = 65
28 = 2.32 jobs
d. Average job lateness = 9
5 = 1.8 days
M19_HEIZ0422_12_SE_C15.indd 612 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 613
3. The EDD rule shown in the next table gives the sequence B–A–D–C–E. Note that jobs are ordered
by earliest due date fi rst.
JOB WORK FLOW JOB DUE JOB
JOB SEQUENCE (PROCESSING) TIME TIME DATE LATENESS
B 2 26 0
A 6 88 0
D 3 11 15 0
C 8 19 18 1
E 9 28 23 5
28 68 6
Measurements of eff ectiveness for EDD are:
a. Average completion time = 68
5 = 13.6 days
b. Utilization metric = 28
68 = 41.2,
c. Average number of jobs in the system = 68
28 = 2.43 jobs
d. Average job lateness = 6
5 = 1.2 days
4. The LPT rule shown in the next table results in the order E–C–A–D–B.

JOB WORK FLOW JOB DUE JOB
JOB SEQUENCE (PROCESSING) TIME TIME DATE LATENESS
E 99 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
Measures of eff ectiveness for LPT are:
a. Average completion time = 103
5 = 20.6 days
b. Utilization metric = 28
103 = 27.2,
c. Average number of jobs in the system = 103
28 = 3.68 jobs
d. Average job lateness = 48
5 = 9.6 days
The results of these four rules are summarized in the following table:

AVERAGE AVERAGE NUMBER AVERAGE
COMPLETION
UTILIZATION
METRIC 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
INSIGHT c LPT is the least effective measurement for sequencing for the Avanti Sethi firm. SPT is
superior in 3 measures, and EDD is superior in the fourth (average lateness).
LEARNING EXERCISE c If job A takes 7 days (instead of 6), how do the 4 measures of effectiveness
change under the FCFS rule? [Answer: 16.4 days, 35.4%, 2.83 jobs, 2.8 days late.]
RELATED PROBLEMS c 15.15, 15.17a–d, 15.18, 15.19 (15.15 alternate, 15.24 are available in MyOMLab)
EXCEL OM Data File Ch15Ex5.xls can be found in MyOMLab.
ACTIVE MODEL 15.1 This example is further illustrated in Active Model 15.1 in MyOMLab.
LO 15.4 Name and
describe each of the
priority sequencing rules
M19_HEIZ0422_12_SE_C15.indd 613 05/11/15 5:57 PM
614 PART 3 | MANAGING OPERATIONS
The results in Example 5 are typically true in the real world also. No one sequencing rule
always excels on all criteria. Experience indicates the following:
1. Shortest processing time is generally the best technique for minimizing job flow and minimizing the average number of jobs in the system. Its chief disadvantage is that long-duration
jobs may be continuously pushed back in priority in favor of short-duration jobs. Customers
may view this dimly, and a periodic adjustment for longer jobs must be made.
2. First come, first served does not score well on most criteria (but neither does it score particularly poorly). It has the advantage, however, of appearing fair to customers, which is
important in service systems.
3. Earliest due date minimizes maximum tardiness, which may be necessary for jobs that have a
very heavy penalty after a certain date. In general, EDD works well when lateness is an issue.
Critical Ratio
For organizations that have due dates (such as manufacturers and many firms like your local
printer and furniture re-upholsterer), the critical ratio for sequencing jobs is beneficial. The
critical ratio (CR) is an index number computed by dividing the time remaining until due date
by the work time remaining. As opposed to the priority rules, critical ratio is dynamic and
easily updated. It tends to perform better than FCFS, SPT, EDD, or LPT on the average joblateness criterion.
The critical ratio gives priority to jobs that must be done to keep shipping on schedule. A job
with a low critical ratio (less than 1.0) is one that is falling behind schedule. If CR is exactly 1.0, the
job is on schedule. A CR greater than 1.0 means the job is ahead of schedule and has some slack.
The formula for critical ratio is:
CR = Time remaining
Workdays remaining = Due date – Today>s date
Work (lead) time remaining (15-6)
Example 6 shows how to use the critical ratio.
Critical ratio (CR)
A sequencing rule that is an index
number computed by dividing the
time remaining until due date by
the work time remaining.
Your doctor may use a first-come, first-served priority rule
satisfactorily. However, such a rule may be less than optimal
for this emergency room. What priority rule might be best, and
why? What priority rule is often used on TV hospital dramas?
Tyler Olson/Fotolia
Example 6 CRITICAL RATIO
Today is day 25 on Zyco Medical Testing Laboratories’ production schedule. Three jobs are on order,
as indicated here:
JOB DUE DATE WORKDAYS REMAINING
A 30 4
B 28 5
C 27 2
M19_HEIZ0422_12_SE_C15.indd 614 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 615
APPROACH c Zyco wants to compute the critical ratios, using the formula for CR.
SOLUTION c
JOB CRITICAL RATIO PRIORITY ORDER
A (30 2 25)>4 5 1.25 3
B (28 2 25)>5 5 .60 1
C (27 2 25)>2 5 1.00 2
INSIGHT c Job B has a critical ratio of less than 1, meaning it will be late unless expedited. Thus, it
has the highest priority. Job C is on time, and job A has some slack. Once job B has been completed, we
would recompute the critical ratios for jobs A and C to determine whether their priorities have changed.
LEARNING EXERCISE c Today is day 24 (a day earlier) on Zyco’s schedule. Recompute the CRs
and determine the priorities. [Answer: 1.5, 0.8, 1.5; B is still number 1, but now jobs A and C are tied for
second.]
RELATED PROBLEMS c 15.16, 15.17e, 15.21
In most production scheduling systems, the critical-ratio rule can help do the following:
1. Determine the status of a specific job.
2. Establish relative priority among jobs on a common basis.
3. Adjust priorities (and revise schedules) automatically for changes in both demand and job
progress.
4. Dynamically track job progress.
Sequencing N Jobs on Two Machines: Johnson’s Rule
The next step in complexity is the case in which N jobs (where N is 2 or more) must go through
two different machines or work centers in the same order. (Each work center only works on
one job at a time.) This is called the N /2 problem.
Johnson’s rule can be used to minimize the time for sequencing a group of jobs through two
work centers. It also minimizes total idle time on the machines. Johnson’s rule involves four
steps:
1. All jobs are to be listed, and the time that each requires on a machine is to be shown.
2. Select the job with the shortest activity time. If the shortest time lies with the first machine,
the job is scheduled first. If the shortest time lies with the second machine, schedule the
job last. Ties in activity times can be broken arbitrarily.
3. Once a job is scheduled, eliminate it.
4. Apply steps 2 and 3 to the remaining jobs, working toward the center of the sequence.
Example 7 shows how to apply Johnson’s rule.
Johnson’s rule
An approach that minimizes the
total time for sequencing a group
of jobs through two work centers
while minimizing total idle time in
the work centers.
Example 7 JOHNSON’S RULE
Five specialty jobs at a La Crosse, Wisconsin, tool and die shop must be processed through two work
centers (drill press and lathe). The time for processing each job follows:
Work (processing) Time for Jobs (hours)
JOB
WORK CENTER 1
(DRILL PRESS)
WORK CENTER 2
(LATHE)
A5 2
B3 6
C8 4
D 10 7
E7 12
The owner, Niranjan Pati, wants to set the sequence to minimize his total time for the five jobs.
M19_HEIZ0422_12_SE_C15.indd 615 05/11/15 5:57 PM
616 PART 3 | MANAGING OPERATIONS
APPROACH c Pati applies the four steps of Johnson’s rule.
SOLUTION c
1. The job with the shortest processing time is A, in work center 2 (with a time of 2 hours). Because it is
at the second center, schedule A last. Eliminate it from consideration.
A
2. Job B has the next shortest time (3 hours). Because that time is at the fi rst work center, we schedule it
fi rst and eliminate it from consideration.
B A
3. The next shortest time is job C (4 hours) on the second machine. Therefore, it is placed as late as
possible.
B C A
4. There is a tie (at 7 hours) for the shortest remaining job. We can place E, which was on the fi rst work
center, fi rst. Then D is placed in the last sequencing position:
BE DCA
The sequential times are:
Work center 1 3 7 10 8 5
Work center 2 6 12 7 4 2
The time-phased flow of this job sequence is best illustrated graphically:
Time 0 1 3
B
5 7 11 12 13 17 19 21 22 23 25 27 29 31 33 35 10
E D C A
= Idle = Job completed
Time 0 3 10 20 28 33
9
Work
center
1
Work
center
2
BE D C A
B E DC A
Thus, the five jobs are completed in 35 hours.
INSIGHT c The second work center will wait 3 hours for its first job, and it will also wait 1 hour after
completing job B.
LEARNING EXERCISE c If job C takes 8 hours in work center 2 (instead of 4 hours), what sequence
is best? [Answer: B–E–C–D–A.]
RELATED PROBLEMS c 15.20, 15.22, 15.23 (15.25 is available in MyOMLab)
EXCEL OM Data File Ch15Ex7.xls can be found in MyOMLab.
LO 15.5 Use
Johnson’s rule
Limitations of Rule-Based Sequencing Systems
The scheduling techniques just discussed are rule-based techniques, but rule-based systems
have a number of limitations. Among these are the following:
1. Scheduling is dynamic; therefore, rules need to be revised to adjust to changes in orders,
process, equipment, product mix, and so forth.
M19_HEIZ0422_12_SE_C15.indd 616 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 617
2. Rules do not look upstream or downstream; idle resources and bottleneck resources in
other departments may not be recognized.
3. Rules do not look beyond due dates. For instance, two orders may have the same due
date. One order involves restocking a distributor and the other is a custom order that will
shut down the customer’s factory if not completed. Both may have the same due date, but
clearly the custom order is more important.
Despite these limitations, schedulers often use sequencing rules such as SPT, EDD, or critical
ratio. They apply these methods at each work center and then modify the sequence to deal
with a multitude of real-world variables. They may do this manually or with finite capacity
scheduling software.
Finite Capacity Scheduling (FCS)
Short-term scheduling systems are also called finite capacity scheduling. 2 Finite capacity scheduling (FCS) overcomes the disadvantages of systems based exclusively on rules by providing
the scheduler with interactive computing and graphic output. In dynamic scheduling environments such as job shops (with high variety, low volume, and shared resources) we expect
changes. But changes disrupt schedules. Operations managers are moving toward FCS systems that allow virtually instantaneous change by the operator. Improvements in communication on the shop floor are also enhancing the accuracy and speed of information necessary for
effective control in job shops. Computer-controlled machines can monitor events and collect
information in near real-time. This means the scheduler can make schedule changes based on
up-to-the-minute information. These schedules are often displayed in Gantt chart form. In
addition to including priority rule options, many of the current FCS systems also combine an
“expert system” or simulation techniques and allow the scheduler to assign costs to various
options. The scheduler has the flexibility to handle any situation, including order, labor, or
machine changes.
The combining of planning and FCS data, priority rules, models to Help analysis, and
Gantt chart output is shown in Figure 15.5 .
Finite capacity scheduling allows delivery requirements to be based on today’s conditions
and today’s orders, not according to some predefined rule. The scheduler determines what
constitutes a “good” schedule. FCS software packages such as Lekin (shown in Figure 15.6 ),
ProPlanner, Preactor, Asprova, Schedlyzer, and Jobplan are currently used at over 60% of U.S.
plants.
Finite capacity
scheduling (FCS)
Computerized short-term scheduling that overcomes the disadvantage of rule-based systems by
providing the user with graphical
interactive computing.
LO 15.6 Define finite
capacity scheduling
Setups and
run time
Interactive Finite Capacity Scheduling
Planning Data Routing files;
work center
information
Priority
rules
• Expert systems
• Simulation
models
• Master
schedule
• BOM
• Inventory
Tooling and
other resources
Maintenance
Job
A
B
C
D
Day
1
Day
2
Day
3
Day
4
Day
5
Day
6
Day
7
Day
8
Figure 15.5
Finite Capacity Scheduling
Systems Use Production Data
to Generate Gantt Load Charts,
and Work-in-Process Data
That Can Be Manipulated by
the User to Evaluate Schedule
Alternatives
M19_HEIZ0422_12_SE_C15.indd 617 05/11/15 5:57 PM
618 PART 3 | MANAGING OPERATIONS
Scheduling Services
Scheduling service systems differs from scheduling manufacturing systems in several ways:
◆ In manufacturing, the scheduling emphasis is on machines and materials; in services, it is
on staffing levels.
◆ Inventories can help smooth demand for manufacturers, but many service systems do not
maintain inventories.
◆ Services are labor intensive, and the demand for this labor can be highly variable.
◆ Legal considerations, such as wage and hour laws and union contracts that limit hours
worked per shift, week, or month, constrain scheduling decisions.
◆ Because services usually schedule people (rather than material), social, fatigue, seniority, and
status issues complicate scheduling.
The following examples note the complexity of scheduling services.
Hospitals A hospital is an example of a service facility that may use a scheduling system
every bit as complex as one found in a job shop. Hospitals seldom use a machine shop priority
system such as first come, first served (FCFS) for treating emergency patients, but they often
use FCFS within a priority class, a “triage” approach. And they often schedule products (such
as surgeries) just like a factory, maintaining excess capacity to meet wide variations in demand.
Banks Cross-training of the workforce in a bank allows loan officers and other managers
to provide short-term help for tellers if there is a surge in demand. Banks also employ parttime personnel to provide a variable capacity.
Retail Stores Scheduling optimization systems, such as Workbrain, Cybershift, and
Kronos, are used at retailers including Walmart, Payless Shoes, and Target. These systems
track individual store sales, transactions, units sold, and customer traffic in 15-minute increments to create work schedules. Walmart’s 2.2 million and Target’s 350,000 employees used to
take thousands of managers’ hours to schedule; now staffing is drawn up nationwide in a few
hours, and customer checkout experience has improved dramatically.
Starbucks’ scheduling software is discussed in the OM in Action box on the next page.
Figure 15.6
Finite Capacity Scheduling
(FCS) System
This Lekin ® finite capacity
scheduling software presents
a schedule of the five jobs and
the two work centers shown in
Example 7 (pages 615 – 616 ) in
Gantt chart form. The software
is capable of using a variety of
priority rules and many jobs. The
Lekin software is available for
free at http://community.stern
.nyu.edu/om/software/lekin
/download.html and can solve
many of the problems at the end
of this chapter.
Screenshot from Lekin ® Finite Capacity Scheduling Software. Reprinted with permission.
STUDENT TIP
Scheduling people to perform
services can be even more
complex than scheduling
machines.
VIDEO 15.2
Scheduling at Hard Rock Cafe
M19_HEIZ0422_12_SE_C15.indd 618 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 619
Airlines Two of the constraints airlines face when scheduling flight crews are: (1) a complex
set of FAA work-time limitations and (2) union contracts that guarantee crew pay for some
number of hours each day or each trip. Planners must also make efficient use of their other
expensive resource: aircraft. These schedules are typically built using linear programming models.
24/7 Operations Emergency hotlines, police/fire departments, telephone operations, and
mail-order businesses (such as L.L.Bean) schedule employees 24 hours a day, 7 days a week.
To allow management flexibility in staffing, sometimes part-time workers can be employed.
This provides both benefits (in using odd shift lengths or matching anticipated workloads) and
difficulties (from the large number of possible alternatives in terms of days off, lunch hour
times, rest periods, starting times). Most companies use computerized scheduling systems to
cope with these complexities.
Good scheduling in the health care industry can help
keep nurses happy and costs contained. Here, nurses
in Boston protest nurse-staffing levels in Massachusetts
hospitals. Shortages of qualified nurses is a chronic
problem.
Patricia McDonnell/AP Images
OM in Action Starbucks’ Controversial Scheduling Software
Starbucks recently announced revisions to the way the company schedules
its 130,000 baristas, saying it wanted to improve “stability and consistency”
in work hours from week to week. The company intends to curb the muchloathed practice of “clopening,” or workers closing the store late at night and
returning just a few hours later to reopen. All work hours must be posted at
least one week in advance, a policy that has been only loosely followed in the
past. Baristas with more than an hour’s commute will be given the option to
transfer to more convenient locations, and scheduling software will be revised
to allow more input from managers.
The revisions came in response to a newspaper article about a single mother
struggling to keep up with erratic hours set by automated software. A growing push to curb scheduling practices, enabled by sophisticated software, has
caused havoc in employees’ lives: giving only a few days’ notice of working
hours; sending workers home early when sales are slow; and shifting hours significantly from week to week. Those practices have been common at Starbucks.
And many other chains use even more severe methods, such as requiring workers to have “open availability,” or be able to work anytime they are needed, or to
stay “on call,” meaning they only find out that morning if they are needed.
Starbucks prides itself on progressive labor practices, such as offering
health benefits, free online degrees at Arizona State University, and stock.
But baristas across the country say that their actual working conditions vary
wildly, and that the company often fails to live up to its professed ideals, by
refusing to offer any guaranteed hours to part-time workers and keeping many
workers’ pay at minimum wage. Scheduling has been an issue for years. Said
a former company executive: “Labor is the biggest controllable cost for frontline operators, who are under incredible pressure to hit financial targets.”
Sources: New York Times (September 24, 2015 and August 15, 2014) and
BloombergBusinessweek (August 15, 2014).
RosaIreneBetancourt 7/Alamy
M19_HEIZ0422_12_SE_C15.indd 619 05/11/15 5:57 PM
620 PART 3 | MANAGING OPERATIONS
Scheduling Service Employees with Cyclical Scheduling
A number of techniques and algorithms exist for scheduling service-sector employees when
staffing needs vary. This is typically the case for police officers, nurses, restaurant staff, tellers,
and retail sales clerks. Managers, trying to set a timely and efficient schedule that keeps personnel happy, can spend substantial time each month developing employee schedules. Such
schedules often consider a fairly long planning period (say, 6 weeks). One approach that is
workable yet simple is cyclical scheduling .
Cyclical Scheduling Cyclical scheduling focuses on developing varying (inconsistent)
schedules with the minimum number of workers. In these cases, each employee is assigned to
a shift and has prescribed time off. Let’s look at Example 8 .
LO 15.7 Use the
cyclical scheduling
technique
Example 8 CYCLICAL SCHEDULING
Hospital administrator Doris Laughlin wants to staff the oncology ward using a standard 5-day workweek with two consecutive days off, but also wants to minimize the staff. However, as in most hospitals,
she faces an inconsistent demand. Weekends have low usage. Doctors tend to work early in the week,
and patients peak on Wednesday then taper off.
APPROACH c Doris must first establish staffing requirements. Then the following five-step process
is applied.
SOLUTION c
1. Doris has determined that the necessary daily staffi ng requirements are:
DAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY SUNDAY
Staff
required 5 5 6 5 4 3 3
2. Identify the two consecutive days that have the lowest total requirement and circle these. Assign these
two days off to the fi rst employee. In this case, the fi rst employee has Saturday and Sunday off because
3 plus 3 is the lowest sum of any 2 days. In the case of a tie, choose the days with the lowest adjacent
requirement, or by fi rst assigning Saturday and Sunday as an “off ” day. If there are more than one,
make an arbitrary decision.
3. We now have an employee working each of the uncircled days; therefore, make a new row for the
next employee by subtracting 1 from the fi rst row (because one day has been worked)—except for the
circled days (which represent the days not worked) and any day that has a zero. That is, do not subtract
from a circled day or a day that has a value of zero.
4. In the new row, identify the two consecutive days that have the lowest total requirement and circle
them. Assign the next employee to the remaining days.
5. Repeat the process (Steps 3 and 4) until all staffi ng requirements are met.
Employee 1
Employee 2
Employee 3
Employee 4
Employee 5
Employee 6
Employee 7
Capacity
(measured in
number of
employees)
Excess capacity
5
4
3
2
1
1
5
4
3
2
1
1
6
5
4
3
2
1
5
4
3
2
2
1
4
3
2
2
2
1
3
3
3
3
2
1
1
3
3
3
2
1
0
5
0
5
0
6
0
5
0
4
0
3
1
3
0
MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY SUNDAY
M19_HEIZ0422_12_SE_C15.indd 620 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 621
Doris needs six full-time employees to meet the staffing needs and one employee to work Saturday.
Notice that capacity (number of employees) equals requirements, provided an employee works overtime on Saturday, or a part-time employee is hired for Saturday.
INSIGHT c Doris has implemented an efficient scheduling system that accommodates 2 consecutive
days off for every employee.
LEARNING EXERCISE c If Doris meets the staffing requirement for Saturday with a full-time
employee, how does she schedule that employee? [Answer: That employee can have any 2 days off,
except Saturday, and capacity will exceed requirements by 1 person each day the employee works (except
Saturday).]
RELATED PROBLEMS c 15.26, 15.27
Using the approach in Example 8 , Colorado General Hospital saved an average of 10 to
15 hours a month and found these added advantages: (1) no computer was needed, (2) the
nurses were happy with the schedule, (3) the cycles could be changed seasonally to accommodate avid skiers, and (4) recruiting was easier because of predictability and flexibility. This
approach yields an optimum, although there may be multiple optimal solutions.
Other cyclical scheduling techniques have been developed to aid service scheduling. Some
approaches use linear programming: This is how Hard Rock Cafe schedules its services (see the
Video Case Study at the end of this chapter). There is a natural bias in scheduling to use tools
that are understood and yield solutions that are accepted.
Summary
Scheduling involves the timing of operations to achieve the
efficient movement of units through a system. This chapter
addressed the issues of short-term scheduling in processfocused and service environments. We saw that processfocused facilities are production systems in which products
are made to order and that scheduling tasks in them can
become complex. Several aspects and approaches to scheduling, loading, and sequencing of jobs were introduced. These
ranged from Gantt charts and the assignment method of
scheduling to a series of priority rules, the critical-ratio rule,
Johnson’s rule for sequencing, and finite capacity scheduling.
Service systems generally differ from manufacturing systems. This leads to the use of first-come, first-served rules
and appointment and reservation systems, as well as linear
programming for matching capacity to demand in service
environments.
Key Terms
Loading (p. 604 )
Input–output control (p. 606 )
ConWIP cards (p. 606 )
Gantt charts (p. 607 )
Assignment method (p. 608 )
Sequencing (p. 611 )
Priority rules (p. 611 )
Flow time (p. 611 )
Critical ratio (CR) (p. 614 )
Johnson’s rule (p. 615 )
Finite capacity scheduling
(FCS) (p. 617 )
Ethical Dilemma
Scheduling people to work second and third shifts (evening and
“graveyard”) is a problem in almost every 24-hour company.
Medical and ergonomic data indicate the body does not respond
well to signifi cant shifts in its natural circadian rhythm of sleep.
There are also signifi cant long-run health issues with frequent
changes in work and sleep cycles.
Consider yourself the manager of a nonunion steel mill that
must operate 24-hour days, and where the physical demands
are such that 8-hour days are preferable to 10- or 12-hour days.
M19_HEIZ0422_12_SE_C15.indd 621 05/11/15 5:57 PM
622 PART 3 | MANAGING OPERATIONS
Discussion Questions
Your empowered employees have decided that they want to
work weekly rotating shifts. That is, they want a repeating work
cycle of 1 week, 7 A.M. to 3 P.M., followed by a second week from
3 P.M. to 11 P.M., and the third week from 11 P.M. to 7 P.M. You are
sure this is not a good idea in terms of both productivity and the
long-term health of the employees. If you do not accept their
decision, you undermine the work empowerment program,
generate a morale issue, and perhaps, more significantly,
generate few more votes for a union. What is the ethical position
and what do you do?
Marcel Mooij/Shutterstock
1. What is the overall objective of scheduling?
2. List the four criteria for determining the effectiveness of a
scheduling decision. How do these criteria relate to the four
criteria for sequencing decisions?
3. Describe what is meant by “loading” work centers. What are
the two ways work centers can be loaded? What are two techniques used in loading?
4. Name five priority sequencing rules. Explain how each works
to assign jobs.
5. What are the advantages and disadvantages of the shortest
processing time (SPT) rule?
6. What is a due date?
7. Explain the terms flow time and lateness .
8. Which shop-floor scheduling rule would you prefer to apply
if you were the leader of the only team of experts charged
with defusing several time bombs scattered throughout your
building? You can see the bombs; they are of different types.
You can tell how long each one will take to defuse. Discuss.
9. When is Johnson’s rule best applied in job-shop scheduling?
10. State the four effectiveness measures for dispatching rules.
11. What are the steps of the assignment method of linear
programming?
12. What are the advantages to finite capacity scheduling?
13. What is input–output control?
Using Software for Short-Term Scheduling
In addition to the commercial software we noted in this chapter, short-term scheduling problems can be solved with the
Excel OM software that comes free with this text. POM for
Windows also includes a scheduling module. The use of each of
these programs is explained next.
X USING EXCEL OM
Excel OM has two modules that help solve short-term scheduling problems: Assignment and Job Shop Scheduling. The
Assignment module is illustrated in Programs 15.1 and
15.2 . The input screen, using the Example 4 data, appears
first, as Program 15.1 . Once the data are all entered, we
choose the Data tab command, followed by the Solver
command. Excel’s Solver uses linear programming to
optimize assignment problems. (So select Simplex LP.)
The constraints are also shown in Program 15.1 . We then select
the Solve command; the solution appears in Program 15.2 .
Excel OM’s Job Shop Scheduling module is illustrated in
Program 15.3 . Program 15.3 uses Example 5 ’s data. Because
jobs are listed in the sequence in which they arrived (see column A), the results are for the FCFS rule. Program 15.3 also
shows some of the formulas (columns F, G, H, I, J) used in the
calculations.
To solve with the SPT rule, we need four intermediate
steps: (1) Select (that is, highlight) the data in columns A, B,
C for all jobs; (2) invoke the Data command; (3) invoke the
Sort command; and (4) sort by Time (column C) in ascending
order. To solve for EDD, Step 4 changes to sort by Due Date
(column D) in ascending order. Finally, for an LPT solution,
Step 4 becomes sort by Due Date (column D) in descending
order.
M19_HEIZ0422_12_SE_C15.indd 622 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 623
B22 is where we placed our
total costs on the data screen.
We need to create row and
column totals in order to
create the constraints.
These are the constraints
for the linear programming
representation of the
assignment problem.
Nonnegativity constraints have been
added through the checkbox.
Select Simplex LP as the
solution method.
In Excel 2007 and later for PCs and Excel 2016 for Macs, Solver
is in the Analysis section of the Data tab. In Excel 2011 for Macs,
Solver is under the Tools menu.
Use the SUMPRODUCT function
to calculate the total cost. Notice
that this function is multiplying the
data table by the assignment table.
The assignments will be
filled in by Excel’s Solver.
Copy the names
from the above
table.
These are the cells that we will ask
Excel’s Solver to fill in for us.
Program 15.1
Excel OM’s Assignment Module Using Example 4 ’s Data
After entering the problem data in the yellow area, select Data, then Solver.
Solver has filled in the assignments with 1s.
It is important to check the statement made by
the Solver. In this case, it says that Solver found a
solution. In other problems, this may not be the
case. For some problems there may be no feasible
solution, and for others more iterations may be
required.
Program 15.2
Excel OM Output Screen for Assignment Problem Described in Program 15.1
M19_HEIZ0422_12_SE_C15.indd 623 05/11/15 5:57 PM
624 PART 3 | MANAGING OPERATIONS
An IF function is used
to determine whether
or not the job was late.
= IF(I13–D13>=0,
I13–D13,0)
The results are for an
FCFS schedule. To
create other results,
sort cells A9 through
D13 based on a new
criterion.
= AVERAGE(H9:H13)
Calculate the slack as = D9 – C9.
In this example, all
work begins on Day
1 and all jobs are
available on Day 1.
The completion times
and the flow times are
identical since work
= H14/C14 begins on Day 1
Program 15.3
Excel OM’s Job Shop Scheduling Module Applied to Example 5 ’s Data
P USING POM FOR WINDOWS
POM for Windows can handle both categories of scheduling problems we see in this chapter. Its Assignment module is used to solve
the traditional one-to-one assignment problem of people to tasks, machines to jobs, and so on. Its Job Shop Scheduling module can
solve a one- or two-machine job-shop problem. Available priority rules include SPT, FCFS, EDD, and LPT. Each can be examined
in turn once the data are all entered. Refer to Appendix IV for specifics regarding POM for Windows.
Solved Problems Virtual Office Hours help is available in MyOMLab.
SOLVED PROBLEM 15.1
King Finance Corporation, headquartered in New York, wants
to assign three recently hired college graduates, Julie Jones, Al
Smith, and Pat Wilson, to regional offices. However, the firm
also has an opening in New York and would send one of the
three there if it were more economical than a move to Omaha,
Dallas, or Miami. It will cost $1,000 to relocate Jones to New
York, $800 to relocate Smith there, and $1,500 to move Wilson.
What is the optimal assignment of personnel to offices?
SOLUTION
a) The cost table has a fourth column to represent New York.
To “balance” the problem, we add a “dummy” row (person)
with a zero relocation cost to each city.
OFFICE
OMAHA MIAMI DALLAS NEW YORK
HIREE
Jones $800 $1,100 $1,200 $1,000
Smith $500 $1,600 $1,300 $ 800
Wilson $500 $1,000 $2,300 $1,500
Dummy 0 0 0 0
OFFICE
OMAHA MIAMI DALLAS
HIREE
Jones $800 $1,100 $1,200
Smith $500 $1,600 $1,300
Wilson $500 $1,000 $2,300
b) Subtract the smallest number in each row and cover all zeros
(column subtraction of each column’s zero will give the same
numbers and therefore is not necessary):
OFFICE
OMAHA MIAMI DALLAS NEW YORK
HIREE
Jones 0 300 400 200
Smith 0 1,100 800 300
Wilson 0 500 1,800 1,000
Dummy 0 0 0 0
M19_HEIZ0422_12_SE_C15.indd 624 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 625
c) Only 2 lines cover, so subtract the smallest uncovered number
(200) from all uncovered numbers, and add it to each square
where two lines intersect. Then cover all zeros:
OFFICE
OMAHA MIAMI DALLAS NEW YORK
HIREE
Jones 0 100 200 0
Smith 0 900 600 100
Wilson 0 300 1,600 800
Dummy 200 0 0 0
d) Only 3 lines cover, so subtract the smallest uncovered number
(100) from all uncovered numbers, and add it to each square
where two lines intersect. Then cover all zeros:
OFFICE
OMAHA MIAMI DALLAS NEW YORK
HIREE
Jones 0 0 100 0
Smith 0 800 500 100
Wilson 0 200 1,500 800
Dummy 300 0 0 100
e) Still only 3 lines cover, so subtract the smallest uncovered
number (100) from all uncovered numbers, add it to squares
where two lines intersect, and cover all zeros:
OFFICE
OMAHA MIAMI DALLAS NEW YORK
HIREE
Jones 100 0 100 0
Smith 0 700 400 0
Wilson 0 100 1,400 700
Dummy 400 0 0 100
f) Because it takes four lines to cover all zeros, an optimal
assignment can be made at zero squares. We assign:
Wilson to Omaha
Jones to Miami
Dummy (no one) to Dallas
Smith to New York
Cost = $500 + $1,100 + $0 + $800
= $2,400
SOLVED PROBLEM 15.2
A defense contractor in Dallas has six jobs awaiting processing.
Processing time and due dates are given in the table. Assume
that jobs arrive in the order shown. Set the processing sequence
according to FCFS and evaluate. Start date is day 1.
JOB PROCESSING JOB DUE
JOB TIME (DAYS) DATE (DAYS)
A6 22
B 12 14
C 14 30
D2 18
E 10 25
F4 34
SOLUTION
FCFS has the sequence A–B–C–D–E–F.
JOB
JOB PROCESSING
SEQUENCE TIME FLOW TIME DUE DATE JOB LATENESS
A 6 622 0
B 12 18 14 4
C 14 32 30 2
D 2 34 18 16
E 10 44 25 19
F 4 48 34 14
48 182 55
1. Average completion time = 182>6 = 30.33 days
2. Average number of jobs in system = 182>48 = 3.79 jobs
3. Average job lateness = 55>6 = 9.16 days
4. Utilization = 48>182 = 26.4,
M19_HEIZ0422_12_SE_C15.indd 625 05/11/15 5:57 PM
626 PART 3 | MANAGING OPERATIONS
SOLUTION
SPT has the sequence D–F–A–E–B–C.
JOB
JOB PROCESSING
SEQUENCE TIME FLOW TIME DUE DATE JOB LATENESS
D 2 218 0
F 4 634 0
A 6 12 22 0
E 10 22 25 0
B 12 34 14 20
C 14 48 30 18
48 124 38
1. Average completion time = 124>6 = 20.67 days
2. Average number of jobs in system = 124>48 = 2.58 jobs
3. Average job lateness = 38>6 = 6.33 days
4. Utilization = 48>124 = 38.7,
SPT is superior to FCFS in this case on all four measures. If we were to also analyze EDD, we would, however, find its average
job lateness to be lowest at 5.5 days. SPT is a good recommendation. SPT’s major disadvantage is that it makes long jobs wait,
sometimes for a long time.
SOLVED PROBLEM 15.4
Use Johnson’s rule to find the optimum sequence for processing
the jobs shown through two work centers. Times at each center
are in hours.
JOB WORK CENTER 1 WORK CENTER 2
A6 12
B3 7
C 18 9
D 15 14
E 16 8
F 10 15
SOLUTION
BAFDCE
The sequential times are:
Work center 1 3 0 15 18 16
Work center 2 7 12
6
15
1
14 9 8
SOLVED PROBLEM 15.5
Illustrate the throughput time and idle time at the two work centers in Solved Problem 15.4 by constructing a time-phased chart.
SOLUTION
0 10
A
37 51 52 68 76
D E Idle time
0 9 19 52 68
22
Work
center
1
Work
center
2
B A D C E
B F E
3
3
F
A
B F
34
D C
61
C
SOLVED PROBLEM 15.3
The Dallas firm in Solved Problem 15.2 also wants to consider job sequencing by the SPT priority rule. Apply SPT to the same
data, and provide a recommendation.
M19_HEIZ0422_12_SE_C15.indd 626 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 627
Problems Note: PX means the problem may be solved with POM for Windows and/or Excel OM.
Problems 15.1–15.14 relate to Loading Jobs
• • 15.1 Ron Satterfield’s excavation company uses both
Gantt scheduling charts and Gantt load charts.
a) Today, which is the end of day 7, Ron is reviewing the Gantt
chart depicting these schedules:
◆ Job #151 was scheduled to begin on day 3 and to take
6 days. As of now, it is 1 day ahead of schedule.
◆ Job #177 was scheduled to begin on day 1 and take 4 days.
It is currently on time.
◆ Job #179 was scheduled to start on day 7 and take 2 days. It
actually got started on day 6 and is progressing according to
plan.
◆ Job #211 was scheduled to begin on day 5, but missing equipment delayed it until day 6. It is progressing as
expected and should take 3 days.
◆ Job #215 was scheduled to begin on day 4 and take 5 days.
It got started on time but has since fallen behind 2 days.
Draw the Gantt scheduling chart for the activities above.
b) Ron now wants to use a Gantt load chart to see how much
work is scheduled in each of his three work teams: Able,
Baker, and Charlie. Five jobs constitute the current workload
for these three work teams: Job #250, requiring 48 hours and
#275 requiring 32 hours for Work Team Able; Jobs #210 and
#280, requiring 16 and 24 hours, respectively, for Team Baker;
and Job #225, requiring 40 hours, for Team Charlie.
Prepare the Gantt load chart for these activities.
• • 15.2 First Printing and Copy Center has 4 more jobs to
be scheduled, in addition to those shown in Example 3 in the
chapter. Production scheduling personnel are reviewing the
Gantt chart at the end of day 4.
◆ Job D was scheduled to begin early on day 2 and to end
on the middle of day 9. As of now (the review point after
day 4), it is 2 days ahead of schedule.
◆ Job E should begin on day 1 and end on day 3. It is on time.
◆ Job F was to begin on day 3, but maintenance forced a delay
of 1½ days. The job should now take 5 full days. It is now
on schedule.
◆ Job G is a day behind schedule. It started at the beginning of
day 2 and should require 6 days to complete.
Develop a Gantt schedule chart for First Printing and Copy Center.
• 15.3 The Green Cab Company has a taxi waiting at each of
four cabstands in Evanston, Illinois. Four customers have called
and requested service. The distances, in miles, 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.
CAB SITE
CUSTOMER
ABCD
Stand 1 7348
Stand 2 5465
Stand 3 6796
Stand 4 8674
• 15.4 J.C. Howard’s medical testing company in Kansas
wishes to assign a set of jobs to a set of machines. The following table provides the production data of each machine when
performing the specific job:
PX
JOB
MACHINE
ABCD
1 7 9 8 10
2 10 9 7 6
3 11 5 9 6
4 9 11 5 8
a) Determine the assignment of jobs to machines that will maximize total production.
b) What is the total production of your assignments? PX
• 15.5 The Johnny Ho Manufacturing Company in
Columbus, Ohio, is putting out four new electronic components.
Each of Ho’s four plants has the capacity to add one more product to its current line of electronic parts. The unit-manufacturing
costs for producing the different parts at the four plants are
shown in the accompanying table. How should Ho assign the new
products to the plants to minimize manufacturing costs?
ELECTRONIC
COMPONENT
PLANT
123 4
C53 $0.10 $0.12 $0.13 $0.11
C81 0.05 0.06 0.04 0.08
D5 0.32 0.40 0.31 0.30
D44 0.17 0.14 0.19 0.15
• 15.6 Jamison Day Consultants has been entrusted with the
task of evaluating a business plan that has been divided into four
sections—marketing, finance, operations, and human resources.
Chris, Steve, Juana, and Rebecca form the Assessment team. Each
of them has expertise in a certain field and tends to finish that
section faster. The estimated times taken by each team member
for each section have been outlined in the table below. Further
information states that each of these individuals is paid $60/hour.
a) Assign each member to a different section such that Jamison
Consultants’s overall cost is minimized.
b) What is the total cost of these assignments?
Times Taken by Team Members for Different Sections (minutes)
MARKETING FINANCE OPERATIONS HR
Chris 80 120 125 140
Steve 20 115 145 160
Juana 40 100 85 45
Rebecca 65 35 25 75
• • 15.7 The Baton Rouge Police Department has five detective squads available for assignment to five open crime cases. The
chief of detectives, Jose Noguera, wishes to assign the squads so
that the total time to conclude the cases is minimized. The average
number of days, based on past performance, for each squad to
complete each case is as follows:
CASE
SQUAD A B C D E
1 14 7 3 7 27
2 20 7 12 6 30
3 10 3 4 5 21
4 8 12 7 12 21
5 13 25 24 26 8
PX
PX
M19_HEIZ0422_12_SE_C15.indd 627 05/11/15 5:57 PM
628 PART 3 | MANAGING OPERATIONS
Each squad is composed of different types of specialists, and
whereas one squad may be very effective in certain types of cases,
it may be almost useless in others.
a) Solve the problem by using the assignment method.
b) Assign the squads to the above cases, but with the constraint
that squad 5 cannot work on case E because of a conflict. PX
• 15.8 Tigers Sports Club has to select four separate co-ed
doubles teams to participate in an inter-club table tennis tournament. The pre-selection results in the selection of a group of four
men—Raul, Jack, Gray, and Ajay—and four women—Barbara,
Dona, Stella, and Jackie. Now, the task ahead lies in pairing these
men and women in the best fashion. The table below shows a
matrix that has been designed for this purpose, indicating how
each of the men complements the game of each of the women.
A higher score indicates a higher degree of compatibility in the
games of the two individuals concerned. Find the best pairs.
Game Compatibility Matrix
BARBARA DONA STELLA JACKIE
Raul 30 20 10 40
Jack 70 10 60 70
Gray 40 20 50 40
Ajay 60 70 30 90
••• 15.9 Daniel Glaser, chairman of the College of San Antonio’s
business department, needs to assign professors to courses next
semester. As a criterion for judging who should teach each course,
Professor Glaser reviews the past 2 years’ teaching Assessments
(which were filled out by students). Since each of the four professors taught each of the four courses at one time or another during
the 2-year period, Glaser is able to record a course rating for each
instructor. These ratings are shown in the following table.
a) Find the assignment of professors to courses to maximize the
overall teaching rating.
b) Assign the professors to the courses with the exception that
Professor Fisher cannot teach statistics. PX
PROFESSOR
COURSE
STATISTICS MANAGEMENT FINANCE ECONOMICS
W. W. Fisher 90 65 95 40
D. Golhar 70 60 80 75
Z. Hug 85 40 80 60
N. K. Rustagi 55 80 65 55
• • 15.10 Lifang Wu owns an automated machine shop that
makes precision auto parts. He has just compiled an input–output
PX
Mikeledray/Shutterstock
report for the grinding work center. Complete this report and
analyze the results.
Input–Output Report
PERIOD 1234 TOTAL
Planned input 80 80 100 100
Actual input 85 85 85 85
Deviation
Planned output 90 90 90 90
Actual output 85 85 80 80
Deviation
Initial backlog: 30
Additional problems 15.11–15.14 are available in MyOMLab.
Problems 15.15–15.25 relate to Sequencing Jobs
• • 15.15 The following jobs are waiting to be processed at the
same machine center. Jobs are logged as they arrive:
JOB DUE DATE DURATION (DAYS)
A 313 8
B 312 16
C 325 40
D 314 5
E 314 3
In what sequence would the jobs be ranked according to the following decision rules: (a) FCFS, (b) EDD, (c) SPT, and (d) LPT? All
dates are specified as manufacturing planning calendar days. Assume
that all jobs arrive on day 275. Which decision is best and why? PX
• 15.16 The following 5 overhaul jobs are waiting to be processed at Avianic’s Engine Repair Inc. These jobs were logged as
they arrived. All dates are specified as planning calendar days.
Assume that all jobs arrived on day 180; today’s date is 200.
JOB DUE DATE REMAINING TIME (DAYS)
103 214 10
205 223 7
309 217 11
412 219 5
517 217 15
Using the critical ratio scheduling rule, in what sequence would
the jobs be processed? PX
• • 15.17 An Alabama lumberyard has four jobs on order, as
shown in the following table. Today is day 205 on the yard’s schedule.
JOB DUE DATE REMAINING TIME (DAYS)
A 212 6
B 209 3
C 208 3
D 210 8
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
Which is best and why? Which has the minimum lateness?
• • 15.18 The following jobs are waiting to be processed at Rick
Solano’s machine center. Solano’s machine center has a relatively
PX
M19_HEIZ0422_12_SE_C15.indd 628 05/11/15 5:57 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 629
long backlog and sets a fresh schedule every 2 weeks, which does
not disturb earlier schedules. Below are the jobs received during
the previous 2 weeks. They are ready to be scheduled today, which
is day 241 (day 241 is a work day). Job names refer to names of
clients and contract numbers.
JOB DATE JOB RECEIVED
PRODUCTION
DAYS NEEDED DATE JOB DUE
BR-02 228 15 300
CX-01 225 25 270
DE-06 230 35 320
RG-05 235 40 360
SY-11 231 30 310
a) Complete the following table. (Show your supporting calculations.)
b) Which dispatching rule has the best score for flow time?
c) Which dispatching rule has the best score for utilization metric?
d) Which dispatching rule has the best score for lateness?
e) Which dispatching rule would you select? Support your decision.
DISPATCHING
RULE
JOB
SEQUENCE
FLOW
TIME
UTILIZATION
METRIC
AVERAGE
NUMBER
OF JOBS
AVERAGE
LATENESS
EDD
SPT
LPT
FCFS
• • 15.19 The following jobs are waiting to be processed at Julie
Morel’s machine center:
JOB DATE ORDER RECEIVED
PRODUCTION
DAYS NEEDED DATE ORDER DUE
A 110 20 180
B 120 30 200
C 122 10 175
D 125 16 230
E 130 18 210
In what sequence would the jobs be ranked according to the following rules: (a) FCFS, (b) EDD, (c) SPT, and (d) LPT? All dates
are according to shop calendar days. Today on the planning calendar is day 130, and none of the jobs have been started or scheduled. Which rule is best? PX
• • 15.20 Sunny Park Tailors has been asked to make three different types of wedding suits for separate customers. The table
below highlights the time taken in hours for (1) cutting and sewing
and (2) delivery of each of the suits. Which schedule finishes sooner:
first come, first served (123) or a schedule using Johnson’s rule?
Times Taken for Different Activities (hours)
SUIT CUT AND SEW DELIVER
14 2
27 7
36 5
• • 15.21 The following jobs are waiting to be processed at
Jeremy LaMontagne’s machine center. Today is day 250.
JOB DATE JOB RECEIVED PRODUCTION DAYS NEEDED DATE JOB DUE
1 215 30 260
2 220 20 290
3 225 40 300
4 240 50 320
5 250 20 340
PX
PX
Using the critical ratio scheduling rule, in what sequence would
the jobs be processed? PX
•••• 15.22 The following set of seven jobs is to be processed
through two work centers at George Heinrich’s printing company. The sequence is first printing, then binding. Processing time
at each of the work centers is shown in the following table:
JOB PRINTING (HOURS) BINDING (HOURS)
T 15 3
U7 9
V4 10
W7 6
X 10 9
Y4 5
Z7 8
a) What is the optimal sequence for these jobs to be scheduled?
b) Chart these jobs through the two work centers.
c) What is the total length of time of this optimal solution?
d) What is the idle time in the binding shop, given the optimal
solution?
e) How much would the binding machine’s idle time be cut by
splitting Job Z in half? PX
••• 15.23 Six jobs are to be processed through a two-step operation. 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
B7 4
C5 7
D3 8
E2 6
F4 3
Determine a sequence that will minimize the total completion
time for these jobs. Illustrate graphically. PX
Additional problems 15.24–15.25 are available in MyOMLab.
Problems 15.26–15.27 relate to Scheduling Services
• • 15.26 Daniel’s Barber Shop at Newark Airport is open
7 days a week but has fluctuating demand. Daniel Ball is interested in treating his barbers as well as he can with steady work
and preferably 5 days of work with two consecutive days off.
His analysis of his staffing needs resulted in the following plan.
Schedule Daniel’s staff with the minimum number of barbers.
DAY
MON. TUE. WED. THU. FRI. SAT. SUN.
Barbers
needed
6555643
• • 15.27 Given the following demand for waiters and waitresses at S. Ghosh Bar and Grill, determine the minimum wait
staff needed with a policy of 2 consecutive days off.
DAY
MON. TUE. WED. THU. FRI. SAT. SUN.
Wait staff
needed
3445674
M19_HEIZ0422_12_SE_C15.indd 629 05/11/15 5:58 PM
630 PART 3 | MANAGING OPERATIONS
CASE STUDIES
Old Oregon Wood Store
In 2015, George Wright started the Old Oregon Wood Store to
manufacture Old Oregon tables. Each table is carefully constructed
by hand using the highest-quality oak. Old Oregon tables can support more than 500 pounds, and since the start of the Old Oregon
Wood Store, not one table has been returned because of faulty workmanship or structural problems. In addition to being rugged, each
table is beautifully finished using a urethane varnish that George
developed over 20 years of working with wood-finishing materials.
The manufacturing process consists of four steps: preparation,
assembly, finishing, and packaging. Each step is performed by
one person. In addition to overseeing the entire operation, George
does all of the finishing. Tom Surowski performs the preparation
step, which involves cutting and forming the basic components
of the tables. Leon Davis is in charge of the assembly, and Cathy
Stark performs the packaging.
Although each person is responsible for only one step in the
manufacturing process, everyone can perform any one of the steps.
It is George’s policy that occasionally everyone should complete
several tables on his or her own without any help or Helpance. A
small competition is used to see who can complete an entire table
in the least amount of time. George maintains average total and
intermediate completion times. The data are shown in Figure 15.7 .
It takes Cathy longer than the other employees to construct
an Old Oregon table. In addition to being slower than the other
employees, Cathy is also unhappy about her current responsibility of packaging, which leaves her idle most of the day. Her first
preference is finishing, and her second preference is preparation.
In addition to quality, George is concerned with costs and
efficiency. When one of the employees misses a day, it causes
major scheduling problems. In some cases, George assigns
another employee overtime to complete the necessary work. At
other times, George simply waits until the employee returns to
work to complete his or her step in the manufacturing process.
Both solutions cause problems. Overtime is expensive, and waiting causes delays and sometimes stops the entire manufacturing
process.
To overcome some of these problems, Randy Lane was hired.
Randy’s major duties are to perform miscellaneous jobs and
to help out if one of the employees is absent. George has given
Randy training in all phases of the manufacturing process, and
he is pleased with the speed at which Randy has been able to
learn how to completely assemble Old Oregon tables. Randy’s
average total and intermediate completion times are given in
Figure 15.8 .
Preparation
100
Assembly Finishing Packaging
160 250 275
(Tom)
Preparation
80
Assembly Finishing Packaging
160 220 230
(George)
Preparation
110
Assembly Finishing Packaging
200 280 290
(Leon)
Preparation
120
Assembly Finishing Packaging
190 290 315
(Cathy)
Preparation
110
Assembly Finishing Packaging
190 290 300
Figure 15.7
Manufacturing Time in Minutes
Figure 15.8
Randy’s Completion Times in Minutes
Discussion Questions
1. What is the fastest way to manufacture Old Oregon tables using
the original crew? How many could be made per day?
2. Would production rates and quantities change significantly if George would allow Randy to perform one of the
four functions and make one of the original crew the backup
person?
3. What is the fastest time to manufacture a table with the original
crew if Cathy is moved to either preparation or finishing?
4. Whoever performs the packaging function is severely underutilized. Can you find a better way of utilizing the four- or
five-person crew than either giving each a single job or allowing
each to manufacture an entire table? How many tables could be
manufactured per day with this scheme?
M19_HEIZ0422_12_SE_C15.indd 630 05/11/15 5:58 PM
CHAPTER 15 | SHORT-TERM SCHEDULING 631
The massive 875,000-square-foot Amway Center in Orlando,
Florida, is a state-of-the-art sports entertainment center. While it
is the home of the Orlando Magic basketball team, it is a flexible
venue designed to accommodate a vast array of entertainment.
The facility is used for everything from a concert by the Eagles
or Britney Spears, to ice hockey, to arena football, to conventions, as well as 41 regular season home games played by its major
tenant, the National Basketball Association’s Orlando Magic.
The building is a LEED-certified (Leadership in Energy and
Environmental Design), sustainable, environmentally friendly design,
with unmatched technology. Dispersed throughout the building are
over 1,000 digital monitors, the latest in broadcasting technology,
and the tallest high-definition video board in an NBA venue. To fully
utilize this nearly $500 million complex, conversions from one event
to the next must be done rapidly—often in a matter of hours. Letting
the facility sit idle because of delays in conversion is not an option.
Well-executed conversions help maximize facility revenue and
at the same time minimize expenses. Fast and efficient conversions
are critical. Like any other process, a conversion can be analyzed
and separated into its component activities, each requiring its
own human and capital resources. The operations manager must
determine when to do the conversion, how to train and schedule
the crew, which tools and capital equipment are necessary, and
the specific steps necessary to break down the current event and
set up for the next. In addition to trying to maintain a stable crew
(typically provided by local staffing companies) and to maintain
From the Eagles to the Magic: Converting the Amway Center Video Case
control during the frenzied pace of a conversion, managers divide
the workforce into cross-trained crews, with each crew operating
in its own uniquely colored shirt.
At the Amway Center, Charlie Leone makes it happen. Charlie
is the operations manager, and as such, he knows that any conversion is loaded with complications and risks. Concerts add a special
risk because each concert has its own idiosyncrasies—and the breakdown for the Eagles concert will be unique. Charlie and his crews
must anticipate and eliminate any potential problems. Charlie’s
immediate issue is making a schedule for converting the Eagles’ concert venue to an NBA basketball venue. The activities and the time
for various tasks have been determined and are shown in Table 15.3 .
TABLE 15.3 CONCERT-TO-BASKETBALL CONVERSION TASKS
TIME ALLOWED TASKS CREW AND TIME REQUIRED
3 to 4 hr 11:20 PM Performance crew begins teardown of concert stage & equipment Concert’s Responsibility
45 min 11:20 PM Clear Floor Crew
Get chair carts from storage 10 for 15 min
Clear all chairs on fl oor, loading carts starting at south end, working north 16 for 30 min
Move chair carts to north storage and stack as they become full (includes 1 fork truck operator)
15 min 11:50 PM (Or as soon as area under rigging is cleared) 6 for 15 min
Set up retractable basketball seating on north end
Take down railing above concert stage
Place railings on cart and move to storage
2.5 hr 12:05 AM Basketball Floor Crew 8
Position 15 basketball fl oor carts on fl oor
Mark out arena fl oor for proper placement of basketball fl oor
Position basketball fl oor by section
Assemble/join fl ooring/lay carpets over concrete
Position basketball nets in place
Set up scorer tables
Install risers for all courtside seating
Install 8-ft tables on east side of court
2.5 hr Seating Unit Crew Starts same time as Basketball Floor Crew 8
Set up retractable basketball seating on north end (includes 2 fork truck operators)
Set up retractable basketball seating on south end
(Can only be done after concert stage and equipment is out of way)
Install stairs to Superstar Seating
2 hr Board Crew Starts after Seating Unit Crew fi nishes 4
Install dasher board on south end
Move stairs to storage
Available crew size 5 16, including two fork truck drivers
(Continued) Fernando Medina
M19_HEIZ0422_12_SE_C15.indd 631 05/11/15 5:58 PM
632 PART 3 | MANAGING OPERATIONS
Discussion Questions *
1. Make a Gantt chart to help Charlie organize his crew to perform
the concert-to-basketball conversion. Note : Do not include the
teardown of the concert stage and equipment, as that is the
responsibility of the concert crew.
TIME ALLOWED TASKS CREW AND TIME REQUIRED
2 hr Chair Crew Starts after Seating Unit Crew fi nishes 12
Get chair carts from storage
Position chair carts on fl oor
Position chairs behind goals, courtside, and scorer tables
Clean, sweep, and place carts in order
45 min End-of-Shift Activities Starts after Chair Crew fi nishes 12
Perform checklist items
Ensure that steps and stairways and railings are in place and tight
Check all seats are in upright position and locked in place
Report any damaged seats or armrests in need of repair
Verify exact number of chairs behind goals, courtside, and scorer tables
15 min Check Out Starts after End-of-Shift Activities 16
Check for next conversion date and time and inform crew
Report any injuries
Punch out all employees before leaving
8:00 AM Floor ready for Magic practice
TABLE 15.3 Continued
2. What time will the floor be ready?
3. Does Charlie have any extra personnel or a shortage of personnel?
If so how many?
Scheduling at Hard Rock Cafe Video Case
Whether it’s scheduling nurses at Mayo Clinic, pilots at Southwest
Airlines, classrooms at UCLA, or servers at a Hard Rock Cafe,
it’s clear that good scheduling is important. Proper schedules use
an organization’s assets (1) more effectively, by serving customers
promptly, and (2) more efficiently, by lowering costs.
Hard Rock Cafe at Universal Studios, Orlando, is the world’s
largest restaurant, with 1,100 seats on two main levels. With typical turnover of employees in the restaurant industry at 80% to
100% per year, Hard Rock General Manager Ken Hoffman takes
scheduling very seriously. Hoffman wants his 160 servers to be
effective, but he also wants to treat them fairly. He has done so
with scheduling software and flexibility that has increased productivity while contributing to turnover that is half the industry
average. His goal is to find the fine balance that gives employees
financially productive daily work shifts while setting the schedule
tight enough so as to not overstaff between lunch and dinner.
The weekly schedule begins with a sales forecast. “First, we
examine last year’s sales at the cafe for the same day of the week,”
says Hoffman. “Then we adjust our forecast for this year based
on a variety of closely watched factors. For example, we call
the Orlando Convention Bureau every week to see what major
groups will be in town. Then we send two researchers out to check
on the occupancy of nearby hotels. We watch closely to see what
concerts are scheduled at Hard Rock Live—the 3,000-seat concert stage next door. From the forecast, we calculate how many
people we need to have on duty each day for the kitchen, the bar,
as hosts, and for table service.”
Once Hard Rock determines the number of staff needed, servers submit request forms, which are fed into the software’s linear
programming mathematical model. Individuals are given priority
rankings from 1 to 9, based on their seniority and how important
they are to fill each day’s schedule. Schedules are then posted by
day and by workstation. Trades are handled between employees,
who understand the value of each specific shift and station.
Hard Rock employees like the system, as does the general manager, since sales per labor-hour are rising and turnover is dropping.
Discussion Questions *
1. Name and justify several factors that Hoffman could use in
forecasting weekly sales.
2. What can be done to lower turnover in large restaurants?
3. Why is seniority important in scheduling servers?
4. How does the schedule impact productivity?
• Additional Case Study: Visit MyOMLab for this free case study:
Payroll Planning, Inc.: Describes setting a schedule for handling the accounting for dozens of client fi rms.
* You may wish to view the video that accompanies this case before
answering the questions.
* You may wish to view the video that accompanies this case before
answering the questions.
Endnotes
2. Finite capacity scheduling (FCS) systems go by a number of
names, including finite scheduling and advance planning systems
1. Opportunity costs are those profits forgone or not obtained. (APS). The name manufacturing execution systems (MES) may
also be used, but MES tends to suggest an emphasis on the reporting system from shop operations back to the scheduling activity.
M19_HEIZ0422_12_SE_C15.indd 632 05/11/15 5:58 PM
Chapter 15 Rapid Review 15Rapid Review
Main Heading Review Material MyOMLab
THE IMPORTANCE
OF SHORT-TERM
SCHEDULING
(p. 602 )
The strategic importance of scheduling is clear:
j Effective scheduling means faster movement of goods and services through a
facility. This means greater use of assets and hence greater capacity per dollar
invested, which, in turn, lowers cost .
j Added capacity, faster throughput, and the related flexibility mean better
customer service through faster delivery .
j Good scheduling contributes to realistic commitments, hence dependable delivery .
Concept Questions:
1.1–1.2
SCHEDULING
ISSUES
(pp. 602 – 605 )
The objective of scheduling is to allocate and prioritize demand (generated by either
forecasts or customer orders) to available facilities.
j Forward scheduling—Begins the schedule as soon as the requirements are known.
j Backward scheduling—Begins with the due date by scheduling the final
operation first and the other job steps in reverse order.
j Loading—The assigning of jobs to work or processing centers.
The four scheduling criteria are (1) minimize completion time , (2) maximize utilization ,
(3) minimize work-in-process (WIP) inventory , and (4) minimize customer waiting time .
Concept Questions:
2.1–2.4
VIDEO 15.1
From the Eagles to the
Magic: Converting
the Amway Center
SCHEDULING
PROCESS-FOCUSED
FACILITIES
(p. 605 )
A process-focused facility is a high-variety, low-volume system commonly found
in manufacturing and services. It is also called an intermittent, or job shop,
facility.
Concept Questions:
3.1–3.4
LOADING JOBS
(pp. 605 – 610 )
j Input–output control —A system that allows operations personnel to manage facility work flows by tracking work added to a work center and its work completed.
j ConWIP cards —Cards that control the amount of work in a work center, aiding
input/output control.
ConWIP is an acronym for constant work-in-process. A ConWIP card travels with
a job (or batch) through the work center. When the job is finished, the card is
released and returned to the initial workstation, authorizing the entry of a new
batch into the work center.
j Gantt charts —Planning charts used to schedule resources and allocate time.
The Gantt load chart shows the loading and idle times of several departments,
machines, or facilities. It displays the relative workloads in the system so that the
manager knows what adjustments are appropriate.
The Gantt schedule chart is used to monitor jobs in progress (and is also used for
project scheduling). It indicates which jobs are on schedule and which are ahead
of or behind schedule.
j Assignment method —A special class of linear programming models that involves
assigning tasks or jobs to resources.
In assignment problems, only one job (or worker) is assigned to one machine
(or project).
The assignment method involves adding and subtracting appropriate numbers in
the table to find the lowest opportunity cost for each assignment.
Concept Questions:
4.1–4.4
Problems: 15.1–15.14
Virtual Office
Hours for Solved
Problem: 15.1
SEQUENCING JOBS
(pp. 611 – 617 )
j Sequencing —Determining the order in which jobs should be done at each work
center.
j Priority rules —Rules used to determine the sequence of jobs in process-oriented
facilities.
j First come, first served (FCFS)—Jobs are completed in the order in which they
arrived.
j Shortest processing time (SPT)—Jobs with the shortest processing times are
assigned first.
j Earliest due date—Earliest due date jobs are performed first.
j Longest processing time (LPT)—Jobs with the longest processing time are
completed first.
Average completion time = Sum of total flow time
Number of jobs (15-1)
Utilization metric = Total job work (processing) time
Sum of total flow time (15-2)
Concept Questions:
5.1–5.4
Problems: 15.15–15.25
Virtual Office
Hours for Solved
Problems: 15.2–15.5
ACTIVE MODEL 15.1
M19_HEIZ0422_12_SE_C15.indd 633 05/11/15 5:58 PM
Main Heading Review Material MyOMLab
Average number of jobs in the system = Sum of total flow time
Total job work (processing) time (15-3)
Average job lateness = Total late days
Number of jobs (15-4)
Job lateness = Max{0, yesterday + flow time – due date} (15-5)
SPT is the best technique for minimizing job flow and average number of jobs in
the system.
FCFS performs about average on most criteria, and it appears fair to customers.
EDD minimizes maximum tardiness.
j Flow time —The time each job spends waiting plus the time being processed.
j Critical ratio (CR) —A sequencing rule that is an index number computed by
dividing the time remaining until due date by the work time remaining:
CR = Time remaining
Workdays remaining = Due date – Today>s date
Work (lead) time remaining (15-6)
As opposed to the priority rules, the critical ratio is dynamic and easily updated.
It tends to perform better than FCFS, SPT, EDD, or LPT on the average joblateness criterion.
j Johnson’s rule —An approach that minimizes processing time for sequencing a
group of jobs through two work centers while minimizing total idle time in the
work centers.
Rule-based scheduling systems have the following limitations: (1) Scheduling is
dynamic, (2) rules do not look upstream or downstream, and (3) rules do not look
beyond due dates.
FINITE CAPACITY
SCHEDULING (FCS)
(pp. 617 – 618 )
j Finite capacity scheduling (FCS) —Computerized short-term scheduling that
overcomes the disadvantage of rule-based systems by providing the user with
graphical interactive computing.
Concept Questions:
6.1–6.2
SCHEDULING
SERVICES
(pp. 618 – 621 )
Cyclical scheduling with inconsistent staffing needs is often the case in services.
The objective focuses on developing a schedule with the minimum number of
workers. In these cases, each employee is assigned to a shift and has time off.
Concept Questions:
7.1–7.4
VIDEO 15.2
Scheduling at Hard
Rock Cafe
Problems: 15.26–15.27
15Rapid Review
Chapter 15 Rapid Review continued
Self Test
j Before taking the self-test, refer to the learning objectives listed at the beginning of the chapter and the key terms listed at the end of the chapter.
LO 15.1 Which of the following decisions covers the longest time
period?
a) Short-term scheduling
b) Capacity planning
c) Aggregate planning
d) A master schedule
LO 15.2 A visual aid used in loading and scheduling jobs is a:
a) Gantt chart.
b) planning file.
c) bottleneck.
d) load-schedule matrix.
e) level material chart.
LO 15.3 The assignment method involves adding and subtracting
appropriate numbers in the table to find the lowest _____
for each assignment.
a) profit
b) number of steps
c) number of allocations
d) range per row
e) opportunity cost
LO 15.4 The most popular priority rules include:
a) FCFS. b) EDD.
c) SPT. d) all of the above.
LO 15.5 The job that should be scheduled last when using Johnson’s
rule is the job with the:
a) largest total processing time on both machines.
b) smallest total processing time on both machines.
c) longest activity time if it lies with the first machine.
d) longest activity time if it lies with the second machine.
e) shortest activity time if it lies with the second machine.
LO 15.6 What is computerized short-term scheduling that overcomes
the disadvantage of rule-based systems by providing the
user with graphical interactive computing?
a) LPT b) FCS
c) CSS d) FCFS
e) GIC
LO 15.7 Cyclical scheduling is used to schedule:
a) jobs. b) machines.
c) shipments. d) employees.
Answers: LO 15.1. b; LO 15.2. a; LO 15.3. e; LO 15.4. d; LO 15.5. e; LO 15.6. b; LO 15.7. d.
M19_HEIZ0422_12_SE_C15.indd 634 05/11/15 5:58 PM

Order | Check Discount

Tags: #1 Assignment Help Online Service for Students in the USA, AI Plagiarism free essay writing tool, Australian best tutors, best trans tutors, buy essay uk