The job sequence using Johnson's Rule is D, B, C, A.

1. Aggregate Planning
(Sales and Operations Planning )

2. Framework for
Operations
Planning for
Goods and
Services

3. Chapter 13 Resource Management
Aggregate Planning Process
• Aggregate planning is the development of a long-
term output and resource plan in aggregate units of
measure.
• These typically define output levels over a planning
horizon of 1 to 2 years, focusing on product families
or total capacity requirements.
• Aggregate planning later translates into monthly or
quarterly production plans, taking into account
capacity limitations such as supply availability,
equipment, and labour.

4. Stages in Operations Planning Process.
• Level 2 planning, or disaggregation, is the process of
translating aggregate plans into short-term
operational plans that provide the basis for weekly
and daily schedules and detailed resource
requirements.
• Level 3 focuses on execution, moving work from
one workstation to another, assigning people to
tasks, setting priorities for jobs, scheduling
equipment, and controlling processes.

5. Required Inputs to the Production
Planning System

6. t Aggregate Planning Decisions and Strategies
• Demand Management:
Management
 The cooperation between marketing and manufacturing to
create more feasible aggregate demands.
• Production-Rate Changes:
 Utilizing overtime, subcontracting during peak months.
• Work-Force Changes:
 Hiring and firing employees—often not a feasible
alternative.
• Inventory Smoothing:
 Building inventories or carrying back orders.
• Facilities and Equipment,
 Typically a long-term investment, although companies
can rent equipment for peak seasons.

7. Aggregate Planning Process
1. Chase Approach: The capacities and output levels are
adjusted to match demand requirements over the
planning horizon
• Advantages: Investment in inventory is low and Labour
utilization is high
Disadvantage: The cost adjusting output and capacities
2. Level Approach: Capacities are kept constant over the
planning horizon.
• Advantages:Stable output rate and work force levels
Disadvantage: Greater inventory cost, Increased
overtime and idle time and varying resource utilization

8. Relevant Costs
1. Basic production costs
• The fixed and variable costs incurred in
producing a given product type in a given time
period
2. Costs associated with changes in the
production rate
• Hiring, training, and laying off personnel
3. Inventory holding costs
4. Backorder costs

9. General Procedure for Aggregate
Planning
1. Determine the demand for each period
2. Determine the capacities (regular time, overtime,
subcontracting) for each period
3. Identify pertinent company policies such as level of
safety stock, stable workforce etc.
4. Determine unit costs for regular time, overtime,
subcontracting, holding inventories, back orders, layoffs
etc.
5. Develop alternative plans and compute the cost of each
6. If satisfactory plans emerge, select the one that best
satisfies the objectives. Otherwise, return to step 5

10. Techniques
• Trial and error Techniques using
graphs and spreadsheets
• Linear Programming:
Transportation model
• Simulation Models

11. Yield Management
• Yield management: the process of allocating the right type
of capacity to the right type of customer at the right price
and time to maximize revenue or yield
– Can be a powerful approach to making demand more predictable
• Has existed as long as there has been limited capacity for
serving customers
• Its widespread scientific application began with American
Airlines’ computerized reservation system (SABRE)

12. Yield Management Most Effective
When
1. Demand can be segmented by customer
2. Fixed costs are high and variable costs are
low
3. Inventory is perishable
4. Product can be sold in advance
5. Demand is highly variable

13. Chapter 13 Resource Management
Disaggregation in Manufacturing
• Disaggregation (Level 2) provides the link between
aggregate plans developed at Level 1 and detailed
execution at Level 3
• This provides the basis for detailed purchasing and
production schedules for all of the components that
comprise the finished good or support service delivery.
• There are three major components for disaggregating
aggregate plans into Level 2 plans.
 Master production scheduling (MPS)
 Materials requirement planning (MRP)
 Capacity requirement planning (CRP)

14. Disaggregation
Framework for
Manufacturing
Plans and
Schedules

15. Material Requirements Planning (MRP)
• MRP is a technique that has been employed since the
1940s and 1950s.
• Joe Orlicky is known as the Father of MRP
• The use and application of MRP grew through the
1970s and 1980s as the power of computer hardware
and software increased.
• MRP gradually evolved into a broader system called
manufacturing resource planning (MRP II).

16. What is MRP?
• MRP: a computer-based system that develops
plans for ordering and producing dependent
demand items.
• Material requirements plan: a plan that
specifies the timing and size of new production
orders, adjustments to existing order
quantities, and expediting or delay of late/early
orders

17. MRP Inputs
MRP utilizes two basic principles:
1. Requirements for dependent demand items are
derived from the production schedule for their
parents the items that are assembled from
component parts).
2. The production order is offset to account for the lead
time.
• Developed through a combination of three inputs:
1. The Master Production Schedule
2. The Bill of Materials
3. Inventory Records

18. Aggregate Forecasts
Firm orders
product of demand
from known
plan from random
customers
customers
Engineering Master production
Schedule (MPS) Inventory
design
transactions
changes
Material
planning
Bill of (MRP Inventory
material computer record file
file program)
Secondary reports
Primary reports
Exception reports
Planned order schedule for Planning reports
inventory and production Reports for performance
control control
©The McGraw-Hill Companies, Inc., 2004

19. Master Production Schedule for a Family of Bicycles

20. Key Aspects of Master Production
Scheduling
• The sums of the quantities in the MPS must equal
those in the aggregate production plan.
• Aggregate production quantities should be planned
efficiently over time in order to minimize setup,
production, and inventory costs.
• Capacity limitations must be considered before
finalizing the MPS, including labour and machine
capacity, storage space, transportation equipment,
and other factors.

21. The Bill of Materials
• Bill of materials (BOM): a document that
specifies all assemblies, subassemblies, parts,
and raw materials that are required to produce
one unit of the finished product. It is also called
the Product Structure

22. Partial Bill
of Materials for a Bicycle

23. Inventory Records
• Inventory record: a document that specifies
order/lot size policy and lead time and records
all transactions made for parts, assemblies,
and components
– Includes: transactions made for parts, assemblies,
and components both from manufacturing within
an organization and from purchasing items from
external suppliers

24. MRP Terminology
• Gross requirements: the total number of units of a
part or material derived from all parent production
plans
• Scheduled receipts: orders that have been placed
but not yet received or completed
• Projected on-hand inventory: the estimated
inventory that will be available after the gross
requirements have been satisfied, plus any planned
or scheduled receipts for that time bucket

25. MRP Terminology
• Planned order receipts: future orders that which have not yet been
released but are planned in order to avoid a shortage or backlog of
inventory
• Planned order release: when an order must be released in order to
offset for the lead time so that the order will be received when
planned
• The difference between a planned and a scheduled receipt: a planned
receipt is not firmly committed to and can be changed relatively easily
up until the time the order is released.
• As soon as the order is released, it becomes a scheduled order, which
is much harder to change.

26. MRP Computer Program
• Begins with number of end items needed
• Add service parts not included in MPS
• Explode MPS into gross requirements by consulting
bill of materials file
• Modify gross requirements to get net requirements:
• Net Requirements = Gross Requirements
+ Allocated Inventory
(scheduled receipts)
+ Safety Stock
- Inventory On Hand
• Offset orders to allow for lead time

27. Outputs of MRP
• Planned order schedule - quantity of material
to be ordered in each time period
• Changes to planned orders - modifications to
previous planned orders
• Secondary outputs:
– Exception reports
– Performance reports
– Planning reports

28. Lot Size
• Lot size rules determine:
– the size of the order placed, and by
extension the timing of orders,
– the frequency of set-ups, and
– the inventory holding costs for an item.
• Three types:
– Fixed order quantity
– Periodic order quantity
– Lot for lot

29. MRP Lots
• Fixed order quantity (FOQ): a lot size rule
with a constant order size where the same
quantity is ordered every time
• Periodic order quantity (POQ): a lot size rule
with a variable lot size designed to order
exactly the amount required for a specified
period of time
• Lot for lot (L4L): a lot size rule that is a special
case of the periodic order quantity with the
period equal to 1

30. MRP Record for Item C Using
the Lot-for-Lot (LFL) Rule

31. Capacity Requirements Planning (CRP)
• Tests MPS for feasibility
• Utilizes routings to determine labour/machine
loads
• If schedule feasible, recommends freezing
• If schedule overloads resources, points out
processes that are overscheduled

32. MRP to MRP II
• MRP simply exploded demand (MPS) into
required materials
• MRP II became Manufacturing Resource
Planning which provides a closed-loop
business management system that
integrates the material database with other
functions

33. Evolution of MRP to
Enterprise Resource Planning
• Manufacturing resource planning (MRP II): a
system that links the basic MRP system to other
company systems, including finance, accounting,
purchasing, and logistics
• Enterprise resource planning (ERP): a system
that provides a complete linkage of all functional
areas of a business
– Allows manufacturing to see new orders as soon as
marketing or sales enters them into the system.

34. Enterprise Resource Planning
• Integration of all aspects of a business –
accounting, customer relationship
management, SCM, manufacturing, sales,
human resources – into a unified information
system.
• Principal vendors: SAP, Oracle, i2 Technologies

35. Operations Scheduling

36. Sequencing & Scheduling
• Sequencing refers to determining the order in
which jobs or tasks are processed
• Scheduling refers to the assignment of start
and completion times to particular jobs, people,
or equipment.

37. Work-Center Scheduling Objectives
• Meet due dates
• Minimize lead time
• Minimize setup time or cost
• Minimize work-in-process inventory
• Maximize machine utilization

38. Priority Rules for Job Sequencing

39. Lateness & Tardiness
• Lateness and tardiness measure performance related to
customer-focused due-date criteria.
• Lateness is the difference between the completion time and the
due date (either positive or negative).
• Tardiness is the amount of time by which the completion time
exceeds the due date. (Tardiness is defined as zero if the job is
completed before the due date, and therefore no credit is given
for completing a job early).
Li = Ci - Di
Ti = Max (0, Li)
where Li = lateness of job i
Ti = tardiness of job i
Di = due date of job i.

40. Chapter 14 Operations Scheduling and Sequencing
Single-Resource Sequencing Problem
• In a serial manufacturing process, a bottleneck
workstation controls the output of the entire process.
Therefore, it is critical to schedule it efficiently.
• With different processing times, SPT sequencing
maximizes workstation utilization and minimizes average
job flow time.
• When processing times are relatively equal, first-come-
first-serve sequencing is applied.
• Using Earliest Due Date (EDD), the maximum job
tardiness and lateness are minimized.

41. Example of Job Sequencing: First-Come First-Served
Jobs (in order Processing Due Date
Suppose you have the four jobs of arrival) Time (days) (days hence)
to the right arrive for processing A 4 5
on one machine B 7 10
C 3 6
D 1 4
What is the FCFS schedule?
Do all the jobs get done on time?
Answer: FCFS Schedule No, Jobs B, C, and
D are going to be
Jobs (in order Processing Due Date Flow Time
late
of arrival) Time (days) (days hence) (days)
A 4 5 4
B 7 10 11
C 3 6 14
D 1 4 15

42. Example of Job Sequencing: Shortest Operating Time
Jobs (in order Processing Due Date
Suppose you have the four jobs of arrival) Time (days) (days hence)
to the right arrive for processing A 4 5
on one machine B 7 10
C 3 6
D 1 4
What is the SOT schedule? Do all the jobs get done on time?
Answer: Shortest Processing Time Schedule
Jobs (in order Processing Due Date Flow Time No, Jobs A and B
of arrival) Time (days) (days hence) (days) are going to be
D 1 4 1 late
C 3 6 4
A 4 5 8
B 7 10 15

43. Example of Job Sequencing: Earliest Due Date First
Jobs (in order Processing Due Date
Suppose you have the four jobs of arrival) Time (days) (days hence)
to the right arrive for processing A 4 5
on one machine B 7 10
C 3 6
D 1 4
What is the earliest due date first
schedule? Do all the jobs get done on time?
Answer: Earliest Due Date First
Jobs (in order Processing Due Date Flow Time No, Jobs C and B
of arrival) Time (days) (days hence) (days) are going to be
D 1 4 1 late
A 4 5 5
C 3 6 8
B 7 10 15

44. Example of Job Sequencing: Johnson’s Rule (Part 1)
Suppose you have the following five jobs with time requirements
in two stages of production. What is the job sequence using
Johnson’s Rule?
Time in Hours
Jobs Stage 1 Stage 2
A 1.50 1.25
B 2.00 3.00
C 2.50 2.00
D 1.00 2.00

45. Example of Job Sequencing: Johnson’s Rule (Part 2)
First, select the job with the
Time in Hours
smallest time in either stage.
Jobs Stage 1 Stage 2
That is Job D with the smallest time A 1.50 1.25
in the first stage. Place that job as B 2.00 3.00
early as possible in the unfilled job C 2.50 2.00
sequence below. D 1.00 2.00
Drop D out, select the next smallest time (Job A), and place it 4th in the job
sequence.
Drop A out, select the next smallest time. There is a tie in two stages for two
different jobs. In this case, place the job with the smallest time in the first stage
as early as possible in the unfilled job sequence.
Then place the job with the smallest time in the second stage as late as possible
in the unfilled sequence.
Job Sequence 1 2 3 4
Job Assigned D B C A

46. Make Span Time
• Make span time is the time needed to
process a given set of jobs; a short make
span aims to achieve high equipment
utilization.
M= C -S
where
M = makespan time of a group of jobs,
C = completion time of last job i in the
group,
S = start time of first job i in the group.

47. Chapter 14 Operations Scheduling and Sequencing
Johnson’s Rule Exercise
• In the following example, we assume that each job must
be processed first on Resource #1 and then on Resource
#2.
• Hirsch Products manufactures custom parts that first
require a shearing operation and then a punch-press
operation. Order information is provided below.
Shear Punch
Job (days) (days)
1 4 5
2 4 1
3 10 4
4 6 10
5 2 3

48. Gantt Chart for Hirsch Product Sequence By-
the-Numbers Rule 1-2-3-4-5
If jobs are completed by order number, the punch press
oftentimes experiences idle time awaiting the next job as shown
below The makespan is 37 days.

49. Gantt Chart for Hirsch Product Sequence 5-1-4-3-2 Using
Johnson’s Rule
Johnson’s Rule results in a reduction in makespan
from 37 days to 27 days, as shown in the Gantt chart
below.

50. Jobs A, B, C, D and E must go through Processes
1 and 2 in that sequence. Use Johnson’s rule
to determine the optimal sequence in which to schedule
the jobs so as to minimize the total time required.
Jobs Process 1 time Process 2 time
A 4 5
B 16 14
C 8 7
D 12 11
E 3 9