Session-15

- Fixed Workforce Schedule

- Introduction to Inventory Management
 Session-15

Fixed Workforce Schedule

Developing a Workforce Schedule Suppose that we are

interested in developing a workforce schedule for a company
that operates seven days a week and provides each employee
with two consecutive days off.
 Fixed Workforce Schedule

Step 1. From the schedule of net requirements for the week,

find all the pairs of consecutive days, excluding the day (or
days) with the maximum daily requirement.
If so, select the pair with the lowest total requirements.

Step 2. If a tie occurs, choose one of the tied pairs, consistent

with the provisions written into the labor agreement, if any.

Step 3. Assign the employee the selected pair of days off.

And update the requirement.
Step 4. Repeat steps 1 through 3 until all the requirements
have been satisfied or a certain number of employees have
been scheduled.
 Workforce Scheduling
The Amalgamated Parcel Service is open seven days a week.
The schedule of requirements is

The manager needs a workforce schedule that provides two

consecutive days off and minimizes the amount of total slack
capacity. To break ties in the selection of off days, the scheduler
gives preference to Saturday and Sunday if it is one of the tied
pairs. If not, she selects one of the tied pairs arbitrarily.
Solution Friday contains the maximum requirements, and the pair
S–Su has the lowest total requirements. Therefore,
Employee 1 is scheduled to work Monday through Friday.
Solution
 Session-15

Inventory Management

Instructor:
Dr. Anupam Keshari
Operations Management & Decision Science Area
 Outline

• Elements of Inventory Management

• Inventory and Supply Chain Management

• Economic Order Quantity

• Continuous review and Periodic review policies

 What is inventory?
A physical resource that a
firm holds in stock with
the intent of selling it or
transforming it into a
more valuable state.

Purpose of inventory
management
• How many units to order?
• when to order? discount
 Types of Inventories

Raw materials
Purchased parts and supplies Finished Goods

Work-in-process (partially completed products )

Items being transported

Tools and equipment

 Nature of Inventories

Raw Materials – Basic inputs that are converted into finished product
through the manufacturing process

Work-in-progress – Semi-manufactured products need some more works

before they become finished goods for sale

Finished Goods – Completely manufactured products ready for sale

Supplies – Office and plant materials not directly enter production but are
necessary for production process and do not involve significant
investment.
 Inventory and Supply Chain Management

• demand information is distorted as it moves away from

the end-use customer(forecast)
Bullwhip effect
• higher safety stock inventories are stored to
compensate

Seasonal or cyclical demand

Sale of umbrella , dominos sale in weekend

Inventory provides independence from vendors

Take advantage of price discounts

Inventory provides independence between stages and avoids work stoppages

WIP inventories
 Two Forms of Demand

Dependent Independent
(not used by customer directly)
•Demand for items used by
•Demand for items used to external customers
produce final products
•Cars, computers, and
•Tires stored at a plant are houses are examples of
an example of a dependent independent demand
demand item inventory
 Inventory Costs

Carrying cost

•cost of holding an item in inventory

Ordering cost

•cost of replenishing inventory

Shortage cost

•temporary or permanent loss of sales when

demand cannot be met
Economic Order Quantity (EOQ) Models
Economic Order Quantity (EOQ) Models

• We want to determine the optimal number of

EOQ units to order so that we minimize the total cost
associated with the purchase, delivery and
storage of the product.

Basic EOQ model

Production quantity model
 Assumptions of Basic EOQ Model

Demand is known, constant, and independent

Lead time is known and constant

Order quantity received is

instantaneous and complete

No shortage is allowed
Repetitive order quantity
 Instantaneous Resupply
procurement Carrying
costs costs

It requires balance between

D ICQ
TC  S 
Q 2

Procurement Carrying
cost cost
TC - Total annual relevant inventory cost
Q - Order size
D - Item annual demand, units/year
S - Procurement cost, dollars/order
C - Item value, dollar/unit
I - Carrying cost, percent/year
Instantaneous Resupply
Economic Order Quantity (EOQ):
Q* = 2 DS
Optimal time between orders: IC
T* = Q*/D

Optimal number of times per year to place an order:

N = D/Q*

Reorder point, assuming no uncertainity in demand or lead time

ROP = d X LT
Lead time for resupply

Place
order Max stock
level
Quantity on hand

Q*

ROP Receive
order

LT LT LT
Q= Order quantity
T T
ROP=Reorder point
Time LT= Lead Time
T=Time between
Basic Pull Inventory Control Model
orders
Example
 Demand = 750 units/year
 Setup cost = $50
 Carrying cost = 25% per year
 Item value = $35
Find EOQ and optimal time between the orders ??

2 DS 2(750)(50)
Q 
*
 = 92.58 or 93 units
IC (0.25)(35)

T *  Q* / D  92.58 / 750 = 0.12 years or 6.4 weeks

Example cond…
 Demand = 750 units/year
 Lead time = 1.5 weeks

Find Reorder Point? Assume no demand

or lead time uncertinity
Demand (d) = 750units/ year = 14.42 units/week

ROP  d  LT  14 . 42  1 . 5 = 21.6 or 22 units

When inventory level drops to 22 units, place a replenishment

order of 93 units.