Operations and Supply Chain

Management
SESSION 6

S H I VA N E E P E T H E
Section A Discussion
Newsvendor:
◦ Discuss costs of over ordering and under-ordering
◦ Critical fractile & Contracts
ABC Analysis & FSN Analysis
Division of products based on metric of choice
ABC & HML : based on their value
FSN: rate of consumption
VED & SDE: need and availability

Kind of product determines their movement decisions

FSN Analysis
Divide products into Fast moving, Slow moving and Non-moving based on either their inventory
turnover

F: High IT (>3)
S: Moderate IT (between 1 and 3)
N: Low IT (<1)
ABC Analysis
Divide products based on consumption value:
A: About 20% products holding 80% value
B: About 30% products holding 15% value
C: About 50% products holding 5% value

Value is usually measured via sales volume

XYZ Analysis
Categorize based on stability of demand given by Coefficient of Variation

X: Low CoV or stable demand

Y: Moderate CoV or moderately stable demand
Z: High CoV or unstable demand
How does it fit in with everything else?
High Importance Products (A type in ABC of F type in FSN)
◦ Continuous Review
◦ Store Close to the retail outlets

Medium – Low Importance (B & C type in ABC or S type in FSN)

◦ Periodic Review
◦ Stock centrally

Dead Stock (N type in FSN)

◦ Dispose
Layout Planning
Facility layout:
The process of determining placement of departments, workgroups within departments,
workstations, machines and stock-holding points within a facility

Process needs the following inputs:

◦ Specifications of objectives used to evaluate the design
◦ Demand estimates
◦ Processing specifications and requirements
◦ Space requirements for each element
◦ Space availability within the facility
Types of Layouts
Workcentre

• Functional layouts like job-shop and flow-shop

• Similar equipment is grouped

Assembly Line

• Work processes are arranged according to the process steps

Manufacturing Cell

• Dissimilar machines are grouped to work on similar products

Project Layout

• Product remains at one location

Assembly Line Balancing: Process
Cycle time: a uniform time interval in which a moving conveyor passes a series of workstations
◦ Or the time between successive units coming off the line

Assembly-line balancing: assigning all tasks to a series of workstations so that each workstation
has no more than can be done in the cycle time
Precedence relationship: the order in which tasks must be performed in the assembly process
Assembly Line Balancing: Process
1. Specify the sequential relationships among tasks
2. Determine the required cycle time
3. Determine the theoretical minimum number of workstations
4. Select a primary and secondary assignment rule
5. Assign tasks
6. Evaluate the efficiency of the balance
7. Rebalance if needed
Assembly Line Balancing: Formulae
Example: Produce 500 wagons in 7hrs.
Example: Precedence Graph
Example: Calculations
Production time per day 60 sec. x 420 min
C 
Output per day 500 wagons
25,200
  50.4
500
T 195 seconds
Nt    3.87  4
C 50.2 seconds
Dependent Task Table
Assignment Rule
Primary Rule:
Largest number of following tasks

Secondary Rule:
Task Time
Example: Assignment
Example: Efficiency

T 195
Efficiency    0.77  77%
N a C 550.4 
Aggregate Production Planning
Determines quantity and timing of production for intermediate future (3-18 months)

Three levels of operations planning

◦ Long range

◦ Medium range

◦ Short range

Objectives:
◦ To meet forecasted demand

◦ Minimize cost by adjusting controllable variables

APP Strategies
Capacity Options
◦ Change inventory levels
◦ Vary workforce size
◦ Vary Production rate
◦ Sub-contracting
◦ Use part time workers

Demand Options
◦ Influence Demand
◦ Backorder
◦ Counter-seasonal Products
Key AP Mixing Strategies
Chase Strategy: Meet exact demand
◦ Production is set to match demand
◦ Doesn’t carry leftovers
◦ Essentially lean production
◦ Works well for dependent products

Level Strategy
◦ Ensure production levels remain constant
◦ Hire more resources when required

Stable Strategy
◦ Maintain constant resource utilization throughout

Production planning is done as an MILP/LPP problem deciding per period production to minimise costs based on chosen strategy
(At home assignment)
Thank You!