Chapter 6: Sales & Operations Planning

Part-A: Purpose of S & OP, Objectives of S & OP by Richard Ling, qualitative issues,
business environment issues
Part-B: approaches of S & OP, strategies for S & OP, strategies for balancing
resources –internal and external, Math 3.6, example 3.1,

Chapter 7: Project Management

Part-A: project, project life cycle, Name the six key decisions in project
management, duties of project manager, project management triangle,
project champions, WBS, gantt chart, PERT vs. CPM,
Part-B: Math example 4, 5, 6 solved problem 1 ,3 ,4 Text book problem 7 (a,b) 8,
9, 10

Chapter 8: Waiting Line

Part-A: define waiting line/queuing theory, managerial implications, goal of

waiting lines,
Part-B What metrics are used to help managers analyze waiting lines?
Example 1, 2, 3,4, 8, 9,10, 11, from materials problem 1 (a-k),
2,3,4,4,5,6(a,b)

Chapter 9: Transportation in Supply Chain

Part-A: Class lecture
Part-B: : Class lecture

Chapter 10: IT in Supply Chain

Part-A: : Class lecture
Part-B: : Class lecture
Chapter # 6
Math:

3.6
The Waldorf Sport Boat Company has a demand forecast for all its aluminum
fishing boats under 15 feet for the next 6 months. The forecast is:
Month Demand
January 250
February 300
March 420
April 560
May 610
June 580
There are currently 10 workers assigned to the production line, each capable of producing
approximately 15 boats per month (December is typically the slowest month for sales). For this simple
example we will assume each month has the same number of production days. They can hire more
workers at a hiring and training cost of $400 per worker. If they layoff any workers, the
unemployment cost is $1,000 per worker. The boats have a standard production cost (labor,
material, and overhead) of $300 per boat. They can use overtime to produce boats, but a boat
produced in overtime adds $60 in labor cost, and each worker can only produce an extra three
boats per month using overtime. If they keep any boats in inventory it will cost them $6 per boat
per month for any boat in inventory at the end of the month. Failure to meet market demand
typically will imply the customer will buy from another supplier, and therefore cost the company
$120 in profit. They recognize this lost profit (selling price less standard cost) as a stock out cost. They
currently have no boats in inventory.
Using this simple data, the following tables will illustrate planning approaches using chase, level, and a
combination strategy.

Solution :

Chase
In this example, we will use a minimum number of workers to meet all demand. No inventory will be
allowed, and overtime can be used if necessary rather than adding another worker who could potentially
add inventory. Overtime production will be limited to 15 boats per month, for at that level it is better
to hire another worker.

The number of workers necessary is calculated by dividing the demand by 15 (the regular production per
worker per month). For example, in January, dividing the demand of 250 by 15 yields 16.67. That implies
16 workers are needed, giving a regular production of 240 and leaving the additional 10 to be produced in
overtime. The grand total for hire/fire, regular production cost, and overtime cost is $832,100.

Level :
In this strategy we try to establish a level workforce for the entire 6 months. If we divide the total 6
months' demand (2720 units) by 6, we see the average demand is about 453 boats. Establishing the level
production at 450 (30 workers), we ensure that we will approximately meet the average demand, although
it is obvious that inventory or shortages will occur since every month is not average. We will allow the
inventory or shortage conditions, but will always have a constant, level production rate. At the end we
will have to remember to add the one-time hiring cost of the additional 20 workers ($8,000):

This total cost (production plus inventory plus shortages plus the one-time hiring cost) is $828,260, or
$3,840 less than the first alternative over the 6 months. On the negative side, however, there are 20
customers in June that did not get the boat they wanted. Note that to save space only columns that had
relevant activity are included. We could have, for example, had a column for hire/fire cost, but since the
only activity was in January we elected to add that cost at the end.

Combination
As mentioned before, there are numerous approaches that can be taken under the "combination" category.
We will illustrate but one. In this alternative, we start with 25 workers-plenty of workers to meet early-
year demand and build some inventory. As demand grows, we will use the inventory and start to
authorize overtime. We want to meet all demand, so eventually we will have to add workers. With a
three-boat limit per worker per month on overtime, the 25 workers will only be authorized to produce 75
extra boats on overtime, and this may not be enough for some months. It will be a policy to add the
minimum number of workers, however.

When we reached May we did not have enough capacity to meet demand even with overtime. The
inventory was used up in April, and with 25 workers we could only produce 450 units (each worker can
produce 18-15 in regular time and 3 in overtime). The decision was to hire nine workers. Recall they want
to minimize the total number of workers. To come to the number of 34 workers, we divided the May
demand of 610 by 18 to obtain 33.9. That implies that 34 workers could meet demand using almost all the
authorized overtime. In June, the demand of 580 divided by the 18 gives 32.2, meaning they can meet
demand with one less worker, but still with most working overtime. Note that the total cost of this
alternative ($842,380) is the largest of the three examples, but does have the advantage of having little
disruption of new workers and does meet all demand. Other alternatives may prove to be significantly
cheaper.
EXAMPLE 3.1
The Acme Accounting Partners are a local CPA firm. They are relatively small, with only 15 full-time accountants.
The accountants are highly trained, and any layoffs are out of the question for the firm. They also believe that for
now the staff of 15 is as many as they can afford to keep on a full-time basis. During the tax season (January through
April) the demand on the accountant's time is very heavy. They are paid on the basis of a 40-hour work week, but
during tax season they can be expected to work a maximum of 60 hours per week. The partners believe that any
more hours than that will hurt productivity and concentration to the point where major mistakes and inefficiencies
are probable. Luckily, they have an agreement with a temporary employment service that can supply temporary
clerical help at the rate of $25 per hour. When they use the clerical help, they merely adjust the workload so the
accountants can do the technical work while the clerks can concentrate on more structured tasks.The company will
save the overtime hours for the accountants in an "inventory" of hours. The accountants are then expected to use
those hours to take time off during the period oflight demand (usually in the summer). Since their fiscal year ends
August 31, any hours left in "inventory" are paid in monetary compensation to the accountants at the rate of $50 per
hour. The partners have developed a forecast of demand (in hours) for the next 8 months based on past experience
of client tax needs.

The partners need an estimate of the financial impact to determine if their decision to keep the staff at 15
is a good one. They also need to determine if it may be feasible to take on additional work, should a new
client request their services.
Solution:
The following table shows the financial impact of their aggregated demand

Using this projection, the partners can now see they need approximately $170,000 beyond their normal
salary expectations-$130,000 for temporary workers plus $40,000 (800 hours at $50 per hour) to
compensate for unused overtime at the end of August.

Chapter # 7
The partners need an estimate of the financial impact to determine if their decision to keep the staff at 15
is a good one. They also need to determine if it may be feasible to take on additional work, should a new
client request their services.
Solved Problems :
SOLUTION
SOLUTION:
SOLUTION
CHAPTER # 8 : MANAGEMENT OF WAITING LINE
Single Server, Constant Service Time, M/D/1

Multiple Servers, M/M/S

A multiple-server system exists whenever two or more servers are working independently to
provide service to customer arrivals. Use of the model involves the following assumptions:
1. A Poisson arrival rate and exponential service time.
2. Servers all work at the same average rate.
3. Customers form a single waiting line (in order to maintain first-come, first-served
processing).
Multiple Priorities
QUEUING MODEL: FINITE-SOURCE
PROBLEM FROM MATERIAL
1. Arrivals at a telephone both are considered to be Poisson at an average time of 8 min
between our arrival and the next. The length of the phone call is distributed exponentially, with
a mean of 4 min.
Determine
(a) Expected fraction of the day that the phone will be in use.
(b) Expected number of units in the queue Expected waiting time in the queue.
(c) Expected number of units in the system.
(e) Expected waiting time in the system
(f) Expected number of units in queue that from time to time.
(g) What is the probability that an arrival will have to wait in queue for service?
(h) What is the probability that exactly 3 units are in system
(i) What is the probability that an arrival will not have to wait in queue for service?
(j) What is the probability that there are 3 or more units in the system?
(k) What is the probability that an arrival will have to wait more than 6 min in queue for
service?