CHAP 9.

LAYOUT DECISION

ASSEMBLY - LINE BALANCING

1. Ranked positional weight

2. Most following task

Example 1: Tailwind, Inc., produces high-quality but expensive training shoes for
runners. The Tailwind shoe, which sells for $210, contains both gas- and liquid-filled
compartments to provide more stability and better protection against knee, foot, and
back injuries. Manufacturing the shoes requires 10 separate tasks. There are 400
minutes available for manufacturing the shoes in the plant each day. Daily demand is 60.
The information for the tasks is as follows the below table.
a) Draw the precedence diagram.
b) Assign tasks to the minimum feasible number of workstations
according to the “ranked positional weight” decision rule.
c) What is the efficiency of the process you completed in (b)?
d) What is the idle time per cycle?
Task Performance time (min) Task must follow task listed below

A 1 _

B 3 A

C 2 B

D 4 B

E 1 C, D

F 3 A

G 2 F

H 5 G

I 1 E, H
 J 3 I
a)

b) Cycle time : 400/60 = 6.67 mins/unit

The minimum feasible number of workstations : 25/6.67 = 3.75 = 4

Task Positional Weight (min)

A 1+3+2+1+1+4+3+2+5+3 = 25
B 14
C 7
D 9
E 5
F 14
G 11
H 9
I 4
J 3

Assign tasks to the minimum feasible number of workstations according to the “ranked
positional weight” decision rule
Workstation task time time left
(sec) (sec)
Workstation 1 A 1 5.67
Cycle time = 6.67 sec B 3 2.67
C 2 0.67
Workstation 2 F 3 3.67
Cycle time = 6.67 sec G 2 1.67
Workstation 3 D 4 2.67
Cycle time = 6.67 sec E 1 1.67
Workstation 4 H 5 1.67
Cycle time = 6.67 sec I 1 0.67
 Workstation 5 J 3 3.67
Cycle time = 6.67 sec

c) The efficiency of the process you completed in (b)?

Efficiency = = 25/(5x6) = 0.83
d) What is the idle time per cycle : 0.67+1.67+1.67+0.67+3.67 = 8.35 mins

Example 2: The Action Toy Company has decided to manufacture a new train set, the
production of which is broken into six steps. The demand for the train is 4,800 units per
40-hour work-week:

Task Performance time (sec) Predecessors

A 20 None

B 30 A

C 15 A

D 15 A

E 10 B, C

F 30 D, E

a) Draw a precedence diagram of this operation.

b) Given the demand, what is the cycle time for this operation?
c) What is the theoretical minimum number of workstations?
d) Assign tasks to workstations.
e) How much total idle time is present each cycle?
f) What is the efficiency of the assembly line with five stations?
With six stations?

a)
 b) The cycle time : (40x3600)/4800 = 30 seconds/unit
c) Total task time 20+30+15+15+10+30 = 120 seconds
Theoretical minimum number of workstations : 120/30 = 4 workstations
d) Assign tasks to workstations by using Most of following task rule

Task Number of following task

A 5
B 2
C 2
D 1
E 1
F 0

Workstation task time time left

(sec) (sec)
Workstation 1 A 20 10
Cycle time = 30
sec
Workstation 2 B 30 0
Cycle time = 30
sec
Workstation 3 C 15 15
Cycle time = 30 D 15 0
sec
Workstation 4 E 10 20
Cycle time = 30
sec
Workstation 5 F 30 0
Cycle time = 30
sec

e) Total idle time is present each cycle : 10+20 = 30

f) The efficiency of the assembly line with five stations :
Efficiency = = 120/(5x30) = 0.8

The efficiency of the assembly line with six stations :

Efficiency = = 120/(6x30) = 0.67
 CHAP 12: MANAGING INVENTORY

1. ABC ANALYSIS
Example:
Item stock Annual volume Unit
number units cost ($)

P1 1,000 90

P2 500 154

P3 1,550 17

P4 350 42.86

P5 1,000 12.5

P6 600 14.17

P7 2,000 .60

P8 100 8.5

P9 1,200 .42

P10 250 .60

2. ECONOMIC ORDER QUANTITY MODEL (EOQ)

❖ Minimizing cost:
- P: price/cost per unit ($2/unit)
- Q: number of unit per order (units/order)
- EOQ (or Q*): optimal number of unit per order , economic order quantity
- D: annual demand (units/year)
- S: Setup cOst, Ordering cOst, reorder cOst (cOst/Order → $100/Order)
- H: Holding cost, carrying cost per unit per year (--> $5/unit/year)

● Annual setup cost: DS/Q

● Number of order placed per year: N = D/Q
● Annual holding cost: HQ/2
● Average inventory level: Q/2
● When Annual setup cost = Annual holding cost
SD/Q = HQ/2
● → Q = Că n (2SD/H) : number of units per order, EOQ (Q*): optimal number of
units per order, economic order quantity
● Expected number of orders: N = D/Q* = D/EOQ
● Time between orders: T = Number of working days per year / N
● Total cost (per year) = Annual setup cost + Annual holding cost + Product cost
 = SD/Q + HQ/2 + PD
 Example 1: The Warren W. Fisher Computer Corporation purchases 8,000 transistors
each year as components in minicomputers. The unit cost of each transistor is $10, and
the cost of carrying one transistor in inventory for a year is $3. Ordering cost is $30 per
order. What are (a) the optimal order quantity, (b) the expected number of orders
placed each year, and (c) the expected time between orders? Assume that Fisher
operates on a 200-day working year.

D = 8000 units/year
H = $3 / order
S = $30 / order

a) The optimal order quantity Q = = 400 transistors

b) The expected number of orders placed each year : N = D/Q = 8000/400 = 20
transistors
c) The expected time between orders : T = 200/20 = 10 days

❖ Reorder point:
● ROP = d x L = Demand per day x Lead time in days
● Reorder point with Safety stock: ROP = d x L + Safety stock
● Safety stock = Z x σ x Că n L - σ : standard deviation (Variance)

Example 1: Southeastern Bell stocks a certain switch connector at its central warehouse
for supplying field service offices. The yearly demand for these connectors is 15,000
units. Southeastern estimates its annual holding cost for this item to be $25 per unit. The
cost to place and process an order from the supplier is $75. The company operates 300
days per year, and the lead time to receive an order from the supplier is 2 working days.
a) Find the economic order quantity.
b) Find the annual holding costs.
c) Find the annual ordering costs.
d) What is the reorder point?

D = 15000 units/year => d = 15000/300 = 50 units/day , H = $25/unit, S = $75/order

a) the economic order quantity : Q = EOQ = = 300 units
b) the annual holding costs : HQ/2 = 3750
c) the annual ordering costs : DS/Q = 3750
d) the reorder point ROP = d x L = 50 x 2 = 100

Example 2: The daily demand for 520 flat-screen TVs at Sarah’s Discount Emporium is
a standard deviation of 2 units. The lead time for receiving a shipment of new TVs is 10
days and is fairly constant. Determine the reorder point and safety stock for a 95%
service level.

d = 520 units/day , σ = 2 , L = 10 days, 95% => z = 1.645

ROP Reorder point with Safety stock: ROP = d x L + z x σ x L = 520x10 + 1.645x2x =
5210

3. QUANTITY DISCOUNT MODEL

Example 1: Bell Computers purchases integrated chips at $350 per chip. The holding
cost is $35 per unit per year, the ordering cost is $120 per order, and sales are steady, at
400 per month. The company’s supplier, Rich Blue Chip Manufacturing, Inc., decides to
offer price concessions in order to attract larger orders. The price structure is shown
below.

Quantity purchased Price/unit

1-99 units $ 350

100-199 units $ 325

200 or more units $ 300

a) What is the optimal order quantity and the minimum annual

cost for Bell Computers to order, purchase, and hold these
integrated chips?
b) Bell Computers wishes to use a 10% holding cost rather than
the fixed $35 holding cost in (a). What is the optimal order
quantity, and what is the optimal annual cost?

a)
Unit price: P = $350/ unit
Holding cost: H $35/unit/year
Ordering cost: S= $120/order
Demand per month: 400 units per month => Annual demand: D = 400 x 12 -
4.800 unit/year
 Optimal order quantity: EOQ = 181.42 units = 181 units / order
 Total cost (per year) = Annual setup cost + Annual holding cost +
Purchase cost (Product cost) = SD/Q + HQ/2 + PxD
● With EOQ = 181 units per order, Price per unit is $325:
TC = SD/Q + HQ/2 + PxD = (120x4800)/181 + (35x181)/2 + 325x4800
- $ 1.566.350 per year
● If the company orders 200 units per an order, the unit price is $300/unit:
TC = … = (120x4800)/200 + (35x200)/2 + 300x4800 = $ 1.446.380 per year
● If the company orders 99 units per an order, the unit price is $350 unit:
TC = ... = (120x4800)/99 + (35x99)/2 + 350x4800 = $1.786.550 per year
 Hence, the minimum annual cost is $ 1.446.380 per year with the optimal order
quantity is 200 units per order .
 b) New holding cost : 10% x price per unit = 0.1P => H =0.1
Optimal order quantity: EOQ = 181.42 units = 181 units / order
● With EOQ = 181 units per order, Price per unit is $325:
TC = SD/Q + HQ/2 + PxD = (120x4800)/181 + (0.1x325x181)/2 + 325x4800
- $ 1.566.349.82 per year
● If the company orders 200 units per an order, the unit price is $300/unit:
TC = … = (120x4800)/200 + (0.1x300x200)/2 + 300x4800 = $ 1.445.880 per
year
● If the company orders 99 units per an order, the unit price is $350 unit:
TC = ... = (120x4800)/99 + (0.1x350x99)/2 + 350x4800 = $1.687.550 per year
 Hence, the minimum annual cost is $ 1.445.880 per year with the optimal order
quantity is 200 units per order .

Example 2: M. P. VanOyen Manufacturing has gone out on bid for a regulator

component. Expected demand is 700 units per month. The item can be purchased from
either Allen Manufacturing or Baker Manufacturing. Their price lists are shown in the
table. Ordering cost is $50, and annual holding cost per unit is $5.

ALLEN MFG BAKER MFG.

QUANTITY UNIT PRICE QUANTITY UNIT PRICE

1–499 $16.00 1–399 $16.10

500–999 15.50 400–799 15.60

1,000+ 15.00 800+ 15.10

a) What is the economic order quantity?

b) Which supplier should be used? Why?
c) What is the optimal order quantity and total annual cost of ordering, purchasing, and
holding the component?
 4. PRODUCTION ORDER QUANTITY MODEL (EPQ)
- Q:.......................................................................
- H: .......................................................................
- p: daily production rate
- d: daily demand (rate)/ usage rate
- t: length of the production run in days
● Annual setup cost = DS/Q (giố ng EOQ)
● Annual holding cost = Average inventory level x H
● Average inventory level = Maximum inventory level / 2
● Production run = D/Q*
● Maximum inventory level:
= Total production during the production run - Total used during the production run
= pt - dt

● Q = Total produced = pt => t = Q/p

➔ Maximum inventory level = pt - dt = p (Q/p) - d (Q/p) = Q (1 - d/p)
➔ Annual holding cost = (Maximum inventory level x H)/2 = HQ/2 x (1-d/p)

● Optimum number of units per order: EPQ = Q* =

Example: Arthur Meiners is the production manager of Wheel-Rite, a small producer of

metal parts. Wheel-Rite supplies CalTex, a larger assembly company, with 10,000 wheel
bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite
is $40, and holding cost is $.60 per wheel bearing per year. Wheel-Rite can produce 500
wheel bearings per day. CalTex is a just-in-time manufacturer and requires that 50
bearings be shipped to it each business day.
a) What is the optimal production quantity?
b) What is the maximum number of wheel bearings that will be in inventory at Wheel-
Rite?
c) How many production runs of wheel bearings will Wheel-Rite have in a year?
d) What is the total setup 1 holding cost for Wheel-Rite?

Annual demand: D = 10,000 units/year

Daily demand: d=50 units/day
Setup cost: S= $40/order
Holding cost: H= $0.60/unit/year
Daily production rate: p= 500 units/day
 5. PROBABILISTIC MODEL AND SAFETY STOCK
Annual stockout costs = The sum of the units short for each demand level x The
probability of that demand level x The stockout cost per unit x The number of orders
per year.

Example 2: David Rivera Optical has determined that its reorder point for eyeglass
frames is 50 (d * L) units. Its carrying cost per frame per year is $5, and stockout (or lost
sale) cost is $40 per frame. The store has experienced the following probability
distribution for inventory demand during the lead time (reorder period). The optimum
number of orders per year is six. How much safety stock should David Rivera keep on
hand?

Number of units Probability

30 .2

40 .2

50 .3

60 .2

70 .1
 CHAP 14. MATERIAL REQUIREMENT PLANNING (MRP)

I. Product structure:

Example: Speaker Kit, Inc., packages high-fidelity components for mail order.
Components for the top-of-the-line speaker kit, “Awesome” (A), include 2 Bs and 3 Cs.
Each B consists of 2 Ds and 2 Es. Each C has 2 Fs and 2 Es. Each F includes 2 Ds and 1 G.
It is an awesome sound system. Identify the number of units of each item required to
satisfy demand for a new order of 50 Awesome speaker kits, draw product structure
and level.

II. Time phrase:

Component A B C D E F G

Lead time (weeks) 1 2 1 1 2 3 2

 III. Rule:

Example: Product X has:

Period 1 2 3 4 5 6 7 8 9 10 11 12

Gross 30 40 30 70 20 10 80 50
requirem
ent

Holding cost = $2.5/unit/week, setup cost = $150, LT=1 week, beginning

inventory= 40, stockout cost =$10.

1. Lot for lot

Product X, Level (..), Lot-for-lot, LT=1, beginning inventory = 40

Period 1 2 3 4 5 6 7 8 9 10 11 12

Gross
30 40 30 70 20 10 80 50
requirement

Schedule
0 0 0 0 0 0 0 0
receipts

Projected on
40 10 10 0 0 0 0 0 0 0
hand - 40

Net
0 30 30 70 20 10 80 50
requirements

Planned order
30 30 70 20 10 80 50
receipts

Planned order
30 30 70 20 10 80 50
releases
 2. Lot for size (EOQ)

Product X, Level (..), EOQ= 57 , LT=1, beginning inventory = 40

Period 1 2 3 4 5 6 7 8 9 10 11 12

Gross
30 40 30 70 20 10 80 50
requirement

Schedule
0 0 0 0 0 0 0 0 0
receipts

Projected on
40 10 10 27 27 54 41 21 21 11 45 45 52
hand - 40

Net
0 30 3 16 0 0 69 5
requirements

Planned order
57 57 57 114 57
receipts

Planned order
57 57 57 114 57
releases

● Total holding cost = 10 units x $2.5 + 10 x 2.5 + 27 x 2.5 + 27 x 2.5 + 54 x 2.5 +

41x2.5 + 21x2.5 + 21x2.5 + 11x2.5 + 45x2.5 + 45x2.5 + 52x2.5 = (10+10….+) x 2.5
= 364 x 2.5 = $910 per week
● Total setup cost = $150 x 5 = $750
● Total cost = total setup cost + total holding cost = 750 + 910 = 1660

3. Period order quantity (POQ)

POQ = EOQ / average (weekly) usage = 57/(330/12) = 2.1 weeks → POQ = 3 weeks

Product X, Level (..), POQ=3 , LT=1, beginning inventory = 40

Period 1 2 3 4 5 6 7 8 9 10 11 12
Gross requirement 30 40 30 70 20 10 80 50
Schedule receipts 0
Projected on hand | 40 40 10 10 30 30 0 20 0 0 80 0 0
Net requirements 0 30 0 70 0 10 0 50
Planned order receipts 60 90 90 50
Planned order releases 60 90 90 50
 CHAP 15. SCHEDULING FOR THE SHORT-TERM

I. SEQUENCING JOBS
1. Priority rules:
- First come first serve
- Shortest processing time
- Earliest due date
- Longest processing time
● Average completion time =
● Utilization metric=
● Average number of jobs in the system =
● Average job lateness =

Example: Determine the sequence of processing according to FCFS, SPT, EDD, and LPT
rules.

Job Processing time (days) Job due date (days)

A 6 8

B 2 6

C 8 18

D 3 25

E 9 23

1. FCFS:

Job Job work Flow Job Job

sequenc (processing time due latenes
e time) date s
A 6 6 8 0
B 2 8 6 2
C 8 16 18 0
D 3 19 15 4
E 9 28 23 5
Total 28 77 11
2. SPT:

Job Job work Job Job

Flow
sequenc (processing due latenes
time
e time) date s
B 2 2 6 0

D 3 5 25 0

A 6 11 8 3

C 8 19 18 1

E 9 28 23 5

3. EDD:

Job Job work Flow Job Job

sequence (processing time) time due date lateness

4. LPT:

Job Job work Flow Job Job

sequence (processing time) time due date lateness
Hence, …. rule is the most effective b/c it has the smallest job lateness (... days)

5. Critical ratio:

Critical ratio = =

Example: Today is day 25 on Zyco Medical Testing Laboratories’s production schedule.

Three jobs are on order, as indicated here:

Job Due date Workdays remaining

A 30 4

B 28 5

C 27 2

job Critical ratio priority order

A (30-25)/4 = 1.25 3
B (28-25)/5 = 0.6 1
C (27-25)/2 = 1 2

Job Job work Flow Job Job

sequenc (processing time due latenes
e time) date s
B
C
A
…
…
 6. Johnson’s Rule: Sequencing jobs on 2 machines

Example: 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 Work center 2

(Drill press) (Lathe)

A 5 2

B 3 6

C 8 4

D 10 7

E 7 12

The sequencing position

B E D C A

The sequential time:

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 illustrated graphically

Total idle time = 3 + 1 + 2 = 6 hrs , The five jobs are completed in 35 hrs

II. Assignment method

Example 1: First Printing wants to find the minimum total cost assignment of 3 jobs to
3 typesetters.

Typesetters A B C

Jobs

R-34 $11 14 6

S-66 $8 10 11

T-50 $9 12 7

Mỗ i hà ng trừ số nhỏ nhấ t củ a hà ng đó

Typesetter A B C
s
Jobs
R-34 5 8 0
S-66 0 2 3
T-50 2 5 0

Mỗ i cộ t trừ số nhỏ nhấ t củ a cộ t đó , sau đó : dù ng gạ ch ngang và dọ c tố i thiểu để gạ ch hết

số 0
 Typesetter A B C
s
Jobs
R-34 3 4 0
S-66 0 0 5
T-50 0 1 0

Mình đã dù ng số đường gạch tối thiểu nhất là 3 thì mớ i gạ ch hết 0

Số đườ ng gạ ch tố i thiểu nhấ t là 3 = số hà ng = số cộ t

A chọ n S or T A chọ n T

B chọ n S => B chọ n S

C chọ n R or T C chọ n R

Hence, the company should choose typesetter A for job T-50, typesetter B for job S-66,
typesetter C for job R-34

The minimum total cost: $9 + $10 + $6 = $25

Example 2: 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?

Office OMAHA MIAMI DALLAS

Hiree

Jones $800 1,100 1,200

 Smith 500 1,600 1,300
Wilson 500 1,000 2,300

Mỗ i hà ng trừ số nhỏ nhấ t

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

Mỗ i cộ t trừ số nhỏ nhấ t

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

Office OMAHA MIAMI DALLAS NEW YORK

Hiree
Jones Smith 0 0 100 0
Wilson 0 800 500 100
Dummy 0 200 1,500 800
300 0 0 100
 Office OMAHA MIAMI DALLAS NEW YORK

Hiree
Jones 100 0 100 0
Smith 0 700 400 0
Wilson 0 100 1,400 700
Dumm 400 0 0 100
y

Jone – Miami
Smith – New York
Wilson – Ohama
Dummy – Dallas
Hence, the company should choose Jone for Miami , Smith for NY, Wilson for Omaha,
Dummy for Dallas
The minimum total cost: $1,100 + $800 + $500 + 0 = $2,400