Production and Operations Management

Module 4

Capacity Planning
Capacity planning involves determining the production capacity an organization
needs to meet its demand and objectives effectively. This process ensures that
the company can produce the right quantity of goods or services at the right
time while maintaining efficiency and controlling costs.
Capacity planning typically consists of the following steps:
a. Forecasting Demand: The first step is to forecast the future demand for
products or services. This involves analysing historical data, market trends, and
customer orders to estimate future requirements.
b. Capacity Analysis: Next, assess the existing capacity of the production facility.
This includes evaluating factors such as machinery, labor, technology, and
space.
c. Identifying Gaps: Compare the forecasted demand with the existing capacity.
Identify any gaps between what is needed and what is available.
d. Capacity Expansion or Reduction: Based on the gap analysis, organizations
can make decisions to expand or reduce capacity. This might involve investing in
new equipment, hiring additional staff, or optimizing existing processes.
e. Implementation: Finally, put the capacity plan into action and continually
monitor and adjust it as necessary to meet changing demand and operational
conditions.

Aggregate Planning
Aggregate planning is an intermediate-range capacity planning strategy that
focuses on balancing production and workforce capacity with anticipated
demand over a time horizon typically ranging from a few months to a year. The
primary goal of aggregate planning is to achieve a match between supply and
demand while minimizing costs and optimizing resources.
It involves the following key elements:
a. Demand Forecasting: Like capacity planning, aggregate planning begins with
forecasting future demand for products or services.
b. Production and Labor Planning: Once demand is known, organizations
determine the production levels required to meet that demand. This includes
decisions about the number of workers needed, work shifts, and overtime
policies.
c. Inventory Management: Aggregate planning considers inventory levels and
strategies for maintaining them. This can help buffer fluctuations in demand and
supply.
d. Hiring and Layoff Policies: Decisions related to hiring, training, and layoffs are
integral to aggregate planning. Organizations need to ensure they have the right
workforce in place to meet production goals.
e. Subcontracting and Outsourcing: In some cases, organizations may consider
subcontracting or outsourcing as a strategy to meet demand fluctuations more
cost-effectively.

Master Production Scheduling (MPS)

Master Production Scheduling focuses on the detailed planning and scheduling
of specific products or services. It is a short-term planning process that typically
covers a few weeks or months and helps in fine-tuning production plans.
The key components of MPS include:
a. Demand Management: MPS starts with an understanding of actual customer
orders and forecasts to determine what needs to be produced.
b. Material Requirements Planning (MRP): MRP is used to ensure that the
necessary materials and components are available to support the production
schedule. It involves tracking inventory levels and generating purchase orders or
production orders to meet the requirements.
c. Production Scheduling: MPS creates a detailed schedule specifying when and
how each product or service will be produced. This includes assigning resources,
defining work orders, and setting timelines.
d. Capacity Planning: MPS considers the production facility's capacity
constraints and the availability of skilled labor to ensure that the production
schedule can be met.
e. Feedback and Adjustment: As MPS is executed, feedback is continually
received from the shop floor and used to make adjustments to the schedule as
needed. This may involve rescheduling, expediting orders, or reassigning
resources.

Master Production Scheduling helps ensure that production operations run

smoothly and efficiently on a day-to-day basis, aligning with the longer-term
goals and constraints set during capacity planning and aggregate planning.
Differences:

1. Time Horizon:
• Capacity Planning: It is a long-term process, often covering periods
of several years, and focuses on strategic decisions regarding an
organization's overall production capacity.
• Aggregate Planning: Aggregate planning operates within a medium-
term timeframe, typically spanning a few months to a year, aiming to
balance production capacity with anticipated demand.
• Master Planning Scheduling: This is a short-term process, typically
spanning weeks or months, that focuses on detailed scheduling of
production activities to meet immediate customer orders and
specific operational constraints.
2. Scope:
• Capacity Planning: It deals with determining the overall capacity of
an organization, including factors like machinery, labor, technology,
and space.
• Aggregate Planning: It focuses on matching the overall production
and workforce capacity with expected demand, considering
elements like production rates, workforce levels, and inventory
strategies.
• Master Planning Scheduling: It involves detailed production
scheduling and sequencing, specifying the timing and sequence of
tasks for individual products or orders.
3. Objective:
• Capacity Planning: The primary objective is to ensure that the
organization can produce the right quantity of goods or services at
the right time, maintaining efficiency and controlling costs.
• Aggregate Planning: It aims to balance supply and demand, optimize
resources, minimize costs, and achieve production goals while
considering medium-term planning factors.
• Master Planning Scheduling: The main goal is to create a detailed
schedule that accounts for available resources, capacity constraints,
and order-specific requirements to meet short-term production
needs.
Capacity planning sets the foundation for meeting future demand, aggregate
planning bridges the gap between strategic and detailed planning, and master
production scheduling fine-tunes operations on a short-term basis to ensure
goals are met.
Systems
In production and operations management, various inventory and production
systems are used to control the flow of materials, goods, and information within
the supply chain. Three fundamental concepts in this regard are the push
system, pull system, and Just-in-Time (JIT) system.

1. Push System: In a push system, production is initiated based on forecasts,

schedules, or predetermined production plans. Products are manufactured
or ordered in advance of customer demand.
Key Points:
• Production decisions are made independently of current
customer demand, which means that products are often
produced in large batch quantities.
• This system is typically used in settings where demand is
relatively stable, and there is a focus on economies of scale and
efficiency in production.
• Excess inventory may result from overproduction, which can
lead to carrying costs, storage issues, and the risk of
obsolescence.

2. Pull System: A pull system is demand-driven, meaning that production or

replenishment of inventory is triggered by actual customer orders or
consumption of existing stock.
Key Points:
• This system relies on real-time information about customer
demand and adjusts production or restocking based on that
demand.
• Inventory levels are monitored, and replenishment is initiated
only when stock reaches a predefined minimum level.
• Pull systems are often associated with lean manufacturing
principles, as they help reduce excess inventory, minimize
waste, and improve responsiveness to customer demand.

3. Just-in-Time (JIT) System: JIT is a specific type of pull system that aims to
produce or deliver goods and services at the precise time they are needed,
and in the exact quantity required, eliminating waste and reducing costs.
Key Points:
 • JIT emphasizes producing only what is needed, when it is
needed, and in the right quantity. This minimizes inventory
carrying costs and eliminates the need for excessive storage.
• JIT relies on close coordination with suppliers, with a focus on
small, frequent deliveries and high-quality components.

Comparison:
• Push vs. Pull: The key distinction between push and pull systems is the
initiation of production. Push systems are driven by forecasts and
schedules, while pull systems are driven by actual demand. JIT is a subset
of the pull system that emphasizes producing just what is needed when it
is needed.
• Inventory Levels: Push systems tend to maintain higher inventory levels to
meet forecasted demand, while pull and JIT systems aim to minimize
inventory to reduce carrying costs and waste.
• Customer Responsiveness: Pull and JIT systems are highly responsive to
changes in customer demand, as they adapt production and inventory
levels in real-time. Push systems are less adaptable to such changes and
are suitable for stable demand.

Single Processor Job Shop Scheduling

It is a critical aspect of production and operations management, where you aim
to efficiently schedule a series of jobs through a single processing unit or
machine. Two common scheduling methods are the Due Date Method and the
Shortest Processing Time Method.

Due Date Method: In this method, jobs are scheduled based on their due dates.
The objective is to minimize the total tardiness, which is the sum of the lateness
of each job. Lateness is the difference between the job's completion time and
its due date.

Criteria:
1. Mean Flow Time: Mean Flow Time is the average time it takes for a job to
flow through the system, from entering the system to completion. It is an
essential criterion for evaluating the efficiency of the scheduling process.
2. Mean Tardiness: Mean Tardiness is the average lateness of all jobs in the
schedule. It measures how late, on average, jobs are in comparison to
their due dates.
 3. Number of Tardy Jobs: This criterion counts the number of jobs that are
completed after their due dates. Reducing the number of tardy jobs is
often a key objective in job shop scheduling.

Numerical:
You have five jobs with their processing times and due dates as follows:
Job Processing Time Due Date
A 3 12
B 4 15
C 2 10
D 5 18
E 4 12
Step 1: Calculate the completion times for each job:
Job Processing Time Due Date Completion Time
A 3 12 3
B 4 15 7
C 2 10 9
D 5 18 14
E 4 12 18
Step 2: Calculate the tardiness of each job:
Job Processing Time Due Date Completion Time Tardiness
A 3 12 3 -9
B 4 15 7 -8
C 2 10 9 -1
D 5 18 14 -4
E 4 12 18 6
Step 3: Calculate the Mean Flow Time, Mean Tardiness, and Number of Tardy
Jobs:
• Mean Flow Time = (3 + 7 + 9 + 14 + 18) / 5 = 51 / 5 = 10.2
• Mean Tardiness = (-9 - 8 - 1 - 4 + 6) / 5 = -16 / 5 = -3.2 (indicating that, on
average, jobs are completed 3.2 time units early)
• Number of Tardy Jobs = 1 (Job E is tardy)
Using the Due Date Method, the Mean Flow Time is 10.2, the Mean Tardiness is
-3.2 (on average, jobs are completed 3.2 time units early), and there is 1 tardy
job.
The Shortest Processing Time (SPT)
In the SPT method, jobs are scheduled in ascending order of their processing
times. This means that the job with the shortest processing time is scheduled
first, followed by the next shortest, and so on.

Numerical Example:
Let's consider a simple example with five jobs and their processing times:
Job Processing Time
1 4
2 3
3 2
4 5
5 4
Step 1: Sort the jobs in ascending order of processing times:
Job Processing Time
3 2
2 3
1 4
5 4
4 5
Step 2: Schedule the jobs in SPT order:
1. Job 3 (Processing Time: 2)
2. Job 2 (Processing Time: 3)
3. Job 1 (Processing Time: 4)
4. Job 5 (Processing Time: 4)
5. Job 4 (Processing Time: 5)
Step 3: Calculate the completion times for each job:
Job Processing Time Completion Time
3 2 2
2 3 5
1 4 9
5 4 13
4 5 18
Step 4: Calculate the lateness of each job:
Job Processing Time Completion Time Lateness
3 2 2 0
2 3 5 2
1 4 9 5
5 4 13 9
4 5 18 13
Step 5: Calculate the Mean Flow Time, Mean Tardiness, and Number of Tardy
Jobs:
• Mean Flow Time = (2 + 5 + 9 + 13 + 18) / 5 = 47 / 5 = 9.4
• Mean Tardiness = (0+2+5+9+13) / 5 = 29 / 5 = 5.8 (indicating that, on
average, jobs are completed 5.8 time units late)
• Number of Tardy Jobs = 4 (Job 2,1,5,4)
Using the SPT method, the Mean Flow Time is 9.4, the Mean Tardiness is -3
(indicating that, on average, jobs are completed early), and there are 4 tardy
jobs in this schedule.

Johnson's Rule
It is a heuristic approach used for scheduling jobs on two machines. It is
particularly helpful when you need to determine the optimal sequence for
processing jobs on two machines to minimize the makespan, which is the total
time it takes to complete all the jobs. The rule is most commonly used in
settings like manufacturing and job shops.
Johnson's Rule:
1. List the jobs to be scheduled and record their processing times on both
machines.
2. Identify the minimum processing time across all jobs and both machines.
3. Determine whether the minimum processing time belongs to the first or
second machine:
• If it belongs to the first machine, schedule the job next on the first
machine and remove it from the list.
• If it belongs to the second machine, schedule the job last on the
second machine and remove it from the list.
4. Repeat steps 2 and 3 until all jobs have been scheduled.
Objective: The objective of Johnson's Rule is to find the sequence that
minimizes the makespan, which is the total time required to complete all jobs
on both machines.
Numerical Example:
Let's illustrate Johnson's Rule with a numerical example. Consider the following
five jobs with their processing times on two machines (M1 and M2):
Job Processing Time (M1) Processing Time (M2)
A 2 6
B 3 5
C 4 7
D 6 3
E 2 4
Step 1: List the jobs and their processing times on both machines.
Step 2: Find the minimum processing time in the list. In this case, it is 2, which
belongs to job A.
Step 3: Since the minimum processing time belongs to machine M1, schedule
job A next on M1 and remove it from the list.
Schedule: A (M1)
Updated list:
Job Processing Time (M1) Processing Time (M2)
B 3 5
C 4 7
D 6 3
E 2 4
Step 2: Find the new minimum processing time in the updated list, which is 2,
belonging to job E.
Step 3: Since the minimum processing time belongs to machine M1, schedule
job E next on M1 and remove it from the list.
Schedule: A (M1) - E (M1)
Updated list:
Job Processing Time (M1) Processing Time (M2)
B 3 5
C 4 7
D 6 3
Step 2: Find the new minimum processing time in the updated list, which is 3,
belonging to job B.
Step 3: Since the minimum processing time belongs to machine M1, schedule
job B next on M1 and remove it from the list.
Schedule: A (M1) - E (M1) - B (M1)
Updated list:
Job Processing Time (M1) Processing Time (M2)
C 4 7
D 6 3
Step 2: Find the new minimum processing time in the updated list, which is 3,
belonging to job D.
Step 3: Since the minimum processing time belongs to machine M2, schedule
job D last on M2 and remove it from the list.
Schedule: A (M1) - E (M1) - B (M1) - D (M2)
Updated list:
Job Processing Time (M1) Processing Time (M2)
C 4 7
Step 2: Find the new minimum processing time in the updated list, which is 4,
belonging to job C.
Step 3: Since the minimum processing time belongs to machine M1, schedule
job C next on M1 and remove it from the list.
Schedule: A (M1) - E (M1) - B (M1) - D (M2) - C (M1)
Step 4: All jobs have been scheduled.
Now, let's calculate the makespan, which is the time required to complete all
the jobs on both machines:
Makespan = max{A(M1) + E(M1) + B(M1), D(M2) + C(M1)} = max{2 + 2 + 3, 3 + 4}
= max{7, 7} = 7
So, the optimal schedule determined by Johnson's Rule is:
A (M1) - E (M1) - B (M1) - D (M2) - C (M1)
The makespan is 7 time units. This schedule minimizes the makespan for the
given set of jobs and processing times.