PRD Shounak

Module # 5
Scheduling
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Course: Production Management Shounak Basak
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Programme: HRM 23-25 Room no. 6, Library Building,
XLRI – Xavier School of Management,
Term II, 2023 Jamshedpur – 831001
Jamshed1
Phone: 0657 – 665 – 3424
Email: shounak@xlri.ac.in
Shounak Basak
PODS Area, XLRI – Xavier School of Management
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Scheduling
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scheduling
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Infinite loading: Work is assigned to the work center without considering the capacity of the
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work center
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Finite loading: Work is assigned to the work center based on the capacity of the work center
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Forward scheduling: Schedules from now to future to tell the earliest a work can be
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completed
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Backward scheduling: Schedules from due date in reverse to tell the latest a work can be
scheduled
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Scheduling
Problem # 3.1
Schedule the jobs A,B,C,D,E on machine 1
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Job sequence Processing Time Due Date
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A 3 5
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B 4 6
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D 6 9
E 1 2
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Sequencing
Sequencing: Determining the order of processing of jobs at a work center
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Priority rules: heuristics to set the job order
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Job flow time: the total time from when a job arrives until it gets finished
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Tardiness: Difference between actual completion time and due date
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Makespan: Total time needed to finish a group of job from first job to last job
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𝑡𝑜𝑡𝑎𝑙 𝑓𝑙𝑜𝑤 𝑡𝑖𝑚𝑒
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑗𝑜𝑏𝑠 𝑖𝑛 𝑠ℎ𝑜𝑝 𝑊𝑜𝑟𝑘 − 𝑖𝑛 − 𝑝𝑟𝑜𝑔𝑟𝑒𝑠𝑠 =
𝑚𝑎𝑘𝑒𝑠𝑝𝑎𝑛
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Sequencing
𝑡𝑖𝑚𝑒 𝑟𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔 𝑡𝑖𝑙𝑙 𝑑𝑢𝑒 𝑑𝑎𝑡𝑒

Critical ratio heuristic:
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𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑡𝑖𝑚𝑒
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Scheduling
Problem # 3.1
Sequence the jobs A,B,C,D,E on machine 1
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A 3 5
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B 4 6
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D 6 9
E 1 2
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Scheduling - FCFS
Job sequence Processing Time Due Date Start Date Finish Date Flow time Tardiness
A 3 5 0 3 3 0
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B 4 6 3 7 7 1
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C 2 7 7 9 9 2
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D 6 9 9 15 15 6
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E 1 2 15 16 16 14
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Total Flow time 50 Total Tardiness 23
Average Flow time 10 Average Tardiness 4.6

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Scheduling - SPT
E 1 2 0 1 1 0
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C 2 7 1 3 3 0
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A 3 5 3 6 6 1
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B 4 6 6 10 10 4
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D 6 9 10 16 16 7
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Average Flow time 7.2 Average Tardiness 2.4

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Scheduling - EDD
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E 1 2 0 1 1 0
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A 3 5 1 4 4 0
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B 4 6 4 8 8 2
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C 2 7 8 10 10 3
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D 6 9 10 16 16 7
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Total Flow time 39Total Tardiness 12
Average Flow time 7.8Average Tardiness 2.4

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Scheduling – critical ratio
A 3 5
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B 4 6
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C 2 7
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D 6 9
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Total Flow time Total Tardiness
Average Flow time Average Tardiness

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Scheduling – Critical Ratio
Job sequence Processing Time Due Date Start date CR
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A 3 5 0 1.6666667
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B 4 6 0 1.5
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C 2 7 0 3.5
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D 6 9 0 1.5
E 1 2 0 2
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B 4 6 0 4 4 0
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A 3 5 4 0.3333333
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B 4 6 4 0.5
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C 2 7 4 1.5
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D 6 9 4 0.8333333
E 1 2 4 -2
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B 4 6 0 4 4 0
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E 1 2 4 5 5 3
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A 3 5 5 0
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B 4 6 5 0.25
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C 2 7 5 1
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D 6 9 5 0.6666667
E 1 2 5 -3
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B 4 6 0 4 4 0
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E 1 2 4 5 5 3
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A 3 5 5 8 8 3
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A 3 5 8 -1
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B 4 6 8 -0.5
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C 2 7 8 -0.5
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D 6 9 8 0.1666667
E 1 2 8 -6
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B 4 6 0 4 4 0
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E 1 2 4 5 5 3
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A 3 5 5 8 8 3
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C 2 7 8 10 10 3
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A 3 5 10 -1.666667
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B 4 6 10 -1
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C 2 7 10 -1.5
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D 6 9 10 -0.166667
E 1 2 10 -8
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B 4 6 0 4 4 0
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A 3 5 5 8 8 3
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C 2 7 8 10 10 3
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Average Flow time 8.6 Average Tardiness 3.2

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Scheduling
Problem # 3.2
Sequence the jobs A,B,C,D,E on machine 1
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A 7 7
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D 1 17
E 9 12
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Sequencing - Multi Work Centre
Indexing Method
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Scheduling – Multi Work Centre
Problem # 3.1
Sequence the jobs A,B,C,D,E on Work centre 1, 2, 3, 4
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Job Work Centre
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1 2 3 4
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A 10 9 8 12
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B 3 4 5 2
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D 7 9 10 9
E 18 14 16 25
Days available 20 20 20 20
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Job Work Centre
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1 2 3 4
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A 10 1.25 9 1.13 8 1.00 12 1.50
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B 3 1.50 4 2.00 5 2.50 2 1.00
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C 25 1.79 20 1.43 14 1.00 16 1.14
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D 7 1.00 9 1.29 10 1.43 9 1.29
E 18 1.29 14 1.00 16 1.14 25 1.79
Days
available 20 20 Shounak Basak
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Job Work Centre
1 2 3 4
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A 10 1.25 9 1.13 8 1.00 12 1.50
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B 3 1.50 4 2.00 5 2.50 2 1.00
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C 25 1.79 20 1.43 14 1.00 16 1.14
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D 7 1.00
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Pa 9 1.29 10 1.43 9 1.29
E 18 1.29 14 1.00 16 1.14 25 1.79
Days
available 20 20 20 20
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Job Work Centre
1 2 3 4
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A 10 1.25 9 1.13 8 1.00 12 1.50
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B 3 1.50 4 2.00 5 2.50 2 1.00
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C 25 1.79 20 1.43 14 1.00 16 1.14
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D 7 1.00
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Pa 9 1.29 10 1.43 9 1.29
E 18 1.29 14 1.00 16 1.14 25 1.79
Days
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Job Work Centre
1 2 3 4
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A 10 1.25 9 1.13 8 1.00 12 1.50
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B 3 1.50 4 2.00 5 2.50 2 1.00
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C 25 1.79 20 1.43 14 1.00 16 1.14
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D 7 1.00
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Pa 9 1.29 10 1.43 9 1.29
E 18 1.29 14 1.00 16 1.14 25 1.79
Days
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References
Material for the Lecture has been sourced from: Selected References:
Russell, R. S., & Taylor-Iii, B. W. (2008). Operations management along the supply https://www.cellphones.ca/cell-phones/p/what-is-sim-card-10066/
chain. John Wiley & Sons. https://www.indiatvnews.com/news/india-indian-navy-aims-to-induct-first-indigenous-aircraft-
Stevenson, W. (2014). Operations management. McGraw-Hill Higher Education. carrier-by-2018-348222
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Chase, R. B., Jacobs, F. R., & Shankar, R. (2010). Operations and supply chain https://www.indiatvnews.com/science/news-isro-makes-history-as-its-mars-orbiter-mission-
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management. Mcgraw Hill completes-four-years-465256
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Mahadevan, B. (2015). Operations management: Theory and practice. Pearson https://www.financialexpress.com/infrastructure/railways/bogibeel-bridge-longest-rail-road-indian-
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Education India railways-opening-date-facts-features/1162677/
Krajewski, L. J., Ritzman, L. P., & Malhotra, M. K. (2010). Operations management: https://www.financialexpress.com/infrastructure/railways/indian-railways-creates-history-converts-
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processes and supply chains. Upper Saddle River, New Jersey: Pearson diesel-loco-to-make-in-india-10000-hp-electric-locomotive/1086123/
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Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E., & Shankar, R. (2008). Designing and
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managing the supply chain: concepts, strategies and case studies. Tata McGraw-Hill
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Education
Chopra, S., & Meindl, P. (2007). Supply chain management. Strategy, planning &
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operation. In Das summa summarum des management (pp. 265-275). Gabler
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Shah, J. (2009). Supply chain management: text and cases. Pearson Education India
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module # 6
Inventory control
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Jamshed1
Phone: 0657 – 665 – 3424
Shounak Basak
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Inventory control
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Inventory control
Traditional
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stores
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Online
stores
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Inventory control
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Carvana, a used car sales firm is an online platform that sells used cars.
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Carvana buys used cars from sellers, remodels them, and then, sells these cars to
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prospective buyers of used cars. Carvana buys the cars and remodels them while
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keeping the cars in its inventory. Therefore, keeping the cars in inventory is good
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when the demand is certain and pulls out the inventory. Otherwise, inventory
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maintenance will bleed the cash flow and there could be propositions for clearing the
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inventory at lesser than profit levels. Due to increased paperwork costs and other
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remodeling costs, it was required for Carvana to increase its prices to sustain profit
levels. However, that meant keeping an inventory, and that increased other costs
which brought down the profit levels.
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Inventory control
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Nike, a sports shoe and athletic sportswear brand, is an American company, formerly
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known as Blue Ribbon Sports.
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Nike was reported to have an excess inventory problem, wherein the inventory was
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supposed to be bloated in the year 2022. However, Nike was confident of consumer
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demand and expected the wholesalers to absorb the inventory. Strong demand by
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wholesalers meant the inventory was absorbed at the determined prices. On the
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contrary, a slump in wholesale demand would have led to heavy discounting on the
part of Nike to get rid of its inventory.
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Inventory control
Purpose:
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• Independence of operations
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• Variation in product demand
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• Flexibility in production scheduling
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• Delivery time variation
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• Economic order sizes
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Inventory control
EOQ model:
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• Deterministic setting – amount of order and demand known
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• Order quantity is fulfilled instantaneously
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• Rate of usage is also constant
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Inventory control
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Order
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Quantity
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Inventory Level
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Time
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EOQ formulation
EOQ model:
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𝑌𝑒𝑎𝑟𝑙𝑦 𝑑𝑒𝑚𝑎𝑛𝑑 = 𝐷
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𝑂𝑟𝑑𝑒𝑟 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = 𝑄
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𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑐𝑜𝑠𝑡 = 𝑐𝑐
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𝑂𝑟𝑑𝑒𝑟 𝑐𝑜𝑠𝑡 = 𝑐𝑜
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𝐷 𝑄
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑐𝑜 + 𝑐𝑐
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𝑄 2
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2𝑐𝑜 .𝐷
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𝑄𝑜𝑝𝑡𝑖𝑚𝑎𝑙 = Pa
𝑐𝑐
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EOQ problem
Problem # 11.1
New telecoms entered into a contract with Mango instruments for supply of telecom dish transistors for a period of 1
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year starting from June 2018 to May 2019. The number of transistors required is 11750 for the period of the whole year.
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The order amounts have not been fixed and therefore, Mango instruments are due to provide them whenever required.
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New telecom has to incur the inventory cost of Rs. 47 per unit per year. Every time New telecom orders for a stock, it
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has to incur the transportation cost and other costs amounting to Rs. 2000. What is the optimal batch size to order.
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How many times will the order be placed.
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If there is a lead time of order fulfillment, approx. 15 days, at what level of inventory should the order be placed.
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EPQ problem
Problem # 11.2
Mango Instruments manufactures telecom dish transistors for a period of 1 year starting from June 2018 to May 2019.
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Consider there are 300 working days in the year. Total demand for transistors is 12000 in the year. Total capacity of
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production is 18000 units in a year. The set up cost for each batch of production run is Rs. 7500. Mango Instruments has
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to incur an inventory cost of Rs 60 per transistor per year. What is the optimal batch size for transistor production?
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How many times will the order be placed.
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If there is a lead time of order fulfillment, approx. 15 days, at what level of inventory should the order be placed?
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Inventory control – Varying demand
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Order
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Quantity
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Inventory Level
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Safety stock
Time
Safety stock is based on the variance of the varying demand and lead time of supply
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Inventory control
BestBuy is a leading consumer electronic retailer in America.
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Back in 1997, when PCs were getting into homes, BestBuy as an electronics store was involved in
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selling PCs. BestBuy sold consumer electronics by keeping a large inventory that turned over 4 – 5
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times in a year. It backfired on BestBuy when they used the same strategy on PCs. It was quoted as
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“PCs are perishables” due to faster obsolescence from the market. Nevertheless, PCs were relatively
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expensive and outdated PCs forced BestBuy to write off $15 Million worth of obsolete inventory in
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1996. Taking lessons, BestBuy instituted tighter inventory controls, and the inventory was turned over
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11 times a year to ward off obsolescence. BestBuy eschewed a longer list of SKUs, focusing on SKUs
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which returned higher unit profitability.
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Overstocking problem and its solution
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Inventory control
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Driscoll is the world’s largest berry company.
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Back in 2020, Driscoll’s American division fearing the effect of the pandemic advised its farmers to
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plant fewer strawberries as the demand for berries was dwindling at the grocery stores. Nevertheless,
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Americans stuck at home started binging on berries while the availability of berries decreased. Driscoll,
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despite surged demand was unable to fulfill the requirements due to a decreased harvest of berries.
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However, other crops like spinach have a much shorter harvesting cycle of 30 days and thus provide
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higher flexibility in adapting to demand or supply variations.
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Understocking problem and its solution
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Single period uncertainty
• Newsvendor model
A typical model of a newsvendor who is faced with the tough question of how
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many newspapers to procure at the beginning of the day as there is no clue of
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demand for the day
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A newsvendor model solution considers an uncertain demand in the following
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manner
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Demand (units) Probability of occurrence
10 0.11
20 0.22
30 0.33
40 0.22
50 0.11
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Optimal order quantity can be roughly taken as the demand corresponding to
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the cumulative probability which is just more than the value calculated as:
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𝐶𝑢
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𝑃𝑟 ≥
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𝐶𝑢 + 𝐶𝑜
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Where,
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𝐶𝑢 : 𝑈𝑛𝑑𝑒𝑟𝑠𝑡𝑜𝑐𝑘𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 − 𝑝𝑟𝑜𝑐𝑢𝑟𝑒𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡 𝑜𝑟 𝑜𝑝𝑝𝑜𝑟𝑡𝑢𝑛𝑖𝑡𝑦 𝑐𝑜𝑠𝑡
𝐶𝑜 : 𝑂𝑣𝑒𝑟𝑠𝑡𝑜𝑐𝑘𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 (𝑃𝑟𝑜𝑐𝑢𝑟𝑒𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡 − 𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑣𝑎𝑙𝑢𝑒)
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• Refer to the excel file on newsvendor model sheet_1
• Uncertain demand is shown in columns E,G and H

• Each order quantity is considered corresponding to all the demands and compared with all the demand scenarios
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• The corresponding profit is computed for each order quantity and demand scenario in columns W,X,Y,Z and AA
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The expected profit is calculated by multiplying the probability of occurrence of each profit with that profit and
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summing it up
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-2 rs
That is
23 ou
𝑥1 , 𝑥2 , 𝑥3 , 𝑥4 , 𝑎𝑛𝑑 𝑥5 𝑎𝑟𝑒 𝑡ℎ𝑒 𝑝𝑟𝑜𝑓𝑖𝑡𝑠 𝑖𝑛 𝑓𝑖𝑣𝑒 𝑠𝑖𝑡𝑢𝑎𝑡𝑖𝑜𝑛𝑠 𝑎𝑛𝑑 𝑜𝑐𝑐𝑢𝑟 𝑤𝑖𝑡ℎ 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑝1 , 𝑝2 , 𝑝3 , 𝑝4 , 𝑎𝑛𝑑 𝑝5
M C
𝑡ℎ𝑒 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑝𝑟𝑜𝑓𝑖𝑡 𝑥𝑚 = 𝑥1 ∙ 𝑝1 + 𝑥2 ∙ 𝑝2 + 𝑥3 ∙ 𝑝3 + 𝑥4 ∙ 𝑝4 + 𝑥5 ∙ 𝑝5
R RI
Condition is 𝑝1 + 𝑝2 + 𝑝3 + 𝑝4 + 𝑝5 = 1
,H L
D of X
• The order quantity that maximizes expected profit is the one that we should chose
PR rt
• We find the maximum expected profit from column AB
Pa
• We also find that if we follow the procedure mentioned in the previous slide, we find the same order quantity
• Illustrated: As indicated in the original excel file, price is 110, procurement cost is 40 and salvage value is 10
• 𝐶𝑢 = 70 𝑎𝑛𝑑 𝐶𝑜 = 30
• 𝐹 𝑄 = 0.7
• Cumulative probability of 0.67 is less than 0.7 and 0.83 is just greater than 0.7, so the optimal order quantity
is corresponding demand of cumulative probability 0.83
Shounak Basak
12/18/2023
17
• Change the price, cost and salvage values in the excel file and you can study the changes
• Check the sheet 2 for another example.
• Make your own sheet and see the change if we get more information on demand probabilities
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R RI
,H L
D of X
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Pa
• This is just an illustration

• The newsvendor problem is an exact mathematical solution and can be discussed in detail with interested students
Shounak Basak
12/18/2023
18
newsvendor problem
Problem # 11.5
Happy Valley Skiing company procures skiing jackets to be bought by tourists in the winter season. These jackets are
made from polyester and are designed to be resistant to cold and wet weather. Happy valley skiing company must place
l
ia
an advanced order with a Ludhiana based company to procure all the jackets before the beginning of the season. Happy
er
valley has entered into a contract with the Ludhiana based company to procure the jackets at a cost of Rs. 8000. The
at
M
company plans to sell the jackets to tourists at Rs. 11000. After the season is over, these jackets deteriorate over time
5 e
and cannot be used again in the next season and therefore, are sold at throwaway prices to the locals. Happy Valley
-2 rs
23 ou
estimates the throwaway prices to be an average of Rs. 1000. If Happy Valley has estimated the demand to be around
M C
100 units with standard deviation of 10. What is the optimum number of jackets that the company should procure?
R RI
,H L
D of X
PR rt
Pa
Shounak Basak
12/18/2023
19
Inventory control
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Inventory Balance:
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Inventory investment leads to more inventory
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availability at the store. Ideally, inventory balance
23 ou
M C
shall operate on the curve that is the efficient
R RI
frontier. Therefore, inventory balance shall move
,H L
D of X
from point ‘A’ to point ‘B’. In reality, inventory
PR rt
balance shall be inside the curve as in point ‘C’.
Pa
Shounak Basak
12/18/2023
20
Inventory control
Inventory fill rate: Amount of inventory that can fulfill the demand at a certain point in time
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Inventory utilization rate: Percentage of total inventory that can fulfill the demand at a certain
er
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point in time
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D of X
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12/18/2023
21
Inventory control
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Inventory Balance:
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Inventory fill rate and inventory utilization rate
-2 rs
23 ou
should be high enough to be characterized as a
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R RI
balanced inventory control. All the 3 unbalanced
,H L
D of X
scenarios represent a lack of synchronization
between the SKUs in inventory.
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Shounak Basak
12/18/2023
22
Inventory control
SKU-10 92.36% 100.00%
SKU-9 100.00% 94.67%
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SKU-8 87.80% 100.00%
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SKU-7 73.50% 100.00%
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SKU-6 100.00% 81.62%
23 ou
M C
SKU-5 85.79% 100.00%
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SKU-4
,H L
87.07% 100.00%
D of X
SKU-3 100.00% 86.14%
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SKU-2 100.00% 86.88%
SKU-1 92.16% 100.00%
Fill Rate Utilization Rate
Refer: inventory_imbalance.xlsx
Shounak Basak
12/18/2023
23
ABC/XYZ/VED classification
ABC Classification:
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The classification of inventory items in decreasing order of annual dollar value (price
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multiplied by volume)
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XYZ Classification:
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The classification of inventory items in increasing order of variability usage (measured by
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variance or standard deviation)
,H L
D of X
VED Classification:
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The classification of inventory items in decreasing order of importance (vital, essential and
Pa
desirable)
• Refer to ABC excel file for illustration of ABC and XYZ classification
Shounak Basak
12/18/2023
24
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ABC-XYZ Grid
M C
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Low Variability Medium Variability High Variability
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D of X
High Dollar Value AX AY AZ
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Medium Dollar Value BX Pa BY BZ
Low Dollar Value CX CY CZ
Shounak Basak
12/18/2023
25
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23 ou
ABC-VED Grid
M C
R RI
Vital Essential Desirable
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D of X
High Dollar Value AV AE AD
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Medium Dollar Value BV Pa BE BD
Low Dollar Value CV CE CD
Shounak Basak
12/18/2023
26
Quantity discount
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Procter and Gamble is a globally leading consumer products company based in Cincinnati.
M
P&G had offered an array of combinations of discounts for different quantities. Back in 1993, P&G cut
5 e
-2 rs
its distribution costs by offering to let retailers buy in large quantities only. Smaller retailers were
23 ou
effectively forced to buy from the wholesalers at a premium. This was mulled because of higher
M C
distribution costs incurred due to the wide range of discounts.
R RI
,H L
D of X
PR rt
Pa
Shounak Basak
12/18/2023
27
Quantity discount
Buyer Cost
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Seller Cost
5 e
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23 ou
M C
R RI
,H L
D of X
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Shounak Basak
12/18/2023
28
Quantity discount
EOQ with quantity discount model:
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• Order quantity is fulfilled instantaneously
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23 ou
M C
R RI
• Cost of item is dependent on amount of order quantity
,H L
D of X
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Shounak Basak
12/18/2023
29
Quantity discount model
EOQ model:
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𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑐𝑜𝑠𝑡 = 𝑐𝑐 = 𝑓 × 𝑠𝑖
5 e
-2 rs
23 ou
𝑙𝑒𝑠𝑠 𝑡ℎ𝑎𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑏, 𝑝𝑟𝑖𝑐𝑒 𝑖𝑠 𝑠1
M C
𝑔𝑟𝑒𝑎𝑡𝑒𝑟 𝑡ℎ𝑎𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑏, 𝑝𝑟𝑖𝑐𝑒 𝑖𝑠 𝑠2
R RI
,H L
D of X
𝐷 𝑄
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑐𝑜 + 𝑠𝑖 𝑓 + 𝐷𝑠𝑖
𝑄 2
PR rt
Pa
2𝑐𝑜 .𝐷
𝑄𝑜𝑝𝑡𝑖𝑚𝑎𝑙 =
𝑠𝑖 𝑓
Shounak Basak
12/18/2023
30
Quantity discount problem
Problem # 11.3
Mango instruments offers quantity discounts on its supplies. For order quantities less than 90, it offers its transistors at
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Rs. 10. For quantities more than 90, it offers at a price of Rs. (10/36). Annual demand is 80 units and ordering cost is
at
Rs. 40. Inventory cost is 40% of cost of the product. What is the optimum order quantity?
M
What is the order quantity if cost of product is Re. 1 and discounted cost is Rs. (10/36)?
5 e
-2 rs
What is the order quantity if cost of product is Rs. 10 and discounted cost is Rs. 2.5?
23 ou
M C
R RI
,H L
D of X
PR rt
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Shounak Basak
12/18/2023
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Quantity discount model
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EOQ model:
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23 ou
If EOQ for higher quantity (lower price) is feasible, then select it as the order quantity
M C
R RI
Else, compare the EOQ of the lower quantity (higher price) (if feasible) with the order
,H L
D of X
quantity equal to the quantity break point and calculate the total cost.
Select the order quantity with least cost.
PR rt
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Shounak Basak
12/18/2023
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Supplementary material
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(not covered in class)
23 ou
M C
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(not for exam)
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D of X
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12/18/2023
33
Inventory review system
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Continuous review system:
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The inventory levels are continuously monitored and when it falls below, reorder point, order
M
is placed
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23 ou
Order quantity is fixed, ordering time differs
M C
R RI
,H L
Periodic review system:
D of X
The inventory levels are periodically monitored and based on the level of the inventory, order
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is placed Pa
Order quantity differs but ordering time is fixed
Shounak Basak
12/18/2023
34
Inventory control
EPQ model:
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• Order quantity is not fulfilled instantaneously
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23 ou
M C
• There is a rate of production or rate of order fulfillment
R RI
,H L
D of X
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Shounak Basak
12/18/2023
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Inventory control
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Order
at
Quantity
M
Inventory Level
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23 ou
M C
R RI
,H L
D of X
PR rt
Pa
Time
Shounak Basak
12/18/2023
36
EPQ formulation
EPQ model:
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𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑐𝑜𝑠𝑡 = 𝑐𝑐
M
5 e
-2 rs
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑓𝑢𝑙𝑓𝑖𝑙𝑙𝑚𝑒𝑛𝑡 𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 = 𝑝
23 ou
M C
𝑅𝑎𝑡𝑒 𝑜𝑓𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑢𝑠𝑎𝑔𝑒 = 𝑟
R RI
,H L
D of X
𝐷 1 𝑄
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑐𝑜 + 𝑐𝑐 . [ . (𝑝 − 𝑟)]
𝑄 2 𝑝
PR rt
Pa
2𝑐𝑜 .𝐷
𝑄𝑜𝑝𝑡𝑖𝑚𝑎𝑙 = 𝑝−𝑟
𝑐𝑐 × 𝑝
Shounak Basak
12/18/2023
37
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑜𝑣𝑒𝑟𝑠𝑡𝑜𝑐𝑘𝑖𝑛𝑔 + 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑢𝑛𝑑𝑒𝑟𝑠𝑡𝑜𝑐𝑘𝑖𝑛𝑔
l
𝑄
ia
𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑜𝑓 𝑙𝑒𝑓𝑡𝑜𝑣𝑒𝑟 = 𝑠 ‫׬‬0 (𝑄 − 𝑥)𝑓 𝑥 𝑑𝑥
er
at
𝑄 ∞
M
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑜𝑓 𝑑𝑒𝑚𝑎𝑛𝑑 = 𝑝[‫׬‬0 𝑥𝑓 𝑥 𝑑𝑥 + ‫]𝑥𝑑 𝑥 𝑓𝑄 𝑄׬‬
5 e
-2 rs
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑜𝑟𝑑𝑒𝑟 = 𝑐𝑄
23 ou
M C
R RI
𝑄 ∞ 𝑄
,H L
D of X
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑝 න 𝑥𝑓 𝑥 𝑑𝑥 + න 𝑄𝑓 𝑥 𝑑𝑥 − 𝑐𝑄 + 𝑠 න (𝑄 − 𝑥)𝑓 𝑥 𝑑𝑥
0 𝑄 0
PR rt
Pa
𝑐𝑢
𝐹 𝑄 =
𝑐𝑢 + 𝑐𝑜
Shounak Basak
12/18/2023
38
Q has to be selected such that

𝑐𝑢
l
it is equal to 𝐹 𝑄 =
ia
er
𝑐𝑢 +𝑐𝑜
at
M
5 e
-2 rs
Distribution is based on the
23 ou
M C
demand distribution
R RI
F(Q)
,H L
parameters
D of X
PR rt
Pa
Shounak Basak
12/18/2023
39
References
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Education
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Shounak Basak
18-12-2023
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Session # 8
Introduction to supply chain management
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Jamshed1
Phone: 0657 – 665 – 3424
Shounak Basak
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Supply chain management
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D of X
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Shounak Basak
12/18/2023
2
Supply chain
Supply chain encompasses all activities associated with the flow and
l
transformation of goods and services from the raw material stage to end-user
ia
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at
along with the information flows
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M C
R RI
,H L
D of X
Supply chain management can be defined as the management of flow of
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Pa
materials, information and funds across the entire supply chain from suppliers
to component producers to final assemblers to distribution and ultimately to
the consumer
Shounak Basak
12/18/2023
3
examples
• Amul is a supply chain
• Procurement of milk
• Processing of milk
• Distribution of milk
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• Levis jeans has a supply chain
M
• Cotton from US
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• Cotton is shipped to China to be made into Yarn
23 ou
• Yarn is made into denim cloth
M C
• Denim cloth is shipped to Bangladesh to be sewn into denim jeans
R RI
• The denim jeans are shipped back to US to be sold
,H L
D of X
• Even cereals, fruits and vegetables follow supply chain (Example of West Bengal)
PR rt
Pa
• Newer varieties of seeds are developed in Agricultural university near Kolkata
• Seeds are distributed by West Bengal state seed corporation limited
• Farmers plant the seeds and raise the crops
• Farmers harvest the output and sell them at village mandi
• Middlemen buy the output and bring to the output to city wholesale market
• Retailers buy the produce and sell them to consumers near Kolkata
Shounak Basak
12/18/2023
4
Supply chain members
Upstream supply chain members are those who provide raw materials to
processing point
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Downstream supply chain members are those who provide the processed
23 ou
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materials from the processing point to the consumers
R RI
,H L
D of X
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• What are the upstream and downstream supply chain members in a chain with not a specific processing point like the
denim jeans
• Concept of outsourcing the activities becomes interesting in this specific context
Shounak Basak
12/18/2023
5
Supply chain
INFORMATION FLOW
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CASH FLOW
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23 ou
M C
R RI
,H L
D of X
Procurement Production Distribution
PR rt
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PRODUCT FLOW
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12/18/2023
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Tier structure
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Supplier Supplier
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Retailer
er
Distribution
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Supplier
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Supplier Supplier
R RI
,H L
D of X
Retailer
Supplier Distribution
PR rt
Pa
Supplier
Consumer
Supplier
Supplier
Distribution
Supplier
Shounak Basak
12/18/2023
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Bullwhip effect
Bullwhip Effect
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Slight forecasting
M
error of consumer
5 e
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demand
23 ou
M C
R RI
Huge variation in
,H L
D of X
upstream
Refer production
bullwhip_effect.xlsx
PR rt
quantity Pa
• Accurate forecasting is vital for production
Shounak Basak
12/18/2023
8
Supply chain disruption
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Major automakers were affected by the 2011 Tohoku earthquake.
M
In March’2011, the great Tohoku earthquake and tsunami devastated the northeast
5 e
-2 rs
coast of Japan affecting the Japanese assembly plants. A typical motor vehicle has
23 ou
M C
15000 parts sourced from various suppliers and the lack of any one component can
R RI
,H L
halt the production. Electronic components were to be blamed most for disruption.
D of X
Typically, approximately less than 40% of vehicle cost is from electronic
PR rt
Pa
components. Technologies like electronic fuel injection systems, airbags, and anti-
locking brakes use semiconductors for their functioning.
Shounak Basak
12/18/2023
9
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Renesas Electronics is a major automotive chip manufacturer formed by the merger
5 e
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of Hitachi and Mitsubishi Technologies and later NEC Electronics. Renesas
23 ou
Electronics met 40% of the automotive chip demand. Automakers around the world
M C
R RI
including Toyota and General Motors had to suspend the production of around 17 out
,H L
D of X
of 20 models based on Japanese models due to lack of semiconductors. Production in
Toyota plants, that were far away from the earthquake zone was reduced by 78%
PR rt
Pa
(YoY April’ 2011) and took more than a year to return to normal.
Shounak Basak
12/18/2023
10
Supply chain resilience
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Toyota action in 2022 earthquake in Japan.
at
M
The design incorporating the chip is flexible in manufacturing, taking different sizes
5 e
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of chips thus, other components could be swapped without waiting for a specific type
23 ou
of chip.
M C
R RI
Toyota and Renesas have financial ties that make it even more important to keep the
,H L
D of X
supply chain intact. Toyota owns around 3% stake in Renesas and additional stake
through another supplier Denso.
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Toyota has divided its product category to carry more inventory for higher priority
components.
Shounak Basak
12/18/2023
11
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Wage protests in Bangladesh textile factories.
5 e
Bangladesh houses world’s second-largest garment manufacturing hub after China. In
-2 rs
23 ou
November’2023, protests emerged after demands by garment workers to raise the
M C
R RI
minimum wage rates from $95 per month to $ 205 per month were not accepted. This
,H L
D of X
resulted in violent protests that stalled production and hit the global demand of
renowned fashion brands including H&M, Zara, Levi Strauss & Co., Patagonia,
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Pa
Puma, Gap, Abercrombie, and Fitch.
Shounak Basak
12/18/2023
12
Strategic sourcing
Sourcing is the process suitable for procuring products that are strategically
l
important to the firm
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Strategic sourcing is the development and management of supplier
M C
relationships to acquire goods and services in a way that aids in achieving the
R RI
,H L
D of X
needs of the business
PR rt
Pa
Shounak Basak
12/18/2023
13
Strategic sourcing model
Process technology’s role in competitive advantage

• whether sourcing decisions would compromise with the competitive positioning of the firm
l
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Maturity of the process technologies under consideration
er
at
• If the process is in use in some other industry, there is little incentive to invest in R&D, but to source the product appropriately
M
5 e
Competitor’s process technology positions
-2 rs
23 ou
• Benchmarking against the competitor’s process technology is imperative which would entail appropriate sourcing decision for the
M C
process
R RI
,H L
Sourcing decisions involving proprietary technology
D of X
• Key processes run the risk of exposition by reverse engineering etc.
PR rt
Pa
The “cost of quality” in a sourcing decision
• Quality control can be better in manufactured product than sourced ones with the exception of cases where in the suppliers are adept
in the process control of the particular product
Sourcing decision frequency
• In a rapidly technological industry, reassessment of the sourcing decisions are imperative
Shounak Basak
12/18/2023
14
Supply chain uncertainty framework
Functional products Innovative products
Efficient supply chain Responsive supply chain

• Strategies that make them responsive
Stable supply
• Cost effective supply chains with least non-
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and flexible to demand and change
er
value added activities, utilize economies of
at
process
scale and high capacity utilization quickly as per customer taste
M
• Grocery, basic apparel • Fashion apparel, low-end computers
5 e
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23 ou
M C
R RI
,H L
D of X
Risk-hedging supply chain Agile supply chain
PR rt
Pa
evolving supply
• These supply chains strategize to • These supply chains are responsive

pool the supply resources to to customer demand and hedge
minimize the effect of supply supplier disruption by pooling
process
disruptions inventory
• Food processing industry • Cell phones, high-end computers
Shounak Basak
12/18/2023
15
Supply chain efficiency
l
ia
er
at
M
5 e
-2 rs
Garment manufacturers in Bangladesh.
23 ou
Big brands like H&M make their products in Bangladesh but do not own factories.
M C
R RI
The prices set by these brands are paid to the local factory owners who contract the
,H L
D of X
production of garments at costs that yield profits to these local players as well
resulting in efficient supply chain profits.
PR rt
Pa
Shounak Basak
12/18/2023
16
Supply chain responsive
l
ia
er
at
Lego manufacturing in Billund, Demark.
M
Lego A/S, the European toy giant was unable to meet surging demands in Europe
5 e
-2 rs
despite having factories in Denmark and Hungary. Lego because of its increased
23 ou
M C
demand was not able to keep pace with it albeit, boosting its capacity. Lego bricks do
R RI
,H L
not present manufacturing challenges, but demand surge puts the company struggling
D of X
with scarcity. Decorating the yellow heads of its minifigures has been delayed to the
PR rt
Pa
packaging stage to make use of standard manufacturing leading to a responsive
supply chain.
Shounak Basak
12/18/2023
17
Supply chain diversification
l
ia
er
at
M
5 e
-2 rs
Conagra is a major food manufacturer in North America.
23 ou
Conagra manufactures Hunt’s Ketchup, Healthy Choice frozen meals and Slim Jim
M C
R RI
Meat sticks. Conagra has stated that increasing the supply lines or boosting the
,H L
D of X
supply bases is the only way to set up a resilient supply chain as it can tackle
problems like jammed ports in China or loss of tomato production in Mexico.
PR rt
Pa
Shounak Basak
12/18/2023
18
References
l
ia
er
at
M
5 e
-2 rs
23 ou
M C
Education
R RI
,H L
D of X
Welch, J. A., & Nayak, P. R. (1992). Strategic sourcing: a progressive approach to the
make-or-buy decision. Academy of Management Perspectives, 6(1), 23-31
PR rt
Pa
Shounak Basak
18-12-2023
19

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Module # 5

Schedule the jobs A,B,C,D,E on machine 1

Sequencing: Determining the order of processing of jobs at a work center

𝑡𝑖𝑚𝑒 𝑟𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔 𝑡𝑖𝑙𝑙 𝑑𝑢𝑒 𝑑𝑎𝑡𝑒

Sequence the jobs A,B,C,D,E on machine 1

Total Flow time 50 Total Tardiness 23

Average Flow time 10 Average Tardiness 4.6

Total Flow time 36 Total Tardiness 12

Average Flow time 7.2 Average Tardiness 2.4

Total Flow time 39Total Tardiness 12

Average Flow time 7.8Average Tardiness 2.4

Total Flow time Total Tardiness

Average Flow time Average Tardiness

Job sequence Processing Time Due Date Start date CR

Job sequence Processing Time Due Date Start date CR

Job sequence Processing Time Due Date Start date CR

Job sequence Processing Time Due Date Start date CR

Job sequence Processing Time Due Date Start date CR

Total Flow time 43 Total Tardiness 16

Average Flow time 8.6 Average Tardiness 3.2

Sequence the jobs A,B,C,D,E on machine 1

Sequence the jobs A,B,C,D,E on Work centre 1, 2, 3, 4

Job Work Centre

BestBuy is a leading consumer electronic retailer in America.

Overstocking problem and its solution

Understocking problem and its solution

• Uncertain demand is shown in columns E,G and H

• This is just an illustration

SKU-9 100.00% 94.67%

SKU-1 92.16% 100.00%

Fill Rate Utilization Rate

EOQ with quantity discount model:

Order quantity differs but ordering time is fixed

• Deterministic setting – amount of order and demand known

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑜𝑣𝑒𝑟𝑠𝑡𝑜𝑐𝑘𝑖𝑛𝑔 + 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑢𝑛𝑑𝑒𝑟𝑠𝑡𝑜𝑐𝑘𝑖𝑛𝑔

Q has to be selected such that

• Concept of outsourcing the activities becomes interesting in this specific context

• Accurate forecasting is vital for production

Process technology’s role in competitive advantage

Efficient supply chain Responsive supply chain

• Cost effective supply chains with least non-

scale and high capacity utilization quickly as per customer taste

• These supply chains strategize to • These supply chains are responsive

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