Forecasting

Forecasting is a statement about the future. Its is estimating future event (variable), by
casting forward past data. Past data are systematically combined in predetermined
way to obtain the estimate. Forecasting is not guessing or prediction.
Its help managers to:
• Plan the system
• Plan the use system
The process of analyzing and understanding current and past information to
understand the future patterns through a scientific and systemic approach is called
forecasting. And the process of estimating the future demand of product in terms
of a unit or monetary value is referred to as demand forecasting.
The purpose of forecasting is to help the organization manage the present as to
prepare for the future by examining the most probable future demand pattern.
However, forecasting has its constraint for example we cannot estimate a pattern
for technologies and product where there are no existing pattern or data.
Features of Forecasting
• Rarely Perfect
• Time horizon increases
• Group of item is more accurate
• Degree of stability
Element of good forecast
• Timely
• Reliable
• Accurate
• Meaningful
• Written
• Easy to use
Classification of Business Forecasting
Business forecasting has many dimensions and varieties depending upon the utility
and application. The three basic forms are as follows:
• Economic Forecasting: these forecasting are related to the broader macro-
economic and micro-economic factors prevailing in the current business
environment. It includes forecasting of inflation rate, interest rate, GDP, etc. at the
macro level and working of particular industry at the micro level.
• Demand Forecast: organization conduct analysis on its pre-existing database or
conduct market survey as to understand and predict future demands. Operational
planning is done based on demand forecasting.
• Technology Forecast: this type of forecast is used to forecast future technology up
gradation.
Timeline of Business Forecasting
A forecast and its conclusion are valid within specific time frame or horizon. These
time horizons are categorized as follows:
• Long Term Forecast: This type of forecast is made for a time frame of more than
three years. These types of forecast are utilized for long-term strategic planning in
terms of capacity planning, expansion planning, etc.
• Mid-Term Forecast: This type of forecast is made for a time frame from three
months to three years. These types of forecasts are utilized production and layout
planning, sales and marketing planning, cash budget planning and capital budget
planning.
• Short Term Forecast: This type of forecast is made of a time frame from one day to
three months. These types of forecasts are utilized for day to day production
planning, inventory planning, workforce application planning, etc.
Factors affect decisions and activities
Accounting Cost/Profit estimates

Finance Cash flow and funding

Human Resources Hiring/Recruiting/ training

Marketing Pricing, promotion, strategy

MIS IT/IS system, services

Operation Schedules, MRP, workloads

Product/service design New products and services

 Step in forecast Development
1. Determine purpose of forecast
2. Establish a time horizon
3. Select forecasting technique
4. Gather and analyze data
5. Prepare the forecast
6. Monitor forecast
 Method of forecast
• Quantitative (based on time series data)
– Trend
– Seasonality
– Cycle
– Random variation
– Irregular Variation

Qualitative methods (based on judgment and opinions)

Jury of executives
sales force composite
Consumer market survey
Delphi method
 Difference between Qualitative and
Quantitative Method
Qualitative method Quantitative method

Uses when situation is vague Used in stable situation

Little data available Historical data available

New products Existing products

New technology Current technology

Involves mathematical technology

e.g. forecasting newly introduced Example: sales of colour TV’s

online sales
 Overview of Operation Planning
• Operations planning and scheduling systems concern with the volume and timing of outputs,
the utilization of operations capacity at desired levels for competitive effectiveness. These
systems must fit together activities at various levels, form top to bottom, in support of one
another, as shown in the following fig. Note that the time orientation ranges from long to short
as we progress from top to bottom in the hierarchy. Also, the level of detail in the planning
process ranges from broad at the top to detail at the bottom.
• Components of Operations Planning and Scheduling System
– THE BUSINESS PLAN
The business plan is a statement of the organization’s overall level of business activity for
the coming six to eighteen months, usually expressed in terms of outputs (in volume of
sales) for its various product groups, a set of individual products that share or consume
common blocks of capacity in the manufacturing process. It also specifies the overall
inventory and backlog levels that will be maintained during the planning period. The
business plan is an agreement between all functional areas finance, production, marketing,
engineering, R & D about the level of activity and the products they are committed to
support. The business plan is not concerned with all the details and specific timing of the
actions for executing the plan. Instead, it determines a feasible general posture for
competing to achieve its major goals. The resulting plan guides the lower-level, more
details decisions.
– AGGREGATE PRODUCTION OUTPUT PLANNING
The process of determining output levels of product groups over the coming six to
eighteen months on a weekly or monthly basis. It identifies the overall level of outputs in
support of the business plan. The plan recognizes the division’s existing fixed capacity and
the company’s overall policies for maintaining inventories and backlogs, employment
stability and subcontracting.
– AGGREGATE CAPACITY PLANNING
It is the process of testing the feasibility of aggregate output plans and evaluating overall
capacity utilization. A statement of desired output is useful only if it is feasible. Thus, it
addresses the supply side of the firm’s ability to meet the demand. As for aggregate
output plans, each plant, facility, or division requires its own aggregate capacity plan
– MASTER PRODUCTION SCHEDULING
MPS is a schedule showing week by week how many of each product must be produced
according to customer orders and demand forecasts. Its purpose is to meet the demand
for individual products in the product group. This more detailed level of planning
disaggregates the product groups into individual products and indicates when they will
be produced. The MPS is an important link between marketing and production. It shows
when incoming sales orders can be scheduled into production, and when each shipment
can be scheduled for delivery. It also takes into account current backlogs so that
production and delivery schedules are realistic
– RESOURCE REQUIREMENT PLANNING
Resource requirement planning (rough-cut capacity planning) is the process of testing
the feasibility of master production schedule in terms of capacity. This step ensures that
a proposed MPS does not inadvertently overload any key department, work centre, or
machine, making the MPS unworkable.
– MATERIAL REQUIREMENT PLANNING
Material requirement planning (MRP) is a system of planning and scheduling the time
phased material requirements for releasing materials and receiving materials that
enable the master production schedule to be implemented. Thus, the master
production schedule is the driving force for material requirements planning. MRP
provides information such as due dates for components that are subsequently used for
shop floor control. Once this information is available, it enables managers to estimate
the detailed requirements for each work centers.
– CAPACITY REQUIREMENT PLANNING
Capacity requirement planning (CRP) is an iterative process of modifying the MPS or
planned resources to make capacity consistent with the production schedule. CRP is a
companion process used with MRP to identify in detail the capacity required to execute
the material requirement planning. At this level, more accurate comparisons of available
and needed capacity for scheduled workloads are possible.
– SHOP FLOOR CONTROL
Shop floor control involves the activities that execute and control shop operations
namely loading, sequencing, detailed scheduling and expediting jobs in production. It
coordinates the weekly and daily activities that get jobs done. Individual jobs are
assigned to machines and work centers (loading), the sequence of processing the jobs
for priority control is determined, start times and job assignments for each stage of
processing are decided (detailed scheduling ) and materials and work flows from station
to station are monitored and adjusted (expediting).
– LOADING
Each job (customer order) may have its unique product specification and, hence, it is
unique through various work centers in the facility. As new job orders are released, they
are assigned or allocated among the work centers, thus establishing how much of a load
each work centre must carry during the coming planning period. This assignment is
known as loading (sometimes called shop loading as machine loading).
– SEQUENCING
This stage establishes the priorities for jobs in the queues (waiting lines) at the work
centers. Priority sequencing specifies the order in which the waiting jobs are processed;
it requires the adoption of a priority sequencing rule.
– DETAILED SCHEDULING
Detailed scheduling determines start times, finish times and work
assignments for all jobs at each work centre. Calendar times are specified
when job orders, employees, and materials (inputs), as well as job
completion (outputs), should occur at each work centre. By estimating how
long each job will take to complete and when it is due, schedulers can
establish start and finish dates and develop the detailed schedule.
– EXPEDITING
Expediting is a process of tracking a job’s progress and taking special actions
to move it through the facility. In tracking a job’s progress, special action may
be needed to keep the job moving through the facility on time.
Manufacturing or service operations disruptions-equipments breakdowns,
unavailable materials, last-minute priority changes, require managers to
deviate from plans and schedules and expedite an important job on a special
handling basis.
– INPUT/OUTPUT CONTROL
Input/output control related to the activities to monitor actual versus
planned utilization of a work centre’s capacity. Output plans and schedules
call for certain levels of capacity at a work centre, but actual utilization may
differ from what was planned. Actual versus planned utilization of the work
centre’s capacity can be monitored by using input-output reports and, when
discrepancies exist, adjustments can be made
 Capacity Planning
• The production system design planning considers input requirements,
conversion process and output. After considering the forecast and long-term
planning organization should undertake capacity planning.
• Capacity is defined as the ability to achieve, store or produce. For an
organization, capacity would be the ability of a given system to produce
output within the specific time period. In operations, management capacity
is referred as an amount of the input resources available to produce relative
output over period of time.
• In general, terms capacity is referred as maximum production capacity, which
can be attained within a normal working schedule.
• Capacity planning is essential to be determining optimum utilization of
resource and plays an important role decision-making process, for example,
extension of existing operations, modification to product lines, starting new
products, etc.
• Capacity planning is the process of determining the production capacity
needed by an organization to meet changing demands for its products. In the
context of capacity planning, design capacity is the maximum amount of
work that an organization is capable of completing in a given period
 Objectives of capacity planning
The objectives of capacity planning are:
• To identify and solve capacity problem in a timely manner to
meet consumer needs.
• To maintain a balance between required capacity and
available capacity.
• The goal of capacity planning is to minimize this discrepancy.
Capacity is calculated: (number of machines or workers) ×
(number of shifts) × (utilization) × (efficiency).
Goal of Capacity Planning
• The ultimate goal of capacity planning is to meet the current
and future level of the requirement at a minimal wastage. The
three types of capacity planning based on goal are lead
capacity planning, lag strategy planning and match strategy
planning.
 Factors Affecting Capacity Planning
• Effective capacity planning is dependent upon
factors like production facility (layout, design,
and location),
• product line or matrix,
• production technology,
• human capital (job design, compensation),
• operational structure (scheduling, quality
assurance)
• external structure ( policy, safety regulations)
 3 steps in capacity planning
Determine Service Level Requirements:
The first step on the capacity planning process is to categorize the work done by
systems and to quantify users’ expectation for how the work gets down.
• Define workloads
• Determine the unit of work
• Identify service levels for each workload
Analyze current capacity:
Next, the current capacity of the system must be analyzed to determine how it is
meeting the needs of the users.
• Measure service levels and compare to objectives
• Measure overall resources usages.
• Measure resource usages by workload
• Identify components of response time
Planning for future:
• Finally, using forecasts of future business activity, future system requirements are
determined. Implementing the required changes in system configuring will ensure
that sufficient capacity will be available to maintain service level, even as
circumstanced change in the future.
• Determine future processing requirements
• Plan future system configuration
 Activities in capacity planning
Capacity planning normally involves the following
activities:
• Assessing existing capacity.
• Forecasting capacity needs.
• Identifying alternative ways to modify capacity.
• Evaluating financial, economical, and
technological capacity alternatives.
• Selecting a capacity alternative most suited to
achieving strategic mission.
 Aggregate Production Planning
• An organization can finalize its business plans on the
recommendation of demand forecast. Once business plans are
ready, an organization can do backward working from the final
sales unit to raw materials required. Thus annual and quarterly
plans are broken down into labor, raw material, working capital,
etc. requirements over a medium-range period (6 months to 18
months). This process of working out production requirements for
a medium range is called aggregate planning.
• Aggregate planning is an intermediate term planning decision. It is
the process of planning the quantity and timing of output over the
intermediate time horizon (3 months to one year). Within this
range, the physical facilities are assumed to –10 be fixed for the
planning period. Therefore, fluctuations in demand must be met
by varying labor and inventory schedule. Aggregate planning seeks
the best combination to minimize costs.
 Factors Affecting Aggregate Planning
Aggregate planning is an operational activity critical to the organization as it
looks to balance long-term strategic planning with short term production
success. Following factors are critical before an aggregate planning process
can actually start;
• A complete information is required about available production facility and
raw materials.
• A solid demand forecast covering the medium-range period
• Financial planning surrounding the production cost which includes raw
material, labor, inventory planning, etc.
• Organization policy around labor management, quality management, etc.
For aggregate planning to be a success, following inputs are required;
• An aggregate demand forecast for the relevant period
• Evaluation of all the available means to manage capacity planning like sub-
contracting, outsourcing, etc.
• Existing operational status of workforce (number, skill set, etc.), inventory
level and production efficiency
Aggregate planning will ensure that organization can plan for workforce level,
inventory level and production rate in line with its strategic goal and
objective.
 Aggregate planning as an Operational Tool
• Aggregate planning helps achieve balance between operation goal,
financial goal and overall strategic objective of the organization. It serves
as a platform to manage capacity and demand planning.
• In a scenario where demand is not matching the capacity, an
organization can try to balance both by pricing, promotion, order
management and new demand creation.
• In scenario where capacity is not matching demand, an organization can
try to balance the both by various alternatives such as.
• Laying off/hiring excess/inadequate excess/inadequate
excess/inadequate workforce until demand decrease/increase.
• Including overtime as part of scheduling there by creating additional
capacity.
• Hiring a temporary workforce for a fix period or outsourcing activity to a
sub-contractor.
Importance of Aggregate Planning
• Aggregate planning plays an important part in
achieving long-term objectives of the organization.
Aggregate planning helps in:
• Achieving financial goals by reducing overall variable
cost and improving the bottom line
• Maximum utilization of the available production facility
• Provide customer delight by matching demand and
reducing wait time for customers
• Reduce investment in inventory stocking
• Able to meet scheduling goals there by creating a
happy and satisfied work force
 Aggregate Planning Strategies
There are three types of aggregate planning strategies available for
organization to choose from. They are as follows.
• Level Strategy
As the name suggests, level strategy looks to maintain a steady production
rate and workforce level. In this strategy, organization requires a robust
forecast demand as to increase or decrease production in anticipation of
lower or higher customer demand. Advantage of level strategy is steady
workforce. Disadvantage of level strategy is high inventory and increase
back logs.
• Chase Strategy
As the name suggests, chase strategy looks to dynamically match demand
with production. Advantage of chase strategy is lower inventory levels and
back logs. Disadvantage is lower productivity, quality and depressed work
force.
• Hybrid Strategy
As the name suggests, hybrid strategy looks to balance between level strategy
and chase strategy.
 Aggregate Planning Strategies
The variables of the production system are labor, materials and capital. More
labor effort is required to generate higher volume of output. Hence, the
employment and use of overtime (OT) are the two relevant variables.
Materials help to regulate output. The alternatives available to the
company are inventories, back ordering or subcontracting of items. These
controllable variables constitute pure strategies by which fluctuations in
demand and uncertainties in production activities can be accommodated
by using the following steps:
• Vary the size or the workforce: Output is controlled by hiring or laying off
workers in proportion to changes in demand.
• Vary the hours worked: Maintain the stable workforce, but permit idle
time when there is a slack and permit overtime (OT) when demand is
peak.
• Vary inventory levels: Demand fluctuations can be met by large amount of
inventory.
• Subcontract: Upward shift in demand from low level. Constant production
rates can be met by using subcontractors to provide extra capacity
 Aggregate Planning Guidelines
The following are the guidelines for aggregate planning:
• Determine corporate policy regarding controllable
variables.
• Use a good forecast as a basis for planning.
• Plan in proper units of capacity.
• Maintain the stable workforce.
• Maintain needed control over inventories.
• Maintain flexibility to change.
• Respond to demand in a controlled manner.
• Evaluate planning on a regular base.
 Production Strategies
• Production strategies are broad long-term action plans. They are
made for achieving the main objectives of organisation.
Production strategies tell us what the production department
must do to achieve the top aims of the organisation. It provides a
road map for the production department.
• So, production strategies are long-term action plans of the
organisation, for the production of goods and services.
• Production strategies decide about the investment to be made for
production, the technology to be used for production, the training
to be given to the production staff, the production schedule to be
followed, etc. It also decides about the goods and services to be
produced and when to introduce them in the market.
• It is the top level of management that first fixes the main
objectives of the organisation. Then top-level managers make
strategies for achieving these objectives
 Types of strategies
There are two types of strategies, viz.,
• Business Strategies are strategies made for the entire
organisation. It covers all departments of the organisation.
These are made by the top-level management.
• Functional or Departmental Strategies are strategies made
for a particular department. Each department has its own
strategy such as production and marketing strategy. These
strategies support the business strategy to achieve the
main objectives of the organisation. They are made by
middle-level management, i.e. by Departmental Heads. So,
production strategy is a functional strategy.
 Capacity requirements Planning
• Capacity requirements planning is the process by
which a company figures out how much it needs to
produce, and determines if it is capable of meeting
those production goals. Small businesses must
conduct capacity requirements planning regularly to
keep up with changes in supply and demand.
• Capacity requirements planning is an accounting
method used to determine the available
production capacity of a company. Capacity
requirement planning first assesses the schedule of
production that has been planned by the company.
 Material Requirements Planning
• Material requirement planning is an information system for production
planning based on inventory management. The basic components of
material planning are:
• Material planning provides information that all the required raw material
and products are available for production.
• Material planning ensures that inventory level are maintained at its
minimum levels. But also ensures that material and product are available
whenever production is scheduled, therefore, helping in matching
demand and supply.
• Material planning provides information of production planning and
scheduling but also provides information around dispatch and stocking.
• MRP refers to the basic calculations used to determine components
required from end item requirements. It also refers to a broader
information system that uses the dependence relationship to plan and
control manufacturing operations.
• “Materials Requirement Planning (MRP) is a technique for determining the
quantity and timing for the acquisition of dependent demand items needed
to satisfy master production schedule requirements.”
Objectives of Material Requirement Planning
Material requirement planning is processed which production planning and inventory control system,
and its three objectives are as follows:
• Primary objective is to ensure that material and components are available for production, and final
products are ready for dispatch.
• Another primary objective is not only to maintain minimum inventory but also ensure right
quantity of material is available at the right time to produce right quantity of final products.
• Another primary objective is to ensure planning of all manufacturing processes, this scheduling of
different job works as to minimize or remove any kind of idle time for machine and workers.
• Inventory reduction: MRP determines how many components are required when they are required
in order to meet the master schedule. It helps to procure the materials/ components as and when
needed and thus avoid excessive build up of inventory.
• Reduction in the manufacturing and delivery lead times: MRP identifies materials and
component quantities, timings when they are needed, availabilities and procurements and actions
required to meet delivery deadlines. MRP helps to avoid delays in production and priorities
production activities by putting due dates on customer job order.
• Realistic delivery commitments: By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
• Increased efficiency: MRP provides a close coordination among various work centres and hence
help to achieve uninterrupted flow of materials through the production line. This increases the
efficiency of production system.
 Advantages of Material Resource
Planning
• It helps in maintain minimum inventory levels.
• With minimum inventory levels, material
planning also reduces associated costs.
• Material tracking becomes easy and ensures
that economic order quantity is achieved for
all lot orders.
• Material planning smoothens capacity
utilization and allocates correct time to
products as per demand forecast.
Disadvantages of Material Resource Planning

• Material planning is highly dependent on inputs it

receives from other systems or department. If input
information is not correct than output for material
planning will also be incorrect.
• Material planning requires maintenance of robust
database with all information pertaining inventory
records, production schedule, etc. without which
output again would be incorrect.
• Material planning system requires proper training for
end users, as to get maximum out of the system.
• Material resource planning system requires substantial
investment of time and capital.
MRP System
• MASTER PRODUCTION SCHEDULE (MPS)
MPS is a series of time phased quantities for each item that a company
produces, indicating how many are to be produced and when. MPS is
initially developed from firm customer orders or from forecasts of demand
before MRP system begins to operate. The MRP system whatever the
master schedule demands and translates MPS end items into specific
component requirements. Many systems make a simulated trial run to
determine whether the proposed master can be satisfied.
• INVENTORY STATUS FILE
Every inventory item being planned must have an inventory status file
which gives complete and up to date information on the on-hand
quantities, gross requirements, scheduled receipts and planned order
releases for an item. It also includes planning information such as lot sizes,
lead times, safety stock levels and scrap allowances.
• BILL OF MATERIALS (BOM)
BOM identifies how each end product is manufactured, specifying all
subcomponents items, their sequence of build up, their quantity in each
finished unit and the work centres performing the build up sequence. This
information is obtained from product design documents, workflow
analysis and other standard manufacturing system.
 Schedule
• Scheduling can be defined as “prescribing of when and where each
operation necessary to manufacture the product is to be
performed.” It is also defined as “establishing of times at which to
begin and complete each event or operation comprising a
procedure”. The principle aim of scheduling is to plan the sequence
of work so that production can be systematically arranged towards
the end of completion of all products by due date.

Principles of Scheduling
• The principle of optimum task size: Scheduling tends to achieve
maximum efficiency when the task sizes are small, and all tasks of
same order of magnitude.
• Principle of optimum production plan: The planning should be such
that it imposes an equal load on all plants.
• Principle of optimum sequence: Scheduling tends to achieve the
maximum efficiency when the work is planned so that work hours
are normally used in the same sequence.
 Inputs to Scheduling
• Performance standards: The information
regarding the performance standards (standard
times for operations) helps to know the capacity
in order to assign required machine hours to the
facility.
• Units in which loading and scheduling is to be
expressed.
• Effective capacity of the work centre.
• Demand pattern and extent of flexibility to be
provided for rush orders.
• Overlapping of operations.
• Individual job schedules.
 Scheduling Strategies
Scheduling strategies vary widely among firms and range from ‘no
scheduling’ to very sophisticated approaches. These strategies are
grouped into four classes:
• Detailed scheduling: Detailed scheduling for specific jobs that are
arrived from customers is impracticable in actual manufacturing
situation. Changes in orders, equipment breakdown, and
unforeseen events deviate the plans.
• Cumulative scheduling: Cumulative scheduling of total work load is
useful especially for long range planning of capacity needs. This
may load the current period excessively and under load future
periods. It has some means to control the jobs.
• Cumulative detailed: Cumulative detailed combination is both
feasible and practical approach. If master schedule has fixed and
flexible portions.
• Priority decision rules: Priority decision rules are scheduling guides
that are used independently and in conjunction with one of the
above strategies, i.e., first come first serve. These are useful in
reducing Work-In-Process (WIP) inventory.
 Types of Scheduling
Types of scheduling can be categorized as forward scheduling and backward
scheduling.
• Forward scheduling
is commonly used in job shops where customers place their orders on
“needed as soon as possible” basis. Forward scheduling determines start and
finish times of next priority job by assigning it the earliest available time slot
and from that time, determines when the job will be finished in that work
centre. Since the job and its components start as early as possible, they will
typically be completed before they are due at the subsequent work centers in
the routing. The forward method generates in the process inventory that are
needed at subsequent work centers and higher inventory cost. Forward
scheduling is simple to use and it gets jobs done in shorter lead times,
compared to backward scheduling.
• Backward scheduling
is often used in assembly type industries and commit in advance to specific
delivery dates. Backward scheduling determines the start and finish times for
waiting jobs by assigning them to the latest available time slot that will enable
each job to be completed just when it is due, but done before. By assigning
jobs as late as possible, backward scheduling minimizes inventories since a job
is not completed until it must go directly to the next work centre on its
routing. Forward and backward scheduling methods are shown in the
following figure.
Forward and backward scheduling
 Scheduling Methodology
The scheduling methodology depends upon the type of industry,
organization, product, and level of sophistication required. They
are:
• Charts and boards,
• Priority decision rules, and
• Mathematical programming methods.

Gantt Charts and Boards

Gantt charts and associated scheduling boards have been
extensively used scheduling devices in the past, although many of
the charts are now drawn by computer. Gantt charts are extremely
easy to understand and can quickly reveal the current or planned
situation to all concerned. They are used in several forms, namely,

– Scheduling or progress charts, which depicts the sequential schedule;

– Load charts, which show the work assigned to a group of workers or
machines; and
– Record a chart, which are used to record the actual operating times
and delays of workers and machines.
• Priority Decision Rules
Priority decision rules are simplified guidelines for determining the
sequence in which jobs will be done. In some firms these rules take
the place of priority planning systems such as MRP systems.
Following are some of the priority rules followed.

• .
• Mathematical Programming Methods
Scheduling is a complex resource allocation problem. Firms process
capacity, labor skills, materials and they seek to allocate their use so
as to maximize a profit or service objective, or perhaps meet a
demand while minimizing costs.
The following are some of the models used in scheduling and
production control.

– Linear programming model:

Here all the constraints and objective functions are formulated as a
linear equation and then problem is solved for optimality. Simplex
method, transportation methods and assignment method are major
methods used here.
– PERT/CPM network model: PERT/CPM network is the network
showing the sequence of operations for a project and the precedence
relation between the activities to be completed.
• Note: Scheduling is done in all the activities of an organization i.e.,
production, maintenance etc. Therefore, all the methods and
techniques of scheduling are used for maintenance management
WHAT IS THE THEORY OF CONSTRAINTS?
• The Theory of Constraints is a methodology for
identifying the most important limiting factor (i.e.
constraint) that stands in the way of achieving a goal
and then systematically improving that constraint until
it is no longer the limiting factor. In manufacturing, the
constraint is often referred to as a bottleneck.
• The Theory of Constraints takes a scientific approach to
improvement. It hypothesizes that every complex
system, including manufacturing processes, consists of
multiple linked activities, one of which acts as a
constraint upon the entire system (i.e. the constraint
activity is the “weakest link in the chain”).
 The Theory of Constraints provides a
powerful set of tools for helping to achieve
that goal, including:

• The Five Focusing Steps (a methodology for

identifying and eliminating constraints)
• The Thinking Processes (tools for analyzing
and resolving problems)
• Through put Accounting (a method for
measuring performance and guiding
management decisions)
• https://www.youtube.com/watch?v=AqzbZUL9Rh8
The Five Focusing Steps
 What is the difference between a
bottleneck and a constraint?

• A bottleneck (resource) is a resource with

capacity less or equal to demand while a
constraint is a limiting factor to organization's
performance, an obstacle to the organization
achieving its goal. A constraint can be
called bottleneck but a bottleneck is not
always a constraint.
Theory of Constraints implementation
will have the following benefits:
• Increased profit (the primary goal of TOC for
most companies)
• Fast improvement (a result of focusing all
attention on one critical area – the system
constraint)
• Improved capacity (optimizing the constraint
enables more product to be manufactured)
• Reduced lead times (optimizing the constraint
results in smoother and faster product flow)
• Reduced inventory (eliminating bottlenecks
means there will be less work-in-process)
What is a production system in operations management?

• It is concerned with managing an entire production

system which is the process that converts inputs (in the
forms of raw materials, labour, and energy) into outputs (in
the form of goods and/or services), as an asset or delivers a
product or services. Operations produce
products, manage quality and creates service.

• The production system of an organization is that part,

which produces products of an organization. It is that
activity whereby resources, flowing within a defined
system, are combined and transformed in a controlled
manner to add value in accordance with the policies
communicated by management. A simplified production
system is shown above. The production system has the
following characteristics:
Production is an organized activity, so every
production system has an objective.
• The system transforms the various inputs to
useful outputs.
• It does not operate in isolation from the other
organization system.
• There exists a feedback about the activities,
which is essential to control and improve
system performance.
 Classification of Production System
• Production systems can be classified as Job Shop, Batch,
Mass and Continuous Production systems.
Classification of production systems
The Five Focusing Steps are further
described in the following table.
• Identify - Identify the current constraint (the single part of the process that
limits the rate at which the goal is achieved).
• Exploit - Make quick improvements to the throughput of the constraint
using existing resources (i.e. make the most of what you have).
• Subordinate - Review all other activities in the process to ensure that they
are aligned with and truly support the needs of the constraint.
• Elevate - If the constraint still exists (i.e. it has not moved), consider what
further actions can be taken to eliminate it from being the constraint.
Normally, actions are continued at this step until the constraint has been
“broken” (until it has moved somewhere else). In some cases, capital
investment may be required.
• Repeat - The Five Focusing Steps are a continuous improvement cycle.
Therefore, once a constraint is resolved the next constraint should
immediately be addressed. This step is a reminder to never become
complacent – aggressively improve the current constraint…and then
immediately move on to the next constraint.
 What is JIT system?
• Just-in-time (JIT) manufacturing, also known as just-in-time production or
the Toyota Production System (TPS), is a methodology aimed primarily at
reducing times within production system as well as response times from
suppliers and to customers.
• The just-in-time inventory method is considered a "pull" approach in
manufacturing. When sales activities warrant more production, inventory is
"pulled" and more manufacturing supplies are ordered. The result is a
smooth flow of production and reduced inventory costs.
• Just in time (JIT) inventory is a strategy to increase efficiency and decrease
waste by receiving goods only as they are needed in the production process,
thereby reducing inventory costs.

• Just-In-Time (JIT) Manufacturing is a philosophy rather than a technique.

By eliminating all waste and seeking continuous improvement, it aims at
creating manufacturing system that is response to the market needs.
• https://study.com/academy/lesson/just-in-time-inventory-definition-advantages-examples.html
 Lean System
• Lean manufacturing or lean production, often simply "lean", is a
systematic method for waste minimization within a manufacturing
system without sacrificing productivity, which can cause problems.
Lean also takes into account waste created through over burden
and waste created through unevenness in work loads . Working
from the perspective of the client who consumes a product or
service, "value" is any action or process that a customer would be
willing to pay for.

• Lean manufacturing makes obvious what adds value, by reducing

everything else (which is not adding value). This management
philosophy is derived mostly from the Toyota Production
System (TPS) and identified as "lean" only in the 1990s. TPS is
renowned for its focus on reduction of the original Toyota seven
wastes to improve overall customer value, but there are varying
perspectives on how this is best achieved. The steady growth
of Toyota , from a small company to the world's largest automaker,
has focused attention on how it has achieved this success.
 3 Steps in Lean system
• The first step in the lean manufacturing process is to consider what the real
value of your product is for the customer. For instance, if your customer is
buying a stereo speaker, he might be looking for sound quality, durability and
affordability. The first principle of lean manufacturing is that every step in the
production process must add something of value that the customer actually
wants.
• The next step in the lean process is to examine every activity involved in
manufacturing your product, to understand which activities add value and
which don't. Then, redesign your manufacturing process to remove activities
that don't add value, as far as it's possible.
• Once everything that does not add value has been removed from the value
stream, your manufacturing process should flow more efficiently. At this stage
in the process, lean manufacturing and just in time are identical. The next step
in leaning manufacturing is to only manufacture what your customer orders or
requests, so that customer demand or "pull" drives your production. This is
similar to just in time in that new parts are ordered based on short-term
requirements, but the driving force behind the efficiency of the process is
customer value rather than cost reduction.
Differences Between JIT & Lean Manufacturing
• Lean manufacturing takes the concept of JIT and re-examines in the
light of customer value.
• Just-in-time manufacturing is focused on efficiency, while lean
manufacturing is focused on using efficiency to add value for your
customer.
• Just-in-time manufacturing can be practiced on its own, or as one
step in your lean manufacturing process.
• For cost reduction purpose in method of just in time new parts are
ordered based on short-term requirements, but in lean system parts
are ordered based on short-term requirements the driving force
behind the efficiency of the process is customer value rather than
cost reduction.

• https://study.com/academy/lesson/jit-lean-implementation-uses-drawbacks.html