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Recall that the previous chapter was about selection and organization of the physical assets of the organization. Now that the production system has been set up, we need to discuss how to operate it. This chapter is about the operating rules for the production system.

One difference between the previous chapter and this one is in the amount of time that a decision affects the organization. Building a new facility (Chapter 5) is a decision that usually affects the company for years and takes money and time to change that decision. In this chapter, I’ll describe decisions that usually affect the company for less time, and that take less time to change, but even among these decisions, the time varies. Consider these decisions:

• Select and commit to working with a supplier.
• Hire enough workers to run the operation for two shifts.
• Allocate planned production over the next month and schedule workers for different shifts.
• Decide which particular jobs will be done on this week’s shifts.
• Begin work on a particular job on a particular machine by a particular team.

These decisions are all part of “operations management” and they have impact over a shorter time period than the decisions in Chapter 5, but they still vary in how long they affect the company.

This chapter is organized into the following sections. (This organization follows closely that used by Turner et al.)

• 7.1 Forecasting
  In chapter 5, we already discussed the issue of deciding on the size of an operation. How big a steel plant? How big a hospital? How many fast food restaurants in one area? How big a chip manufacturing plant. The answer to those questions puts an upper limit on how much steel can be made, how many chips can be made, how many patients can be served, and how many customers can be served, but the organization still needs to forecast demand and make adjustments to the work force, the resources ordered, and so forth.
• 7.2 Aggregate planning
  With a forecast of overall demand, the organization now plans how it will meet that demand, perhaps through building inventory during certain periods or by adding temporary workers.
• 7.3 Operations planning
  Now the organization gets more specific. Given the aggregate plan, how much of which resources will be needed? Which supplier will deliver them? How will work be allocated in the manufacturing process?
• 7.4 Supply chain and inventory management
  When and where will incoming resources be received? How will finished product be stored? Will subassemblies be made and used as orders are received?
• 7.5 Operations policies
  Which order will be started at what time on which production equipment by whom? Many other decisions about scheduling and other policies are needed before operations can begin.
• 7.6 Operations
  Once operations are underway, the IE still has some questions to answer. How is the work proceeding? Is the schedule still working? How can we handle any difficulties that arise? What information should we collect on the actual operations?