Resource Planning

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Resource Planning
Chapter 15
2
How Resource Planning fits the Operations
Management Philosophy
Operations As a Competitive Weapon Operations
Strategy Project Management
Process Strategy Process Analysis Process
Performance and Quality Constraint
Management Process Layout Lean Systems
Supply Chain Strategy Location Inventory
Management Forecasting Sales and Operations
Planning Resource Planning Scheduling
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Resource Planning and ERP

• Resource planning A process that takes sales and
  operations plans processes information in the
  way of time standards, routings, and other
  information on how the firm produces its services
  or products and then plans the input
  requirements.
• Enterprise process A companywide process that
  cuts across functional areas, business units,
  geographical regions, and product lines.
• Enterprise resource planning (ERP) systems
  Large, integrated information systems that
  support many enterprise processes and data
  storage needs.

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ERP Application Modules
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ERP Design

• ERP revolves around a single comprehensive
  database that can be made available across the
  entire organization (or enterprise).
• The database collects data and feeds them into
  the various modular applications (or suites).
• As new information is entered as a transaction in
  one application, related information is
  automatically updated in the other applications.
• The ERP system streamlines the data flows
  throughout the organization and provides
  employees with direct access to a wealth of
  real-time operating information.
• ERP eliminates many of the cross-functional
  coordination problems older nonintegrated systems
  suffered from.

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Possible Planningand Control Systems
The most prominent systems now in use are the
material requirements planning (MRP) system, the
Drum-Buffer-Rope (DBR) system, and lean systems.
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Dependent Demand

• Dependent demand The demand for an item that
  occurs because the quantity required varies with
  the production plans for other items held in the
  firms inventory.
• Parent Any product that is manufactured from one
  or more components.
• Component An item that goes through one or more
  operations to be transformed into or become part
  of one or more parents.

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MRP Inputs
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Bill of Materials
A Ladder-back chair
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Master Production Schedule

• Master production schedule (MPS) A part of the
  material requirements plan that details how many
  end items will be produced within specified
  periods of time.

MPS for a Family of chairs
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Master Production Scheduling Process
Operations must first create a prospective MPS to
test whether it meets the schedule with the
resources.
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Developing a Master Production Schedule
MPS for Weeks 1 2
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Available-To-Promise Inventory

• Available-to-promise (ATP) inventory The
  quantity of end items that marketing can promise
  to deliver on specified dates.
• It is the difference between the customer orders
  already booked and the quantity that operations
  is planning to produce.
• As new customer orders are accepted, the ATP
  inventory is reduced to reflect the commitment of
  the firm to ship those quantities
• Actual inventory stays unchanged until the order
  is removed from inventory and shipped to the
  customer.

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MPS Worksheet
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MPS SchedulewithATP
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MPS for Product AApplication 15.1
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MPS for Product AApplication 15.1
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Inventory Record

• Inventory record A record that shows an items
  lot-size policy, lead time, and various
  time-phased data.
• Gross requirements The total demand derived from
  all parent production plans.
• Scheduled Receipts (open orders) are orders that
  have been placed but not yet completed.
• Projected on-hand inventory An estimate of the
  amount of inventory available each week after
  gross requirements have been satisfied.
• Planned receipts Orders that are not yet
  released to the shop or supplier.
• Planned order release An indication of when an
  order for a specified quantity of an item is to
  be issued.

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Inventory Record Shows an items lot-size policy,
lead time, and various time-phased data.
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Planning Factors

• Planning lead time An estimate of the time
  between placing an order for an item and
  receiving the item in inventory.
• Setup time
• Processing time
• Materials handling time between operations
• Waiting time
• Lot-sizing rules A rule that determines the
  timing and size of order quantities.

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Comparing Lot-Sizing Rules

• FOQ, POQ, and L4L rules affect inventory costs
  and setup and ordering costs. In the example,
  each rule took effect in week 4, when the first
  order was placed.
• A comparison of projected on-hand inventory
  averaged over weeks 4 through 8 of the planning
  horizon for the ladder-back chair seat
  subassembly
• FOQ (22722777187187)/5 181 units
• POQ (150150000)/5 60 units
• L4L (00000)/5 0 units
• FOQ generates high inventory because it creates
  remnants.
• POQ reduces on-hand inventory because it does a
  better job of matching order quantity to
  requirements.
• L4L minimizes inventory investment but maximizes
  the number of orders placed.

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Safety Stock

• The usual policy is to use safety stock for end
  items and purchased items to protect against
  fluctuating customer orders and unreliable
  suppliers of components but to avoid using it as
  much as possible for intermediate items.
• Schedule a planned receipt whenever the projected
  on-hand inventory balance drops below the desired
  safety stock level.

Ladder-back Chair Seat subassembly
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MRP translates, or explodes, the MPS and other
sources of demand into the requirements needed
for all of the subassemblies, components, and raw
materials the firm needs to produce parent items.
This process generates the material requirements
plan for each component item.
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117
117
117
300
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117
117
117
227
227
230
230
300
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117
187
117
117
187
230
230
300
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40
110
110
110
300
300
110 is carried in inventory until week 5 when
more is needed.
40 on hand plus 300 in receipts minus demand of
230 110
Lot of 300 must be scheduled to start production
in week 4 and arrives as planned receipt in week
5.
40 on-hand is carried from previous plan to week
one.
230
230
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180
180
180
180
300
300
The 180 in inventory is carried until the next
gross requirements.
On-Hand for week 5 is 300 110 - 230 180
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Planned order releases are sized to gross
requirements.
Two planned order releases of 230 units are
scheduled.
Projected on-hand inventory remains at zero.
0
230
230
230
230
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Gross requirements for seat-frame boards will be
1200 units (or 4 x 300) in week 3.
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Other Important Reports

• Action notice A computer-generated memo alerting
  planners about releasing new orders and adjusting
  the due dates of scheduled receipts.
• Capacity requirements planning (CRP) A technique
  used for projecting time-phased capacity
  requirements for workstations its purpose is to
  match the material requirements plan with the
  capacity of key processes.
• Manufacturing resource planning (MRP II) A
  system that ties the basic MRP system to the
  companys financial system and to other core and
  supporting processes.

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Drum-Buffer-Rope System

• Drum-Buffer-Rope (DBR) A planning and control
  system that regulates the flow of work-in-process
  materials at the bottleneck or the capacity
  constrained resource (CCR) in a productive system.

Drum-Buffer-Rope System with a Capacity
Constrained Resource (CCR)
Market Demand 650 units/week
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Resource Planning for Service Providers

• Dependent demand for services
• Restaurant
• Airlines
• Hospitals
• Hotels
• Bill of Resources A record of a firms
  parent-component relationships and all of the
  materials, equipment time, staff, and other
  resources.

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Bill of Resources (BOR) A record of a service
firms parent component relationships and all of
the materials, equipment time, staff, and other
resources associated with them, including usage
quantities.
BOR for Treating an Aneurysm
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Scheduling
Chapter 16
38
How Scheduling fits the Operations Management
Philosophy
Operations As a Competitive Weapon Operations
Strategy Project Management
Process Strategy Process Analysis Process
Performance and Quality Constraint
Management Process Layout Lean Systems
Supply Chain Strategy Location Inventory
Management Forecasting Sales and Operations
Planning Resource Planning Scheduling
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Scheduling

• Scheduling The allocation of resources over time
  to accomplish specific tasks.
• Demand scheduling A type of scheduling whereby
  customers are assigned to a definite time for
  order fulfillment.
• Workforce scheduling A type of scheduling that
  determines when employees work.
• Operations scheduling A type of scheduling in
  which jobs are assigned to workstations or
  employees are assigned to jobs for specified time
  periods.

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Performance Measures

• Job flow time The amount of time a job spends in
  the service or manufacturing system. Also
  referred to as throughput time or time spent in
  the system, including service.
• Makespan The total amount of time required to
  complete a group of jobs.
• Past due (Tardiness) The amount of time by which
  a job missed its due date or the percentage of
  total jobs processed over some period of time
  that missed their due dates.
• Work-in-process (WIP) inventory Any job that is
  waiting in line, moving from one operation to the
  next, being delayed, being processed, or residing
  in a semi-finished state.
• Total inventory The sum of scheduled receipts
  and on-hand inventories.
• Utilization The percentage of work time that is
  productively spent by an employee or machine.

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Gantt Charts

• Gantt chart Used as a tool to monitor the
  progress of work and to view the load on
  workstations.
• The chart takes two basic forms (1) the job or
  activity progress chart, and (2) the workstation
  chart.
• The Gantt progress chart graphically displays the
  current status of each job or activity relative
  to its scheduled completion date.
• The Gantt workstation chart shows the load on the
  workstations and the nonproductive time.

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Gantt Progress Chart
Gantt Progress Chart for an Auto Parts Company
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Gantt Workstation Chart
Gantt Workstation Chart for Hospital Operating
Rooms
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Scheduling Customer Demand

• Three methods are commonly used to schedule
  customer demand
• Appointments assign specific times for service to
  customers.
• Reservations are used when the customer actually
  occupies or uses facilities associated with the
  service.
• Backlogs
• The customer is given a due date for the
  fulfillment a product order, or
• Allow a backlog to develop as customers arrive at
  the system. Customers may never know exactly when
  their orders will be fulfilled

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Scheduling Employees

• Rotating schedule A schedule that rotates
  employees through a series of workdays or hours.
• Fixed schedule A schedule that calls for each
  employee to work the same days and hours each
  week.
• Constraints The technical constraints imposed on
  the workforce schedule are the resources provided
  by the staffing plan and the requirements placed
  on the operating system.
• Other constraints, including legal and behavioral
  considerations, also can be imposed.

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Workforce Scheduling Example 16.1
The Amalgamated Parcel Service is open 7 days a
week. The schedule of requirements is
The manager needs a workforce schedule that
provides two consecutive days off and minimizes
the amount of total slack capacity. To break ties
in the selection of off days, the scheduler gives
preference to Saturday and Sunday if it is one of
the tied pairs. If not, she selects one of the
tied pairs arbitrarily.
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Workforce Scheduling Example 16.1 Steps 1 2
Required employees
Step 1. Find all the pairs of consecutive days
that exclude the maximum daily requirements.
Select the unique pair that has the lowest total
requirements for the 2 days. Friday contains the
maximum requirements (10), and the pair SSu has
the lowest total requirements. Therefore,
Employee 1 is scheduled to work Monday through
Friday. Step 2. If a tie occurs, choose one of
the tied pairs or ask the employee to make a
choice.
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Workforce Scheduling Example 16.1 Step 3
Required employees
Step 3. Subtract the requirements satisfied by
the Employee 1 from the net requirements for each
day the employee is to work and repeat step
one. Again the pair SSu has the lowest total
requirements. Therefore, Employee 2 is scheduled
to work Monday through Friday.
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Workforce Scheduling Example 16.1 Step 4
Required employees
Step 4. Repeat steps 1 through 3 until all the
requirements have been satisfied. After
Employees 1, 2, and 3 have reduced the
requirements, the pair with the lowest
requirements changes, and Employee 4 will be
scheduled for Wednesday through Sunday.
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Workforce Scheduling Example 16.1 Step 4 continued
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Workforce Scheduling Example 16.1 Step 4 continued
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Workforce Scheduling Example 16.1
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Workforce Scheduling Example 16.1 Final Schedule
M T W Th F S Su Employee 1 X X X X X off off
Employee 2 X X X X X off off Employee 3 X X X X
X off off Employee 4 off off X X X X X Employee
5 X X X X X off off Employee 6 off off X X X X X
Employee 7 X X X X X off off Employee 8 X X X X
X off off Employee 9 off X X X X X off Employee
10 X X X X X off off
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Operations Scheduling

• Operations schedules are short-term plans
  designed to implement the master production
  schedule.
• Operations scheduling focuses on how best to use
  existing capacity.
• Often, several jobs must be processed at one or
  more workstations. Typically, a variety of tasks
  can be performed at each workstation.
• Job shop A firm that specializes in low- to
  medium-volume production and utilizes job or
  batch processes.
• Flow shop A firm that specializes in medium- to
  high-volume production and utilizes line or
  continuous processes.

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Manufacturing Process
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Job Shop Dispatching

• Dispatching A method of generating schedules in
  job shops whereby the decision about which job to
  process next is made using simple priority rules
  whenever the workstation becomes available for
  further processing.
• Priority sequencing rules The rules that specify
  the job processing sequence when several jobs are
  waiting in line at a workstation.
• Critical ratio (CR) A ratio that is calculated
  by dividing the time remaining until a jobs due
  date by the total shop time remaining for the
  job. CR (Due date Todays date)/Total shop
  time remaining
• Total Shop Time Setup, processing, move, and
  expected waiting times of all remaining
  operations, including the operation being
  scheduled.

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Job Shop Dispatching

• Earliest due date (EDD) A priority sequencing
  rule that specifies that the job with the
  earliest due date is the next job to be
  processed.
• First-come, first-served (FCFS) A priority
  sequencing rule that specifies that the job
  arriving at the workstation first has the highest
  priority.
• Shortest processing time (SPT) A priority
  sequencing rule that specifies that the job
  requiring the shortest processing time is the
  next job to be processed.

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Job Shop Dispatching

• Slack per remaining operations (S/RO) A priority
  sequencing rule that determines priority by
  dividing the slack by the number of operations
  that remain, including the one being scheduled.

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Scheduling Jobs for One Workstation

• Single-dimension rules A set of rules such as
  FCFS, EDD, and SPT, that bases the priority of a
  job on a single aspect of the job, such as
  arrival time at the workstation, the due date, or
  the processing time.
• Priority rules, such as CR and S/RO, incorporate
  information about the remaining workstations at
  which the job must be processed. We call these
  rules multiple-dimension rules.
• Multiple-dimension rules A set of rules that
  apply to more than one aspect of a job.

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Example 16.2
Single-Dimension Rule Sequencing

• Five engine blocks are waiting for processing.
  The processing times have been estimated.
  Expected completion times have been agreed. The
  table shows the situation as of Monday morning.
  Customer pickup times are measured in business
  hours from Monday morning.
• Determine the schedule by using the EDD rule and
  then the SPT rule.
• Calculate the average hours early, hours past
  due, WIP inventory, and total inventory for each
  method.
• If low job flow times and WIP inventories are
  critical, which rule should be chosen?

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Example 16.2
Single-Dimension Rule EDD
Average hours early 0.6 hour
Average job flow time 23 hours
Average hours past due 7.2 hours
Average WIP 2.61 blocks
Average total inventory 2.68 engine blocks
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Example 16.2
Single-Dimension Rule SPT
3 6 8 12 15
0 3 9 17 29
18 12 10 22 20
Econoline 150 Explorer Ranger Thunderbird Bronco
Average hours early 3.6 hour
Average job flow time 20.4 hours
Average hours past due 7.6 hours
Average WIP 2.32 blocks
Average total inventory 2.73 engine blocks
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Comparing the EDD and SPT Rules
Using the previous example, a comparison of the
EDD and SPT sequencing is shown below.

• The SPT schedule has a lower average job flow
  time and lower WIP inventory.
• The EDD schedule has better customer service,
  (average hours past due) and lower maximum hours
  past due.
• EDD also has a lower total inventory because
  fewer hours were spent waiting for customers to
  pick up their engine blocks after they had been
  completed.

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Example 16.3
Multiple-Dimension Rule CR
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Example 16.3
Multiple-Dimension Rule S/RO
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Comparing the CR and S/RO Rules
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Priority Rule Summary

• The S/RO rule is better than the EDD rule and the
  CR rule but it is much worse than the SPT rule
  and the FCFS rule for this example.
• S/RO has the advantage of allowing schedule
  changes when due dates change. These results
  cannot be generalized to other situations because
  only four jobs are being processed.

FCFS 1 2 3 4 SPT 1 3 2 4 EDD 4
2 1 3 CR 4 2 3 1 S/RO 4 3 1
2
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Scheduling Jobs for Multiple Workstations

• Priority sequencing rules can be used to schedule
  more than one operation. Each operation is
  treated independently.
• Identifying the best priority rule to use at a
  particular operation in a process is a complex
  problem because the output from one process
  becomes the input for another.
• Computer simulation models are effective tools to
  determine which priority rules work best in a
  given situation.
• When a workstation becomes idle, the priority
  rule is applied to the jobs waiting for that
  operation, and the job with the highest priority
  is selected.
• When that operation is finished, the job is moved
  to the next operation in its routing, where it
  waits until it again has the highest priority.

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Johnsons Rule

• Johnsons rule A procedure that minimizes
  makespan when scheduling a group of jobs on two
  workstations.
• Step 1. Find the shortest processing time among
  the jobs not yet scheduled. If two or more jobs
  are tied, choose one job arbitrarily.
• Step 2. If the shortest processing time is on
  workstation 1, schedule the corresponding job as
  early as possible. If the shortest processing
  time is on workstation 2, schedule the
  corresponding job as late as possible.
• Step 3. Eliminate the last job scheduled from
  further consideration. Repeat steps 1 and 2 until
  all jobs have been scheduled.

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Example 16.5 Johnsons Rule at the Morris
Machine Co.
Sequence
M1
M2
M3
M4
M5
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Example 16.5 Johnsons Rule at the Morris
Machine Co.
The schedule minimizes the idle time of
workstation 2 and gives the fastest repair time
for all five motors. No other sequence will
produce a lower makespan.
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Labor-limited Environments

• The limiting resource thus far has been the
  number of machines or workstations available. A
  more typical constraint is the amount of labor
  available.
• Labor-limited environment An environment in
  which the resource constraint is the amount of
  labor available, not the number of machines or
  workstations.
• Assign personnel to the workstation with the job
  that has been in the system longest.
• Assign personnel to the workstation with the most
  jobs waiting for processing.
• Assign personnel to the workstation with the
  largest standard work content.
• Assign personnel to the workstation with the job
  that has the earliest due date.

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Linking Operations Scheduling to the Supply Chain

• Advanced planning and scheduling (APS) systems
  Systems that seek to optimize resources across
  the supply chain and align daily operations with
  strategic goals. Four characteristics of these
  systems are
• Demand Planning. This capability enables
  companies in a supply chain to share demand
  forecasts.
• Supply Network Planning. Optimization models
  based on linear programming can be used to make
  long-term decisions.
• Available-to-Promise. Firms can use this
  capability to promise delivery to customers by
  checking the availability of components and
  materials at its suppliers.
• Manufacturing Scheduling. This module attempts to
  determine an optimal grouping and sequencing of
  manufacturing orders based on detailed product
  attributes, production line capacities, and
  material flows.