I. Introduction

The range of this research paper is to discourse stock list control systems as they relate to the overall production for a company. I will foremost discourse production factors for companies and costs associated with high stock lists. Then. exchange the focal point to depict. discuss. and compare Just-in-time ( JIT ) Production and Material Requirements Planning ( MRP ) processes as methods to cut down and hence minimize stock lists for concerns.

Productiveness can be defined as a common step of how good a state. industry. or concern unit is utilizing its resources. See the equation below for the mathematical relationships used to specify productiveness.

Productivity ( P ) = Outputs or Goods and Services produced

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Inputs All Resources Used

Expanding on consequences in: Productivity = Output T

Labor + Capital + Materials

These equations allow productiveness to be defined in footings of comparative step. This allows a concern to compare current productiveness degrees against old productiveness degrees. or against their competition’s productiveness. The company defines what entire or partial factors will be considered as end product and input in these equations and so uses these values to cipher an initial productiveness value. The value by itself is non of import but it allows the company to do alterations in the concern theoretical account or operations and see how it affects the productiveness of that company.

Now. let’s expression at costs associated with stock list. There are four major costs associated with stock list: Retention costs. Setup costs. Ordering costs. Deficit costs. Keeping or transporting costs refer to the costs for storage installations. handling ( i. e. traveling ) . insurance. pilferage. breakage. obsolescence. revenue enhancements. depreciation and the loss of chance costs of capital. These costs can be really important to the company. Any sum of money spent towards keeping costs is capital that is unavailable for other undertakings. research and development. etc therefore the “opportunity loss” .

Apparatus costs ( a. k. a. production alteration costs ) refers to alterations in stuffs. agreement or equipment. paperwork. costs for clip and stuff involved in traveling out one natural stuff and delivery in the following. Therefore. these costs can be reduced by trying to minimise loss of clip and stuff involved in altering from one merchandise to another. This allows smaller batch sizes to be produced. which in bend would cut down the needed stock list degrees needed to bring forth these tonss. One of the major ends of the just-in-time ( JIT ) system is to cut down the apparatus costs for a company.

Ordering costs refer to the managerial and clerical costs to fix the purchase or order. These costs range from everyday points such as numbering stock and ciphering order measures to elaborate procedure costs like the care costs associated with an order tracking system.

The last stock list cost is shortage costs. This cost occurs when the stock of a peculiar point has been depleted ensuing in orders necessitating this stock to be delayed or cancelled. This consequences in a tradeoff between the costs to keep a “safety stock” and the costs happening due to running out. Transporting a safety stock would guarantee no orders will be lost or delayed due to running out. nevertheless. the safety stock would increase the keeping costs. Keeping a safety stock may be preferred when the expected loss of net income. good will. clients. or late punishments could be important or impossible to gauge for the company.

The overall end for a company is to set up the right measure to order and optimum batch size to minimise these four stock list costs. By diminishing the stock list costs. the capital ( resource ) required for production lessenings. This consequences in the mensural productiveness increasing for the company as shown:

Productivity = Outputs = ( Outputs are unchanged ) productiveness additions

Inputs ( Inputs are less )

II. Just-in-time Production

Just-in-time production is a major discovery in fabricating doctrine. JIT is an incorporate procedure of activities designed to accomplish high-volume production utilizing minimum stock lists of parts. These parts are planned to get at the workstation or production centre precisely when needed ( i. e. just-in-time ) to let rapid completion. JIT strives to keep minimum stock lists of natural stuff. work-in-process and finished merchandises. JIT production assumes nil will be produced until it is needed.

Some elements in the doctrine of JIT can be traced as far back as the 1900’s. Henry Ford’s streamlined assembly line construct and riddance of merchandise waste is the most easy recognizable usage of JIT in the pre-World War II epoch. Japan to the full developed and realized the benefits of JIT fabrication after WWII. Japan makers were able to streamline the flow of stuffs used in production while keeping a really high quality of goods and services. The two most identifiable countries utilizing JIT are automotive assembly and consumer electronics. Japan merely focused on importing engineering and was thereby avoiding the bulk of research and development costs. Japan would wait until a new merchandise was developed in another state and so import it. Their following measure would be to concentrate their production attempts to the mill floor alternatively of the merchandise design. By uniting high merchandise quality. dependability. and riddance of waste with a “respect for people” doctrine the Japanese were able to increase their market portion and obtain laterality in several production countries.

Typically. the need signal in a JIT system is created by existent demand for a merchandise. When an point is sold. the system senses the demand for a replacing and pulls from the terminal of the production line. This pull on the terminal merchandise triggers a need signal from the old workstation to replace the necessary units. This “upstream station” would so draw from the following “upstream station”… this procedure continues until the natural stuffs or seller is reached. In order for this procedure to run swimmingly. JIT requires high merchandise quality and dependability at each phase in the procedure. strong seller dealingss for rapid response to demand. and a reasonably predictable demand for the terminal merchandise. JIT is typically applied to repetitive fabrication when the same or similar points are to be made over and over. JIT does non necessitate big volumes and can easy be applied to any insistent sections in a concern regardless of where they appear. The strong seller dealingss would let for multiple cargos a twenty-four hours to be processed to the buying concern which in bend supports batch sizes little and inventory low. The optimum batch size in an ideal or hone JIT system is one.

The continual end of JIT is to drive all stock list waiting lines to zero. which accordingly minimizes stock list investing and shortens lead times. By maintaining stock list degrees low. JIT besides aids in observing and rectifying quality jobs. High stock list degrees may conceal or dissemble productiveness jobs. By cut downing stock list degrees these productiveness jobs runing from machine downtime. seller delinquencies. backlogs ( paperwork. determination. and review ) . extra bit. design redundancies. etc become seeable leting the company to observe and rectify other jobs in the production theoretical account. These extra corrections to the production theoretical account ( ensuing from low stock list degrees enabled from JIT ) at the really least will salvage the company’s input resources and may ensue in increased company end product due to treat betterment. Therefore. from the productiveness equation antecedently discussed. a company’s overall productiveness would increase from lower stock list costs but may increase due to process betterments associated with JIT production.

JIT utilizes three cardinal constructs to accomplish higher production: 1 ) Elimination of waste by bring forthing merely the minimal necessary units in the smallest possible measures ( batch sizes ) at the latest possible clip. 2 ) By promoting employee engagement in all facets of production a company fosters the feeling of ownership and pride. 3 ) All systems of production demand to be integrated to accomplish the optimum effects of the JIT doctrine. These constructs together allow the overall end of JIT. bring forthing what is needed when it is needed and no more. to be realized. Companies that perfect the three cardinal constructs enjoy better quality merchandises. higher stock list turnover. lower production costs. which in bend consequence in higher productiveness. The lone possible downside of JIT associated with stock list is that the lower limit degrees maintained and little batch sizes per se have small allowance for mistake when covering with any eventualities that occur.

The constructs of system integrating and employee encouragement/respect are indispensable elements involved in accomplishing the riddance of waste end. The Nipponese focal point on riddance of waste spans into every facet of a company’s operation and will now be discussed in deepness:

a ) Focused mill webs allow for smaller specialised workss vs. big vertically incorporate production installations. Large operations tend to hold increased bureaucratisms and are harder to keep focal point towards the company ends and direction manner.

B ) Group engineering. which was originally developed by the United States. has been widely adopted and successful in Japan. This doctrine groups similar parts into households and so groups the procedure required to do these parts into specialised work cells. This procedure reduces and may in some instances eliminate motion and waiting ( line uping ) clip between operations. This procedure consequences in decreased stock list and decreased figure of employees required. However. the procedure does necessitate retained employees to be able to work several occupations and machines. This increased preparation and cognition demand for employees helps to guarantee a concern remains focused on employee keeping and satisfaction.

degree Celsius ) Extinguish the waste of hapless quality. Put merely ; do it right the first clip and when jobs appear. halt the production line and repair it instantly. This waste riddance is besides referred to as quality at the beginning. Factory workers become their ain inspectors. concentrating on each facet of the work production. This doctrine non merely leads to increased quality. it allows workers to detect quality jobs shacking in the production system itself. This empowering of employees reiterates direction respecting/trusting their employees to work efficaciously and responsibly.

vitamin D ) Uniform works lading smoothes the production flow and dampens the reaction waves that normally occur when scheduling fluctuations occur. By puting up a house production program with a frozen end product rate for the close hereafter. companies are able to bring forth the same mix of merchandises everyday even if the measures of some points are little. This burden enables the house to do accommodations every bit little as possible when a alteration in the concluding assembly occurs. thereby minimising the effects on the full merchandise line and supply concatenation.

vitamin E ) Kanban production control systems use a signaling device to modulate flow of stuff and merchandises in a JIT works. Kanban ( sign/instruction card in Nipponese ) control in paperless systems can be obtained by utilizing containers or taging signals to modulate merchandise flows.

Note: The Kanban system will be discussed farther after the stuff demands planning ( MRP ) treatment in order to compare/contrast the two systems with regard to push/pull systems.

Traditionally. the Nipponese emphasis regard for people and lifetime employment for lasting places within houses. This allows companies to keep degree paysheets during concern enlargement and contraction. Permanent workers make up about tierce of the entire work force. These workers have greater occupation security. be given to be more flexible. remain with the company. and hence are the drive forces in assisting the house achieve its ends. Unions in Japan foster concerted relationships with direction which helps better productiveness. Management views workers as assets non as machines or liabilities. Company mechanization uses robotics to execute dull. insistent. or everyday occupations enabling employees to concentrate their attempts on of import undertakings such as procedure betterment. etc. Employees understand that if the company performs well fillips or other pecuniary inducements will be given to honor work attempts. This regard for people concept may be one of the biggest grounds that JIT systems have had more success in Japan than in the U. S.

Table 1. Common buying differences between Nipponese JIT and traditional U. S.

Buying ActivityJITTraditional

Lot sizeSmall batch size with frequent deliveriesLarge batch sizes with less frequent bringings

Choosing supplierSingle beginning of supply for a given portion in nearby geographical country with a long term contractRely on multiple beginnings of supply for a given portion with short-run contracts

Measuring SupplierEmphasis placed on merchandise quality. bringing public presentation. and monetary value. but no per centum of cull from provider is acceptableEmphasis placed on merchandise quality. bringing public presentation. and monetary value. but about two per centum of cull from provider is acceptable

Receiving inspectionCounting and having review on entrance parts is reduced and finally eliminatedBuyer is responsible for having numeration and inspecting all entrance parts

Negociating and offering processPrimary aim is to accomplish merchandise quality through a long term contract and just pricePrimary aim is to acquire the lowest monetary value possible

Determining manner of transportationConcern for both inbound & A ; outward cargo. with on-time bringing. Delivery agenda left to the buyerConcern for outbound cargo and lower outbound costs. Delivery agenda left to supplier

Product Specifications”Loose” specifications. The purchaser relies more on public presentation specifications than on merchandise design and the provider is encouraged to be more innovative”Rigid” specifications. The purchaser relies more on design specifications than on merchandise public presentation and the providers have less freedom in design specifications

PaperworkLess formal paperwork. Delivery clip and measure degree can be changed by telephone callsRequired great trade of clip and formal paperwork. Changes in bringing day of the month and measure require purchase orders

Boxing Small standardized containers used to keep exact measure with exact specificationsRegular packaging for every portion and portion figure with no clear specifications on merchandise content

Although non all companies can utilize the JIT theoretical account for production the above tabular array clearly illustrated were inventory costs and other company nest eggs can be obtained to increase productiveness. Toyota. for illustration. strives to bring forth the Camry Solara Coupe to client orders in five yearss. Typically 30 to sixty yearss are required to bring forth custom orders for other car makers. Toyota will most likely achieve a important competitory advantage from this production. First. car makers typically make estimated conjectures on consumer demand. In order to sell theoretical accounts with specification the purchasers do non desire. car shapers will offer discounts and price reductions to acquire the stock list ( auto ) off the batch. This consequences in consumers higgling over monetary value and acquiring a auto they truly didn’t privation and the car shapers losing one million millions in dead stock list costs. Toyota uses unvarying works lading to accomplish the five twenty-four hours auto. By altering or cut downing monthly auto manner measures into day-to-day measures. Toyota can calculate a theoretical account rhythm clip or clip between two indistinguishable units. This enables Toyota to set resources more rapidly and expeditiously to the precise measure needed.

Toyota adjusts the velocity of the production line to bring forth the needful measure each twenty-four hours. This production enables Toyota to construct a usage made auto at a lower cost than their competitor’s batch made autos ( one time the costs of stock list are taken into history for the competitor’s bottom line ) . Therefore. the consumer gets what they want at a lower monetary value ensuing in a win-win for the company and consumer. Toyota is simply trying to copy the success of computing machine maker Dell. Dell’s physique to order theoretical account is a perfect illustration of a U. S. company accommodating Japan’s JIT scheme with success. Dell struck the market fast and difficult and was the first computing machine maker to do the physique to order theoretical account. Dell has succeeded in cut downing stock list costs ( obsolescence is a immense costs in the computing machine industry ) while still supplying fast assemble and transportation of merchandises to consumers. These are merely two of the many companies that have succeeded in utilizing the JIT production doctrine in today’s economic system.

III. Material Requirements Planning ( MRP )

In many of today’s fabrication companies a composite planning procedure exists to find the specific engineerings and processs required in order to bring forth a merchandise or service. Typically. plans control group inputs bing or forecasted orders into a Master Production Schedule ( MPS ) . The MPS is used to bring forth the sum and day of the months of specific points required for each order. Coarse capacity planning so compares production. warehouse. equipment. installations. and labour required against suppliers/vendors capacity to supply the stuffs as needed. At this point. stuff demands planning ( MRP ) takes the terminal merchandise from the MPS and interrupt this information down into component parts and subassemblies to make a stuffs program. This program specifies when production and purchase orders must be placed for each portion and subassembly is required to finish the orders on agenda. The MRP is so broken down into a weekly/daily agenda to stipulate when machines. production lines. work centres and natural stuffs are needed.

The recent tendencies toward traveling from batch-oriented processing to online dealing treating systems have allowed the function of MRP to spread out. This enlargement has been a natural development of the procedure to include all facets of production. The expanded MRP has been called Manufacturing Resource Planning ( MRP II ) . and with the add-on of the cyberspace into the to the full incorporate computing machine production the term Enterprise Resource Planning ( ERP ) has become more common. These two constructs will be discussed in deepness subsequently. However. the anchor of any new ERP or MRP II fabrication system continues to be the scheduling map associated with the traditional MRP. MRP systems have been installed in about every fabrication house. big or little. The chief ground for this is that MRP is a logical. easy to understand attack to the job of finding the figure of parts. constituents. and stuffs needed for each point in add-on to when that point is needed.

MRP works good in industries with a job-shop environment. MRP works better for companies involved in assembly operations than companies involved in fiction. MRP does non work good in companies that produce a low figure of extremely complex or expensive merchandises due to lead-time uncertainness and complex constellation costs. This makes perfect sense when analysing from an stock list position. Companies with high production rates associated with assembly type operation would have the most benefit from MRP due to its cost nest eggs in maintaining stock list depression. The figures below display a typical MRP merchandise tree and hebdomadal agenda for the Widget merchandise. I will utilize this illustration to discourse measure of stuffs. lead-time and production agendas.

The measure of stuffs ( BOM ) file contains the complete merchandise description. naming the stuffs. parts. and constituents but besides the sequence in which the merchandise is created. The BOM is frequently called the merchandise tree or merchandise construction because it shows how a merchandise is put together. The BOM can name parts two different ways: simple individual degree or indented construction. The indented construction clearly identifies each point and the mode in which it is assembled because each indenture signifies the constituents of that point. The simple individual degree list is used for computing machine usage it is more efficient. otherwise each degree would hold to be expanded and so summed. The individual degree list shows each parent constituent and the figure of units needed per unit of the parent. Examples of each are displayed after the merchandise
construction tree. The BOM is one of the three inputs into any MRP plan. The other inputs into the MRP system are the Master Production Schedule ( MPS ) and Inventory Records File.

Given the followers: the current stock list. lead clip for telling. safety stock required ( if any ) . and Lot Size. a 7 hebdomad production chart with stock list tracked on it will be created below for four of the parts as illustrations. A Maestro production agenda would be the combined consequence of the production agendas for all parts. For simpleness merely a twosome parts will be shown with separate production agendas.

Note: The Company presently plans to do 15 Doodads per hebdomad based on current orders and the undermentioned extra informations is provided for the treatment.

PartInventoryLead TimeSafety StockQuantityRQMT’s per hebdomad





The MPS contains the gross demands for the hebdomad. scheduled grosss ( outstanding orders position both purchase and fabrication ) . and stock list. Inventory is fundamentally current parts on manus. Lead-time is how long it takes to acquire the portion ( in hebdomads ) . Safety stock is how much must be kept on manus to manage immediate or add-on orders. ( I. E. supply safety or some degree of protection against stockouts. ) Merely portion E with an abnormally long lead-time of three hebdomads was given a safety stock in this illustration. Measure is the lower limit that can be ordered at one clip. Lot-For-Lot is a particular instance. Lot-For-Lot basically means as needed or individual units can be ordered. An MRP system in which all telling from providers is Lot-For-Lot and lead times swerving towards less than a hebdomad will run really similar to JIT systems and will see some if JIT’s benefits every bit good.

The maestro production agenda ( MPS ) is the time-phased program stipulating how many and when the house plans to construct each point. From this agenda the above agendas from each portion are projected out. As stated earlier the combination of all the above agendas for all parts would be the MPS. nevertheless. the MPS is created foremost and so interrupt down into the hebdomadal agendas for each portion. Keep in head the chief intent of a basic MRP system are to command stock list degrees. assign runing precedences to points. and program capacity to lade the system. The aim of the stock list direction under MRP is to better client service. minimise stock list costs and thereby maximise production-operating efficiency. The basic MRP process illustrated above is comparatively simple. Basically for each degree in the measure of stuff. get downing with end points MRP does the following for each measure:

a ) Determine the net demands by deducting on-hand stock list and any scheduled grosss from the gross demands. The gross demands for the zero degree points come from the MPS. while those for the lower-level points are the consequence of the old MRP operations.

B ) Divide the lacy demand into appropriate batch sizes to organize occupations.

degree Celsiuss ) Offset the due day of the months of the occupations with lead times to find start times.

vitamin D ) Use the start times. the batch sizes and the BOM to bring forth gross demands of any needed constituents at the lower degree ( s ) .

vitamin E ) Repeat these stairss until all degrees are processed.

From these basic stairss companies can explicate an full work flow processes to better effectivity and efficiency of all fabricating operations.

IV. Development of MRP a MRP II and ERP systems

A material demand planning is a systematic method for planning and buying stuffs to back up production. These thoughts have been comparatively simple and easy to implement utilizing computing machines. However. issues such as capacity unfeasibility. long planned lead times. system nervousness. etc can sabotage the effectivity of an MRP system. ( System nervousness refers to the consequence of little alterations in the Master Production Schedule ( MPS ) ensuing in big alterations in the planned order release. ) Over clip extra processs have been developed to turn to these jobs. The add-on of these processs has resulted in Fabrication Requirements Planning ( MRP II ) . Beyond merely turn toing lacks of MRP. MRP II has incorporated other company maps ensuing in a genuinely incorporate fabrication system. The buying map was one of the first maps absorbed into MRP II. The concluding end of MRP II is to hold a program that monitors all the resources used by the house: fabrication. selling. finance. technology. etc. The extra maps of demand direction. prediction. capacity planning. despatching. input/output control. and capacity demands be aftering were added to the traditional maestro production agenda and unsmooth cut capacity maps of MRP to organize MRP II.

MRP II focuses on three phased of planning: long-range planning ( prediction and aggregative production planning ) . intermediate-range planning ( MPS. MRP. BOM. demand direction ) . and short-run planning ( occupation release. dispatching. and I/O control ) . MRP II is able to unite all of a company’s resource sections with the planning facet to organize a better more functional and efficient system. The prediction and planning facets involved in MRP II allow the house to command stock list degrees more efficaciously ensuing in increased production as discussed above. It is of import to recognize that the additions of MRP II have an initial cost higher than the basic MRP system since all degrees of a company must now be integrated. In the old ages following the development of MRP II. sellers and advisers developed a figure of follow-on replacements. But none of the suggested names ( I. E. MRP III )

Nor any other related acronym seemed appropriate at the clip. Finally. with the coming of the Internet combined with computing machine information systems capable of expeditiously and efficaciously associating concern with supply spouses and other affiliate offices around the universe. enterprise resource planning ( ERP ) has become the term for today. ERP biggest success has been the ability to link/combine MRP functionality with supply concatenation direction ( SCM ) and consumer resource direction ( CRM ) . The usage of intranets within a company to pass on between sections and extranets ( dedicated external lines leting entree to a company’s intranet ) outside the company to pass on with providers and distributers has resulted in dramatic betterments in the company’s productiveness. With the outgrowth of ERP systems many companies are now able to use concern procedure reengineering ( BPR ) to radically alter direction construction in support of the new package bundles. Today many directors feel that one of the benefits of ERP execution is the opportunity to reengineer their operations.

Prior to ERP. companies were loath to reengineer due to the high hazard and inability to foretell the terminal affect on productiveness. Now. companies are able to bind all concern applications together and visualise where reengineering would dramatically assist their concern. Many ERP systems have prediction tools built in that allow companies to do fake accommodations to the production line and position likely consequences. SCM has enabled companies to immediately update sellers and strategic spouses on order demands and alterations. Immediately. the stock list degrees can be adjusted to suit additions or lessenings in demand cut downing stock list costs increasing production. Another added benefit of an ERP system is that it enables easy tendency analysis to find where production is efficient and where it is non efficient. This allows concerns to concentrate their resources to bettering the uneffective parts of any section monitored by the ERP system ( production. accounting. finance. selling. human resource. etc ) .

V. Push V. Pull: Kanban Analysis

This analysis should be really utile in showing how the Kanban system work and how JIT and MRP production systems can be compared. Kanban is the individual technique most closely associated with JIT patterns. Toyota uses kanban cards to regulate the flow of stuffs through the works. In order to understand this system I will discourse push and pull systems.

In a push system. such as MRP. work releases are scheduled. In a pull system work releases are authorized. The difference is that a agenda is prepared in progress. while an mandate depends on the production position of the works at the clip. Thus a push system straight accommodates a clients due day of the month. but. the system must be forced to react to alterations in the works. ( I. E. MRP must be regenerated ) . On the other manus. a pull system ( JIT ) straight responds to works alterations. but must be forced to suit client due day of the months. This is accomplished by fiting a degree production program against demand and utilizing overtime to guarantee production rate is maintained.

In the MRP system. releases into production line are triggered by the MPS. Equally shortly as work on a portion is complete at a workstation. it is “pushed” to the following workstation. Equally long as the occupation Stationss and machine operators have parts. they will go on working under the system.

In the kanban system. production is triggered by demand. When a portion is removed from the concluding stock list point. which might be the finished goods stock list. the old workstation ( I. E. last workstation ) in the line is given mandate to replace the portion that has been used. This workstation would so direct an mandate signal to the upstream workstation to replace the portion that it merely used. Each station would continue to make the same thing. refilling the downstream nothingness and directing mandate to the old or following upstream station to work. In the kanban JIT system the operator requires both the portion and the mandate signal ( kanban ) to work. Toyota uses a two-card kanban system. Other companies use a one-card system. Some companies’ usage paperless signals I. E. containers. marks. etc.

VI. Summary

Neither JIT nor MRP can be considered to be simple processs or techniques that will work for every company. JIT is non ever a chiseled coherent direction scheme. JIT tends to be more associated with attitudes. doctrines and methodological analysiss that jointly form into the JIT system. Additionally. MRP can non ever be considered an easy option to JIT. Both systems work really efficaciously for their associated concern theoretical accounts. Most major fabrication houses use MRP. nevertheless. many in insistent fabrication effort to integrate JIT techniques to better operations. With the patterned advance of MRP into ERP. companies in insistent fabrication are able to more easy integrate the JIT “pull” methodological analysis into the executing stage. I. E. usage MRP to be after and schedule but utilize JIT down on the store floor. This allows MRP companies to use JIT patterns to command when sellers should present stuff. when merchandise should be produced. and when completed merchandise should be distributed. In this system the store agenda and kanban system is the interface matching the MRP and JIT system along with the capacity control and group planning. Regardless of the particular system being used. the common yarn between these two systems of direction is minimising company stock list and accordingly increasing overall productiveness.


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