Optimized Production Technology (OPT)

OPT is a proprietary software package for production planning and scheduling owned by Creative Output, Inc., of Milford, Connecticut. The objectives of OPT is to schedule production so that production output is maximized. Because of the limited information available about the inner workings of the scheduling procedure used in OPT, it is difficult to assess whether OPT represents a new methodological approach. Nevertheless, the framework employed by OPT contains some useful ideas applicable to a number of production/operations situations. The key distinctive feature of OPT is its ability to identify and isolate bottleneck operations and focus on these bottlenecks to determine production plans and schedules for the entire shop. This simple idea could lead to the better utilization of manufacturing resources, resulting in greater productivity and lower costs. Given as an illustration the advantage of using a bottleneck operation is to drive the planning for the remaining operations by means of a simple example.

Consider two products, 1 and 2, that are manufactured by the process. The process consists of three operations, A, B, and C. The set-up times and production rates for the three operations and are identical for the two products. We assume that 40 hours per week are available for production and that equal amounts of the two products must be made available at the end of each week.

From the chart below, clearly, operation B is the bottleneck operation in the production process. Let us make several observations about the implications of bottleneck operation B for the preceding operation A and the succeeding operation C.


Set up time 1 hr 6 hrs 2 hrs
Prodn rate 80 40 60

First, if operation A, which precedes the bottleneck operation, is not controlled, inventory will accumulate between A and B because A will produce at the rate of 80 units per hours, whereas B will only use the output of A at a rate of 40 units per hour. Second, if the capacity of B is increased by one unit (through overtime or by adding facilities) then the throughput of the entire system will be increased by one unit, resulting in an increase in profit equal to the contribution of the whole product (and not merely the relative contribution at stage B) . Conversely, a loss in capacity for operation B (through improper scheduling or a maintenance problem) will result in a decrease in profit equal to the contribution of the whole product. Third, an increase in the number of set-ups for operations A and C, to the point these operations themselves become bottlenecks, produces no incremental cost to the company. Thus, fewer set-ups and larger lots for the bottleneck operations and more frequent set-ups and smaller lots for non-bottlenecks operations often make economic sense. Finally, if the production lot size for operation B is 400 units, it is not necessary that we transfer the product to operation C only after all 400 units have been completed at operation B. Doing so will result in a high level of inventory between operations B and C. To reduce this inventory, it may be practical to transfer in lots of 40 (one hour’s worth of production) or some other quantity smaller than 400 units. Thus, in general, production lot size and transfer lot size may not be equal. It may be economical to use a larger production lot size and smaller transfer lot size. This distinction is important in OPT, and the procedure selects appropriate production and transfer lot sizes for each operation.

Shown here is careful scheduling for operation B will improve the production rate of the system. Recall that for product mix considerations we are required to supply equal amounts of products 1 and 2 by the end of a week. A simple rule then is to produce product 1 for the first 20 hours of the week and product 2 for the next 20 hours or vice versa. In this plan, since 6 hours are required for set-ups for bottleneck operation B, we will be able to produce 40 units per hour X 14 hours = 560 units of each product per week. These 560 units of production are limited by the capacity of operation B. Of course, operation A could produce the 560 units in 8 hours (set-up time of one hour + production time of 560/80 = 7 hours). To reduce inventory, production at operation A should not begin at time 0. Otherwise, by the time production begins at operation B, we will have accumulated 5 hours of production output (400 units) from operation A. Further, by transferring small amounts of product from operation A to B we can maintain a low level of inventory between operations A and B. Similarly, operation C should be carefully scheduled to reduce inventory between B and C while meeting weekly requirements.

Since operation B is the bottleneck, a longer production run at B will improve the output. For example, we can produce product 1 for the first entire week and product 2 for the next entire week at operation B. Thus, each product is produced only once in two weeks at operation B. The weekly output for operation B under this plan would be as follows:

Week Product 1 Product 2

1 1360 0
2 0 1360
3 1360 0
4 0 1360

However, operation C must deliver equal amounts of products 1 and 2 each week. To achieve this, 680 units of inventory must be carried between operation B and C. Hence in week 1, operation C will require 680 units of both product 1 and product 2. Since 1360 units of product 1 are produced by operation B, the ending inventory for week 1 for product 1 will be 680 units. However, operation C must draw 680 units of product 2 from beginning inventory to be able to manufacture the requirements for week 1.

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