UNIT-III

Production Planning
and control
UNIT III : Production planning and control – meaning
– functions – aggregate planning – master production
schedule (MPS) – Material requirement planning
(MRP) – BOM – Capacity requirement planning
(CRP) – Techniques – problems in MRP and CRP –
an introduction to MRP II and ERP – Business
Process Re-engineering - Total Productive
Maintenance (TPM)
 PRODUCTION
PLANNINGAND CONTROL (PPC)

3
PRODUCTION PLANNING

Production Planning can be referred to as a

technique of forecasting every step in the long
process of production, taking them at right time
and in the right degree and trying to complete
operations at the maximum efficiency.

“The planning of industrial operations

involves Three considerations, namely,
what work shall be done, how the work shall
be done and lastly, when the work shall be
done.” (by – Kimball) 4
PRODUCTION CONTROL

Production control is the process that keeps a

watchful eye on the production flow, size of
resources along with any deviation from the
planned action. It also includes arrangement for
the prompt remedy or adjustment in case of any
deviation so that the production may run
according to the original or revised schedule.

“Production control refers to ensuring that all

which occurs is in accordance with the rules
established and instructions issued.” (By – Henry
Fayol)
5
 PPC : HISTORY

Planning Department bulletin board -

1911 6
 PPC : HISTORY
• 1776 -Specialization of labor in manufacturing -Adam
Smith
• 1799 -Interchangeable parts, cost accounting -Eli
Viihitney and others
• 1832 -Division of labor by skill; assignment of jobs by
skill; basics of time study -Charles Babbage
• 1900- Scientific management time study and work study
developed; dividing planning and doing of work -
Frederick W. Taylor
• 1900- Motion of study of jobs -Frank B. Gilbreth
• 1901- Scheduling techniques for employees, machines
jobs in manufacturing -Henry L. Gantt
• 1915 -Economic lot sizes for inventory control -F.W.
Harris 5
 PPC : HISTORY
• 1927 -Human relations; the Hawthorne studies -Elton
Mayo
• 1931 -Statistical inference applied to product quality:
quality control charts -W.A. Shewart
• 1935 -Statistical sampling applied to quality control;
inspection sampling plans -H.F. Dodge &H.G. Roming
• 1940- Operations research applications in World War ll -
P.M. Blacker and others.
• 1946- Digital computer -John Mauchlly and J.P.
Eckert
• 1947-Linear programming -GB. Dantzig, Williams &
others
8
 PPC : HISTORY
• 1950- Mathematical programming, on-Iinear and stochastic
processes –A. Charnes, W.W. Cooper & others
• 1951- Commercial digital computer; large scale computations
available. -Sperry Univac
• 1960- Organizational behavior; continued study of people at
work -L. Cummings, L. Porter
• 1970- Integrating operations into overall strategy and policy.
Computer applications to manufacturing. Scheduling and
control. Material requirement planning (MRP)-W. Skinner J.
Orlicky and G. Wright
• 1980-Quality and productivity applications from Japan
robotics. CAD-CAM -W.E. Deming and J. Juran

9
 PPC : HISTORY
• PPC concept developed since late 19th Century
• Factories were simple and relatively small
• Small number of products with large batches
• Work for each man and each machine used to
be chalked out
• even as factories grew,they were just
bigger,not more complex
• Main Industry – Textiles , Railways

10
PPC : CHARACTERISTICS
• Inputs like materials, men and machines are
efficiently used
• Factors of production are integrated to use them
economically
• Division of work is undertaken carefully so that
every available element is properly utilized
• Work is regulated from the first stage of
procuring raw materials to the stage of finished
goods
• Questions like what, when and how to be
manufactured are decided
11
PPC : OBJECTIVES

12
 PRODUCTION PLANNING
INVOLVES….
• Preparation of production budget
• Devising manufacturing methods and sequence of
operations
• Deciding type of machines and equipments
• Preparation of operation sheets and instruction
cards
• Estimating men, machine and material
requirements
• Undertaking time and motion studie
• Preparing master schedules s
13
PPC : PROCESS

14
 PPC : PROCESS
• Planning : What is the Task ?
• Routing : Where it needs to be carried out ?
• Scheduling : When it needs to be carried out ?
• Loading : Who will perform the task ?

15
 PLANNING
Itis the first element of production planning and control.
Planning means deciding in advance what is to be done in
future. An organizational set up is created to prepare plans
and policies. Various charts, manuals and production
budgets are also prepared. Planning provides a sound base
for control. A separate department is set up for this work.

16
 ROUTING
“Routing is the specification of the flow
sequence of operations and processes to be
followed in producing a particular
manufacturing lot.”( Alford & Beaty)

17
 ROUTING PROCEDURE

• Deciding what part to be made or purchased

• Determining Materials required
• Determining Manufacturing Operations and
Sequences
• Determining of Lot Sizes
• Determining of Scrap Factors
• Analysis of Cost of the Product
• Preparation of Production Control Forms

18
 SCHEDULING

“The determination of the time that should be

required to perform each operation and also
the time necessary to perform the entire series,
as routed, making allowances for all factors
concerned.”(Kimball)

19
 TYPES OF SCHEDULES
• Master Scheduling – It is the breakup of
production requirements. It is the start of
scheduling. It is prepared by keeping in view the
order or likely sales order in near future.
• Manufacturing Scheduling – It is used where
production process is continuous. The order of
preference for manufacture is also mentioned in
the schedule for a systematic production
planning.
• Detail Operation Scheduling – It indicates the time
required to perform each and every detailed
operations of a given process
20
 LOADING
• The next step is Loading which is execution of the
scheduled plan as per the route chalked out. It includes
the assignment of the work to the operators at their
machines or work places.
• So Loading determines who will do the work.

21
 DISPATCHING

“Dispatches put production in effect by

releasing and guiding manufacturing order in
the sequence previously determined by route
sheets and schedules.”(John A.Shubin)

22
DISPATCHING PROCEDURES
• Centralized Dispatching – Under this, orders are
directly issued to workmen and machines. It helps
in exercising effective control.

• Decentralized Dispatching – Under this procedure all

work orders are issued to the foreman or dispatch
clerk of the department or section. It suffers from
difficulties in achieving co-ordination among
different departments.

23
FOLLOW UP & EXPEDITING

Progress may be assessed with the help of routine reports

or communication with operating departments. The
follow up procedure is used for expediting and
checking the progress.

“Follow up or expediting is that branch of

production control procedure which regulates
the progress of materials and part through the
production process.”

24
• Inspection is the process of ensuring whether the products
manufactured are of requisite quality or not.

• Inspection is undertaken both of products and inputs. It is

carried on at various levels of production process so that
pre-determined standards of quality are achieved.

• Inspection ensures the maintenance of pre-determined

quality of products.

25
 PPC : LIMITATIONS
• Assumption based
• Rigidity
• Difficult for small firms
• Costly
• Dependence on external factors
• Team work is a must
• Demands high level of co-ordination & efficiency

26
 PPC : SIGNIFICANCE
• Structured & Planned Process
• Increased Production
• Seamless Plant Activity
• Better Co-ordination
• Optimal Resource Utilization
• Cost Control
• Rationalization of production Activities

27
AGGREGATE
PLANNING
 MEANING

 Aggregate planning is the process of developing, analyzing,

and maintaining a preliminary, approximate schedule of the
overall operations of an organization.

 The aggregate plan generally contains targeted sales

forecasts, production levels, inventory levels, and customer
backlogs. This schedule is intended to satisfy the demand
forecast at a minimum cost.

29
 DEFINED AS …

 The process of determining output levels of product groups

over the coming 6 to 18 months on a weekly or monthly
basis ; the plan identifies the overall level of outputs in
support of the business plan.

 Aggregate planning involves translating long-term

forecasted demand into specific production rates and the
corresponding labor requirements for the intermediate term.
OBJECTIVES
• Minimize cost / maximize profits
• Maximize customer service
• Minimize inventory investment
• Minimize changes in production rates
• Minimize changes in workforce levels
• Maximize utilization of plant and
equipment

31
AGGREGATE PLANNING PROCESS

Determine demand Determine

Identify policies
for each period . capacities for each
that are pertinent
period .

Develop alternative
Determine units Select the best plan
plans and compute
costs for units that satisfies
costs for each.
produced . objectives
AGGREGATE PLANNING STRATEGIES
 There are two pure planning strategies available to
the aggregate planner:

Level
strategy Chase
strategy

 Firms may choose to utilize one of the pure strategies in

isolation, or they may opt for a strategy that combines the
two.
33
 LEVEL STRATEGY
 A level strategy seeks to produce an aggregate plan that
maintains a steady production rate and a steady
employment level.

 In order to satisfy changes in customer demand, the firm

must raise or lower inventory levels in anticipation of
increased or decreased levels of forecast demand.

34
 LEVEL STRATEGY
 The firm maintains a level workforce and a steady rate of
output when demand is low. This allows the firm to establish
higher inventory levels than are currently needed.

 As demand increases, the firm is able to continue a steady

production rate/steady employment level, while allowing the
inventory surplus to absorb the increased demand

35
 CHASE STRATEGY
 A chase strategy implies matching demand and
capacity period by period.

 This could result in a considerable amount of hiring, firing

or laying off of employees; insecure and unhappy
employees; increased inventory carrying costs; problems
with labor unions; and erratic utilization of plant and
equipment.

36
 CHASE STRATEGY

 It also implies a great deal of flexibility on the firm's part.

The major advantage of a chase strategy is that it allows
inventory to be held to the lowest level possible, and for
some firms this is a considerable savings.

 Most firms embracing the just-in-time production concept

utilize a chase strategy approach to aggregate planning

37
LEVEL VS. CHASE

LEVEL CHASE
• ADVANTAGES • ADVANTAGES

• Stable output rates and • Investment in inventory is

workforce low
• Labor utilization in high
• DISADVANTAGES
• DISADVANTAGES
• Greater inventory costs
• Increased over time and • The cost of fluctuating work
idle time force
• Resource utilizations vary • Potential damage to employee
over time morale

38
TECHNIQUES

Linear Programming
Model

Linear Decision Rule

Simulation

39
INPUTS TO AND OUTPUTS FROM AGGREGATE
PRODUCTION PLANNING
 MASTER PRODUCTION
SCHEDULING

MPS sets the quantity of each end item to be completed in each

time period ( week /month/quarter) of the short-range planning
horizon
Objectives of Master Production Scheduling
1. To schedule end items to be completed promptly and when
promised to customers.

2. To avoid overloading or under loading the production facility

so that production capacity is efficiently utilized and low
production costs result.
 FUNCTIONS OF MPS:

 Translating aggregate plans

 Evaluating alternative master schedules
 Generating material and capacity requirements
 Facilitating information processing
 Maintaining priorities
 Utilizing the capacity effectively
MASTER PRODUCTION SCHEDULE -
FLOW CHART
 MATERIAL REQUIREMENTS
PLANNING

Material Requirements Planning is a computerized information

system that aids the planning of materials in manufacturing
organizations.

MRP is a computer based system in which the given MPS is

exploded in to the required amounts of raw materials, parts and
sub assemblies ,needed to produce the end items in each time
period (week or month) of the planning horizon
OBJECTIVES OF MRP
 To improve customer service by meeting
delivery schedules promised and shortening delivery lead
times.
 To reduce inventory costs by reducing inventory levels.

 To improve plant operating efficiency by better use of

productive resources.

 Three main purposes of a basic MRP system are to:

 Control inventory levels
 Assign operating priorities
 Assign capacity to load production systems.
MRP Inputs MRP Processing MRP Outputs

Changes
Order releases
Master
schedule Planned-order
schedules
Primary
reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports control
reports

Inventory
records Inventory
transaction
 MASTER SCHEDULE

Master schedule: One of three primary inputs in

MRP; states which end items are to be produced,
when these are needed, and in what quantities.

Cumulative lead time: The sum of the lead times that

sequential phases of a process require, from
ordering of parts or raw materials to completion of
final assembly.
 OR
PRODUCT STRUCTURE
FILE
• This file provides the information regarding all the materials,
parts and sub-assemblies that go in to the end of the product. Is
having series of levels each of which represents a stage in the
manufacture of the end product

• The product structure graphically depicts the dependency

relationships among various items that make up the end
product
 TELEPHONE

Connecting Connecting jack

Base Unit 1 Hand Set 1
Level Table 1 2

Micro
Operating Panel B.Cover Speaker H.Cover
phone
Unit 1 Board 1 plate 1 plate 2
1
1

Button Control
Assy Panel
1 1

Button 12 Screw 12 Dial 3 Screw 3 Screw 4 Screw

4
 INVENTORY
STATUS FILE
• The inventory status file gives the complete and up-tp-date
information on the on-hand quantities, gross requirements,
scheduled receipts and planned order releases for the item. It
also includes other information such as lot sizes, lead times,
safety stock levels and scrap allowances etc…

Net requirement for a period = Gross requirement for the period –

Scheduled receipt for the period+ on hand inventory at the end
of the period
 MRP -OUTPUTS

• Primary
1. Planned orders- A schedule indicating the amount and timing of
future orders
2. Order Release- authorizing the execution of planned orders
3. Changes- to planned orders , revision of due dates, order
quantities, cancellation of orders.

 Secondary
 Performance control reports- evaluation of system operations
 Planning Reports- data useful for assessing future MRP
 Exception reports- any major discrepancies encountered , late and
over due orders, excessive scraps
 CAPACITY REQUIREMENT
PLANNING

• It is a technique for determining what labor /personnel

equipment capacities are needed to meet the production
objectives symbolized in the master production schedule
and MRP

• The process of determining the short range capacity

requirements
CAPACITY REQUIREMENT
PLANNING
 CRP
CRP Inputs
Planned orders and Released orders from the MRP System
Loading information from the work centre status file
Routing information from the shop routing file
Changes with modify capacity, give alternative routings or
altered planned orders

CRP Outputs
•Rescheduling information which call for capacity
modifications or revisions of MPS
•Verification of planned orders for MRP system
•Load Reports
HIERARCHICAL APPROACH TO
PLANNING
Business Plan

Marketing Plan Financil plan

Production plan ( Capacity)

MPS

MRP CRP

Detail Scheduling

Shop floor Control

 CAPACITY
PLANNING

Production capacity is defined as the maximum production

rate of a facility or a plant.

Measurement of Capacity

Capacity of a plant can be expressed as the rate of output, units

per day or per week or per month, tones per month, gallons
per hour, labor hour per day.

Capacity may be measured in terms of inputs or output of the

conversion process
• Capacity Decisions
• Major considerations in capacity decisions are
a. What size of plant? How much capacity to install?

b. When capacity is needed? When to phase-in capacity or phase-out

capacity?
c. At what cost? How to budget for the cost?
 Factors Affecting Determination of
Plant Capacity

1. Market demand for a product/service.

2. The amount of capital that can be invested.
3. Degree of automation desired.
4. Level of integration (i.e., vertical integration).
5. Type of technology selected.
6. Flexibility for capacity addition
 Capacity planning involves activities such as:
a. Assessing existing capacity
b. Forecasting future capacity needs
c. Identifying alternative ways to modify capacity

d. Evaluating financial, economical and technological capacity

alternatives

e. Selecting a capacity alternative most suited to achieve the

strategic mission of the firm. Capacity planning involves
capacity decisions that must merge consumer demands with
human, material and financial resources of the organization.
TYPES OF CAPACITY
• Fixed capacity
• Adjustable Capacity
• Design Capacity
• System Capacity
• Potential Capacity
• Immediate capacity
• Effective Capacity
• Normal Capacity
• Actual Capacity
 BENEFITS OF MRP
 Low levels of inventories and reduction in
manufacturing lead time
 Ability to track material requirements hence
reducing shortages
 Ability to evaluate capacity requirements

 Means of allocating production time

 MANUFACTURING RESOURCES PLANNING
(MRP II)
 Involvesthe whole production process, starting with
aggregate planning, then MPS and finally MRP.

 Emphasizes integration with:

 Financial planning
 Marketing
 Engineering
 Purchasing
 Manufacturing
 Personnel
MRP II

Market Master
Finance Manufacturing production schedule
Demand

Adjust master schedule

Marketing
Production
plan MRP

Rough-cut Capacity
capacity planning planning
Adjust
production plan
Yes No Requirements No Yes
Problems? schedules Problems?
 ENTERPRISE RESOURCE PLANNING (ERP)

 Integration
of financial, manufacturing and
human resources on a single computer system.

 Represents expanded effort to integrate

standardized record keeping using one database
that will permit information sharing among
different areas of an organization to manage the
system more effectively.
“An organizational make-over”
 BPR is the fundamental rethinking and redesign of
business processes to achieve dramatic improvements in
critical, contemporary measures of performance, such
as cost, quality, service and speed.
(Hammer & Champy, 1993)
  What is Process
Definition of Process
 A process is a cross-functional interrelated series
of activities that convert business inputs into business
outputs

Supplier Input Activity Activity Activity Output Customer

Process
What is a Business
Process
 Customers
 Demanding
 Sophistication
 Changing Needs

 Competition
 Local
 Global
 Change
 Technology
 Customer Preferences
 Complacency

 Resistance

 New Developments

 Fear of Failure
  WHAT DOES IT
SEEK
 BPR seeks

 Cost
 Quality
 Service
 Speed, improvements
Method Study Questions
for Process Analysis
CHARACTERSTIC
S
 Radical
Improvement

 Stepped Approach
 Process improvements will not happen over night they
need to be gradually introduced
 Also assists the acceptance by staff of the change
 Viable Solutions
 Process improvements must be viable and practical

 Balanced Improvements
 Process improvements must be realistic
 Business Understanding
 Empowerment &
Participation
 Organizational Culture
 Added Value
 BPR Initiatives must add-value over and above the
existing process

 Customer-Led
 BPR Initiatives must meet the needs of the customer
Focus on End-
Customers
 Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan
 Select the Process

 Two Crucial Tasks

 Select The Process to be Reengineered

 Appoint the Process Team to Lead the Reengineering

Initiative
 Review Business Strategy and
Customer Requirements

 Select Core Processes

 Understand Customer Needs

 Don‟t Assume Anything

 Select Correct Path for Change

 Remember Assumptions can Hide Failures

 Competition and Choice to Go Elsewhere

 Ask - Questionnaires, Meetings, Focus

Groups
Appoint the Process
Team
 Capacity to view the organization as a whole

 Ability to focus on end-customers

 Ability to challenge fundamental assumptions

 Courage to deliver and venture into unknown areas

Core Skills Required
 Used to generate internal capacity
 Appropriate when a implementation is needed
quickly
 Ensure that adequate consultation is sought from
staff so that the initiative is organization-led and not
consultant-driven
 Control should never be handed over to the
consultant
 Understand the
Current Process
 Understand the
Current Process
 Develop Communicate
Vision of Improved Process

 Always provide information on the progress of the

BPR initiative - good and bad.

 Demonstrate assurance that the BPR initiative is both

necessary and properly managed
 Develop Communicate
Vision of Improved Process

 Indicate actions required and those responsible

 Tackle any actions that need resolution

 Direct communication to reinforce new patterns of

desired behavior
 Develop an Improvement Plan

 Appoint Process Owners

 Simplify the Process to Reduce Process

Time

 Remove any Bureaucracy that may hinder

implementation
 Remove no-value-added activities

 Standardize Process and Automate Where

Possible

 Up-grade Equipment

 Plan/schedule the changes

 Qualify/certify the process
 Perform periodic qualification reviews
 Define and eliminate process problems
 Evaluate the change impact on the business and on
customers
 Benchmark the process
 Provide advanced team training
 Process Simplification is Common - True BPR is
Not
 Desire to Change Not Strong Enough
 Start Point the Existing Process Not a Blank Slate
 Commitment to Existing Processes Too Strong
 REMEMBER - “If it ain‟t broke …”
 Quick Fix Approach
Common Problems
with BPR
Business Process Reengineering

Current Future
Products/Services Products/Services

Information SD Information
T I
Current RR Future
Business AE Business
Technology Technolog
Processes T C y
Processes
E
T
G O
I
Skills I Skills
N
C S

Current Future
Environments (AS-IS) Environments (TO-BE)

Transition/Implementation (Change
Management)