OPERATIONS AND QUALITY MANAGEMENT (CPT)

MODULE -3

SECOND SEMESTER

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BAPUJI ACADEMY OF MANAGEMENT AND RESEARCH

DAVANAGERE
 M0DULE - 3

PRODUCTION PLANNING AND CONTROL

Production function is that part of an organization, which is concerned with the transformation of
a range of inputs into the required outputs (products) having the requisite quality level.
Production may be understood as ―the step-by-step conversion of one form of material into
another form through chemical or mechanical process to create or enhance the utility of the
product to the user. Thus production is a value addition process. In any manufacturing enterprise,
the main objective of production department is to produce the things in desired quantity at
desired time so that they may be made available to end users when they demand it. Production,
being a very complex process is very difficult to manage for the people. This includes a large
number of activities and operations which need to be planned appropriately and in turn
controlled for the effective production of the output. The main purpose of production planning
and control (PPC) is to establish routes and schedules for the work that will ensure the optimum
utilization of materials, workers, and machines and to provide the means for ensuring the
operation of the plant in accordance with these plans. There are different types of production
systems. The choice of production system depends upon the nature of products, variety of
products and volume of products. These production systems have been discussed in this chapter
in detail. Entrepreneurs, after finalizing the production system to be used are required to go for
the production planning and control (PPC) which essentially depends upon the type of
production system. Production planning and control is necessarily concerned with implementing
the plans, i.e. the detailed scheduling of jobs, assigning of workloads to machines (and people),
the actual flow of work through the system. Production is an organized activity of converting
row materials into useful products. Production system requires the optimal utilization of natural
resources like men, money, machine, materials and time. Production planning and control
coordinate with different departments: such as production, marketing, logistics, warehouse and
other departments depending upon the nature of organization. Production planning and control
receives data related to orders from marketing departments. Production plan based on marketing
and production data is prepared in production planning and control. This production plan
provides clear idea about utilization of manufacturing resources for production. Prepared
production plan is delivered to production department. Production department manufacture
products according to that plan. The ultimate objective of production planning and control, like
that of all other manufacturing controls, is to contribute to the profits of the enterprise. As with
inventory management and control, this is accomplished by keeping the customers satisfied
through the meeting of delivery schedules.

Definition of PPC:

Meaning of Production Planning and Control: PPC is a very critical decision which is necessarily
required to ensure an efficient and economical production. Planned production is an important
feature of any manufacturing industry. Production planning and control (PPC) is a tool to
coordinate and integrate the entire manufacturing activities in a production system. This
essentially comprises of planning production before actual production activities start and then
exercising control over those activities sto ensure that the planned production is realized in terms
of quantity, quality, delivery schedule and cost of production. According to Gorden and Carson,
PPC usually involve the organization and planning of manufacturing process. Principally, it
includes entire organization. The various activities involved in production planning are designing
the product, determining the equipment 11 and capacity requirement, designing the layout of
physical facilities and material and material handling system, determining the sequence of
operations and the nature of the operations to be performed along with time requirements and
specifying certain production and quantity and quality levels. Production planning also includes
the plans of routing, scheduling, dispatching inspection, and coordination, control of materials,
methods machines, tools and operating times. Its ultimate objective is the to plan and control the
supply and movement of materials and labour, machines utilization and related activities, in
order to bring about the desired manufacturing results in terms of quality, quantity, time and
place. This provides a physical system together with a set of operating guidelines for efficient
conversion of raw materials, human skills and other inputs to finished product.

It is the processes of effectively organising, directing, planning, coordinating and controlling the
production, that is the operations of that part of an enterprise, it means to say that PPC is
responsible for the actual transformation of raw materials into finished products.

Objectives of Production Planning and Control:

Production planning and control consists of planning production in a manufacturing organization

before production activities take place and exercising control actions to ensure that the planned

production is realized in terms of quantity, quality, delivery schedule and cost of production.

The main objectives are:

1. To attain maximum utilization of resources.

2. To produce quality products.

3. To minimize manufacturing cycle time.

4. To maintain optimum inventory levels.

5. To maintain flexibility in operations.

6. To achieve coordination between labour, machines, and other supporting departments.

7. To remove bottle-necks at all levels of production.

8. To achieve cost-reduction and cost control.

9. To prepare and maintain the production schedules.

10. To achieve the goals at minimum cost.

ADVANTAGES OF PPC PRODUCTIONS

The implementation of PPC based production system yields various advantages to any
organization for various functional activities, which include the following:

a) Last hour rush is avoided: Production is well planned and controlled as per the given time
schedules. Therefore, production control reduces the number of emergency order and overtime
works on plant and thus reduces the overheads.

b) Problems areas of bottleneck get reduced: The incomplete work or work-in-transit does not
get piled up because production control balances the line and flow of work.

c) Cost reduction: An appropriate production control increases the men-machines utilization,

which maintains in process inventories at a satisfactory level, leads to a better control on raw
material inventories, reduces costs of storage and materials 17 handling, helps in maintaining
quality and limits rejections and thus ultimately reduces the unit cost of production.

d) Optimum utilization of resources: It reduces the time loss of the workers waiting for materials
and makes most effectives use of equipment.

e) Better coordination of plants activities: PPC coordinates the activities of the plant that leads to
control concerted effort by workforce.

f) Benefits to workers: PPC results into better efficiency and productivity, which leads to
adequate wages stable employment, job security, improved working conditions increased job
satisfaction and ultimately high morale.

g) Improved services to customers: PPC leads to better services to the customers as it ensures
production in accordance with the time schedules and therefore, deliveries are made as per the
committed schedules.

MANUFACTURING METHODS AND PPC

JOB PRODUCTION – FUNCTIONS OF PPC

i. Materials are purchased on receipt of the order.

ii. Standard tools are stocked and special tools are either made in house or purchased from
outside.

iii. Process planning activity normally does not exist. Based upon drawings and specification,
supervisor decides the work methods, fixes up the machines and estimates time for completion
of the operation

iv. Schedule is prepared to mark the beginning and finish of each activity. The day-to-day
scheduling is at the discretion of the supervisor.

v. Progressing is through the meeting with the supervisors.

BATCH PRODUCTION- FUNCTIONS OF PPC

Functions are more complex.

i. Materials control and tools control are more important and systematic stock replenishment
system is essential.

ii. Detailed route sheets (process sheets) are prepared.

iii. Loading and scheduling are to be worked out with greater details.

iv. Progressing function is crucial as the detailed data is to be collected on the progress of the
work.

CONTINUOUS PRODUCTION – FUNCTIONS OF PPC

i. Material function is critical.

ii. No tools control because of the nature of the plant.

iii. No process planning activity.

iv. Scheduling is restricted to final quantity required.

v. Progressing requires only recording of final production quantity.

Elements of Production Planning and Control

This is important to note that production plan is the first and the foremost element of PPC.
Planning refers to deciding in advance what is to be done in future. A separate planning
department is established in the organization which is responsible for the preparation of
policies and plans with regard to production to be undertaken in due course. The planning
department prepares various charts, manuals production budgets etc., on the basis of
information received from management. These plans and charts or production budgets are
given practical shape by carrying various elements under production control. If production
planning is defective, production control is bound to be adversely affected. For achieving
the production targets, production planning provides sound basis for production control.
One needs to remember that production plans are prepared in advance at top level
whereas, production control is exercised at machine shop floor (bottom level) where
actual production is taking place. Some important elements of PPC have been depicted in
the figure as below
The important elements may be listed as following:

1. Materials: planning for procurement of raw material, component and spare parts in the
right quantities and specifications at the right time from the right source at the right place.
Purchasing, storage, inventory control, standardization, variety reduction, value analysis and
inspection are the other activities associated with material.

2. Method: choosing the best method of processing form several alternatives. It also
includes determining the best sequence of operations (process plan) and planning for tooling, jigs
and fixtures etc.

3. Machines and equipment: manufacturing methods are related to production facilities

available in production systems. It involves facilities planning, capacity planning, allocations,
and utilization of plant and equipment, machines etc.

4. Manpower: planning for manpower (labour and managerial levels) having appropriate
skills and expertise.

5. Routing; determining the flow of work material handling in the plant, and sequence of
operations or processing steps. This is related to consideration of appropriate shop layout plant
layout, temporary storage location for raw materials, component and semi-finished goods, and of
materials handling system.

Route Sheet: a route sheet is a document providing information and instructions for converting
the raw material in finished part or product. It defines each step of the production operations and
lay down the precise path or route through which the product will flow during the conversion
process. Route sheet contains following information:

a) The operation required at their desired sequence

b) Machines or equipment to be used for each operations

c) Estimated set-up time and operation time per piece

d) Tools, jigs, and fixtures required for operations

e) Detailed drawings of the part, sub-assemblies and final assemblies

f) Specification, dimensions, tolerances, surface finishes and quality standard to be

achieved

g) Specification of raw material to be used

h) Speed, feed etc. to be used in machines tools for operations to be carried on.

i) Inspection procedure and metrology tools required for inspection

j) Packing and handling instructions during movement of parts and subassemblies through
the operation stages.

6. Estimating: Establishing operation times leading to fixations of performance standards

both for worker and machines. Estimating involves deciding the quantity of the product which
needs to be produced and cost involved in it on the basis of sale forecast. Estimating manpower,
machine capacity and material required meeting the planned production targets are like the key
activities before budgeting for resources.
7. Loading: machine loading is the process of converting operation schedule into practices
in conjunctions with routing. Machine loading is the process assigning specific jobs to machines,
men, or work centers based on relative priorities and capacity utilization. Loading ensures
maximum possible utilization of productive facilities and avoid bottleneck in production. It‘s
important to either overloading or under loading the facilities, work centers or machines to
ensure maximum utilization of resources.

8. Scheduling: scheduling ensure that parts and sub-assemblies and finished goods are
completed as per required delivery dates. It provides a timetable for manufacturing activities.

Purpose of scheduling:

a) To prevent unbalance use of time among work and centers and department.

b) To utilize labour such a way that output is produced within established lead time or cycle
time so as to deliver the products on time and complete production in minimum total cost.

9. Dispatching: This is concerned with the execution of the planning functions. It gives
necessary authority to start a particular work which has already planned under routing and
scheduling functions. Dispatching is release of orders and instructions for starting of production
in accordance with routing sheet and scheduling charts.

10. Inspection: This function is related to maintenance of quality in production and of

evaluating the efficiency of the processes, methods and labours so that improvement can be
made to achieve the quality standard set by product design.

11. Evaluating: The objective of evaluating is to improve performance. Performance of

machines, processes and labour is evaluated to improve the same.

12. Cost control: Manufacturing cost is controlled by wastage reduction, value analysis,
inventory control and efficient utilization of all resources.
 AGGREGATE PLANNING

Aggregate production planning is concerned with the determination of production,

inventory, and work force levels to meet fluctuating demand requirements over a
planning horizon that ranges from six months to one year.

The aggregate production approach is predicated on the existence of an aggregate

unit of production, such as the average" item, or in terms of weight, volume,
production time, or dollar value. Plans are then based on aggregate demand for one
or more aggregate items. Once the aggregate production plan is generated,
constraints are imposed on the detailed production scheduling process which
decides the specific quantities to be produced of each individual item.

Importance of Aggregate Planning

• Achieving financial goals by reducing overall variable cost and improving
the bottom line
• Maximum utilization of the available production facility
• Provide customer delight by matching demand and reducing wait time for
customers
• Reduce investment in inventory stocking
 • Able to meet scheduling goals there by creating a happy and satisfied work force

Inputs and outputs to the Aggregate Planning

Inputs to the Aggregate Planning

❖ Capacity constraints

❖ Strategy objectives

❖ Company policies

❖ Demand forecasts

❖ Financial constraints

Outputs to the Aggregate Planning

❖ Workforce level

❖ Production per month

❖ Inventory level
 ❖ Backorders

❖ Subcontracts

Aggregate Planning Strategies

1. Level Strategy

2. Chase Strategy

3. Mixed Strategy

Level Strategy: The production-smoothing plan

As the name suggests, level strategy looks to maintain a steady production rate and workforce
level. In this strategy, organization requires a robust forecast demand as to increase or decrease
production in anticipation of lower or higher customer demand. Advantage of level strategy is
steady workforce. Disadvantage of level strategy is high inventory and increase back logs.

• Produce same amount every day

• Keep work force level constant

• Sets capacity to accommodate average demand

• Often results in lowest production costs

• Often used for make-to-stock products like appliances

• Use inventory or idle time as buffer

• Disadvantage- builds inventory and/or uses back orders

Chase Strategy:

As the name suggests, chase strategy looks to dynamically match demand with production.
Advantage of chase strategy is lower inventory levels and back logs. Disadvantage is lower
productivity, quality and depressed work force.

❖ Match output rates to demand forecast for each period

❖ Produces exactly what is needed each period

❖ Vary workforce levels or vary production rate

❖ Sets equipment capacity to satisfy period demands

❖ Favoured by many service organizations

❖ Disadvantage- constantly changing short term capacity

 Mixed Strategy :

As the name suggests, hybrid strategy looks to balance between level strategy and chase strategy.

As a compromise, a firm might combine the pure strategies, thus designing a mixed strategy.
This mixed strategy varies production capacity slightly up or down as aggregated demand varies.
Drastic changes in production capacity are curtailed, and frequent hiring and lay off situations
are avoided.

Mixed strategies for meeting the demand

• Overtime/ under time production

• Hiring/firing the work force

• Inventory/backordering

• Subcontracting out/in

• Part time/Full time

 MATERIAL REQUIREMENT PLANNING (MRP - I)

MRP refers to the basic calculations used to determine components required from end item
requirements. It also refers to a broader information system that uses the dependence
relationship to plan and control manufacturing operations.
“Materials Requirement Planning (MRP) is a technique for determining the quantity and
timing for the acquisition of dependent demand items needed to satisfy master production
schedule requirements.”
Objectives of MRP
1. Inventory reduction: MRP determines how many components are required when they are
required in order to meet the master schedule. It helps to procure the materials/ components as
and when needed and thus avoid excessive build up of inventory.
2. Reduction in the manufacturing and delivery lead times: MRP identifies materials and
component quantities, timings when they are needed, availabilities and procurements and
actions required to meet delivery deadlines. MRP helps to avoid delays in production and
priorities production activities by putting due dates on customer job order.
3. Realistic delivery commitments: By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
4. Increased efficiency: MRP provides a close coordination among various work centres and
hence help to achieve uninterrupted flow of materials through the production line. This
increases the efficiency of production system.

MRP SYSTEM
The inputs to the MRP system are:
(1) A master production schedule,
(2) An inventory status file and
(3) Bill of materials (BOM).
Using these three information sources, the MRP processing logic (computer programme)
provides three kinds of information (output) for each product component: order release
requirements, order rescheduling and planned orders.
MASTER PRODUCTION SCHEDULE (MPS)
MPS is a series of time phased quantities for each item that a company produces, indicating
how many are to be produced and when. MPS is initially developed from firm customer orders
or from forecasts of demand before MRP system begins to operate. The MRP system whatever
the master schedule demands and translates MPS end items into specific component
requirements. Many systems make a simulated trial run to determine whether the proposed
master can be satisfied.
1. INVENTORY STATUS FILE
Every inventory item being planned must have an inventory status file which gives
complete and up to date information on the on-hand quantities, gross requirements, scheduled
receipts and planned order releases for an item. It also includes planning information such as
lot sizes, lead times, safety stock levels and scrap allowances.
2. BILL OF MATERIALS (BOM)
BOM identifies how each end product is manufactured, specifying all subcomponents
items, their sequence of build up, their quantity in each finished unit and the work centres
performing the build up sequence. This information is obtained from product design
documents, workflow analysis and other standard manufacturing information.
Outputs of MRP:

The outputs of any MRP System are:

a. Planned order schedule which is a plan of the quantity of each material to be ordered in
each time period. The order may be purchase order on the suppliers or production orders for
parts or sub-assemblies on production departments.
b. Changes in planned orders (reschedule notices).
c. "Recommended Purchasing Schedule". This lays out both the dates that the purchased items
should be received into the facility AND the dates that the Purchase orders, or Blanket Order
Release should occur to match the production schedules.
WHERE TO USE MRP :
MRP is the most useful scheduling technique for many industries engaged in fabricating and
assembling products like automobiles, tractor-trailer equipments, Rail coaches, etc., It is
especially suitable for situations where one or all of the following conditions exists :
a) The final product is complex and made up of several levels of assemblies.
b) The final product is expensive.
c) The lead times for components and raw materials are relatively long.
d) The manufacturing cycle is long for the finished product.
e) Consolidation of requirements for several products is desirable so that economic lot sizes
are applicable.
 MASTER PRODUCTION SCHEDULE (MPS)

A master production schedule (MPS) is a plan for individual commodities to be produced in each
time period such as production, staffing, inventory, etc. It is usually linked to manufacturing
where the plan indicates when and how much of each product will be demanded.

An example of a master production schedule (MPS) for manufacturing is usually a spreadsheet

that contains a production plan consisting list of sales orders, from purchase orders and sales
forecasts, and specific time periods that they will be produced within a 3 to 12-month time hori
Master production schedule (MPS) sets the quantity of each end item( finished product) to be
completed in each time period (week or month ) of the short range planning horizon.

MPS is a plan for future production of the end items over a short range planning horizon that
usually spans from few weeks to several months.

OBJECTIVES :

 To schedule the end items to be completed promptly and when promised to customer.
  To avoid over loading and under loading the production facility so that production
capacity is efficiently utilised and low production cost.

TIME FENCES FOR MPS.

 Frozen : Early part of MPS cannot be changed except under extraordinary situations.
Only from the approval of top management.

 Firm : changes can occur but only exceptional cases.

 Full : all the available capacity is allocated to orders. Changes can be made and
production costs will be slightly affected.

 Open : not all the production capacity is allocated and new orders are normally slotted

Benefits of a Master Production Schedule

There are multiple benefits to introducing an MPS in a manufacturing business:

• It provides a solid base for building, improving, and tracking the sales forecast.

• It provides a solid base for determining the desired inventory levels.

• It provides a solid base for calculating the quantities of parts, subcomponents, or raw
materials to purchase or produce, as part of the next stage of Material Requirements
Planning.

• It provides a solid base for calculating the required amount of labor and shifts.

• It allows optimizing the installed capacity and balancing the load of the plant.

• The manufacturing department can estimate the production and maintenance costs
associated with the workstations.
 • The financial department of the company can derive expected revenues and expenses
from the MPS and generate a cash flow forecast. Among other benefits, this will help
build investment plans.

• The HR department can take advantage of the MPS to anticipate the requirements of
hiring labor.

CAPACITY REQUIREMENTS PLANNING

Capacity Requirements Planning, or CRP for short, is a process businesses use to determine their
future resource needs. In other words, it helps business owners figure out how much space,
equipment, and human resources they will need to reach their goals.

Without proper CRP planning, your business may struggle to keep up with demand or face
unexpected expenses down the road.

Definition
Capacity requirements planning (CRP) is the process of establishing, measuring, and adjusting
limits or levels of capacity.

The term CRP in this context refers to determining the labor and machine resources required to
accomplish the production tasks.

Capacity requirements planning is one of the management tools. It helps the company use its
resources efficiently by making its production process accurate.

It determines the capability of the production goal of the company. The company can determine
how many products it can make and meet production objectives through this process.

The inputs required for capacity requirement planning are the capacities of each work center,
open shop order, lead times, routings, and planned order releases.

How do you plan Capacity Requirements?

It is an essential aspect of the company. A company develops its capacity requirement plan based
on some factors.

With the help of the following steps, you can easily plan the capacity requirements.

Discover the requirement at the work level

To find out the work level capacity requirements, you need to arrange the workloads based on
the type of work, the process of work, and the person who does the job.

Once this workload arrangement is completed, define a satisfactory service for every work,
determine the resources required to attain that work, and calculate the amount of work done.

After that, set a service level agreement (SLA) between vendor and customer.

Study the present capacity

Before planning the capacity requirements, analyzing the present capacity is a crucial aspect.
First, you must match the quantification of items referred to in the service level agreement with
their goals.

Then find out the usage of resources. Finally, check out which workload is the leading consumer
of each resource.

Define a plan for future

Estimate the amount of work over certain quarters and figure out the system for satisfying
service level.

Once you plan the capacity requirements, re-evaluation is also more critical. That is because
capacity requirements planning depends on the type of business and industry.

Factors that affect the capacity requirements planning

Some of the factors affect capacity planning. They are

• Type of products: Products with complexity require more time to produce,

lead to delays in the production process, and require more skilled employees
and the most efficient equipment. Simple products need less time. Hence it can
be produced in large volumes within a short period.
• Financial expenditure: Company must have the ability to invest in machinery
or workforce.
• Availability of skilled workforce: If the company has the same qualified or
no skilled employees, it affects the output product’s capacity.
• The capacity of the equipment: Equipment in good condition helps speed up
the production process.

Capacity requirements planning advantages

• CRP plays an essential role in the success of a company.

• It gives a clear picture of the ability of the company to meet its customer
demand.
 • It helps determine how much that company must invest in its employees,
equipment, and materials.
• It helps to find the company’s place in the market.
• It helps to do on-time delivery of the products or services.

Capacity requirements planning disadvantages

• It consumes more time to do the planning. It is easier and less time-

consuming to assign the work to an employee when the project comes than to
schedule it. But by considering the size of your company, you need to execute
CRP. Nowadays, you can speed up capacity requirements planning with the
help of planning tools.
• Maintaining discipline throughout the project in the organization is one of the
disadvantages. You need to schedule the capacity requirements in the exact
structure, and managers or supervisors should consider it their essential task.
Otherwise, there will be a chance of breaking the schedule at the employee
level.

Types of capacity requirements planning strategies

What is the capacity requirements planning strategy?

Capacity requirements planning strategy is the process used to find and add the required capacity
and the available resources to meet the customer demand.

The capacity requirement strategy helps manufacturers to determine the number of raw
materials, machines, and labor resources required for some time to meet customer demand over
products or services.

If there is a lack of capacity planning, it is difficult to meet customers’ demands, leading to

losing the customer.

1. Lead strategy

This method is an aggressive approach. In this method, the manufacturer invests to increase its
resource capacity before increasing actual demand.

This strategy allows the manufacturer to get market share opposite to his competitors. The con of
this method is that there will be a chance of excess inventories when the actual demand is lesser
than the predetermined demand.

2. Lag strategy

This strategy is directly opposite to the lead strategy. In this approach, the manufacturer only
adds the required capacity when the available capacity crosses its limits.

The manufacturer waits to enhance the capacity till the increase in actual demand. In this
method, there is no risk of storing extra inventories.

3. Match strategy

It is the in-between strategy of lead and lag strategies. In this method, the manufacturer gradually
adjusts or boosts the capacity according to the market condition.
4. Dynamic strategy

This is the safest type of approach. In this method, the manufacturer adds the capacity before it is
required by analyzing the sales forecast and actual demand. Hence this strategy is accurate and
less risky.

Capacity Requirements Planning is a business process that identifies the needs of an organization
in terms of production capacity and then plans how to meet those requirements. Capacity can
include labor, equipment, materials, or even space.