Operations Planning and Control

Dr. Komal Goyal

MBA Department
Galgotias Institute of Management and Technology

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Email-ID: komalgoelresearch@gmail.com
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Web of Science(WoS) komal.goyal@galgotia college.edu
23/10/2024 Operations Planning and Control 1
 Unit-1 Introduction

• Meaning and Objective of Production Planning and Control

• Roles and Responsibilities of PPC Manager
• Forecasting Different Techniques of Production Forecast
 Meaning and Objective of
Production Planning and Control

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 Meaning of Production Planning and Control
Production Planning Tool
& Desired Objectives
Production Control

Quantity Production Time

Quality Cost

Production Planning Starts with analysis of the given data, i.e,

• Demand for Products
• Delivery Schedule, etc
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Production Planning and Control (PPC)
•Execution of Plan:
• Once a plan is made, it is executed according to the details provided.
• If there are differences between the actual results and the plan, corrective action is taken.
• Control techniques help achieve the planned targets.
•Definition of PPC:
• PPC is the "direction and coordination of resources towards achieving predetermined goals."
• It ensures smooth operations by providing the right materials at the right time and in the right
quantity.
•Importance of PPC in India:
• In the current competitive manufacturing environment, PPC is vital for:
• Streamlining production activities.
• Maximizing the use of resources to boost productivity.
• It helps coordinate production processes, like a brain controlling a nervous system.

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 Goals of Production Planning and Control (PPC)
•Effective use of resources:
• Ensures that the company uses its resources efficiently.
•Achieve production objectives:
• Focuses on meeting goals related to quality, quantity, cost, and timely delivery.
•Uninterrupted production flow:
• Helps maintain continuous production to meet customer demands.
• Ensures quality and on-time delivery schedules.
•Consistent product supply:
• Supports the company in providing high-quality products to customers regularly.
• Ensures competitive pricing.

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 Need for Production Planning and Control (PPC)
•Pre-production activity:
• PPC involves planning everything before production starts.
•Determines production needs:
• Identifies the requirements for manpower, materials, machines, and the manufacturing
process.
•Ray Wild’s definition:
• Production planning is the determination, acquisition, and arrangement of all facilities
necessary for future production.

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Role of Production Planning and Control in Production
System Design
•Design of Production System:
• PPC not only plans resources but also organizes the entire production process.
•Demand-based Planning:
• PPC establishes a production program based on estimated demand for the company's products.
•Meeting Targets:
• Ensures that production goals are met by effectively using available resources (manpower,
materials, machines).

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Production Control
•Planning Limitations:
• Even with detailed planning, it’s often difficult to achieve 100% production as per the plan.

•Factors Affecting Production:

• Non-availability of materials:
• Shortages or delays in material supply.
• Machine breakdowns:
• Unexpected equipment or plant failures.
• Demand changes:
• Sudden shifts in demand or urgent orders.
• Worker absenteeism:
• Workforce shortages due to absenteeism.
• Lack of coordination:
• Poor communication between different business departments.

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Corrective Actions in Production Control
•Control Function:
• When actual production deviates from the plan, production control takes action.
•Role of Production Control:
• Reviews production progress.
• Takes corrective steps to align actual production with the plan.
•Key Steps in Production Control:
• Initiating production:
• Start the production process as per the plan.
• Progress monitoring:
• Track and review the progress of the ongoing work.
• Corrective actions:
• Take corrective actions based on feedback.
• Report back to production planning to ensure future improvements.

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Objectives of Production Planning and Control (PPC)
1.Systematic production planning:
Ensures efficient production of goods/services.
2.Organizing production facilities:
Manages machines, workers, and other resources to meet production goals in terms of quantity, quality, time, and
cost.
3.Optimum resource scheduling:
Plans the best use of available resources.
4.Coordination with departments:
Works with other departments to ensure a smooth, balanced, and continuous production flow.
5.Meeting delivery commitments:
Ensures that production aligns with delivery schedules.
6.Materials planning and control:
Manages materials to prevent shortages or excess.
7.Adaptability to changes:
Adjusts production based on changing demand or rush orders.

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Roles and Responsibilities of PPC
Manager

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Roles and responsibilities of PPC Manager
• Manage production planning and scheduling to ensure on-time delivery.

• Suggest process improvements to enhance product quality, reduce costs, and

maintain excellent customer service.

• Evaluate system performance and provide recommendations for improvement.

• Supervise team members and ensure they meet their assigned duties effectively.

• Organize job training sessions to help employees meet production goals.

• Ensure the team follows safety and security policies at all times.

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Roles and responsibilities of PPC Manager…

•Review job orders with both customers and the production team to finalize pricing and schedules.

•Monitor job execution and adjust the schedule as needed to meet deadlines.

•Communicate job status updates regularly to customers.

•Attend daily meetings to prioritize production activities for timely delivery.

•Review daily reports to identify and resolve equipment malfunctions, material shortages, or other
issues.

•Assess and decide on equipment, materials, and staffing needs to meet production schedules.

•Coordinate with management to develop company policies and procedures.

•Manage inventory for timely delivery while minimizing transportation costs.

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Forecasting Different Techniques of Production Forecast

1. Brainstorming 3. Graphic Charting

Techniques Technique
2. Goal Oriented
Forecast Technique 4. Matrix Technique

5. Normal Group 6. Delphi 7. Simple Average

Technique Technique Technique

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 1. Brainstorming Technique
The brainstorming technique is a qualitative forecasting method that relies on collaboration among experts to
predict future demand or production needs, particularly useful for new or innovative products. Here’s a breakdown
of how the process works:

• Gather experts: Assemble a diverse group of experts from relevant fields.

• Generate ideas: Each expert provides their forecast, sparking more ideas through discussion.

• Leverage collective knowledge: Use the group's combined insights to develop multiple forecasting scenarios.

• Analyze and refine: Evaluate the ideas and reach a consensus-based forecast.

• Used for: New products or situations where historical data is lacking.

This technique is especially valuable in situations where:

• There is limited historical data available (e.g., for a new product).
• Quantitative methods alone cannot capture the complexity of future trends.
• Multiple perspectives and expertise are needed to forecast demand more accurately.
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2. Goal-Oriented Technique
The Goal-Oriented Forecast Technique is a method where production forecasting revolves around achieving a
predefined objective or target. It is particularly suited to industries where innovation and technological advancements are
essential to meet future production needs. Here's a detailed explanation:
• Set a goal: Define a specific production or business target.

• Identify technological needs: Determine the innovations or advancements required to achieve the goal.

• Forecast technological progress: Estimate when these advancements will be available.

• Plan implementation: Align production strategies with the predicted availability of new technologies.

• Used by: Large companies with R&D departments, typically in innovation-driven industries.
When It's Used:
•Large Companies: This technique is mostly used by large companies that have their own R&D departments, as they can
actively influence technological progress.
•Innovative Industries: It is particularly relevant in sectors like automotive, aerospace, pharmaceuticals, or electronics,
where technological breakthroughs are crucial for growth.
•Long-Term Planning: This method is effective for long-term forecasting, where companies can plan for advancements
over several years.
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3. Graphic Charting Technique
The Graphic Charting Technique forecasts future technological advancements by plotting past developments
on a logarithmic scale. It operates on the assumption that knowledge grows over time. This method helps
estimate when the next significant technological breakthrough is likely to occur.

• Plot past developments: Use a logarithmic scale to chart historical technological progress.

• Assumption: Based on the belief that knowledge and technological advancements expand over time.

• Estimate future breakthroughs: Predict when the next significant technological development will likely
occur.

• Used for: Forecasting future innovations by analyzing past trends in technology.

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4. Matrix Technique

The Matrix Technique combines multiple factors related to the production process, such as technological
developments, product functions, and time considerations, into a matrix. It is a comprehensive and flexible method,
allowing adaptation to changing conditions. This technique is typically used by large companies.

• Combination of factors: Combines technological developments, product functions, and time factors into a
matrix.

• Comprehensive and flexible: Can adapt to changing conditions and is highly flexible.

• Used for: Offering a broad perspective on production forecasting.

• Primarily used by: Large companies due to its complexity and adaptability.

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5. Nominal Group Technique

In the Nominal Group Technique (NGT), group members generate ideas independently. Each member
contributes their own suggestions without initial discussion. Interaction is delayed until all ideas are presented,
ensuring that early opinions don't influence others.

• Independent thinking: Group members generate ideas independently without initial discussion.

• Idea presentation: Interaction occurs only after all ideas are presented by every group member.

• Minimizes early influence: Prevents dominant members from influencing the group in the early
stages.

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6. Delphi Technique
The Delphi Technique is similar to brainstorming but differs in that group members do not interact directly.
Instead, they work remotely, providing feedback from different locations, making personal interaction
impossible. This method is used to gather insights without face-to-face meetings.

• Remote interaction: Similar to brainstorming, but group members don't meet physically or interact
directly.

• Anonymity: Members are located in different places, which removes personal influence from
discussions.

• Used for: Reaching consensus through iterative feedback, especially when personal interaction is not
possible.

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7. Simple Average Technique

•Definition: The simple average (SA) is calculated by averaging demand (sales) over all past periods,
giving each period equal weight.

•Formula: SA = (Sum of Demands for all periods) ÷ (Number of periods).

•Application: Averages can be calculated for different intervals (monthly, quarterly) to minimize
seasonal variation errors.

•Advantage: Reduces the impact of large fluctuations in any single period by smoothing out the data.

•Limitation: Cannot detect changes in underlying demand patterns over time, making it less effective
if trends shift.

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Unit-2 Process of Production Planning
and Control
• Capacity Planning: Concept, Types
• Plant Capacity
• Capacity Planning Strategies
• Routing: Procedure
• Material Flow Pattern
• Scheduling: Production Scheduling
• Machine Scheduling
• Line Balancing
• Loading: Process, Strategies
• Relationship b/w capacity and Loading
• PPC in different production systems

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 Capacity Planning: Concept and Types

Capacity planning involves determining the type and amount of labor

and equipment needed, as well as when they are required. It is typically based on
the available labor or machine hours within a facility. Essentially, capacity
planning is the process of preparing for the quantity or scale of output.

Ability to produce

Hyundai is building 10,000 cars and now at the time of Diwali its sale is going to increase and they
want to produce 12000 units.
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There are four major considerations in capacity planning:

1. Level of demand (What is your demand?)

2. Cost of production (More production less cost)
3. Availability of funds
4. Management policy

Production is only meaningful if products can be sold at a profitable price. A plant's capacity is
usually limited by the current demand level. Stable demand simplifies capacity planning, while
fluctuations in demand complicate resource allocation. Therefore, estimating demand is the first step
in capacity planning. The market size is based on sales potential, not geographical area.

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Importance of Capacity Planning
Capacity planning is important because of below mentioned reasons:

1. Output Rate(Output you can match): Capacity limits the output rate, determining the
company's ability to meet future demand.

2. Operating Costs(less): It influences operating costs since capacity is based on estimated demand.
Discrepancies between actual and estimated demand lead to excess or under capacity, affecting unit
costs and sales.

3. Investment Impact: Capacity decisions directly affect initial fixed investment.

4. Long-term Commitment(Funds for long term): These decisions involve a long-term

commitment of funds, making them difficult to reverse without significant cost.

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Concepts of Capacity in Capacity Planning:
1. Design Capacity: The maximum possible output in an ideal situation within a given time.

2. Effective Capacity: Maximum output achievable considering real-world constraints like product
mix, maintenance, scheduling, and labor issues. It is generally lower than design capacity.

3. Actual Output: The output actually achieved, limited by factors such as machine breakdowns, labor
absenteeism, supply chain disruptions, etc.

Note: The effectiveness of a production system can be measured by two ways:

1. Efficiency: Ratio of actual output to effective capacity.
2. Utilization: Ratio of actual output to design capacity.

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Capacity Planning Classification
1. Long Term Capacity: (Planning for more than three year, Inhouse)

The long-range capacity of an organization is influenced by multiple capacities:

• Design Capacity: Maximum output possible under ideal conditions, as specified by equipment
manufacturers.
• Production Capacity: Maximum output achievable under normal working conditions in a day.
• Sustainable Capacity: Maximum production level achievable under realistic working conditions,
accounting for normal machine breakdowns and maintenance.
• Effective Capacity: Optimal production level, considering predefined job schedules, machine
maintenance, and typical breakdowns.

2. Medium Term Capacity: (Planning between 2 to 3 years, both outsourcing and inhouse)
Strategic capacity planning done for a time frame of 2 to 3 years.

3. Short Term Capacity: (Planning less than 1 years, Outsourcing)

Strategic capacity planning focused on a daily, weekly, or quarterly time frame.

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 Plant Capacity (Factors affecting the plant capacity)

1. Facilities 3. Process

2. Products or 4. Human Factors

Services

5. Operational Factors 6. External Factors

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 1. Facilities:

The design of production facilities plays a critical role in determining effective capacity. It
includes not only the size but also the potential for future expansion. Well-designed facilities
ensure that employees are comfortable in their workspace. Factors like location (proximity to the
market, labor availability, transport costs, and energy sources) are also essential. The layout of the
work area affects workflow efficiency, while environmental conditions such as lighting and
ventilation influence how effectively employees can perform their tasks.

2. Products or Services:

The design of a company's products or services significantly affects capacity utilization. The more
uniform the output, the greater the potential for standardization of materials and processes,
leading to improved capacity use. For example, a restaurant with a limited menu can prepare and
serve meals more quickly. Additionally, the product mix must be considered, as different products
have varying output rates.
Example: Perishable and Non-Perishable goods
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3. Process:

The quantity capacity of a process is a key determinant of effective capacity. However, if the quality of
output does not meet required standards, the rate of output may decrease due to the need for inspections
and rework.

4. Human Factors:

Human factors such as job design, the nature of the job (including the variety of tasks), required
training and experience, employee motivation, leadership style, absenteeism, and turnover rates, all
play a crucial role in determining the rate of output.

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5. Operational Factors:

Key operational factors such as materials management, scheduling, quality assurance, maintenance
policies, and equipment breakdowns play a vital role in determining effective capacity. Delays in
material delivery or poor-quality materials can lower capacity utilization. Inventory issues also
present significant challenges. Additionally, scheduling difficulties may arise when equipment with
varying capabilities is involved.
Example: Machine, Labour

6. External Factors:
External elements like product standards (such as minimum quality and performance requirements),
pollution control regulations, safety measures, and trade union policies significantly impact effective
capacity. These external factors typically act as constraints, limiting the full utilization of capacity.
Example: Competetor policy, government policy
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 Capacity Planning Strategies

1. Lead Strategy 3. Match Strategy

2. Lag Strategy

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There are three primary strategies companies use for capacity planning, each with its own advantages
and drawbacks. Choosing the most suitable one for your company requires careful consideration:

1. Lead Strategy(First Make then Sale): This approach involves increasing capacity in anticipation of future
demand. It allows the company to capture more market share and prevents the risk of being unable to meet
demand spikes. However, it can be costly and risky if the forecasted demand does not materialize.

2. Lag Strategy(Demand then Make): In contrast, the lag strategy focuses on adding capacity only after
demand has been proven. This minimizes the risk of over-investing but can result in missed opportunities and
potential delays in meeting customer demand.

3. Match Strategy(Combination of both Lead and Lag): The match strategy aims for a balance between the
lead and lag strategies by adjusting capacity in small increments as demand fluctuates. This strategy is more
flexible but requires constant monitoring of market trends and operational agility.

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 Routing: Procedure

Raw Materials Process Finished Goods

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 Routing in Manufacturing

• Routing is the process that outlines the path or sequence of operations that raw materials follow
through different machines and steps until the final product is achieved.

• It determines the most efficient and desirable sequence of machines, processes, and operations.

• It helps in planning the exact route for a product from raw material to completion, ensuring an
organized and systematic manufacturing workflow.

The routing process for a new product or component may involve a set of steps
to ensure proper planning and efficiency.

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Routing Procedure for a new product may consists of the following steps:

3. Determination of
1. Determination of what 2. Determination of
Manufacturing Operations
to make and what to buy materials requirement
and Their Sequence

4. Determination of lot 5. Determination of scrap 6. Determination of cost

sizes factors of article

7. Organization of Production
Control Forms

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 Requirement Source of Supply
Vendor selection
determination determination

Purchase order
Goods receipt Order Processing
monitoring

Invoice Verification Payment Processing

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 1. Determination of What to Make and What to Buy:
This step involves deciding whether to manufacture a component in-house or purchase it from an
external supplier.

2. Determination of Material Requirements:

This involves figuring out what materials are needed to meet production needs. The process shows a
cycle of material management activities, which include:
• Requirement Determination: Identifying the materials needed.
• Source of Supply Determination: Finding potential suppliers.
• Vendor Selection: Choosing a supplier based on criteria such as price and quality.
• Order Processing: Managing purchase orders.
• Goods Receipt: Receiving the materials.
• Invoice Verification: Ensuring that the invoices match the received goods.
• Payment Processing: Completing payments for procured goods.

The steps essentially outlines a systematic approach to managing the flow of materials, typically
handled in systems like SAP MM (Materials Management), to ensure a smooth and efficient
production process.
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3. Determination of Manufacturing Operations and Their Sequence:
• The routing section reviews production standards, estimates, and machine capacities to understand the
requirements for manufacturing the product.
• Based on this analysis, it determines the necessary operations and lists them in the correct sequence on a route
sheet.
• The route sheet includes detailed information for each operation:
• Standard Process Time: The expected time to complete each operation.
• Machines Used: Types and number of machines required for each step.
• Materials and Tools Required: Specifications of materials and tools needed to perform each operation.
• This step ensures that all manufacturing processes are systematically organized, leading to efficient production.

4. Determination of Lot Sizes:

•The routing section decides the number of units to be produced in a single batch (lot).
•The determination of lot size depends on the production approach:
• Customer Orders: If products are manufactured to meet specific customer orders, the lot size equals the
order size.
• Stock Production: If products are produced to replenish inventory, the lot size is based on the economic
lot quantity (ELQ) principle, which aims to minimize the total cost of production and inventory holding.
• Scheduled Production: If production is carried out according to a weekly or monthly schedule, the lot size
is determined by the influx of sales orders or backlog while considering the manufacturing capacity.
•Correct lot sizing is crucial to optimize production efficiency, reduce setup costs, and manage inventory effectively.
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5. Determination of Scrap Factors:

• Scrap refers to materials or components that are lost or rendered unusable due to manufacturing defects or wastage
during the production process.

• The routing section needs to account for scrap factors when determining the lot sizes of various components to ensure
enough materials are available to complete the final product despite potential losses.

• It is important to identify where scrap is most likely to occur in the production process:
• Progressive Scrap: Occurs gradually throughout various stages of production.
• Sudden Scrap: May occur all at once after a specific operation.

• Standard scrap factors are established for each stage of production based on experience or historical data related to
scrap.

• Accurate scrap estimation helps in minimizing material wastage, improving efficiency, and ensuring the availability of
adequate materials for uninterrupted production.

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6. Determination of the Cost of the Article:

• While cost estimation is mainly the responsibility of the cost management or accounting department, the
routing section also plays a role by providing crucial data on the manufacturing operations and materials.
• The cost estimation involves:
• Direct Material Costs: The cost of raw materials needed for the production of the components and the
final product.
• Direct Labor Costs: The cost of labor required for performing the various manufacturing operations.
• Indirect Costs: These include both specific indirect expenses (associated with certain operations) and
general indirect expenses (overhead costs such as utilities, maintenance, etc.) allocated to the product.
• By summing up these expenses, the total cost estimate for manufacturing the component parts and the final
product is calculated.

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7. Organization of Production Control Forms:

• The types of production influence the forms required by the plant departments.
• Production control is organized around a schedule in the case of mass manufacturing.
• Job order manufacturing requires various control forms, such as:
• Job cards: Used for tracking the progress and time spent on specific jobs.
• Shop orders: Outline work instructions and tasks.
• Labor cards: Record labor hours for each operation.
• Production control forms can be costly to use, so it's important to:
• Minimize the number of forms while still maintaining the required degree of control.

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 Material Flow Patterns

• Flow patterns means the system to be adopted, for the movement of raw
materials, from the beginning up to the end of manufacturing.
• Objective of the flow pattern is to plan the economical movement of the raw
materials throughout the plant.
Example: MacDonalds
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 The flow patterns affect the following things:

1. Materials handling cost(Tells us what is the handling cost)

2. Amount of work-in-process(Time required)
3. Capital and space tied up by work-in-process
4. Length of the total production time
5. The rate of performance and coordination of operations
6. Amount of physical and mental strain on the operators
7. Supervision and control mechanisms
Factors affecting flow pattern:

1. External transport facilities

2. Number of products to be handled
3. Number of operations on each product
4. Number of units to be processed
5. Number of sub-assemblies made up ahead by assembly line
6. Size and shape of available land
7. Necessary flow between work areas
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 Types of flow patterns

Horizontal Flow lines Vertical Flow lines

(Single Floor) (Multi-Story Floor)
• Processing downward or upward
• I-Flow or Line Flow
• Centralized or Decentralized elevation
• L-Flow
• Unidirectional or Retractional flow
• U-Flow
• Vertical or Inclined flow
• S-Flow (Seeds by shaking)
• Single or Multi-flow
• O-Flow (Repeat flow, if it will come
multiple time on same)

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1. Processing Downwards or Upwards
In downward processing, the materials are fed from the top floor and in the upward processing the
materials are fed from the bottom floor while the finished products is received at the top floor.

2. Centralized or Decentralized elevation

• Centralized elevation:
• All material handling devices are installed at one central place in the building.
• This system is economical in supervision and maintenance.
• It can sometimes reduce installation costs.
• This method is usually used when the flow on each floor follows a U-flow pattern.
• Decentralized elevation:
• It is more costly in installation, maintenance, and space.
• Handling on each floor is greatly reduced, making operations more efficient.
• Allows for more flexibility in the design of flow lines.

3. Unidirectional or Retractional flow

In the retractional flow, material has to come back on the floor which had already passed previously.

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4. Vertical or Inclined flow
This type of flow is more economical and carried on with material handling devices such as elevators, chutes,
buckets etc. Whereas, inclined flow may be caused by conveyor belts as used in coal handling plants

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 Scheduling: Production Scheduling

Which activity will happen when…

i.e. Schedule the process

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 • Production scheduling has become a must for manufacturing operations that wish to take
their production facility to the next level. Production scheduling is the allocation of
resources, events, and processes to create goods and services.

• A business can adjust its production scheduling based on the availability of resources and
client orders. The goal of a production schedule is to adequately balance customer needs
with the resources that are available whilst operating in a cost-effective manner.

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Components of Product Scheduling:

Planning: The planning component of production scheduling is by far the most important. The planning
component pertains to deciding in advance what should be done in the future which is the most crucial
step in production scheduling. Without a plan, production scheduling can not even begin or take place.
Preparing a plan through charts, production budgets, or various others visual representations can provide a
sound basis for steps down the road pertaining to production.

Routing: Production routing is the process that pertains to determining the route or path that a product
must follow. This route entails the path from raw materials until it transform into a finished product. The
main objective of this component is to locate and perform the most economical and enhanced sequence of
operations in the production process.

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 Scheduling: Scheduling coincides with the time and date that the operation
must be completed. Scheduling is an essential and crucial portion of
production scheduling and lays the foundation and groundwork for all of
the steps within the production process. There are three types of scheduling
that an operations utilize, such as master scheduling, manufacturing or
operation scheduling, and retail operation scheduling. Overall, scheduling
is key for a manufacturing operation to proceed.

Dispatching: Dispatching relates to the process of initiating production

with a preconceived production plan. Dispatching is concerned with giving
a practical shape to an overall production plan.

Example: Milk Business

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 Machine Scheduling

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Single-machine scheduling or single-resource scheduling is the process of assigning a group of tasks
to a single machine or resource. These task are arranged so that one or many performance measures
may be optimised.
• Shortest processing time (SPT)
• Earliest due date (EDD)

• Computational
• Genetic Algorithms
• Neural Networks
• Simulated annealing
• Ant colony optimization
• Tabu Search

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 Line Balancing

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 “Line Balancing” in a layout means arrangement of machine capacity to secure
relatively uniform flow at a capacity operation.

Methods of Line Balancing:

• The one possibility in the right direction, as far as balancing the line is concerned,
would be to increase the output.

• The second possibility is that another product may be sent close to the first one so that
some idle machines may be used jointly.

• The third possibility may be to estimate the output of the last two work stations.

• This can be taken as the minimum output of all the intermediate work stations.

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 Loading: Process, Strategies

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•Definition:
• Loading refers to the assignment of work to machines, work centers, or operators. It aims to
balance workloads and optimize resource use.
•Purpose:
• Ensures efficient utilization of capacity in the production process.

The Loading Process

•Step 1: Identify Capacity
• Evaluate the capacity of machines, work centers, or employees.
•Step 2: Distribute Work
• Allocate tasks based on available resources and priority.
•Step 3: Monitor and Adjust
• Track progress and adjust assignments to address bottlenecks or delays.
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Loading Strategies Overview
•Infinite Loading
• Schedules work without considering resource constraints.
• Suitable for high flexibility in adjusting capacity.
•Finite Loading
• Schedules work within the limits of actual capacity.
• Ideal for environments with fixed capacity constraints.

Scheduling Approaches in Loading

•Forward Scheduling
• Starts jobs as soon as resources become available.
• Helps in predicting earliest completion dates.
•Backward Scheduling
• Begins jobs at the latest possible time to meet due dates.
• Focuses on meeting deadlines efficiently.
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Factors Influencing Loading Decisions
•Resource Availability: Machine, labor, and material constraints.
•Job Priority: Urgency and importance of tasks.
•Setup Times: Time required for machine changeover.
•Production Flexibility: Ability to adjust schedules and resources.

Key Benefits of Effective Loading

•Optimized Resource Utilization: Maximizes the productivity of machines and labor.
•Reduced Lead Times: Shortens the time required to complete jobs.
•Enhanced Workflow Management: Minimizes bottlenecks and idle time.
•Improved On-Time Delivery: Increases the ability to meet customer deadlines.

Challenges in Loading
•Handling Capacity Variations: Managing fluctuating resource availability.
•Complexity in Multi-Product Environments: Scheduling diverse products with varying requirements.
•Balancing Efficiency and Flexibility: Ensuring optimal loading while remaining adaptable to changes.
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 Relationship b/w capacity and loading

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Load is the amount of work that MUST be done, amount of
work schedule ahead of a manufacturing facility.

Capacity is the amount of work that CAN be done, and

measures the highest output of work expressed as a rate with
current product specifications, work force, plant, equipment
etc.

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PPC in different production systems i.e. Job, Batch, Mass
(Assembly) and continuous

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 Batch Process

Batch Process refers to a process that consists of a sequence

of one or more steps that should be performed in a defined
order. A finite quantity of product is produced at the end of
the sequence, which is repeated order to produce another
product batch.

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• A flexible assembly system is appropriate when:

• A wide variety of products and /or parts is to be manufactured on same equipment.

• Products have a short life cycle.

• Environmental Uncertanities are taken into account in order for a firm to

accommodate internal changes and external influences.

• Offshore competition can produce products at much lower costs than can traditional
manufacturing.

• Parts can be easily damaged by over-handling through manual cells.

• A high degree of accuracy and repeatibilty is required.

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 Unit-3 Aggregate Planning
• Aggregate Planning: Meaning, Strategies and Cost
• Concept of Aggregate Planning
• Capital Intensive
• Labour Intensive
• Fashion Industries
• Materials Requirement Planning (MRP I)
• Manufacturing Resource Planning (MRP II)
• Master Production Scheduling
• Enterprise Resource Planning (ERP) and Global Practices
 Aggregate Planning: Meaning,
Strategies and Cost

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Aggregate Planning - Overview
• Developing a schedule for overall operations
• Balances capacity and demand to minimize costs
• Targets sales forecasts, production, inventory, and backlogs
• Medium-term plan (3-18 months)

Objectives of Aggregate Planning

• Minimize costs while meeting demand
• Avoid short-term scheduling fluctuations
• Provide a longer-term perspective on resource use
• Basis for detailed production scheduling (e.g., MPS in MRP)

Concept of "Aggregate" in Planning

• Planning considers resources collectively (e.g., product line)
• Aggregate units may include:
• Total workers, machine hours, or raw material tons
• Output in gallons, pounds, or service hours
• Does not distinguish among variations (sizes, colors, etc.)
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Steps in Aggregate Planning
• Determine demand forecast and current capacity
• Express capacity as total units per time period
• Balance demand and capacity
• Increase or decrease capacity
• Modify demand
Strategies to Increase Demand
• Vary Pricing: Offer discounts during low-demand periods
• Promotions: Advertising and direct marketing
• Backordering: Postpone delivery to shift demand
• New Demand Creation: Introduce complementary products/services

Strategies to Adjust Capacity

• Hire/Lay Off Workers: Adjust workforce to meet demand
• Overtime/Extra Hours: Temporary capacity increase
• Part-time/Casual Labor: Use temporary workers
• Inventory Management: Build stock in low-demand periods
• Subcontracting: Outsource to increase capacity
• Cross-Training: Multi-skilled employees increase flexibility
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Additional Capacity Adjustment Methods
• Employee Sharing: Partner with counter-cyclical firms
• Innovative Solutions: Assign meaningful projects during slack times

Aggregate Planning Costs

•Costs include:
• Workforce changes (hiring/layoffs)
• Inventory holding
• Overtime and subcontracting
• Backordering penalties
•Goal: Minimize overall costs while meeting demand

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 Concept of Aggregate Planning

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Aggregate Planning Strategies Overview
• Three main strategies for aggregate planning:
• Level Strategy
• Chase Strategy
• Hybrid Strategy

Level Strategy
• Definition: Maintains steady production rate and workforce levels.
• Requirements: Requires accurate demand forecasting.
• Advantages:
• Stable workforce levels.
• Disadvantages:
• High inventory levels.
• Potential for increased backlogs.

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Level Strategy
• Definition: Maintains steady production rate and
workforce levels.
• Requirements: Requires accurate demand forecasting.
• Advantages:
• Stable workforce levels.
• Disadvantages:
• High inventory levels.
• Potential for increased backlogs.

Chase Strategy
• Definition: Matches production dynamically with changing demand.
• Advantages:
• Lower inventory levels.
• Reduced backlogs.
• Disadvantages:
• Lower productivity and quality.
• Potentially demoralized workforce.
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 Hybrid Strategy
• Definition: Balances between level and chase strategies.
• Approach: Combines elements of both strategies for flexibility.
• Goal: Achieve a balance between steady production and demand matching.

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Long-Term Decisions in Aggregate Planning
• Time Frame: Typically 2-10 years.
• Focus: Aligns with company goals and objectives.
• Key Aspects:
• Product and market planning.
• Financial planning.
• Resource planning (facilities and personnel).

Intermediate Decisions in Aggregate Planning

• Time Horizon: Typically 12-18 months.
• Focus: Production planning and output requirements.
• Considerations:
• Major product groups.
• Labor hours needed for production.
• Workforce output capacity.

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 Short-Term Decisions in Aggregate Planning
• Time Frame: Short-term actions following long-term and intermediate plans.
• Key Areas:
• Materials planning.
• Capacity requirement planning.
• Final assembly scheduling.
• Production activity control.
• Impact: Ensures timely production to meet intermediate and long-term goals.

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 Impact of Intermediate Planning on Employment
• Workforce Levels: Determines labor requirements.
• Capacity Planning: Influences short-term decision-making capabilities.
• Objective: Aligns workforce output with demand forecasts.

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 Capital Intensive

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Capital Intensive - Overview
• Definition: Technique where a larger amount of capital is used per unit of
output compared to labor-intensive methods.
• Key Advocates:
• Prof. Harvey Leibenstein, Paul Baran, Rostow, Hirschman, Maurice
Dobb, Mahalanobis.
• Purpose: Accelerates economic growth, especially in less developed countries.

Capital Intensive in Less Developed Countries

•Paul Baran's View:
• Essential for industrialization in developing countries.
•Rationale:
• Leverage scientific and technological advancements from developed nations for faster
growth.

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 Characteristics of Capital Intensive Technique
•Higher Capital Usage:
• More capital used per unit of output compared to labor.
•Application Examples:
• Modern factory methods for consumer goods production.
• Mechanized methods for infrastructure projects (e.g., roads, irrigation).
•Advantages:
• Lower labor costs due to automation.
• Higher productivity, leading to increased net output per unit of capital.

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Capital vs. Labor Intensive Technique
•Comparison:
• Capital-intensive uses more capital with the same labor to increase output.
• Labor-intensive relies more on human labor.
•Economic Implications:
• Capital-intensive methods are favored for large-scale industrial projects.

Diagram Explanation - Isoquant Curve

•Isoquant Curve (Q):
• Represents different combinations of labor and capital that
produce the same output level.
•Capital Increase:
• Output can be increased by using more capital (OC1) while
keeping labor (OL) constant.

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 Labour Intensive

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Labour Intensive - Overview
• Definition: Production technique using a larger amount of labor and smaller amounts of capital.
• Key Concept: More labor combined with less capital for production.
• Prof. Myint's Definition: "Labor-intensive methods require a large quantity of labor with a given
unit of capital."

Characteristics of Labour Intensive Technique

• Emphasizes Human Labor: Uses more labor input compared to machinery or automation.
• Lower Capital Requirement: Less capital investment for machinery and equipment.
• Production Flexibility: Possible to increase output by adding more labor while keeping
capital constant.

Objectives Fulfilled by Labour Intensive Technique

• Capital Formation: Helps in the gradual build-up of capital through increased production.
• Skill Development: Promotes the use of skills and manual effort in production processes.

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Applications in Agriculture
•Increasing Agricultural Production:
• Use of minor irrigation, better seeds, manure, and simple tools.
• Introduction of short-duration crops to enhance output.

Illustration of Labour Intensive Technique - Isoquant Diagram

•Isoquant Q: Represents initial output level using labor (OL) and capital (OC).
•Higher Output (Q1): Achieved with the same capital (OC) but more labor (OL1), demonstrating labor-
intensive nature.

Advantages of Labour Intensive Technique

•Job Creation: Provides more employment opportunities.
•Lower Capital Investment: Suitable for economies with limited capital resources.
•Supports Small-Scale Industries: Ideal for industries that rely on manual labor.

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Disadvantages of Labour Intensive Technique
•Lower Productivity: May not match productivity levels of capital-intensive methods.
•Quality Variability: Greater chance of inconsistency in output quality.
•Labor-Intensive Costs: Higher labor costs may arise if demand for skilled labor increases.

Comparison with Capital Intensive Techniques

•Labour Intensive:
• More labor, less capital.
• Suitable for labor-abundant economies.
•Capital Intensive:
• More capital, less labor.
• Suitable for large-scale industrial projects.

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 Fashion Industries

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Fashion Industries - Aggregate Planning Overview
•Definition: Process of selecting merchandise and planning inventory for retail in the
fashion industry.
•Goal: Ensure appropriate mix and quantity of inventory to meet customer demand.
•Importance: Helps reduce out-of-stock and overstock issues.

Strategic Business Objectives (SBO)

•Role in Planning: Guide assortment planning based on measurable goals and
target market analysis.
•Influencing Factors:
• Market research related to the apparel retailer's target audience.
• Budget constraints shape SBOs and inventory selection.

Product Categories in Fashion Industry

•Types of Categories:
• Basics: Long life cycle products, e.g., traditional black skirt.
• Fashion Basics: Seasonal variations in color and fabric.
• Fashion: Latest trends with shorter demand windows.
•Assortment Planning Variations: Different strategies used for each category.
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Style Placeholders in Assortment Planning
•Definition: Early planning step that establishes placeholders within categories.
•Purpose: Allows forecasting before final product specifications.
•Attributes Considered: Style, price points, sizes, colors, units, SKU counts.

Forecasting in Fashion Aggregate Planning

•Data Utilized: Financial and sales reports segmented by product category.
•Analysis:
• Identify historical, current, and future trends.
• Evaluate data variances, sell-through rates, inventory turns, and end-of-season
excess.

Aggregate Planning in Fashion Industries

•Process: Project market demand and evaluate production capacity.
•Key Variables: Workforce size and financial resources.
•Objective: Match production capacity with market demand for a specific period.

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Informal Tools in Aggregate Planning
•Usage: Basic tables, charts, and graphics aligned with data processing systems.
•Advantages: Useful for comparing alternative supply management methods.
•Disadvantages: May not always provide the most optimal aggregate plan.

Mathematical Techniques for Aggregate Planning

•Linear Programming: Used to evaluate production rates and resource needs.
•Assumptions: Determinism is factored into the calculations.
•Challenges: May not account for unpredictable market changes.

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 Heuristic Methods in Aggregate Planning
•Definition: Techniques based on the experience and knowledge of planners.
•Application: Used to establish production ratios and inventory levels.
•Examples: Judgments based on past experiences and industry best practices.

Budget Considerations in Aggregate Planning

•Role of Budget: Shapes estimates for production capacity.
•Factors Influencing Budgets:
• Existing inventory levels and historical purchasing patterns.
• Human resource capabilities and revenue allocations.
•Interrelationship: Aggregate planning and budgeting are closely connected functions.

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 Materials Requirement Planning (MRP I)

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Materials Requirements Planning (MRP I) - Overview
•Definition: A system used in manufacturing to efficiently manage materials, inventory, and production
schedules.
•Purpose: Eliminates manual planning and ensures materials are organized for assembly.
•Importance: Helps manufacturers meet growing demand by streamlining the supply chain.

MRP I Functions
•Systemic Approach: Utilizes data analysis and integration to maintain production schedules.
•Decision-Making Capabilities: Supports steady flow of materials throughout the supply chain.
•Benefits: Although it doesn't run a facility on its own, it significantly optimizes material
management.

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Key Functions of MRP I
•Inventory Management:
• Ensures materials are available when needed.
• Automates material orders and alerts for delivery readiness.
•Cost Reduction:
• Reduces holding costs and untimely delivery expenses.
• Contributes to increased revenue through efficient inventory flow.
•Production Optimization:
• Enhances the efficiency of equipment and workforce.
• Maintains steady material flow for a faster production process.

Benefits of Implementing MRP I

•Efficiency: Improves material management and production scheduling.
•Automation: Reduces the need for manual data entry and planning.
•Cost-Effectiveness: Lowers inventory-related costs and increases operational revenue.

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Advanced Planning and Scheduling (APS) Integration with
MRP
•APS Overview: Software that extends MRP capabilities to optimize production.
•Features of APS:
• Resource Scheduling: Allocates resources efficiently.
• Schedule Optimization: Streamlines production schedules.
• Capacity Planning: Ensures production capacity is utilized effectively.
• Order Management: Manages order processes to meet demand.

APS and MRP - A Powerful Combination

•Integration Benefits:
• Enhances the functionality of MRP systems.
• Provides more comprehensive control over the production process.
•Outcome: Improves overall facility performance and meets production goals.

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Materials Requirement Planning (MRP II)

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Master Production Schedule (MPS) - Overview
•Definition: A detailed production plan specifying the quantity of each product to be manufactured over a
set period.
•Based on: Customer demand, production capacity, and available resources.
•Purpose: To efficiently manage resources and meet customer demands without overproduction or
underproduction.
•Time Frame: Typically covers several weeks to months, depending on the business nature.

Functions of MPS
•Balancing Demand and Supply: Matches production with customer orders, forecasts, and inventory
levels.
•Guiding Production Planning: Provides detailed information on production needs, quantities, and
deadlines.
•Facilitating Coordination: Ensures harmony between departments such as sales, production,
procurement, and inventory.
•Improving Customer Service: Helps ensure products are available when needed, reducing delays.

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Functions of MPS (Continued)
•Capacity Planning: Identifies if the production system can meet demand; suggests resource adjustments
if needed.
•Inventory Management: Minimizes excess inventory by aligning production with demand.
•Cost Control: Reduces production costs by streamlining resources and avoiding excess inventory or
last-minute changes.

Determinants of MPS
•Demand Forecast: Estimates based on historical data, market trends, and sales projections.
•Production Capacity: Available resources such as labor, machinery, and other inputs.
•Inventory Levels: Adjusts production based on existing inventory.
•Lead Times: Considers the time required to procure, produce, and deliver products.

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Additional Determinants of MPS
•Seasonality: Accounts for seasonal fluctuations in demand.
•Order Backlogs: Prioritizes existing backlogs over new orders.
•Available Resources: Considers the availability of raw materials, labor, and equipment.
•Manufacturing Constraints: Adjusts for constraints like equipment breakdowns or supply chain
• disruptions.

Uses of MPS
•Production Planning: Provides a roadmap for production runs and resource allocation.
•Capacity Management: Identifies potential bottlenecks and suggests capacity adjustments.
•Inventory Control: Ensures optimal inventory levels to prevent overproduction or stockouts.
•Sales and Operations Planning (S&OP): Aligns production plans with sales forecasts.

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 Additional Uses of MPS
•Resource Allocation: Helps allocate labor, machinery, and materials efficiently.
•Supplier Coordination: Informs suppliers about production schedules for timely raw material
availability.
•Cost Management: Optimizes production and inventory management to reduce costs.
•Improved Decision-Making: Provides data for informed decisions on production, inventory, and
resource management.

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 Enterprise Resource Planning (ERP) and
Global Practices

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Introduction to ERP
•Definition:
• ERP is a comprehensive software system that integrates and manages core business processes,
such as finance, HR, supply chain, and manufacturing, into a unified platform.
•Purpose:
• Streamlines operations, enhances data visibility, and supports strategic planning by centralizing
data and standardizing processes.

Key Functions of ERP

•Integrated Data Management:
• Centralizes data from various departments, ensuring consistency and accuracy.
•Process Automation:
• Automates routine tasks and workflows to improve efficiency and minimize errors.
•Resource Planning and Allocation:
• Helps in budgeting, forecasting, and optimal use of resources like finances, materials, and labor.
•Streamlined Operations:
• Facilitates coordination across departments for seamless business execution.
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ERP Components
•Modules:
• Functional areas such as finance, HR, supply chain, manufacturing, sales, and CRM.
•Database:
• Central repository for all organizational data.
•User Interface:
• User-friendly screens and dashboards for data entry and reporting.
•Reporting and Analytics:
• Tools for generating reports and analyzing key performance indicators (KPIs).

Additional ERP Components

•Integration Middleware:
• Facilitates data exchange between modules and external systems.
•Security and Access Control:
• Protects data through user authentication and role-based access controls.
•Workflow Management:
• Automates business processes and approvals.
•Customization and Configuration Tools:
• Allows for adaptation to unique business needs.
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 ERP Implementation Process

1.Initiation and Planning:

Define project scope, objectives, and team.
2.Requirements Gathering and Analysis:
Document business processes and system requirements.
3.Vendor Selection:
Evaluate ERP vendors and solutions.
4.Customization and Configuration:
Align ERP with business processes.
5. Data Migration and Integration:
Transfer and validate data from legacy systems.
6.Training and Change Management:
Prepare staff for ERP use and address resistance.
7.Deployment and Go-Live:
Launch ERP system and monitor performance.
8.Post-Implementation Support and Optimization:
Ongoing support, monitoring, and improvements.
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 Challenges of ERP Implementation

•Complexity and Customization:

• High effort needed for customization may lead to delays and cost overruns.
•Integration with Legacy Systems:
• Difficulties with incompatible data formats and structures.
•Change Management:
• Resistance to changes in processes and roles.
•Data Quality and Migration:
• Ensuring data accuracy and integrity during migration.
Cost Overruns and ROI:
Unexpected costs and challenges in calculating ROI.
User Adoption and Training:
Resistance due to unfamiliarity or inadequate training can reduce effectiveness.

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 Conclusion

•ERP Benefits:
• Enhances data integration, automates processes, and improves resource planning.
•Implementation Considerations:
• Requires careful planning, robust change management, and ongoing support.
•Future of ERP:
• Continuous advancements to meet evolving business needs.

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