PRODUCTION PLANNING AND CONTROL

In an organization, operations system is responsible to fulfill demand of market by producing

products at the right time. A motorbike company takes a conscious decision to produce
1,00,000 bikes monthly. Changing the monthly production rate is not simple and instantaneous
decision. Operating systems require different types of resources such as labour, resources,
market and materials etc. Effective production planning is the key to successful operations in
a production system. Planning is possible from strategic level to operational level, time horizon
becomes shorter.

Aggregate planning is an intermediate term planning approach. Here operations manager

develops medium- range plans of how they will produce products for next 9 to 12 months.
These plans specify the amount of labour, subcontracting, and other sources of capacity to be
used.
Production - Planning Hierarchy
Long range planning deals with capacity planning such as opening a new plant etc. Next is
aggregate planning which is done for about a year. Decisions related to hiring or firing of
workers, subcontracting, overtime planning, facility modifications are made in aggregate
planning. Then master production schedules disaggregate plans for specific products. This is a
short range from few weeks to 3 months planning horizon. Master Production Schedule drives
production planning and control systems for production schedules of parts and assemblies to
be manufactured, schedules of purchased materials, shop- floor schedules and workforce
schedules.
Aggregate Planning
The aggregate plan deals in totality with the demand and supply side of a firm's activities
for its all products. Aggregate planning helps in optimal loading of facilities to minimize
production costs, to plan sufficient production capacity to meet expected aggregate demand
and finally, to get the most output for the available resources. Aggregate demand is an
important input for aggregate planning. Aggregate demand is the total of demand of various
products offered by a company over a period of time.
Costs associated with Aggregate Plans
1 Straight - time labour cost :- Straight time labour rates are paid to labours. Normally 8 hrs.
per day for a six day week are considered straight time. The sources of labour are full time and
part time present employees, new hires, and workers who have been laid off and can be
recalled.
2. Overtime Cost :- Cost associated with payments for overtime work. Overtime work is done
after normal working hours. Rates of overtime is normally more than straight time rates.
3. Inventory holding Cost :- Cost assoiciated with holding extra production in previous periods
for shipment in later time periods
4. Subcontracting Cost :- Cost associated with production of products by suppliers.
5. Back ordering Cost :- Cost in terms of penalties for fulfilling previous periods demand in
subsequent periods.

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Aggregate Planning Techniques
Traditional aggregate planning techniques are based upon three factors number of workers,
utilization of workers, and inventory size. In different techniques, one factor is variable while
two factors are kept constant.
Level strategy and chase strategy are two basic types of aggregate planning technique.
Level Strategy
In the level strategy, production capacity is held constant over the planning period. Therefore
inventory size becomes variable keeping number of workers and utilization of workers
constant. During months of low demand, the excess production are kept as inventory. During
high demand months, demand is fulfilled from inventory. In this strategy cost of hiring and
training new workers is zero, cost of laying off is also zero.
Chase Strategy
This is opposite of level strategy where no inventory is kept. Production capacity is varied in
each period to exactly match the forecasted aggregate demand in that period. During periods
of high demand, additional workers are hired, the number of working hours is increased,
overtime is done and more capacity is obtained by outsourcing the unmet demand. During
periods of low demand, some workers are laid off, and some may be asked to work for less
than straight time hours. This approach is more suitable when stocking of inventory is not
possible.
Mixed Strategies
Level and Chase Strategies are generic strategies for aggregate production planning. Mixed
Strategies are combinations of two pure strategies in different ways. Sometimes no hiring or
firing is done, but production rate is adjusted by varying the number of shifts or by
subcontracting etc.
In most cases, we maintain level production during periods of low demand by stocking
inventory and chase the demand by additional alternatives during periods of high demand.
Disaggregating the Aggregate Plan
Aggregate plan deals with aggregate demand. It does not give specific information as to how
many units of different models of the product are to be produced. Disaggregation of aggregate
plan is necessary to plan resources for individual models. Master Schedule is the result of
disaggregation of an aggregate plan. Master production Schedule (MPS) is a critical linkage
between planning and execution of operations. While aggregate production planning ensures
that adequate capacity is available in a period - by period basis, organizations need to relate the
capacity needs of specific varieties of products and services that they offer to the overall
capacity available.
Based on the customer orders, forecasts, inventory status reports and production capacity
information, most urgent orders are placed in the earliest available open slot of the MPS.
Rough Cut Capacity Planning
Rough cut capacity is a preliminary check of MPS to determine the effect on the loading of the
production work centers. Objective is to identify any week in the MPS where under loading or
overloading of the production capacity occurs and revise the MPS as required.
Underloading :- Not enough production of end items has been scheduled to fully load the
facility.
Overloading :- Too much production of end items has been scheduled and capacity is
insufficient.

Material Requirement Planning

It is a computerized planning system to handle problems of high inventories in organizations.

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MRP system consider lead time, inventory status, and MPS to ensure production items are
available at the time of requirement. From the point of MRP, two types of inventories exist in
organizations. Operating inventory and distribution inventory. Operating inventory consists of
materials, components which are to be consumed in production process, while distribution
inventory is of finished products which are to consumed by market resources.
A MRP record has information about Gross Requirements, scheduled receipt of material from
previous plans, projected on hand inventory, planned receipts of material and planned order
releases. Planned order release is made according to lead time, so that receipts of these orders
should support
gross requirements.
MRP II is new concept of MRP. MRP II stands for manufacturing resource planning. MRPII
is base for Enterprise Resource Planning (ERP). Both MRP II and ERP are concerned with the
manufacturing aspects of the expanded model. These include conventional Material
Requirements planning and scheduling. They are integrated into purchasing, functions, sales
order, costing, accounts receivable and payable, general ledger, etc.
MAINTENANCE MANAGEMENT
Maintenance is a basic function in any organization for the upkeep and running of the
system. Every production manager wants to make sure that the equipments, machines and
systems in the organization are available for use as and when required. Maintenance
management is a systematic approach to the planning of maintenance activities using
decision - making tools to improve the overall efficiency and effectiveness of the operating
system. To ensure better maintenance management, maintenance departments are developed
within organizations.
The degree of technology of the production processes, the amount of investment in plant
and equipment, the age of the buildings and equipment, and other factors will affect how
maintenance departments are organized, the required worker skills, and the overall mission of
maintenance departments.
The Maintenance Function
Maintenance is defined as 'any action that restores failed equipments to an operational
condition or 'retains non- failed equipments in an operational state' or 'an activity carried out
for any equipment or asset to ensure its reliability to perform its functions.'
The objectives of maintenance function is to ensure trouble free service and output at
rated capacity from equipments, minimum downtime of equipments and to minimize the cost
of operations and maintenance.
Maintenance function decisions directly affect the planning and operational control
activities in an organization. Inputs from maintenance department are crucial to the Aggregate
production planning. The plans for shut- down maintenance and major overhaulds of the
systems are to be factored in the aggregate production planning exercise to assess the
magnitude and timings of the demand supply mismatch. Maintenance decisions have direct
bearing on scheduling also. Scheduling is done on the assumption of availability of
equipments, maintenance function directly ensures this availability. If maintenance function
is not upto the mark, frequent changes in scheduling are possible. This will result in missed
delivery commitments to the customers and loss of goodwill in the longrun.
A good maintenance activity contribute significantly to quality assurance also. Achieving
six sigma quality levels is only possible when maintenance function ensures good upkeep of
equipments.
Over a period, we can see changes in maintenance activities in organization. Earlier
maintenance was only involved when an equipment failed. During this period complexity was
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 less and priority to maintenance was low. Next period of sixties and seventies of twentieth
century, saw starting of scheduled overhaulds. Enough complexities were there in plant
design. People started giving attention to maintenance time and cost. After 1980's, the growth
of mechanization and automation has become more complex and even small breakdowns in
equipment affect the operation of the whole plant. Therefore, reliability and availability
became key issues. Major developments such as condition monitoring, design for reliability
and maintainability, failure mode and effects
analysis (FMEA) are developed.
Equipment Life Cycle
Each equipment has a definite pattern of lifespan. Equipment failure rate has a characteristic
behaviour and is closely related to the life cycle of the equipment. Failure rate is the
frequency with which a piece of equipment breaks down during the intended period of its
use. Figure 11.1 gives a general plot of lifespan of products with respect tofailure rate. This
curve is known as ''bath tub curve''.

failure rate

Infant mortality phase

Useful life period
(Constant failure rates)

The Bath tub Curve

This curve suggestes that the equipments may have a high failure rate in the beginning.
Defective design, improper manufacturing practices resulting in uneven stress distribution in
the structural components, defects in assembly resulting in failures once the equipment becomes
operational and defects in materials that were left undefected in the manufacturing process are
some of the reasons for high failure rate during infant mortality phase

Once the early failures are detected and weeded out, the equipment comes in stable
operational condition. This phase has constant failure rate. This is useful life of the
equipment. The failures that do occur during this period are truly random, unpredictable
and cannot be prevented by additional testing or burn- in of the components.

In time, however, the failures begin to increase until the last of the group succumbs
due to wear and tear. This is the last phase of bathtub curve. As the failure rate increases,
the method adopted for maintenance is likely to undergo change and eventually, the
equipment may require replacement.

Maintenance Strategies

Over the years, many new approaches have been suggested as maintenance strategies that
are intended to overcome problems related to equipment breakdown. Alternatives range from

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 simple routine inspection schedules to equipment replacement. Some of the possible
maintenance strategies are as follows :

Routine Inspection :- This is the simplest form of maintenance. Production workers inspect the
equipments for routine and simple maintenance tasks such as checking of lubrication level etc.
We also check air pressures in tyres, water level coolant level, engine oil level etc. in our
vehicles before starting for a long drive. Routine inspection is done at the beginning of every
shift before regular production activity. Routine inspection helps in timely detection of simple
problems, which helps in retarding wear and tear of the equipment.

(2) Breakdown Maintenance :- This is one of the earliest maintenance strategies. It is

normally implemented in those organizations where a robust maintenance set- up is not
present. It is a reactive maintenance strategy where repair work is performed only after a piece
of equipment has failed. Breakdown maintenance is both expensive and undesirable. Where
capacity and demand are close, breakdowns may affect production and thus reduce profits.

(3) Preventive Maintenance :- Our car is working well, but we take it to garage on a specific
date. This is a case of preventive maintenance. Preventive maintenance is a planned decision
to perform some maintenance on the equipment even when the equipment is in working
condition. Frequency or time gap between preventive maintenance activity is a cirtical issue
in preventine maintenance strategy. Frequent maintenance will incurr extra cost while delayed
maintenance increases the chance of breakdowns. Often, preventive maintenance is scheduled
on the basis of historic data.

Predictive Maintenance :- Predictive maintenance is a condition - based approach to

maintenance. Therefore, it is also known as condition - monitoring. Condition of the
equipment is regularly monitored and the decision to carry out maintenance is based on
extrapolation of the health data of the equipment. Advancements in the field of computers and
communications have enabled organizations to make good analytical models, programs,
softwares for equipment monitoring and predictive maintenance.

(5) Proactive Maintenance :- Proactive maintenance concentrates on the monitoring and

correction of root causes to equipment failures. It aims to achieve zero downtime or zero in -
service breakdowns. It is designed to extend the useful age of the equipment to reach the wear
- out stage by adoptation to a high level of operating precision.

(6) Planned shutdowns : Sometimes a planned shutdown is done for major overhaul.
In a sugar plant, all major overhauls are done during planned shutdonws. In most process
industry, frequent stoppage of the system for maintenance may prove to be expensive.
Planned shutdown once in a year helps in de- bottlenecking and maintenance.

(7) Equipment Replacement :- As shown in the bathtub curve , when the

equipment reaches the end of useful life, failure rate begins to increase. At some stage, both
preventive and breakdown maintenance may prove to be expensive. Now replacement of
equipment may be a better option. We need to compare cost of replacement as it requires
heavy expenditure in comparison with various maintenance strategies

Total Productive Maintenance (TPM)

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 It is expected that maintenance should contribute in improving the productivity and
competitiveness of the organization. TPM is an alternative approach to maintenance that seeks
to achieve zero breakdowns and zero defects. Nakajima (1982) suggests that in the ideal
factory, equipment should be operating at 100% capacity 100% of the time.

TPM draws heavily upon the philosophy of TQM. It involves everyone in all departments
and from all levels of the organizational hierarchy. TPM can help in getting competitive
advantage by substantial measurable improvements in cost, delivery, safety and morals.

TPM is based on following important concepts :-

(i) Autonomous Maintenance :- The workers are trained about cleaning the equipment so
that forced deterioration of equipment can be eliminated.
(ii) Individual Improvement :- Individual improvement is required to achieve zero losses of
all kinds such as breakdown losses, set- up time loss, tool change losses etc. Objective is
to improve overall equipment efficiency (OEE).

OEE is an important measure for maintenance management. OEE is a function of

availability, performance efficiency and quality rate.

OEE = Availability X Performance efficiency X Quality rate

As we want to improve OEE, it helps organizations to gain competitiveness.

(iii) Planned Maintenance :- It helps in extending the life of equipment, stabilizing failures,
periodically restoring deterioration, and even predicting equipment life.
(iv) Quality Maintenance :- It helps in improving the quality of maintenance function. Targets
can be reduction in process failures and consumer complaints.
(v) Development Management :- It aims to drastically reduce the time taken to receive, install
and set- up newly purchased equipment.
(vi) Education and Training :- It emphasizes hard engineering training to familiarize
production workers with equipment. It is similar to give knowledge of engine to a driver.
(vii) Safety, Health, and Environment :- It aims to achieve the objective of zero accidents and
defects and reducing the level of human effort required to attain a given level of
production.
(viii) Office TPM :- Office TPM is related to improve the productivity of office.
Some losses are possible due to delayed decision making, communication losses,
data and document processing. Processes and procedures are analysed in order to
improve the work efficiency in offices.