PRODUCTION PLANNING AND CONTROL

UNIT-I
INTRODUCTION

Production: Production is the process by which goods or services created. Production can also
be defined as a means of converting the raw materials into finished products by performing a set
of manufacturing operations in a pre-determined sequence that transforms material from a given
to a desired form. The transformation may be done in one or in a combination of the following
ways:

1. Transformation by disintegration, having essentially one ingredient as input and

producing several outputs. The transformation is generally accompanied by changes in
the physical shape of the input, such as changes in the physical state or in the geometrical
form. Examples: making components from standardized materials on machine tools,
rolling steel bars from cast ingots, making components by smithy and forging operations
etc.

2. Transformation by integration or assembly, using several components as inputs and

obtaining essentially one product as output. Examples: producing machines, household
appliances, automobiles, radio and television sets etc.

3. Transformation by service, where virtually no change in the object under consideration is

perceptible but where certain operations may be performed to change one of the
parameters which define the object. Examples: sizing and coining in press work,
servicing and light repairs of automobiles, loading and unloading of trucks, transportation
from one place to another which gives place utility etc.

Planning: Planning means preparing the scheme in advance before the actual work is started. It
may also be defined as the pre-determination of future achievement to meet the desired
objectives. Planning begins with an analysis of the given data, on the basis of which a scheme
for the utilization of the firm’s resources can be outlined so that the desired target may be most
efficiently attained. Planning in fact sets up the standards of performance.

Before starting the production, it is necessary to decide in advance what to produce, how much to
produce, where to produce and where to sell. Therefore production planning is the pre-
determination of future achievements in type of product, volume of production, quality, time,
price in manufacture and the resources required. It analyses all the problems likely to arise in
manufacture and decides in advance how these difficulties can be overcome.

Control: Control means the supervision of all the relevant operations with the help of control
mechanism that feeds back the progress of the work. Controlling is made by comparing the
actual performance with the present standards (plan) and deviations are analysed. The control
mechanism is also responsible for subsequently adjusting, modifying, and redefining plans and
targets, in order to ensure attainment of pre-specified production goals, in the most efficient and
effective manner.

DEFINITIONS OF PPC

Some of the important definitions of production planning and control are given below:

“Production planning and control may be defined as the direction and co-ordination of the
firm’s material and physical facilities towards the attainment of pre-specified production goals,
in the most efficient and economical manner”.

According to Samuel Elion: “The highest efficiency in production is obtained by

manufacturing the required quantity of the product, of the required quality, at the required time,
by the best and cheapest method.”

According to Charles A Koepke: “Production planning and control may be defined as the
coordination of the series of functions according to a plan which will economically utilize the
plant facilities and regulate the orderly movement of goods during the entire manufacturing
cycle, from the procurement of all materials to the shipping of finished goods at a predetermined
rate.”

The major objectives of PPC can be stated as:

1) To design a system and plan, by which production may be carried out with a view to meet
promised delivery date consistent with minimum cost and quality standard.
2) To ensure efficient utilization of production facilities.
3) To coordinate the production activities of different departments.
4) To maintain adequate but not excessive stock of raw materials, work in process and of finished
goods to meet production requirements and delivery schedules at the most economical level.
5) To ensure production of right product in right quality at the right time.
6) To maintain flexibility in manufacturing operations, to accommodate rush jobs or to meet
contingencies.
7) To co-ordinate labour, machines and equipment in the most effective and economic manner.
8) Ensuring smooth flow of materials by eliminating bottlenecks if any, in production.
9) Establishing targets and checking it against performance.
10) To provide alternative production strategies in case of emergencies.
11) To determine the nature and magnitude of various input factors to manufacture the desired output.
12) The PPC department guides production by preparing and issuing manufacturing orders which
direct the use of facilities and material and allocate labour to the output of the required quantity of
products of the required quality.
In short PPC regulates and controls “how”, “where” and “when” work is to be done.
FUNCTIONS OF PRODUCTION PLANNING AND CONTROL:

The various functions of production planning and control can be classified into three main categories or
phases as follows:

1) Planning phase.
2) Action phase.
3) Follow up or control phase.

Fig: Functions of PPC

ORGANIZATION OF PPC DEPARTMENT:

The PPC department must be carefully organized carry out the activities and procedures established in the
planning system. Figure illustrates the organization structure for a medium sized firm engaged in job
order or semi-diversified manufacture.
 Plant Manager
Manufacturing

Process Factory Production Planning & Plant

Engineering Production Control Maintenance

Material Tool Estimating Scheduling Order Dispatching &

Control Control & Routing & Control Write up Follow up

Fig: A representative organization chart of a PPC department.

OBJECTIVES
Men Goods and
Materials PRODUCTION
ACTIVITY Services
Machines
Planning
Forecast

CONTROLLER COMPARISON PRODUCTION

PLAN

Modify Plan

Fig: Relation between production planning and control

TYPES OF PRODUCTION (MANUFACTURING) SYSTEM

Modes of manufacture, which may affect production planning and control system, include three main
relevant factors: The type of production i.e., the quantities of finished products and regularity of
manufacture.Size of the plant.The type of industry i.e., the field of specialization of the plant.

The types of production systems can be broadly grouped into three headings according to the volume of
production and the regularity of manufacture:

A) Job production B) Batch production C) Continuous production.

 UNIT-II
FORECASTING
Forecasting is fundamental to planning. Forecasts are the statements about future, specifying the volume
of sales to be achieved and equipment, materials and other inputs needed to realize the expected sales.

Methods of Forecasting:

The forecasting methods can be broadly classified into two types.

I. Qualitative Forecasting

II. Quantitative Forecasting

a. Time Series Forecasting

b. Causal Forecasting

I. Qualitative Forecasting:

Qualitative Forecasting rely on an expert’s opinion in making a prediction for the future. These methods
are useful for intermediate to long-range forecasting tasks. This type of forecasting is used when past data
is not a reliable indicator of the future. This forecasting must also be used for new product introduction,
where a historical database is not available. Following are the different types of qualitative methods.

1. Delphi Technique

2. Market Survey

3. Life cycle analogy

4. Informed judgment

QUANTITATIVE FORECASTING

These methods utilize an underlying model to arrive at a forecast. The basic assumption for all the
quantitative forecasting methods is that, past data and data patterns are reliable predictors of the future.
Past data are then processed by

a. A time series or

b. Causal model to arrive at a forecast.

 UNIT-III
INVENTORY MANAGEMENT
FUNCTIONS OF INVENTORY
1. To Create a Buffer between Input and Output
The outflow of materials can be as little dependent on the input characteristics as possible. They
may be continuous consumption of materials or may consist of a series of sudden withdrawals of
batches from depending on the type of manufacture, on the process and sometimes ON the stock
control system in operation. In chemical and allied industries, where flow of materials is an
integral part of the process, supply from stores is often continuous, while in firms manufacturing
engineering products and consumer goods, the assembly line is often led by small batches of
pails, designed to last for a preplanned production period. The basic difference between the
inflow and outflow characteristics compels the firm to hold inventories, which are designed to
meet the needs of the production departments until new stock arrives.
2. To Ensure Against Delays in Deliveries
A batch of incoming materials is stored for certain period of time. When an order for fresh stock
is made, supply is normally not immediately available, but sometime elapses before it arrives.
The lead time is often subject to some variations, since, it depends very much on how heavy the
production or delivery schedule is at the vendor's end, on the queue for orders that he has to meet
and on the priority system operating in his organization. Therefore, a manufacturing enterprise
must therefore hold some reserve stocks to allow production operation to continue, if delay in
procurement occurs.
3. To Allow for a Possible Increase in Output if so Required
Variations in market requirement may change the manufacturing program. Production rate may
have to be stepped up or reduced from time to time and if increased production should be
allowed to proceed without interference, reserve stocks of materials must be held.
4. To Take Advantage of Quantity Discounts
Materials and components may be cheaper when they are purchased in large quantities, owing to
larger discounts and lower transportation costs. Even this simplifies the paper work and
inspection of incoming goods. On the other hand, capital is tied up in dormant goods, requires
more store space and more handling and maintenance of the goods and greater losses due to
deterioration and obsolescence are normally expected.
5. To Ensure Against Scarcity of Materials in the Market
Fluctuations in the output of certain materials and demand for them, leads to scarcity of materials
which in turn effect the production operations. A reserve stock held by the firm will ensure that
the production operations are not affected by sporadic scarcities in the market, during periods of
rapid economic expansion or during period of emergency, the availability or scarcity of materials
would very often become a prime mover in stock control policy.
6. To Utilize the advantage of Price Fluctuations in the market
Fluctuations in price of materials may have marked effect on the procurement policy of a
company. These fluctuations are advantageous, if the materials are purchased when prices are
low. Industries depending on raw materials, especially basic raw materials, have to pay a great
deal of attention to market prices and some firms feel that they are so dependent on price
fluctuations that major policy decisions and the firms resources become fully geared up the
activities of the purchasing department.

COSTS ASSOCIATED WITH INVENTORY ARE AS FOLLOWS:

1. Ordering costs
2. Carrying costs
3. Stock out costs and
4. Purchasing costs.
Economic Order Quantity (EOQ)
Economic order quantity is defined as that quantity of material, which can be ordered at one time
to minimize the cost of ordering and carrying the stocks. In other words, it refers to the size of
each order that keeps the total cost low.
Material Requirement Planning (MRP)
Introduction:
MRP is a simple system of calculating arithmetically the requirements of the input materials at
different points of time-based on actual production plan. MRP can also be defined as a planning
and scheduling system to meet time-phased materials requirements for production operations.
MRP always tries to meet the delivery schedule of end products as specified in the Master
Production Schedule.
Computerized ordering and scheduling system for manufacturing and fabrication industries, it
uses bill of materials data, inventory data and master production schedule to project what
material is required, when and in what quantity MRP phases orders for dependent demand items
(such as raw materials, components, parts) over a period to synchronize flow of materials and in
in-process inventories with production schedules. It also computes and tracks effect of hundreds
of variables such as new orders, changes in various capacities, overloaded production centers,
shortages and delays by suppliers and feeds financial data into the accounting system. In
contrast, to just-in-time inventory (a demand-pull production system) MRP is a plan-push
system, and in contrast to advanced planning system (a forward scheduling system) it is a
backward scheduling system.

MRP Objectives:
1. Reduction in Inventory Cost
By providing the right quantity of material at right time to meet master production schedule,
MRP tries to avoid the cost of excessive inventory.
2. Meeting Delivery Schedule
By minimizing the delays in materials procurement production decision-making, MRP helps
avoid delays in production there by meeting delivery schedules more consistently.
3. Improved Performance
By stream lining the production operations and minimizing the unplanned interruptions, MRP
focuses on having all components available at right place in right quantity at right time.

MRP System Inputs:

1. Master Production Schedule (MPS)
The MPS specifies what end products are to he produced and when. The planning horizon should
be long enough to cover the cumulative lead limes of all components that must be purchased or
manufactured to meet the end product requirements.
2. Bill of Material File or Product Structure File
This file provides the information regarding all the materials, parts and sub-assemblies that go
into the end product. The bill of materials can be viewed as having a series of levels, each of
which represents a stage in the manufacture of the end product. The highest level (or zero level)
of the BOM represents the final assembly or end product. The BOM file identifies each
component by a unique pan number and facilitates processing by exploding the end product
requirement into component requirements.
3. Inventory Status File
The inventory status file gives complete and up-to-date information on the on-hand quantities,
gross requirements, scheduled receipts and planned order releases for the item. It also includes
other information such us lot sizes, lead times, and safety stock levels and scrap allowances to.
The gross requirements are total needs from all resources where as the net requirement are "net"
after allowing for available inventory and scheduled receipt. Scheduled receipts are quantities
already on order from a vendor or in-house shop. Planned order release indicates the quantity and
date to initiate the purchase or manufacture of materials that will be received on schedule after
the lead time offset.
Net requirement for a period = Gross requirement for a period -(Scheduled receipt for the period
+ On-hand inventory at the end of the period).

Materials planning techniques available as to direct and indirect materials:

The following are the techniques available for materials planning with respect to direct and
indirect materials, which arc to be inputs of MRP (Material Requirement Planning).
1. Master Production Schedule (MPS)
2. Bill of Materials (BOM)
3. Inventory status file.
The quantities and delivery times for the materials needed to determined by the production
schedule. Dependent demand inventory consists of the raw materials, components and
subassemblies that are used in the production of parent or end items. Department demand
Inventory items considered to the finished products, service parts and other items whose demand
arises more directly from the uncertain market environment Thus, distribution inventories often
have an independent and highly uncertain demand. Dependent demands can be calculated,
whereas independent demands usually require some kind of forecasting.
Forecasts and orders are combined in the production plan, which is formalized in the Master
Production Schedule (MPS). The MPS along with a Bill information is used to formulate the
material requirements plan (i.e., materials planning).

The MRP (Material Requirements Planning) determines what component's are needed and when
they should be ordered from an outside vendor or produced personnel are adequate, orders are
released and the work loud is assigned to the various work centers. MRP systems compute
material requirements and specify what materials arrive exactly when needed. The process of
scheduling the receipt of inventory as needed over time is time phasing MRP systems covers.
_ Generation of low-level requirements.
_ Time phasing of those requirements.
_ Planned order release etc. make those end items are assemblies be direct materials.
Conclusion
MRP systems (i.e., MPS. BOM. IS) compute material requirements and specify when orders
should be released so that materials arrive exactly when needed.

Functions served by MRP:

Basically MRP consists of a set of computer programs that are run periodically to incorporate the
latest schedule of production requirements. MRP Performs Three Important Functions
1. Order planning and control i.e., when to release orders and for what quantity.
2. Priority planning and control i.e. Comparison of expected date of availability with needed date
of each item.
3. Provision of a basis for planning capacity requirements and development of broad business
plans.
MRP is applicable primarily to companies that carry out fabrication of parts and assembly of
standard products in batch quantities.
MRP used to coordinate orders within the plant and from outside. Outside orders are called
purchase orders, and within orders are called jobs. MRP focuses on scheduling purchase orders
and jobs to satisfy material requirements generated by external demand. MRP deals with two
basic dimensions of production control are quantities and timing. The system determines suitable
production quantities of all types of items, from final products that are sold to inputs purchased
as raw materials. Production timing must also be determined to ensure meeting order due dates.

LOB (LINE OF BALANCE):

Capacity Balance
In a perfectly balanced plant, the outputs of stage 1 provides the exact input requirement for
stage 2, stage 2’s output provides the exact input requirement for stage-3 and so on.
Manufactures have tried to balance capacity across a sequence of processes, in an attempt to
match capacity with market demand.
Once the Cycle Time (C.T) (i.e., output rate on an average) of the line establishes, production
staff try to make the capacities of all stations the same. This is done by adjusting machines or
equipment used, workloads, skill and type of labour assigned, tools used, and overtime budgeted
and so on. In synchronous production, making all capacities the same is a bad decision. Such a
balance would be possible only if the output times of all stations were constant. A normal
variation in output times causes down streams stations to have idle time when upstream stations
take longer to process-conversely.
When upstream stations process in a shorter time, inventory builds up between the stations. The
effect of the statistical variation is cumulative. The only way that this variation can be
smoothened is by increasing work in process to absorb the variation or increasing capacities
downstream to be able to make up for the longer upstream times. The rule of capacity balance is
that capacities within the process sequence should not be balanced to the same levels. Rather,
attempts should be made to balance the flow of product through the system. When flow is
balanced, capacities will be unbalanced. There are various ways of dealing capacity balance. One
is to add capacity to those stages that are bottlenecks, which can be done by temporary measures
such as scheduling overtime, leasing equipment, capacity meet through sub-contracting (i.e., out
sourcing). Another way is through the use of buffer inventories so that interdependence between
two departments can be loosened. A third approach involves duplicating the facilities of one
department upon which another is dependent. The capacity implies an attainable rate of output.

Line of Balance
In perfect line balancing, each work station/centre completes its assigned work within fixed time
duration so that output from all operations is equal on the line. A perfect line balancing is
difficult to achieve. Certain work centers take more operation time causing subsequent work
centers to become idle. Line balance technique is concerned with the "product layout". There are
two systems in product line, flow-line pattern and mass manufacturing on continuous basis. Line
balancing is used for products of continuous type. There are four methods of line balancing
namely, empirical, heuristic, mathematical model and computer-aided programmes.
Line balance effect due to the following.
_ Breakdowns of machines/equipment.
_ Probable adjustments/repair time.
_ Scraps.
_ Unforeseen hold-ups etc.
Line of balance is apportionment of sequential work activities into workstations to gain a high
utilization of labour and machines/equipment and therefore minimizes idle time. Compatible
work activities are combined into approximately equal time groupings that do not violate
precedence relationships. The lime required at any station exceeds that which is available to one
worker, or machine, additional resources may added be that station.

Line of balance problem involves,

_ Determination of number of work stations and time available at each station.
_ Grouping the individual tasks into amounts of work at each station.
_ Evaluating the efficiency of the grouping idle time.
An efficient line balance will minimize the idle time. Precedence diagram is used to analyze the
line balance task of machines in assembly line. Computers are used to facilitate model change
overs, permitting different lot sizes, different setup time and some task variability.

Just-in-time Inventory:
Demand driven inventory system in which materials, pans and sub-assemblies and support items
are delivered just when needed and neither sooner nor later. Its objective is to eliminate product
inventories from the supply chain as much, a managerial philosophy as an inventory system. JIT
encompasses all activities required to make a final product from design engineering onwards to
the last manufacturing operation. JIT systems are fundamental to time-based competition and
rely on waste reduction, process simplification, setup time and batch size 'reduction, parallel
(instead of sequential) processing and shop floor layout redesign. Under JIT management,
shipments are made within rigidly enforced 'time windows' and all items must be within the
specifications (with very little or no inspection. It was developed and perfected by Taiichi ohno
of Toyota Corporation during 1960s and 70s to meet fast changing consumer demands with
minimum delays.

Elements of Just-in-time Manufacturing System:

The important elements or components of a JIT manufacturing system are,
1. Eliminating Waste
Eliminating waste of all kinds is the deep-seated technology behind JIT. Waste is any activity or
action that adversely affects the value equation for the customer. Waste is a negative to be
avoided or eliminated. Rather than increasing or enhancing value, waste reduces value. For
example, if a company wants to compete on quality, flexibility and performance, then anything
that reduces quality, decreases flexibility or adversely affects performance is a waste.

2. Enforced Problem Solving

JIT is really a system of enforced problem solving. There are few safety factors in JIT. Every
material is expected to meet quality standards, every pan is expected to arrive exactly at the time
promised and precisely at the place it is supposed to be, every worker is expected to work
productively and every machine is expected to function as intended without breakdowns. Behind
JIT is the continuous drive to improve production process and methods. JIT strives to reduce
inventories because high inventory levels are thought to cover-up production problems such as
quality problems, machine breakdowns, work load imbalances, material stock outs, worker
absenteeism and out-of-specification materials. By drastically reducing in-process inventories,
production problems are uncovered and production stops until the causes of production problems
are solved.

3. Continuous Improvement
Japanese manufacturers have long practiced what is called as Kaizen, the goal of continuous
improvement in every phase of manufacturing. Managers may encourage workers to reduce
inprocess inventories a step further to see if any production problems occur, thus, identifying a
target for the worker's to eliminate. Machine setups may be studied with workers and managers
working to make the setups almost instantaneous. Japanese manufacturers have long used the
term SMED which is an acronym for single minute exchange of dies, meaning that their goal is
to have all setups take less than a minute. Continuous improvement is central to the philosophy
of JIT and a key factor in its success