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National Institute of Technology Calicut Department of Mechanical Engineering


An Overview of MPC system:
• MPC systems concerns planning and controlling all aspects of manufacturing,
including managing materials, scheduling machines and people, and coordinating
suppliers and key customers
• Both the MPC system and manufacturing process are designed to meet the dictates of
the marketplace and to support overall company strategy
• An effective MPC system can provide substantial competitive advantage for a
company in its marketplace
• Basically the MPC system provides information to effectively manage the flow of
material, effectively utilize people and equipment, and coordinate supply chains
• It provides to managers with information to make intelligent decisions
• MPC system need to continuously adapt and respond to changes in the company
environment, strategy, customer requirements, particular problems, and new supply
chain opportunities
• Firms to be an effective competitor must have MPC systems with the ability to
determine, transmit, revise, and coordinate requirements throughout a global supply
chain system
Typical MPC Support Tasks
• Plan capacity requirements and availability to meet marketplace needs
• Plan for material to arrive on time in the right quantities needed for product
• Ensure utilization of capital equipments and other facilities is appropriate
• Maintain appropriate inventories of raw materials, work in process, and finished
goods – in correct locations
• Schedule production activities so people and equipments are working on the correct
• Track material, people, customers’ orders, equipment, and other resources in the
• Communicate with customers and suppliers on specific issues and long-term
• Meet customer requirements in a dynamic environment that may be difficult to
• Respond when things go wrong and unexpected problems arise
• Provide information to other functions on the physical and financial implications of
the manufacturing activities

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National Institute of Technology Calicut Department of Mechanical Engineering

MPC System Payoffs

Symptoms of poor MPC system are:
Poor customer service, excessive inventories, inappropriate equipment or worker
utilization, high rate of part obsolescence, lack of responsiveness to changes in the
business environment, and large number of expeditors dedicated to ‘fire fighting’.
Managing the Manufacturing Process
Ø What are the manufacturing process stages?
Ø What are the management concerns with each stage?
Manufacturing process: -
♦ Physical flow is quite universal
♦ Specific differences between firms must be taken into account
§ Production process – vast differences among different types of production processes
§ Four broad classes are job shop, batch production, mass production, and continuous
flow process

Job Shop
Product Variety

Batch Production

Mass Production


Production Volume

Fig. 1 Types of Plant Configurations

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National Institute of Technology Calicut Department of Mechanical Engineering

Job shop
§ Wide range products are manufactured (quantity usually small)
§ Parts are routed to work centres depending on the production steps required
§ Manufacture customised product
§ Job shops are typically inefficient and have long lead times, large work-in-process
inventory, and high costs
§ Major performance criterion is utilisation of equipments
§ Eg:- Special purpose machine tools, Commercial printer, Boilers, etc
Batch production
§ Involves the manufacture of medium-size lots of the same item or product
§ The lots may be produced only once or they may be produced at regular intervals
§ Lot sizes and the frequency of production of a single item are tied up with the
inventory control policies adopted by marketing
§ Product demand characteristics may lead to different kind of production management
especially production control
Ø Usually the products produced in a batch production have somewhat-continuous
Ø But the production rate is usually higher than the demand rate and hence batch
production method is traditionally adopted
Ø The items that goes into the final products generally standardised
Ø Such production of standardised items on a continuous basis is called repetitive
Ø For repetitive production, demand does not have to be large, just stable enough so
that final assembly schedule can be smoothed (ie, have relatively level daily
production output)
Ø To achieve stability and enable levelled production scheduling, some organisation
combine production of different version of products that were formerly produced
Ø Combining production of different products is feasible as long as product
differences are add-on features or options and not differences in fundamental
design, major components or production processes
Ø Grouping different items usually resulted in a particular way of configuring the
system for achieving the better operational efficiency and control
Ø Such configuration is called cellular manufacturing or group layout
Mass production
§ Continuous specialised manufacture of identical products
§ High-volume production lines are characterised by very high production rates and
narrow scope

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National Institute of Technology Calicut Department of Mechanical Engineering

§ One or a few products travel through a set of fabrication activities specially arranged
for the particular products (The entire plant is designed and operated for manufacture
of a single product type)
§ The equipment is dedicated to the manufacture of a single product type such as
automobile, light bulbs, appliances
§ A very high fixed investment is required for one-of-a-kind specialisation of
production facilities, such as fixed transfer lines, dedicated conveyors, buffers, etc
§ Each piece of equipment is optimised in terms of cost and time for the operation it
performs and material movement is automated
Continuous flow process
§ Continuous dedicated production of large amounts of bulk product
§ Product types are few and volumes are high
§ Continuous flow material through a serious of sequential operations
§ Eg:- chemical plants, oil refineries, plastics, iron and steel, and textile industries

A system configuration suitable for the competitive environment where low to mid
volume production is called Flexible Manufacturing Systems (FMS)

Flexible Manufacturing Systems (FMS)

§ Automated transfer lines were installed in automobile and other industries for mass
§ Such systems, although economical, lack flexibility
§ They would be choice configuration for steady markets
§ The small-batch production and custom-made products that accounts for 75 % of total
number of work pieces are essentially manufactured in job shops
§ These shops are inefficient in machine utilisation and have large manufacturing lead
§ FMS have evolved as a solution to efficient mid-volume production of a variety of
part types with low set-up time, low work-in-process inventory, short manufacturing
lead time, high machine utilisation, and high quality
§ Capability to maintain competitive production of a variety of part types in low-to
mid-volume ranges, in the face of design, demand, and part mix changes, and
machine and tool failures
Another kind of difference
§ Distinguished as make to order, assemble to order and make to stock
§ Make to order - Manufacture each customer order on a unique basis
§ Assemble to order – assemble a wide variety of finished goods from a smaller set of
standardised options
- Needs careful integration of actual customer orders with option planning and
final assembly

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National Institute of Technology Calicut Department of Mechanical Engineering

§ Make to stock – produces goods to replenish inventory

- Finished goods inventories are used to separate the assembly process from
customer orders
Still another difference
§ Complexity of component part fabrication and assembly
§ Some firms do little internal fabrication, purchasing most of their component parts
prior to assembly
Ø This is true especially in the current outsourcing scenario
Ø Outsourcing is the term used to describe when a firm purchases material,
assemblies, and other services that were initially done within company, from
sources outside the company
Ø Outsourcing allows a firm to focus on activities that represent its core
Ø Thus the company can create a competitive advantage while reducing cost
Ø The coordination of outsourcing activities is typically carried out by
materials/logistic management
Ø Materials/logistic management refers to the grouping of management functions
that support the complete cycle of material flow, from the purchase and internal
control of production materials; to the planning and control of work-in-process; to
the shipping, and distribution of finished goods
§ Others with extensive machining and other conversion processes, have significantly
more complex component part fabrication activities
§ Some firms makes relatively few products with dozens of components parts;
assemble hundreds of end items made from thousands of component parts
Yet another difference
Push/Pull Systems
§ Based on the timing of the production operation relative to customer demand the
manufacturing system can be classified as push or pull systems
Push System
§ Materials are processed in batches according to a schedule for each workstation,
then moved (pushed) downstream to the next workstation where they processed
according to anther schedule
§ The materials must usually wait until the workstation completes earlier jobs,
changes over, and is ready to process them
§ In a factory that produces many kinds of product with different routing sequences
and demand rates, the wait can be unpredictable
§ As a result, the schedules are substantially padded to offset the waiting time
uncertainty and to account for material shortages, machine breakdowns, and so on
§ This uncertainty and consequential padding of schedules leads to long lead times,
high variability in lead times, and large in process inventories
§ In push process execution is initiated in anticipation of customer orders

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National Institute of Technology Calicut Department of Mechanical Engineering

§ At execution demand is not known and must be forecasted

§ It is a speculative process
Pull System
§ Consumer withdraws whatever material is needed from stock, and when the
amount in stock reaches some minimum level, that signals the producer at the
upstream location to replenish it
§ The producer then makes or procures the material in some prespecified quantity
and puts it into stock
§ In pull production, detailed production schedules for every operations are
§ Immediate decisions about quantities and timing of work are made by workers
using a simple signal system that connects operations throughout the process
§ The charm of the system is that with relatively little inventory and only minimal
information requirements, the system keeps material flowing to meet demand
§ In pull process execution is initiated in response to a customer order
§ At execution demand is known
§ It is a reactive process
§ It is suitable for repetitive production environment
§ Sometimes called stockless production
§ Also called Just-in-time production because it seeks to have every stage in process
produce and deliver materials downstream in the exact quantities and at the exact
times requested
Desirable Characteristics of Production Systems
§ Flexibility – is the ability of the system to respond effectively to change
§ Responsiveness – Rapid response to customer request
§ Product variety
§ Product quality
§ Mass customisation – implies flexibility to produce a variety of products to meet
increasing customer demands and flexibility of process to meet whatever volume
responsiveness is required
§ Affordable cost – product cost and transaction cost
§ Better service
§ Lower inventories
Concerns associated with manufacturing stages are: -
v Management problems
v Techniques and systems
v The data base

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National Institute of Technology Calicut Department of Mechanical Engineering

Material Flows, Management Problems, Decision-making Techniques, and Supporting Database

Stage A B C D E
Example How to maintain How to schedule How to determine
How to monitor How to schedule final
management accurate raw material component item component item
vendor performance assembly
Problems records production requirements
Techniques and Vendor scheduling Cycle counting Shop-floor control Material requirements Master production
systems procedures techniques systems planning(MRP) systems scheduling(MPS) systems
Purchase orders Inventory records Part routings Bill of material Open customer orders

Vendors Raw material Component-part

Purchasing inventories Fabrication inventories

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National Institute of Technology Calicut Department of Mechanical Engineering

How to estimate end-
How to move material to How much and when to How to choose How to meet customer
item demand for each
distribution centers order transportation modes needs
Independent demand
Exponential smoothing Vehicle loading Inventory/tran-sportation Distribution requirement
based inventory
forecasting procedures procedures trade-off techniques planning (DRP) systems
Customer ordering
Sales order history Shipping costs Planned shipments Transportation costs

Finished-goods Customers
Distribution centers Field warehouses
embly Transport Transport

Fig. 2 Material Flows, Management Problems, Decision-making Techniques, and Supporting Database

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National Institute of Technology Calicut Department of Mechanical Engineering

Techniques and systems:

Nature of management problems
Ø Infrequent eg. Determining distribution centres
Ø Frequent (routine) eg. Majority of production and inventory decisions –
component part planning, establishing priorities for unfinished work, etc.

Tightly defined
and consistent
Manual or Policies

Routine Predictable
Fig. 3 How routine decision made predictable
The managerial issue are how to
♦ Design the system
♦ Provide the data
♦ Set the decision rules
♦ Implement the system
♦ Monitor system and
♦ Make improvement- it comes from better
Integration of material flow
Data (accurate and pertinent)
The data base:
Ø Techniques or systems rely on basic information eg. A large job shop machine
scheduling system
Ø The complexity of MPC problems are mainly due to the enormity of underlying
database required to properly support routine decision making system eg. A firm
requires 5 million individual pieces of data to be accurately maintained and
accessed to support a component part planning system.
Ø A well-formulated system must be driven by data that are appropriate, consistent
and accurate.
Ø The data must be managed like any other resource and this might necessitate
major changes in thinking, habits and procedures.
Ø The data base integrity must be maintained with common definitions of terms,
procedure for processing detailed transactions, clear assignment of organisational
responsibility for each data base subsection and company wide commitment to
maintain the integrity of each data base element.

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National Institute of Technology Calicut Department of Mechanical Engineering


v MPC system encompasses 3 distinctive aspects or phases
§ Creating the overall manufacturing plan for the manufacturing part of the
§ Detailed planning of material flows and the capacity to support the overall
§ Execution of these plans in terms of detailed shop scheduling and
purchasing actions
v This is in line with the decision-making framework that recognises the natural
hierarchy of production decisions
A Framework for Production Decision Making
v Decision framework
• Managerial decision making – a broader perspective; identifies a hierarchy of
interconnected decisions
• Operational level decision – coordination for smooth flow of materials
between stages in a multistage process
v Hierarchy of Managerial Decision
Strategic planning, tactical planning, and operational control
v The hierarchy of decisions applied to production function is given the table below
Category of Strategic Tactical Operational
General types of Plans for acquisition of Plans for utilisation Detailed execution
decisions resources of resources of schedules
Managerial levels Top Middle Low
Time horizon Long (2+years) 6 to 24 months Short range
Level of detail Very aggregated Aggregated Very detailed
Degree of High Medium Low
Examples of Products to sell; which Operation hours of What to produce
variables under dimensions to compete; size plants; work force (procure), when, on
control of and location of facilities; sizes; inventory what machine (from
management nature of equipment (e.g. levels; which vendor), in
general purpose vs subcontracting what quantity, and
specialised); long-term raw levels; output rates; in what order; order
material and energy contracts; transportation processing and
labour skills needed; nature of modes used follow-up; material
production planning and control
inventory management
decision systems
Fig. 4 Hierarchy of managerial decisions applied to production function

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National Institute of Technology Calicut Department of Mechanical Engineering

Integration at the Operational Level

v It is necessary to ensure at the operational level the proper coordination of input
streams of the various raw materials, components, subassemblies, and so forth
v There should be a coordination of action back through all the stages of distribution
from the ultimate customer to the interface with production
A single general framework for planning and scheduling within a production
environment is shown in the figure below

Demand Production
Planning planning

Master Front End


Detailed Material
Capacity Requirement
Planning Planning
Material and
Capacity Plans

Shop-floor Purchasing
Control Systems Back End
Fig. 5 General framework manufacturing planning and control system
v It embraces the hierarchy of decisions as well as integration at the operational
v The framework is suitable for Closed Loop Material Requirement Planning. A
more complete system is known as Manufacturing Resource Planning (MRP II)
v It is also consistent with the Enterprise Resource Planning (ERP) framework
v MRP is a material planning and scheduling system for components, parts,
subassemblies and raw materials
v Closed loop MRP can creates better plans compared to MRP as the system
considers feed back information in creating realistic plans and dynamic priority
setting rule in scheduling
v MRP II converts a number of the outputs of production planning and control into
financial terms – e.g.- Inventories in rupees, labour budget, shipping budget,
standard hours of output in rupees, vendor rupee commitment, etc.
v ERP system can be considered a direct extension of MRP

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National Institute of Technology Calicut Department of Mechanical Engineering

v MRP logic is used in the production module of ERP

v Under ERP the entire firm operates from the same data
v ERP system allows for integrated planning across the functional areas in a firm
Enterprise Resource Planning (ERP)
Evolution Towards ERP
• The focus of manufacturing system in the 1960’s was on inventory control
• Techniques of the day focused on the most efficient way to manage large volumes
of inventory
• Software packages were designed to handle inventory based on traditional
inventory concepts
• In the 1970’s, it became increasingly clear that companies could no longer afford
to the luxury of maintaining large quantities of inventory – led to introduction of
Material Requirement Planning (MRP) systems
• For the first time, using a Master Production Schedule (MPS), supported by bill of
material files that identified the specific material needed to produce each finished
item, a computer could be used to calculate gross requirements
• Using accurate inventory record files, the available quantity on hand and
scheduled receipts of material determined net material requirements
• This then prompted an activity such as placing an order, cancelling an existing
order or modifying the timing of existing orders
• For the first time in manufacturing, there was a formal mechanism for keeping
priorities valid in a changing manufacturing environment
• The ability of the planning system to systematically and efficiently schedule all
parts was a tremendous step forward for productivity and quality
• These are a part of the manufacturing problem; capacity planning represents an
equal challenge
• Techniques for capacity planning were added to the basic MRP system
• Tools were developed to support the planning of aggregate sales and production
levels, the development of build schedule, forecasting, sales planning and
customer order promising and high level resource analysis
• Scheduling techniques for the factory floor and supplier scheduling were
incorporated into the MRP systems
• When this occurred, users began to consider their systems as company-wide
• The resultant system is known as closed-loop MRP
• In the 1980’s, companies began to take advantage of the increased power and
affordability of available technology and were able to couple the movement of
inventory with the financial activity
• This led to the development of a more integrated system which incorporated the
financial accounting system and the financial management system along with the
manufacturing and materials management systems

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National Institute of Technology Calicut Department of Mechanical Engineering

• The resultant system is known as Manufacturing Resource Planning (MRP II)

• This system derived the material and capacity requirements associated with a
desired operations plan, translated all this to a financial statement, and suggested a
course of action to address those items that were not in balance with the desired
• By early 1990’s, continuing improvements in technology allowed MRP II to be
expanded to incorporate all resources planning for the entire enterprise
• Areas such as product design, information warehousing, materials planning,
capacity planning, communication systems, human resources, finance, and project
management could now be included in the new system
• The term, ERP was coined for such systems
• ERP can be used not only in manufacturing firms, but in any company that wants
to enhance competitiveness by most effectively using all its assets, including
• Companies today face the challenge of increasing competition, expanding
markets, and rising customer expectations
• This increases the pressure on companies to lower total costs in the entire supply
chain, shorten throughput times, drastically reduce inventories, expand product
choice, provide more reliable delivery dates, and efficiently coordinate global
demand, supply, and production
• As the business world moves ever closer to a completely collaborative model and
competitors upgrade their capabilities, to remain competitive organisations must
improve their own business practices and procedures
• Companies must also increasingly share with their suppliers, distributors, and
customers the critical in-house information they once aggressively protected
• Functions within the company must upgrade their capability to generate and
communicate timely and accurate information
• To accomplish these objectives, companies are increasingly turning to ERP
• ERP provides two major benefits that do not exist in non-integrated departmental
(i) a unified enterprise view of the business that encompasses all functions
and departments; and
(ii) an enterprise database where all business transactions are entered,
recorded, processed, monitored, and reported
ERP Defined
• An important feature of ERP is that it is the first approach that integrally combines
business management and IT concepts
• Its strength stems from its ability to provide a comprehensive business
functionality in an integrated way using a state-of-the-art IT infrastructure
• ERP systems typically are very efficient at handling the many transactions that
document the activities of a company

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National Institute of Technology Calicut Department of Mechanical Engineering

• One significant feature of ERP software is that

Ø Core corporate activities, such as manufacturing, human resources,
finance, and supply chain management are automated and
Ø Improved considerably by incorporating best practices,
Ø So as to facilitate greater managerial control, speedy decision making and
huge reduction of business operational cost
• ERP provides seamless integration of process across functional areas with
improved workflow, standardisation of various business practices, improved order
management, accurate accounting of inventory and better supply chain
• Earlier concepts such as MRP and MRP II, were designed to assist planners by
logistically linking various forms of process information in specific business
contexts such as manufacturing
• ERP system should not be looked as simply as tools that have a fixed and
measurable output, but rather as a technological infrastructure designed to support
the capability of all other tools and processes used by a firm
• ERP systems represent corporate infrastructure, much the same way that physical
high way systems do
• ERP systems are designed to integrate business functions so that real-time
resource accountability across all business units and facilities of a corporation
could be maintained
• The objectives of the ERP could include elimination of conflicting information,
the reduction in data redundancy, standardisation of business unit interfaces,
global access and security
• ERP implementation results in significant benefits produced from the integrated
nature of the system as well as from reengineering business process and the
change in business culture
• ERP supports coordinated planning and execution across functional areas
• Companies’ motivation for ERP implementation could be classified into two
groups –
Technological and Operational
Technological Drivers
• Replacement of disparate systems, Improvement of quality and visibility of
information, Improvement of business process and systems, Simplification of
integration of business acquisitions into the existing technology infrastructure,
Replacement of older and obsolete systems, and Acquirement of system that can
support business growth
Operational Drivers
• Improving inadequate business performance, Reducing high-cost structures,
Improving responsiveness to customers, Simplifying ineffective and complex
business processes, Supporting new business strategies, Expanding business
globally, and Standardising business process throughout the enterprise

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National Institute of Technology Calicut Department of Mechanical Engineering

View point on ERP by Managers, and Information Technology

• ERP represents a comprehensive software approach to support decisions
concurrent with planning and controlling the business
• Focus is more on the potential impact of ERP on the performance of various
business functions
• ERP, with the emphasis on planning, is designed to allow much tighter
integration, thus eliminating the problem of local optimisation
• Manufacturing industry experts describe ERP as:
Ø An enterprise-wide set of management tools that helps balance demand
and supply
Ø Containing the ability to link customers and suppliers into a complete
supply chain
Ø Employing proven business process for decision making
Ø Providing high degree of cross functional integration among sales,
marketing, manufacturing, operations, logistics, purchasing, finance, new
product development, and human resource
Ø Enabling people to run their business with high level of customer service,
responsiveness and productivity, and simultaneously lower costs and
inventories, and providing the foundation for effective e-commerce
Information Technology Community
• ERP is a term to describe a software system that integrates application programs
in finance, manufacturing, logistics, sales and marketing, human resources, and
other functions in a firm
• Focus is on the intricacies of package and process design to meet conceptual
ERP benefits can be classified into five groups
• Relating to cost reduction, cycle time reduction, productivity improvement,
quality improvement, and customer service improvement
• Relating to better resource management, improved decision making and planning,
and performance improvement
• Concerning business growth, supporting business alliance, building business
innovations, building cost leadership, generating product differentiation, and
building external linkages
IT Infrastructure
• Involving building business flexibility, IT cost reduction, and increased IT
infrastructure capability

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National Institute of Technology Calicut Department of Mechanical Engineering

• Relating to supporting organisational changes, facilitating business learning,

empowering, and building common visions
Software Imperatives
Multifunctional in scope: - Ability to track financial results in monetary terms,
procurement activity in unit of material, sales in terms of product units and
services, and manufacturing or conversion process in units of resource or people
Excellent ERP software produces results closely related to the need of people for
their day-to-day work
Integration:- When transaction or piece of data representing an activity of the
business is entered by one of the functions, data regarding the other related
function is changed as well
This eliminates the need for reposting data to the system
Modular in Structure:- The software can be combined into a single expansive
system, narrowly focused on a single function, or connected with software from
another source/application
Facilitate classic manufacturing planning and control activities:- Forecasting,
production planning, inventory control
Routine Decision Making VS Transaction Processing
Transaction Processing
• Transaction processing relates to the posting and tracking of the activities that
document the business
• When an item is purchased from a vendor a specific sequence of activities occurs
• Solicitation of the offer, acceptance of the offer, delivery of goods, storage in
inventory, and payment for the purchase are all activities that occur as a result of
the purchase
• The efficient handling of the transactions as goods move through each step of the
production process is the primary goal of an ERP system
Decision Support System
• Relate to how well the system helps the user make intelligent judgement about
how to run the business
• With respect to the manufacturing planning and control, decision concerning the
amount to purchase, the selection of vendor and how it should be delivered need
to determined
• An ERP system with decision logic based parameters set in the system can assist
the managers to take appropriate decision
• For items stored in inventory, the specific reorder points, order quantities,
vendors, transportation vendors, and storage locations can be established when
items are initially entered in the system
1. Vollmann, T.E., Berry, W.L., Whybark, D.C., and Jacobs, F.R., (2005)
Manufacturing Planning and Control Systems, Fifth Edition, Tata McGraw-Hill.

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National Institute of Technology Calicut Department of Mechanical Engineering

2. Nicholas, J., (2001) Competitive Manufacturing Management - Continuous

Improvement, Lean Production, and Customer-Focused Qualities, Tata McGraw-
Hill Editions.
3. Viswanadham, N., and Narahari, Y., (1992) Performance modeling of automated
manufacturing systems, Prentice-Hall of India, New Delhi.
4. Umble, E.J., Haft, R.R., and Umble, M.M. (2003) Enterprise resource planning:
Implementing procedures and critical success factors, European Journal of
Operational Research, 146, 241-257.
5. Jacobs, F.R. and Bendoly, E., (2003) Enterprise resource planning: Developments
and directions for operations management research, European Journal of
Operational Research, 146, 233-240.
6. Al-Mashari, M., Al-Mudimigh, A. and Zairi, M., (2003) Enterprise resource
planning: A taxonomy of critical factors, European Journal of Operational
Research, 146, 352-364.

Useful link
What is ERP?

Academic articles on ERP

Industry articles on ERP

ERP in India solution directory

To get an idea about the following concepts used in ERP software click the link below
Product structure
Material Requirement Planning (MRP)
Shop Floor Control

Significance of ERP implementation

Hitting the moving target of operational excellence identifying and obtaining the
information needed for continued success – White paper

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