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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
MPC System Payoffs
Symptoms of poor MPC system are:

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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
What are the manufacturing process stages?
What are the management concerns with each stage?
Manufacturing process: Physical flow is quite universal

Product Variety

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

Batch Production

Mass Production
Production Volume
Types of Plant Configurations
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

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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
Usually the products produced in a batch production have somewhat-continuous
But the production rate is usually higher than the demand rate and hence batch
production method is traditionally adopted
The items that goes into the final products generally standardised
Such production of standardised items on a continuous basis is called repetitive
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)
To achieve stability and enable levelled production scheduling, some organisation
combine production of different version of products that were formerly produced
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
Grouping different items usually resulted in a particular way of configuring the
system for achieving the better operational efficiency and control
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
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

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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
Make to stock produces goods to replenish inventory
- Finished goods inventories are used to separate the assembly process from
customer orders
Still another difference

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Complexity of component part fabrication and assembly

Some firms do little internal fabrication, purchasing most of their component parts
prior to assembly
This is true especially in the current outsourcing scenario
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
Outsourcing allows a firm to focus on activities that represent its core
Thus the company can create a competitive advantage while reducing cost
The coordination of outsourcing activities is typically carried out by
materials/logistic management
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
At execution demand is not known and must be forecasted
It is a speculative process
Pull System

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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: Management problems
Techniques and systems
The data base

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

How to maintain
How to schedule
How to monitor
accurate raw material component item
vendor performance
Techniques and Vendor scheduling
Cycle counting
Shop-floor control
Purchase orders
Inventory records
Part routings


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Raw material

How to determine
How to schedule final
component item
Material requirements
Master production
planning(MRP) systems scheduling(MPS) systems


Bill of material


Open customer orders


How to estimate enditem demand for each


How to move material to

distribution centers

How much and when to


How to choose
transportation modes

How to meet customer


Exponential smoothing
forecasting procedures

Vehicle loading

Independent demand
based inventory

trade-off techniques

Distribution requirement
planning (DRP) systems

Sales order history

Shipping costs

Planned shipments

Transportation costs

Customer ordering


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Distribution centers

Field warehouses


Techniques and systems:

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

Manual or



Tightly defined
and consistent


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:
Techniques or systems rely on basic information eg. A large job shop machine
scheduling system
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.
A well-formulated system must be driven by data that are appropriate, consistent and
The data must be managed like any other resource and this might necessitate major
changes in thinking, habits and procedures.
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.


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
This is in line with the decision-making framework that recognises the natural
hierarchy of production decisions
A Framework for Production Decision Making
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
Hierarchy of Managerial Decision
Strategic planning, tactical planning, and operational control
The hierarchy of decisions applied to production function is given the table below
Category of




General types of Plans for acquisition of


Plans for utilisation Detailed execution

of resources
of schedules





Time horizon

Long (2+years)

6 to 24 months

Short range

Level of detail

Very aggregated


Very detailed

Degree of




Examples of
variables under
control of

Products to sell; which

Operation hours of
dimensions to compete; size plants; work force
and location of facilities;
sizes; inventory
nature of equipment (e.g.
general purpose VS
specialised); long-term raw levels; output rates;
material and energy contracts; transportation
labour skills needed; nature of modes used
production planning and

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What to produce
(procure), when, on
what machine (from
which vendor), in
what quantity, and
in what order; order
processing and
follow-up; material

inventory management
decision systems
Integration at the Operational Level
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
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



Front End



Material and
Capacity Plans




Back End

Manufacturing Planning and Control System

It embraces the hierarchy of decisions as well as integration at the operational level
The framework is suitable for Closed Loop Material Requirement Planning. A more
complete system is known as Manufacturing Resource Planning (MRP II)
It is also consistent with the Enterprise Resource Planning (ERP) framework
MRP is a material planning and scheduling system for components, parts,
subassemblies and raw materials

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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
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.
ERP system can be considered a direct extension of MRP
MRP logic is used in the production module of ERP
Under ERP the entire firm operates from the same data
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 1960s was on inventory control

Techniques of the day focused on the most efficient way to manage large volumes of
Software packages were designed to handle inventory based on traditional inventory
In the 1970s, 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
Techniques for capacity planning were added to the basic MRP system capabilities

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

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When this occurred, users began to consider their systems as company-wide systems

The resultant system is known as closed-loop MRP

In the 1980s, 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
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 plan
By early 1990s, 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

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a unified enterprise view of the business that encompasses all functions and
departments; and
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
One significant feature of ERP software is that
Core corporate activities, such as manufacturing, human resources, finance,
and supply chain management are automated and
Improved considerably by incorporating best practices,
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 management
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
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

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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

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
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:
An enterprise-wide set of management tools that helps balance demand and
Containing the ability to link customers and suppliers into a complete supply
Employing proven business process for decision making
Providing high degree of cross functional integration among sales, marketing,
manufacturing, operations, logistics, purchasing, finance, new product
development, and human resource
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

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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
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
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

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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
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

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