CIM Unit 2

UNIT II
PRODUCTION PLANNING AND CONTROL AND

COMPUTERISED
PROCESS PLANNING
Syllabus
• Process planning – Computer Aided Process
Planning (CAPP) – Logical steps in Computer
Aided Process Planning – Aggregate
Production Planning and the Master
Production Schedule – Material Requirement
planning – Capacity Planning- Control
Systems-Shop Floor Control-Inventory
Control –Brief on Manufacturing Resource
Planning-II (MRP-II) & Enterprise Resource
Planning (ERP) - Simple Problems.
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Introduction
• To manufacture a product that meets the
design specification, the manufacture of each
component part of the product must be
thoroughly planned.
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Process planning – the design/manufacture
interface
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Process Planning Activities
• An ability to interpret engineering drawings
• Knowledge of materials for manufacture
• Knowledge of manufacturing processes
• Knowledge of jigs and fixtures
• An ability to use reference material, for ex, manufacturing
date, tooling date, etc.,
• Knowledge of relative costs of material, processes and
tooling
• An ability to calculate manufacturing parameters and costs
• Knowledge of inspection/QA procedures and specification
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Drawing interpretation
• Part geometry
• Dimensions and associated tolerances
• Geometric tolerances
• Surface finish specifications
• Material specification
• Number of parts required
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Material evaluation and process selection
• Knowledge of the materials used in
manufacturing is essential for effective process
planning
• Some materials undergo changes in properties
during processing and therefore during
consideration must be given to this fact
• Knowledge about the material impact resistance
or toughness
– Process selection and criteria
• Material form, component size and weight, economic
considerations, dimensional and geometric accuracy, surface
finish specifications, batch size and production rate
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Selection of machines and tooling
• Once the process planner has determined
which processes are being used, the specific
production equipment required for this must be
selected.
– Component size and weight
– The physical size
– Construction of the machine
– Power and torque of the machine
– Type of tools available
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• Once the equipment decision has been made,
the specific tooling for each operation must be
identified.
• Selecting an appropriate tool including
– Work piece material
– Type of cut
– Tool material
– Machining data
– Quality/capability
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Setting process parameters
• Once the machines and tooling have been
selected, specific parameters must be
established for each operation for each
machine
– Calculating appropriate feeds
– Speeds and depth of cut
– Time taken
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Work holding devices
• From the drawing interpretation, the process
planner identifies any general location and
restraint requirements and any critical location
and restraint requirements.
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Selecting quality assurance methods
• To specify the inspection criteria for all these
critical processing factors as all manufacturing
processes have some degree of inherent
variability.
• Decides which tools and techniques are most
appropriate.
• Strike the balance between ensuring the
product quality and avoiding unnecessary
checking.
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Costing
• Estimating the manufacturing costs of
producing a component or product based on
the available cost and time data.
• Used to determine the unit cost and the
profitability of the product.
• Cost date will also be used to formulate the
process plan itself.
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Preparing the process planning documentation
• There are two documents involved in the
preparation of the process plans, they are
– Routing sheets
– Operation sheets
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Routing Sheets
• Specifies the route the raw material follows
through the manufacturing environment.
• Specifies the equipment and tooling to be used.
• Providing travel information for the operators.
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Operation list
• Detailed plan for every operation can be
operated using an operations list.
• Specifies more detail each individual
operation.
• Content of the operation sheet will vary from
machine organization to organization, it will
include details of tooling(including work
holding devices), feeds and speeds , setup and
operation times
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APPROACHES TO PROCESS PLANNING
• There are basically two approaches to process
planning which are as follows :
• (i) Manual experience-based process planning,
and
• (ii) Computer-aided process planning method.
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Manual Experience-based Process Planning
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Following difficulties are associated with manual
experienced based process planning method :
• It is time consuming and over a period of time,
plan developed are not consistent.
• Feasibility of process planning is dependent on
many upstream factors (design and availability of
machine tools). Downstream manufacturing
activities such as scheduling and machine tool
allocation are also influenced by such process
plan.
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Defining Process planning
• Process planning can be defined as the systematic determination of
the detailed methods by which workpieces or parts can be
manufactured economically and competitively from initial stages (raw
material form) to finished stages (desired form).
• Geometrical features, dimensional sizes, tolerances, materials, and

surface finishes are analyzed and evaluated to determine an
appropriate sequence of processing operations.
Final Form Initial Form
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• In general, the inputs to process planning are
 design data,
 raw material data,
 facilities data (machining data, tooling data, fixture data, etc.),
 quality requirements data, and
 production type data.
• The output of process planning is the process plan.

 The process plan is often documented into a specific format and called
 process plan sheet,
 process sheet,
 operation sheet,
 planning sheet,
 route sheet,
 route plan, or
 part program.
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• A process plan is an important document for production
management. The process plan can be used for
 Management of production,
 Assurance of product quality,
 Optimization of production sequencing, and
 Determination of equipment layout on the shop floor.
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• Recent research results have also demonstrated that process

planning plays an important role in Computer Integrated
Manufacturing – CIM
Process planning is the key link for integrating design and manufacturing
• the process plan provides necessary information for

technical and equipment preparation, such as:
 tools,
 jigs and fixtures,
 machines,
 inspection devices,
 raw material stocks,
 inventory plans,
 purchasing plans,
 personal requirements,
 etc.
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Defining Computer Aided Process planning - CAPP
• Computer Aided Process Planning (CAPP) can be defined as

the functions which use computers to assist the work of
process planners.
• The levels of assistance depend on the different strategies
employed to implement the system.
 Lower level strategies only use computers for

storage and retrieval of the data for the process plans
which will be constructed manually by process
planners, as well as for supplying the data which will
be used in the planner's new work.
 Higher level strategies use computers to

automatically generate process plans for some
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workpieces of simple geometrical shapes.
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CAPP a key factor in CAD/CAM integration because it is the link

between CAD and CAM.
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Benefits of CAPP
1. Reduction in process planning time.

2. Reduction in the required skill of the process
planner.
3. Reduction in costs due to efficient use of resources.
4. Increased productivity.
5. Production of accurate and consistent plans.
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Approaches of CAPP
In general, three approaches to CAPP are traditionally
recognized:
• the variant approach,

• the generative approach, and
• the hybrid (semi-generative) approach
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The Variant approach of CAPP
• The variant approach, which is also called retrieval approach,
uses a group technology (GT) code to select a generic process
plan from the existing master process plans developed for each
part family and then edits to suit the requirement of the part.
• Variant approach is commonly implemented with GT coding

system. Here, the parts are segmented into groups based on
similarity and each group has a master plan.
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Geometry Classification
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Advantages of Variant approach of CAPP
1. Once a standard plan has been written, a variety

of components can be planned.
2. Programming and installation are comparatively

simple.
3. The system is understandable, and the planner

has control of the final plan.
4. It is easy to learn and easy to use.
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Disadvantages of Variant approach of CAPP
1. The components to be planned are limited to

previously planned similar components.
2. Experienced process planners are still required to

modify the standard plan for the specific
component.
3. Details of the plan cannot be generated.
4. Variant planning cannot be used in an entirely

automated manufacturing system, without
additional process planning.
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The Generative approach of CAPP
• In a generative approach, a process plan for each
component is created from scratch without human
intervention. These systems are designed to automatically
synthesize process information to develop a process plan
for a part
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The Generative approach of CAPP
• Generative CAPP systems contain the logic to use manufacturing
data bases, knowledge bases and suitable part description schemes
to generate a process plan for a particular part.
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Advantages of Generative approach of CAPP
1. Consistent process plans can be generated rapidly.
2. New components can be planned as easily as

existing components.
3. It has potential for integrating with an automated

manufacturing facility to provide detailed control
information.
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The Hybrid (Semi-Generative) approach of CAPP
• A hybrid planner, for example, might use a variant,

GT-based approach to retrieve an existing process
plan, and generative techniques for modifying this
plan to suit the new part
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Main Steps of CAPP Systems
• Identification of part specifications.

• Selection of blanks or stock.
• Selection of machining operations.
• Selection of machine tools.
• Selection of cutting tools.
• Calculation of cutting parameters.
• Generation of setup plans.
• Selection of work holding devices (fixtures).
• Calculation of times and costs.
• Generation of process plans
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Production planning and control
• Production Planning and Control is concerned
with the logistics problems that are
encountered in manufacturing, that is,
managing the details of what and how many
products to produce and when, and obtaining
the raw materials, parts and resources tp
produce the products.
• PPC is the integrator in CIM.
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Production Planning
• Production planning consists of
– Deciding which products to make, in what
quantities, and when they should be completed
– Scheduling the delivery and production of parts
and products
– Planning the man power and equipment resources
needed to accomplish the production plan.
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Activities in Production Planning
• Aggregate Production Planning
• Master Production Planning
• Material Requirement Planning
• Capacity Planning
• Shop Floor Control
• Inventory Control
• Manufacturing Resources Planning
• Enterprises Resources Planning
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Aggregate Planning
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Production and Operations Planning
Production Process Long Term
Design Capacity Planning
Aggregate Planning
Forecast
Master Production
Schedule
Demand
Material Requirements
Planning
Individual Order
Scheduling
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The main idea behind aggregate planning
Aggregate planning
Translates business plans into
rough labor schedules and
production plans
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Issues to Consider for Aggregate Planning
Production rate: “aggregate units” per worker per unit time
Workforce level: available workforce in terms of hours
Actual Production: Production rate x Workforce level
Inventory: Units carried over from previous periods
Costs: production, changing workforce, inventory
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What does aggregate planning do?
Given an aggregate demand forecast , determine production levels, inventory levels,

and workforce levels, in order to minimize total relevant costs over the planning
horizon
Given the number of

variables, there is not a
single optimal solution!
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Aggregate Planning Strategies
1. Chase strategy: match production rate to production requirements by varying

the workforce (no inventory buildup or shortage allowed)
2. Level strategy: keep a constant workforce who work at maximum capacity
(inventory will vary from period to period); workforce level chosen such that
the total requirement over the planning horizon can be exactly met
3. Stable workforce: keep a constant workforce who work at maximum capacity;
outsource in order to match production and requirements (no inventory buildup
or shortage allowed); workforce level chosen such that they can exactly satisfy
the requirements in the period with the minimum requirement level
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Example: CA&J Company…
JAN FEB MAR APR MAY JUN Total
Demand Forecast 1,800 1,500 1,100 900 1,100 1,600 8,000
Working Days 22 19 21 21 22 20 125
Costs Inventory
Inventory holding $1.50/unit/month Beginning Inventory 400 units

Backorders $5.00/unit/month
Hiring and training $200.00/worker Labor
Layoff $250.00/worker
Beginning Labor 40 workers
Labor time required 0.20 units/hour
Straight time cost (8 hours) $4.00/hour
Outsourcing $20.00/unit
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First step: Analyze the requirements…
JAN FEB MAR APR MAY JUN

Beginning Inventory 400
Demand Forecast 1,800 1,500 1,100 900 1,100 1,600
Production requirement
Ending Inventory
Production requirement = Forecast – Beginning Inventory
Ending Inventory = Beginning Inventory + Production Requirement – Forecast
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First step: Analyze the requirements…

Beginning Inventory 400 0 0 0 0 0
Demand Forecast 1,800 1,500 1,100 900 1,100 1,600
Production requirement 1,400 1,500 1,100 900 1,100 1,600
Ending Inventory 0 0 0 0 0 0
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Plan 1: Chase strategy (variable workforce)
Production hours required

Days per month 22 19 21 21 22 20
Worker hours per month
Workers required
Workers hired
Hiring cost
Workers laid off
Layoff cost
Labor cost
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Plan 1: Chase strategy
Production hours required 7,000 7,500 5,500 4,500 5,500 8,000
Days per month 22 19 21 21 22 20
Worker hours per month 176 152 168 168 176 160
Workers required 40 49 33 27 31 50
Workers hired 0 9 0 0 4 19
Hiring cost 0 1800 0 0 800 3,800
Workers laid off 0 0 16 6 0 0
Layoff cost 0 0 4,000 1,500 0 0
Labor cost 28,000 30,000 22,000 18,000 22,000 32,000
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Plan 1: Chase strategy
Hiring cost 6,400
Layoff cost 5,500
Labor cost 152,000
Total Cost 163,900
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Plan 2: Level strategy
Beginning inventory 400
Working days per month 22 19 21 21 22 20
Production hours available
Monthly production level
Demand Forecast 1,800 1,500 1,100 900 1,100 1,600
Ending Inventory
Shortage Cost
Inventory cost
Labor cost
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Number of workers required
= Total hours required over planning horizon/(8*total days)
= 38,000/(8*125) = 38. This is the no. of workers for each month

Beginning inventory 400 -62 -407 -230 147 385
Production hours available 6688 5776 6384 6,384 6,688 6,080
Monthly production level 1,338 1,155 1,277 1,277 1,338 1,216
Demand Forecast 1,800 1,500 1,100 900 1,100 1,600
Ending Inventory -62 -407 -230 147 385 1
Shortage Cost 310 2035 1150 0 0 0
Inventory cost 0 0 0 220.5 577.5 1.5
Labor cost 26752 23104 25536 25536 26752 24320
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Layoff cost 500
Shortage
3,495
cost
Inventory
798
cost
Labor cost 152,000
Total Cost 156,793
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Plan 3: Stable strategy with outsourcing
Monthly production hours
Monthly production level
Monthly outsourcing level
Monthly outsourcing cost
Monthly labor cost
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Number of workers
= enough workers to cover requirements in April
= 900*5/(21*8)
= 27 workers (this is the no. of workers for each month)
Monthly production hours 4,752 4,104 4,536 4,536 4,752 4,320
Monthly production level 950 821 907 907 950 864
Monthly outsourcing level 450 679 193 - 150 736
Monthly outsourcing cost 9,000 13,580 3,860 0 3,000 14,720
Monthly labor cost 19,008 16 416 18,144 18,144 19,008 17,280
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Layoff Cost 3,250
Outsourcing
44,160
Cost
Labor Cost 108,000
Total Cost 155,410
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Comparison
Layoff cost 500
Shortage
Hiring cost 6,400 3,495 Layoff Cost 3,250
cost
Inventory Outsourcing
Layoff cost 5,500 798 44,160
cost Cost
Labor cost 152,000 Labor cost 152,000 Labor cost 108,000
Total Cost 163,900 Total Cost 156,793 Total Cost 155,410
Chase Level Stable
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“Sensitivity Analysis”
WHAT IF…
… outsourcing costs increase or decrease?

… the holding costs are higher?
… the hiring costs are lower?
… the firing costs are higher?
We can always plug the data in and re-calculate the costs
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Disaggregation
Working with aggregate units facilitates intermediate planning.

But to put this plan into action we should translate it,
decompose it, disaggregate it and state it in terms of actual units
of products and for a shorter period
Aggregate planning was for 12 or more months.

Now we should break it down into shorter periods, say 2-3 months.
Disaggregation:
Breaking down the aggregate plan into specific products - from

aggregate product to real specific products - based on the
specific products, then calculating detail of manpower,
material and inventory requirements.
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Disaggregation
Aggregate Plan
Month Jan Feb Mar
Lawn Mower 200 300 400
Master Schedule
Push 100 100 100
Self-propelled 75 150 200
Riding 25 50 100
Total 200 300 400
Total of aggregate and
disaggregate products are not
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Master Schedule
The result of disaggregation is a master schedule.
The Master Schedule shows quantity and timing of specific products.

It usually covers 6 to 12 weeks.
After preparing a tentative Master Schedule, a planner can do Rough-cut

Capacity Planning.
Rough-cut capacity planning is to check the feasibility of the Master

Schedule with respect to available manpower and machinery capacities,
storage spaces, and vendor capabilities.
It is just a rough check to ensure that the master schedule is achievable.
The master schedule then is used as the basis for short term planning.
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Master Schedule
Aggregate plan: 12 months.
Master schedule: 12 weeks.
Master schedule is updated every 2 weeks.
Therefore, it is on a rolling basis, always we

have a disaggregated plan for the next 12
weeks.
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Master Production Schedule (MPS)
Master schedule states quantity and delivery time of specific products.
It says we need 75 push lawnmowers in January. But it does not say how we get it -
from production, or from inventory.
Master Production Schedule (MPS) is developed

based on Master Schedule.
MPS: Quantity and timing of planned production.
MPS determines the

Promised Inventory, and the
Production Requirements available to promise inventory for each period.
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Master Scheduling Process
Inputs Outputs
Beginning inventory Master production schedule
Master
Forecast Projected inventory
scheduling
Customer orders Uncommitted inventory

(Available to Promise)
The key idea is: we have a forecast, but it turns into and actual
order when we receive a customer order.
MPS starts with a preliminary calculation of projected inventory.
This reveals when we need production

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Example; Projected on-hand Inventory
Beginning
Inventory
JUNE JULY
64 1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
Customer Orders
(committed) 33 20 10 4 2
Projected on-hand
inventory 31 1 -29 Forecast is larger than
Customer orders in week 3
Customer orders are Forecast is larger than

larger than forecast in Customer orders in week 2
week 1
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Master Production Scheduling Process
Negative projected on-hand inventory is the signal for production.
Suppose the economic production lot size for this product is 70 units.
Whenever production is called, 70 units are produced.
The negative projected inventory of -29 in period 3 calls for production, 70 units
are produced, the projected inventory becomes 41.
The same calculation continues across the whole planning horizon.
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64 June July
1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
Customer Orders 33 20 10 4 2
(committed)
Projected on 31 1 41 11 41 1 31 61
hand inventory
MPS 70 70 70 70
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64 June July
1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
Customer Orders 33 20 10 4 2
(committed)
Projected on 31 1 41 11 41 1 31 61
hand inventory
MPS 70 70 70 70
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Available To Promise (ATP)
64 June July
1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
Customer Orders (committed) 33 20 10 4 2
Projected on hand inventory 31 1 41 11 41 1 31 61
MPS 70 70 70 70
Now we can determine available to promise at each period.
We use a look ahead procedure.

Sum booked customer orders week by week up to (not including) the next week of
production. This is booked orders.
The remaining inventory is ATP.
ATP is only calculated for the first week and for weeks in which there is a MPS quantity.
(In this example: weeks 1, 3, 5, 7, 8)
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Available To Promise (ATP); First week
64 June July
1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
MPS 70 70 70 70
ATP 11 56 68 70 70
Available to promise in week 1 = Inventory in week 0 + Production in week 1 - Customer

Orders at week 1 - Customer Orders at week 2
ATP(1) = I(0)+ P(1) - CO(1) - CO(2)

ATP(1) = 64+0 -33 -20 = 11
This is an uncommitted inventory.

It can be assigned to week 1, week 2, or both.
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Available To Promise (ATP); Other weeks
For other weeks, beginning inventory is removed from the formula:
ATP(3) = P(3)-CO(3)-CO(4)
ATP(3)= 70-10-4= 56
64 June July
1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
MPS 70 70 70 70
ATP 11 56 68 70 70
64 June July
1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
MPS 70 70 70 70
ATP 11 56 68 70 70
9/30/20197 and 8, no CO, therefore ATP =

For weeks CIM UNIT II (VM)
MPS 79
Updating ATP
As additional orders are booked, they would be entered into the schedule.
ATP would be updated to reflect new booked orders.
Marketing can use updated ATP amounts to provide realistic delivery dates to customers
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Updating MPS
Changing to a master production schedule can be disruptive.

Particularly changes in the immediate periods of the schedule
Aggregate Plan is developed for say 1 year

Master Production Schedule is developed for a period of say 12
weeks.
MPS is updated say every 2 weeks, it is on a rolling basis.
1 2 3 4 5 6 7 8 9 10 11 12
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Frozen Firm CIM UNIT
FullII (VM) Open 81
Assignment
Problem 1. Book Page 627.
Forecast of demand for the next four months is 70 units per

month
Committed customer orders for the next four months are 80,
50, 30, and 10, respectively. Order size is 100 units.
Beginning inventory is 0.
Prepare MPS
Prepare ATP
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Solution to Problem 1
Month
1 2 3 4
Forecast 70 70 70 70
Customer Orders
Inventory on hand
MPS
ATP
Month
1 2 3 4
Customer Orders 80 50 30 10
Inventory on hand
MPS
ATP
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Month
1 2 3 4
Inventory on hand 20
MPS 100
ATP
Month
1 2 3 4
Inventory on hand 20 50
MPS 100 100
ATP
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Month
1 2 3 4
Inventory on hand 20 50 80
MPS 100 100 100
ATP
Month
1 2 3 4
Inventory on hand 20 50 80 10
MPS 100 100 100
ATP
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Month
1 2 3 4
MPS 100 100 100
ATP 20
Month
1 2 3 4
MPS 100 100 100
ATP 20 50
Month
1 2 3 4
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MPS 100 CIM UNIT100
II (VM)
100 86
ATP 20 50 60
Material Requirement Planning (MRP)
Material Requirement Planning (MRP)
 ______________________________________
 ______________________________________
Key Outputs of MRP
• Calculate demand for component items
• Determine requirements for subassemblies, components, and raw material
• Determine when they are needed
• Generate work orders and purchase order
• Consider lead time
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When to use MRP
 ___________________________________
 ___________________________________
 ___________________________________
 ___________________________________
Dependent / Independent Demand?
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Demand Characteristics
Demand Characteristics for Finished Products and Their Components
Independent demand Dependent demand
100 x 1 =
100 tabletops
100 tables
100 x 4 = 400 table legs
400 – Continuous demand Discrete demand

400 –
300 –
No. of tables
300 –
No. of tables
200 –
200 –
100 –
100 –
1 2 3 4 5
Week M T W Th F M T W Th F
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MRP Input & Output
Material
Requirements
Planning
(MRP)
Work Purchase Rescheduling

9/30/2019 orders CIMorders
UNIT II (VM) notices 91
Major Inputs to MRP Process:
1. Bill of Material
• Product structure file
• Determines which component items need to be scheduled
Product Structure Record
Level 0
Clipboard
Pressboa Clip Rivet

rd (1) Assembly s (2) Level 1
(1)
Top Bottom Piv Sprin

Clip (1) Clip (1) ot g (1) Level 2
(1)
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2. Master Production Schedule (MPS)
 Drives MRP process with a schedule of finished products
 Quantities represent production not demand
 Quantities may consist of a combination of customer orders &
demand forecasts
 Quantities represent what needs to be produced, not what can be
produced
 Example
PERIOD
MPS ITEM 1 2 3 4 5
Clipboard 85 95 120 100 100
Lapdesk 0 50 0 50 0
Lapboard 75 120 47 20 17
Pencil Case 125 125 125 125 125
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3. Inventory Record
• _________________________________________________
• Contains an extensive amount of information on every item that is produced,
ordered, or inventoried in the system
• _________________________________________________
DESCRIPTION INVENTORY POLICY

Item Pressboard Lead time 1
Item no. 734 Annual demand 5000
Item type Purch Holding cost 1
Product/sales class Comp Ordering/setup cost 50
Value class B Safety stock 0
Buyer/planner RSR Reorder point 39
Vendor/drawing 07142 EOQ 316
Phantom code N Minimum order qty 100
Unit price/cost 1.25 Maximum order qty 500
Pegging Y Multiple order qty
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LLC 1 CIM UNIT II (VM)
Policy code 3 94
MRP Processes – 4 Basic Steps
1. Exploding the bill of material
• ___________________________________
2. Netting out inventory
• ___________________________________
• ___________________________________
3. Lot sizing rule – How many units
• ___________________________________
• ___________________________________
• ___________________________________
4. Time-phasing requirements
• ___________________________________
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Lot Sizing Rule Comparison
• The FOQ rule _factory
order quantity rule
• The POQ rule __ Periodic
order quantity
• The L4L rule __Lot for

Lot_
_______________________
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MRP Matrix
Gross Requirement
• Derived from planned order releases of the parent
• Actual / estimated demand, in case of final product
Schedule Receipts
• Items on order
• Scheduled to arrive in the future time period
Projected on hand
• Current inventory, or anticipated inventory at the end of period
Projected on-hand Inventory on- Scheduled / Gross

Inventory at end hand at end planned requirements
of period t
= of period t - 1 + receipts in - in period t
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period t
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MRP Matrix
Net requirements
• Actual quantity to produce based on projected on hand and on-order
quantity
Planned Order Receipts
• Quantity, when orders need to be received
• Consider lot sizing rule:
Planned Order Release
• When order need to be placed to receive on time
• Consider lead time
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MRP Matrix
(You can download the template from our class webpage)
ITEM NAME OR NO. PERIOD

LOT SIZE LT 1 2 3 4 5
Gross Requirements Derived from MPS or planned order
releases of the parent
Scheduled Receipts On order and scheduled to be received
Projected on Hand Beg Inv Anticipated quantity on hand at the end

of the period
Net Requirements Gross requirements net of inventory and

scheduled receipts
Planned Order Receipts When orders need to be received
Planned Order Releases When orders need to be placed to be

received on time
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Example MRP Matrix
ITEM: CLIPBOARD LLC: 0 PERIOD

LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Receipts
Planned Order Releases
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MRP Example 1
Given the following information, determine when orders should be
released for A, C, and D and the size of those orders A
LT=3
C(3) D(2)
LT=4 LT=2
Parts On hand Scheduled Lot Size Demand

Receipts
A 10 0 L4L 100, period 8

C 140 0 Mult 50
D 200 250, period 2 Mult 250
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MRP Example 2
Given the following information, determine

when orders should be released for A, B, A B
C, and D and the size of those orders. LT=3 LT=2
C(3) D(2) D(3)

LT=4 LT=2 LT=2
Parts On hand Scheduled Lot Size Demand
Receipts
A 10 0 L4L 100, period 8

B 5 0 L4L 200, period 6
C 140 0 Mult 50 -
D 200 250, period 2 Mult 250 -
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Capacity Planning
• The original MRP system that were developed in
the 1970 created schedules that were not always
consistent with the production capabilities and
limitations of the plants that were to make the
products.
• MRP system developed the detailed schedule that
was unrealistic.
• When the current capacity is inadequate, the firm
must make plans for changes in capacity to meet
the changing production requirements.
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• Capacity planning consists of determining
what labor and equipment resources are
required to meet the current MPS as well as
long term future production needs of the firm.
• Capacity planning also identifies the
limitations of the available production
resources to prevent the planning of an
unrealistic master schedule.
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• Capacity planning is often accomplished in
three stages,
Capacity
• Aggregate Planning • MRP
production • MPS • CRP
planning
• RCCP
• RRP
Capacity Capacity
Planning Planning
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• RRP (resource requirement planning)
– Evaluation process used to make sure that the
aggregate plan is feasible.
– Used to plan for future increase in capacity to
match the ambitious plan.
RCCP (rough cut capacity planning)
Significant violation of production capacity .
Depends on the allocation of work orders to
specific work cells in the plant.
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• CRP (capacity requirement planning)
– Sufficient production capacity in the individual
departments and in the work cells to complete the
specific parts and assemblies.
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Capacity adjustments
• Short term adjustments
– Employment level
– Temporary workers
– Work shifts
– Labour hours
– Inventory stockpiling
– Order backlogs
– Sub contracting
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• Long term adjustments
– New equipment
– New plants
– Purchasing existing plants
– Acquiring existing companies
– Closing plants
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Shop floor control
• Set of activities in production control that are
concerned with releasing production orders to
the factory, monitoring and controlling the
progress of the orders through various work
centres, and acquiring current information on
the status of the orders.
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Three phases of shop floor control
• Order release
• Order scheduling
• Order progress
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Order release
• Provides the documentation needed to process
the production order through the factory. The
collection of documents is some times called
the shop packet.
– Route sheet
– Material requisition
– Job cards
– Move tickets
– Parts list
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Order scheduling
• Order scheduling phase follows the directly
from the order release phase and assigns the
production orders to the various work centres
in the plant.
• It executes the dispatching function in PPC.
• Provides information about relative priorities
of the different jobs, by showing due dates of
the job.
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Order scheduling phases
• Machine loading
– Allocating orders to the work centres
– Work centres will have a queue of orders waiting
to be processed
• Job sequencing
– Determining the sequence in which the jobs will be
processed through a given work centre.
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Priorities for production orders
• First come first serve
• Earliest due date
• Shortest processing time
• Least slack time
• Critical ratio
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Order progress
• Monitors the status of the various orders in the
plant, work in process, and other measures that
indicate the progress of production
– Work order status report
– Progress report
– Exception report
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Factory data collection system
• These techniques range from manual methods that require
workers to fill out paper forms that are later compiled to
fully automated methods that require no human
participation.
• It serves as an input to the order progress phase in the shop
floor.
• Ex :
– Piece counts completed at each work centre
– Scrapped parts and parts needing rework
– Operations completed in the routing sequence for each order
– Direct labor time expended on each other
– Machine downtime
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Inventory Control
• Inventory attempts to achieve a compromise
between two opposing objectives
– Minimizing the cost of holding inventory
– Maximizing customer service.
Minimizing inventory cost suggests keeping
inventory to a minimum, in the extreme, zero
inventory.
Maximizing customer service implies keeping large
stocks on hand so that customer orders can
immediately be filled.
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Major costs of holding inventory
• Investment cost
• Storage cost
• Cost of possible obsolescence or spoilage
Collectively these three costs are referred as

carrying cost or holding costs.
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Economic Order Quantity
Economic Order Quantity
Definition of EOQ
How to use the EOQ model in a
business organization
How the EOQ model works
Real world example
The Definition of EOQ
EOQ, or Economic Order Quantity, is

defined as the optimal quantity of orders
that minimizes total variable costs required
to order and hold inventory.
How to use EOQ in your organization
How much inventory should we
order each month?
The EOQ tool can be used to model the amount of

inventory that we should order each month.
How EOQ Works
The Principles Behind EOQ: The Total Cost Curve
& 
How EOQ Works
The Principles Behind EOQ: The Holding Costs
Keeping inventory on hand

Interest
Insurance
Taxes
Theft
Obsolescence
Storage Costs
How EOQ Works
The Principles Behind EOQ: The Holding Costs
Interest
Obsolescence
Storage
How EOQ Works
The Principles Behind EOQ: The Procurement Costs
Primarily the labor costs associated with

processing the order:
Ordering and requisition
A portion of the freight if the amounts vary
according to the size of the order
Receiving, inspecting, stocking
Invoice processing
How EOQ Works
The Total Cost Formula
Total Cost = Purchase Cost + Order Cost + Holding Cost

How EOQ Works
This represents the unchanging

fixed costs
P = Purchase cost per unit

R = Forecasted monthly usage
How EOQ Works
This represents the variable

order costs

C = Cost per order event (not per unit)
Q = The number of units ordered
How EOQ Works
This represents the variable

holding costs

Q = The number of units ordered
F = Holding cost factor
How EOQ Works
The EOQ Formula
Total Cost
Formula
Taking the derivative of both sides of the equation and setting equal to
zero to find the minimum value of the function, one obtains:
How EOQ Works
The EOQ Formula
The result of differentiation
The Economic Order Quantity

How EOQ Works
The EOQ Formula
Review and Summary of the EOQ Formula

How EOQ Works
The EOQ Formula
Review and Summary of the EOQ Formula
Here is the a graphic representation of the EOQ equation

Real Life Example:
Real Life Example:
Real Life Example:
First, Recall the

EOQ Equation:
Real Life Example:
Next let’s identify the

correct variables…
Real Life Example:

Forecasted
Amount
Real Life Example:

Ordering
Costs
Real Life Example:

Cost per Unit

Real Life Example:

Holding Cost
Factor
Real Life Example:
R = Annual demand
C = Fixed ordering cost
P = Cost per case
F = Holding Cost Factor
Real Life Example:
R = 5200
C = $10 per order
P = $2
F = 20% of value of inventory
per year
Real Life Example:
R = 5200
2 (10) (5200)
C = $10 per order
EOQ =
P = $2 (2 )(.20)
F = 20% of value of inventory
per year
Real Life Example:
2 (10) (5200)
EOQ =
(2 )(.20)
EOQ = 510 cases

Wrapping It Up
EOQ, or Economic Order Quantity, is defined as the optimal
quantity of orders that minimizes total variable costs required to
order and hold inventory.
Closing Comments
EOQ is a tool, not a simple solution.
EOQ is useful in determining optimal order

quantity
Understand the equation and what you are
trying to find
Find accurate inputs for the equation
Evolution of MRP
 MRP (material requirements planning) was the

precursor to ERP
 Primarily a production planning and control system
 MRP evolved to MRP II (manufacturing resource
planning)
 ERP (Enterprise Resource Planning) and ERP II
continue to extend the links through all business
processes
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Enterprise Resource Planning (ERP)
An Overview
 Organizes and manages a company’s business processes by sharing
information across functional areas
 Connects with supply-chain and customer management applications
 ERP in the nutshell*

 Client server software
 Integrates majority of business processes
 Processes majority of transactions
 Enterprise wide database
 Real time data access
* adapted from e-courseware, MIT Sloan
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ERP Modules
[Figure 12.1 Organizational Data Flow]
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ERP Modules
[Figure 12.2 ERP’s Central Database]
Finance &
Accounting
Sales Production &

& ERP Data Materials
Marketing Repository Management
Human
Resources
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ERP Implementation Process
 First step is to analyze business processes
 Which processes have the biggest impact on customer relations?
 Which process would benefit the most from integration?
 Which processes should be standardized?
 Use of Internet portals can aid implementation
9/30/2019 CIM UNIT II (VM) 154

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UNIT II

PRODUCTION PLANNING AND CONTROL AND

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• Geometrical features, dimensional sizes, tolerances, materials, and

Final Form Initial Form

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• The output of process planning is the process plan.

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• Recent research results have also demonstrated that process

• the process plan provides necessary information for

• Computer Aided Process Planning (CAPP) can be defined as

 Lower level strategies only use computers for

 Higher level strategies use computers to

CAPP a key factor in CAD/CAM integration because it is the link

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1. Reduction in process planning time.

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• the variant approach,

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• Variant approach is commonly implemented with GT coding

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1. Once a standard plan has been written, a variety

2. Programming and installation are comparatively

3. The system is understandable, and the planner

4. It is easy to learn and easy to use.

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1. The components to be planned are limited to

2. Experienced process planners are still required to

3. Details of the plan cannot be generated.

4. Variant planning cannot be used in an entirely

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1. Consistent process plans can be generated rapidly.

2. New components can be planned as easily as

3. It has potential for integrating with an automated

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• A hybrid planner, for example, might use a variant,

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• Identification of part specifications.

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Production rate: “aggregate units” per worker per unit time

Workforce level: available workforce in terms of hours

Actual Production: Production rate x Workforce level