Answer sheet (SARSTEC)

PPC
Answer to the question No: 01
PPC: Production planning and control is a predetermined process which includes the
use of human resource, raw materials, machines etc. PPC is the technique toplan each and
every step in a long series of separate operation.

The objectives of PPC are as follows:

 to ensure safe and economical production process
 to effectively utilize plant to maximize productivity
 to maximize efficiency by proper coordination in production process
 to ensure proper delivery of goods
 to place the right man for the right job, at right time for right wages.
 to minimize labor turnover
 to reduce the waiting time

Production planning and control is needed to achieve:

 Effective utilization of firms’ resources.
 To achieve the production objectives with respect to quality, quantity, cost and
timeliness of delivery.
 To obtain the uninterrupted production flow in order to meet customers varied
demand with respect to quality and committed delivery schedule.
 To help the company to supply good quality products to the customer on the
continuous basis at competitive rates.

Answer to the question No: 02

Function of PPC:
Pre-Planning function: Pre-planning is a macro level planning and deals with analysis
of data and is an outline of the planning policy based upon the forecasted demand, market
analysis and product design and development. This stage is concerned with process design
(new processes and developments, equipment policy and replacement and work flow (Plant
layout). The pre-planning function of PPC is concerned with decision-making with respect to
methods, machines and work flow with respect to availability, scope and capacity.
 Planning Function: The planning function starts once the task to be accomplished is
specified, with the analysis of four M’s, i.e., Machines, Methods, Materials and Manpower.
This is followed by process planning (routing). Both short-term (near future) and long-term
planning are considered. Standardization, simplification of products and processes are given
due consideration.
Control Function: Control phase is effected by dispatching, inspection and expediting
materials control, analysis of work-in-process. Finally, evaluation makes the PPC cycle
complete and corrective actions are taken through a feedback from analysis. A good
communication, and feedback system is essential to enhance and ensure effectiveness of PPC.

Answer to the question No: 03

The stages of Production planning and control has three phases namely:
 Planning Phase
 Action Phase
 Control Phase

Phases of production planning and control

Planning Phase: Planning is an exercise of intelligent anticipation in order to

establish how an objective can be achieved or a need fulfilled in circumstances, which are
invariably restrictive. Production planning determines the optimal schedule and sequence of
operations economic batch quantity, machine assignment and dispatching priorities for
sequencing. It has two categories of planning namely
 Prior planning
 Active planning.

Action Phase: Action phase has the major step of dispatching. Dispatching is the
transition from planning phase to action phase. In this phase, the worker is ordered to start
manufacturing the product. The tasks which are included in dispatching are job order, store
issue order, tool order, time ticket, inspection order, move order etc.
 Control Phase: The control phase has the following two major modules:
 Progress reporting, and
 Corrective action.

Answer to the question No: 04

Classification Of Production system:

1. Job-Shop Production: It is featured by manufacturing one or more quantity of
products designed and produced as per the specification of customers within prefixed time
and cost. The distinguishing feature of this is low volume and a high variety of products. A
job-shop comprises of general-purpose machines arranged into different departments. Each
job demands unique technological requirements demands to process on machines in a certain
sequence.

Features of Job-shop Production:

 A high variety of products and low volume.
 Use of general purpose machines and facilities.
 Highly skilled operators who can take up each job as a challenge because of
uniqueness.
 Large inventory of materials, tools, parts.

2. Batch Production: Batch Production is a form of manufacturing in which the job

pass through the functional departments in lots or batches and each lot may have a different
routing. It is characterized by the manufacture of a limited number of products produced at
regular intervals and stocked stored for sales.

Features of Batch Production:

 Shorter production runs.
 Plant and machinery are flexible.
 Plant and machinery set up are used for the production of the item in a batch and
change of set up is required for processing the next batch.
 Manufacturing lead-time and cost are lower as compared to job order production.

3. Mass Production: Manufacturer of discrete parts or assemblies using a continuous

process is called Mass Production. This production system is justified by a very large volume
of production. The machines are arranged in a line or product layout. Product and process
standardization exists and all outputs follow the same path.

Features of Mass Production:

 Standardization of product and process sequence.
 Dedicated special purpose machines having higher production capacities and
output rates.
 A Large volume of products.
 The shorter cycle time of production.
 Lower in process inventory.
 Perfectly balanced production lines.
 4. Continuous Production: Production facilities are arranged as per the sequence of
production operations from the first operations to the finished product. The items are made to
flow through the sequence of operations through material handling devices such
as conveyors, transfer devices, etc.

Features of Continuous Production:

 Dedicated plant and equipment with zero flexibility.
 Material handling is fully automated.
 The process follows a predetermined sequence of operations.
 Component materials cannot be readily identified with the final product.
 Planning and scheduling is a routine action.

Answer to the question No: 05

Product life cycle: The product life cycle is an important concept in marketing. It
describes the stages a product goes through from when it was first thought of until it finally
is removed from the market. Not all products reach this final stage. Some continue to grow
and others rise and fall.

The main stages of the product life cycle are:

 Research & development: researching and developing a product before it is made
available for sale in the market
 Introduction: launching the product into the market
 Growth: when sales are increasing at their fastest rate
 Maturity: sales are near their highest, but the rate of growth is slowing down, e.g.
new competitors in market or saturation
 Decline: final stage of the cycle, when sales begin to fall

This can be illustrated by looking at the sales during the time period of the product.
 Answer to the question No: 06
Loading: A load means the quantity of work, and allocating the quantity of work to
the processes necessary to manufacture each item is called loading.

Scheduling: Scheduling is the process of arranging, controlling and optimizing work

and workloads in a production process or manufacturing process. Scheduling is used to
allocate plant and machinery resources, plan human resources, plan production processes and
purchase materials.

Answer to the question No: 07

Selection of appropriate location is necessary due to following reasons:
 Plant location partially determines operating and capital cost. It determines the
nature of investment.
 Each plant location requires some basic facilities like transportation, availability of
water, electricity, fuel, cheap labors etc.
 Each prospective location implies a new allocation of capacity to respective market
area.
 Government plays an important role in the choice of the location keeping in view
the national benefits.
 Answer to the question No: 08
Nonetheless, regardless of the type of business/enterprise, there are host of factors but
not confined to the following only that influence the selection of the location of an
enterprise:
 Availability of Raw Materials
 Proximity to Market
 Infrastructural Facilities
 Government Policy
 Availability of Manpower
 Local Laws, Regulations and Taxation
 Ecological and Environmental Factors
 Competition
 Incentives, Land costs. Subsidies for Backward Areas
 Climatic Conditions
 Political conditions.

Answer to the question No: 09

 Answer to the question No: 10
Setting up a business in a different country can hold tremendous benefits when it
comes to financial resources, as well as labor and workforce issues, such as quality of life.
However, determining which location an international business should choose can be
overwhelming.

1. It’s all about the people: The most important consideration when evaluating a
location for a business is the people. Without the right people to execute the tasks that drive
success, most companies will fail. Not only is it crucial to find readily available skilled labor
at the right level for the job and with the necessary language skills, but it may also be crucial
to be able to recruit employees from HQ or other offices to move to this new country.

2. True costs: The cost of operating in a foreign country touches on many aspects, not
only the direct cost of space and personnel, but also indirect costs that affect the bottom line
and level of productivity. Factors to consider include: the level of taxation for both
corporations and individuals, government incentives, employer overhead in the form of
social costs, local labor laws regulating the number of hours that employees work and the
general motivation, reliability and commitment of the local workforce.
 3. Innovation is the name of the game: In today’s fast moving market, a country
needs to provide the institutions, human capital, infrastructure, partnership opportunities,
market sophistication and business aptitude to help an enterprise succeed. These conditions
can affect a business even if the operation is only for the local market. It is also important to
build off of an existing ecosystem of innovation whenever possible.

4. Government regulations: Onerous labor laws can prove to be a prohibitive burden

even for small operations. American companies are used to having flexibility and freedom to
make decisions to react to the market, such as personnel adjustments, especially in the early
stages of starting in a new location. U.S. businesses will want to make sure they are legally
protected in every manner. A few of the factors that can determine how business-friendly a
government is from a legal and regulatory standpoint include: open and transparent local
government on taxes and permits, IP protection, liberal labor laws and freedom to manage
personnel.

Answer to the question No: 11

The necessity of plant layout may be felt and the problem may arise when:
 There are design changes in the product.
 There is an expansion of the enterprise.
 There is proposed variation in the size of the departments.
 Some new product is to be added to the existing line.
 Some new department is to be added to the enterprise and there is reallocation
of the existing department.
 A new plant is to be set up.

Objectives of Plant Layout: A well planned and designed plant layout is one that can
be useful in achieving the following objectives:
 efficient and proper utilization of available floor space
 effective utilization of production capacity
 reduction in material handling costs
 utilization of labor force efficiently
 provide for volume and product flexibility
 provide easiness of control and supervision
 provide employee safety
 allow easy maintenance of plant and machines
 improve productivity
 reduce accidents
 Answer to the question No: 12
Factors affecting plant layout can be classified as external and internal factors. These
are explained below in detail.
External factors:
 availability of transportation facilities
 receiving operations such as unloading, stores and so on
 storage facilities
 dispatching operations (shipping)
 packaging operations
 office and other support facilities
 diverse climatic conditions

Internal factors:

 Nature of product and process: Heavy products needs stationary layout, while line
layout is suitable for production of light products which can be moved easily from
one machine to another. The process layout is suitable when part and product design
are not stable.
 Volume of production: Quantity of production and the standardization of the
product also affect the type of layout. If standardized commodities are to be
manufactured on large scale, line type of layout is adopted.
 Nature of plant location: The size, shape and topography of the site where the plant
is located also affect the layout. For example, if a site is near the railway line, the
arrangement of general layout for receiving and shipping and for the efficient flow
of production in and out the plant may be made by the side of the railway lines. If
space is narrow and the production process is long, the layout of plant may be
arranged on the land surface.
 Management policies and decisions: Management policies regarding size of the
plant, kind and quality of the product, scope for expansion, etc. also affect location
of a plant.
 Type of process: it is an intermittent process of production calls for functional or
process layout, while continuous process of production needs line type of layout.
 Nature of machinery and equipment: The nature of nature of machines and
equipment also affects the plant layout. If machines are heavy in weight or create
noise, stationery layout is preferred. Heavy machines are generally fixed on the
ground floor.
 Nature of raw materials: Design and specification of raw materials, like physical
properties, quantity and quality of raw materials, etc. affect the plant layout.
 Human factors and working conditions: Men are the most important factor of any
production system and therefore special consideration for their safety and comforts
should be provided while planning a layout, specific safety items like obstruction-
free floor, workers non-exposure to hazards, exit etc. should be supplied.
 Characteristics of the building: Shape of building, covered and open area, number
of stores, facilities of elevators, parking area and many other similar factors influence
the layout plan.
 Answer to the question No: 13
A layout refers to the arrangement and grouping of machines and equipment’s so as to
produce the products efficiently and economically. It calls for grouping of machines and other
production facilities which can be done in different ways as follows:
 Process, functional or job shop layout
 Product, line processing or flow line layout
 Fixed position or static layout
 Cellular Manufacturing (CM)
 Hybrid layout

Process Layout: It is also called as functional layout. All machines performing similar
kind of operations are grouped together at one location in the process layout, for example, all
lathes, milling machines, grinding machines, cutting machines etc. are clustered together. Thus
all forging will be done in one area and all the lathes will be placed in another area. This type
of process is more suitable to job and batch of production. In such production the operation
differs from product to product. So, it is desirable to arrange the machines on the basis of
process rather than on the products.
Product or Line Processing Layout: In this type of layout the machines and
equipment’s are arranged in one line depending upon the sequence of operations required for
the product. It is also called as line layout. The material moves to another machine sequentially
without any backtracking or deviation, i.e. the output of one machine becomes input of the
next machine. It requires a very little material handling.

Fixed or Stationary Layout: In fixed or stationary position layout, the movement of

manpower and machines to the product remains stationary. The movement of men and
machines is advisable as the cost of moving them would be lesser. This type of layout is ideal
where the size of the job is heavy and large. For example, locomotives, ships, wagon building,
aircraft manufacturing, and so on.

Cellular Manufacturing Layout: Under cellular manufacturing layout, machines are

placed within the cells that function on the lines of product layout within a larger shop or
process layout.

Combined or Hybrid Layout: In practice, a pure process or a pure line layout is rarely
found. Both are considered to be mutually exclusive. However, if a proper combination of both
these types of layouts is achieved, then it is possible to gain the advantages of both. This is
done in combined or hybrid layouts. This is an arrangement in which some portions of the
facility have a flexible-flow and others have a line-flow layout.
 Answer to the question No: 14
Sales forecasting: Sales forecasting is the process of estimating future sales. Accurate
sales forecasts enable companies to make informed business decisions and predict short-term
and long-term performance. Companies can base their forecasts on past sales data, industry-
wide comparisons, and economic trends.

Sales forecasting is a very important function for a manufacturing concern, since it is

useful in following ways:
 It helps to determine production volumes considering availability of facilities, like
equipment, capital, manpower, space etc.
 It forms a basis of sales budget, production budget natural budget etc.
 It helps in taking decision about the plant expansion and changes in production mix
or should it divert its resource for manufacturing other products.
 It helps in deciding policies.
 It facilitates in deciding the extent of advertising etc.
 The sales forecast is a commitment on the part of the sales department and it must
be achieved during the given period.
 Sales forecast helps in preparing production and purchasing schedules.
 Accurate sales forecasting is a very good aid for the purpose of decision making.
 It helps in guiding marketing, production and other business activities for achieving
these targets.

Answer to the question No: 15

There are two types of forecasting:
 Short-term forecasting and
 Long-term forecasting.

1. Short-Term Forecasting: This type of forecasting can be defined when it covers a

period of three months, six months or one year. Generally, the last one is most preferred. The
period is dependent upon the nature of business. If the demand fluctuates from one month to
another, forecasting may be done only for a short period.

Purpose of Short-Term Forecasting:

 To adopt suitable production policy so that the problem of overproduction and
short supply of raw material, machines etc. can be avoided.
 To reduce the cost of raw materials, machinery etc.
 To have proper control of inventory.
 To set the sales targets.
 To have proper controls.
 To arrange the financial requirements in advance to meet the demand.

2. Long-Term Forecasting: The forecasting that covers a period of 5, 10 and even 20

years. The period here also depends upon the nature of business, but beyond 12 years, the
future is assumed as uncertain. But in many industries like ship-building, petroleum refinery,
paper making industries, a long term forecasting is needed as the total investment cost of
equipment is quite high.
 Purpose of Long-Term Forecasting:
 To plan for the new unit of production or expansion of existing unit to meet the
demand.
 To plan the long-term financial requirements.
 To train the personnel so that man-power requirement can be met in future.

Answer to the question No: 16

The following are the various methods of sales forecasting:
 Jury of Executive Opinion.
 Sales Force Opinion.
 Test Marketing Result.
 Consumer’s Buying Plan.
 Market Factor Analysis.
 Expert Opinion.
 Past Sales (Historical Method).
 Statistical Methods.

1. Jury of Executive Opinion: This method of sales forecasting is the oldest. One or
more of the executives, who are experienced and have good knowledge of the market factors
make out the expected sales. The executives are responsible while forecasting sales figures
through estimates and experiences. All the factors-internal and external—are taken into
account. This is a type of committee approach. This method is simple as experiences and
judgment are pooled together in taking a sales forecast figure. If there are many executives,
their estimates are averaged in drawing the sales forecast.

2. Sales Force Opinion: Under this method, salesmen, or intermediaries are required
to make out an estimate sales in their respective territories for a given period. Salesmen are
in close touch with the consumers and possess good knowledge about the future demand
trend. Thus all the sales force estimates are processed, integrated, modified, and a sales
volume estimate formed for the whole market, for the given period.

3. Test Marketing Result: Under the market test method, products are introduced in a
limited geographical area and the result is studied. Taking this result as a base, sales forecast
is made. This test is conducted as a sample on pre-test basis in order to understand the
market response.

4. Consumers’ Buying Plan: Consumers, as a source of information, are approached

to know their likely purchases during the period under a given set of conditions. This method
is suitable when there are few customers. This type of forecasting is generally adopted for
industrial goods. It is suitable for industries, which produce costly goods to a limited number
of buyers- wholesalers, retailers, potential consumers etc. A survey is conducted on face to
face basis or survey method. It is because changes are constant while buyer behavior and
buying decisions change frequently.

5. Market Factor Analysis: A company’s sales may depend on the behavior of

certain market factors. The principal factors which affect the sales may be determined. By
studying the behaviors of the factors, forecasting should be made. Correlation is the
statistical analysis which analyses the degree of extent to which two variables fluctuate with
reference to each other.

6. Expert Opinion: Many types of consultancy agencies have entered into the field of
sales. The consultancy agency has specialized experts in the respective field. This includes
dealers, trade associations etc. They may conduct market researches and possess ready-made
statistical data. Firms may make use of the opinions of such experts. These opinions may be
carefully analyzed by the company and a sound forecasting is made.

7. Econometric Model Building: This is a mathematical approach of study and is an

ideal way to forecast sales. This method is more useful for marketing durable goods. It is in
the form of equations, which represent a set of relationships among different demand
determining market factors. By analyzing the market factors (independent variable) and sales
(dependent variable), sales are forecast. This system does not entirely depend upon
correlation analysis. It has great scope, but adoption of this method depends upon availability
of complete information. The market factors which are more accurate, quick and less costly
may be selected for a sound forecasting.

8. Past Sales (Historical method): Personal judgment of sales forecasting can be

beneficially supplemented by the use of statistical and quantitative methods. Past sales are a
good basis and on this basis future sales can be formulated and forecast. According to
Kirkpatrick, today’s sales activity flows into tomorrow’s sales activities; that is last year’s
sales extend into this year’s sales. This approach is adding or deducting a set of percentage to
the sales of previous year(s). For new industries and for new products, this method is not
suitable.

9. Statistical Methods: Statistical methods are considered to be superior techniques of

sales forecasting, because their reliability is higher than that of other techniques.
They are:
 Trend Method
 Graphical Method
 Time-series Method:
 Freehand method
 Semi-average method
 Moving average method
 Method of least square
 Correlation method
 Regression method.

Answer to the question No: 17

Work measurement: Work measurement can be defined as the implementation of a
series of techniques which are designed to find out the work content, of a particular task or
activity, by ascertaining the actual amount of time necessary for a qualified worker, to perform
the task, at a predetermined performance level.

Objectives of Work Measurement:

 To compare the times of performance by alternative methods.
 To enable realistic schedule of work to be prepared.
  To arrive at a realistic and fair incentive scheme.
 To analyses the activities for doing a job with the view to reduce or eliminate
unnecessary jobs.
 To minimize the human effort.
 To assist in the organization of labor by daily comparing the actual time with that
of target time.

Answer to the question No: 18

Techniques of Work Measurement:

 Direct Time Study: Direct time study refers to the ascertainment of the time
needed to carry out a unit of work. In this method, observation and recording of
time is necessary for undertaking each unit of an operation are done, with a view
to ascertaining, the actual time, in which the work can be accomplished.
 Synthesis Method: A work measurement method, in which the job or activity is
divided into various parts, after which the time consumed in performing each
element of the job is recorded and then combined.
 Analytical Estimating: This method of time measurement is used to ascertain
the time values for the tasks that are long and not repetitive in nature.
 Predetermined Motion Time System (PMTS): In PMTS method, basic times
are set up for basic human motions. Such time values are used to compute the
time required by the job for its completion, with fixed standard. It is a new and
improved version of motion study.
 Work Sampling or Ratio Delay Method: A work measurement method, in
which the work of several employees is sampled randomly, at periodic intervals,
to ascertain the proportion of total operations, of a specific activity.

Answer to the question No: 19

Standard time: Standard time may be defined as the, amount of time required to
complete a unit of work: (a) under existing working conditions, (b) using the specified
method and machinery, (c) by an operator, able to the work in a proper manner, and (d) at a
standard pace.

Thus basic constituents of standard time are:

 Elemental (observed time).
 Performance rating to compensate for difference in pace of working.
 Relaxation allowance.
 Interference and contingency allowance.
 Policy allowance.

Steps in time study

 Components standard time

Answer to the question No: 19

Answer to the question No: 20

ILLUSTRATION 1: Assuming that the total observed time for an operation of assembling an electric switch is
1.00 min. If the rating is 120%, find normal time. If an allowance of 10% is allowed for the operation, determine
the standard time.
 Answer to the question No: 21
There are two methods of timing using a stop watch. They are
 Fly back or Snap back method.
 Continuous or Cumulative method.

Fly back method: Here the stop watch is started at the beginning of the first element.
At the end of the element the reading is noted in the study sheet (in the WR column). At the
same time, the stop watch hand is snapped back to zero. This is done by pressing down the
knob, immediately the knob is released. The hand starts moving from zero for timing the next
element. In this way the timing for each element is found out. This is called observed time
(O.T.)
 Continuous method: Here the stop watch is started at the beginning of the first element.
The watch runs continuously throughout the study. At the end of each element the watch
readings are recorded on the study sheet. The time for each element is calculated by successive
subtraction. The final reading of the stop watch gives the total time. This is the observed time
(O.T.).

Answer to the question No: 22

Fixed cost: A fixed cost is a cost that does not change with an increase or decrease in
the amount of goods or services produced or sold. Fixed costs are expenses that have to be
paid by a company, independent of any specific business activities.

Variable cost: A variable cost is a corporate expense that changes in proportion

with production output. A variable cost can increase or decrease depending on several factors,
as opposed to a fixed cost which is one-time or constant.

Answer to the question No: 23

Break-even point: The break-even point (BEP) or break-even level represents the sales
amount—in either unit (quantity) or revenue (sales) terms—that is required to cover total costs,
consisting of both fixed and variable costs to the company. Total profit at the break-even
point is zero.

Graphically Representing the Break Even Point: The graphical representation of unit
sales and dollar sales needed to break even is referred to as the break even chart or Cost
Volume Profit (CVP) graph. Below is the CVP graph of the example above:

Explanation:
 The number of units is on the X-axis (horizontal) and the dollar amount is on the Y-
axis (vertical).
 The red line represents the total fixed costs of $100,000.
 The blue line represents revenue per unit sold. For example, selling 10,000 units
would generate 10,000 x $12 = $120,000 in revenue.
 The yellow line represents total costs (fixed and variable costs). For example, if the
company sells 0 units, the company would incur $0 in variable costs but $100,000 in
 fixed costs for total costs of $100,000. If the company sells 10,000 units, the
company would incur 10,000 x $2 = $20,000 in variable costs and $100,000 in fixed
costs for total costs of $120,000.
 The breakeven point is at 10,000 units. At this point, revenue would be 10,000 x $12
= $120,000 and costs would be 10,000 x 2 = $20,000 in variable costs and $100,000
in fixed costs.
 When the number of units exceeds 10,000, the company would be making a profit
on the units sold. Note that the blue revenue line is greater than the yellow total costs
line after 10,000 units are produced. Likewise, if the number of units is below
10,000, the company would be making a loss. From 0-9,999 units, the total costs line
is above the revenue line.

Answer to the question No: 24

Enterprise Resource Planning: ERP is a modern concept which puts an organization
into a common platform through which all the resources of the organization are effectively
and efficiently connected with each other.

Benefits of ERP:
 Improve the decision-making process.
 Planning realistic future scenarios.
 The minimum duplication.
 ERP systems are modular.
 Total adaptation to the needs of your company.
 Greater control and traceability.
 Integration with other members of the value chain.
 Improved Internal Communication.
 Automation of Tasks.
 Lower costs, more competitive.
 Increased performance and return on investment in the long term.
 Access to reliable information. This benefit is achieved by:
 Avoid data redundancy and operations and. Arial
 Reduced cycle time and delivery.
 Cost Reduction.
 Ease of Adaptability.
 Improvements in "Scalability".
 Improved maintenance.
 Reach outside the organization.
 E-commerce and e-business.
 Long-term Savings.
 Decision Making.
 Quality and Customer Relations.
 Benefits of ERP for Security.
 Employee Productivity.
 Standardizes Organization' Profit Level.
 Boost Profit to grow.
 Answer to the question No: 25
MRP: Material requirements planning (MRP) is a production planning, scheduling, and
inventory control system used to manage manufacturing processes. Most MRP systems are
software-based, but it is possible to conduct MRP by hand as well.

Objectives of MRP:
 One of the primary material requirements planning objectives is that it reduces
inventory. It accurately determines the required materials for every product. As a
result, it helps the company procure materials as and when needed and avoids
excessive build-up.
 It identifies materials quantities, timings, availabilities, procurements and actions
required to meet deadlines. It aids in avoiding delay in production and indicates the
due date of the customer’s job order.
 MRP enables the firm to give realistic delivery dates to the customers. Even the
slightest delay can be relayed to the customer, and effective measures can be taken.
 One of the best material requirements planning objectives is that it improves
coordination among the employees. It helps in achieving an uninterrupted flow of
inventory through the production line. MRP strategically enhances the efficiency of
the production system.
 It guarantees that the inventory level is at its optimum levels. Additionally, it ensures
that the material and product is ready for production and thereby matching demand
and supply.
 It is a priority system that throws up a red alert as soon as the safety levels are
breached. Subsequently, if there is a missing component, the MRP system will
reschedule it to another time.

Functions of MRP:
 Inventory Management: Arguably the main objective of an MRP system, the
feature is to ensure that materials are available at a moment’s notice. This eliminates
the need for manual-entered data and is able to carry out material orders with ease.
It also is able to alert the facility when products are ready to be delivered.
 Cost Reduction: In correlation with inventory management, cost is reduced
significantly. Through ensuring a steady flow of inventory, holding and untimely-
delivery cost are reduced, ultimately bringing more revenue into the operation.
 Production Optimization: Although the main goal of MRP is to oversee and
manage materials, it benefits the rest of the system as well. As materials are flowing
throughout the supply chain, equipment and employees are able to work at a much
faster and efficient rate as well.
 Answer to the question No: 26
Inventory control system: The Inventory control system is maintained by every firm
to manage its inventories efficiently. Inventory is the stock of products that a company
manufactures for sale and the components or raw materials that make up the product. Hence,
an inventory comprises of the buffer of raw material, work-in-process inventories and finished
goods.

Objectives:
 To minimize capital investment in inventory by eliminating excessive stocks;
 To ensure availability of needed inventory for uninterrupted production and for
meeting consumer demand;
 To provide a scientific basis for planning of inventory needs;
 To tiding over the demand fluctuations by maintaining reasonable safety stock;
 To minimize risk of loss due to obsolescence, deterioration, etc.;
 To maintain necessary records for protecting against thefts, wastes leakages of
inventories and to decide timely replenishment of stocks.

Advantages of Inventory Control: Scientific inventory control provides the following

benefits:
 It improves the liquidity position of the firm by reducing unnecessary tying up of
capital in excess inventories.
 It ensures smooth production operations by maintaining reasonable stocks of
materials.
 It facilitates regular and timely supply to customers through adequate stocks of
finished products.
 It protects the firm against variations in raw materials delivery time.
 It facilitates production scheduling, avoids shortage of materials and duplicate
ordering.
 It helps to minimize loss by obsolescence, deterioration, damage, etc.
 It enables the firms to take advantage of price fluctuations through economic lot
buying when prices are low.

Answer to the question No: 27

Answer to the question No: 28