OPERATIONS SPECIALIZATION

Manufacturing Resources Planning and Control

Overview of operations Planning and Control

MRP has become a general term used to describe material requirements
planning, closed-loop MRP and manufacturing resource planning (MRP II). The
advent cheap computing power in the 1950s and 1960s led to a rapid growth in
number of companies using MRP.

Even after the operations system has been successfully designed and placed in
to actual use, considerable managerial discretion remains. This is because
decisions must be made on a shorter term basis – month to month, day to day
even hour to hour as to how the system will be operated and controlled.
Operational planning and control decisions involve scheduling and control of
human resources, materials, and financial input to produce the desired quantity
and quality of output most efficiently.

Operational planning and control are based on forecasts of future demand for
the output of the system. Even with the best possible forecasting and the most
finely tuned operations system, demand cannot always be met with existing
system capacity in a given time period. Unexpected trends and new product
developments, such as the smart card identity, as well as environmental and
political conditions can throw the forecasts off, and problems in the operations
system can reduce capacity. At these times, shorter term managerial decisions
must be made to allocate system capacity to meet demand. Planning and control
is concerned with the reconciliation between what the service beneficiary
requires and what the operation’s resources can deliver.

Planning and control activities provide the systems, procedures and decisions
which bring different aspects of supply and demand together. The purpose is
always the same – to make a connection between supply and demand that will
ensure that the operation’s processes run effectively and efficiently and produce
products and services as required by service beneficiaries or dictated by relevant
legislation.
 Planning is a formalisation of what is intended to happen at some time in the
future. However, a plan does not guarantee that an event will actually happen.
Service beneficiaries change their minds about what they want and when they
want it. Service providers may not always deliver on time, machines may fail,
or staff may be absent through illness. Control is the process of coping with
changes. It may mean that plans need to be redrawn. It may also mean that an
‘intervention’ will need to be made in the operation to bring it back ‘on track’ –
for example, finding a new service provider that can deliver quickly, repairing
the machine which failed, or moving staff from another part of the operation to
cover for the absentees. Control makes the adjustments which allow the
operation to achieve the objectives that the plan has set, even when the
assumptions on which the plan was based do not hold true. Within the
constraints imposed by its design, an operation has to be run on an ongoing
basis.

‘Planning and control’ is concerned with managing the ongoing activities of the
operation so as to satisfy service beneficiary demand. All operations require
plans and require controlling, although the degree of formality and detail may
vary.

What is Forecasting?
Forecasting helps operations managers and departments develop meaningful
plans and reduce uncertainty of events in the future. Two important aspects
associated with forecasting are the expected level of demand and the forecast's
degree of accuracy.

A department uses a variety of forecasting methods to assess possible outcomes.

The primary advantage of forecasting is that it provides the department with
valuable information that it can use to make decisions about the future of the
organisation. It is not possible to accurately forecast the future. Because of the
qualitative nature of forecasting, a department can come up with different
scenarios depending upon the interpretation of the data.

Forecasts are vital to departments and for every significant management

decision. It is beneficial for all levels of functional planning, strategic planning,
and budgetary planning. Decision-makers use forecasts to make many important
decisions regarding the future direction of the department. Forecasting enables
you to set in train actions that will deliver outcomes in time for when they are
needed. Depending on the kind of lead time involved, you may have to do
weekly, monthly or yearly forecast.

The primary goal of operations management is to match supply to demand.

Forecasts play an important role in the planning process because they enable
managers to anticipate the future so they can plan accordingly. Forecasts affect
decisions and activities throughout a department, in finance, human resources,
marketing, and management information systems (MIS), as well as in
operations and other parts of an organization. For example, Human resources
Hiring activities, including recruitment, interviewing, and training; counselling
MIS New/revised information systems, Internet services. Operation Schedules,
capacity planning, work assignments and workloads, inventory planning, make-
or-buy decisions, outsourcing, project management.
 The forecast should be timely
 The forecast should be accurate, and the degree of accuracy should be
stated. This will enable managers to plan for possible errors and will
provide a basis for comparing alternative forecasts.
 The forecast should be reliable; it should work consistently.
 The forecast should be expressed in meaningful units. Financial planners
need to know how much funds will be needed, production planners need
to know how many units will be needed, and schedulers need to know
what machines and skills will be required. The choice of units depends on
user needs.
 The forecast should be in writing.
 The forecasting technique should be simple to understand and use.
 The forecast should be cost-effective:
Steps in Forecasting
1. Determine the purpose of the forecast. How will it be used and when will
it be needed? This step indicates the level of detail required in the
forecast, the amount of resources (personnel, computer time, finds) that
can be justified, and the level of accuracy necessary.
2. Establish a time horizon. The forecast must indicate a time interval,
keeping in mind that accuracy decreases as the time horizon increases.
3. Obtain, clean, and analyse appropriate data. Obtaining the data can
involve significant effort. Once obtained, the data may need to be
 “cleaned” to get rid of outliers and obviously incorrect data before
analysis
4. . Select a forecasting technique.
5. Make the forecast.
6. Monitor the forecast. A forecast has to be monitored to determine
whether it is performing in a satisfactory manner. If it is not, re-examine
the method, assumptions, and validity of data, and so on; modify as
needed; and prepare a revised forecast.

OPERATIONAL PLANNING
Operational planning is the day-by-day and month by month planning for what
your organisation is doing; strategic planning determines the entire direction of
your organisation, including what it's not doing but should be doing. The two
forms of planning must be integrated, but must not be confused. It is important
to understand the difference between an "operational plan" and a "strategic
plan". The strategic plan is about setting a direction for the organisation,
devising goals and objectives and identifying a range of strategies to pursue so
that the organisation might achieve its goals.
Strategic Plan Operational plan

Components of an operation plan

The key components of a complete operational plan include:
 Human capital. The staff and skills required to implement your project, as
well as current and potential sources of these resources.
  Financial requirements. The funding required to implement your project, your
current and potential sources of these funds.
 Risk assessment. What risks exist and how they can be addressed.
 Estimate of project lifespan, sustainability and exit strategy. How long your
project will last, when and how you will exit your project, and how you will
ensure sustainability of your project’s achievements.
An Operational Plan is the next step after a Strategic Plan has been created. The
task is to take every single strategy contained within the Strategic Plan and
allocate resources, set a timeline and stipulate performance indicators.

Impleme
nting the Operational Plan

The Operational Plan is a basic tool that directs the day-to-day activities of
organisational staff. All staff should be aware of the existence of the operational
plan, what its purpose is and why it is important to them. The Operational Plan
is only as good as the diligence of staff in putting it into action. To ensure that
there is sufficient understanding of the operational plan, the highest echelons of
management within the organisation must thoroughly communicate the
operational plan to staff.
Communication strategies can include:
 A series of staff / team meetings in which senior management are engaged in
explaining key aspects of the operational plan and dealing with questions that
staff raise about the plan.
 A breakdown of the overall operational plan into subsets and communication
of each subset to the work team or section that takes responsibility. This enables
the work team to more clearly understand, and be focused on, their part in
implementing the whole plan.
 The development of systems that enable progress of strategies / tasks to be
measured and reported within a work team, and to management.
 The provision of training so that staff may better understand their tasks and
responsibilities, and especially how they can contribute to the overall
achievement of the operational plan.
 Aspects of the Operational Plan can be described in position descriptions of
employees

The implementation of the Operational Plan requires management to regularly

monitor achievement and exert control to reduce any variance from the plan.
This control by managers will involve:
 Investigating on a regular basis of what has been achieved, and what has not
 Implementing corrective action where tasks are not achieved, or achieve on
time  Checking that resources will be available when needed
 Supervising, supporting and motivating the people of the organisation to
ensure tasks are undertaken
 Adjusting the operational plan if there is a need
 Reporting problems to superiors e.g. directors, committee personnel, the
Board Members of the organisation In planning and controlling the volume and
timing of activity in operations, four distinct activities are necessary:
 loading, which dictates the amount of work that is allocated to each part of the
operation;
 sequencing, which decides the order in which work is tackled within the
operation;
 scheduling, which determines the detailed timetable of activities and when
activities are started and finished;
 monitoring and control, which involve detecting what is happening in the
operation, replanning if necessary, and intervening in order to impose new
plans.

OPERATIONS CONTROL
Operational control regulates the day-to-day output relative to schedules,
specifications, and costs. Are product and service output high-quality and
delivered on time? Are inventories of raw materials, goods-in-process, and
finished products being purchased and produced in the desired quantities? Are
the costs associated with the transformation process in line with cost estimates?
Is the information needed in the transformation process available in the right
form and at the right time? Is the energy resource being used efficiently?
Operational control can be a very big job, requiring substantial overhead for
management, data collection, and operational improvement.

The idea behind operational control is streamlining the process to minimize

costs and work as quickly and efficiently as possible. Operations Control is a
management function aimed at achieving defined goals within an established
timetable, and usually understood to have three components:
 setting standards,
 measuring actual performance, and
 Taking corrective action.
A typical process for operations control includes the following steps: (1) actual
performance is compared with planned performance, (2) the difference between
the two is measured, (3) causes contributing to the difference are identified, and
(4) Corrective action is taken to eliminate or minimize the difference.

Why We Need To Control Operations The management process should

involve continual checking of the implementation of the Operational Plan and
exercising control of the organisation's resources to ensure success. What needs
to be checked by the operations manager if management team includes:
 Timelines - have strategies been commenced and will all tasks be completed
by the scheduled timelines?
 Performance Measures - has progress been made according to performance
measures? Is it likely that targets will be met?
 Responsibilities - is there anyone having difficulty with the tasks allocated to
them? Does there need to be any reassignment of responsibilities?
 Physical Resources - the assignment of assets e.g. equipment, vehicles, space
in a building or outdoors
 Budget - the allocation of money e.g. pay salaries, purchase equipment, hire
venues, undertake advertising and promotion. Managers will therefore need to
control the above factors on a week-to-week basis. This control by managers
will involve:
 Investigating on a regular basis of what has been achieved, and what has not
 Implementing corrective action where tasks are not achieved, or achieve on
time
 Checking that resources will be available when needed
 Supervising, supporting and motivating the people of the organisation to
ensure tasks are undertaken
 Adjusting the operational plan if there is a need
 Reporting problems to superiors e.g. directors, committee personnel, the
Board Members of the organization

How Do We Control Operations

 Having created a plan for the operation through loading, sequencing and
scheduling, each part of the operation has to be monitored to ensure that
planned activities are indeed happening. Any deviation from the plans
can then be rectified through some kind of intervention in the operation,
which itself will probably involve some replanning.
 The output from a work centre is monitored and compared with the plan
which indicates what the work centre is supposed to be doing. Deviations
from this plan are taken into account through a replanning activity and the
necessary interventions made to the work centre which will ensure that
the new plan is carried out. Eventually, some further deviation from
planned activity will be detected and the cycle is repeated.
Types of control used in an organisation:
 Feed-forward controls, also called preliminary controls, are
accomplished before a work activity begins; they ensure that directions are
clear and that the right resources are available to accomplish them.
 Concurrent controls, sometimes called steering controls, monitor
ongoing operations and activities to make sure that things are being done
correctly; they allow corrective actions to be taken while the work is being
done.
 Feedback controls, also called post action controls, take place after an
action is completed and focus on end results; they address the question:
"Now that we are finished, how well did we do?"
 External control is accomplished through personal supervision and the
use of formal administrative systems.
 Internal control occurs through individuals taking responsibility for their
work; it allows motivated individuals and groups to exercise self-discipline
in fulfilling job expectations and is consistent with many progressive
developments in the new workplace. Monitoring and control, which involve
detecting what is happening in the operation, replanning if necessary, and
intervening in order to impose new plans.

Two important types are ‘pull’ and ‘push’ control. Pull control is a system
whereby demand is triggered by requests from a work centre’s (internal)
customer. Push control is a centralized system whereby decisions are issued
to work centres which are then required to perform the task and supply the
next workstation Push and Pull Control One element of control is periodic
intervention into the activities of the operation. An important decision is how
this intervention takes place.

Adjustment of Operation Plans

Adjusting is the process of altering business strategies on the basis of sensed
outcomes. In this phase, which is done in tandem with sensing, business unit
or department heads assess the data to determine possible resource and
capability trade-offs. The management committee should use reports against
its annual operational plans to review progress towards meeting the strategic
aims and objectives.

Therefore, they must ensure that whoever is doing the work is keeping
appropriate records so that progress can be assessed. This will involve, at the
implementation stage of the plan, being clear what systems and structures are
required. The things that need to be measured will give an indication of how
well the department is doing, hence, the name indication or performance
measures. Before completing the plan, agreement is required on how and
when it will be monitored and reviewed and what information the
Management Committee needs to receive in order to review progress. When
reviewing progress towards achieving the strategic aims and objectives, the
Management Committee should:
 ensure that activities are kept within the parameters of the agreed strategic
aims and objectives;
 ensure that activities are consistent with organisation’s vision, mission and
values; and
 keep under review internal and external changes which may require
changes to the organisation’s strategy or affect their ability to achieve their
objectives.
RECENT BUSINESS ENVIRONMENT and CHALLENGES IN
COMPETITIVE EDGE.

Globalization
.Globalization can be defined as “a process of interaction and integration
among the people, companies, and governments of different nations.” It is
driven by a reduction in trade barriers, advancements in information technology,
and transportation technology. Operation managers face competition from the
company across the street, as well as, from across the country and across the
world. The companies who compete with others abroad will have to improve
quality while lowering prices to remain competitive. This falls on the operations
manager as he or she is the one who “engages in the four functions of planning,
organizing, leading, and controlling to ensure that the product or service
remains competitive in the market.”
Operations manager must tap into their creative skills as innovation will be a
key factor of success as will knowledge about international business and the
myriad cultures of the businesses around the globe.
Sustainability
One has defined business operational sustainability as a “method of evaluating
whether a business can maintain existing practices without putting future
resources at risk.” When discussing the concept of sustainability, it is often
referred to as the Three Pillars of Sustainability which are social,
environmental, and economic. Operations managers must concern themselves
with the outcomes of each of the pillars including how their work affects safety,
welfare, communities, the environment and economic sustainability.
Effective operations managers must implement best practices with a concern for
all three pillars of sustainability. They also need to initiate and verify corrective
action when any outcome of one of the three pillars becomes jeopardized.
Ethical Conduct
Ethics is defined as a subset of business ethics that is “meant to ensure that the
production function and/or activities are not damaging to either the consumer or
the society.” In particular organizations should consider the effects new
technologies, defective services, animal testing and business deals have on
people, safety, and the environment.
Unethical behavior has significantly contributed to the demise of successful
corporations like Enron, Tyco, and many varied firms doing business on Wall
Street. Being ethical across all business functions such as accounting, human
resource management, marketing and sales, and production are clearly within
the purview of the operations manager. Unethical behavior, regardless of its
origin, becomes a stain on the company as a whole.
Effective Communication
Being consistent and effective when communicating can be difficult anyone in
any position within an organization. The challenge for the operations manager is
to be able to communicate effectively with all internal and external
stakeholders. Whether they are talking to someone on the factory floor, or in the
boardroom, they must be able to effectively communicate their message as well
as process the messages being directed to them. Mastering oral, written, and
non-verbal communication is integral to making day-to-day operations run
smoothly. Effective and efficient communication is also necessary for building
employee morale and deepening trust with management. Operations managers
who take the time to be self-reflective, the initiative to be authentic, and the
effort to work on their communication skills are bound to be both productive
and successful. The development of these skills are frequently the most
requested of upper level management of their new and mid-level managers and
required to be successful in any company.
System Design
Key Issue in Operations, In relationship between system design and
operational management, the main theme is that organizations must develop
systems capable of “producing quality goods and services in demanded
quantities in acceptable time frames.” Designing the system, planning the
system, and managing the system present a wide variety of challenges to even
the most savvy operations managers.
As operations managers work in multidisciplinary environments, they must be
aware of and effectively respond to the challenges presented by globalization,
sustainability, ethical conduct, effective communication, and system design.
Doing this calls for operations managers to excel in the business, technical, and
interpersonal aspects of their work as they actively support the mission and
vision of their organization.

VARIOUS MANUFACTURING RESOURCES

In first approach , Manufacturing resources are sometimes understood as

persons or things that add value to a product in its production or delivery for a
similar approach. Although it remains unclear what “adding value” means, it
suggests that resources contribute to the completion of the given manufacturing
activity occurrence.
According to PSL approach manufacturing resources are required for certain
activities to occur. The idea is that activities cannot occur without the specified
resources.
The second approach to manufacturing resources is manufacturing resource
can be defined as , where resource captures the relational link between
resources and activities. Accordingly, a manufacturing resource is an entity that
satisfies the manufacturing resource description included in the activity at stake.

Manufacturing resource description means repeatable content in engineering

specifications.
Third approach is ‘goal’ based manufacturing resources, the idea is that
manufacturing resources are entities employed in manufacturing environments
to bring about agents’ goals, e.g., the goal of making a product with the desired
characteristics. The advantage of this view over the previous ones is the
possibility of modelling resources independently from the plans to which they
are possibly related. For instance, one may conceive a driller as a manufacturing
resource only because the driller is functional to achieve certain goals, rather
than because there is a plan for a drilling process covering the description of the
driller.

the first approach is well suited to model resources in tight connection to

manufacturing activity occurrences. On the other hand, it is less exploitable for
application cases where resources are to be managed independently from the
manufacturing processes where they only possibly participate. The second view
deals with this issue by binding resources to activities (plans) rather than
occurrences. A manufacturing resource is therefore an entity that is functional
for a manufacturing activity. Finally, the third approach is more general and
flexible than the previous ones, since it models resources independently from
both activities and occurrences but in connection to agents’ goals.

Importance their planning and control

Growing companies tend to develop systems to solve problems as they arise.
The philosophy behind MRP II is centralization and coordination, allowing
considering effort to be saved by everyone following the same system.

Traditionally, accounting figures were not based on same information as

manufacturing figures. For example, the accounts department would have
separate from manufacturing to calculate the inventory. This was because the
manufacturing information was not believed to be accurate for accounting
purpose- it was prepared by engineer, not accountants.

Production departments would often independently calculate the work in

progress measured in terms of ‘standard hours’. Advanced user of closed loop
MRP system realized that if the accuracy of inventory record good enough to
support an MRP system then it would be good enough to support an MRP
system then it would be good enough to be used financial purposes. This
allowed the financial and production departments to work with the same,
accurate, information thus allowing them to keep business plan up to date.
The linking of financial and manufacturing system is main step in moving from
closed loop MRP to MRP II.
Meaning of Manufacturing Resource Planning (MRP II):- Manufacturing
Resource Planning (MRP II) is method for the effective planning of all resource
of a manufacturing company.
It is made up of variety of interlinked functions, as shown in such as:
1. Strategic and Business Planning.
2. Demand Management.
3. Sales and Operation Planning (S&OP, also called Production/Aggregate
Planning).
4. Master Production Scheduling (MPS) with Rough-Cut Capacity Planning.
5. Material Requirements Planning (MRP I)
6. Capacity Requirements Planning (CRP) and Vendor Requirements Planning
(VRP).
7. The Execution Support System for Capacity and Material [Shop Floor
Control (SFC), and Purchase Planning and Control]
8.Operational planning in sales units
9. Financial planning in monetary units (for example in rupees or dollars etc.)
 Further, an ideal MRP II system has simulation capacity to answer ‘what if’
questions.
 Output from various report MRP II function is usually integrated with
financial report such as financial plan, purchase commitment report, inventory
projections.
 MRP II often integrated with a company’s warehousing and distribution
processes.
MRP II is an approach to managerial planning, execution, and control of
productive activity.
MRP II software can relate many information needs of all functions and
departments, including purchasing, accounting, payroll, distribution, marketing,
engineering, production activity control and general managerial planning,
measurement, evaluation and control.
MRP II is an explicit and formal manufacturing information system that
integrated marketing, finance and operations. It coordinates the sales and
manufacturing plans to assure their
consistency. It converts resource requirements, such as facilities, equipment,
personnel, and material, into financial requirements and converts production
outputs into monetary terms. It evaluate the organization’s ability to execute the
plan financially and also evaluates the financial merits of plan in terms of
measures as profit, returns on investment and return on assets.
Functions of operation planning and control
Like other manufacturing industry, Production planning and Control (PPC)
department is one of the most important department in garment manufacturing
industry. It plays an important role in apparel export business. It helps to build-
up strong relationship with the other departments to obtain maximum output
from the export order. To cope with the short lead time and small but frequent
orders, apparel manufacturers strive to improve their production processes in
order to deliver finished products within the expected time frame at the lowest
production cost. Production planning is therefore gaining importance in
contemporary apparel manufacturing.

Production control is the activity of monitoring and controlling garment

production or operation. It ensures that quantities booked into warehouse match
cut quantities. It influences to ensure having goods made on time, of adequate
quality, and at reasonable cost. Production control is the key tool for reduce
wastage and cost. In this article we will discuss on functions or activities of
production planning and control of clothing industry.

Functions of production planning and control of apparel industry:

The functions of PPC could be discussed in two individual stages as shown in
Fig.

Fig: Functional diagram of PPC

Functions of production planning:
Production planning involves everything from scheduling each task in the
process to execution and delivery of products.

The production planning functions include the following:

1.Estimating
It involves determining the quantity of garments to be produced and associated
cost involved for the same based on the sales forecast. Determinations of raw
materials and labour required to meet the planned targets and machine capacity
are the vital activities prior to budgeting for resources.

2.Routing
It is the method of determining the chain of operations to be carried out in the
production line to complete the assembling of garments. This information is
given by a product engineering function and is beneficial to make machine
loading charts. A route sheet is a document giving the guidelines and
information for conversion of raw materials into finished products. Route sheets
contain the following information:

 The necessary operations and their sequence.

 Machine has to be used for every operation.
 Projected set up and operation time per garment piece.
 Description of raw materials to be utilized for garment
production.
 Inspection procedure and tools required for inspection.
 Garment packing and handling guidelines during the movement
of parts and sub-assemblies through the operation stages.
3.Scheduling
It involves standardizing the priorities for each work and determining the
starting and finishing time for each process or operation.

It gives a time table for production, representing the total time period essential
for the production of a specific garment style. The objectives of scheduling are
as follows:
 To avoid unbalanced utilization of time amid various
departments as well as work centers.
 To utilize labor in an efficient manner such that the target is
achieved well within the established lead time to dispatch the order in
time and complete production at a minimum total cost.
4.Loading
Loading is the process of transforming the scheduled processes into practical
work. Two main concepts of loading are facility loading and machine loading.
 Facility loading: It is the loading of the work center and
deciding which kind of jobs to be allotted to which machine.
 Machine loading: It is the process of allocating specific jobs to
machines or workers based on primacies and capacity utilization. A
machine loading chart has to be made to demonstrate the planned
utilisation of machines and workers by allocating the jobs to
machineries as per priority determined at the time of scheduling.
Functions of production control:
Production control functions include the following:

1.Dispatching
It is defined as making the production-related activities in a dynamic manner by
issuing the orders and guidelines in agreement with the previously planned time
frames. It also gives a means for comparing actual progress of the work with
respect to the planned progress. The functions of dispatching are given below:

 Ensuring the smooth flow of raw material and other accessories

from stores to first garment production operation and then from one
operation to the next operation until all production processes are
carried out. In the garment unit, it comprises the flow of fabric to
inspection and then to the spreading room, cutting section, sewing
room, finishing, packing and dispatching.
 Gathering tools like cutting tools, sewing tools, etc., from tool
stores and delivering them to the concerned department or operator.
 Delivering the specification sheets, drawings and route cards to
the concerned departments.
 Giving the job orders and approving the processes in agreement
with production schedule and time frame as indicated in schedules or
machine loading charts.
 Getting the schedule of inspection by the buyers or internal
inspectors in an organisation and delivering it to the inspection
section of the line.
2.Expediting/Follow-up
It confirms that the process is done as per the production plan and the delivery
schedules are met. Progressing comprises activities like status reporting,
attending to bottleneck processes in the production line and eliminating them,
controlling of deviations from the planned performance levels, monitoring and
follow-up of progress of work in all stages of production, coordinating with
stores, tool room, purchase and maintenance departments and revising the
production plans and replanning it if necessary. The necessity for follow-up
could arise owing to the following reasons:

 Delay in supply of materials.

  Excessive absenteeism.
 Changes in design specifications.
 Changes in delivery schedules initiated by the customers.
 Breakdown of machines, tools, jigs and fixtures.
 Errors in design drawings of patterns and process plans.

Hierarchy of production plans overview, linkages to achieve business plans

Meaning
Typically, the manufacturing organizations have three categories of managerial
planning activities whose names "strategic", "tactical", and "operational"
production planning. Strategic planning is clearly of "long- range" scope
planning decisions. It is a responsibility of top management so it is called
"business planning". Tactical planning is a "medium- range" activity involving
middle managements. Finally operational planning, which involves "short-
range" actions, and it is normally executed by lower levels of management
(factory operations managers). Long-range (business plans) are necessary to
develop facilities and equipment, major suppliers, and production processes and
become constraints on the medium-range plan. Medium-range is "aggregate
plans" concerning with employment, aggregate inventory, utilities, facility
modifications, and material-supply contracts.

These aggregate plans impose constraints on the short-range production plans

that follow. So short-range is "Master Production Schedules" (MPS) for
producing finished goods or end items, which are used to derive production
planning and control systems. These systems develop short-range production
schedules of parts and assemblies, schedules of purchased materials, shop-floor
schedules, and workforce schedules. Figure (1) gives an illustration of the
planning activities.
Hierarchical production planning basically involves the decomposition of
decision problems in a production environment and the design of a sequential
solution procedure, the required information and the organizational systems. A
hierarchical decision process in a decentralized organization implies that upper
level decisions are made first to impose constraints upon the lower level
decisions. It is an important issue to design the linking mechanism between
different levels in a manner so as to guarantee consistency and feasibility. This
linking mechanism in fact defines the information flow between the levels, and
the aggregation/ disaggregation procedure of decision variables and production
data should also be designed carefully to permit information exchange.
Mathematical modelling is frequently employed to characterize the decision
process in each level, and the level of detail, the length of planning horizons, the
objective functions, the decision variables and the decision-makers usually
differ in each model.
The hierarchical planning process is used for PPC to help a manager understand
and control the operations for which he is responsible. A high-level plan sets the
context within which the next lower level plans operate. The different levels in
the hierarchy operate on different time scales. Typically aggregate planning is
associated with long planning horizons and detailed planning is associated with
short planning horizons. A common operational starting point for planning
production is the Master Production Schedule from which the requirements of
materials, parts, machines and labour are derived. Modifications may be made
to the plans if the derived requirements are thought to be inappropriate. The
consequences of the chosen plans, usually expressed as a list of requirements of
made-in and bought-out parts, become the basis of the work schedules placed
on individual men and machine and order supplied to vendors.
ASSEMBLY LINE BALANCING
An assembly line is a manufacturing process in which interchangeable parts are
added to a product in a sequential manner to create a finished product. The
assembly line was first used by Henry Ford and his engineers. Ford was also the
very first to build factories around that concept. Line balancing has been an
optimization problem of significant industrial importance: the efficiency
difference between an optimal and a sub-optimal assignment can yield
economies (or waste) reaching millions of dollars per year. Decreased costs of
production allowed lower prices of manufactured goods, better competitiveness
of enterprises, and better exploitation of the markets potential. There are many
different types of assembly line systems some common variations include the
classic automated intermittent and lean manufacturing models. These assembly
line systems are often used for making different types of products. Assembly
lines have some shared characteristics.
Wenqiang Zhang The Assembly Line Balancing (ALB) problem is a well-
known manufacturing optimization problem, which determines the assignment
of various tasks to an ordered sequence of stations, while optimizing one or
more objectives without violating restrictions imposed on the line. As Genetic
Algorithms (GAs) have established themselves as a useful optimization
technique in the manufacturing field, the application of GAs to ALB problem
has expanded a lot.
Assembly line Balancing Objectives
The main objective of line balancing is to distribute the task evenly over the
work station and lime balancing aims at grouping the facilities or workers in an
efficient pattern in order to obtain an optimum or most efficient balance of the
capacities and flows of the production or assembly processes.
MAIN TYPES OF ASSEMBLY LINES
There are many types of assembly line systems, some common variations
include the classic, automated, intermittent and lean manufacturing models.
These assembly line systems are often used for making different types of
products. Assembly lines have some shared characteristics. Figure 1
summarizes the kinds of assembly systems.
There are many different types of assembly line systems some common
variations include the classic automated intermittent and lean manufacturing
models. These assembly line systems are often used for making different types
of products. Assembly lines have some shared characteristics.
 1. Single model assembly line. Single model assembly line is a type of
assembly line in which assemblers work on the same product.
2. Mixed Model assembly line. In mixed-model production is the practice of
assembling several distinct models of a product on the same assembly line
without changeovers and then sequencing those models in a way that smoothes
the demand for upstream components. Setup times between models could be
reduced sufficiently enough to be ignored, so that intermixed model sequences
can be assembled on the same line. In spite of the tremendous efforts to make
production systems more versatile, this usually requires very homogeneous
production processes.
The objective is to smooth demand on upstream work centers, manufacturing
cells or suppliers and thereby reduce inventory, eliminate changeovers, improve
kanban operation. It also eliminates difficult assembly line changeovers. The
Mixed-Model Assembly Line (MMAL) is a more complex to balance in which
several types of the products are assembled simultaneously on the line which
considering to the shape of line.

3. Multi Model Assembly lines. Multi-product production supports process

manufacturers where multiple or single components are run through a
processing line which delivers multiple end items or finished products,
including waste or by-products. Serial/Lot control for components and end
items is available, as is a variety of costing and yield methods.

4. Peaced and unpeaced assembly lines. In peaced assembly systems a fixed

time value restricts the work content of stations (SALB further assumes that the
cycle time of all stations is equal to the same value). Assembly lines with this
attribute are called paced, as all stations can begin with their operations at the
same point in time and also pass on work pieces at the same rate.

In unpaced lines, work pieces do not need to wait until a predetermined time
span is elapsed, but are rather transferred when the required operations are
finished. This type of line control is often implemented if stochastic variations
influence processing times. Fig. 1. Assembly lines for single and multiple
products. Assembly line balancing (ALB) relates to a finite set of work
elements or tasks, each having an operation processing time and a set of
precedence relations, which specify the permissible orderings of the tasks. One
of the problems in organizing mass production is how to group work tasks to be
performed on workstations so as to achieve the desired level of performance.

Line balancing is an attempt to allocate equal amounts of work to the various

workstations along the line. The fundamental line balancing problem is how to
assign a set of tasks to an ordered set of workstations, such that the precedence
relations are satisfied and some measure of performance is optimized. The aim
of assembly line balancing problems (ALBPs) is to assign activities to stations
with respect to the precedence relationships and other constraints while some
measurements of performance are optimized.

There Are , only two main types of measurements have been used in the
ALBPs.
The first one is technical measurements such as cycle time, balance delay or
total idle time, and minimizing the number of workstations. The second one is
economic measurements like profit maximization and cost minimization. In
general, assembly line balancing problem occur when an assembly line has to
be designed or redesigned. The assembly line problem was first introduced by
Henry Ford in 1915, the father of modern assembly lines used in mass
production.

WHY WE USED LINE BALANCING

All factories that have a line such as traditional assembly line and new assembly
line such as heuristic and U-type and also mixed model used a few technique
such as genetic algorithms and fuzzy logic and also simulation method to
improve a few parameter of line control in other hand manager like has a
productivity and high yield in their factory and for this goal get help from
previous technique to locate a machine ,employer ,assign employer to machine
to select best choose for control and work by machine .

In a few company one employer control 2 or more than 2 machines and this
result is output of line balancing. In another word the company used line
balancing for grow up the rate of production and decrease man power, idle time
and buffer near machine, also used line balancing for produced more than 2
products Assembly lines are the most important components of mass production
systems. The improved labor productivity is their essential significance for
manufacturers who have to produce high volume products in a fast and cost
effective manner. An assembly line consists of several successive workstations
in which a group of assembly operations (tasks) are performed in a limited
duration (cycle time).

The productivity level of an assembly line generally depends on balancing

performance. Assembly line balancing (ALB) is the problem of assigning tasks
to successive workstations by satisfying some constraints and optimizing a
performance measure. This performance measure is usually the minimization of
the number of workstations utilized over the assembly line.

ASSEMBLY LINE BALANCING TERMINOLOGIES

1) Assembly line: An Assembly is made up of a number of workstations,
arranged serially. These stations are linked together by a transportation system
that aims to supply materials and move the production item from one station to
next one.
2) Line Balancing: Line Balancing is leveling the workload across all processes
in a cell or value stream to remove bottlenecks and excess capacity. A constraint
slows the process down and results if waiting for downstream operations and
excess capacity results in waiting and absorption of fixed cost.
3) Cycle Time: Cycle time is the Maximum amount of time allowed at each
station. This can be found by dividing required units to production time
available per day.
4) Lead Time: Summation of production times along the assembly line or Total
time required to manufacture an item or it is the time that elapses between when
a process starts and when it is completed.
5) Idle Time: Idle time is the time specified as period when system is not in use
but is fully functional at desired parameters.
6) Bottleneck: Delay in transmission that slow down the production rate. This
can be overcome by balancing the line
. 7) Precedence: The product can’t be move to the next station if it doesn’t
complete at the previous station. The products flow from one station to the other
station. In assembly line the products have to obey this rule. It can be
represented by nodes or graph.
8) Smoothness Index: This is the index to indicate the relative smoothness of a
given assembly line balance. Smoothness indeed is zero Indicates perfect
balance.
9) Workstation. It is an assigned location where a given amount of work is
performed. Normally a workstation is manned by one operator only.
Sometimes, work stations are manned by several operators, e.g. aircraft
production line. Minimum rational work element. It is an indivisible element of
work, or natural minimum work unit, beyond which assembly work cannot be
divided rationally. In an automobile assembly, fixing fuel pump, fuel tank,
wheel drum etc., are some of the examples of minimum rational work element.

BENEFITS OF ASSEMBLY LINE BALANCING

The benefits of assembly line balancing may be classified into two categories as
represented here.
Technical benefits
-Minimizing the number of workstations for a given cycles.
-Minimizing the cycle time for a given number of numbers of workstations.
-Minimizing the balance delay (or) maximizing the balancing efficiency.
-Minimizing the total idle time
. -Minimizing the overall facility or line length.

DEMAND MANAGEMENT/FORECASTING
Methods of forecasting
Qualitative methods

Qualitative techniques permit inclusion of soft information (e.g., human factors,

personal opinions, hunches) in the forecasting process. Those factors are often
omitted or downplayed when quantitative techniques are used because they are
difficult or impossible to quantify. In some situations, forecasters rely solely on
judgment and opinion to make forecasts. If management must have a forecast
quickly, there may not be enough time to gather and analyse quantitative data.

At other times, especially when political and economic conditions are changing,
available data may be obsolete and more up-to-date information might not yet
be available. Similarly, the introduction of new products and the redesign of
existing products or packaging suffer from the absence of historical data that
would be useful in forecasting. In such instances, forecasts are based on
executive opinions, service beneficiary surveys, and opinions of experts.
Executive Opinions A small group of upper-level managers (e.g., in
marketing, operations, and finance) may meet and collectively develop a
forecast. This approach is often used as a part of long-range planning and new
product development.
Service Beneficiary Surveys Because it is the service beneficiaries who
ultimately determine demand, it seems natural to solicit input from them. In
some instances, every service beneficiary or potential service beneficiary can be
contacted. However, usually there are too many service beneficiaries or there is
no way to identify all potential service beneficiaries. Therefore, departments
seeking service beneficiary input usually resort to surveys, which enable them
to sample service beneficiary opinions.
Opinion of Experts A manager may solicit opinions from a number of other
managers and staff people. Occasionally, outside experts are needed to help
with a forecast.

Another approach is the Delphi method, an iterative process intended to

achieve a consensus forecast. This method involves circulating a series of
questionnaires among individuals who possess the knowledge and ability to
contribute meaningfully. Responses are kept anonymous, which tends to
encourage honest responses and reduces the risk that one person’s opinion will
prevail. Each new questionnaire is developed using the information extracted
from the previous one, thus enlarging the scope of information on which
participants can base their judgments.

The Delphi method has been applied to a variety of situations, not all of which
involve forecasting. As a forecasting tool, the Delphi method is useful for
technological forecasting, that is, for assessing changes in technology and their
impact on an organization. Often the goal is to predict when a certain event will
occur.

Quantitative methods involve either the projection of historical data or the

development of associative models that attempt to utilize causal (explanatory)
variables to make a forecast. Quantitative techniques consist mainly of
analysing objective, or hard, data. They usually avoid personal biases that
sometimes contaminate qualitative methods. In practice, either approach or a
combination of both approaches might be used to develop a forecast.

Time Series A time series is a time-ordered sequence of observations taken at

regular intervals (e.g. Hourly, daily, weekly, monthly, quarterly, annually). The
data may be measurements of demand, shipments, accidents, output,
precipitation, productivity, or the consumer price index.

Averaging Techniques A simple moving average forecast is used when the

demand for a product or service is constant without any seasonal variations. A
weighted moving average forecast varies the weights, given a particular factor
and is thus able to vary the effects between current and past data. Exponential
smoothing improves on the simple and weighted moving average forecast as it
considers the more recent data points to be more important. To correct for any
upward or downward trend in data collected over time periods to smoothing
constants are used. Alpha is the smoothing constant, while delta reduces the
impact of the error that occurs between the actual and the forecast. Causal
relationship forecasting attempts to determine the occurrence of one event based
on the occurrence of another event. Focus forecasting tries several rules that
seem logical and easy to understand to project past data into the future. Today
many computer forecasting programs are available to easily forecast variables.
When making long-term decisions based on future forecasts, great care should
be taken to develop the forecast. Likewise, multiple approaches to forecasting
should be used.

Monitoring the Forecast

Many forecasts are made at regular intervals (e.g., weekly, monthly, and
quarterly). Because forecast errors are the rule rather than the exception, there
will be a succession of forecast errors. Tracking the forecast errors and
analysing them can provide useful insight on whether forecasts are performing
satisfactorily.
Forecasting Techniques
FORECASTING PROCESS FOR OPERATIONS PLANNING
Step 1 Select a method of forecasting for operations and production
planning. Available methods include the moving average, exponential
smoothing and regression analysis. The moving average takes into account
production averages over a period of time and looks specifically at the
average of each production period against how that average has changed.
Exponential smoothing weighs the average of the most recent forecast
against the current demand for the product. Regression analysis uses a chart
to view the moving average as a single line of change over time.
Step 2 Determine a time period to study. Forecasting is most effective
over the short term, rather than the long term. This is because long-term
forecasting can quickly become inaccurate when service beneficiary demand
changes or environmental trends adjust unexpectedly. The best time period
will reflect previous departmental activity and what changes the department
 has seen over time–quarterly, bi-annually. Bear in mind that the best
forecasts for production planning tend to reflect shorter amounts of time.
Step 3 Choose reports on previous departmental activity to help with
projecting future production. Projecting for the future requires looking into
the past, and departments can utilise previous production results to make
forecasts for the future. Departments can look at specifics for service
beneficiary demand over certain periods of time–for instance, if demand
drops during some months and rises during others–and apply this
information to the forecasting method that has been selected.
Step 4 Pick environmental trends to apply to the forecast. Market trends
must work alongside expectations of service beneficiary. The environment
will play a role in dictating the extent to which service beneficiary demand
will increase or decrease. If trends indicate that the need for a certain product
is about to expand, the department might use this to increase production, but
if trends indicate a decrease in market interest, the department might
reconsider production needs.
CAPACITY PLANNING
The effective management of capacity is the most important responsibility of
production and operations management. The objective of capacity management
i.e., planning and control of capacity is to match the level of operations to the
level of demand. Capacity planning is concerned with finding answers to the
basic questions regarding capacity such as:
(i) What kind of capacity is needed?
(ii) How much capacity is needed?
(iii) When this capacity is needed?
Capacity planning is to be carried out keeping in mind future growth and
expansion plans, market trends, sales forecasting, etc. Capacity is the rate of
productive capability of a facility. Capacity is usually expressed as volume
of output per period of time. Capacity planning is required for the following:
• Sufficient capacity is required to meet the customers demand in time,
• Capacity affects the cost efficiency of operations,
• Capacity affects the scheduling system,
• Capacity creation requires an investment,
• Capacity planning is the first step when an organisation decides to produce
more or new products.
Capacity planning is mainly of two types:
(i) Long-term capacity plans which are concerned with investments in new
facilities and equipments. These plans cover a time horizon of more than two
years.
(ii) Short-term capacity plans which takes into account work-force size,
overtime budgets, inventories
Capacity refers to the maximum load an operating unit can handle. The
operating unit might be a plant, a department, a machine, a store or a worker.
Capacity of a plant is the maximum rate of output (goods or services) the plant
can produce.
The production capacity of a facility or a firm is the maximum rate of
production the facility or the firm is capable of producing. It is usually
expressed as volume of output per period of time (i.e., hour, day, week, month,
quarter etc.). Capacity indicates the ability of a firm to meet market demand -
both current and future.
Effective Capacity can be determined by the following factors:
 Facilities - design, location, layout and environment.
 Product - Product design and product-mix.
 Process - Quantity and quality capabilities.
 Human factors - Job content, Job design, motivation, compensation,
training and experience of labour, learning rates and absenteeism and
labour turn over.
 Operational factors - Scheduling, materials management, quality
assurance, maintenance policies, and equipment break-downs.
 External factors - Product standards, safety regulations, union attitudes,
pollution control standards.
Measurement of capacity
Capacity of a plant is usually expressed as the rate of output, i.e., in terms of
units produced per period of time (i.e., hour, shift, day, week, month etc.). But
when firms are producing different types of products, it is difficult to use
volume of output of each product to express the capacity of the firm. In such
cases, capacity of the firm is expressed in terms of money value (production
value) of the various products produced put together.
Capacity Planning Decisions
Capacity planning involves activities such as:
(i) Assessing the capacity of existing facilities.
(ii) Forecasting the long-range future capacity needs.
(iii) Identifying and analysing sources of capacity for future needs.
(iv) Evaluating the alternative sources of capacity based on financial,
technological and economical considerations.
(v) Selecting a capacity alternative most suited to achieve strategic mission of
the firm.
Capacity planning is necessary when an organisation decides to increase its
production or introduce new products into the market or to increase the volume
of production to gain the advantages of economies of scale. Once the
existing capacity is evaluated and a need for new or expanded facilities is
determined, decisions regarding the facility location and process technology
selection are undertaken.
When the long-range capacity needs are estimated through long-range forecasts
for products, a firm may find itself in one of the two following situations:
(i) A capacity shortage situation where present capacity is not enough to meet
the forecast demand for the product.
(ii) An excess or surplus capacity situation where the present capacity exceeds
the expected future demand.
Factors affecting determination of plant capacity
(i) Capital investment required,
(ii) Changes in product design, process design, market conditions and product
life cycles,
(iii) Flexibility for capacity additions,
(iv) Level of automation desired,
(v) Market demand for the product
(vi) Product obsolescence and technology obsolescence and
(vii) Type of technology selected.
Forms of capacity planning:
 Based on time-horizon
Long term Capacity planning
Over the long term, capacity planning relates primarily to strategic issues
involving the firm's major production facilities. In addition, long-term
capacity issues are interrelated with location decisions. Technology and
transferability of the process to other products is also intertwined with long-
term capacity planning. Long-term capacity planning may evolve when
short-term changes in capacity are insufficient. For example, if the firm's
addition of a third shift to its current two-shift plan still does not produce
enough output, and subcontracting arrangements cannot be made, one
feasible alternative is to add capital equipment and modify the layout of the
plant (long-term actions). It may even be desirable to add additional plant
space or to construct a new facility (long-term alternatives).

 SHORT-TERM CAPACITY PLANNING

In the short term, capacity planning concerns issues of scheduling, labor
shifts, and balancing resource capacities. The goal of short-term capacity
planning is to handle unexpected shifts in demand in an efficient
economic manner. The time frame for short-term planning is frequently
only a few days but may run as long as six months.

Alternatives for making short-term changes in capacity are fairly

numerous and can even include the decision to not meet demand at all.
The easiest and most commonly-used method to increase capacity in the
short term is working overtime. This is a flexible and inexpensive
alternative. While the firm has to pay one and one half times the normal
labor rate, it foregoes the expense of hiring, training, and paying
additional benefits. When not used abusively, most workers appreciate
the opportunity to earn extra wages. If overtime does not provide enough
short-term capacity, other resource-increasing alternatives are available.
These include adding shifts, employing casual or part-time workers, the
use of floating workers, leasing workers, and facilities subcontracting.

 Firms may also increase capacity by improving the use of their resources.
The most common alternatives in this category are worker cross training
and overlapping or staggering shifts. Most manufacturing firms inventory
some output ahead of demand so that any need for a capacity change is
absorbed by the inventory buffer. From a technical perspective, firms
may initiate a process design intended to increase productivity at work
stations. Manufacturers can also shift demand to avoid capacity
requirement fluctuation by backlogging, queuing demand, or lengthening
the firm's lead times. Service firms accomplish the same results through
scheduling appointments and reservations.

 A more creative approach is to modify the output. Standardizing the

output or offering complimentary services are examples. In services, one
might allow customers to do some of the process work themselves (e.g.,
self-service gas stations and fast-food restaurants). Another alternative—
reducing quality—is an undesirable yet viable tactic.
  Finally, the firm may attempt to modify demand. Changing the price and
promoting the product are common. Another alternative is to partition
demand by initiating a yield or revenue management system. Utilities
also report success in shifting demand by the use of "off-peak" pricing.

 Finite Capacity Planning and Scheduling - Finite capacity planning
recognized that every production facility and business has a fixed amount
of resources that are available that can produce its product or services.
This is why careful planning is extremely important when it comes to
producing a product or service, simply because of the various constraints
within production. This approach to planning is referred to as finite
planning and scheduling, based on the finite amount of resource capacity
to apply to the production of products or services.
 Infinite Capacity Planning - Infinite capacity planning ignores the
resource constraints and plans production activities backward from a
customer due date or another fixed end date. Infinite capacity planning
and scheduling uses the lead times or work times of the production to
back-schedule work to each resource, whether a work center or one or
more individuals. Infinite capacity loading disregards any existing work
or commitments of the resources.
 Infinite Capacity Planning Versus Finite Capacity Planning - An infinite
capacity loading approach to planning and scheduling assumes that the
due date of every order is absolute. This means that through scheduling
backward from the order due date and loading work tasks to each of the
work centers, those that require additional resource capacity stand out. If
the resources are not available, the time requirements - on station,
between stations, or perhaps even the customer due date will need
adjustment. Now, this differs from the finite approach to planning and
scheduling through allowing a manager to view the overall impact of new
orders on the production capacity. This is conducted without
reprioritizing the existing work and any due dates that require
adjustments. Finite capacity planning creates a more realistic schedule for
the production processes than the infinite loading approach, especially in
the short run.

Factors Affecting Capacity Planning:

Two kinds of factors affecting capacity planning are:
(i) Controllable Factors: amount of labour employed, facilities installed,
machines, tooling, shifts of work per day,
days worked per week, overtime work, subcontracting, preventive maintenance
and number of production set ups.
(ii) Less Controllable Factors: absenteeism, labour performance, machine break-
downs, material shortages, scrap and rework, strike, lock-out, fire accidents etc.
Capacity Requirement
Capacity Requirement Planning : Capacity requirement planning (CRP) is a
technique which determines what equipment and labour/personnel capacities are
required to meet the production objectives (i.e., volume of products) as per the
master production schedule and material requirement planning (MRP-I).
Capacity Requirement Planning Strategies:
Two types of capacity planning strategies used are:
(i) “Level capacity” plan and
(ii) “Matching capacity with demand” plan.
Level capacity plan is based in “produce-to-stock and sell” approaches wherein
the production systems are operated at uniform production levels and finished
goods inventories rise and fall depending upon whether production level
exceeds demand or vice versa from time period to time period (say every
quarter

“Matching capacity with demand” Plan: In this plan, production capacity is

matched with the demand in each period (weekly, monthly or quarterly
demand). Usually, material flows and machine capacity are changed from
quarter to quarter to match the demand. The main advantages are low levels of
finished goods inventory resulting in lesser inventory carrying costs. Also, the
back-ordering cost is also reduced. The disadvantages are high labour and
material costs because of frequent changes in workforce (hiring, training and
lay-off costs, overtime or idle time cost or subcontracting costs).

Optimum Plant Capacity: Plant capacity has a great influence on cost of

production with increasing volume of production, economies of scale arises
which results in reduction in average cost per unit produced. For a given
production facility, there is an optimum volume of output per year that results in
the least average unit cost. This level of output is called the “best operating
level” of the plant.
As the volume of output increases outward from zero in a particular production
facility, average unit costs fall. These declining costs are because of the
following reasons:
(i) Fixed costs are spread over more units produced,
(ii) Plant construction costs are less,
(iii) Reduced costs of purchased material due to quantity discounts for higher
volume of materials purchased and
(iv) Cost advantages in mass production processes. Longer production runs
(i.e., higher batch quantity of products produced) have lesser setup cost per unit
of product produced, lesser scrap etc., resulting in savings which will reduce the
cost of production per unit. This is referred to as “economies of scale”. But this
reduction in per unit cost will be only upto certain volume of production.
Additional volumes of outputs beyond this volume results in ever-increasing
average unit production cost. This increase in cost per unit arise from increased
congestion of materials and workers, which decreases efficiency of production,
and due to other factors such as difficulty in scheduling, damaged products,
reduced employee morale due to excessive work pressure, increased use of
overtime etc., resulting in “diseconomies of scale”. Hence, the plant capacity
should be such that the optimum level of production which gives the minimum
average cost of production per unit should be possible. This plant capacity is
referred to as optimum plant capacity.

Balancing the Capacity: In firms manufacturing many products (a product line

or a product-mix) the load on different machines and equipments vary due to
changes in product-mix. When the output rates of different machines do not
match with the required output rate for the products to be produced, there will
be an imbalance between the work loads of different machines. This will result
in some machine or equipment becoming a “bottleneck work centre” thereby
limiting the plant capacity which wills in-turn increase the production costs per
unit.
To overcome problem of imbalance between different machines, additional
machines or equipments are added to the bottleneck work-centre to increase the
capacity of the bottle-neck work centre to match with the capacity of other work
centres. Adding new machines or equipments to bottleneck work centres to
remove the imbalance in capacity between various work centres is found to be
economical than giving excessive overtime to workers working in bottle-neck
centres which increases production costs.
Another method to remove imbalance is to subcontract excess work load of
bottleneck centres to outside vendors or subcontractors. Another way to balance
capacities is to try to change the productmix by manipulating the sales for
different products to arrive at a suitable product-mix which loads all work
centres almost uniformly.
Implications of Plant Capacity
There are two major cost implications of plant capacity:
(i) C hanges in output of an existing plant of certain installed capacity affect the
prodction costs.
(ii) Changes in the plant capacity by changing the size of a plant have
significant effects on costs.
Factors influencing Effective Capacity
The effective capacity is influenced by – (1) Forecasts of demand, (2) Plant and
labour efficiency, (3) Subcontracting, (4) Multiple shift operation, (5)
Management policies.
Forecasts of demand: Demand forecast is going to influence the capacity plan
in a significant way. As such, it is very difficult to forecast the demand with
accuracy as it changes significantly with the product life-cycle stage,
number of products. Products with long lifecycle usually exhibit steady demand
growth compared to one with shorter life-cycle. Thus the accuracy of forecast
influences the capacity planning.
Plant and labour efficiency: It is difficult to attain 100 per cent efficiency of
plant and equipment. The efficiency is
less than 100 percent because of the enforced idle time due to machine
breakdown, delays due to scheduling
and other reasons. The plant efficiency varies from equipment to equipment and
from organisation to organisation. Labour efficiency contributes to the overall
capacity utilisation. The standard time set by industrial engineer is for a
representative or normal worker. But the actual workers differ in their speed and
efficiency. The actual efficiency of the labour should be considered for
calculating efficiency. Thus plant and labour efficiency are very much
essential to arrive at realistic capacity planning.
Subcontracting: Subcontracting refers to off loading, some of the jobs to
outside vendors thus hiring the capacity to meet the requirements of the
organisation. A careful analysis as to whether to make or to buy should be done.
An economic comparison between cost to make the component or buy the
component is to be made to take the decision.
Multiple shift operation: Multiple shifts are going to enhance the firm’s
capacity utilisation. But especially in the third shift the rejection rate is higher.
Specially for process industries where investment is very high it is
recommended to
have a multiple shifts.
Management policy: The management policy with regards to subcontracting,
multiplicity of shifts (decision regarding how many shifts to operate), which
work stations or departments to be run for third shift, machine replacement
policy, etc., are going to affect the capacity planning.

Factors favouring over capacity and under capacity

It is very difficult to forecast demand as always there is an uncertainty
associated with the demand. The forecasted demand will be either higher or
lower than the actual demand. So always there is a risk involved in creating
capacity based on projected demand. This gives rise to either over capacity or
under capacity.
The over capacity is preferred when:
(a) Fixed cost of the capacity is not very high.
(b) S ubcontracting is not possible because of secrecy of design and/or quality
requirement.
(c) The time required to add capacity is long.
(d) The company cannot afford to miss the delivery, and cannot afford to loose
the customer.
(e) There is an economic capacity size below which it is not economical to
operate the plant.
The under capacity is preferred when:
(b) shortage of products does not affect the company (i.e., lost sales can be
compensated).
(c) The technology changes fast, i.e., the rate of obsolescence of plant and
equipment are high.
(d) The cost of creating the capacity is prohibitively high.
LAYOUT
Plant Layout, also known as layout of facility refers to the configuration of
departments, work-centres and equipment and machinery with focus on the flow
of materials or work through the production system.
Plant layout or facility layout means planning for location of all machines,
equipments, utilities, work stations, customer service areas, material storage
areas, tool servicing areas, tool cribs, aisles, rest rooms, lunch rooms, coffee/ tea
bays, offices, and computer rooms and also planning for the patterns of flow of
materials and people around, into and within the buildings. Layout planning
involves decisions about the physical arrangement of economic activity centres
within a facility. An economic activity centre can be anything that consumes
space, a person or group of people, a machine, a work station, a department, an
aisle, a store room and so on. The goal or layout planning is to allow workers
and equipments to operate more effectively.
The questions to be addressed in layout planning are:
 How much space and capacity does each centre need?
 How should each center’s space be configured?
 What centres should the layout include?
 Where should each centre be located?
The location of a centre has two dimensions:
• Absolute location or the particular space that the centre occupies within the
facility.
• Relative location i.e., the placement of a centre relative to other centers.
The importance of layout decisions:
The need for layout planning arises both in the process of designing new plants
and the redesigning existing plants or facilities.
Most common reasons for design of new layouts are:
(i) Layout is one of the key decisions that determine the long-run efficiency in
operations.
(ii) Layout has many strategic implications because it establishes an
organisation’s competitive priorities in regard to capacity, processes, flexibility
and cost as well as quality of work life, customer contact and image (in case
of service organisations).
(iii) An effective layout can help an organisation to achieve a strategic
advantage that supports differentiation, low cost, fast response or flexibility.
(iv) A well designed layout provides an economic layout that will meet the
firm’s competitive requirements.
Need for redesign of layout arises because of the following reasons:
• Accidents, health hazards and low safety,
• Changes in environmental or legal requirements,
• Changes in processes, methods or equipments,
• Changes in product design/service design,
• Changes in volume of output or product-mix changes,
• Inefficient operations (high cost, bottleneck operations),
• Introduction of new products/services,
• Low employee morale.
Good Plant layout- Objectives:
• Efficient utilisation of labour reduced idle time of labour and equipments,
• Higher flexibility (to change the layout easily),
• Higher utilisation of space, equipment and people (employees),
• Improved employee morale and safe working conditions,
• Improved flow of materials, information and people (employees),
• Improved production capacity,
• Reduced congestion or reduced bottleneck centers,
• Reduced health hazards and accidents,
• To allow ease of maintenance,
• To facilitate better coordination and face-to-face communication where
needed,
• To improve productivity,
• To provide ease of supervision,
• To provide product flexibility and volume flexibility,
• To utilise available space efficiently and effectively.
Choices of Layout:
Layout choices can help greatly in communicating an organisation’s product
plans and competitive priorities. Layout has many practical and strategic
implications. Altering a layout can affect an organisation and how well it meets
its competitive priorities by:
• Facilitating the flow of materials and information,
• Improving communication,
• Improving employee morale,
• Increasing customer convenience and sales (in service organisations such as
retail stores),
• Increasing the efficient utilisation of labour and equipment,
• Reducing hazards to employees.
The type of operations carried out in a firm determines the layout requirements.
Some of the fundamental layout choices available to managers are:
• Whether to plan the layout for the current or future needs?
• Whether to select a single-story or multistory building design?
• What type of layout to choose?
• What performance criteria to emphasise?
Factors influencing layout choices:
Primarily the layout of a plant is influenced by the relationship among
materials, machinery and men. Other factors influencing layout are type of
product, type of workers, the type of industry, management policies etc.
Some of these factors are discussed in detailed below:
 Location: The size and type of the site selected for the plant, influences the
type of buildings (single story or multi story) which in turn influences the
layout design. Also, the location of the plant determines the mode of
transportation from and into the plant (such as by goods trains, truck, or
ships) and the layout should provide facilities for mode of transport used.
Also, the layout should provide for storage of fuel, raw materials, future
expansion needs, power generation requirements etc.
 Machinery and Equipments: The type of product, the volume of production,
type of processes and management policy on technology, determines the
type of machines and equipments to be installed
 Managerial Policies: regarding volume of production, provision for future
expansion, extent of automation, make-or-buy decisions, speed of delivery of
goods to customers, purchasing and inventory policies and personnel policies
influence the plant layout design.
 Materials: Plant layout includes provision for storage and handling of raw
materials, supplies and components used in production. The type of storage
areas, racks, handling equipments such as cranes, trolleys, conveyors or
pipelines etc., used - all depend on the type of materials used - such as solid,
liquid, light, heavy, bulky, big, small etc.
 Product: The type of product i.e., whether the product is light or heavy, big
or small, liquid or solid etc., it influences the type of layout. For example,
Ship building, Aircraft assembly, Locomotive assembly etc., requires a
 layout type different from that needed to produce refrigerators, cars,
scooters, television sets, soaps, detergents, soft drinks etc. The
manufacturing process equipments and machines used and the processing
steps largely depend on the nature of the product and hence the layout design
depends, very much on the product.

Plant Layout- Principles:

The layout selected in conformity with layout principles should be an ideal one.
These principles are:-
• Principle of Minimum Travel: Men and materials should travel the shortest
distance between operations so as to avoid waste of labour and time and
minimise the cost of materials handling.
• Principle of Sequence: Machinery and operations should be arranged in a
sequential order. This principle is best achieved in product layout, and efforts
should be made to have it adopted in the process layout.
• Principle of Usage: Every unit of available space should be effectively
utilised.
• Principle of Compactness: There should be a harmonious fusion of all the
relevant factors so that the final layout looks well integrated and compact.
• Principle of Safety and Satisfaction: The layout should contain built in
provisions for safety for the workmen. It should also be planned on the basis of
the comfort and convenience of the workmen so that they feel satisfied.
• Principle of Flexibility: The layout should permit revisions with the least
difficulty and at minimum cost.
• Principle of Minimum Investment: The layout should result in savings in
fixed capital investment, not by avoiding installation of the necessary facilities
but by an intensive, use of available facilities.
Types of Layout:
A layout essentially refers to the arranging and grouping of machines which are
meant to produce goods. Grouping is done on different lines. The choice of a
particular line depends on several factors. The methods of grouping or the types
of layout are:
(i) Process layout or functional layout or job shop layout; (ii) Product layout or
line processing layout or flow-line layout; (iii) Fixed position layout or static
layout; (iv) Cellular manufacturing (CM) layout or Group Technology layout
and (v) Combination layout or Hybrid layout.
Process Layout:
Also called the functional layout, layout for job lot manufacture or batch
production layout, the process layout involves a grouping together of similar
machines in one department. For example, machines performing drilling
operations are installed in the drilling department; machines performing turning
operations are grouped in the turning department; and so on. In this way, there
would be an electroplating department, a painting department, a machining
departments and the like, where similar machines or equipments are installed in
the plants which follow the process layout. The process arrangement is signified
by the grouping together of like machines based upon their operational
characteristics. For example, centre lathes will be arranged in one department,
turret lathes in a second department, and milling machines in a third
departments.

A quantity of raw material is issued to a machine which performs the first

operation. This machine may be situated anywhere in the factory. For the next
operation, a different machine may be required, which may be situated in
another part of the factory. The material should be transported to the other
machine for the operation. Thus, material would move long distances and along
crisscrossing paths. At one stage, the material may be taken to a separate
building, say, for heat treatment, and then brought back for grinding. If
machines in one department
are engaged, the partly finished product awaiting operations may be taken to the
store and later reissued for production. Partly finished goods would be waiting
for processing in every department, like commuters waiting for buses in a city.
Machines in each department attend to any product that is taken to them. These
machines are, therefore, called general purpose machines. Work has to be
allotted to each department in such a way that no machine in any department is
idle. In a batch production layout, machines are chosen to do as many different
jobs as possible, i.e., the emphasis is on general purpose machines. The work
which needs to be done is allocated to the machines according to loading
schedules, with the objective of ensuring that each machine is fully loaded. The
process layout carries out the functional idea of Taylor and from the historical
point of view, process layout precedes product layout.
This type of layout is best suited for intermittent type of production. While
grouping machines according to the process type, certain principles must be
kept in mind. These are:
• Convenience for inspection.
• Convenience for supervision. Process layout may be advantageously used in
light and heavy engineering industries, made-to-order furniture industries and
the like.
• The distance between departments needs to be as short as possible with a view
to avoiding longdistance
movement of materials.
• Though similar machines are grouped in one department, the departments
themselves should be located in accordance with the principle of sequence of
operations. For example, in a steel plant, the operations are smelting, casting;
rolling etc. These different departments may be arranged in that order to avoid
crossovers and backtracking of materials.
Product Layout:
Also called the straight-line layout or layout for serialised manufacture, the
product layout involves the arrangement of machines in one line depending
upon the sequence of operations. Material is fed into the first machine and
finished products come out of the last machine. In between, partly finished
goods move from machine to machine, the output of one machine becoming the
input for the next. In a sugar mill, sugar cane, fed at one end of the mill comes
out as sugar at the other end. Similarly, in paper mill, bamboos are fed into the
machine at one end and paper comes out at the other end.
In product layout, if there are more than one, line of production, there are as
many, lines of machines. The emphasis here, therefore, is on special purpose
machines in contrast to general purpose machines, which are installed in the
process layout. Consequently, the investment on machines in a straight line
layout is higher than the investment on machines in a functional layout.

The grouping of machines should be done, on product line, keeping in mind the
following principles:
• All the machine tools or other types of equipment must be placed at the point
demanded by the sequence of operations.
• All the operations, including assembly, testing and packing should be,
included in the line.
• Materials may be fed where they are required for assembly but not necessarily
all at one point; and
• There should be no points where one line crosses another line;
The product layout may be advantageously followed in plants manufacturing
standardised products on a mass scale such as chemical, paper, sugar, rubber,
refineries and cement industries.

Fixed Platform layout

As the term itself implies, the fixed position layout involves the movement of
men and machines to the product which remains stationary. In this type of
layout, the material or major component remains in a fixed location, and tools,
machinery and men as well as other pieces of material are brought to this
location. The movement of men and machines to the product is advisable
because the cost of moving them would be less than the cost of moving the
product which is very bulky.
Also called static layout, this type is followed in the manufacture, if bulky and
heavy products, such as locomotives, ships, boilers, air crafts and generators.

Layout of Service Facility:

The fundamental difference between service facility and manufacturing facility
layouts is that many service facilities exist to bring together customers and
services. Service facility layouts should provide for easy entrance to these
facilities from freeways and busy thoroughfares. Large, well organized and
amply lighted parking areas and well designed walkways to and from parking
areas are some of the requirements of service facility layouts.
Because of different degree of customer contact, two types of service facility
layouts emerge, viz., those that are almost totally designed around the customer
receiving and servicing function (such as banks) and those that are designed
around the technologies, processing of physical materials and production
efficiency (such as hospitals).

MANUFACTURING RESOURCES PLANNING

Shifting of MRP I to MRP II.
During the 1970s, material requirements planning was introduced and was
quickly widely accepted. Material requirements planning – The new way of life
in production and inventory management, which was the first detailed
description of MRP logic as well as such necessities as low-level coding

“Enterprise resource planning - The use of dependent demand logic brought an

entirely new way of planning purchase materials and components, sub-
assemblies, etc., based on the bill of material (BOM). This also affected the
nature of forecasting in manufacturing firms, since dependent demand items did
not need forecasting. Instead, the material requirements could be derived from
higher-level items and end products. The “MRP Crusade” was launched in the
mid-1970s by APICS (then American Production and Inventory Control
Society, now APICS – The Association for Operations Management). Since all
manufacturing firms have manufacturing-related value-adding operations, they
also have relationships between purchase items, intermediate items, and end
products. Consequently, all manufacturing firms could take advantage of MRP.

MRP-based systems

The computer-based systems for operations planning and control started to

include MRP functionality. With MRP it was now easier to utilise a variety of
lot-sizing techniques, in particular dynamic lot-sizing models, such as lot-for-
lot, period order quantity, fixed-period requirements, etc. By the mid-1970s it
was estimated that there were approximately 700 users of computerised MRP
systems. Material requirements planning – The new way of life in production
and inventory management.  Many of these offered up to 99 BOM levels. The
closed-loop MRP system included capacity requirements planning (CRP) for
evaluating the consequences of the material plan for capacity, and feedback
from the execution functions so the planning could be kept valid at all times.

The 1980s – Master production scheduling and MRP II

The 1980s is a decade which brought about a fundamental paradigm shift in

how operations could be made more efficient and effective. In the early 1980s,
reports on just-in-time (JIT) and optimised production technology/theory of
constraints (OPT/TOC) surfaced. Rather than optimising the operations taking
the current constraints as a given, the focus shifted to improving the basic
characteristics of the production system, such as quality improvements and
setup time reduction . A revolution in manufacturing: the SMED system. 

“Toyota production system and kanban system: materialization of just-in-time

and respect-for-human system.” Introducing the kanban system and JIT as well
as illustrating dramatic reductions in, for example, setup times, lot sizes, and
lead times.
 Today, many companies have adopted their own versions of TPS “Exploring
the phenomenon of company-specific production systems: one-best-way or
own-best-way?” 

Almost simultaneously, Goldratt introduced Optimised Production Technology

(OPT), a scheduling software system accompanied by principles on how to
manage bottlenecks; . “Optimum production technology (OPT) and the theory
of constraints (TOC) – analysis and genealogy.”  The system was later
complemented with the drum-buffer-rope (DBR) concept, and later developed
into the theory of constraints (TOC). Today, this combined approach is typically
referred to as TOC.

With JIT and TOC as new alternatives to MRP, a long debate started,
concerning ‘Which is best – MRP, JIT or TOC?’, These discussions helped to
link planning and control approaches to the production environment, looking at
the specific features of each planning and control approach and its relative
merits in different situations. modelled the relationships between market and
product characteristics and the strategic choices for master scheduling, materials
planning, and shop floor control. At each level a set of market-related attributes
such as demand volume, product variety, and order winners, is used as a point
of reference to make generic choices among a set of MPC design variables. At
the master scheduling level, there are three choices; make-to-order (MTO),
assemble-to-order (ATO), or make-to-stock (MTS). At the materials-planning
level the choices are rate-based or time-phased. Finally, at the shop floor control
level the choices are MRP-type or JIT-type.

MRP II and master production scheduling

The term MRP began to be applied to increasingly encompassing functions,

leading to the use of the phrase “manufacturing resource planning” rather than
“material requirements planning” The term MRP II (manufacturing resource
planning) was coined to identify the newer systems’ capabilities However the
heart of any MRP II system was the fundamental MRP logic. The MRP II
systems offered a broader structure for operations planning and control, and in
particular the master production schedule; Even though MRP II was primarily
considered a tool for practitioners, in 1982 it had already attracted academic
attention.
Many manufacturing firms were especially attracted by the available-to-promise
(ATP) logic in the master schedule that allowed for a quick check of how much
was available for immediate delivery or at a particular point in time; The MRP
II structural approach to planning and control was included in most software
systems for manufacturing planning and control (MPC). At the end of the
1980s there were about 280 commercial software systems for MPC in the US
and about 70 in Sweden. Most of these systems adopted the MRP II structure
and included MPS and ATP functionality.

Many MRP II systems were re-branded as ERP systems during the 1990s and
were successively provided with increased information and communication
technology functionality, and they served a broader range of functions within
the manufacturing corporation. With the switch from MRP II to ERP systems,
the particular functionality of S&OP gained recognition in many manufacturing
firms. S&OP can be characterised as the long-term planning of production and
sales relative to the forecasted demand and the complementary resource
capacity planning. The planning object in S&OP is product families (groupings
of products having similar characteristics) and the planning horizon is typically
15–18 months with monthly planning periods. With a longer-term perspective, it
became possible to evaluate investments in production resources that take a
long time to acquire with respect to structured plans for sales, operations,
inventories, and backlogs.

With S&OP, operations planning and control can be viewed as a four-level

structure consisting of S&OP, MPS, materials planning (e.g. MRP), and shop
floor control – from long range to short range. At the S&OP level, there are two
pure planning strategies – chase and level. A chase strategy should be used for
low-volume and highly customised products, while a level strategy is more
suitable for high-volume and standardised products, “Linking manufacturing
strategy decisions on process choice with manufacturing planning and control
systems. Framework for linking planning and control approaches to the strategic
perspective. The practical managerial implication is that markets with high-
volume, standardised products, few variants, and short lead times should be
planned and controlled by level, MTS, rate-based, and JIT/lean-type
approaches, whereas markets with low-volume, highly customised products,
wide product range, and long lead times should be planned and controlled using
chase, MTO, time-phased, and MRP-type approaches. Olhager and Selldin
tested this model empirically and found that the choice of approaches at the
MPS and S&OP levels has a significant mediating role for operational
performance. S&OP fundamentally concerns volume planning, while the MPS
is concerned with product mix planning.

Lean, agile and other improvement approaches

This decade offered new approaches for improving operations. Concepts such
as lean production Particularly the concept of lean production has grown since
then and has synthesised the aspects of JIT, TQM, and other improvement
programs to become one of the most influential manufacturing paradigms of
recent times. However, the lean approach has been contrasted with the agile
approach that is related to flexibility. The contrasting nature of lean and agile is
the core of the leagile approach that advocates that supply chains adopt a lean
manufacturing approach upstream, enabling a level schedule and opening up an
opportunity to drive down costs upstream while simultaneously still ensuring
that downstream of the de-coupling point there is an agile response capable of
delivering to an unpredictable marketplace

Empirical investigations of lean versus agile have shown that there are
differences as well as some similarities between leanness and agility, Today,
many firms classify their improvement initiatives as “lean”.

Elements of MRP

Feedback – MRP II features important feedback from the production floor and
relay both progress and delay. It integrates this information to all levels of
schedule so that the next run is updated on a regular basis.
Schedule of Resources – Inventory management and control includes a
scheduling capability that concentrates on resources such as equipment,
machinery, and raw materials, which are crucial in the production of the final
goods. This feature is essentially where MRP II got its name from. MRP II
allows for the generation of comprehensive and accurate data, which helps
personnel gain tighter control of the manufacturing process.
Batching Guidelines – Batching guidelines are integrated as it is an important
element in the scheduling of resources. MRP software systems feature a host of
batching rules. The most important elements however are:
Lot for Lot – Lot for lot essentially means batches that perfectly match client
orders. For example, a company will only make 20 finished products for
Product A, to be followed by 10 of Product B. these batches are then
automatically followed throughout the process to ensure that it matches the
requirements of customers.
Economic Batch Quantity (EBQ) – In the case of EBQ, the size of the batch is
computed using a formula that significantly reduces cost through balancing
between set up cost and cost of stock. See the image below for explanation.

Part Period Cover – Part Period Cover essentially means production of batches
that matches the demand for a fixed period of time. Guidelines of making
products on a weekly basis is an example of Part Period Cover.
Software Extension Capabilities – Aside from inventory and resource control,
there are different other programs that are included in MRP II. Some of these
tools were designed to make the scheduling procedure more efficient. The MRP
II may also include an option for Sales Ordering Processing. Manufacturing
Resource Planning may also include stock recording and cost accounting
programmes, all of which are integrated into a company’s main database
system.
There are also MRP that feature advanced planning capabilities that include:
 Computerized ordering of raw materials
 Hard and soft allocation
 Ideal versus present analysis of resource materials
 Minimum and maximum panning activities
Planning for Labour Capacity – MRP facilitates calculation of standard labor
against the number of hours needed to meet daily, weekly, or monthly labor
schedules. It automatically manages labor by means of category and
qualifications.
Accurate Data – Initial data typed in should be accurate in order for the MRP
II to positively impact the manufacturing process. Errors in encoding
information in the system results in a variety of problems to the business. 
Companies that develop and distribute MRP recommend users to carefully input
data to achieve up to 98% or higher in terms of accuracy.
Benefits
 he MRP provides rich, detailed information that can be utilized by the
company in core functions such as planning, management decision-
making, and production.
 Reduce overall workload and maximum efficiency if the MRP system is
managed correctly at all times.
 Data from MRP enables the management to plan ahead, and forecast how
such planning can affect the overall profitability of the business.
 Planning with the help of MRP makes a company more efficient, thus
avoiding unnecessary expenditures while maximizing profits altogether.
 MRP is an innovative and highly competitive tool that undeniably beats
the traditional system of stock control and management.
 A fully-automated MRP software system easily and efficient formulates a
production schedule which saves the company a large sum of money,
time, and labor.
MRP.
Material Requirements Planning (MRP) is a computer-based production
planning and inventory Control system. MRP is concerned with both production
scheduling and inventory control. It is a material control system that attempts to
keep adequate inventory levels to assure that required Materials are available
when needed. MRP is applicable in situations of multiple items with complex
bills of materials. MRP is not useful for job shops or for continuous processes
that are tightly linked.
The major objectives of an MRP system are to simultaneously:

 Ensure the availability of materials, components, and products for

planned production and for Customer delivery,
 Maintain the lowest possible level of inventory,
 Plan manufacturing activities, delivery schedules, and purchasing
activities.
MRP is especially suited to manufacturing settings where the demand of many
of the components and subassemblies depend on the demands of items that face
external demands. Demands for end items are independent. In contrast, demand
for components used to manufacture end items depend on the demands for the
end items. The distinctions between independent and dependent demands are
important in classifying inventory items and in developing systems to manage
items within each demand classification. MRP systems were developed to cope
better with dependent demand items. The three major inputs of an MRP system
are the master production schedule, the product structure records, and the
inventory status records. Without these basic inputs the MRP system cannot
function.
Inventory Arrangement and Control: In the cosmopolitan world of today, the
inventory arrangement would mean the purchase of materials to be stored
before entering the production stage or sold out, such that the stock cost is zero.
There are three kinds of inventories: a) raw material, b) purchased goods, and c)
finished components. Their inventory control is the responsibility of the
materials management department, production department and the sales
department. It is always important to ensure that inventory at different levels is
maintained, the raw materials are available at each level and that there is proper
flow of materials from one production facility to another at all levels in a
manufacturing firm.
Continual and effective flow and supply of materials: The required material
by all production center and other departments should be ensured for its
continuity in flow and supply by the material management department. Many a
times, low or zero inventories lead to stock-outs and halts in production.
Importer or lack of material handling tools can also lead to hurdles in material
supplies. Alternately options or emergency supply systems can be deployed to
ensure continuity in production lines. Fluctuations in both demand and
productions capacity are the critical factors. To keep pace with changing
demands and perceptions of consumer, the management needs to maintain
continuity in productions and control the flow of materials supply and
distributions at different productions facilities and other related departments in
an organization.
Material Quality Control: The quality of the finished products manufactured
will depend upon the quality of raw material used to manufacture those
products. Therefore, the purchase of right quality of materials is indeed very
important. The quality of materials can be measured through proper inspection,
specification, quality control, simplification and standardization. The
components and parts can be assured for reliability by their size and dimensions
within tolerance limits.
System Efficiency: This function ascertains the efficiency of the system being
used. If the system used for materials management in inept of faulty, the above
objectives cannot be met, irrespective of the procedure adopted. For things to be
maintained in an effective manner as planned for managing materials, an
effective control ought to be there for every single process in the department.
The Management Information Systems (MIS) and a feedback control
mechanism should be adopted at every stage to organise the management and
employees’ performance and achieve best results.
Secondary Functions
The secondary objectives can only be fulfilled through the following key
secondary functions of the materials management:
Standardization and Generalization: The design and the technical department
of an organization, which comes after the production department process,
determine the standards and specifications of different types of materials. The
term ‘standard’ encompass the alterations in sizes and variety, the quality and
the exchangeability of components and products. Standard and generalization
(or simplification) ensures proper utilization of materials and diminishes
wastage. Standard materials can also be availed at economic costs. It also aids
the purchasing department in selecting the materials and the vendors from
whom they need to be purchased. If there is lesser variety of materials to be
bought and stored, it saves on both the kinds of investors as well as the costs of
transporting those inventories to the stores. Manufacturing a standard product
ensures overall cost of production.
Product Design and Development: The product sales can be boosted with its
range and functionality. With the help of the advanced technology such as
computer such as Computer Aided Design (CAD), the product can be designed
different with a variety of options and yet a fast pace. Another technology
development in manufacturing is the computer Aided Manufacturing (CAM)
that can bring both a variety as well as flexibility to a product. The materials
management department shall then perform as per the use of the ranges of
material and produce variety of components and hence, ensure the delivery of
such material.
Manufacturing and Purchase Decisions: The manufacturing and purchase
decisions are a part of the management’s policy decisions. The organization’s
capacity and other facilities developed to produce a range of items should be the
prime objective and is the most important planning activity of every
organization. However, when an organization grows rapidly, its sales also
increases at the same pace and this is when it comes critically important to take
a decision on whether the organization must buy the parts or expand its facilities
to keep pace with the rising demand and sales. This is also a key decision for
the materials management department and aides in the selection of vendors such
that the items can be purchased at reduced prices. The manufacturing and
buying decisions can be largely influenced by material assessment, its
availability, procurement, alternate material selection and inventory control
functions, and are taken on the basis of the cost economics and cost-benefit
analysis developed by the organization by use of existing and future production
capacity of skills, labour and available machines in the factory.
Material Coding and Classification: One of the important functions of
materials management, the material coding and classification provides support
to the production and purchasing department of an organization. The materials
are classified through a simple yet standard method, such as ABC Analysis, to
manufacture the product or sell various goods. This method is used by many
organizations for the purposes of classifying and storing materials, which are
identified by their codes and nomenclatures. The coding methods should be
used by every firm to keep a check on the range of materials, their quantities
and costs.
Estimation and Planning: The MRP can be implemented through accurate
estimates of sales and demand for products in the industry. Market fluctuations
should be given due consideration to make any production control. The
materials management department can make use of one of the methods of
forecasting that gives productive results to the organization. Predicting the
future demand of sales helps in the planning of materials supply.
 IMPORTANCE OF MPS.

A production plan is an aggregate plan that schedules product families in

relatively long time intervals. Master production schedule is used for individual
end products and in shorter time intervals. MPS is important in the following
aspects:
1. It is the link between what is expected (production planning) and what is
actually to be built, i.e., material requirement planning and final assembly
schedule (FAS, to be discussed).
2. It develops data to drive the detailed planning, MRP. MPS is a priority plan
for manufacturing. It keeps priorities valid.
3. It is the basis for calculating the resources available (capacity) and the
resources needed (load). It provides devices to reconcile the customers’ demand
and the plant’s capability.
4. It makes possible reliable delivery promises. It provides salespeople
information on available-to-promise (ATP) indicating when end products are
available. ATP will be discussed later.
5. It is a tool that can be used to evaluate the effects of schedule changes. It is a
device for communication and a basis to make changes consistent with the
demands of the marketplace and manufacturing capacity. 6. It is a contract
between marketing and manufacturing departments. It is an agreed-upon plan. It
coordinates plans and actions of all organizational functions and is a basis to
measure the functions’ performance.
7. It provides management with the means to authorize and control all
resources needed to support integrated plans.
8. In the short horizon, MPS serve as the basis for planning material
requirement, production of components, order priorities, and short-term
capacity requirements.
9. In the long horizon, MPS serves as the basis for estimating long-term
demands on the company resources such as people, equipment, warehousing,
and capital.