Production and Operations

Management
04MB0204

Module 3
Production Planning and
Control

Faculty of Management Studies Dr. Gaurav Kumar Badhotiya

gauravkumar.badhotiya@marwadieducation.edu.in
Production Planning and Control

"Production planning and control may be defined as the coordination of a series of functions
according to a plan which will, economically utilize the plant facilities and regulate the orderly
movement of goods through their entire manufacturing cycle, from the procurement of all
materials to the shipping of finished goods at a predetermined rate".
Charles A. Koepke

"Production planning and control comprise the planning, routing. scheduling, dispatching and
follow up function in the productive process, as organised that the movements of material,
performance of machines and operations of labour, are direct and coordinated as to quantity,
quality, time and place". Alford and Beatty
 Production Planning

Production Planning is a managerial function which is mainly concerned with the

following important issues:

• What production facilities are required?

• How these production facilities should be laid out in the space available for
production? and

• How they should be used to produce the desired products at the desired rate of
production?
 Production Planning

The planning process within an organization about deciding future courses of action of
the organization well in advance so that executives at different level will play their role
as per these guidelines.

In any organization, the following type of planning is usually done.

• Long term (Capacity/strategic planning)

• Medium term (Aggregate planning)

• Short term (Operational planning)

Production Planning
 Long term planning

• Up to 5 years ahead or more.

• Example industry like cement, petroleum, automobile. Demand of the product

remain for long time.

• The type of decisions taken at this level is often highly unstructured in nature

• strategic decisions are

• warehouse location, distribution systems, building a new plant,

mergers and acquisitions, new product planning, compensation
planning, quality assurance planning, R&D planning, forming new
technology department, social responsibility planning, etc.
 Medium term planning

• Up to 2 years ahead.

• How can demand be met from existing facilities and resource inputs?

• Tactical decisions are

• pricing a product, product improvement through value analysis,

preventive maintenance policy, short term forecasting, make or buy
analysis, project scheduling, negotiating, buying equipments etc.
Short term planning

• Monitoring and correction of day-to-day activities

• The type of decision taken at this level is mostly structured in nature.

• Operational decisions are

• inspect the raw materials at stores, deciding price discount at

salesman level in the field, scheduling of maintenance manpower,
machine loading, daily operator scheduling, order entry, production
scheduling, inventory control etc.
Aggregate planning

• An aggregate plan specifies what materials and other resources are needed and
when they should be procured to minimize cost.

• Aggregate planning refers to sales and operations planning for product lines or
families.

• Resource capacity is expressed in aggregate terms, typically as labor or machine

hours.

• For services, capacity is often limited by space—number of airline seats, number

of hotel rooms, number of beds in a correctional facility.
objectives

• There are two objectives to sales and operations planning:

1. To establish a company-wide game plan for allocating resources, and

2. To develop an economic strategy for meeting demand.

Resource Planning

▪ Sales and operations plan is for families of items and the master production
schedule is for individual products.

▪ The material requirements plan (MRP) translates the master production schedule
(MPS) into requirements for components, subassemblies, and raw materials.

▪ The capacity requirements plan (CRP) converts the material plan into labor and
machine requirements.

▪ Once the plans have been approved, purchase orders are released to suppliers and
work orders are released to the shop.
Hierarchical Resource Planning
Material Requirement Planning

▪ Material requirements planning (MRP) is a computerized inventory control and

production planning system.

▪ One objective of MRP is to maintain the lowest possible level of inventory. MRP
does this by determining when component items are needed and scheduling them
to be ready at that time, no earlier and no later.
WHEN TO USE MRP

▪ MRP is useful for dependent and discrete demand items, complex products, job
shop production, and assemble-to-order environments.

▪ Managing component demand inventory is different from managing finished goods

inventory.
 MASTER PRODUCTION SCHEDULE

▪ Daily, weekly or monthly production plans are specified by individual final product

▪ MPS specifies which end items or finished products a firm is to produce, how many
are needed, and when they are needed.

▪ The schedule of finished products provided by the MPS is needed before the MRP
system can do its job of generating production schedules for component items.
MASTER PRODUCTION SCHEDULE
 PSF BOM IMF

▪ Once the MPS is set, the MRP system accesses the product structure file to
determine which component items need to be scheduled. The product structure file
contains a bill of material (BOM) for every item produced.

▪ The bill of material for a product lists the items that go into the product, includes a
brief description of each item, and specifies when and in what quantity each item is
needed in the assembly process.

▪ The item master file, or inventory file, contains an extensive amount of information
on every item that is produced, ordered, or inventoried in the system. It includes
such data as on-hand quantities, on-order quantities, lot sizes, safety stock, lead
time, and past usage figures.
CAPACITY REQUIREMENTS PLANNING (CRP)

▪ Capacity is the maximum capability to produce.

▪ Capacity requirements planning (CRP) is a computerized system that projects the

load from a given material plan onto the capacity of a system and identifies
underloads and overloads.
 ENTERPRISE RESOURCE PLANNING (ERP)

▪ Enterprise resource planning (ERP) is software that organizes and manages a

company’s business processes by sharing information across functional areas.

▪ In addition to managing all sorts of back-office functions, ERP connects with supply
chain and customer management applications, helping businesses share
information both inside and outside the company.

▪ SAP AG (Systems Applications and Products in Data Processing), a German

software company, created a generic ERP software package to integrate all
business processes together for use by any business in the world.
ERP MODULES

▪ ERP systems consist of a series of application modules that can be used alone or in
concert. The modules are fully integrated, use a common database, and support
processes that extend across functional areas.

▪ ERP modules are typically grouped into four main categories:

(1) finance and accounting,

(2) sales and marketing,

(3) production and materials management, and

(4) human resources.

ERP MODULES
 Benefits of ERP

1. Reduction of procurement lead time

2. On time delivery of goods and services

3. Reduction in order lead time

4. Improved resource utilization

5. Better customer satisfaction

6. Increased flexibility

7. Reduced quality cost

8. Improvement and accuracy of decision making capability

BUSINESS PROCESS REENGINEERING (BPR)/
PROCESS INNOVATION

▪ Business Process Reengineering is defined as the “fundamental rethinking and

radical redesign of business processes to achieve dramatic improvement in critical,
contemporary measures of performance such as cost, quality and speed of
products/services delivered/provided by an organization.”

▪ The products/services delivered/provided by the organization to its customers

should have the utmost quality with the least cost and lead time.
Characteristics of BPR

▪ Process oriented – process based approach to strategy rather than market based.

▪ Redesigned governed – not believe in minor improvements

▪ Radical – entire form or structure of the process may change

▪ Dramatic – not much useful for marginal improvements of business performance

▪ Customer oriented – customer satisfaction in cost effective manner

Steps of BPR

▪ The steps of BPR which are practiced by many organizations are as listed below:

(i) Development of process vision and determination of process objectives

(ii) Definition of processes to be reengineered

(iii) Measurement of existing processes

(iv) Identification of information technology applications

(v) Design of prototype and implementation.

Applications of BPR

Railway reservations system

Before After

▪ Booking of onward journey only from ▪ Reduced waiting time of customers

the place of start of the journey. at the booking counters

▪ Booking of return journey subject to ▪ Capability to answer the queries like,

availability of seats; otherwise, availability of seats for onward as
customers waited for written well as return journey in the desired
confirmation from the other end. trains.

▪ Cumbersome process of cancellation

of tickets during return journey.
PPC Phases

Production planning and control has three phases.

1. Planning phase - Production planning is an exercise of intelligent anticipation in

order to establish how an objective can be achieved

2. Action phase - provides guidelines for implementing all the plans into practice.

3. Control phase - provides necessary guidelines to control the production system

through a feedback mechanism.
 Production control

Production control is a mechanism to monitor the execution of the plans. It has several
important functions:

• Making sure that production operations are started at planned places and planned
times.

• Observing progress of the operations and recording it properly.

• Analyzing the recorded data with the plans and measuring the deviations.

• Taking corrective actions to minimize the negative impact of deviation.

• Providing feedback to planning section to improve future plans.

Production planning and control Functions

PPC
Functions

Production Production
planning control

Routing Scheduling Loading Dispatching Follow up Inspection

Production planning Functions

1) Routing: Routing includes the planning of where and by when work shall
be done, the determination of path that work shall follow and necessary
sequence of operations.

2) Scheduling: Scheduling involves establishing the amount of work to be

done and the time when each element of work will start or order of work"

3) Loading: It means allotment of tasks to different machines depending on

their capacity or load handling.
 Production Control Functions

1) Dispatching: The dispatching function involves the actual granting of

permission to proceed according to plans already laid down.

2) Expediting/Follow-Up: expediting is designed to evaluate the effectiveness

of the whole production process and compare the initial plans against the
actual result of productions.

3) Inspection: performed to ensure that all the planning and controlling

approaches identified by the management are consistently implemented.
 Scheduling

• Scheduling is the allocation of resources applying the limiting factors of time and
cost to perform a collection of tasks.
• Scheduling specifies when labour, equipment, and facilities are needed to produce
a product or provide a service.

❑ In process industries - determining the mix of ingredients

❑ For mass production - when the assembly line is laid out
❑ For projects - scheduling techniques such as PERT and CPM
❑ For batch or job shop production – S&OP, MPS, MRP, CRP, and route for processing
Scheduling objectives

▪ Meeting customer due dates;

▪ Minimizing job lateness;

▪ Minimizing lead time;

▪ Minimizing setup time;

▪ Maximizing machine or labour utilization;

▪ Minimizing idle time; and

▪ Minimizing work-in-process inventory.

Job shop Scheduling

• The scheduling and monitoring of day-to-day production in a job shop. It is

usually performed by the production control department.

1. Loading — checking the availability of material, machines, and labor.

Smoothing the load is called load leveling.
2. Sequencing — releasing work orders to the shop and issuing dispatch lists
for individual machines. This sequence is often based on certain sequencing
rules.
3. Monitoring — maintaining progress reports on each job until it is completed.
Sequencing

• When more than one job is assigned to a machine or activity, the operator needs
to know the order in which to process the jobs.
• The process of prioritizing jobs is called sequencing.
Priority Rules for Job Sequencing

1. First-come, first-served (FCFS)

2. Last come, first served (LCFS)

3. Shortest processing time (SPT)

4. Earliest due date first (EDD)

5. Slack time remaining (STR) first SLACK = (due date - today’s date) – (processing time)

6. Critical ratio (CR)

7. Random order
 Scheduling

Sequencing n jobs Sequencing two jobs on n Assigning n jobs on

machines in different machine m machines
sequences (Akers method)

On one On two On three On m

machine machines machines machines

First come, first Last come, In the same job

Assignment
served (FCFS) first served sequence
Model
method (FCFS)
method

Due date Random Johnson’s

method method method

Shortest processing
time (SPT)) method
SEQUENCING JOBS THROUGH ONE MACHINE
SEQUENCING JOBS THROUGH TWO MACHINE

Johnson’s rule finds the fastest way to process a series of jobs through a two-step system in
which every job follows the same sequence through two processes. The procedure is as follows:

i. List the time required to complete each job at each process. Set up a one-dimensional matrix
to represent the desired sequence with the number of slots equal to the number of jobs.
ii. Select the smallest processing time at either process. If that time occurs at process 1, put the
associated job as near to the beginning of the sequence as possible.
iii. If the smallest time occurs at process 2, put the associated job as near to the end of the
sequence as possible.
iv. Remove the job from the list.
v. Repeat steps 2–4 until all slots in the matrix have been filled or all jobs have been
sequenced.