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Production planning and control

PPC is a management tool that co-ordinates all

the manufacturing activities by obtaining the required quantity of products, of the required quality, at the required time, by the best and cheapest method.

PPC is defined as the planning, direction and co-

ordination of the firms material and physical facilities towards the attainment of pre determined

production objectives in the most economical


Functions or scope of PPC

Material handling :- Raw materials, spare parts,

and components which must be available in the correct qualities and specification @ the right time. methods:- processes, operations and their sequences.

machines:- allocation and utilization. And

maintenance. manpower:- estimating, utilizing and reducing idle time routing:- plan for a flow of work in the plant and is related t considerations. loading and scheduling:- time table of production, priority sequencing and machine loading.

inspection:- checking the quality in production

and evaluating the efficiency of the processes, methods and workers so that improvement can be made to achieve the desired level of quality. evaluating and controlling: continuous comparison of standard performance with the actual performance and taking corrective actions to reduce the deviation .

Role of PPC in operations management

Strategic planning

Tactical planning






Objectives Of PPC
To deliver the required goods @ required quantities, @

required time, @ required quality to achieve the maximum customer satisfaction.

To ensure maximum utilisation of all the resources. To maintain optimum inventory levels. To maintain flexibility in manufacturing operations.

To plan for the plant capacities for the future requirements. to co-ordinate between labour and machines and various

supporting departments.
To ensure effective cost reduction. to prepare production schedules and ensure the promised

delivery dates are met.

Production planning and control

Production planning 1. Estimating 2. Routing 3. Scheduling 4. Loading Production control 1. Dispatching (implementation) 2. Expediting (follow up) 3. Inspection 4. Evaluation and corrective action.

Materials management
the word inventory originates from the French word

INVENTAIRE and Latin word INVENTARIOM which implies a list of things found. The term inventory has been defined by several authors. The more popular of them are the term inventory includes materials raw materials, work-in-progress, finished products. And other stocked in order to meet an unexpected demand or distribution in the future.

To ensure continuous supply of raw materials. To maintain the sufficient finished goods for smooth

sales operation and efficient customer service. To coordinates with the all the departments in an organisation. IM helps to reduce material handling cost like ordering cost, carrying cost. To utilise all the 4Ms efficiently and effectively.

IM permits the procurement of raw materials in economic

lot sizes as well as processing of these raw materials into finished goods in the most economical quantities.

Inventory Costs
Carrying cost cost of holding an item in inventory Ordering cost cost of replenishing (restock or reload or refill) inventory Shortage cost temporary or permanent loss of sales when demand cannot be met

Types of Inventories
Raw Materials

Finished Goods Distribution Inventory Supplies: Maintenance, Repair and Operating (MRO)

Managing Facilitating Goods

Replenishment order Replenishment Replenishment order order Customer order






Production Delay

Shipping Delay

Shipping Delay

Item Withdrawn

Wholesaler Inventory

Distributor Inventory

Retailer Inventory

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Inventory Positions in the Supply Chain

Raw Materials

Works in Process

Finished Goods

Finished Goods in Field

Inadequate control of inventories can result in both under- and overstocking of items.
Under stocking (too few) results in missed deliveries, lost

sales, dissatisfied customers, and production bottlenecks (idle workers or machines). Resulting underage cost.
Overstocking (too many) ties up funds that might be more

productive elsewhere. Resulting excess cost.

Goal: matching supply with demand!

Reasons for Inventories

Improve customer service
Economies of purchasing Economies of production

Transportation savings
Hedge against future risk. Unplanned shocks (labor strikes, natural disasters,

surges in demand, etc.) To maintain independence of supply chain

Inventory control techniques

2. 3.

5. 6. 7. 8.

ABC Classification. HML classification. VED classification. SDE classification. FSN classification. EOQ Max-Minimum system Two bin system

ABC Classification
Class A

5 15 % of units 70 80 % of value
Class B

30 % of units 15 % of value
Class C

50 60 % of units 5 10 % of value

Classifying Inventory Items

ABC Classification (Pareto Principle)
A Items: very tight control, complete and accurate records, frequent review

B Items: less tightly controlled, good records, regular review

C Items: simplest controls possible, minimal

records, large inventories, periodic review and reorder

ABC Classification System


Classifying inventory according to some measure of importance and allocating control efforts accordingly.

A - very important B important C - least important

High Annual $ value of items Low



Percentage of Items

ABC Classification System

2. HML classification.
This follows the same procedures as is adopted in ABC

classification. Only the difference is that in HML classification unit value is the criterion and not the annual consumption value. The items of inventory should be listed in descending order of unit value and it is up to the management to fix limits for 3 categories.

ex: the management may decide that all units with unit value

of Rs 2000 and above will by the H items Rs 1000 t0 2000 M items Less than Rs 1000 belongs to L items.
ABC considers ----quality , importance and consumption value
HML considers -----Value of the items

3.VED classification
While in ABC, classification of inventories on the

basis of their consumption value. In HML analysis unit value is the basis, Criticality of inventories is the basis for vital, essential and desirable categorization.

VED continued
The VED analysis is done to determine the criticality of an

item and its effect on production and other services. It is specially uses for classification of spare parts.
If it is vital V classification (large stock of spare parts)
If it is essential E classification(average stock of spare

If it is desirable D classification.(average stock of spare


4. SDE classification
This analysis is based upon the availability of items and is

very useful in the context of scarcity of supply. In this analysis S stands SCARE items generally imported and those which are in short supply D Stands DIFFICLUT items which are available indigenously but are difficult items to procure. Items which have to come from distant places or for which reliable suppliers are difficult to come by, fall into category. E refers to items which are easy to acquire and which are available in the local market

5. FSN analysis
It stands for fast moving, slow moving and non-

moving. Here classification is based on the pattern of issues from stores and useful in controlling techniques. 1. Items which has not moved since more than 3 years called non moving 2. items which has moved once a year called slow moving 3. very high consumption and frequently moving items called fast moving

6. GOLF analysis
This stands for Government, Open market, Local or

Foreign source of supply. For many items, imports are canalized through govt agencies such as state trading corporation, mineral and Metal trading Corporations, drugs and Pharmaceuticals etc. For such items, the buying firms can not apply any inventory control techniques and have to accept the quota allotted by the govt.

Golf continued
Open market category are those who form a bulk of

suppliers and procurement is rather easy.

L category includes those local suppliers from whom

items can be purchased off-the-shelf on cash purchases basis,

F category indicates foreign suppliers. Since

elaborate import procedures is involved, it is better to buy imported items in a bigger lots usually covering the annual requirements.

7. EOQ
It is the level of inventory order of which inventory

cost is minimum. Buying in a large qualities always reduces ordering cost but increases the carrying cost. So inventory manager has to play core role between these 2 costs,

Inventory Costs
Carrying cost or holding cost cost of holding an item in inventory Ordering cost cost of replenishing (restock or reload or refill) inventory Shortage cost temporary or permanent loss of sales when demand cannot be met