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Level-I Fit Allign Resources With Requirements
Level-I Fit Allign Resources With Requirements
2) It is the brain ¢ral nervous system of the Production programme responsible for
having all the required material at the right time and right place.
It means to ascertain progress of operations according to predetermined time & place of
schedule to ensure that goods are provided at right time to the customer.
4) It is a system providing support to decision making keeping in view the three levels of
operational strategy process.
Increasing Complexity
6) The system is not static or preconceived. It is flexible & is capable of adapting to the
erratic changes in demand patterns or changes in the business environment.
PPC
Need of PPC:
Manufacturing is a complex process. Some companies make few products, while most of the
companies make variety of products each uses a variety of processes; machinery materials,
equipments, toils, workers. All these must he organized efficiently, economically, effectively
for better productivity.
The goods must be manufactured at right Quantity & Quality at right time and must be
delivered at right place. The effectiveness of production system is increased by PPC
A good PPC system must answer P.P.C. system must answer the following questions
Each level varies in purpose, time span, and every level details are as follows:
2) Production Plan:
Gives the quantities of each product group must he produced each period.
3) Master Production:
Schedule is the plan for the individual end items. Production plan limits the master
production schedule.
PPC SYSTEM
a) Whole PPC system should be integrated and changes at any level must affect
immediately the other levels.
b) Effective computerized PPC is needed since thousands nos. of components are required
in any firm for variety of products.
d) New orders come in, some gets cancelled there may emergency VIP customer orders.
e) There may be production breakdowns on the shop floor due to workers absenteeism,
breaks downs in markets, equipments, power failures late or early delivery from
suppliers.
f) It is difficult to keep the track of all these changes manually. Therefore there is
tendency to keep safety stock to take care of this.
h) These are creation of wastes hence management computerized PPC system will solve
all above problems.
1) Order preparation
2) Materials Control
3) Tools Control
4) Process Planning
5) Scheduling
6) Dispatching
7) Progressing
8) Expediting
FEW COMPANIES MAY ASSIGN FOLLOWING FOUR AREAS:
1) Cost Estimation
2) Works Measurement
3) Sub Contract or Forming Out
4) Capacity Planning
PREPLANNING:
PLANNING
CONTROL PHASE
1) Dispatching
2) Inspection
3) Expediting
4) Evaluation
PRODUCTION (POLICY)
Allows the production to start only after co. receives customer orders & halts the
production until another order is received. This policy is suitable for organizations that
produce products, parts or components of high value like (Transformer, Aero plane,
Special machine). These are meant exclusively for specific purpose.
Customized design product when the level customization is high and quantity product is
low. Products are designed to satisfy individual customer needs. The emphasis in this
type of product design in ON QUALITY & ON TIME DELIVERY rather that COST. Many
industrial products like boilers, turbines, motors etc.
INTERMITTENT
Projective Production System. Turn key type (L & T)
Job Order
Batch Order
In this policy the products are produced well in advance & stored in ware houses from
where they are dispatched as per customers order. This policy is suitable for
organizations, manufacturing products, parts or components which has seasonal
demand like (Refrigerators, air coolers, conditioner etc) of those which as general
application like (nuts, bolts) etc.
CONTINUOUS
Mass
Flow
Process
The relation between process structure and volume requirements is often shown on product
process matrix.
TYPES OF PRODUCTION
Job
Batch
Product Process Matrix
Mass
Flow
Process
Degree of Repeatability
Ex: general repair shop, fabricators, S.P.M. manufacturer, workshops to manufacture, jig,
fixtures, gauges etc. Building contractors, tailoring shops of manufacturing special suits made
to order, manufacturer of ships, cranes, furnace turbo generators, pressure vessels,
transformer, Electric generator etc.
FUNCTIONS OF PPC
The PPC job is difficult & not easy. The success of this type of production depends upon the
ability of the engineer in charge of the contract.
BATCH PRODUCTION:
Here limited quantity of each type of product is authorized for manufacture at a time. It is a
manufacture of a limited nos. of products (but many such quantities of different products &
produced in a lot at a time (Batch) at regular intervals of time & stocked in ware houses as
finished goods (or finished parts) awaiting (or withdrawal) for assly.
Quantity
AP AC
TP M TC
Time
Equipment is busy up to time tp & hence another batch of product can be schedule at point
‘M’. Here the jobs comprising the batch move from one operation to the next. No subsequent
operation is performed until all jobs have undergone the previous operation. At times,
subsequent operations may be started to overlap the previous operation. The items comprising
the batch on the completion of last operations are usually delivered to the stores.
CHARACTERISTICS OF BATCH OF PRODUCTION
1) The functions are more complex than any other type of production system.
2) Material control & tool control functions are important scientific stock control system
needs to be used to ensure routine replenishment.
3) Detailed operational layouts & route sheets are prepared for each part of the product.
4) Loading & scheduling needs to be more detailed and more sophisticated. Since every
machine requires to be individually scheduled.
5) Progress function is very important to collect on the progress of work. A separate
progress card needs to be maintained to record the progress of the each component.
6) Expediting is generally necessary, since jobs many a times, due to imbalances in work
contents, tend to lag behind.
It is the manufacture of identical products on large scale. Whenever there is large demand for a
standardized product. The repetitive nature of production is taken into consideration in setting
operation, machine, and equipments. Hence the scope of special purpose machine & tools &
material handling equipment.
The rate of production = The rate of consumption.
ap
Quantity
ac
tp tc
Here the production run is conducted line either on a single machine or on nos. of machines
arranged according to the sequence of operations & several nos. of products are produced at a
time & stocked in ware house.
Examples: Plastic goods, sintered products, hardware manufacture & assly shops of
automobiles, refrigerators, radios, televisions sets, electric fans, motors, domestic appliances.
CHARACTERISTICS:
1) Flow of material – is continuous & there is little or no queing at any stage of processing.
2) Plant layout – product type by sequence of operation.
3) Special purpose machines & tools.
4) Materials handling – It is comparatively less because the materials move through a
shorter distance between the stages. The materials handling activity is mostly
mechanized by conveyors & transfer lines.
5) Skill of labour – low skilled.
6) Manufacturing cycle time – is very short. The machines capacities are balanced by
duplicating machines whenever necessary.
7) Qualities of supervision – Relatives easier as only few instructions are necessary & that
too at the start of the job.
8) WIP is less.
9) The type of maintenance is preventive
10) Flexibility in production schedules is nil.
PROCESS PRODUCTION:
It is also one kind of continuous type of production where the product is highly highly
standardized. The flexibility of a such plant is almost zero.
EXAMPLES – SUGAR, STEEL, CEMENT, PAPER, REFINERIES, COKE ETC., GLAZED TILES.
1) Layout of plant & equipment – the layout of plant, shape, size of its building, location of
services & storage yards, positions of crane & conveyors is such that material flow is
unidirectional and at steady rate. S.P.M. & equipment with built in controls to measure
output & regulate the input. The process parameters are controlled automatically.
2) Materials handling is highly mechanized. Conveyor system & automatic transfer
machines move materials from one stage to another stage.
3) Manufacturing cycle time is almost zero. The whole plant is like one large machines
where in materials enter at one end and emerges as a finished product at the other end.
4) Skilled of workmen – semiskilled and skilled technician.
5) Quality of supervision – the supervisor is highly qualified & must have considerable
knowledge of the processes involved.
6) WIP – is very less as material is in flow continuously.
To set up PPC dept in an organization is not an easy task. Lot of preparatory work needs to be
done before the dept is ready to take off. PPC depends on nos. of factors. Yet preplanning in
the following area is must.
This is achieved through a function called as Evaluating in OPC. OPC is said to be effective.
PRODUCTION PLANNING
Production plan is developed from business plan which is derived from all functional plans. A
production plan contains information regarding the –
1) Production Processes
2) Manufacturing Facilities
3) Inventory Requirements
4) Suppliers
Production output is expressed in terms of revenue earned, tons of output generated or units
of aggregate product that represents all products in the product line of an organization
operation plans should be aligned with business plans & objectives of other functional areas live
Marketing, Finance, H.R etc.
OPERATIONAL PLANNING: is concerned with planning, organizing, directing and controlling the
materials and methods to be used to make the products, and the way in which the production
facilities such as buildings, machines, equipments should be laid out in the space available for
Production Planning the sequence of operations / processes / work tasks that have to be
carried out to complete the required product (i.e. ROUTING).
FACTORY OR PLANT PLANNING: this is the first level planning, at this level the sequence of
work tasks is planned in units of the process, and spatial relationship of work places is planned.
Here we decide what departments are required to complete product (turning, milling, press
working, assembly, packing). Then to have smooth flow of material we allocate place in the
factory to the department, so that materials flow from dept. to dept. sequentially. This may be
termed as planning the dept. This also determined service depts. placing the total power
requirements (utilities like electricity, steam, oil etc) laying down the pipe lines, cables etc.)
PROCESS PLANNING: this is 2nd level of production planning, at this level each dept. found in
the above level is considered further & the flow of material in each dept. is considered. Here
the requirement of facilities to get desired physical change in the material is considered. Then
proper place is allocated to each facility depending upon flow of pattern of material & layout of
facilities in space available is prepared i.e. we are planning the process in sequential manners.
OPERATIONAL PLANNING: it is 3 rd level of production planning, here we consider each & every
production facility particularly machinery and equipment and the work is divided into elements,
then how each operation is performed and in which sequence is planned. Here the study of
ergonomics is made to increase human efficiency at work place.
FACILITY PLANNING:
1) Marketing forecast
2) Interplant forecast
3) Customer orders
4) Warehouse orders
5) Spare parts
DEMAND MANAGEMENT: Recognizing and managing all demands for products and services in
accordance with master plan.
Forecasting seeks to predict what is most likely to happen in the future by predicting the most
probable future values of a variable. It is an important aid in effective and efficient decision
making. In many cases there happens to be a time lag between awareness of an impending
event or need and the occurrence of that event. This lead time necessitates the process of
planning and forecasting. If by chance this lead time is very small or zero. There is no need for
planning; organizations need to forecast the demand for their products and services so that all
relevant plans can be developed.
DEMAND: It is the quantity of a product or service that buyers are able & willing to purchase
during a particular time period in specific market environment. The environment (Market) is
influenced by the following factors-
1) The price of a product and the price of its substitute & complementary products.
2) Income of customers & their expectations regarding price changes, tastes, preferences.
The nos. of customers & their travel costs to the point of purchase (POP).
The first step in planning is the forecast demand & the resources required to produce
product output and satisfy market requirements operation managers need to forecast
demand accurately as possible. Since forecasting can never be 100% accurate. But tracking
the results of forecasts & determining their accuracy will improve the accuracy of future
forecasts.
Forecasting can provide vital information for strategic, factual & operational planning. The
estimating needs to be done accurately. Since overestimation or underestimation will have
negative impact on the overall performance of an organization overestimation can lead to
huge inventory of finished goods & locking up of significant amount of working capital
underestimation - can lead to an increase in supply lead time and results in loss of orders.
Moreover because of inability to meet demand, customer may decide to switch to
competitors products.
Objectives / Need of Sales Forecasting:
Sales Forecasting: It is an Art & Science of predicting future events. It may involve taking
historical data and projecting them into future with some mathematical model. It may be
subjective or intuitive prediction or may involve a combination of these i.e. mathematical
model adjusted by a manger’s good judgment.
Aggregate Demands
Qualitative
ANALYTICAL METHOD relies upon actual demand data of last few years arranged in a
chronological order called as “Time Series”. The method consists of determining the nature of
the existing trend and extra polating the trend into future.
Trends (T) could be linear, exponential, logarithmic, non linear (quadric) etc.
SYNTHETIC METHODS – are qualitative methods. These are subjective, Judgmental and based
on institution, opinion and estimates.
SYNTHETIC METHODS –
Delphi Method
Historical Analogy
Nominal Group Technique – A panel of experts working together to arrive at a
consensus through discussion & ranking the ideas.
ANALYTICAL METHODS
Time series
Casual Methods
1. Delphi Method- An interactive learning process that involves a group of experts responding
to a questionnaire. The results obtained are complied to formulate a new questionnaire
which is again circulated to a group.
2. Historical Analogy- Makes analogies to the past in judgmental manner by trying what is
being forecast to a similar item. This is important in planning for new products.
3. Executive Committee Consensus- A committee comprised of executives from various
organizational depts. Develops a forecast by using observations and finding of staff analysts.
4. Market Research- Estimate of future sales which are obtained by conducting market surveys
Analytical Methods
For
New Product Existing
1) Direct Survey 1) Projection Method
2) Indirect Survey 2) Related information Method
3) Comparing with related products 3) Market Research Method
4) Limited Market Trial 4) Executive Op
5) Sales force opinion Method
Projection Methods
Casual Methods: Attempts to understand the environment underlying the surrounding the
item being forecast.
Regression Analysis: The forecast is influenced by the occurrence of other events. Data is used
to establish the functional relationship between variables, which is used to forecast dependent
variable values. The demand for a product or service is dependent on different factors or
variables like-
Price
Quality
Availability of substitute & or complementary products / services
Income level of customers
Nos. of competitors
So organization must identify the variables that affect the demand for a production.
CASUAL METHODS evaluate the relationship between variables & their influence on each other.
Casual methods include linear & multiple regression analysis.
REGRESSION refers to the functional relationship between two or more co-related variables.
Linear regression analysis establishes a relationship between dependent variable for which
future demand is needed and a group of other variables known as independent variables which
influence the dependent variable.
Ex- sale of TV is dependent on advertising budgets & nos. of retailers. Here TV sales is
dependent variable while adv. Budgets & nos. of retailers are independent variables.
In linear regression the relationship between the dependent variable & independent variable to
defined by a straight line.
Y = a + bX
Where Y is the value of dependent variable.
X is the value of independent variables
b is slope of the line
a is intercept on y axis
LEAST SQUARE METHOD: It is used to generate a regression model by assigning data is used to
form a linear model by representing the data points to a single line once linear equation is
formed. Future demand Y can be calculated –
Y = a + bx
a = y – bx
Where Y = y
N
X = x
N
y = an + bx
xy = ax + b x2
These assume that past data is a good indicator of future. These models always can find some past
relevant data to predict future. This technique uses a series of past data points to make a forecast. A
time series is simply a set of readings of values of variable quantity measured at intervals of time. It is
based on a sequence of evenly spaced (weekly, monthly, quarterly) data points. Since the forecast is
predicted from past values & OTHER VARIABLES NO MATTER HOW POTENTIALLY VALUABLE MAY BE
IGNORED. Therefore regression method approach is more powerful than time series methods.
Time series is chronological data or a set of quantitative reading of some variable or composite of
variables arranged in chronological order of their occurrence.
The time series has two factors one is some quantity such as sales in Rs, or income of individual as
dependent variable & second one is unit of time as independent variable.
Irregular or By chance
Linear Non Linear Non Linear Cyclical
1) Trend Component
2) A Seasonal
3) Cyclic
4) Irregular or Erratic or Random.
Paint
Mangoes pulp manufacturing
Sugar Manufacturing
Restaurants Beer
Umbrella & Rain Coats etc.
Season ability can be applied hourly, daily, weekly, monthly, quarterly. This is important for CAPACITY
PLANNING WHICH HANDLES PEAK LOADS. (Electric power companies, wodar clothes, banks, subway
restaurant, theaters).
3) CYCLICAL FUNCTIONS: It is a wave like functions in data about trend. The periodicity is equal to
trade cycle (which is greater than a year). These occur every several years. They are tied into
the business cycle and they are important in SHORT TERM business analysis. These may affect
due to political event or by international turmoil.
4) RANDOM FLUCTUATIONS: These are the unexplained chance variations which remain when
other three components have been identified and removed from the original time series. These
may be due to draughts, floods, famine and wars etc. These are highly unpredictable, once the
components of the time series are known then they are either considered in multiplicative or
additive form to yield a forecast. The model accomplishes the decomposition of the time series.
X = T x C x S x I – Multiplicative System
The above model is mostly used because it deals with % changes rather than absolute changes.
The variation in time series can be attributed to a nos. of causes- 1) Natural 2) Institutional 3) Socio
Economical.
SEASONAL VARIATIONS: They occur with some degree of regularity with in specific period. Influencing
factors are 1) climate and weather condition, 2) customs, habits & traditions.
CYCLIC VARIATIONS: In economics & business activities we see good times & bad times occur one after
another and which are in long term in nature. The main difference between seasonal, cyclic variation is
a degree of regularity and time period. In any business we see four changes of phases-
1) Prospering
2) Recession
3) Depression
4) Recovery
A business show prospering due to influencing factors then it shows decline & finally reaches worst state
that is a depression. After that due to changes in economic environment it recovers from depressed
state.
TREND: The growth or secular trend is the outcome of population growth. The population growth
influences the other fields of economy. Increasing population is potential market for all products.
When we speak of growth the variables under question shows that increases in quantity. Similarly in
decaying trend we observe decreasing quantity of the variable concerned. Factors responsible for
uptrend in time series.
1) Technological Development
2) Rationalization
3) Improved Productivity
4) Better organization methods, Professional management, Good quality control, Standardization,
Innovative marketing.
Reasons for decreasing trend:
1) Decline in Demand
2) Price induced Substitutes
3) Scarcity of material required
4) Changes in habits of customer and shift in the customer preference.
1) CURVE FITTING: The problem of finding equations of approximating curves that closely fit the
given data is called as curve fitting. In other worlds curve fitting is the representation of
relationship between the two variables by means of an algebraic expression.
Y 2) Y
0 0
Y = a + bx X Y = a + bx + cx2 X
Fitting of first degree Fitting of second degree
SIMPLE MOVING AVERAGE: This technique forecasts demand on the basis of average demand
calculated from actual demand in past. It makes the use of old data and computes a rolling average for
a constant number of periods. It discards old figures as new one comes in I.e fresh average is computed
at the end of each period by adding the demand of the most recent period & omitting the oldest values’-
WEIGHTED MOVING AVERAGE: Sometimes a forecaster wants to use moving average but does not want
all ‘n’ periods equally weighted owing to some trend or seasonality in the demand. There is no set rule
for calculating weights. Experience & trail-error methods are used to assign weights to a particular data.
Each element is weighted by a factor & the sum for weights should be equal to one. The formula for
calculating the weighted moving average is –
n
WMA (t+1) = CtAt
t=1
EXPONENTIAL SMOOTHING: A weighted moving average forecasting technique in which data points are
weighted by an exponential function. This method is based on the assumption that most recent data is
better indication of future trends than past data. This method is useful when used on data characterized
by SEASONAL Tendencies. The advantage of this method are availability of standard software packages;
relatively little data storage and computational requirements, accuracy of the forecasts & results can be
easily understood. In exponential smoothing method the demand of the most recent time period is
given maximum weightage. The weights assigned to the preceding periods decrease exponentially. The
data required for making a forecast are the most recent forecasts, the actual demand for the time
period & a smoothing constant & which lies between (0-1).
OR
New Forecast Ft = last periods forecast + [last periods actual demand – last periods forecast]
= F(t-1) + [D(t-1) – F(t-1)]
= F(t-1) + D(t-1) - F(t-1)
D(t-1) + (1-) [F(t-1)]
1) Collect a sample historical data on actual demand for the past periods.
2) Using the equation of Ft = D(t-1) + (1-) [D(t-1) – Ft-1] determine the forecast for the past
above periods using different values of say in increments of 0.1.
3) Plot the graph period wise actual demand & forecast demand for varying values of .
4) Examine the curves to select the one which closely matches the actual demand curve. The
smoothing constant corresponding to a such curve is the weightage factor.
REGRESSION ANALYSIS
LOGARITHMIC FUNCTION
Y = a xb
Where x denotes time period
a & b are constants
log y = log a + b log x
y = A + B
Where A = log b, y= log y, = log x, B = constant
Use formula y = An + B
xy = Ax + Bx2
2) FOR DECISIONS like capital & cash budgeting, sales planning production planning and inventory
budgeting MEDIUM Range forecasting like Regression analysis is used.
3) FOR FORECASTING LONG RANGE decisions like product planning, facility location, expansion &
capacity planning. The use of REGRESSION ANALYSIS, DELPHI, MARKET RESEARCH ETC.
Cost & Accuracy – Generally operation managers make a tradeoff between cost & accuracy. Accurate
forecasting methods have high implication of costs as they require data, which is difficult to obtain,
skilled may be require (to conduct study). Because these methods being accurate can help organizations
reducing operating costs & wastages of resources. There are many software tools that improve the
technique employed.
Optimal
Optimal Decision
Intuitive approach
A forecasts are future predictions, they are subject to error, since the demand for a product is
dependent on various factors, all of which can’t be represented in a forecasting model. Thus obtaining
accurate results from a forecasting model is highly improbable. Thus accuracy of forecasting method is
of great value to the use of a particular forecasting model in given situation.
A FORECASTING ERROR is the difference between actual demand & forecasted demand in that period.
The average error of the model gives us how well the forecast model is well.
The errors does not only help the management to compare effectiveness of various forecasting models
but also enable them to plan their functional activities in a way that minimizes the effect of forecasting
errors in their functional activities.
The possible sources of forecasting errors are omission of relevant variables during forecasting, ignoring
or misinterpreting seasonal variations.
Aggregate: Production Planning is concerned with setting production rates by product group for
intermediate term (6 to 18 months). It is a process of determining output levels of product group over
next 6 to 18 months period on weekly, monthly basis Aggregate Planning involves planning the best
quantity to produce during time periods in the intermediate range horizon (often 3 months to 18
months) and planning the lowest cost method of providing adjustable capacity to accommodate the
production requirements. For manufacturing operation Aggregate Planning involves planning work
force size, production rate, & inventory levels.
The Aggregate Plan is a part of business plan. The aggregate plan precedes the Master schedule.
Aggregate plan is a statement of company’s production rate, work force level & inventory holdings
based on the customer’s or estimates & capacity limitation.
1) Production rate refers to the nos. of units produced per unit of time [Per hr, Per day].
2) Work force level – nos. of workers needed for production.
3) Inventory on hand is the balance of unused inventory carried over previous period.
Aggregate planning requires pre-estimated the quantity to be produced & timing the output over an
intermediate range.
The demand is changing over a period of time, the resources cannot be changed as fast as rate of
demand. Thus the fluctuations in demand have to be absorbed by the production system. The
aggregate planning offers strategies to absorb the fluctuations. The strategies available to a planner
are pure or fixed strategies.
Aggregate plan is part of business plan made by operational people. Thus plan is done with
interaction of various functions like Marketing, Finance, HR, Materials, and Engineering etc.
Aggregate planning process is complex due to nos. of variables to be considered in planning process.
Aggregate plan means combining appropriate resources in general or overall term. Given demand
forecast, facility capacity, inventory levels, workforce & related inputs. The planner has to decide the
rate of output over next 3 to 18 months.
Aggregate production plan is not product by product breakdown. But it is established in gross terms
such as families of products or tons of steel, nos. of automobiles cars made may be of different
models etc.
Aggregate products plan provides the basis of development of detailed master production schedule.
* Add together to get monthly production aggregate 1500 master production schedule is
derived from Aggregate Plan Master product schedule is established in terms of specific
product i.e. Maruti 800 – to be produced 100 units each in week & week 3 of Jan.
Managers should adhere to MPS.
Various Process
Current Physical Current Man Inventory
Required for
Facilities power Levels
Production
MASTER PRODUCTION SCHEDULE FLOW CHART
While developing aggregate production plan interrelationship among various functional areas is
essential. Generally all department heads are involved –
The business planning process co-ordinates the activities of each function or department. Which will
lead to achieve the organizational objectives. In business planning all heads of function are involved so
that functional plans are focused towards achievement of long term goals. Intermediate plans involve
specific objectives for various departments. like Finance, Marketing, HR, and Production etc.
AN OVERVIEW OF OPERATIONS PLANNING & SCHEDULING-
Business Plan
Operations
Loading
Ref Fig 2
Detailed Scheduling
Expediting
OBJECTIVES OF AGGREGATE PLANNING
2) DEMAND OPTIONS
Influencing demand when demand is low. A company can try to increase through advertising,
promotion personal selling & price cuts.
Back ordering during high demand period. Back orders are orders for goods & services that a
firm accepts but unable to fill at that moment. If customer is prepared to wait without loss of
their goods will.
There are demand & fine capacity options to develop aggregate plan. Since the demand is known
operation manager can develop various plans by using the capacity options in a given environment and
select the optimal plan which gives least cost of production & gives customer satisfaction. There may be
nos. of strategies are available –
Any one of the above is used in practice is called as PURE STRATEGY while two or more combined
together is called as mixed strategy.
CHASE STRATEGY: It matches production rate to order rate by hiring and laying of employees as
the order rate varies. The success of these strategies depend on having a pool of easily trend
applicants to draw on as order volume increases. There are obvious motivational aspects/
impacts when the order back logs are low, Employee may feel are compelled to slow down out
of fear of being led off, as soon as existing orders are completed.
STABLE WORK FORCE STRATEGY : Variable work hours varies the output by varying the no of
hours work through flexible work schedule are over time. By varying the no of work hours,
production quantities can be match to orders this strategy provides work force continuity and
avoids many of the emotional and tangible cost of hiring and firing associated with chase
strategy.
LEVEL STRATEGY: Maintain a stable work force working at constant output rate. Shortages and
surpluses are absorbed by fluctuating inventory levels, order back logs, lost sales. Employees
benefits from stable work hours and the cost of potentially decrease customer services level and
increase inventory cost. Another concern is the possibility of inventories products becoming
absolute. When just one of these variables is use to absorbs demands fluctuations It is term as
pure strategy.
MIXED STRATEGY: Two or more pure strategies used in combination is called as mixed strategy.
These strategy is used widely by many organization if it convenient and reduces the cost of
production and increase service levels of the customer.
The formal statement of Aggregate planning can be given the demand forecast for each period (time) in
the planning Horizon that extends over total period T (May be year or 18 month). Determine the
Production level (PT), Inventory level (IT), Work force level (WT) for periods 1, 2, 3, ---- T that minimizes
the relevant costs over planning horizon.
One of the approach to develop aggregate plan is by simulating various MPS and calculating
corresponding capacities requirement to see if adequate labour and equipment exist at each work
centre. If capacity is inadequate, additional requirement for Over Time, subcontracting, extra workers,
& so forth are specified for each product line and combined into rought cut plan. This plan is then
modified by trial and error or mathematical method to derive optimum or very near to optimum final
plan.
In smaller companies: The owner may make simple calculations and workforce needs that reflect the
general stating strategy. The process by which the plan is derived also varies.
ONE COMMON APPROACH USED IS TO DERIVE IT FROM CORPORATE ANNUAL BUSINESS PLAN.
1) A typical corporate plan contains a section in manufacturing that specified how many units need
to be produced over next (3 to 18 months) to meet sales requirement. Production / operation which
develops plan that are best comprise among cost, customer service, inventory investment, stable work
force levels & facility utilization.
PURCHASING: The aggregate plan provides information on supplier capabilities, and co-ordinate the
inbound flow of materials & services in the supply chain management. As well out bound requirements
of warehouses, transportation, etc.
HR: Becomes of aware of how is labour market, how to plan for man power planning, & training
capacity requirement.
FINANCE: Financial condition of the firm, funds requirements & cash flows.
MARKETING: Provides demand forecast & information on competition & customer preference.
It is a process of devising a plan for providing a production capacity system to support the intermediate
range sales forecast.
It minimizes overload and under loading of facilities and keep production costs low.
Orderly and systematic transition of production capacity to meek peak and valleys of expected
customer demand facilitated.
To manage change in operations / production management by planning for production
resources that adopt to changes in customer demands.
In times of scare production resources, getting the max. output by enhancing the existing
resources [effective utilization/ less wastage].
Adequate production capacity is provided to meet expected aggregate demand.
1) Prepare the sales forecast for each product that indicates the quantities to be sold in each time
period over a planning horizon (3 to 18 months).
2) Sum up the individual or service forecast into one aggregate demand for the factory.
3) Transform aggregate demand for each time period into labour, materials, machines and other
elements of production capacity required to satisfy aggregate demand.
4) Develop alternative resource scheme for supplying the necessary production capacity to support
the cumulative aggregate demand.
5) Select the capacity plan from the alternatives considered that satisfy aggregate demand & best
meets the objectives of the organization.
In developing an intermediate aggregate capacity plan, the variables that may be manipulated to vary
the production capacity from month to month are-
1) Size of the work force
2) The use of Over Time or Idle time
3) The use of inventories or back orders
4) The use of subcontractors
5) Leaving demand unfilled to buffer the difference between production capacity and variation in
demand from month to month.
The choices concerning aggregate production, work force, inventory levels influence several relevant
costs. These costs need to be identified and measured so that alternative aggregate plans can be
evaluated on total cost criterion.
1) Payroll costs.
2) Cost of overtime, second, third shift working and cost of subcontracting.
3) Cost of hiring and laying off workers.
4) Cost of excess inventory and backlog.
5) Cost of production rate changes.
When an aggregate plan is implemented, it has impact on almost all functions & departments. of the
organization like purchase, subcontracting hireling, for (people to hire or fire.)
1) Allocating relative weightage for each job, which will help in prioritizing the orders for
sequencing.
2) Issuing dispatch list to each work centre having details of priorities and completion of time etc.
for the jobs.
3) Keeping record of WIP inventory. This includes knowing the location of each job in the system
and also knowing the nos. of good parts produced that survive each production set up, no of
unit scrapped, short fall of no of units scrape generated and no of units to be reworked.
4) Providing input – output control at each work centers. This means developing information
about the flow of job between machines.
5) Measuring the efficiency, machine utilization, and work productivity at each work centre.
1) Profits
2) Better Cost Service Raw Material Cost Control
3) Increased Market Share
Single Source Supply
4) Faster
5) Increase R.O.I
Optimum Material
CAPACITY:
1) The throughput or nos. of units a facility can hold, receive, store or produce in a period of time.
2) It is value creating ability of the organization ability that takes form in a wide variety of
resources. Like manpower, machine equipments technology, materials, finance etc.
3) It is a measure of productive capability of a facility for a unit of time.
4) Capacity is rate of doing work but not quantity of work done.
5) To produce product & service two important factors of production resources like
1) Materials,
2) Productive Resources-
Technology,
Machine, equipments,
Tools
Men
If there is no material the productive resources will remain Idle or similarly when there are no
productive resources, material is of little use. Hence all manufacturing organizations deal with Capacity
Planning.
Capacity is the capability of a worker, machine, work centre, plant or organization to produce output per
unit of time period.
Capacity is of two types
CHARACTERISTICS OF CAPACITY
1. Capacity requires capital investment & it determines larger portion of fixed cost. With get added
in overall cost of any production system. Capacity also determines if demand will be satisfied or
if facilities will remain idle.
4. If capacity is more than demand then some capacity remains Idle & hence increases cost of
existing product.
5. If demand capacity then management can’t satisfy the customer, market is lost & opportunity of
business is lost.
TO DETERMINING FACILITY SIZE WITH AN OBJECTIVE OF ACHIEVING HIGH LEVEL UTILIZATION & HIGH
RETURN ON INVESTMENT IS ESSENTIAL.
Production System
Input Inside Output Side
Conversion or Transformation
CAPACITY CAN BE MEASURED EITHER AT INPUT SIDE OR OUTPUT SIDE OF A PRODUCTION SYSTEM.
For manufacturing firm the productive resources are usually consists of material, labour, equipments,
technology while for service oriented firm, the customers themselves can be considered as key
resources together with labour & equipment.
For example: A service station can state its capacity is 10 motors (Automobile Cars) per day.
A Bus capacity is 60 seats per trip.
Capacity planning involves capacity decisions that merge consumer demand with Human, Materials, and
Financial resources of the organization.
Capacity Decisions
Maximum type concentrates how best to utilize the available resources to produce
Maximum required
Capacity
Minimum type to indicates that to produce minimum amount below which it is not
advisable to produce i.e. company has to achieve breakeven volume of production.
1. Long range capacity planning is called as RESOURCE REQUIREMENT PLANNING. The time horizon
is greater than one year. These decision deals with accommodation of major changes that affect
the overall level out put in long term. Here assessing market demand for a long time is difficult,
correctness will make this plan effective where production facility to be locate layouts and
others.
2. Capacity planning for intermediate range of time horizon between (3months to 18months
Medium range )
3. Short range capacity planning – Use existing capacity in the best possible manners. (Time
horizon 0 to 3months)
1) Scheduling the jobs, People and allocate machinery. Assigning the jobs to facility with
proper sequencing & having proper process planning.
2) Hire temporary people or fire them.
3) Schedule O.T.
4) Use alternative routings if the original machines in original routing are busy. But machines
on alternative routing are not busy.
Capacity planning occurs at each level of planning process. Varying only in the level details & the time
span involved.
1. Priority Capacity
Long Range
Master
Rough cut
lines
Medium Range
production
or families
of planning
capacity
Plan
Master
schedulerequirement
Capacity
planning
Short Range
MPS
requirement planning
Implementation &
Production
Control
material Activity Control
Capacity Control
1 RESOURCE REQUIREMENT PLANNING
Manpower
Plant and capital equipment
Product design or facilities
2 This determines the impact of high level plan on resources which are needed to carryout
) production plans.
3 It quickly identifies the obstacles to the plan without going through the details. It performs
) two functions
1 It testifies the validation of a production plan & the Master Production Schedule. Before
doing details manufacturing capacity planning.
2 It initiates actions for making Mid-range to Long-range capacity arrangements.
In case of product mix, Rough cut capacity planning runs directly from MPS.
1) It is simple, a quicker tool which does not require greater accuracy in routing of each item,
bill of materials, inventory data.
2) This is better simulation tool use to take less time for computation
Whereas actual product Building requires the resources at all work centers to be considered.
Therefore executive of production plan is susceptible to consequence not highlighted during
(RCCP) process.
Forecast
demand Production Plan Revise plan
Load profiles
No
1. It connects with the material requirement planning (MRP). This type of planning focuses
on components parts, subassemblies & therefore grater details is involved.
2. It is called as short term capacity planning.
3. It is concerned with individual orders at individual work centre and calculates work
center loads & labour requirements for each time period at each work center.
4. Thus it is most details complete & accurate of the capacity planning technique
Time standards
Lead time
calculations
Work centre
capacity
DETERMINATION OF AVAILABLE CAPACITY
1) Measured capacity can be obtained from historical data while calculated capacity can be
determined form available time, utilization & efficiency
Actual hrs
= standard hrs required × efficiency × utilization.
required
1) Utilization measures that should indicate to what degree potential capacity is used
2) LOAD,
1) Load is the required capacity of the system or the resources need to produce a
desired out put in a given time period.
2) Load is input rate at which work is imposed upon the system.
3) Load is the amount of planned work scheduled for and actual work released to a
manufacturing facility i.e. work center, operation for specific span of time usually
expressed in terms of standard hrs of work or units of production when the item
consume similar resources at the same rate.
Released Load
Planned Load
Unreleased load
Load
Unplanned
1) Planned Load: - it is generated by the MRP1 syst. This type of load is known in
advance and the capacity for meeting this type of load can be arranged long
before it is required.
2) Released load ---- (scheduled receipts)
This load consists of those orders that have been released to the shop by MRP
planner. This order appears as MRP and displays as scheduled receipts and on
shop dispatch list as shop orders.
3) Unreleased load (planed order release) these orders are in MRP system only for
planning purposes. They do not show up in the shop at all until actual released
by the planner.
4) Unplanned Load: - Is not generated by MRP. This can include
a) Emergencies
b) Engineering, requests
c) Unplanned response to important customer
d) Personal work &
e) Variation from other situations.
The following files are available to input open order file (schedule receipt) an
open order appears as schedule receipt on the material requirement plan. It is
triggered for the release of quantity of part to be manufactured and completed
on specific date & contains information about the quantities, due dates, &
operations. The open order file is a record of all the acting shop orders and
contains the following data by the part number & work order
3. ROUTING FILE
This is used as a shop traveller that accompany works from start to finish.
The necessary details how to manufacture an item are found in routine
file. Routine file contains the following information.
I. Operation to be performed
II. Sequence of operations
III. Work centre in which the operations should be performed
IV. Possible alter native work centers
V. Tooling needed for each operation
VI. Standard times (associated with each operations) setup times & runtime
per piece.
VII. Operator’s skill
VIII. Inspection, operations & testing requirements
4. ALTERNATIVE ROUTING
The standard routing for an item is its primary routing. An item may have one
or more alternative routings. Which describe additional methods of
manufacturing. The same item. Alternative routings are used when primary
routing is not available (which occurs due to capacity constraints or
equipment unavailability)
This file assimilated all the date related to work centre such as Information
concerning cost, capacity, lead time, crew size, and function capacity, move,
waiting, queue time associated with work centre. Work centre file is one of
the prime inputs to Capacity Requirement Planning (CRP). It provides work
center capacity data to PRODUCTION SCHEDULING, SHOP LOADING, &
Capacity planning.
1) Queue time: - It is a planned time a job waits, at work centre before being
handled. It is significant in the calculation of (Lead time & capacity
utilization.
2) Waiting time: - it is a time a job is, at work centre after completion &
before being moved.
3) Move time – it is the time taken to move from one work center to
another
4) Internal & external setup time: - external setup which does not allow to
stop the machine from performing the work while the internal at which
machine is require to stop to do the work. Therefore there is interference
to production hence external setup can be preferred to internal setup.
5) Lead time: - it is the sum of queue, setup, run, used in operation. Lead
time is required to place the work load in proper time period. It is noted
here that actual work load in the time period is only setup run times.
However queuing, waiting, inspecting are elements of total times that do
not USE CAPACITY BUT ARE PART OF IT. Which use space & time as a
resources which are infact wasted.
I. Functional
II. A flow type work center.
III. Widely different process
IV. A group technology work center
V. A group project work center
CRP OUTPUT - CAPACITY REQUIREMENT PLANNING
A load report is a comparative analysis of expected versus actual capacity usage. In the
department or at work center.
The work center load reports shows future capacity requirement based on Release &
planned orders for each time period on production plan. Load reports are very detailed
& prescribe units of output required & labour by skill level or by employee required.
Over load
110
110
102
104 103
Rated capacity
100 (100)
S 97
T
A
N
D 80
A
Under load
R
D
L
60
O
A
D
40
20
2 3 4 5
1
Period
Work center load report table form which the above graph is plotted.
WORK CENTER LOAD REPORT
2 Planned load 79 77 89 78 82
5 Overload +4 +3 +10 -3 +2
Forward scheduling
Scheduling Strategies
Backward Scheduling
These two terms are frequently associated with capacity requirement planning.
Infinite loading
Loading
Finite
1) Capacity requirement planning uses infinite loading in conjunction with BACKWARD SHEDULING
to generate capacity requirements plan or work centre load reports, OPERATION SEQUENCING
which is a part of production activity control. Use of finite loading & various forms of scheduling
can help to determine the priorities for each and every individual orders the highest priority
number get first priority on the available capacity in each work center.
TYPES OF CAPACITY
1) FIXED CAPACITY :- Fixed Assets (Building, equipment, tools etc. ) which remain for
particular time to derive the revenues. They can’t be easily changed with intermediate
time Horizons.
2) Adjustable Capacity :- it is flexible capacity which can be added or deleted at any point
of time horizon.
a. Number of hrs per week people work
b. The number of shifts and overtime working
c. The extent of subcontracting
d. The number of people working
3) INSTALLED OR DESIGN CAPACITY: - it is a planned rate of output under normal or full
scale operating conditions. It sets the maximum limit to capacity and serve to judge
actual utilization of capacity.
a) Scheduling delays
b) Machines break downs
c) Preventive maintenance program
5) ACTUAL OR UTILIZATION CAPACITY: - This is the actual output achieved during particular
time period. The actual output may he lesser than the rated output because of short
range factors such as employee absenteeism, labour inefficiencies and productivity
levels.
CHAPTER
2) It is top level management activity that determines the long range capacity is overall levels
3) It addresses changes in manpower, plant & capital equipment product designs or facilities that
take a by time to acquire & eliminate.
4) For producing products & service as per sales forecast resources are required. The necessary
resources can’t be built in short time. Hence Resource Planning Is required to take care of
today’s business eventualities & requirements. Thus allocation of resources is necessary to
ensure timely deliveries & to meet competition.
Today manufacturing has become a complex process. Since many companies are producing
variety of products, each product uses a variety of methods, processes, machineries,
equipments. All these must be organized effectively, efficiently & economically. Goods must be
manufacturing at right quality, & quantity at right time must be deliver at right place with
minimum cost
5) Evaluation of Per period basis of Resource Requirement with available resources & identification
of short falls.
Computerization of operations began when first computer was installed in General Electric in
1954. The whole purpose was to reduce manual labour & costs involved in tasks such as
preparing salary statements, accounting statement like profit & loss Account.
In 1960 operations Managers started using computer to analysis their operations with the help
of analytical software which is capable of handing linear programming. The objective of using
this was to reduce costs associate with operations & improve the efficiency of the production
systems.
These information systems latter led to the development of Materials Requirement Planning
MRP or MRP I ) than MRP II manufacturing resource planning & (ERP) Enterprise Resource
Planning.
It is an integrated information system that synchronized the activates of production and other
functional areas of business like engineering, finance, marketing & purchasing through proper & quickly
& timely information flow.
This system can be used to analyze complete product cycle from corporate production plans to finished
goods distribution. The function of can be broadly divided into three parts.
1) Product planning
2) Operations control
3) Operations control
Since operations decisions are interrelated there was a requirement of comprehensive systems.
Which included feed backs form other functional areas like purchasing, marketing, finance,
engineering. MRP II is a such systems, which co-ordinates the allocations of various
manufacturing resources through integrated approach of a production of plan. MRP II can
forecast customer requirements, allocate necessary resources & insure timely delivery of
products. MRP II assists organization on handling out of order situations without distribution the
normal flow of product to customers.
MRP II A system that allows with MRP in place, inventory data can be augmented by other
resources variable in this case MRP become MRP II inventory data can be augmented by labour
hrs, by material cost (rather than material quantity) by capital cost, or by virtually any other
Resource MRP used in this way is usually reported as MRP II .
For instance MRP have scheduled units (Quantities). However these units require resource on
addition to its components. These additional resources include.
Labour HRS, markets hrs, and Accounts Payable (cash) each of these resources can be used in
MRP format just as we used quantities.
The sample production schedule requires to exhibit all above resources in each period a part
from quantities of material only. These requirements are compared with receptive capacity i.e
(labour hrs, market hrs, cash etc) so operation manager can make schedule that will work.
To aid the functions of MRP II, most of MRP computer programmes are tied into other computer
files and provide data to MRP system or receive data from MRP system. Purchasing, production
scheduling capacity planning & warehouse management, few example of this data integration.
By utilizing logic of MRP, resources such as labour, market hrs, & cost can be accurately
determined and scheduled. Weekly demand for labour, market hrs & payables can be drawn.
MRP II converted for MRP schedule time
4 5 6 7
A (Units) lead time 1 week labour 1 X 100 = 100
10 hrs each market 2hrs each 100 X 10 =
payable Rs.(300) 1000
100 X 2 = 200
100 X 0 = 0
B (Units) (led time 2 week e each 2 x 100
labour = 10 hrs (each ) 200 X 10 =
Market = 2hrs (each) 2000
Payable raw material at Rs. 5/- 200 X 2 = 400
200 X 5 = 1000
C (Unit) Lead time & week (3 each 3 X 100 = 300
require) 300 x 2 = 600
Labour = 2 hrs / each 300 X 1 = 300
Market = 1hr / each 300 X 10 =
Payable Raw material Rs. 10/each 3000
Assembly Require
100 A component
1Week A 100
1 week
100X2 B = 200
3 week 2 weeks
component 3 week
component
(110X 3 each) (100 X 2each)
100X 3 = 300
MASTER PRODUCTION SCHEDULE
Business Planning
Demand planning
Aggregate planning
Disintegration
M M
P P
S S
No Are Material Are Capacities NO
Adequate Adequate
Yes Yes
FIRM MRP.
Loading Shop
floor Short term
SEQUENCING
control capacity
Scheduling control,
Details Scheduling
Expediting
1. A BUSINESS PLAN is the statement of an organization’s overall business activities for ensuing 0 to 18
months. This plan expresses the companies objectives in terms of projected sales, incomes, costs &
profits. This plan is based on general economic conditions, anticipated condition of industry &
prevailing completive factors.
For the success of business plan it is necessary that forecasting (demand planning) should be as
closely as future expected demands. i.e the inevitable forecast error associated with the plan
should be minimal. Forecast is an integral part of decision making. All other planning decision are
made on the basis of what is forecasted. In the highly dynamic & competitive environment of
business today it is necessary for survival of the company that demand planning should be done
effectively & efficiently. The business plan is the translated into sales & operational plans which
establish the production rate required to meet the business plan. The sales & operation plan is often
stated as AGGREGATE PLAN. Aggregate plan represents the production side of business plan. It
addresses the demand side of plan by showing level as expressed in numbers of units. At this level
plan ignores & individual product family details about size, colour, weight, style, etc. Aggregate plan
provides the overall level of out but, backlogs, & inventory dictated in the business plan. Hence it is
necessary to break down the aggregate plan into finer detail I called as DIS AGGREGATION.
MASTER PRODUCTION SCHEDULE - Specifies what is to be made and when it is to be made. This must be
in line with production plan, includes verification of inputs to production plan including financial plan,
customer demand, engineering Capabilities, labour productivity, inventory fluctuation, supplier
performance and other considerations.
A planning process moves form production plan to executions of each lower level plan, must be feasible.
When one is not feasible then feedback is given to the next higher level and necessary adjustments are
done.
The strength of MRP is its ability to determine precisely the feasibility of a schedule with in aggregate
capacity constraints. This planning process can yield the excellent result. The production sets upper &
lower bounds on the master production schedule.
MPS states how many end items will be produced in specified time periods, each end time are either
finished products or the highest level of subassemblies that directly go into finished products. Time
periods over which planning is made can be expressed in week although they can be in days, hrs or even
months.
1. It dis-aggregates the product groups into individual product & indicates where individual
production will be produced.
2. It links sales (marketing) with production by a) showing when incoming sales orders can be
scheduled around.
3. When production is over and
4. When shipments can be scheduled.
Disaggregation is the reverse of aggregating planning by which planning data is further broken-down to
detailed level.
1) The master production schedule is the vehicle for implementing the production plan.
2) It states that what will be produced, when it will be produced & in what Quantity it will be
produced
3) It deals with specific end items, usually finished goods or major sub assembles.
4) The master schedule assigns specific dates to items with in those periods.
5) It is a vital link in any manufacturing system.
6) It is an important tool that is used to satisfy the needs of the market by effective utilization of
manufacturing resources
7) Thus it is important tool for both manufacturing & marketing.
8) It is the outcome of disaggregation
9) It provides basic frame work for manufacturing decision making.
MPS is a REALISTIC, DETAILED, MANUFACTURING PLAN in which all possible demands are put upon the
manufacturing facilities.
Realistic means not wish list but able to do detailed means it must maintained high level of accuracy in
terms of part numbers, Quantities and time period
Manufacturing plan. It uses the sales forecast and other demands & transfers them into detailed
production plan.
ALL POSSIBLE DEMANDS CONSIDERED ARE AS FOLLOWS
1) Sales forecast
2) Customer forecast
3) Inter plan requirements
4) Service part demands
5) Plant capacity
6) Product lead times
7) Inventory planning:- requirement of initial inventory, safety stock, final inventory or end
inventory.
Supply = Demand
MPS
The demand (market place) is determined from the sales forecast & other different ways. While
supply comes from manufacturing resources. (men, machines, materials, equipments and money)
Therefore MPS is an anticipated build schedule for manufacturing end items or products option by
Quantity per planning period. It represents what company plans to produce.
Objective of MPS
1. Translate Aggregate plans into detailed manufacturing plans period wise which breaks up
different production or product lines. The sizes of lots are determined in such way that the
products are economical to produce and utilize firm’s facilities & resource at optimum level.
Master schedule is more detailed in specific numbers of individual products to be manufactured
in specific time periods at specific work stations.
2. Evaluate Alternative Schedule : Planners use computerized production inventory control
system with simulation capabilities to evaluate alternative Master Schedules. Once all
alternative are evaluated the detail materials & capacity requirements are identified and exact
lead items and delivery schedules are also determined by the planners. The simulations even
suggest how increased demand for one product can affect the production schedule of other
products
3. Identity material requirement : The prime input for a material requirements planning system is
master schedule once the master schedule is drawn up it alerts the material requirement
planning system to produce or purchase the necessary components that are needed to meet
requirements of find assembly schedules.
4. Generate Capacity Requirements : For capacity requirements, planning needs inputs form the
material requirement plan, which in turn is directed by master schedule so master schedule is
prerequisite capacity planning. The Master schedule reflects most economical use age of labour
and equipments capacity. It the capacity available is not satisfy the requirements of the master
schedule either the production capacity or MPS is revised.
5. Effectively utilize capacity. The master production schedule assigns loads for labour and
equipments based on the requirements. The load reports takes into account of the individual
product requirements and available resources in assigning load to individual workers,
equipments workstation. The objective is to fully utilize available capacity.
Input to
Out put
MPS
MPS Process
1. INPUT TO MPS -- Aggregate plan, Manufacturing policy which or given by top management
2. OUTPUT – A set of planning nos. expressed in firm planned orders, which drive MRP, output is
the anticipated Build schedules – Quantity, time period etc. this schedule gives available to
promise, means the planned production as well as what can’t be produced.
3. MASTER SCHEDULING PROCESS – it is a technique which takes production plan (Aggregate)
notes for each product line & converts them into daily weekly product mix with identification of
specific models features and options to be produced while tacking into accounts raw material
shortage & purchases, lead time, manufacturing capacity.
This master production scheduling process involves the planning of activities to determine whether or
not an operation can achieve production objective mentioned in MPS.
MRP & CRP ARE TWO PLANNING ACTIVITIES THAT ARE THE PART OF MASTER PRODUCTION
SCHEDULING PROCESS
1) CRP determines whether the existing capacity of production is sufficient to achieve the objective
of the MPS (use tentative MPS chart) & MRP ensures that the materials are available at right
time to produce and hence delays are avoided.
Master production scheduling is generally based on the result of demand forecasts. Since
the result of forecasts are not accurate & actual production output is not always the same as
the actual market demand. To accommodate these in balanced operations manger modify
the master production schedule by
1) Allowing inventory level to increased when demand for the product is low and
decrease when demand is higher
2) Determining the routine, maintenance & diverting, labour capacity to manufacturing
3) Subcontracting the additional capacity requirements
4) Altering the prices of production to influence demand level
Product Line P
Master P1 P2 P3 P4
Schedule
When sales / marketing provides the sales Forecast at product line level P. and also provides product
mix forecast for products P1 - P4 . The Master Production Schedule is developed taking sales forecast
for model P1 - P4 along with beginning inventory & predetermined inventory objectives.
MPS FOR PRODUCE OR MAKE TO ORDER – for this type of items, detailed scheduling of time and
materials required is essential because the items & quantities specified are unique for a particular
customer order. In this type of product on there is no finished goods inventory customer orders are
backlogged and production begins only after the orders have been placed. In this case the planning bill
of materials is normally developed by product family based upon a forecast from sales / marketing with
planning percentages developed for individual products.
1) The sum of master schedules must be equal to the production plan i.e. Realistic MPS is equal
to availability of materials & capacity.
2) Sales forecast must be uncoupled from MRP. This is accomplished by placing MPS between
sales forecast & MRP.
3) Master scheduled should be crated at product level that provides greatest flexibility & best
control
4) Rough cut – capacity analysis must be done either at production plan or Master schedule
level before going to MRP. This is done by running schedule against product load profile or
representing routing and creating a resource requirement plan.
5) Time fances are real and should be agreed by all functions. This should be done in order to
meet the requirement of manufacturing and marketing so that a greater flexibility & control
can be accessed.
6) Master schedule must have a control of a Master schedule with in the planning time hence
and noting is done automatically by computer to changed it
7) Past due Master schedule items must he eliminated it is absolutely necessary to reschedule
all past due items appear on the MPS line.
8) Consume the MPS with customer order as they are received, consumption is accomplished
by determining the units the company has available to promise.
9) Over planning for safety stock in Assemble to order should be done in the first unsold
period. This is to address forecast error associated with production plan
10) MPS should be established as company’s game plan and agreed upon by manufacturing &
Marketing
11) Responsibility must be assigned and master scheduled held responsibility for creation,
execution, maintenance & monitoring.
12) All management must understand, support & commit to above principles. Management
must insist that MPS should be workable it should be changed after consideration has been
given to the impact of the change and alternative available
FORMAT OF MPS
Projected available is the total available balance after satisfying the need of the current period.
Projected available = on hand inventory + MPS – forecast (or actual) is called as ending inventory
CHAPTER
ENTERPRISE RESOURCES PLANNING FUNCTIONING & FEATURES OF E.P.P, SCOPE BENEFITS ERP,
application selection of ERP package
E.R.P. – it is an information system for identifying and planning the enterprise wide resources
needed to take make, ship and account for customer orders. The objective of ERP system is to co-
ordination firms whole business form supplier & valuation to customer invoicing. ERP systems are
evolving as an umbrella systems that tie together a variety of specialized systems. This is
accomplished by using centralized data base to assist the flow of information among business
functions to take decisions.
With growing complexity of organizations and increasing information flow between different
business process, the need to co-ordinate and control of flow of information to various decision
centers has gained importance, ERP is complete organization wide system that allows co-ordination
between various functional and geographical entities.
THUS E.R.P. IS DEFINED AS A PROCESS THAT IS USED FOR INTEGRATED MANAGEMENT OF BUSINESS
THOUGH THE EFFICIENT USE OF AVAILABLE RESOURCES & WITH THE AIM TO INTEGRATION
INFORMATION ACROSS THE COMPANY. THUS ERP IS SOFTWARE THAT ALLOWS THE COMPANY TO
EVALUATION OF ERP-:
Prior to ERP there were various computer systems which were restricted to specific function integrating
& co-coordinating thus different and compatibility of the systems was also a major issue. This problem is
over came by ERP. The roots of ERP development can be traced basis to the concepts of MRP, MRP II
systems used in manufacturing to automate the various aspects of inventory management, production
processes, for instance automating the order process scheduling operation etc. MRP II was an extension
to MRP. It was conceived with objective of automating all manufacturing function & providing an
interface with other functional domains. As a result it is able to achieve high degree of integration with
other automatically process in organizations ERP extends the functionality of MRP & MRP II systems to
provide completed business solution because of this wider scope ERP is concerned not just with internal
issues but take into accounts external factor like competition, Demand
The key aspect of ERP is ability to integrate different business entities without being constrained by
geographical & functional differences
Thus the scope of ERP is wide across all business process. In addition to traditional components of MRP,
MRP II, ERP systems provide the following things
FEATURES OF ERP
1) ERP is software having centralized data base (single) in which the information from different
functional domain is stored.
2) The information needs of different entities can be met from single location
3) The data is entered one time only into a common complete and consistent data base which is
shared by all applications.
4) The data field must be defined identically across the entire enterprise
5) In additional to data integration ERP software promise reduced transaction cost, and speed &
accuracy of information
6) Each ERP product is unique & every ERP has standard modules designed for specific industries if
as standard module does not fit in the business of any organization they can change the way
they do the business to accommodate the software.
7) Alternatively ERP software can be customized to meet there specific requirements
8) Existing ERP software can be upgraded by interfacing the various software on to existing one
9) The inter phases allow expansion of ERP system so that they can integrate with other system.
Such as ware house management, logistic, exchanges electronic catalogs, quality management &
product life cycle management.
10) ERP package have a series of service modules such as health care, govt, retail store financial
service air lines etc.
ADVANTAGE OF ERP
2) Delivery Reliability & Speed- This is one of the criteria on which customer judge on organization
competitiveness. ERP can stream line procurement, distribution activities & reduce the lead time
involved in purchasing raw material & distribution of finished products. ERP helps to co-ordinate
these activities among all entities of supply chain through the smooth flow of information
between them, with the help of ERP the lead time required to do the work is reduced.
3) Quality : - EPR by bridging the gap between the existing process and best process can help an
organization to achieve its quality objectives.
4) Product Range – In today’s competitive world the organization need to provide products in
different shapes, size that satisfy the requirements of the different segments of the market.
They need a variety of products in their product line. But as product range increases the cost &
time of production increases due to modification of production processes to accommodate the
changes required for each product range. ERP through integrated functionality and common
data base enhances the capabilities that assists organizations in this direction.
Once conception process of designing business process is over. The available packages are evaluated to
identify the package that will provide a comprehensive solution to given organizational requirements.
The following points should be considered.
The Italian sportswear company Benetton is engaged in manufacturing and selling of the sportswear
is situated in Italy but selling all our globe. The company makes & ships 50 million pieces each year
that is 30,000 boxes everyday – Boxes must be filled with exactly items ordered going to correct
store of 5000 outlets in 60 countries
This highly automated distribution center uses only 19 people without ERP, 400 people would be
needed. Here how ERP SOFTWARE WORKS
1) ORDERING: - a sales man in the Detroit (U.S.A) finds that he is running out of a bestselling blue
sweater. Using a laptop his local Benetton sales agent tops into ERP sales module.
2) Availability: - ERP inventory software simultaneously forewords the order to the main frame in
Italy and finds that half the order can be filled immediately from Italian warehouse. The rest will
be manufactured and shipped in 4 weeks
3) PRODUCTION: - Blue sweater was originally created by computer aided design (CAD). ERP
manufacturing software passes the specifications to knitting machine. The knitting machine
makes the sweaters
4) WAREHOUSING: - the blue sweaters are boxed with a Radio frequency ID (RFID) TAG
ADDRESSED Detroit store and placed in one of 30,000 slots in the Italian warehouse. A root
fillies by reading (RFID) tags, pick out only and all boxes ready for Detroit store and loads them
for shipment
5) ORDER TRACKING :- Detroit sales person logs on to ERP system through internet and sees that
sweater (and other items) are completed and being shipped
6) PLANNING: Based on the data from ERP’s forecasting and finance modules. Benetton chef
buyer decides that blue sweaters are in high demand & quite profitable, he decides to add three
new houses.
Thus the integrated approach of ERP allow production dept located in one geographical area to
send the products situation at other geographical area in short time. Similarly products on
demands can send financial information to the head office and marketing information of one
location can be accessed by production dept at another location. So that markets patterns can
be identified and appropriate responses can be designed.