Production Planning

and Control
Production
System
The methods, procedure or arrangement
which includes all functions required to
accumulate (gather) the inputs, process or
reprocess the inputs, and deliver the
marketable output (goods).
Production Planning

Production planning involves management

decisions on the resources that the firm will require
for its manufacturing operations and the selection
of these resources to produce the desired goods at
the appropriate time and at the least possible cost.
Production Control

Production control guides and directs flow of

production so that products are manufactured in a
best way and conform to a planned schedule and
are of the right quality
Objective of PPC
• Systematic planning of production activities to achieve the highest
efficiency in production of goods and services.
• To organize the production facilities like machines, men, etc., to achieve
stated production objectives with respect to quantity and quality time and
cost.
• Optimum scheduling of resources
• Coordinate with other departments relating to production to achieve
regular balanced and uninterrupted production flow
• To conform to delivery commitments
• Materials planning and control
• To be able to make adjustments due to changes in demand and rush
orders.
Information
Requirement of
PPC
Stages in PPCs
Stages of PPC
 Stages of PPC

Planning states all the Routing determines the path
materials, manpower, of goods starting from raw
manufacturing materials up to finished
techniques, resources, products. It specifies the most
and other initial details efficient sequence of the
needed to complete the operations and also identifies
production. the machines to be used in
each step of production.
Scheduling is the Loading, as defined in
determining of time and the manufacturing
date when each operation aspect, is the process of
is to be commenced and determining the ideal
completed. allocation of workload
to employees and to
machines used, in
accordance with their
capacity.
Stages of PPC
(a) Complete analysis or study of the product
(b) Analysis of the article and materials
(c) Determination of manufacturing operations and their sequence.
(d) Determination of lot to proper size
(e) Determination of possibility of scrap in manufacturing a product
(f) Determination of the cost of the article or the product
(g) production control forms
(h) Preparation of route sheets
Stages of PPC
Stages of PPC
Master Production
Scheduling

Manufacturing or
Operation Scheduling

Retail operation
scheduling
 Stages of PPC

Dispatching is the part of Expediting is designed to keep Inspection is the quality Correction enables
production control that track of the work effort. The control aspect of production businesses to further
translates the paper — aim is to ensure that what is planning and control. It enhance their
work into actual intended and planned is ensures that goods produced production process and
production. It is the group being implemented are of the right quality implement planning
that coordinates and and control techniques
translates planning into in a more efficient
actual production. manner.
Forecasting
• An estimate of demand, which will happen in future
• Since it is only an estimate based on the past demand,
proper care must be taken while estimating it
• Given the sales forecast, the factory capacity, the
aggregate inventory levels and size of work force, the
manager must decide at what rate of production to
operate the plant over an intermediate planning horizon
Forecasting Approaches
Forecasting Approaches
Forecasting Approaches
Forecasting Approaches
Time Series Models
Time series analysis is perhaps the most common
statistical demand forecasting model. It examines
patterns in past behavior over time to forecast future
behavior.
1. Naïve Approach
2. Moving Average
3. Weighted Moving Average
4. Exponential Smoothing
5. Trend Projection
6. Seasonal Indexes

Associative Models
Associative Models is when one or more
independent variables can be used to predict the
changes in the dependent variable
1. Linear Regression
Forecasting Approaches
1. Naïve Approach

Uses last period’s actual value as a forecast

Forecasting Approaches
2. Moving Average

A series of arithmetic means

Provides all impression of data over time

Formula:

σ 𝑑𝑒𝑚𝑎𝑛𝑑 𝑖𝑛 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠

Moving Average = 𝑛
Forecasting Approaches
2. Moving Average

Auto Sales at Carmen’s Chevrolet are shown below. Develop a 3-week moving average for Week 6

Week Auto Sales

1 8
2 10
3 9
4 11
5 10
Forecasting Approaches
3. Weighted Moving Average

• Used when trend is present

• Older data is usually less important
• Weights based on experience and intuition

σ)𝑤𝑒𝑖𝑔ℎ𝑡 𝑓𝑜𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 𝑛) 𝑥 (𝑑𝑒𝑚𝑎𝑛𝑑 𝑖𝑛 𝑝𝑒𝑟𝑖𝑜𝑑 𝑛)

𝑊ⅇⅈ𝑔ℎ𝑡ⅇ𝑑 𝑚𝑜𝑣𝑖𝑛𝑔 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 =
σ 𝑤𝑒𝑖𝑔ℎ𝑡𝑠
Forecasting Approaches
3. Weighted Moving Average

• J&S Furniture’s actual sales from Jan to Mar are as follows. Compute for the 3-month weighted
moving average for April if an importance weight of 0.6 assigned to the most recent actual
demand, 0.3 to the second most recent actual demand, and 0.1 to the oldest observation?

Actual Shed
Month
Sales
January 10
February 12
March 13
Forecasting Approaches
4. Exponential Smoothing

• Used when trend is present

• Older data is usually less important
• Weights based on experience and intuition
Forecasting Approaches
4. Exponential Smoothing

Toyota Vios’ predicted demand last month is 142 units but actual demand is 153 units. Compute for
the next month’s forecast using smoothing constant of 0.20
Forecasting Approaches
4. Exponential Smoothing (with Trend Adjustment)
Forecasting Approaches
4. Exponential Smoothing (with Trend Adjustment)

J&S Furniture’s actual sales for 1 month. Compute for the next month forecast with smoothing
constant as a = 0.20 and b = 0.40
Forecasting Approaches
4. Exponential Smoothing (with Trend Adjustment)

From the initial problem, compute for the 3rd month forecast.
Forecasting Approaches
4. Exponential Smoothing (with Trend Adjustment)

From the initial problem, compute for the 4th month forecast.
Forecasting Approaches
4. Exponential Smoothing (with Trend Adjustment)

Given the following data for 4 months, compute the trend adjusted smoothing average. Use a = 0.3
and b = 0.6
Forecasting Approaches
4. Exponential Smoothing (with Trend Adjustment)

Given the following data for 4 months, compute the trend adjusted smoothing average. Use a = 0.3
and b = 0.6
Forecasting Approaches
5. Trend Projection
Forecasting Approaches
5. Trend Projection

Compute for the trend line to be used on the following data.

Forecasting Approaches
6. Seasonal Variation

Steps:

1. Find average historical demand each season

2. Compute the average demand for all seasons
3. Compute a seasonal index for each season
4. Estimate next year’s total demand
5. Divide this estimate of total demand by the number of seasons, then multiply it by the seasonal
index for that season
Forecasting Approaches
6. Seasonal Variation

Compute for the forecast for Jan and Feb reflecting seasonal variation if the annual forecast for next
year is 1200.
Forecasting Approaches
7. Associative Forecasting
Forecasting Approaches
7. Associative Forecasting

If the payroll next year is to be estimated at Php 6M, compute for the forecasted sales.
Forecast Accuracy
Difference between actual and forecasted value (also known as residual)

Common measures of error:

Forecast Accuracy
The last four weekly values of sales were 80, 100, 105, and 30 units. The last four forecast
(for the same four weeks) were 60, 80, 95, and 75 units. Calculate MAD.
Forecast Accuracy
The last four weekly values of sales were 80, 100, 105, and 30 units. The last four forecast
(for the same four weeks) were 60, 80, 95, and 75 units. Calculate MSE.
Forecast Accuracy
The last four weekly values of sales were 80, 100, 105, and 30 units. The last four forecast
(for the same four weeks) were 60, 80, 95, and 75 units. Calculate MAPE.
Aggregate Planning
• Determine the quantity and timing of
production for the immediate future
• Objective is to minimize cost over the planning
period by adjusting :
• Production rates
• Labor levels
• Inventory Levels
• Overtime Work
• Subcontracting rates
• Other controllable variables
 Aggregate Planning Strategies

1. Use Inventories to absorb changes in demand

2. Accommodate changes in varying workforce size

3. Use part-timers, overtime, or idle time to absorb changes

4. Use subcontractors and maintain a stable workforce

5. Change prices or other factors to influence demand

Capacity Options
Demand Options
Mixing Options to Develop a Plan
• Level Strategy
• Daily production is uniform
• Use inventory or idle time as buffer
• Stable production leads to better quality and productivity
• Some combination of capacity options, a mixed strategy, might be the best
solution
• Chase Strategy
• Match output rates to demand forecast
• Vary workforce levels or vary production rate
• Favored by many service organizations
Example
The CEO of Water Ski has decided to forgo the company’s policy of
guaranteed employment. Assume the cost of hiring and firing workers
is $100 per worker hired and $400 per worker fired. Try level
production strategy. If necessary, allow backordering at $10 per pair of
skis per quarter. What is the cost of the plant?
Example
Example
The CEO of Water Ski has decided to forgo the company’s policy of
guaranteed employment. Assume the cost of hiring and firing workers
is $100 per worker hired and $400 per worker fired. Try chase demand
production strategy. If necessary, allow backordering at $10 per pair of
skis per quarter. What is the cost of the plant?
Example