CHAPTER NO.

- 02 (PRODUCTION MANAGEMENT)
PRODUCTION MANAGEMENT: Production management, also called operations
management, planning and control of industrial processes to ensure that they move smoothly at
the required level. Techniques of production management are employed in service as well as
in manufacturing industries.
2.1 WHAT IS FORECASTING: Is a process of estimating a future event by casting forward past
data. The past data are systematically combined in a predetermined way to obtained the estimate of
the future"
 Forecasting refers to the practice of predicting what will happen in the future by taking into
consideration events in the past and present.
 Basically, it is a decision-making tool that helps businesses cope with the impact of the future’s
uncertainty by examining historical data and trends.
 It is a planning tool that enables businesses to chart their next moves and create budgets that will
hopefully cover whatever uncertainties may occur.
 Forecasting refers to the practice of predicting what will happen in the future by taking into
consideration events in the past and present.
 Both qualitative and quantitative methods are used when developing a forecast.
 A statement about the future value of a variable of interest such as demand.
 Predictions about the future.
 Two important aspects of forecasts. One is the expected level of demand; the other is the degree
of accuracy that can be assigned to a forecast (i.e., the potential size of forecast error).
 Forecasts may be Short range (e.g., an hour, day, week, or month), or Long range (e.g., the next six
months, the next year, the next five years, or the life of a product or service)
NEED OF FORECAST IN PRODUCTION /OPERATIONS MANAGEMENT
There are two basic reasons for the need of for cast in any field more so in production/ operation
management.
1) Purpose - Any action/plan is contemplated/devised in the PRESENT to take care of some
contingency accruing out of a situation/condition or set of conditions set in future. These future
conditions offer a purpose/target to be achieved so as to take advantage of or to minimize the
impact of (if the for seen conditions are adverse in nature) these fixture conditions. An action or a
plan cannot be taken/ devised in void-without any purpose/objective/target. Any plan or action is to
achieve something. This ‘something' is a derived function of future condition (s).
2) Time- To prepare a plan, to organise resources for its implementation, to implement; and
complete the plan; all these need time as a resource. Some situations need very little time; some
other situations need several years of time. Therefore, if future forecast is available in advance,
appropriate actions can be planned and implemented ‘in time’
Top benefits of forecasting
Let’s see how forecasting can help your business succeed:
 Forecasting helps in setting goals and plans ahead of time — Analyzing data and
statistics helps businesses better evaluate their progress and adapt business operations
accordingly.
 Forecasting helps in allocating a business budget — A forecast will give you estimates
about the amount of revenue or income that is expected in a future period. This, in turn,
helps companies get insight into where to allocate their budget.
 Forecasting helps in predicting market changes — Data and projections help companies
make better adjustments to their strategies and improve operations in order to meet current
market trends. This, in turn, helps them stand out from the competition. To sum up,
forecasting is an absolute necessity for any business because it helps you:
 Plan for both short and long term future,
 Invest your money wisely,
 Expand into new markets,
 Use real-time data,
  Improve collaboration between team leaders, and most importantly,
 Plan the next steps for your business.
There are various tools that help businesses get better insight into how operations and processes
currently work, and find out what needs to be changed or improved. We will mention a few
forecasting tools below.
Top Forecasting Methods
There are four main types of forecasting methods that financial analysts use to predict
future revenues, expenses, and capital costs for a business. While there are a wide range of
frequently used quantitative budget forecasting tools, in this article we focus on four main
methods: (1) straight-line, (2) moving average, (3) simple linear regression and (4) multiple linear
regression.
Technique Use Math involved Data needed
1. Straight line Constant growth rate Minimum level Historical data
2. Moving Repeated forecasts Minimum level Historical data
average
3. Simple linear Compare one independent with one Statistical A sample of relevant
regression dependent variable knowledge required observations
4. Multiple linear Compare more than one Statistical A sample of relevant
regression independent variable with one knowledge required observations
dependent variable
Key Highlights
 Four of the main forecast methodologies are: the straight-line method, using moving averages,
simple linear regression and multiple linear regression.
 Both the straight-line and moving average methods assume the company’s historical results will
generally be consistent with future results.
 The regression methodologies forecast results based on the relationship between two or more
variables.
1. Straight-line Method
The straight-line method is one of the simplest and easy-to-follow forecasting methods. A financial
analyst uses historical figures and trends to predict future revenue growth.
2. Moving Average
Moving averages are a smoothing technique that looks at the underlying pattern of a set of data to
establish an estimate of future values. The most common types are the 3-month and 5-month
moving averages
3. Simple Linear Regression
Regression analysis is a widely used tool for analyzing the relationship between variables for
prediction purposes. In this example, we will look at the relationship between radio ads and revenue
by running a regression analysis on the two variables.
4. Multiple Linear Regression
A company uses multiple linear regression to forecast revenues when two or more independent
variables are required for a projection. In the example below, we run a regression on promotion
cost, advertising cost, and revenue to identify the relationships between these variables.
Stages of Production Planning & Control
2.2.1 Production Planning & Control is done in three stages namely;
The activities of preplanning, planning and control may be considered to take place in a time
sequence. The preplanning is completed before production commences. Planning takes place
immediately before production starts and control is exercised during production.
1. Pre-planning
2. Planning
3. Control.
Stage 1: Pre-Planning
Under this phase of production planning, basic ground work on the product design, layout design
and work flow are prepared. The operations relating to the availability scope and capacity of men,
money materials, machines, time are estimated.
It is the procedure followed in developing and designing a work or production of a developing and
installing a proper layout or tools. It may be involved many functions of the organization and draws
upon forecasting, product design, jigs and tool design, machine selection and estimating to enable
proper design to be made. In short, preplanning decides what shall be made and how it shall be
made. In respective manufacture a large uneconomic output could be produced if preplanning is
omitted. It is also important in one of the operations such as setting up a new plants as preplanning
can identify and avoid probable costly errors.
Stage 2: Planning
This is a phase where a complete analysis on routing, estimating and scheduling is done. It also tries
to find out the areas of concern for short time and long time so that prominent planning can be
prepared.
This stage decides where and when the product shall be made. It includes the sequencing of
operations viz outing and the time schedule for manufacturing viz scheduling. It also states
procedures for material planning and supplies, machine loading and deliveries. To perform as
functions properly it will need past records of performance and to control statistic which may be
obtained from pre-planning, cost control or progress.
Stage 3: Control
Under this phase, the functions included are dispatching, follow up, inspection and evaluation. It
tries to analyse the expedition of work in progress. This is one of the important phases of the
Production Planning and Control.
This refers to the stage of ensuring that the planned action is in tact carried out. Control initiate the
plan at the right time using dispatching and there after control makes appropriate adjustments
through progressing to take care of any unforeseen circumstances
 The main functions of PPC are the coordination of all the activities, which exist during
production or manufacturing.
Materials: This function is concerned with ensuring that the Raw material, standard finished parts,
finished parts of products must be available while starting the operation within the time.
Methods: This function is concerned with the analysis of all methods of manufacturing and
selecting the best appropriate method according to the given set of circumstances and facilities.
Machines and Equipments: It is important that methods of manufacturing should to be related to
the available production facilities coupled with a detail study of equipment replacement policy. This
function is concerned with the detailed analysis of the production facilities, maintenance procedures
and equipment policy.
Routing: It refers to the flow of sequence of operation and processes to be followed in producing a
particular finish product. It determines manufacturing operation and their sequence.
Estimating: This function is concerned with estimation of operations time. The operation time can
be worked Out once the overall method and sequence of operation is fixed and process sheet for
each operation is available.
Loading & Scheduling: It is important that machine should be loaded according to their
capabilities performance the given and according to the capacity. It is concerned with preparation of
machine loads and fixation of starting and completion dates for a particular operation.
Dispatching: It means the assignment of work to different machines or work places which involve
authorities to start of production activities in order of their priority as determined by scheduling.
Expediting: It is also called Follow Up or Progress. Follow up which regulates the progress of
materials and parts through the production process. It is closely interrelated with activities of
dispatching.
Inspection: It is an important control tool. Its assessment is important in the execution of current
program and planning stage of undertaking when the limitations of the processor, method and
manpower are known. It forms a basis for future investigations with respect to method, process etc.
which is useful for evaluation phase.
Evaluating: This is the integral part of control function. The evaluating function is concerned with
providing a feedback mechanism on the long term basis so that the past experience can be
evaluated with the aim of improving utilization of method and facilities.
PRODUCTION PLANNING AND CONTROL (PPC) IS A TERM THAT COMBINES TWO
STRATEGIES: production planning and production control.
In the manufacturing world, production planning and control are defined by four stages: Routing,
Scheduling, Dispatching, and Follow-Up. The first two stages relate to production planning while the
second two relate to production control.
The Four Stages of Production Planning and Control
1. Routing - The first stage of production planning is to determine the path of production from raw
materials to finished goods. Here, you will determine the equipment, resources, materials and
sequence to be used.
2. Scheduling - The second stage of production planning is to determine when operations are
scheduled. Here, the goals may be to increase throughput, reduce lead time, or increase profits.
Many strategies can be used to create the most efficient schedule.
3. Dispatching - The third stage of production control starts when production is initiated. That is, when
the scheduling plan is implemented, materials and work orders are released, and work is flowing
down the production line.
4. Follow-Up - The fourth stage of production controls is to determine whether there are any
bottlenecks or inefficiencies in the process. Here, you can compare the predicted run hours and
quantities with the actual values reported to determine whether processes can be improved.
Time and Capacity Management are crucial factors to enhance the efficiency of the shop floor and
of the business. These factors are directly associated with the second stage of production planning
and control: Scheduling.
2.2.3 SCHEDULING: Scheduling is the determination of the time that should be required to perform
each operation and also the time necessary to perform the entire series, as routed, making
allowance for factors concerned. It involves the preparation of a time-table, indicating the total time
needed for the manufacture of a product as also the time expected to be spent at each machine and
process.
In preparing schedules, the persons concerned will have to take into consideration the various types
of orders on hand and the dates by which their completion has been promised. Some orders may be
such as will require over-time work; because completion is not possible according to the delivery
dates set for them, in the regular course of production.
THE TYPES OF SCHEDULING IN PRODUCTION PLANNING AND CONTROL
1) Master Production Scheduling: Master Production Scheduling (MPS) is a scheduling strategy that
dictates when and how much of each product is going to be produced based on criteria such as
demand, capacity, and inventory availability. This type of scheduling focuses on a planning horizon
that is divided into equal time period (called ‘time buckets’). It includes a plan for the production of
certain products and defines resources, staffing, inventory, etc required for the allotted time period.
2) Manufacturing and Operation Scheduling: Manufacturing Scheduling (also called ‘Detailed
Scheduling’ or ‘Production Scheduling’) focuses on a shorter horizon than MPS. This type of
scheduling fixes a time and a date to each operation in a continuous timeline rather than in time
buckets. Each process can then be visualized in terms of its start time and completion time-frame.
The subsequent stages of production planning and control depend on this timeline.

LOADING: Loading involves assigning jobs to work centers and to various machines in the work
centers. If a job can be processed on only one machine, no difficulty is presented. However, if a job
can be loaded on multiple work centers or machines, and there are multiple jobs to process, the
assignment process becomes more complicated. The scheduler needs some way to assign jobs to
the centers in such a way that processing and setups are minimized along with idle time and
throughput time.
Two approaches are used for loading work centers: infinite loading and finite loading.
infinite loading jobs are assigned to work centers without regard for capacity of the work center.
Priority rules are appropriate for use under the infinite loading approach. Jobs are loaded at work
centers according to the chosen priority rule. This is known as vertical loading.
Finite loading projects the actual start and stop times of each job at each work center. Finite
loading considers the capacity of each work center and compares the processing time so that
process time does not exceed capacity. With finite loading the scheduler loads the job that has the
highest priority on all work centers it will require. Then the job with the next highest priority is
loaded on all required work centers, and so on. This process is referred to as horizontal loading. The
scheduler using finite loading can then project the number of hours each work center will operate. A
drawback of horizontal loading is that jobs may be kept waiting at a work center, even though the
work center is idle. This happens when a higher priority job is expected to arrive shortly. The work
center is kept idle so that it will be ready to process the higher priority job as soon as it arrives. With
vertical loading the work center would be fully loaded. Of course, this would mean that a higher
priority job would then have to wait to be processed since the work center was already busy. The
scheduler will have to weigh the relative costs of keeping higher priority jobs waiting, the cost of
idle work centers, the number of jobs and work centers, and the potential for disruptions, new jobs
and cancellations.
AIMS LOADING AND SCHEDULING: The next step within production planning and control is
scheduling. Loading and Scheduling are concerned with preparation of workloads and fixing of
starting and completing date of each operation. On the basis of the performance of each machine,
loading and scheduling tasks are completed. This is when the production plan is almost completed
and ready to be enacted. Scheduling differs from planning by diving into the details of the
production process.
WHAT IS A GANTT CHART: A Gantt chart is a visual representation of all tasks or operations
scheduled on specific resources. In this type of chart, activity blocks (representing operations) are
arranged on horizontal lines (representing resources). All of the blocks are arranged on the same
timeline, which allows everyone to know when the operations will start and finish.
In addition, the length of the activity block is proportional to the time required to perform the
operation. This way, you can easily see which tasks take longer than others and may decide to split
those operations between resources to met your need dates.
Gantt Charts Provide Visibility
Common benefits of task interdependence visibility aid in the the reliability of:
 On-time Delivery
 Scheduling Precision
 Production Plan Adherence
 Overall Process Control
 Cost to Produce is Lowered
 Cost Effective/Material Planning
2.2.4 ROUTING: Once
production plans are generated
and ready to be executed, routing
comes into play. It is about
selection of path or route through which raw materials pass in order to make it into a finished
product. The points to be noted while routing process are – full capacity of machines, economical
and short route and availability of alternate routing. Setting up time for the process for each stage
of route is to be fixed. Once overall sequence are fixed, then the standard time of operations are
noted using work measurement technique.
Determining the flow of work, material handling in the plant and sequence of operations or
processing steps. This is related to considerations of appropriate shop layout and plant layout
temporary storage locations for raw materials, components and semi-finished goods and of
materials handling systems.
TECHNIQUES OF ROUTING: While converting raw material into required goods different
operations are to be performed and the selection of a particular path of operations for each piece is
termed as 'Routing'. This selection of a particular path, i.e. sequence of operations must be the best
and cheapest to have the lowest cost of the final product. The various routing techniques are:
1. Route card: This card always accompanies with the job throughout all operations. This indicates
the material used during manufacturing and their progress from one operation to another. In
addition to this the details of scrap and good work produced are also recorded
2. Work sheet: It contains Specifications to be followed while manufacturing.
Instructions regarding routing of every part with identification number of machines and This sheet is
made for manufacturing as well as for maintenance.
3. Route sheet: It deals with specific production order. Generally made from operation sheets. One
sheet is required for each part or component of the order. This includes the following:
Number and other identification of order.
➤Symbol and identification of part.
➤Number of pieces to be made.
➤Number of pieces in each lot if put through in lots.
➤ Operation data which includes:
✓ List of operation on the part.
✓Department in which operations are to be performed.
✓Machine to be used for each operation.
✔Fixed sequence of operation, if any.
2.2.5. DISPATCHING is ‘release of orders and instructions for starting of the production for an item
in accordance with the ‘route sheet’ and schedule charts’.
Dispatching is defined as setting production activities in motion through the release of orders (work
order, shop order) and instructions in accordance with the previously planned time schedules and
routings. Dispatching also provides a means for comparing actual progress with planned production
progress.
PRINCIPLES/ FUCTION OF DISPATCHING:
 Checking the availability of material and then taking appropriate action to have it transferred from
the main stores to the point at which it is needed.
 Ensuring that all production aid is ready when needed and then having them issued to
manufacturing departments.
 Obtaining specific drawings from the drawing office.
 Informing the process section that production is commencing.
 At the conclusion of the manufacturing, ensure that all the drawings, layout and tools are
withdrawn and returned to their correct location.
 Dispatching is an important step as it translates production plans into actual production.
Commonly Used Priority Rules:
 First come, first served (FCFS): Jobs are processed in the order in which they arrive at a
machine or work center.
 Last come, first served (LCFS): The last job into the work center or at the top of the stack is
processed first.
 Earliest due date (EDD): The job due the earliest has the highest priority.
 Shortest processing time (SPT): The job that requires the least processing time has the highest
priority.
 Longest processing time (LPT): The job that requires the longest processing time has the
highest priority.
 Critical Ratio (CR): The job with the smallest ratio of time remaining until due to its processing
time remaining has the highest priority.
 Stack per remaining operations (S/R0): The job with the least stack per remaining operations is
given the highest priority. Calculate by dividing stack by remaining operations.
2.2.6. PROCESS PLANNING: The process of the product design consists in a plan for the product,
its components and subassemblies. To obtain the physical entity building a manufacturing plan is
needed. The activity of developing such a manufacturing plan is name process planning. Process
planning is the relation between design and manufacturing. Process planning consists in defining
the sequence of the steps that should be taken to make the product. Process planning is referring to
the engineering and technological issues of how to make it.
PP Known as: manufacturing planning, material processing, process engineering, machine routing
Functions included in process planning:
 Raw material preparation
 Processes selection
 Process sequencing
 Machining parameter selection
 Tool path planning
 Machine selection
 Fixture selection
OPERATIONAL PLANNING: What does operational planning mean? Operational planning creates
a detailed roadmap based on a strategic plan.The operational plan aligns timelines, action items and
key milestones that finance or the business needs to complete to execute on the strategic plan. In
this way, an operational plan outlines the organization’s key objectives and goals and clarifies how
the organization will achieve them.
During the operational planning process, finance or the business responsibilities are described in
detail based on the timeline for the operational plan. The timeframe should depend on typical
organizational velocity; creating an annual operational plan is a fluid, changing process, so keeping
clarity and collaboration is vital for success.
A well-conceived business operational plan keeps team members collaborating smoothly, ensures
everyone knows what needs to be done and what their part in it is, and guides critical decisions
about long-term strategy.
Production Planning?
Production planning involves developing a comprehensive strategy for making the company’s
products and services. Initially adopted by large manufacturers, production planning has since
become more popular among small and midsize businesses in multiple industries — largely because
technology has made it easier to plan and track production processes with less effort. Production
planning covers many different aspects of production, from forecasting demand to determining the
raw materials, workforce, equipment and steps needed to make the company’s products.