The Planning Elements of CIM

Production Planning and Control

Introduction
Production

planning and control (PPC) is concerned with the logistics problems that are encountered in manufacturing, that is, managing the details of what and how many products to produce and when, and obtaining the raw materials, parts, and resources to produce those products.

Resource Planning for Manufacturing

Introduction...
PPC

solves these logistics problems by managing information are essential for processing the tremendous amounts of data involved to define the products and the manufacturing resources to produce them

Computers

Introduction...
Planning

and control in PPC must themselves be integrated functions It is insufficient to plan production if there is no control of factory resources to achieve the plan It is ineffective to control production if there is no plan with which to compare factory progress Both planning and control must be accomplished, and they must be coordinated with each other and with other functions in the manufacturing firm
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Production Planning

Consists of
1. Deciding which products to make, in what quantities, and when they should be completed; 2. Scheduling the delivery of the parts and products; and 3. Planning the manpower and equipment resources needed to accomplish the production plan.
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Production Planning

Activities within the scope of production planning include

Aggregate production planning Master production scheduling Material Requirements Planning Capacity Planning

Aggregate planning (1 & 2) involves planning six months or more into the future, whereas detailed planning (3 & 4) is concerned with the shorter term (weeks to months)
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Production Control

It consists of determining whether the necessary resources to implement the production plan have been provided If not, take corrective actions to address the deficiencies

It includes various systems and techniques for controlling production and inventory in the factory; including
Shop floor control Inventory control Manufacturing execution systems (MES) Manufacturing resource planning Enterprise resource planning
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Aggregate Production Planning and The Master Production Schedule

APP is a high-level corporate planning activity APP indicates production output levels for major product lines of the company Objectives of APP include

Establish a company wide game plan for allocating resources Develop an economic strategy for meeting demand

The production quantities of the major product lines listed in the aggregate plan are converted into a very specific schedule of individual products known as master production schedule (MPS) This is a list of the products to be manufactured, when they should be completed and delivered, and in what quantities
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Aggregate Production Planning and The Master Production Schedule

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Material Requirements Planning

Computerized

inventory control and production planning system Calculates the demand for components items, when they are needed and lead time to make or buy them MRP translates a master schedule for end items into time-phased requirements for sub-assemblies, components and raw materials MRP plans
Purchasing activities Manufacturing activities Delivery schedules

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Demand Characteristics
Independent Demand (Finished product) A Dependent Demand (Component parts) C(2)

B(4)

D(2)

E(1)

D(3)

F(2)

Independent demand is uncertain. Dependent demand is certain.

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Material Requirements Planning

Product structure file

Master production schedule

Material requirements planning

Item master file

Planned order releases

Work orders

Purchase orders

Rescheduling notices
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MRP Inputs and Outputs

Inputs

Master production schedule Product structure file Item master file Outputs Planned order releases Work orders Purchase orders Rescheduling notices
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Product Structure File

Once MPS is set, MRP system accesses the product structure file to determine which component items need to be scheduled Product structure file contains a bill of material (BOM) for every item produced The BOM for a product lists
the items that go into the product, their brief description, and when and in what quantity each item is needed in the assembly process

When each item is needed can best be described in the

form of a Product Structure Diagram An assembled item is referred to as a parent, and a component as a child

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Product Structure
Clipboard

Top clip (1)

Bottom clip (1)

Pivot (1)

Spring (1)

Rivets (2) Finished clipboard Pressboard (1)

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Product Structure Diagram

Clipboard Level 0

Pressboard (1)

Clip Assy (1)

Rivets (2)

Level 1

Top Clip (1)

Bottom Clip (1)

Pivot (1)

Spring (1)

Level 2

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Item Master File

Contains

an extensive amount of information on every item that is produced, ordered, or inventoried in the system Includes data such as on-hand quantities, onorder quantities, lot sizes, safety stocks, lead times, past usage figures The item master file is updated whenever items are withdrawn from or added to the inventory or whenever order is released, revised or completed

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Item Master File

DESCRIPTION Item Pressboard Item no. 734 Item type Purch Product/sales class Comp Value class B Buyer/planner RSR Vendor/drawing 07142 Phantom code N Unit price/cost 1.25 Pegging Y LLC 1 INVENTORY POLICY Lead time Annual demand Holding cost Ordering/setup cost Safety stock Reorder point EOQ Minimum order qty Maximum order qty Multiple order qty Policy code 1 5000 1 50 0 39 316 100 500 3
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Item Master File

PHYSICAL INVENTORY On hand Location On order Allocated Cycle Last count Difference 100 W142 100 75 3 9/5 -2 USAGE/SALES YTD usage/sales MTD usage/sales YTD receipts MTD receipts Last receipt Last issue CODES Cost acct. Routing Engr 00754 00326 07142
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1100 75 1200 0 8/25 10/5

MRP Matrix

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MRP: Example

School Mate offers a number of standard products to encourage writing outside of the class room, including clipboards, lapdesks, lapboards, and pencil boxes. Rising costs and inventory level have prompted the company to install a computerized planning and control system called MRP. The MPS and bill of material modules are up and running. Sample output is shown previously. Before going live with the MRP module, School Mate has asked for a manual demonstration. Since manual calculations can be quite tedious, you are asked to prepare MRP matrices for only three items the clipboard and lapdesk, and a common component, pressboard. The MPS, inventory information, and abbreviated product structure diagram are given below: 23

MRP: Example
Master Production Schedule 1 Clipboard Lapdesk 85 0 2 95 60 3 120 0 4 100 60 5 100 0

Item Master File

On hand On order (sch receipt) LLC Lot size Lead time CLIPBOARD 25 175 (Period 1) 0 L4L 1 LAPDESK 20 0 0 Mult 50 1 PRESSBOARD 150 0 1 Min 100 1
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MRP: Example
Product Structure Record

Clipboard

Level 0

Pressboard (1)

Clip Assy (1)

Rivets (2)

Level 1

Lapdesk

Level 0

Pressboard (2)

Trim (3)

Beanbag (1)

Glue (4 oz)

Level 1
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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L Gross Requirements Scheduled Receipts Projected on Hand 25 LLC: 0 LT: 1 1 85 175 2 95 PERIOD 3 120 4 100 5 100

Net Requirements
Planned Order Receipts Planned Order Releases

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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L Gross Requirements Scheduled Receipts Projected on Hand 25 LLC: 0 LT: 1 1 85 175 115 2 95 PERIOD 3 120 4 100 5 100

Net Requirements
Planned Order Receipts Planned Order Releases

(25 + 175) = 200 units available (200 - 85) = 115 on hand at the end of Period 1
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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L Gross Requirements Scheduled Receipts Projected on Hand 25 LLC: 0 LT: 1 1 85 175 115 20 2 95 PERIOD 3 120 4 100 5 100

Net Requirements
Planned Order Receipts Planned Order Releases

115 units available (115 - 85) = 20 on hand at the end of Period 2

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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L Gross Requirements Scheduled Receipts Projected on Hand 25 LLC: 0 LT: 1 1 85 175 115 20 0 2 95 PERIOD 3 120 4 100 5 100

Net Requirements
Planned Order Receipts Planned Order Releases

0
100

100
100

20 units available (20 - 120) = -100 100 additional Clipboards are required Order must be placed in Period 2 to be received in Period 3
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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L Gross Requirements Scheduled Receipts Projected on Hand 25 LLC: 0 LT: 1 1 85 175 115 20 0 0 0 2 95 PERIOD 3 120 4 100 5 100

Net Requirements
Planned Order Receipts Planned Order Releases

0
100

100
100 100

100
100 100

100
100

Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases

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MRP: Example
ITEM: LAPDESK LOT SIZE: MULT 50 Gross Requirements Scheduled Receipts Projected on Hand 20 LLC: 0 LT: 1 1 0 2 60 PERIOD 3 0 4 60 5 0

Net Requirements
Planned Order Receipts Planned Order Releases

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MRP: Example
ITEM: LAPDESK LOT SIZE: MULT 50 Gross Requirements Scheduled Receipts Projected on Hand 20 20 10 10 0 0 LLC: 0 LT: 1 1 0 2 60 PERIOD 3 0 4 60 5 0

Net Requirements
Planned Order Receipts Planned Order Releases

0
50

40
50 50

50
50

Following the same logic, the Lapdesk MRP matrix is completed as shown
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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 100 1 50 1 2 2 PERIOD 3 4 5 Planned Order Releases ITEM: LAPDESK LLC: 0 LOT SIZE: MULT 50 LT: 1 Planned Order Releases ITEM: PRESSBOARD LLC: 0 LOT SIZE: MIN 100 LT: 1 Gross Requirements Scheduled Receipts Projected on Hand 150 Net Requirements Planned Order Receipts Planned Order Releases 100 100 PERIOD 3 4 50 PERIOD 3

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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 100 PERIOD 3 4 5

Planned Order Releases ITEM: LAPDESK LLC: 0 LOT SIZE: MULT 50 LT: 1 Planned Order Releases ITEM: PRESSBOARD LLC: 1 LOT SIZE: MIN 100 LT: 1 Gross Requirements Scheduled Receipts Projected on Hand 150 Net Requirements Planned Order Receipts Planned Order Releases

x1
1 2

100 100 PERIOD x1 3 4

x1
5

x2

50

1 100

50 x2 PERIOD 2 3 4 100 200 100

5 0

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MRP: Example
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 100 1 50 1 100 50 2 PERIOD 3 4 5 Planned Order Releases ITEM: LAPDESK LLC: 0 LOT SIZE: MULT 50 LT: 1 Planned Order Releases ITEM: PRESSBOARD LLC: 0 LOT SIZE: MIN 100 LT: 1 Gross Requirements Scheduled Receipts Projected on Hand 150 Net Requirements Planned Order Receipts Planned Order Releases 100 100 PERIOD 3 4

50 PERIOD 2 3 4 100 200 100 50 50 100 150 0 150 150 100 0 100 100

5 0 0

100

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MRP: Example
Planned Order Report PERIOD ITEM Clipboard Lapdesk Pressboard 1 2 100 50 100 150 3 100 50 100 4 100 5

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MRP Example 2

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Capacity Requirements Planning (CRP)

MRP ensures that material requirements are met Material is not the only resource necessary to produce goods

A certain amount of labor and machine hours are also required

Thus, the next step in the planning process is to verify that the MRP plan is feasible by checking for the availability of labor and/or machine hours This process is called capacity requirement planning
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Capacity Requirements Planning (CRP)

Creates

a load profile Identifies under-loads and over-loads Inputs

Planned order releases: from the MRP process Routing file:
Which

machines or workers are required Order of operations to be conducted Length of time each operation should take

Open orders file

Status

of jobs that have already been released but have not yet been completed
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CRP
MRP planned order releases

Routing file

Capacity requirements planning

Open orders file

Load profile for each machine center

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Capacity Requirements Planning (CRP)

Load profile: compares released orders and planned orders with work center capacity Capacity: the capability to produce Capacity = ( no. of machines or workers) x (no. shifts) x (utilization) x (efficiency) Utilization: the percentage of available working time that a worker actually works or a machine actually runs Efficiency: how well a machine or worker performs compared to a standard output level Load: standard hours of work assigned to a facility

Load percent =

Load X 100 % Capacity

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Determining Loads and Capacities: Example

Copy Courier is a fledgling copy center in downtown Richmond run by two college students. Currently, the equipment consists of two high-speed copiers that can be operated by one operator. If the students work alone, it is conceivable that two shifts per day can be staffed. The students each work 8 hours a day, 5 days a week. They do not take breaks during the day, but they do allow themselves 30 minutes for lunch or dinner. In addition, they service the machines for about 30 minutes at the beginning of each shift. The time required to set up for each order varies by the type of paper, use of color, number of copies, and so on. Estimates of setup time are kept with each order. Since the machines are new, their efficiency is estimated at 100 percent
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Determining Loads and Capacities: Example

Due to extensive advertising and new customer incentives, orders have been pouring in. The students need help determining the capacity of their operation and the current load on their facility. Use the following information to calculate the normal daily capacity of Copy Courier and to project next Mondays load profile and load percent.
Job No. 10 No. of Copies 500 Setup Time (Min) 5.2 Run Time (Min/Unit) 0.08

20
30 40 50

1000
5000 10000 2000

10.6
3.4 11.2 15.3

0.10
0.12 0.14 0.10
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Determining Loads and Capacities: Example

Solution: The machines and/or operators at Copy Courier are out of service for 1 hour each shift for maintenance and lunch. Utilization is, thus, 7/8, or 87.5 percent. Daily copy shop capacity is: 2 machines x 2 shifts x 8 hours /shift x 100% efficiency x 87.5% utilization = 28 hours or 1680 minutes The projected load for Monday of next week is as follows:
Job No. 10 20 30 40 Total Time 5.2+(500 x 0.08) 3.4 + (5000 x 0.12) = 45.2 = 603.4 10.6 + (1000 x 0.10) = 110.6 11.2 + (10000 x 0.14) = 1411.2

Load percent = 2385.7/1680 = 1.42 x 100% = 142%

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15.3 + (2000 x 0.10) = 215.3

2385.7 minutes

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Determining Loads and Capacities: Example

Copy Courier is loaded 42 percent over capacity next Monday. Increasing utilization (even to 100 percent) would not be sufficient to get the work done. To complete the customer orders on time, another shift could shift could be added (i.e., another person hired). With this adjustment, the copy shops daily capacity would increase to 2 machines x 3 shifts x 8 hours /shift x 100% efficiency x 87.5% utilization = 42 hours or 2520 minutes The revised load percent is: 2385.7/2520 = 0.9467 x 100% = 94.67% In the future, Copy Courier should determine if it has enough capacity to complete a job by the customers requested due date 45 before the job is accepted.

Capacity Adjustments
Short-term

adjustments

Employment levels Number of temporary workers Number of work shifts Number of labor hours Inventory stockpiling Order backlogs

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Capacity Adjustments
Long-term

adjustments

Investing in new equipment Constructing new plants Purchasing existing plants Acquiring existing companies Closing plants

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Shop Floor Control

A typical SFC system consists of three phases

1. Order release, 2. Order scheduling, and 3. Order progress

These phases are executed by a combination of computer and human resources The term manufacturing execution system (MES) is used to denote the computer software that supports SFC Other functions included in an MES are
Generation of process instructions Real-time inventory control Machine and tool status monitoring Labor tracking
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Order Release

Consists of

These paper documents move with production order in the operation of a conventional factory AIDC in modern factory

1. The route sheet, which documents the process plan for the item to be produced, 2. Material requisitions to draw the necessary raw materials from inventory, 3. Job cards to report direct labor time devoted to the order and to indicate progress of the order through the factory, 4. To authorize the material handling personnel to transport parts between work centers 5. The parts list for assembly jobs

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Order Scheduling
Assigns the production orders to the various work centers in the plant It is intended to solve two problems in production control

Allocating orders to work centers is referred to as machine loading Job sequencing involves determining the sequence in which the jobs will be processed Priorities are established among the jobs in the queue

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Machine loading and 2. Job sequencing

1.

Order Scheduling
Dispatching

rules to establish priorities

First come first served Earliest due date Shortest processing time Least slack time (the difference between the time remaining until the due date and the process time remaining) Lowest Critical ratio (the ratio of the time remaining until the due date divided by the process time remaining)

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Order Progress
Work order status reports: Current work center where each job is located Processing hours remaining Job is on time or behind schedule Progress reports: Used to report the performance of the shop during a certain time period Exception reports: Provides exception information such as deviations from the production schedule
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Inventory Control
Stock

of items kept to meet future demand Purpose of inventory management

how many units to order when to order

Types of inventory: Raw materials Purchased parts and supplies Work-in-process (partially completed) products (WIP)
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Inventory Costs
1. Carrying costs Cost of holding an item in inventory Vary with the level of inventory and the length of time an item is held Carrying costs include Rent Heating, cooling, lighting Security Record keeping Depreciation Obsolescence Product deterioration, spoilage, breakage
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Inventory Costs
2.

Ordering costs Cost of replenishing inventory Expressed as a dollar amount per order Independent of the order size Vary with the number of orders made As the order size increases, ordering costs decrease and carrying costs increase Ordering costs include Purchase orders Transportation and shipping Receiving Inspection Accounting and auditing
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Inventory Costs
3.

Shortage costs Temporary or permanent loss of sales when demand cannot be met because of insufficient inventory Customer dissatisfaction and loss of goodwill Price discounts or rebates For internal demand, shortage can cause work stoppage or create delays Costs resulting from lost sales because demand cannot me met are difficult to determine Shortage costs have an inverse relationship to carrying costs

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Inventory Control Systems

1. Continuous Inventory Systems (fixed-orderquantity)
Constant amount ordered when inventory declines to predetermined level referred to as reorder point The order is placed for a fixed amount that minimizes the total inventory costs This amount is called economic order quantity Inventory level is continuously monitored Cost of maintaining a continual record

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Economic Order Quantity (EOQ) Models

In

a fixed-order-quantity system when inventory reaches a specific level, referred to as the reorder point, a fixed amount is ordered To determine how much to order in a continuous system the economic order quantity (EOQ) model is used The function of EOQ model is to determine the optimal order quantity that will minimize total inventory costs
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The Basic EOQ Model

The basic EOQ model is a formula for determining the optimal order size that minimizes the sum of carrying costs and ordering costs Assumptions: Demand is known with certainty and is constant over time No shortages are allowed Lead time for the receipt of orders is constant Order quantity is received all at once
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Inventory Order Cycle

Order quantity, Q Inventory Level

Demand rate

Reorder point, R

Lead time Order Order placed receipt

Lead time Order Order placed receipt

Time

EOQ is a continuous inventory system

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Inventory Control Systems

2.

Periodic Inventory System

Also known as fixed-time-period system Order placed for variable amount after fixed passage of time Advantage: Inventory level is not monitored at all during time intervals between orders Disadvantages: Less direct control Larger inventory levels Determine a new order quantity each time a periodic order is made
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The ABC Classification System

An

inventory classification system in which a small percentage of (A) items account for most of the inventory value In ABC analysis each class of inventory requires different levels of inventory control The higher the value of inventory, the tighter the control

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The ABC Classification System

Class

5 15 % of units 70 80 % of value
Class

30 % of units 15 % of value
Class

50 60 % of units 5 10 % of value
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Manufacturing Resource Planning (MRP II)

Computer-based system for planning, scheduling and controlling the materials , resources and supporting activities needed to meet the MPS MRP II is a closed loop system Consists of three major modules

1. 2. 3.

Material requirements planning, or MRP, Capacity planning, and Shop floor control

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Enterprise Resource Planning

Computer

software system that organizes and integrates all of the data and business functions of an organization through a single, central database ERP commonly runs as a client-server system Operates on a company-wide basis, not on plantbasis like MRP Modules in an ERP system include
Production and materials management Sales and marketing What is ERP II? Finance and accounting Human resources

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Example of ERP Use

Industrial

Engineering Faculty wants to buy a new Printer this reason Secretary gives a purchasing order by filling purchasing order forms

For

Next

slide shows how this purchasing request process flow was working before ERP systems

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New Printer Purchasing Process

1. Purchase order form for a new printer 2. Head of Department Confirmation- Faculty Head

3. Purchase order document sent to Account Office

4. Account Office Secretary sents the purchase order to the Responsibles 5. Purchase order- Responsible personal Confirmation 6. Purchasing department- Manager Confirmation 7. Transfer to Finance Department Secretary for processing 8. Finance Department Responsibles Confirmation 9. Transfer to Rectors Office

10. Rectors Secretary- Confirmation

11. Confirmation Transfer, to Purchase Department Secretary 12. Purchase Responsible personal commends with Purchase:
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Example: Before ERP Systems

Transfer to Accounting Office

Secretarys New printer application

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Example IE Faculty
Industrial

Engineering Faculty wants to buy a new HP Printer this reason Secretary gives a purchasing order using Online ERP systems

For

Next

slide shows the purchasing order process flow with ERP Systems
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After ERP Systems

SECRETARY REQUEST OF NEW HP PRINTER SAP SYSTEM ONLINE HEAD OF DEPARTMENT CONFIRMATION

CONFIRMATION

SAP SYSTEM ONLINE PURCHASEING MANAGER

FINANCIAL ACCOUNTING

SAP SYSTEM ONLINE PURCHASE RESPONSIBLE

SAP SYSTEM ONLINE FINANCE DEPARTMENT

CONFIRMATION

SAP SYSTEM ONLINE RECTORS OFFICE

CONFIRMATION

PURCHASE OF NEW HP PRINTER

SAP SYSTEM ONLINE PURCHASE DEPARTMENT

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Companies After ERP Systems

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In this real case there the benefits of the ERP systems

Online

Data Flow decreases the process time Fast & Online Confirmation Less Paperwork No need for folder storage Database Security Less Employee needed Easy Financial Management Better Inventory Management
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Usesful SAP Modules for Engineers

MM-

Material Management

Better

Procurement Handling Orginized Inventory Management Easy Purchase Organization Faster Storage Location
PM

Plant Maintenance
Maintenance

Order Management Equipment and Technical Objects Coordination Preventive Maintenance Workflow Scenarios Work Clearance Management

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The End

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