PPC RKRczs

Production planning and control

Contents
SYLLABUS......................................................................................... 3 MODULE-I ......................................................................................... 4

1.1 Introduction to production planning and control............................. 4 1.1.1 Objectives of PPC ............................................................................. 5 1.2 Factors affecting PPC ...................................................................... 7 1.3 Phases in PPC .................................................................................. 7 1.3.1 Planning phase ................................................................................ 8 1.3.2 Action phase .................................................................................... 8 1.3.3 Control phase .................................................................................. 9 1.4 Functions of PPC ............................................................................. 9 1.5 Basic elements of PPC ................................................................... 11 1.5.1 Planning ........................................................................................ 11 1.5.2 Routing ......................................................................................... 11 1.5.3 Scheduling .................................................................................... 12 1.5.4 Dispatching ................................................................................... 12 1.5.5 Expediting ..................................................................................... 12 Steps in forecasting ............................................................................... 13 Forecasting methods .............................................................................. 13 Trend projection method/Technological forecasting .................................... 16 MODULE-II ...................................................................................... 23 2.1 Production planning ...................................................................... 23 2.2 Process planning ........................................................................... 24 2.3 Capacity planning ......................................................................... 26 2.4 Aggregate planning ........................................................................ 27 2.5 Master production scheduling (MPS) .............................................. 28 2.6 Material Requirement Planning (MRP) ........................................... 29 2.7 BoM ............................................................................................... 30 2.8 Product structure .......................................................................... 30 2.9 Production control ........................................................................ 31 2.10 Routing ......................................................................................... 34 MODULE III ................................................................................... 36 3.1 Sequencing .................................................................................... 36 Methods of sequencing ........................................................................... 36 3.2 Assumptions in sequencing ........................................................... 36 3.3 Procedure for two machines and n Jobs ....................................... 37 3.4 Procedure for three Machines and n Jobs .................................... 39 3.5 Procedure for m Machines and n Jobs........................................ 40 MODULE -IV .................................................................................... 42 4.1 Materials management .................................................................. 42 4.2 Functions of materials management .............................................. 43 4.3 Costs involved in the management of materials ............................ 44 4.4 Components of integrated material management .......................... 45 4.4.1 Materials planning ......................................................................... 45
4.4.2 Inventory control ........................................................................... 45 4.4.3 Purchase management................................................................... 45 4.4.4 Stores management ....................................................................... 45 4.5 Types of inventory control ............................................................ 46 4.5.1 Two-bin system ............................................................................. 46 4.5.2 Maximum-Minimum System .......................................................... 46 4.5.3 Economic Order Quantity (EOQ) system......................................... 46 4.5.4 Fixed Order Quantity and Variable Cycle System (Q system) .......... 46 4.5.6 Replenishment System or S,s policy ............................................... 47 4.5.7 Ordering when quantity are available ............................................. 48 4.7 Supply chain management ............................................................ 48 Supply chain design ................................................................................... 49 Bullwhip Effect....................................................................................... 50 Methods of enhancing SCM .................................................................... 50 Role of inventory in SCM ............................................................................ 52 SCM in ISO 9000:2000 .............................................................................. 52 Stages in supply chain ............................................................................... 52 Vendor rating ............................................................................................. 52 Open tender ............................................................................................... 52 4.8 ERP ............................................................................................... 52 4.9 Role of I.T in materials management ............................................. 52 MODULE- V ..................................................................................... 53 Algorithms used for scheduling .............................................................. 53 5.2.1 Aim of scheduling .......................................................................... 53 5.2.2 Reasons for scheduling .................................................................. 53 5.2.3 Master scheduling or aggregate scheduling .................................... 53 5.4 Estimating shop loads ................................................................... 53 5.5 Short term scheduling ................................................................... 53 5.6 Mathematical loading and scheduling ............................................ 53 5.7 Dispatching ................................................................................... 53 Steps involved progress control .................................................................. 53 Charts used in progress reporting .............................................................. 53 5.1 Network analysis using P.E.R.T and C.P.M ..................................... 54 5.1.1 Critical Path Method (C.P.M) .......................................................... 58 5.1.2 Programme Evaluation Review Technique (PERT) ........................... 60 Kanban................................................................................................... 66
Syllabus
M 803-PRODUCTION PLANNING AND CONTROL Module 1 Introduction to PPC: need for PPC, effect, advantages, functions and problems of PPC. Forecasting: methods of sales forecasting-forecasting for new productsforecasting for established products-time series analysis for sale forecasting long term forecasting methods of estimating Sales trend- problems- correlation analysis. Module 2 Production planning: objectives-characteristics-process planning. Capacity planning- factors affecting-Master production scheduling-material requirement planning BOM and product structure. Production control: objectives- production control systems- principle and procedure of production Control. Routing: objectives- procedure route sheets. Module 3 Sequencing assumptions: solution of sequencing problems-processing n jobs through two machines Processing n jobs through three machines processing n jobs through m machines processing two Jobs through m machines-problems Module 4 Materials management: Components of integrated material management Purchasing management- stores management. Supply chain management ERPRole of I.T. Module 5 Loading and scheduling: aim- reasons for scheduling- master scheduling or aggregate scheduling Estimating shop loads- short term scheduling mathematical loading and scheduling- problemsScheduling through PERT / CPM problems. Dispatching- duties- procedure- rules. Follow up and reporting- types-report preparation and presentation.
Module-I
1.1 Introduction to production planning and control
Inputs Transformation process Production is the Outputs Labour sequence of technical Product planning Material Goods and Process planning processes requiring either Equipment Services Production control directly or indirectly the Capital Maintenance Management mental and physical skill of Feed back craftsman and consists of Inventory levels changing the shape, size and Sales volume properties of materials, and Labour efficiency ultimately converting them Production system into useful articles. Some examples of production are manufacturing custom-made products like constructing flats, manufacturing standardized products like, car, motor cycle, television, etc. Production system of an organization is that part, which produces products of that organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. A simplified production system is shown in the figure.
Production planning is a pre-production activity. Production planning may be defined as the technique of foreseeing every step in a long series of separate operations, each step to be taken at the right time and in the right place and each operation to be performed in maximum efficiency. It helps entrepreneur to work out the quantity of material manpower, machine and money requires for producing predetermined level of output in given period of time. Production control constantly monitors and regulates the progress of execution of the tasks in the manufacturing process from the beginning to the end. Production control analyzes the variances between actual achievement and the set targets/standards. Production control process takes corrective action in case of shortfalls in achievements when compared with the set targets/standards. Planning and control are interrelated and interdependent. Planning is meaningless unless control action is taken to ensure the success of the plan. Control also provides information feedback which is helpful in modifying the existing plans and in making new plans. Similarly, control is dependent on planning as the standards of performance are laid down under planning. PPC function essentially consists of planning production in a manufacturing organization before the actual production activities start and exercising control over activities to ensure mat the planned production is realized In terms of quantity, quality, delivery schedule and cost of production. Once the entrepreneur has taken the decisions regarding the product design and production processes and system, his next task is to take steps for production planning and control, as this function is essentially required for efficient and economical production. An effective PPC system is critical to the success of any company. Production planning and control (PPC) is most essential for any organization. It consists of the planning of routing, scheduling, dispatching, inspection, and coordination, control of materials, methods, machines, tools and operating times etc. The ultimate objective of PPC is to organize the supply and movement of materials and labour, machines utilization and related activities, in order to bring about the desired manufacturing results in terms of quality, quantity, time and place.
Production planning and control 1.1.1 Objectives of PPC
The ultimate objective of production planning and control, like that of all other manufacturing controls, is to contribute to the profits of the enterprise. Specific objectives of production planning and control are to establish routes and schedules for work that will ensure the optimum utilization of materials, workers, and machines and to provide the means for ensuring the operation of the plant in accordance with these plans. PPC ensure coordinated flow of work so that the required numbers of products are manufactured in the required quantity and of required quality at the required time at optimum efficiency. Important objectives of PPC are discussed below. 1. Continuous flow of production - It tries to achieve as smooth and continuous production by eliminating successfully all sorts of bottlenecks in the process of production through well-planned routing and scheduling requirements relating to production work. Planned requirements of resources - It seeks to ensure the availability of all the inputs i.e. materials, machines, tools, equipment and manpower in the required quantity, of the required quality and at the required time so that desired targets of production may be achieved. Coordinated work schedules - The production activities planned and carried out in a manufacturing organization as per the master schedule. The production planning and control tries to ensure that the schedules to be issued to the various departments/units/supervisors are in co-ordination with the master schedule. Optimum inventory - It aims at minimum investment in inventories consistent with continuous flow of production. Increased productivity - It aims at increased productivity by increasing efficiency and by being economical. This is achieved by optimizing the use of productive resources and eliminating wastage and spoilage. Customer satisfaction - It also aims at satisfying customers requirements by producing the items as per the specifications or desires of the customers. It seeks to ensure delivery of products on time by coordinating the production operations with customers orders. Production and employment stabilization - Production planning and control aims at ensuring production and employment levels that are relatively stable and consistent with the quantity of sales. Evaluation of performance - The process of production planning and control is expected to keep a constant check on operations by judging the performance of various individuals and workshops and taking suitable corrective measures if there is
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Importance of production planning and control The system of production planning and control serves as the nervous system of a plant. It is a coordinating agency which coordinates the activities of engineering, purchasing, production, selling and stock control departments. An efficient system of production planning and control helps in providing better and more economic goods to customers at lower investment. It is essential in all plants irrespective of their nature and size. The principal advantages of production planning and control are summarized below.
Production planning and control 1.
Better service to customers - PPC, through proper scheduling and expediting of work, helps in providing better services to customers is terms of better quality of goods at reasonable prices as per promised delivery dates. Delivery in time and proper quality, both help in winning the confidence of customers, improving relations with customers and promoting profitable repeat orders. Fewer rush orders - In an organization, where there is effective system of PPC, production, operations move smoothly as per original planning and matching with the promised delivery dates. Consequently, there will be fewer rush orders in the plant and less overtime than, in the same industry, without adequate PPC. Better control of inventory - A sound system of PPC helps in maintaining inventory at proper levels and, thereby, minimizing investment in inventory. It requires lower inventory of work-in-progress and less finished stock to give efficient service to customers. It also helps in exercising better control over rawmaterial inventory, which contributes to more effective purchasing. More effective use of equipment - An efficient system of PPC makes for the most effective use of equipment. It provides information to the management on regular basis pertaining to the present position of all orders in process, equipment and personnel requirements for next few weeks. The workers can be communicated well in advance if any retrenchment, lay-offs, transfer, etc., is likely to come about. Also, unnecessary purchases of equipment and materials can be avoided. Thus, it is possible to ensure proper utilization of equipment and other resources. Reduced idle time - PPC helps in reducing idle time i.e., loss of time by workers waiting for materials and other facilities; because PPC ensures that material and other facilities are available to the workers in time as per the production schedule. Consequently, less man-hour is lost. Improved plant morale - An effective system of PPC control co-ordinates the activities of all the departments involved in the production activity. It ensures even flow of work and avoids rush orders. It maintains healthy working conditions in the plant thus, there is improve plant morale as a by-product. Good public image - A proper system of PPC is helpful in keeping systematized operations in an organization. Such an organization is in a position to meet its orders in time to the satisfaction of its customers. Customers satisfaction leads to increased sales, increased profits, and, ultimately, good public image. Lower capital requirements - Under a sound system of PPC, everything relating to production is planned well in advance of operations. Where, when and what is required in the form of input is known before the actual production. Inputs are made available as per schedule which ensures even flow of production without any bottlenecks. Facilities are used more effectively and inventory levels are kept as per schedule. Thus, PPC helps, in minimizing capital investment.
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Limitation of PPC 1. 2. 3. 4. PPC functions are based on certain assumptions or forecast of customer demand, plant capacity which is not always reliable. Employees may resist changes in production. Production planning process is time consuming. Production planning is difficult when the environmental factors change rapidly, such as technology changes, government policies, customers taste etc.
Production planning and control 1.2 Factors affecting PPC
Production planning and control varies from company to company. Three major factors that affect the application of production planning and control to manufacturing are discussed below. 1. Type of product PPC depends on the complexity of the product and not what the product is; this may in turn relate to the market being served. Production control procedures are much more complex and involve many more records in the manufacture of large steam turbine generator sets or locomotives to customer orders then in the production of large quantities of a standard product involving only a few component parts, such as electric blankets, steam irons, or similar small appliances. Type of manufacturing This is probably the most influential factor in the control situation. For a large continuous manufacturing plant producing a standard product, requires less complicated process planning and vice versa. Size of the plant/Volume of production The amount and intensity of production planning is determined by volume of production. Production planning is expected to reduce manufacturing costs. Planning of production incase of custom job order is limited to planning of raw materials and determination of work centers. In high volume of production, enormous amount of effort is needed for designing the product and the manufacturing process. Phases in PPC
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PPC has three phases viz., planning phase, action phase and control phase. They are discussed below.
Production planning and control 1.3.1 Planning phase
Planning phase has two categories of planning namely prior Production planning planning and active planning. Prior planning means pre-production planning. This includes all the planning efforts which are taking Aggregate production place prior to the active planning such as demand forecasting, planning product planning and development, aggregate planning, Master Production Scheduling, order writing, Material Requirement Master Production Planning. Forecasting is an estimate of demand which will happen Scheduling(MPS) in future. Product development and design is the process of developing a new product with all the features which are essential Material Requirement Planning(MRP) for effective use in the field and designing it accordingly. Aggregate Sequence of operations planning is process of planning the overall production. Aggregate in planning phase planning is considered to be intermediate-term (as opposed to longor short-term) in nature. Aggregate plans form the basis to develop all the production plans. Aggregate planning does not distinguish among sizes, colors, features, and so forth. For example, with automobile manufacturing, aggregate planning would consider the total number of cars planned for not the individual models, colors, or options. Master scheduling is the next level exercise following the aggregate planning which aims to find out the product-wise planning. Disaggregation of aggregate planning results is used in the development of the MPS. Order writing is nothing but giving authority to one or more persons to undertake a particular job. Material requirements planning is a technique for determining the quantity and timing for the acquisition of dependent items (if exist) needed to the MPS. Active planning means the actual production planning which includes various activities directly related to the production at micro level immediately following the prior planning. The modules of active planning are process planning and routing, materials planning, tools planning, loading, scheduling etc. Process planning or routing is a complete determination of the specific technological process steps and their sequence to produce products at the desired quality, quantity and cost. It determines the method of manufacturing a product, selects the tools and equipments, analyzes how the manufacturing of the product will fit into the facilities. Materials planning is the process which determines the requirements of various raw materials/subassemblies by considering various factors such as carrying cost, ordering cost etc. Tools planning determine the requirements of various tools by taking process specifications (surface finish, length of the job, overall depth of cut etc.), material specifications (type of material used, hardness of the material, shape and size of the material etc.) and equipment specifications (speed range, feed range, depth of cut range etc.). Loading is the process of assigning jobs to several machines such that there is a load balance among the machines. Scheduling determines when and in what sequence the work will be carried out. Scheduling fixes the starting as well as the finishing time for each job. 1.3.2 Action phase Action phase has the major step of dispatching. Dispatching is the transition from planning phase to action phase. In this phase, the worker is ordered to start manufacturing the product. The manufacture of product involves moving raw materials/subassemblies to the main line. This is done by a well designed materials handling system. So, proper instruction is given to the materials handling facilities for major movements of materials.
Production planning and control 1.3.3 Control phase
The control phase has the following two major modules viz., progress reporting and corrective action. In progress reporting, the data regarding what is happening with the job is collected. Also, it helps to make comparison with the present level of performance. The various data pertaining to materials rejection, process variations, equipment failures, operator efficiency, operator absenteeism, tool life, etc., are collected and analyzed for the purpose of progress reporting. These data are used for performing variance analysis which would help us to identify critical areas that deserve immediate attention for corrective actions. The tasks under corrective action primarily make provisions for an unexpected event. Some examples of corrective actions are creating schedule flexibility, schedule modifications, capacity modifications, make or buy decision, and so on. Expediting means taking action if the progress reporting indicates deviations from the originally set targets. Re-planning of the whole affair becomes essential in case the expediting fails to bring the deviated plan to its right path. 1.4 Functions of PPC
The functions of PPC depend upon the size and nature of production of a firm. The functions of PPC can be explained with the following parameters. 1. Materials - Raw materials, finished parts and bought out components should be made available in required quantities and at required time to ensure the correct start and end for each operation resulting in uninterrupted production. The function includes the specification of materials (quality and quantity) delivery dates, standardization, procurement and make or buy decisions. Machines and equipment - This function is related with the detailed analysis of available production facilities, equipment down time, maintenance policy procedure and schedules. Concerned with economy of jigs and fixtures, equipment availability. Thus, the duties include the analysis of facilities and making their availability with minimum down time because of breakdowns. Methods - This function is concerned with the analysis of alternatives and selection of the best method with due consideration to constraints imposed. Developing specifications for processes is an important aspect of PPC and determination of sequence of operations. Process planning (Routing) - It is concerned with selection of path or route which the raw material should follow to get transformed into finished product. The duties include a) Fixation of path of travel giving due consideration to layout. b) Breaking down of operations to define each operation in detail. c) Deciding the set up time and process time for each operation. 5. Estimating - Once the overall method and sequence of operations is fixed and process sheet for each operation is available, then the operations times are estimated. This function is carried out using extensive analysis of operations along with methods and routing and a standard time for operation are established using work measurement techniques.
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6. Loading and scheduling - Loading determines who will do the work and scheduling determines when it shall be done. Scheduling determines when an operation is to be performed, or when work is to be completed.
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Machines have to be loaded according to their capability to perform the given task and according to their capacity. Thus the duties include a) b) c) Loading, the machines as per their capability and capacity. Determining the start and completion times for each operation. To coordinate with sales department regarding delivery schedules.
7. Dispatching - Dispatching involves issue of production orders for starting the operations. It authorizes the start of production activities by releasing materials, components, tools, fixtures and instruction sheets to the operator. The activities involved area) b) c) d) e) To assign definite work to definite machines, work centres and men. To issue required materials from stores. To issue jigs, fixtures and make them available at correct point of use. Release necessary work orders for the timely start of operations. To record start and finish time of each job on each machine or by each man.
8. Expediting - Expediting is a process of tracking a jobs progress and taking special actions to move it through the facility. In tracking a jobs progress, special action may be needed to keep the job moving through the facility on time. Manufacturing or service operations disruptions-equipments breakdowns, unavailable materials, last-minute priority changes, require managers to deviate from plans and schedules and expedite an important job on a special handling basis. Expediting spots delays or deviations from the production plans ensuring that the productive operations are taking place in accordance with the plans. It helps to reveal detects in routing and scheduling, misunderstanding of orders and instruction, under loading or overloading of work etc. This is the control tool that keeps a close observation on the progress of the work. This is a logical step after dispatching which is also called as follow-up. The duties include a) b) c) Identification of bottlenecks and delays and interruptions because of which the production schedule may be disrupted. To devise action plans (remedies) for correcting the errors. To see that production rate is in line with schedule.
9. Inspection - It is a major control tool. Though the aspects of quality control are the separate function, this is of very much important to PPC both for the execution of the current plans and its scope for future planning. This forms the basis for knowing the limitations with respects to methods, processes, etc., which is very much useful for evaluation phase. 10. Evaluation - This stage though neglected is a crucial to the improvement of productive efficiency. A thorough analysis of all the factors influencing the production planning and control helps to identify the weak spots and the corrective action. 11. Corrective measures - Corrective action may involve any of those activities of adjusting the route, rescheduling of work changing the workloads, repairs and maintenance of machinery or equipment, control over inventories of the cause of deviation is the poor performance of the employees. Certain personnel decisions like training, transfer, demotion etc. may have to be taken. Alternate methods may be suggested to handle peak loads.
Production planning and control 1.5 Basic elements of PPC
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Production planning and control encompasses the following elements. 1.5.1 Planning The first important step in production planning and control is concerned with the careful preparation of production plans. Production plans determine what will be produced and where, at what type, by whom, and how. The planning function starts once the task to be accomplished is specified, with the analysis of four M's, i.e., machines, methods, materials and manpower. This is followed by process planning (routing). Both short-term and long-term planning is considered. Estimating determines the duration of each operation to be carried out. Scheduling determines when an operation is to be performed, or when work is to be completed. For the detailed planning of operations, the relevant information may be obtained from several sources in the enterprise. Information about quantity and quality of products to be manufactured may be obtained from customers' orders and the sales budget, and information about production facilities may be obtained from the management and the engineering department. Thus, the planning function formulates production plans, and translates them into requirements for men, machinery and materials. Production planning helps to avoid randomness in production, provide regular and steady flow of production activities, utilize production facilities to its maximum by minimizing operating costs and meeting delivery schedules; coordinating various departments, and above all, providing the basis for control in the enterprise. 1.5.2 Routing Routing involves the determination of the path (i.e., route) of movement of raw materials through various machines and operations in the factory. To find this path, emphasis is placed on determining operating data, which usually includes planning of 'where' and 'by whom' work should be done, the determinations of the path that work shall follow, and the necessary sequence of operations. These operating data are contained in the standard process sheet which helps in making out a routing in the standard process sheet which helps in making out a routing chart showing the sequence of operations and the machines to be used. If the machine loan chart indicates the nonavailability of certain machines, alternate routings may also be included on the routing chart. The most efficient routing may have to be compromised with the availability of the machines at a particular time. In other words, "routing establishes the operations, their path and sequence, and the proper class of machines and personnel required for these operations." From the above, it can be inferred that routing is one of the highly essential elements and prime considerations of production control because many production control functions are closely related processes and are dependent on routing functions.
Production planning and control 1.5.3 Scheduling
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Scheduling is planning the time element of production - i.e., prior determination of "when work is to be done". It consists of the starting and completion times for the various operations to be performed. In other words, scheduling function determines when an operation is to be performed, or when work is to be completed. Scheduling is certainly a necessity in a large setup which produces a variety of products with numerous components. The time within which products must be manufactured forms an important element in production control. Time and motion study helps standardization of methods of work surrounding the manufacturing processes. 1.5.4 Dispatching Dispatching is the part of production control that translates the paper - work into actual production. It is the group that coordinates and translates planning into actual production. Dispatching function proceeds in accordance with the details worked out under routing and scheduling functions. As such, dispatching sees to it that the material is moved to the correct work place, that tools are ready at the correct place for the particular operations that the work is moving according to routing instructions. Dispatching carries out the physical work as suggested by scheduling. Thus, dispatching implies the issuance or work orders. These work orders represent authority to produce. These orders contain the following information: a) b) c) d) e) f) g) The name of the product The name of the part to be produced, sub-assembly or final assembly; The order number; The quantity to be produced; Descriptions and numbers of the operations required and their sequence,. The tools required for particular operation; and Machines involved in each operation and starting dates for the operations.
1.5.5 Expediting Expedition or follow-up is the last stage in the process of production control. This function is designed to keep track of the work effort. The aim is to ensure that what is intended and planned is being implemented. Expediting consists in reporting production data and investigating variances from predetermined time schedules. The main idea behind expedition is to see that promise is backed up by performance. It includes the following functions. 1. 2. Check-up to ensure that all materials, tools, component parts are available at all work centers in specified quantities for carrying out manufacturing operations. Check-up on the status of work-in-progress and completed work at various work stations. This includes collecting information relating to the starting and completion time and date of work completed, status of work-in-progress, position and movements of materials and inspection results. Preparation of progress records and keeping the control boards up-to-date. Reporting to manufacturing management on all significant deviations so that corrective action may be taken.
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Thus production planning and control by completing the above discussed phases ensures the manufacturing of goods of right quality, quantity and at competitive market rates. One thing must be borne in mind that production planning and control is a neverending process, and its various functions are inter-dependent.
Production planning and control Steps in forecasting The general steps in the forecasting process are as follows. 1. 2. 3.
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Identify the need for forecasting Select the period of forecast. Select the indicators relevant to the need. Depending upon the product or product line, one or more of the following may be identified : a) Industry sales. b) Competitors (collective) present and project capacity. c) Economic development etc. Select the forecast model to be used. For this, knowledge of various forecasting models, in which situations these are applicable, how reliable each one of them is ; what type of data is required. On these considerations ; one or more models can be selected. Data collection - With reference to various indicators indentified-collect data from various appropriate sources-data which is compatible with the model(s) selected in step. Data should also go back that much in past, which meets the requirements of the model. Prepare forecast - Apply the model using the data collected and calculate the value of the forecast. Evaluate - The forecast obtained through any of the model should not be used, as it is, blindly. It should be evaluated in terms of confidence interval'-usually all good forecast models have methods of calculating upper value and the lower value within which the given forecast is expected to remain with certain specified level of probability. It can also be evaluated from logical point of view whether the value obtained in logically feasible. It can also be evaluated against some related variable or phenomenon. Thus, it is possible, some times advisable to modify the statistically forecasted' value based on evaluation.
Purpose of long term forecasting 1. 2. 3. To plan for the production or expansion of existing unit to meet the demand. To plan for long term financial requirements. To train the personnel so that manpower requirement can be met in.
Forecasting methods Organization can use different methods of forecasting available to analyze the past records and future trends. To use the proper method of forecasting, the experience and good judgment is necessary about market and trend of business. This is to be supplemented with the scientific and mathematical models of forecasting techniques, which gives the proper results of statistical data. The various methods used to forecast sales trend are given below. 1. Moving average method a) b) c) Simple average technique n-period moving average technique Weighted n-period moving average technique
2. Exponential smoothing method 3. Least square method
Production planning and control Simple average technique
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The simple arithmetic average of a set of observed values of sales for n-period is calculated and it is used as forecast for the n+1th period in the immediate future. The average demand for n period is = Davg D + D 2 + D3 +...+D n Davg = 1 n Forecast for n+1 period is Fn+1 = Davg In this method, different weights are given to different periods as compared to simple moving average where equal weights are given to all the periods.
Dn+1 = Weighted n-period moving average Dn+1 = W1D1 + W2 D2 + ......+ Wn Dn Or Dn+1 =

Problems : 1. The monthly sales of scooters in an automobile shop are given below for one year. Find the sales forecast for the first three months in next year using, a) Simple average method, also find average and standard deviation. b) Three months, four months and five months moving average. c) Compare them and plot the values.
k=n k=1
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Exponential smoothing The exponential smoothing method is a sophisticated weighted moving average method that calculates the average of a time series by giving recent demands more weight than earlier demands. It is the most frequently used formal forecasting methods because of its simplicity and the small amount of data needed to support it. In the simple exponential smoothing method, only forecasted and actual demand of current month is necessary to forecast the demand for next period. In simple exponential smoothening, the forecast Ft+1 is made up of the last period forecast Ft plus a portion, '' multiplied by the difference between the last periods actual demand At and last period forecast Ft and is given by the equation given below.
Ft+1 = Ft + (A t - Ft ) where, Ft+1 = Forecasted demand for the next time period Ft = Forecasted demand for t th period = Weightage given (Smoothing constant)
A t = Actual demand for the t th period

Larger values of '' emphasize recent levels of demand and result in forecasts more responsive to changes in the underlying average. Smaller values of '' treat past demand more uniformly and result in more stable forecasts. Simple exponential smoothing yields only an average. Value of '' ranges from 0 to 1. An '' value that yields an approximately equivalent degree of smoothing as a moving average of n periods is:2 = n+1
Production planning and control Problems : 1.
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A firm uses simple exponential smoothing with = 0.1 to forecast demand. The forecast for the week of February was 500 units, whereas actual demand was 450 units. a) Forecast the demand for the next week. b) Continue forecasting through assuming that subsequent demands were 505, 516, 488, 467, 554 and 510 units.
Solution : Given forecast for the first week of February as 500 units and actual demand as 450 units. Forecast for the next time period are computed and are tabulated below.
Ft 500 495 496 498 497 494 500

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At 450 505 516 488 467 554 510
Ft+1 = Ft + (A t - Ft )
F1 = 500 + F2 = 495 + F3 = 496 + F4 = 498 + F5 = 497 + F6 = 494 + F7 = 500 +
0.1(450 - 500) 0.1(505 - 495) 0.1(516 - 496) 0.1(488 - 498) 0.1(467 - 497) 0.1(554 - 494) 0.1(510 - 500)
= 495 = 496 = 498 = 497 = 494 = 500 = 501
Given the weekly demand data, what are the exponential smoothing forecasts for periods 2-10 using =0.10. Assume F1=D1.
Week 1 2 3 4 5 6 7 8 9
Solution :
Demand 820 775 680 655 750 802 798 689 775
Ft+1 = Ft + (A t - Ft )
Week 1 2 3 4 5 6 7 8 9
Ft 820 820 815.50 801.95 787.26 783.53 785.38 786.64 776.88
At 820 775 680 655 750 802 798 689 775
F1 = 820 + 0.1(820 - 820) = 820 F2 = 820 + 0.1(775 - 820) = 815.50 F2 = 815.50 + 0.1(680 - 815.50) = 801.95 F4 = 801.95 + 0.1(655 - 801.95) = 787.26 F5 = 787.26 + 0.1(750 -787.26) = 783.53 F6 = 783.53 + 0.1(802 - 783.53) = 785.38 F7 = 785.38 + 0.1(798-785.38) = 786.64 F8 = 786.64+ 0.1(689 -786.64) = 776.88 F9 = 776.88 + 0.1(775 -776.88) =776.89
Production planning and control Least square method
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In this method, a trend of companys or industrys sales is obtained with the help of historical data relating to sales which are collected, observed or recorded at successive intervals of time. Such data is generally referred to as time series. The study may show that the sales sometimes are increasing and sometimes decreasing, but a general trend in the long run will be either upward or downward. It cannot be both ways. The sales forecasts with the help of this method are made on the assumption that the same trend will continue in the future. The method which is generally used in fitting the trend is the method of least squares as the sum of the square of the deviations of the various points from the line of best fit is minimum or least. It gives the equation of the line for which the sum of the squares of vertical distance between the actual values and the line values are at minimum. This line passes through the points in such a way that the sum of squares of the deviations of the actual points above and below the trend line is minimum. With this method a straight line trend is obtained and hence this method is also called as straight line trend method. This line is called line of best fit. By using the formula of regression equation of Y on X, the future sales are projected. In a simple regression analysis, the relationship between the dependent variable y and come independent variable x can be represented by a straight line
y = a + bx where b is the slop of the line and a is the y-intercept.
The values of the constant a and b are determined by the two simultaneous equations. y = Na + b x
xy
= a x + b x 2
These two equations are called as normal equations. By calculating the values of a and b, the sales can be forecasted for any future period. The values of a and b can be calculated by the equations
a=
y,
N
b=
xy y
2
Least square method when the sum of the deviations is not zero. For the straight line, y = a + bx , the constants a and b can be computed by solving the following the expression y x 2 ) ( x xy ) ( a= 2 ( N x2 ) ( x )
b= N xy ( x y )
( N x ) ( x)
2
Alternatively the values of the constant a and b can eb computed by solving the two equations .
y = Na + b x xy = a x + b x
Production planning and control Problems: 1.
17
From the following time series data of sale project the sales for the next three years. Year Sale (1000 unit) Solution : Years 2001 2002 2003 2004 2005 2006 2007 n=5 Time deviation from 2004 X 3 2 1 0 +1 +2 +3 X = 0 Sales in (1000 units) Y 80 90 92 83 94 99 92 Y = 630 Squares of time 9 4 1 0 1 4 9 X = 28 Product of time deviations and sales XY 240 180 92 0 +94 +198 +276 XY = + 56 X Y 2001 80 2002 90 2003 92 2004 83 2005 94 2006 99 2007 92
Regression equation of Y on X
y = a + bx
To find the values of a and b
a= b=
y y
N xy
2
= =
630 = 90 7 56 =2 28
Hence regression equation comes to Y = 90 + 2X. With the help of this equation we can project the trend values for the next three years, i.e., 2008, 2009 and 2010.
y2008 = 90 + 2(4) = 90 + 8 = 98 (000) units. y2009 = 90 + 2(5) = 90 + 10 = 100 (000) units. y2010 = 90 + 2(6) = 90+ 12= 102 (000) units.
Production planning and control 2.
18
An investigation into the demand for colour TV sets in 5 towns has resulted in the following data:
Population of the town (in lakhs) No of TV sets demanded (in thousands)
X Y
5 9
7 13
8 11
11 15
14 19
Fit a linear regression of Y on X and estimate the demand for CTV sets for two towns with a population of 10 lakhs and 20 lakhs. Solution : Population (in lakhs) X 5 7 8 11 14 X = 45 Sales of CTV (in thousands) Y 9 13 11 15 19 y = 67 Squares of the population X 25 49 64 121 196 X = 455 Product of population and sales of color TV XY 45 91 88 165 266 XY = 655
Regression equation of Y on X y = a + bx To find the values of a and b, the following two equations are to be solved. ...(1) y = Na + b x
xy
= a x + b x 2
...(2)
By putting the values we get

67 = 5a + 45b 655 = 45a + 455b ...(3) ...(4)
Multiplying equation (3) by 9 and putting it as equation (5), we get,

603 = 45a + 405b ...(5)
By deducting equation (5) from equation (4), we get 52 = 50b
b = 1.04 By putting the value of b in equation (3), we get 67 = 5 a + 45 1.04 a = 4.04
19
Now by putting the values of a, b and X (10 lakhs) in regression equation, we get,
y = a + bx y = 4.04 + 1.04 (10) y = 14.44 thousand CTV sets.
Similarly sales estimates for town having population of 20 lakhs, by putting the values of X, a and b in regression equation can be found as
y = 4.04 + 1.04 (20) = 4.04 + 20.80 = 24.84 thousands CTV sets.

3. With the help of following data project the trend of sales for the next five years: Years Sales (in lakhs) Solution : Regression equation of Y on X:
y = a + bx
2002 100
2003 110
2004 115
2005 120
2006 135
2007 140
Year
Time deviations from the middle of 2004 and 2005 assuring 5 years = 1 X
Sales (in lakh Rs.) Y 100 110 115 120 135 140
Squares of time deviation X2 25 9 1 1 9 25
Product of time deviation and sales XY -500 -330 -115 +120 +405 +700
2002 2003 2004 2005 2006 2007 N=6
-5 -3 -1 +1 +3 +5
X = 0
Y = 720
X = 70
XY = 280
To find the values of a and b
a= b=
y y
N xy
2
= =
720 = 120 6 280 =4 70
Sales forecast for the next years, i.e., 2008 to 2012
20
y2008 = 120 + 4 (7) = 120 + 28 = Rs. 148 lakhs y2009 =120 + 4 (9) = 120 + 36 = Rs. 156 lakhs y2010 = 120 + 4 (11) = 120 + 44 = Rs. 164 lakhs. y2011 =120 + 4 (13) = 120 + 52 = Rs. 172 lakhs. y2012 = 120 + 4 (15) = 120 + 60 = Rs. 180 lakhs.
4. There exists a relationship between the expenditure on research and the annual profit. The details of the expenditure for the last six years is given below. Estimate the profit when the expenditure is 6 units
Year 2001 2002 2003 2004 2005 2006 2007
Expenditure for research (x) 2 3 5 4 11 5 6
Annual Profit (y) 20 25 34 30 40 31 ?
(One unit corresponds to 1 Crore Rs.) Solution :
Year 2001 2002 2003 2004 2005 2006 Total

x=
Expenditure for research (x) 2 3 5 4 11 5 30
Annual Profit 20 25 34 30 40 31 180
xy 40 75 170 120 440 155 1000
x 4 9 25 16 121 25 200
30 180 = 5 and y = = 30 6 6 The values a and b is computed as follows: for a linear regression equation
y = a + bx

b= b= N xy ( x y )
21
( N x ) ( x)
2
1000 6 5 30 1000 900 = =2 200 6 5 5 200 50 y = a + bx
y = a + bx a = y bx = 30 2 5 = 20
Thus, the model is, y = 20 + 2 x . The profit when the expenditure is 6 units is y = 20 + 2 6 = 32 units of Rs.
5.
The computer sales of a company for last 6 years are given below. Calculate the forecast for sale of computers for all seven years using Simple exponential smoothing using for 2, 4 and 5 months and least square method. Year 1996 1997 1998 1999 2000 2001 Sales of computers 128 236 354 581 862 1055
Solution : a) Simple exponential smoothing 2 2 2 For 'n' = 2, = = = 0.66, for 'n' = 4, = = 0.4, and for 'n' = 5, = 0.33 n+1 2+1 4+1
Ft 128.0 128.0 199.3 301.4 485.9 734.1

b)
At 128.0 236.0 354.0 581.0 862.0 1055.0
Ft+1 = Ft + (A t - Ft ) '' =0.66 '' =0.4 '' =0.33
F1 = 128+ 0.66(128-128) = 128 F2 = 128+ 0.66(236-128) = 199.28 F3 = 199+ 0.66(354-199) = 301.40 F4 = 301.4 +0.66(581-301.4) = 485.93 F5 = 485.9+ 0.66(862-485.9) = 734.14 F6 = 734.1+ 0.66(1055-734.1) = 945.91
128.0 221.3 333.0 543.0 810.9 1011.4
128.0 206.6 311.8 504.8 759.5 967.5
Least square method Year 1996 X 3 Y 128 X2 9 XY 384
Production planning and control 1997 1998 1999 2000 2001 2 1 +1 +2 +3 236 354 581 862 1055 4 1 1 4 9 472 354 581 1724 3165
22
X = 0
y = a + bx 3216 = 536 and b = n 6 Straight line fit is y = 536 + 152 x a =
Y = 3216
X2 = 28 XY = 4260
y =
xy
2
4260 = 152 28
Forecast for 2002 is = 536 + 152 4 = 536 + 608 = 1144
Production planning and control 2.1 Production planning
23
Module-II
Objectives of production planning Production planning means planning of production. Planning demands a careful and exhaustive study of coordinated and related activities which are necessarily preformed by host of different departmental groups. It is a powerful tool in industrial management. The broad objective of production planning are To schedule the operation of parts In correct sequence to a particular periods.
To achieve this it is necessary to Determine the expected capacity of each work centre Allocate the proportion of this capacity to each broad category of manufacture Prepare sequential load statement for each major product Keep a record of the expected capacity of each work centre Convert the above to a visual presentation of the load and the capacity to meet it.
Characteristics of effective production planning 1. 2. 3. 4. 5. 6. It should embrace well defined objectives. It should not be complicated, rather it should display simplicity and feasibility It should not have any week link. It should be coupled with exacting managerial skill. It should make use of accurate data and should be based on such It should predetermine Norms or standards, which act as a standard yard stick for measuring and comparing the actual results obtained.
Production planning and control 2.2 Process planning

PRODUCT PLANNING Product development Product final design
24
Process planning is defined as the systematic determination of methods by which a product is to be PRODUCT DESIGN manufactured economically and competitively. It consists of Workstation selection selecting the proper machines, determining the sequence of Operation design operations, specifying the inspection stages, and tools, jigs and fixtures such that the product can be manufactured as PROCESS PLANNING per the required specification. The detailed process planning is Framework for process engineering done at each component level. The sequence of operations is determined by the nature of the product, the materials used, the quantities to be produced and the existing physical layout of the plant. The framework of process engineering is shown in the figure. Basic types of process are listed below. 1. 2. 3. 4. Synthetic Assembly of component parts of products eg. Automobile Analytical - Disintegration of raw materials into various elements. eg. Conversion of crude petroleum into elements such as kerosene, refined petroleum etc. Conditioning-Raw materials undergo change in form of physical properties. eg. Leather tanning industries, plastic plants etc. Extractive separation raw from their sources. Obtaining iron from its ore, silver and gold from earth etc.
The purpose of process planning is to determine and describe the best process for each job so that, 1. 2. 3. Specific requirements are established for which machines, tools and others equipment can be designed or selected. The efforts of all engaged in manufacturing the product are coordinated. A guide is furnished to show the best way to use the facilities.
Factors influencing process planning 1. 2. 3. 4. 5. 6. 7. Assembly and detail drawings of product. Specifications of the finished products and service functions. Volume and rate of output. Information regarding plant facilities. Delivery dates for components or products. Accuracy of machines and accuracy requirements of components or parts. The skill and expertise of manpower.
Steps in process planning The needs of the customers are translated into technical specification and the product is designed considering the functional, operational, quality and reliability and cost consideration. The output of the design will be in the form of assembly and part drawings and BoM. This serves as the input to process design. Various steps involved in process planning are explained below. 1. 2. 3. 4. 5. Detailed study of the component drawings to identify the features that influence process selection, machine selection, inspection stages and tooling required. Next step is the selection of machines for operation. Estimate the operation time. Find the total time to complete the job taking into account the loading and unloading times, handling times, and other allowances. Represent the details on the process sheet.
Production planning and control Advantages of process planning 1. 2. 3. 4. Supervisors are free from detailed task of process planning The net result of process planning is more effective and efficient operation It facilities co-ordination among various agencies. It helps in process improvement.
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Production planning and control 2.3 Capacity planning
26
Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. Capacity is the maximum amount of work that an organization is capable of completing in a given period. The capacity of a facility of an industrial unit is planned keeping in mind the current resources and future growth and expansion. The capacity is measured in terms of units of the product per year. For service industries like hotels, hospitals or airlines, the capacity expression becomes the number of rooms, beds or seats occupied per year. Factors affecting capacity planning Capacity planning is relevant in both the long term and the short term. However, there are different issues at stake for each. Over the long term, capacity planning relates primarily to strategic issues involving the firm's major production facilities. In addition, long-term capacity issues are interrelated with location decisions. In the short term, capacity planning concerns issues of scheduling, labor shifts, and balancing resource capacities. A number of factors can affect capacity planning such as number of workers, ability of workers, number of machines, waste, scrap, defects, errors, productivity, suppliers, government regulations, and preventive maintenance. Major factors are listed below. 1. 2. 3. 4. 5. 6. 7. 8. 9. Market demand for a product or service. The amount of capital that can be invested. Degree of automation desired. Level of integration (i.e. vertical integration). Type of technology selected. Dynamic nature of all factors affecting determination of plant capacity, viz, changes in the product design, process technology, market conditions, and product life cycle, etc. Difficulty in forecasting future demand and future technology. Obsolescence of product and technology over a period of time. Flexibility for capacity additions.
Determination of plant capacity or measures of capacity The capacity of the manufacturing unit can be expressed in number of units of output per period. In some situations measuring capacity is more complicated when they manufacture multiple products. In such situations, the capacity is expressed as man-hours or machine hours. The relationship between capacity and output is shown in the figure.
Design capacity Reduced by product mix, long range effects, market conditions System capacity Reduced by actual demand, inefficiency of workers, machine inefficiencies etc.
Actual output Design capacity - Design capacity is the total Capacity and output relationship achievable capacity under perfect conditions. For example, a cement factory may be designed to produce 200 tons per day. Normally, perfect conditions are not achievable, and few organizations operate for any period of time at design capacity. Furthermore, operating at designed capacity can cause rapid wear and breakdowns. Operating at design capacity essentially means operating at the organization`s productive limits.
27
System capacity or Effective capacity- In practice, it may not be possible to achieve production to the extent of design capacity mainly because of mismatch between required resources and available resources, limitation of product mix, quality specification, and breakdowns. The maximum output of a specific product or product mix that the system of workers and equipments is capable of producing as an integrated whole is called system capacity. This may be less than that of the design capacity. The actual output may be even less than the system capacity since it is affected by short-range factors such as actual demand, equipment breakdowns, and personal absenteeism or productivity. The system efficiency is expressed as ratio of actual measured output to the system capacity.
Efficiency =
Actual output Effective capacity
Advantages of capacity planning Capacity planning is necessary when an organization decides to increase its production or introduce new products into the market. Once capacity is evaluated and a need for new or expanded facilities is determined, decisions regarding the facility location and process technology selection are taken. Major benefits of capacity planning are discussed below. 1. 2. It provides the output required to meet product demand. Capacity decisions have a real impact on the ability of the organization to meet future demands for products and services; capacity essentially limits the rate of output possible. Having capacity to satisfy demand can allow a company to take advantage of tremendous opportunities. Capacity decisions affect operating costs. Ideally, capacity and demand requirements will be matched, which will tend to minimize operating costs. In practice, this is not always achieved because actual demand either differs from expected demand or tends to vary (e.g., cyclically). In such cases, a decision might be made to attempt to balance the costs of over and under capacity. Capacity is usually a major determinant of initial cost. Typically, the greater the capacity of a productive unit, the greater its cost. Capacity decisions often involve long-term commitment of resources and the fact that, once they are implemented, it may be difficult or impossible to modify those decisions without incurring major costs. Capacity decisions can affect competitiveness. If a firm has excess capacity, or can quickly add capacity, that fact may serve as a barrier to entry by other firms. Then too, capacity can affect delivery speed, which can be a competitive advantage. Capacity affects the ease of management; having appropriate capacity makes management easier than when capacity is mismatched. Aggregate planning
3.
4. 5. 6.
7. 2.4
Aggregate planning is the process of planning the quantity and timing of output over the intermediate range (often 3 to 18 months) by adjusting the production rate, employment, inventory, and other controllable variables. Master scheduling follows aggregate planning and expresses the overall plan in terms of the amounts of specific end items to produce and dates to produce them. Aggregate planning uses information from both forecasts and orders on hand, and it is the major control (driver) of all production activities. Aggregate planning is concerned with determining the quantity and the
28
schedule of production for the immediate future. Aggregate plans combine resources into general categories and do not give a product-specific breakdown. The inputs used to develop the plan include demand forecast, capacity, inventory levels and workforce size. Once the aggregate plan has been developed to give an overall production rate for the planning period, it is handed to production personnel. 2.5 Master production scheduling (MPS)
Master production schedule (MPS) is a schedule showing the quantity of each end item (finished product) to be produced in a time period (week, month or quarter) of the short range planning horizon that usually spans from a few weeks to several months. It shows when incoming sales orders can be scheduled into production, and when each shipment can be scheduled for delivery. It is developed by reviewing market forecasts, custom orders, inventory levels and capacity information regularly. It is important link between marketing and production. MPS is a main tool to control product. By using the beginning inventory and the sales forecast for a particular end item, a planner can calculate the amount of production needed per period to meet the customer demand. MPS forms the basis for calculating the capacity and resources needed. MPS drives the Material Requirements Plan(MRP). An example of Master Schedule of a product A is shown below. Master Production Schedule-Product A Forecast MPS Functions of MPS 1. 2. 3. 4. 5. 6. 7. 8. MPS translates the specific no of end products to be produced in specific time period. The MPS represents a manufacturing plan of what the firm intends to produce and not the forecast of what the firm hopes to produce. MPS fulfill the capacity requirements of labour and equipment. By specifying the end items requirements over a time period, the MPS establishes the load and utilization parameters for labour and equipments. MPS helps avoid shortages, last minute scheduling, and inefficient allocation of resources. MPS give production, planning, purchasing, and management the information to plan and control manufacturing. Increase the efficiency and accuracy of a company's manufacturing. MPP helps to maintain the required level of finished goods inventory to meet the customer delivery requirements. MPS helps to make the best use of material, labour and equipment. Week 1 150 170 2 100 120 3 50 40 4 25 10
Objectives of Master Production Scheduling : 1. 2. To schedule end item to be completed promptly and when promised to customers. To avoid overloading or under loading the production facility so that production capacity is efficiently utilized and low production costs results.
Production planning and control 2.6 Material Requirement Planning (MRP)
29
Products are manufactured with subassemblies and components. These types of products are called dependent items. Independent item refers to finished goods. Dependent item refers to the items that are subassemblies or component parts to be used in the production of finished goods. The amount of dependent demand is the function of the amount of independent demand. For example, the parts and materials that go into the production of an automobile are examples of dependent items and the finished cars is independent item as a car is not a component of another item. Material requirement planning (MRP) is a technique for determining the component requirements at each assembly level of the finished product for each time period. The technique determines what components are needed, how many are needed, when they are needed and when they should be ordered so that they are likely to be available as needed. The MRP serves as the key component for planning and controlling production operations and purchasing. The information provided by MRP is highly useful in scheduling because it indicates the relative priorities of components for purchase orders. MRP is the most useful scheduling technique for many industries engaged in fabricating and assembling products like automobiles, tractor-trailer equipments, rail coaches, etc. It is especially suitable for situations when the final product is complex and made up of several levels of assemblies. MRP helps to release orders and for what quantities of materials. MRP also forms the basis for planning capacity requirements and developing a broad business plans. Objectives of MRP 1. Inventory reduction - MRP determines how many components are required, when they are required in order to meet the master schedule. It helps to procure the components when needed and thus avoid excessive build up of inventory. Reduction in the manufacturing and delivery lead times - MRP identifies materials and component quantities, timings when they are needed, availabilities and procurements and actions required to meet delivery deadlines. MRP helps to avoid delays in production and priorities production activities by putting due dates on customer job orders. Realistic delivery commitments - By using MRP, production can give marketing timely information about likely delivery times. Increased efficiency - MRP provides a close coordination among various work centres and hence helps to achieve uninterrupted flow of materials through the production line. This increases the efficiency of production system.
Master Production Schedule(MPS) Inventory status records Product structure records
2.
3. 4.
The three major inputs of an MRP system are MPS, the inventory status records and the product structure records. The MRP system takes the master schedule for the finished products and determines the gross quantities of components required from the product structure records. Gross requirements are obtained by exploding the finished product structure into its lower level component requirements. A flow diagram of how a typical MRP system may function is shown in the figure.
MRP
Purchase orders MRP Flow diagram
Production planning and control 2.7 BoM
30
Bill of material (BoM) is a listing of all of the assemblies, subassemblies, parts, and raw materials that are needed to produce one unit of a finished product. The bill of materials can be viewed as having as series of levels, each of which represents a stage in the manufacture of the end product. The highest level of bill of material represents the final assembly or end product. BOMs that describe the sub-assemblies are referred to as modular BoMs. The BOM file identifies each component by a unique part number and facilities processing by exploding the end product requirements into component requirements. BoM is used in materials planning, product costing and for plant maintenance. Originally used internally within a company, the BoM served as a way to track product changes and maintain an accurate list of required components. As manufacturing has become increasingly distributed, however, the BoM has taken on even greater importance. It serves as the primary reference file for product data. An example of a BoM material is shown in the figure. Quantity 5 1 4 1 2.8 Product structure ID No. 5TBR 1DR PC1 FRK Description Unit price Nut Rs.1 Shaft Rs.10 Bearing Rs.15 Casing Rs.30 Total Product cost Total cost Rs.5 Rs.20 Rs.60 Rs.30 Rs.115
Product structure is a hierarchical representation of a product consisting of various components where various components are listed by levels. With the product structure, the understanding of the components which compose a product as well as their attributes, can be represented. The product structure shows the material, component parts subassemblies and other items in a hierarchical structure that represents the grouping of items on an assembly drawing or the grouping of items that come together at a stage in the manufacturing process. Product structure defines the relationship among the various items that make up the product in terms of levels as well as parent / component relationships. A schematic representation of a product structure is shown in the figure.
Production planning and control 2.9 Production control
31
Production control is defined as the design and use of a systematic procedure for establishing plans and controlling all the elements of an activity. Production control includes 1. 2. 3. A complete plan. A follow up procedure for determining how closely the plan is followed. A means of regulating execution to meet the plans requirement.
All organizations irrespective of size, use production control to some degree. In small organizations, the production control may be performed by one person; but in large complex industries the production control department is normally well-organized and highly specialized. Production control make sure the existence of production plans, and it involves the use of various control techniques to ensure production performance as per plans. Co-ordinating men and materials and machines is the task of production control. Production control regulates the orderly flow of materials in the manufacturing process from the raw material stage to the finished product. Production control aims at achieving production targets, optimum use of available resources, increased profits through productivity, better and more economic goods and services etc. Production control helps a company operate and produce more efficiently and achieve lowest possible costs. Production control system Principles and procedure of production control 1. Control of activities-this involves the release of manufacturing orders, setting up plans in motion as a assigned time etc. 2. Control of material movement 3. Control of tool availability 4. Control of due dates 5. Control of quantity produced 6. Control of replacement 7. Control of labour efficiency 8. Control of progress of orders 1. 2. 3. 4. 5. 6. Control of planning - Assure receipt of latest forecast data from sales and production, bill of materials data from product engineering and routing information from process engineering. Controls of materials - Controls of inventory and providing foe issue of material to the shop and movement of materials within the shop. Control of tooling - Check on the availability of tooling and provide foe issue of tools to departments from tool cribs. Control of manufacturing capacity - Determine the availability of equipment and labour capacities and issue realistic production schedules and provide a means of recording completed production. Control of activities - Release order and information at assigned times. Controls of information - Distribute timely information and report showing deviations from plan so that correction action can be taken and provide data on production performance measurement for future planning.
Production planning and control Mechanism of production control 1. 2. 3. 4. Routing Scheduling Dispatching Follow-up
32
Functions of production control The success of an enterprise greatly depends on the performance of its production control department. The production control department generally has to perform the following functions. 1. 2. 3. 4. 5. 6. 7. 8. Provide raw material, equipment, machines and labour. To organize production schedule in conformity with the demand forecasts. The resources are used in the best possible manner in such away that the cost of production is minimized and delivery date is maintained. Proper co-ordination of the operations of various sections/departments responsible for production. To ensure regular and timely supply of raw material at the desired place and of prescribed quality and quantity to avoid delays in production. To perform inspection of semi-finished and finished goods and use quality control techniques to ascertain that the produced items are of required specifications. It is also responsible for product design and development. Thus the fundamental objective of production control is to regulate and control the various operations of production process such a way that orderly flow of material is ensured at different stages of the production and the items are produced of right quality, in right quantity, at the right time with minimum efforts and cost.
Objectives of production control The ultimate objective of production planning and control is to contribute to the profits of the enterprise. This is accomplished by keeping the customers satisfied through the meeting of delivery schedules. Further, the specific objectives of production planning and control are to establish the routes and schedules for work that will ensure the optimum utilization of raw materials, labourers, and machines to provide the means for ensuring the operation of the plant in accordance with these plans. Production planning and control is essentially concerned with the control of work-in-process. To control workin-process effectively it becomes necessary to control not only the flow of material but also the utilization of people and machines. Production planning and control fulfils these objectives by focusing on the following points. 1. 2. 3. 4. Analyzing the orders to determine the raw materials and parts that will be required for their completion. Assisting the human resource departments in the manpower planning and assignment of men to particular jobs. Controlling the stock of finished parts and products. Determining the necessary tools required for manufacturing.
Production planning and control 5. 6. 7. 8. 9. 10.
33
Direction and control of the movement of materials through production process. Issuing requisitions for the purchase of necessary materials. Issuing requisitions for the purchase or manufacture of necessary tools and parts. Keeping the up-to-date records scheduled and in process. Maintaining stocks of materials and parts. Preparing the route sheets and schedules showing the sequence of operation required to produce particular products. 11. Production of work orders to initiate production activities. 12. Receiving and evaluating reports of progress on particular orders and initiating corrective action, if necessary. Levels of Production Control Production control starts with some particular goal and formulation of some general strategy for the accomplishment of desired objectives. There are three levels of production control namely programming, ordering and dispatching. Programming plans the output of products for the factory as a whole. Ordering plans the output of components from the suppliers and processing departments. Dispatching considers each processing department in turn and plans the output from the machine, tools and other work centers so as to complete the orders by due date. Factors determining production control The nature of production control operations varies from organization to organization. The following factors affect the nature and magnitude of production control methods in an organization. 1. Nature of production- In job-oriented manufacturing, products and operations are designed for some particular order which may or may not be repeated in future. Hence production usually requires more time, whereas in a continuous manufacturing system inventory problems are more complex but control operations are rather simple due to fixed process. In mixed stock and custom manufacturing systems the problem of control is further complicated due to simultaneous scheduling of combined process. Nature of operations/activities - In intermittent manufacturing system the operations are markedly varied in terms of their nature, sequence and duration. Due to this the control procedure requires continuous modifications and adjustments to suit the requirements of each order. Magnitude of operations - Centralized control secures the most effective coordination but as an organization grows in size, decentralization of some production control functions becomes necessary. The degree to which the performance of an activity should be decentralized depends upon the scope of operations and convenience of their locations.
2.
3.
Production planning and control 2.10 Routing
34
Routing may be defined as the selection of paths or routes over which each product is to travel in being transformed from raw material into finished products. It is useful for smooth and efficient working of the whole plant or factory. Production planning starts with routing. It decides the path of work and the sequence of operations. The demand for a more systematic method of carrying the work through the shop gave rise to the practice of routing. In fact, production planning starts with routing which includes the following activities. 1. 2. 3. 4. Determining the Determining the Determining the Determining the quality of the product to be manufactured. men, machines and materials to be used. types, number and sequence of manufacturing operations; and place of production.
For effective production control of a well-managed industry with standard conditions, the routing plays an important role, i.e., to have the best results obtained from available plant capacity. Objectives Routing has the following objectives. 1. 2. 3. 4. 5. It determines the sequence of manufacturing operations. It ensures the strict adherence to the sequence so determined. It strives for the best possible and cheapest sequence of operations. It influences the design and layout of the factory building with a view to get quick and better production results. It also influences the installation of plants and factory for better results.
Routing procedure 1. 2. 3. 4. 5. 6. 7. An analysis to determine what to make and what to purchase. An analysis to determine what materials are needed. A determination of the manufacturing operation and their sequence. A determination of lot sizes. A determination of scrap factor. An analysis of cost article. The organization manufacturing forms.
Factors affecting routing procedure 1. 2. 3. 4. Manufacturing cycle employed Availability of plant equipment and their component parts Characteristics of plant equipment and the component parts Human elements
Advantages 1. 2. 3. 4. 5. 6. 7. Economic advantage is based on the principle of division of labor Optimum utilization of machines Production of goods according to schedule. Maximization of productivity. Interruption free production. Reduction in cost of production. Optimum use of all factors of production.
Production planning and control Techniques of routing
35
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 explained below. 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. Work sheet - It contains a) b) Specifications to be followed while manufacturing. Instructions regarding routing of every part with identification number of machines and work place of operation.
2.
This sheet is made for manufacturing as well as for maintenance. 3. Route sheets - Route sheets tell about specific manufacturing orders. One sheet is needed to each or part component of the order. Route sheets are departmental and operations in each department are listed separately. Use of route sheet a) b) To check on subsequent steps of control and shop procedure To register progress of the part from stock to completion and delivery to stores or assembly
Information on the route sheets a) b) c) d) e) Number and identification of order Symbol and other identification of part Number of pieces to be made Number of lot Operation data should include i. List of operations on the part ii. Department in which work is to be done iii. Machine to be used for each operation iv. Fixed sequence in any of the operations v. Rate at which job must be completed
4.
Move order: Though this is document needed for production control, it is never used for routing system. Move order is prepared for each operation as per operation sheet. On this the quantity passed forward, scrapped and to be rectified are recorded. It is returned to planning office when the operation is completed.
Production planning and control 3.1 Sequencing
36
Module III
Sequencing is the process of arranging the operations (jobs) on machines such that there is less idle time for machines. The job shop scheduling models are used to solve one-and two-machine job shop problems. For the one-machine problem the available methods are shortest processing time, first come first serve, due date scheduling, longest processing time, and critical ratio. For two-machine scheduling, Johnsons method is. Purpose of sequencing is to achieve maximum profit by optimum utilization of machines. Process of sequencing is explained below. Consider three different cases viz., 1. 2. 3. n jobs in 2 machines i.e., a system containing 2 machines M1 and M2 and there are n jobs to be carried out in the order M1 and M2. n jobs to be processed on 3 machines in the order M1 , M2 and M3. n jobs to be assigned to m machines.
Methods of sequencing There are several priority rules which can be applied to job sequencing. The most widely used priority rules are discussed below. 1. 2. 3. 4. 5. 6. FCFS (First Come First Served) The first job reaching the production center is processed first. SPT (Shortest Processing Time) Jobs with the shortest processing time are scheduled first. LPT (Longest Processing Time) Jobs having the longest processing time have the highest priority. PCO (Preferred Customer Order) A job from a preferred customer receives the highest priority. DDATE (Due Date) or EDD (Earliest Due Date) The job having the earliest due date has the highest priority. CR (Critical Ratio) Compute the ratio of processing time of the job and remaining time until the due date. The critical ratio gives the highest priority to jobs that must be done to maintain a predetermined shipping schedule. Jobs that are falling behind a shipping schedule receive a ratio of less than 1, while a job receiving a critical ratio greater than 1 is ahead of schedule and is less critical. A job receiving a critical ratio score of 1.0 is precisely on schedule. Assumptions in sequencing No machine can operate more than one operation at a time. Each operation once started must be performed till the completion. No parts should be processed separately by more than one machine at a time. Each operation must be completed before other proceeding operation can be performed. The time for processing an operation is independent of the order in which operations are performed. There is only one of each type of machine. All the jobs are known and ready for processing. The time for transferring the jobs between the machines is negligible.
3.2 1. 2. 3. 4. 5. 6. 7. 8.
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3.3 1. 2. 3. 4. 5.
Procedure for two machines and n Jobs Find out the job having smallest processing time. If the job corresponds to machine M1, assign the job as the first job. If the job corresponds to machine M2, assign the job as the last job. Repeat the step 1 to the remaining jobs. If there are equal smallest processing times for each machine, place the job on machine 1, first in the sequence and one in machine 2 last in the sequence. If the equal smallest times are both on for machine 1, select the job with lower processing time in machine 2, for placing first in the sequence. If the equal smallest times are both on for machine 2, select the job with lower processing time in machine 1, for placing last in the sequence.
Problems : 1. Five jobs are performed on machine M1 and then on Machine M2. Find the hours taken by each job on each machine is given below. Determine the optimum sequence of jobs and minimum time to complete all the jobs. A 5 2 B 1 6 Job C 9 7 D 3 8 E 10 4
Machine M1 M2 Solution : a) b) c) d) e) f)
The order of the machines is M1 M2. Operation taking minimum processing time(1) is for Job B on Machine M1. Hence by rule, assign B as the first job on Machine M1. The next job taking the smallest processing time (2) is A on Machine M2. Hence by rule, assign A as the last job on Machine M2. The next job taking the smallest processing time (3) is D on Machine M1. Hence by rule, assign D as the second job on Machine M1. The next job taking the smallest processing time (4) is D on Machine M2. Hence by rule, assign E as the second last job on Machine M2. The next job taking the processing time (7) is C on Machine M2. Hence, assign C as the job on Machine M2. B D C E A
The order of sequencing so obtained is
Production planning and control Calculation of minimum elapsed time is done as follows. Sequence of jobs B D C E A a) b) Machine M1 Time in 0 1 4 13 23 Processing time 1 3 9 10 5 Time out 1 4 13 23 28 Time in 1 7 15 23 28 Machine M2 Processing time 6 8 7 4 2 Time out 7 15 22 27 30 Idle time 1 0 0 1 1
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c)
Machine M1 start working at the 0th hour. Machine M1 does the processing for 1 hour and then only work can be transferred to Machine M2 for processing. Machine M2 do the processing for 6 hours and so time out is 7th hour. Job to be worked on Machine M2 is ready for working after 4th hour. But Machine M2 is engaged till 7th hour. So work on Machine M2 can be started only after 7th hour. Following the similar rules, time out on both the machines are found. Idle time is the difference of Time In of the Job under consideration and Time out of the last job on Machine M2. Six jobs are to be processed on 2 M/Cs. A then on M/C B. Time in hours taken by each job on each M/C is given below. Determine the optimum sequence of jobs that minimizes the total time to complete the jobs. Machine A B Solution : a) b) c) d) e) f) g) The order of the machines is A-B. Operation taking minimum processing time(2) is for Job 3 on Machine A. Hence by rule, assign 3 as the first job on Machine A. The next job taking the smallest processing time (2) is 2 on Machine B. Hence by rule, assign 2 as the last job on Machine B. The next job taking the smallest processing time (3) is 1 on Machine B. Hence by rule, assign 1 as the second last job on Machine B. The next job taking the smallest processing time (6) is 6 on Machine A. Hence by rule, assign 6 as the second job on Machine A. The next job taking the processing time (10) is 4 on Machine A. Hence, assign 4 as the job on Machine A. Assign 5 as the job on Machine B. 3 6 4 5 1 2 Job 1 5 3 2 3 2 3 2 5 4 10 11 5 12 10 6 6 7
2.
The order of sequencing so obtained is Calculation of minimum elapsed time is done as follows.
Production planning and control Sequence of jobs 3 6 4 5 1 2 3. Machine A Time in 0 2 8 18 30 35 Processing time 2 6 10 12 5 3 Time out 2 8 18 30 35 38 Time in 2 8 18 30 40 43 Machine B Processing time 5 7 11 10 3 2 Time out 7 15 29 40 43 45 Idle time 2 1 3 1 0 0
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Find out the optimum sequence of the jobs. Jobs A B C D E F G Solution : Minimum time 10 is associated with job B, F and G. Also there is a tie break between job F and G. So considering job B first, as per rule, B should be processed last. A D G F B C E Machine - 1 7 11 9 9 10 12 10 Machine - 2 10 10 7 16 6 10 15
3.4 1. 2. 3. 4.
Procedure for three Machines and n Jobs The sequence of jobs can be found out if at least one of the following conditions can be satisfied. Smallest processing time of any operation on M1 should be greater than or equal to the operation having maximum processing time on M2. Smallest processing time of any operation on M3 should be greater than or equal to the operation having maximum processing time on M2. If any of these conditions are satisfied, then convert three machine problem into two machine problem by introducing two fictions machines G and H such that the processing times of each job on G is obtained by combining the processing times of each job M1 and M2 and the processing times of each job on H is obtained by combining the processing times of each job M2 and M3. Processing time of each job on M1 and M2 = G = = Processing time for each job each on M1+ Processing time for each job on M2. Processing time of each job on M2 and M3 = H = = Processing time for each job on M2 + Processing time for each job on M3. Apply the same rules for n jobs in 2 machines.
5. 6. 7.
Production planning and control Problem : 1.
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Find the sequence that minimizes the total elapsed time(in hours) required to complete the following jobs on 3 machines M1, M2 and M3 in the order M1-> M2-> M 3. Machine M1 M2 M3 A 6 3 4 B 8 2 8 Job C 7 5 6 D 10 6 7 E 6 4 8
Solution: 1. 2. 3. Minimum processing time on machine M1 = 6 hours Maximum processing time on machine M2 = 6 hours Minimum processing time on machine M1 > Maximum processing time on machine M2. One of the conditions is fulfilled. Adding the processing times for M1 and M2 first and then M2 and M3, we get, Machine M1and M2 M2 and M3 A 9 7 B 10 10 Job C 12 11 D 16 13 E 10 12
Job sequence is :E B D C A
Calculation of minimum elapsed time is done as follows. Machine M1 Sequence E B D C A 3.5 In 0 6 14 24 31 Pro. Time 6 8 10 7 6 Out 6 14 24 31 37 In 6 14 24 31 37 Machine M2 Pro. Time 4 2 6 5 3 Out 10 16 30 36 40 Idle time 6 4 8 1 1 In 10 18 30 37 43 Machine M3 Pro. Time 8 8 7 6 4 Out 18 26 37 43 47 Idle time 10 4 -
Procedure for m Machines and n Jobs
Let Mij (i=1,2,3m and j=1,2,3.n) be the processing time for jobs and order of processing be 1,2,3.m. Machine 1 2 3 4 m Job 1 M11 M21 Mm1 2 M12 M22 Mm2 3 M13 M23 Mm3 4 M14 M24 Mm4 5 M15 M25 Mm5 6 M16 M26 Mm6
Production planning and control 1. 2.
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3. 4.
5.
The sequence of jobs can be found out if at least one of the following conditions can be satisfied. Smallest processing time of any operation on M1j (First Machine) should be greater than or equal to the operation having maximum processing time on M2j, M3j, M4j,M(m-1)j for all j. (Note: M(m-1)j is the second last machine and M2j is the second machine) Smallest processing time of any operation on Mmj (Last Machine) should be greater than or equal to the operation having maximum processing time on M(m-1)j, M(m-2)j, M(m-3)j,.. M2j for all j. If any of these conditions are satisfied, then convert three machine problem into two machine problem by introducing two fictions machines G and H such that the processing times of each job on G is obtained by combining the processing times M2j, M3j, M4j,M(m-1)j for all j and the processing times of each job on H is obtained by combining the processing times M(m-1)j, M(m-2)j, M(m-3)j,.. M2j for all j. Apply same rules for n jobs in 2 machines.
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Module -IV
4.1 Materials management
Materials are the key resource in an industrial enterprise; no production is possible without materials. Materials also form a major constituent of the cost of the product and, therefore, proper control over their procurement, storage, issue, movement and consumption is necessary. Materials management is a function, which aims towards the management of materials in an industrial undertaking. Materials management covers all aspects of materials and their supply, which are necessary for converting raw materials into finished products. It is thus concerned with planning and programming of materials (material planning), procurement of materials and capital goods (purchasing), receiving, store keeping, warehousing, inventory control, packaging and packing of materials, materials movement, disposal of scrap, surplus and obsolete materials Its main objective is cost reduction and efficient handling of materials at all stages and in all sections of the undertaking. Its function includes several important aspects connected with material such as purchasing, storage, inventory control, material handling, standardization etc. Importance of materials management Materials management is important in a manufacturing industry due to the following reasons. 1. 2. 3. 4. 5. 6. Reduction in material management is always possible through efficient materials management. Effective inventory control and production schedule, organization can increase the production. Materials input is very important as excess material as inventory causes costs to the company and shortage of material results into stoppage of conversion process and subsequently shortage of finished goods leading to customer dissatisfaction. Material as an input to the conversion process is substantial in terms of its contribution to product cost, and current assets. Effective and efficient management of materials can reduce burden on the finances of company. Accounts payable are mostly to materials suppliers. Hence the management of materials is important in management of finance of the company. Materials management provides information about availability of new products and services in the market which leads to cost efficient changes in the process.
Objectives of materials management 1. 2. 3. 4. 5. 6. 7. 8. To maintain a steady flow of materials to ensure uninterrupted production. To achieve economy in cost of materials by adopting cost reduction techniques like value analysis, variety reduction, JIT, MRP etc. To ensure consistency of quality by providing right materials, of the right quality in the right quantity and at the right time. To reduce inventory investment through scientific inventory control techniques. To improve corporate image by maintaining good buyer-seller relations. To maintain goods records of purchase, stores, traffic, etc. To preserve/conserve materials in stock so that losses due to pilferage, deterioration, obsolescence etc. are kept at minimum. To reduce operating cost by minimizing/eliminating wastage and improving productivity of materials.
Production planning and control 4.2 Functions of materials management The activities as in Materials Management are as follows. 1.
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Materials planning and control This is the primary function of materials management. The market forecast is converted into production schedules by production planning and control. Materials management prepares the materials plan to meet the production schedule. The plan is then implemented and controlled. Purchasing - This includes selection of sources of supply finalization of terms of purchase, placement of purchase orders, follow-up, maintenance of smooth relations with suppliers, approval of payments to suppliers, evaluating and rating suppliers. Storage and preservation The procured material is to be stored and preserved against internal and external deterioration and theft. Against the authorized demand, the material from the store is retrieved and issued. Inventory control Inventory generally refers to the materials in stock. It is also called the idle resource of an enterprise. Inventories represent those items, which are either stocked for sale or they are in the process of manufacturing or they are in the form of materials, which arc yet to be utilized. The interval between the receiving the purchased parts and transforming them in to final products varies from industries to industries depending upon the cycle time of manufacture. It is therefore necessary to hold inventories of various kinds to act as a buffer between supply and demand for efficient operation o{ the system. Thus, an effective control on inventory is a must for smooth and efficient running of the production cycle with least interruptions. Inventory control function controls the inventory levels to ensure shortage free and excess free stock to check the costs and ensure customer satisfaction. Vendor development The company makes the chosen vendors effective and efficient by providing necessary inputs of training and information. The suppliers systems are audited to ensure adherence. A good vendor is an asset as he makes his customer more effective and efficient. Vendor rating Organizations rate suppliers to determine the extent of quality, delivery and service rendered by them called as Supplier rating. Vendor rating is a method to evaluate a vendor against certain parameters, related to this supplies. Vendor rating is used as a tool for narrowing down the supplier base for productive management of materials function. The same system is used continuously to assess strengths and weaknesses of short listed vendors for their effective development. Waste control Procuring standard material and continuously trying to improve yield is waste reduction and control function. When a product is processed two types of wastes are generated. One type of waste is called as standard scrap. This is accepted as unavoidable. Product that is not right first time is scrap and thereby wastes. Non moving obsolete material is another waste that cripples organization. Material management should address these wastes and not only should control but reduce the wastes. Value analysis Continuously trying to improve the value of the product mainly by material substitution is a function of the materials management
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8.
Production planning and control 4.3 Costs involved in the management of materials The various costs involved in the management of materials are as follows. 1. 2. 3. 4. 5. 6. 7. 8. 9.
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Basic cost of materials cost paid to the supplier as price of goods. Government levies and taxes - cost paid to the supplier towards Government levies and taxes, namely excise duty, sales tax etc. Ordering costs cost incurred in effecting purchasing, such as cost of tendering, stationery, postage, visits to the suppliers' plant to expedite delivery, cost of receiving, inspection and bill payment, including cost on staff. Inventory carrying costs cost incurred in maintaining inventory such as interest on capital locked, cost of storage and preservation expenses etc. Packaging cost cost incurred in packaging and packing of the products. Material handling costs cost incurred for movement, storage and supply. Freight cost cost incurred in movement of materials. Insurance cost cost incurred in providing adequate insurance cover. Wastage during receipt, storage, production etc. cost of losses due to defects in design, poor quality of material, improper storage methods, rework and rejection during manufacture etc. The primary objective of any organization is to reduce the above costs so that the cost of material is the lowest. Integrated materials management
4.4
Traditionally the organizations performed their functions aiming to achieve excellence in respective areas. Every function tried to sub-optimize their individual function. This approach created some excellent buyers, some excellent movement managers, and some very good storekeepers, but often this functional excellence was at the cost of each other. Impact of excellence of one area on other functions was not taken into account. Performance of this kind did not bring cost benefits to the parent organizations that continued to suffer cost burden. Consider the case of CPU of a computer. CPU contains various components such as motherboard, processor hardisk, RAM etc. Motherboard may support a high speed processor, RAM may have large memory and hardisk may have good speed. CPU will deliver good performance only if the individual performance of the components should match each other. Integrated approach ties all functions together. Various functions when come under one control, focus will always be on the final outcome. Initiatives for individual excellence are undertaken only after establishing their impact on final outcome. Some of the key functions that are undertaken during the process of material management are materials planning, materials purchasing, stores management, inventory control, scrap and surplus disposal. A material management system integrates all these functions as a single function. For best results, all activities related to materials must be placed under one department viz., materials management department. Advantages of integrated materials management 1. 2. 3. 4. Better accountability on materials and material concerned costs. As materials management is handled by single authority, it can result in better coordination, as it becomes the central point for any material related problems. Integrated materials management makes sure that quality material is supplied timely to the requesting departments resulting in better performance of the organization. A materials management system is typically controlled through a computer software system to assist decision making related to material in the organization.
Production planning and control 4.4 Components of integrated material management
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The components of the integrated materials management can be classified into the following. 1. 2. 3. 4. 4.4.1 Materials planning Inventory control Purchase management Stores management Materials planning
Sales forecasting and aggregate planning are the basic inputs for materials planning. The different tasks under planning are listed below. 1. 2. 3. 4. 5. 4.4.2 Estimating the individual requirements of parts. Preparing materials budget. Forecasting the levels of inventories. Scheduling the orders and Monitoring the performance in relation to production and sales. Inventory control
Inventory is essential to provide flexibility in operating a system. The inventory can be classified into raw materials inventory, in-process inventory and finished goods inventory. The raw materials inventories remove dependency between suppliers and plants. The work-in-process inventories remove dependency between machines of a product line. The finished goods inventory removes dependency between plant and its customers/market. The main functions of inventory are summarized below. 1. 2. 3. 4.4.3 smoothing out irregularities in supply minimizing the production cost allowing organizations to cope with perishable materials Purchase management
The purchasing is another major function for the materials management. This function contains the following activities. 1. 2. 3. 4. 5. 6. 4.4.4 Identification and selection of possible Suppliers Finalizing the terms and references of purchases that are to be made. Placing the purchase orders this activity may be staggered as per the inventory control function. Managing the purchase orders till delivery of materials Giving clearance to payment of received good; and Analyzing the performance of the suppliers and rating them. Stores management The different tasks under stores are listed below. 1. 2. 3. 4. 5. 6. Physical control of materials. Preservation of stores. Minimization of obsolescence and damage through handling. Disposal and efficient handling. Maintenance of stores records. Proper location and stocking of materials.
Production planning and control 4.5 Types of inventory control
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The smooth and efficient production is possible by keeping sufficient materials in store called inventory and controlling the amount of this in order to economize the cost of ordering, storing and issuing these inventories at appropriate time is called inventory control. The concept of Just in Time manufacturing is not to store any material as inventory by ordering the exact materials required for production, delivered and received at the production facility just at the start of production operation without any delay. To achieve this type of inventory control, availability of all the type of materials and perfect delivery schedules must be followed. This technique is successful in countries like Japan. It is difficult to adopt in Indian industries because of several factors which may not be controllable. The various uncertainties exists in demand and supply of materials therefore the efficient inventory control methods will only be used to overcome the various inventory problems and uncertainties. The proper quantity of materials required for production must be available as inventory of items. Which materials should be available and how much at what time is the main criterion of selecting the proper inventory control system by the materials management of any organization. These systems of inventory control are discussed below. 4.5.1 Two-bin system Two bin system is a simple system in which two bins are used to store and issue the materials. The two-bin method is often used for low-value, frequently used material. Materials frequently used with the two-bin system include common nails, nuts, bolts, and other low-value, high-usage items. Initially both the bins are filled with the material needed. When the first bin is completely used up, the worker or assembly line worker switches to the other bin and an order is placed for refill. The order will arrive at the time just before the second bin is empty. This process will be repeated. 4.5.2 Maximum-Minimum System The min/max method is used for items whose material demand (that is, usage) constantly changes. The method is based on the maximum and minimum amounts of material required. With this method, maximum and minimum numbers of units to be stocked, as well as the amount of safety stock required until the next order is filled, are determined. Whenever the inventory in hand reaches the minimum stocking level or reorder point, an order is placed for the number of items necessary to reach the maximum stocking level. The advantage of a min/max system is that different minimum and maximum levels can be set for each class of items or for individual items. 4.5.3 Economic Order Quantity (EOQ) system The economic order quantity is the amount of materials which is ordered or produced so that the cost of ordering and carrying in inventory should be minimum. This system is used to economize the cost of inventory control. The minimum cost is obtained when ordering and carrying cost are equal. In this system, inventory is zero when order is received. Order is placed such that all the materials ordered as EOQ is consumed. This method of inventory control is normally used to store valuable and essential items in the store. The method also assumes a fairly constant lead time. 4.5.4 Fixed Order Quantity and Variable Cycle System (Q system) When this system is used, the quantity ordered every time is fixed and the number of cycle for which orders are placed and cycle time may vary. It is also called reorder point or Q system. The fixed order quantity (Q) depends on, price, usage rate and
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maximum and minimum quantity kept in inventory. This method differs from the fixedschedule method because the timing of the orders and the quantities depend on actual demand. When the demand changes, rapidly the reorder point reduces or cycle time is reduced and number of orders placed is increased as the order quantity Q is fixed. What amount of order and when to order are two main problems in this system of inventory control to solve. Order quantity Q is decided in such a way so as to minimize the total cost of procurement (production), storage, handling, distribution and other changes of inventory. The safety stock is always present in this system. 4.5.5 Fixed Cycle and Variable Quantity (P) System This is also called periodic review system. In this time bound system, period of review is fixed as three, six or twelve months. In this system, period of review is fixed and quantity ordered change as per demand or rate of consumption. The period of review P is decided such that the order quantity is economical to purchase the items. 4.5.6 Replenishment System or S,s policy This is a major system of inventory control, which is called optional replenishment system of S,s policy. When the supplier puts the restriction on minimum order quantity, the variable order quantity is decided based on S,s policy i.e., maximum level of inventory is S and minimum safety stock is s. The replenishment level is in between S and s values. Order quantity is decided as
Order quantity = Qr = Q1 - I where Q1 is replenishment level and I is inventory on hand.
This system has advantage of combined fixed order or reorder point systems. To decide the amount of order, Qr to be placed the accurate information of inventory levels and rate of consumption must be available before the orders are placed.
Production planning and control 4.5.7 Ordering when quantity are available
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When the materials are purchased in bulk, the supplier offer purchase discount in price of the materials purchased, if the quantity purchased is more than a particular value. Different discounts are offered on different purchase quantities and frequency of purchase. This is called quantity discount. For this type of ordering, the inventory control model which is used is further discussed in various types of inventory models 4.7 Supply chain management Supply chain management (SCM) is the term used to describe the management of the flow of materials, information, and funds across the entire supply chain, from suppliers to component producers to final assemblers to distribution (warehouses and retailers), and ultimately to the consumer. Goal of supply chain management is to integrate the entire process of satisfying the customers needs all along the supply chain. Supply chain management is a crossfunction approach to manage the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and then the movement of finished goods out of the organization toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity. Objectives supply chain management 1. 2. 3. 4. Supply chain strategy needs to be tailored to meet the needs of its customers which is not always the lowest cost. In situations where the goods are basic commodities with standard benefits (food, home supplies, standard clothing), then cost reduction will be the focus. In fashion goods, timeliness should be the focus of the supply chain. As organizations have continued to adopt more efficient production techniques such as lean manufacturing, total quality management, inventory reduction techniques to reduce costs and improve the quality, functionality, and speed of delivery of their products and services to customers, the costs and delays of procuring the requisite inputs and distributing the resulting goods and services are taking a greater and greater fraction of the total cost and time. Face the increasing global competition. Reduced inventories. Control product flow, information flow and finance flow.
5. 6. 7.
Advantages of supply chain management 1. 2. 3. 4. 5. 6. Supply chain costs often represent 50% or more of total operating costs Firms that have implemented supply chain management have supply chain cost advantage Lower inventory Faster delivery of final product Larger market shares and higher customer loyalty Receive regular forecasts for execution of production and sales plans
Production planning and control 7. 8. 9.
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Analyze different supply line models and subsequently optimize them Automate warehouse inventory management Connect elements of market analysis and friendly interface relations with suppliers.
Supply chain design The supply chain consists of the network of organizations that supply inputs to the business unit, the business unit itself, and the customer network.
Factors to be considered for developing a supply chain 1. 2. 3. 4. Location - Facility location, country differences, taxes and duties, transportation costs associated, locations, and government policies. Inventory and forecasting - Effective supply chain helps to manage inventory and forecasting sales easily. Marketing - An attacking supply chain helps to have efficient marketing. Sourcing and supplier management - Determining the number of suppliers and the best way to structure supplier relationships is becoming an important topic in supply chains. Information and electronic mediated environments - Many network based application softwares have been developed for supply chain management such as SAP, i2s Rhythm and Peoplesofts Red Pepper which can be used to develop supply chain. Product design and new product introduction - Feedbacks of suppliers can be used in developing a product. Service and after sales support - With the presence of supply chain, effective service and after sales support can be delivered t to the end user.
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Production planning and control 8. 9.
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Reverse logistics - Reverse logistics stands for all operations related to the reuse of products and materials. This can be done with the help of supply chain. Global issues - For companies operating in multiple countries, it wont be possible for them to tackle all the issues themselves such as rules formulated by each government etc; which can be handled by the supply chain.
10. The Bullwhip Effect or (Whiplash Effect) Bullwhip Effect
The Bullwhip Effect (or Whiplash Effect) is an observed phenomenon in forecastdriven supply channels. Because customer demand is rarely perfectly stable, businesses must forecast demand in order to properly position inventory and other resources. Forecasts are based on statistics, and they are rarely perfectly accurate. Because forecast errors, companies often carry an inventory buffer called "safety stock". Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock. In periods of rising demand, down-stream participants will increase their orders. In periods of falling demand, orders will fall or stop in order to reduce inventory. The effect is that variations are amplified as one moves upstream in the supply chain (further from the customer). Establishing a demand-driven supply chain which reacts to actual customer orders like kanban is a solution. Methods of enhancing SCM 1. Supplier relationships - In the past, most customers purchased from the lowest bidders who could meet their quality and delivery needs. Customers are seeking a closer, more cooperative relationship with their suppliers. 2. Information Technology 3. Intranets - Web-based intercommunicate. networks that allow all employees of a firm to
4. Customer Relationship Management (CRM) Systems - Designed to collect and interpret customer-based data. CRM systems provide comprehensive customer data
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so the firm can provide better customer service and design and offer the most appropriate products and services for them. 5. Enterprise Resource Planning (ERP) Systems - Facilitate communication throughout the supply chain and over the Internet. The ERP system embodies much more than just the supply chain, it also includes all the electronic information concerning the various parts of the firm. eg.SAP software (Systems Applications and Products) The basic requirements for successful SCM 1. 2. 3. 4. 5. 6. Trustworthy partners Good communication Competent managers with vision Flexible supply and production processes that can very quickly respond to changing customer demand A short-cycle, demand-driven order-to-delivery process Accurate, relevant information that is available on demand throughout the supply chain
Examples of SCM Innovations 1. Direct model by Dell (manufacturers of computers). Dell sells directly to customers, eliminating the wholesaler and retailer. Dell also takes advantage of new information technologies in their communications with suppliers who can access Dell's component inventories, production plans, and forecasts in real time and thus keep their production precisely matched to Dell's needs. Dell deliberately maintains absolute minimum inventory levels at every stage of production, averaging 4 days overall. Strategic sourcing by Palm (manufacturers of PDA) - They have gone from doing business with hundreds of suppliers to developing deep relationships with only a few suppliers. Cross-docking by Wal-Mart. Wal-Mart (trading place at U.S) uses the technique of off-loading goods from incoming trucks at a warehouse directly into outbound distribution trucks instead of being placed into inventory. Delayed differentiation where final modules are either inventoried for lastminute assembly to customer order, or differentiating features are added to the final product upon receipt of the customers order. Adopted by Hewlett-Packard called as Channel Assembly where the carrier (supplier) is given the freedom the to perform the final customization Supplier Diversity adopted by HP - HP promotes diversity in its supply chain because diverse suppliers have fresh ideas, offer innovative products and processes.
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Role of inventory in SCM SCM in ISO 9000:2000 Stages in supply chain Vendor rating Open tender 4.8 4.9 ERP Role of I.T in materials management
Production planning and control 5.1 Loading
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Module- V
A load is the amount of work assigned to a facility work centre or operator, and loading is the assignment of work. Loading does not specify the sequence in which the work is done or when it is to be done. Loading is the aggregate assignment of jobs to specific entities. Inputs necessary for loading include. 5.2 Scheduling
Algorithms used for scheduling Difference between loading and scheduling 5.2.1 Aim of scheduling 5.2.2 Reasons for scheduling 5.2.3 Master scheduling or aggregate scheduling 5.4 5.5 5.6 5.7 Estimating shop loads Short term scheduling Mathematical loading and scheduling Dispatching
Steps involved progress control Charts used in progress reporting Problems
Production planning and control 5.1 Network analysis using P.E.R.T and C.P.M
54
A project is defined as a combination of inter related activities that must be executed in a certain order before the entire task can be completed. The activities are inter-related in a logical sequence in the way that some activities cannot start until others are completed. Constructing houses, factories, shopping malls, developing military weapons systems, aircrafts, and new ships are examples of projects. An activity in a project is usually viewed as a job requiring time and recourses for its completion. It is essential to manage the projects effectively through planning, scheduling and control. Network analysis is the general name given to certain specific techniques which can be used for the planning, management and control of projects. Network analysis is a system which plans projects both small and large by analyzing the project activities. Planning by network analysis, probably got recognition in the year 1955 when dramatic reductions in time (about 70%) were experienced in connection with the overhaul of generating plant by Central Electricity Generating Board in Great Britain. Network analysis helps to minimize the cost and time involved in the project, helps to utilize resources effectively and minimizes delays and interruption in the project. Network analysis helps designing, planning, coordinating, controlling and in decision making in order to accomplish the project economically in the minimum available time with limited available resources. Network analysis is widely used in research and development projects, setting up new industries, planning and launching of new products, construction projects, shifting of manufacturing locations, equipment maintenance and overhauling etc. Objectives of network analysis are 1. 2. 3. Minimize total project cost and time. Effective utilization of resources. Minimizing delays and interruption of the project.
Steps involved in network analysis 1. Specify the individual activities - Define the project and all of its significant activities or tasks. The project (made up of several tasks) should have only a single start activity and a single finish activity. Determine the sequence of the activities - Develop the relationships among the activities. Decide which activities must precede and which must follow others. Decide which task or activities will be performed simultaneously and which others sequentially. Arrange the activities in a logical sequence. Draw the network diagram - A network diagram is constructed which presents the relationships with the activities involved. Estimate activity completion time - The time required to complete each activity can be estimated using past experience or the estimates of knowledgeable persons. Time, costs and other resources are allotted to all the activities. Identify the critical path -Compute the longest time path through the network. This is called the critical path. The significance of the critical path is that the activities that lie on it cannot be delayed without delaying the project. Because of its impact on the entire project, critical path analysis is an important aspect of project planning. Use the network to help plan, schedule, monitor and control the project.
2.
3. 4.
5.
6.
Production planning and control Terms related to network planning methods
55
Event - An event is a specific instant of time which marks start or the end of an activity. Event consumes neither time nor resources. It is represented by a circle and the event number is written within the circle. Event and node are synonyms. e.g. Start of motor, loan approval etc. Activity - Every project consists of a number of tasks which are called activities. An activity is an element of project and may be a process, a material procurement cycle etc. e.g. Install machinery, arranging foreign exchange etc., are activities. An activity is shown by an arrow and it begins and ends with an event. Unlike event, an activity consumes time and resources. An activity may be performed by an individual or group of individuals. An activity is normally given a name like A,B,C etc which is marked below the arrow and the estimated time to accomplish the activity is marked above the arrow. Activities are classified as critical activities, non-critical activities and dummy activities. Critical activities - In a network diagram, critical activities are those, if consume more than their estimated time, the project will be delayed. An activity is called as critical activity if its earliest start time taken is equal to the latest start time. A critical activity is marked either by a thick arrow or as shown in the figure.
2 4 A 1 4 B 3 F 4 D C 4 6 3 E
Critical path in network
Non-critical activities - Such activities have provision (float or slack), so that even if they consume time over and above the estimated time, the project will not be delayed. Dummy Activity - When two activities start at the same instant of time the head events are joined by a dotted arrow and this is known as dummy activity. dummy activity does not consume time. A dummy activity may be critical or non-critical. It becomes critical when its Earliest Start Time(EST) is same as its Latest Finish Time(LFT). As per the above network diagram, Dummy activity is included in the Network Diagram to show that activity D cannot be started until activities B and F are completed. Note - Start machine installation - An event Machine installation - An activity Completion of machine installation - An event Critical path - It is that sequence of activities which decide the total project duration. Critical path is formed by critical activities. A critical path consumes maximum resources. It is the largest path and consumes maximum time. A critical path has zero float. The expected completion dates cannot be met if even one critical activity is delayed. A dummy activity joining two critical activities is also a critical activity. A critical path reveals those activities which must be manipulated by some means if the scheduled completion dates are to be met. Duration - Duration is the time required to complete a task or an activity. Total project time - It is the time which will be taken to complete a project and is found from the sequence of critical activities. In other words, it is the duration of critical path.
56
Pre-operation (PRE-OPR) - Pre-operation are the operations which precede the operation under consideration. eg. Machine installation can be done after machine foundation is completed. Thus machine foundation is the pre-operation of the machine installation. Post Operation (POST-OPR) - Post-operation are the operations which follow after the operation under consideration is completed. eg. Machine installation can be done after machine foundation is completed. Thus machine installation is the post-operation of the machine foundation. Earliest Start Time (EST) - It is the earliest possible time at which an activity can start and is calculated by moving from first to last event in a network diagram. Earliest Finish Time (EFT) - It is the earliest possible time at which an activity can finish. EFT = EST + Duration of that activity. Consider three activities A, B and C in which activity C can start only after the completion of activities A and B. Activities A and B dont have any PRE-OPR. If activity A takes 15 hours to finish and activity B takes 20 hours to finish, then As earliest finish is 15 hours and Bs earliest finish is 20 hours. Latest Finish Time (LFT) - It is the latest time by which the operation must be completed so that scheduled date for the completion of the project may not be delayed. It is calculated by moving backward i.e., from last event to first event of the network diagram. It is the last event time of the head event. Latest Start Time (LST) - It is the latest possible time by which an activity can start. LST = LFT Duration of that activity. Float or Slack - Slack is with reference to an event and float is with reference to an activity. In other words, slack is used with PERT and float with CPM. But in general practice they may be used interchangeably. Float or slack means spare time a margin or extra time over and above duration which a non-critical activity can consume without delaying project. Float is the difference between the time available for completing an activity and time necessary to complete the same. Network diagram - Network diagram or arrow diagram is the basic feature of network planning. It is a diagram which represents all the events and activities in sequence (in which they are required to be performed to complete the project), along with their inter relationships and with their interdependencies. Rules for drawing the network 1. 2. 3. 4. 5. 6. 7. 8. Each activity is represented by one and only one arrow in the network. All the arrows must run from left to right. A circle represents an event. Every activity starts and ends with an event. No two activities can be identified by the same head and tail event. Dotted line arrows represent dummy activities. Do not use dummy activity unless required. Avoid looping and crossing of activity arrows by repositioning. Every activity, except the first and the last, must have at least one preceding and one succeeding activity. Isolated activities must be avoided. For coding use alphabets for all activities including the dummy activity and numbers for events.
Production planning and control Some of the common combination of activity in a project is as follows. SL.No 1.
A
57
Diagram
B
Logic Activity 'A' is preceding activity of 'B'. i.e., activity A' need to be completed before start of activity 'B'. In other words 'B' starts after 'A' is finished.
A C B
2.
Activity A and B are concurrent. Activity C cannot start until both the activities A and B are completed.
3.
C
Activity D cannot begin until both A and C is completed. But B can start after A is complete. The activity Z, represented by dashed arrow, is a dummy activity. This does not consume any resource i.e. have zero time and zero cost.
Example
10 3 0 0 (4) A EST LST D 4 Network diagram 4 4 (6) B 2 (4) 0 8 12 0 (3) E C 10
(5)
15
15 (3) F
18
18
Es EST is 8 hours as E has to wait for operations A and D to finish. Es LST time is 12, as activity F will start only at 15 hours after the completion of E and C. Though activity D was completed after 8th hour, activity E can wait for another 4 hours i.e., activity E can start even at 12 hours as activity E takes only 3 hours to finish and activity F starts only at 15 hours.(8+4=12). Es EFT is 11 hours, as E will have to wait for the completion of activities A and D which takes 4 hours each and activity E itself takes 3 hours to finish. Es LFT is 15 hours, as activity F will start only after the completion of E and C. Though activity E can get over by 11 hours, activity, activity F will start only after the completion of both E and C. So activity E may delay its activity by another 4 hours so that activities E and C finish simultaneously.
Production planning and control 5.1.1 Critical Path Method (C.P.M)
58
The E.I.du.Pont de Nemours Company (U.S.A) in the year 1958 while overhauling a chemical plant employed this technique for the first time to schedule and control the project and experienced a good amount of saving. C.P.M help to plan civilian business and engineering industry were activity timings were relatively well known. C.P.M is applicable to both large and small projects taking from space programmes to wedding or horse shows. CPM, or Critical Path Analysis, is a mathematically based algorithm for scheduling a set of project activities. C.P.M is a technique used for planning and controlling the logical and economic sequence of operations for accomplishing a project. It is an important tool for effective project management. CPM model of the project includes the following : 1. 2. 3. A list of all activities required to complete the project The time (duration) that each activity will take to completion, and The dependencies between the activities.
Using these values the longest path of planned activities to the end of the project, and the earliest and latest time that each activity can start and finish without making the project longer is calculated. This process determines which activities are "critical" (i.e., on the longest path) and which have "Float" (i.e., can be delayed without making the project longer). Identifying the critical path enables to determine the shortest time possible to complete the project. Any delay of an activity on the critical path directly impacts the planned project completion date. These results allow managers to prioritize activities for project completion and to shorten the critical path of a project by adding resources. Steps involved in C.P.M 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Break down the project into various activities systematically. Label all activities. Arrange all activities in logical sequence. Construct the arrow diagram. Number all the nodes and activities. Find the time for each activity. Mark the activity times on the arrow diagram. Calculate early, start and finishing times. Tabulate various times and mark EST, LFT on the arrow diagram. Calculate the total float for each activity. Identify and mark the critical activities and critical path on the arrow diagram. Calculate the total project duration. If it is intended to reduce the total project duration, crash the critical activities of the network. 14. Optimize the cost and update the network.
Advantages 1. 2. Improves efficiency Cost saving
Disadvantages 1. 2. Clear and reliable information should be available. Skilled management is essential.
Production planning and control Problems : 1.
59
A small engineering project consists of six activities namely A,B,C,D,E and F with duration of 4,6,5,4,3 and 3 days respectively. Calculate EST, LST, EFT, LFT and floats. Mark the critical path and find total project duration.
10 3 0 0 (4) A EST LST D 4 4 4 (6) B 2 (4) 0 8 12 0 (3) E C 10
(5)
15
15 (3) F
18
18
Activity A (1-2) B(2-3) C(3-5) D(2-4) E(4-5) F(5-6)
Duration (Days) 4 6 5 4 3 3
EST 0 4 10 4 8 15
LST= LFT-D 0 4 10 8 12 15
EFT= EST+D 4 10 15 8 11 18
LFT 4 10 15 12 15 18
Float = LST-EST or Float = LFT-EFT 0 0 0 4 4 0
Critical path is the one which consumes maximum time and it is 1-2-3-5-6. The total project duration, therefore is 4 + 6 + 5 + 3 = 18 days. 2. Calculate EST, LST, EFT, LFT and floats. Mark the critical path and find total project duration for the network diagram shown below.
2 8 4 6 10 4
5 8
6 4
Activity 1-2 1-4 1-3 2-5 3-5 5-6 4-6
Duration (Days) 8 6 4 10 6 4 8
EST 0 0 0 8 4 18 6
EFT 8 6 4 18 10 22 14
LST 0 8 8 8 12 18 14
LFT 8 14 12 18 18 22 22
Float = LST-EST 0 8 8 0 8 0 8
Critical path is the one which consumes maximum time and it is 1-2-5-6. The total project duration, therefore is 8 + 10 + 4 = 22 days.
Production planning and control 5.1.2 Programme Evaluation Review Technique (PERT)
60
Program (or Project) Evaluation Review Technique, commonly abbreviated PERT, is a model for project management designed to analyze and represent the tasks involved in completing a given project. PERT was developed primarily to simplify the planning and scheduling of large and complex projects. It was able to incorporate uncertainty by making it possible to schedule a project while not knowing precisely the details and durations of all the activities. It is more of an event-oriented technique rather than startand completion-oriented, and is used more in R&D-type projects where time, rather than cost, is the major factor. PERT is intended for very large-scale, one-time, complex, nonroutine projects. PERT is a method to analyze the involved tasks in completing a given project, especially the time needed to complete each task, and identifying the minimum time needed to complete the total project. PERT was invented by Booz Allen Hamilton, Inc. under contract to the United States Department of Defense's US Navy Special Projects Office in 1958 as part of the Polaris mobile submarine-launched ballistic missile project. Features of P.E.R.T 1. 2. 3. 4. 5. 6. 7. 8. 9. P.E.R.T describes the basic network technique which includes planning, monitoring and control of projects. P.E.R.T finds application in planning and controlling complex set of tasks, functions and relationships. It is a very important technique in the field of project management. P.E.R.T is commonly employed for conducting initial review of the project. P.E.R.T is very useful device for planning the time and resources. It points out potentially troublesome areas(which may disrupt programme objectives) against which a timely action can be taken to prevent their occurrences. P.E.R.T helps in decision making. P.E.R.T was actually developed as a research and development tool where activity timings could not be estimated without with enough certainty. To some extent a similar situation occurs in design also. P.E.R.T can be employed at those places where a project cannot be easily defined in terms or resources required. Because of the uncertainty of activity timings, P.E.R.T acquired the shape of probabilistic model. It uses linear programming and probability concept.
Steps involved in P.E.R.T The project is broken down into various activities systematically. Arrange all activities in logical sequence. Construct the network diagram. Events and activities are numbered. Using three time estimate, the expected time for each activity is calculated. Standard Deviation and variance of each activity are calculated. EST and LFT are calculated. Expected time, earliest starting time and latest finishing times are marked on the network diagram. 9. Slack is calculated. 10. Critical paths are identified and marked on the network diagram. 11. Length of critical path or total project duration is found out. 12. Lastly the probability that the project will finish at due date is calculated. 1. 2. 3. 4. 5. 6. 7. 8.
Production planning and control Estimation of activity times in P.E.R.T
61
For each activity, three time estimates are taken. The weights are based on an approximation of the beta distribution. They are1. 2. 3. to (optimistic time) - It is the shortest possible time in which an activity can be completed if every thing goes exceptionally well. tm(most likely time) - It is the time in which the activity is normally expected to complete under normal contingencies.
tp(pessimistic time) - It is the time which an activity will take to complete in case of difficulty i.e., if mostly things go wrong. It is the longest of the three time estimates. to + ( tm 4) + tp 4. te(estimated time) - is given by te = 6 Estimation of variability of activity times
St (standard deviation) =
t p - to 6
t p - to Vt (variance) = 6 The higher the standard deviation, the greater the uncertainty that the project will be completed on the due date.
Length of the critical path or the total project duration Total project duration = Sum of the duration of each critical activity. Variance of the critical path
Variance of the critical path = Sum of the variance of the each critical activity. Standard deviation, St = Variance of the critical path
The probability that the project will meet the schedule or the due date Given the variance, the probability that the project will be completed can be calculated by the certain date assuming a normal probability distribution for the critical path. The probability of completing the project within the scheduled time may be obtained by using the standard normal variate, where D is the expected time of project completion.
Z=
D - Te St Z = Normal deviation ( Standard normal variate) D = Due or schedule date (time) (desired time) St = Standard deviation Te = Total project duration
where
Probability of completion of project that corresponds to Z is obtained from the standard normal table (Given in Appendix I).
Production planning and control Problems :
62
1. The data regarding the activities in a project are given below. It is given that the schedule date of completion of project is 38 days. Draw the network diagram, find the critical path and find the probability that project can be completed at schedule time. Activity 1-2 1-6 2-3 2-4 3-5 4-5 6-7 5-8 7-8 to (Optimistic time) 2 2 5 1 5 2 3 2 7
19 6 2 (6) 0 0 1 5 (5) 6 7 (11) 6 (13) 3 10 4 16 7 18 (15) EST LST 24 19 (11) 30 5 30 (3) 33 8 33
tm (Most likely time) 5 5 11 4 11 5 9 2 13
tp (Pessimistic time) 14 8 29 7 17 14 27 8 31
te = St = Vt =
t o + ( t m 4) + t p 6 t p - to 6 t p - to 6
2
Solution : Activity 1-2 1-6 2-3 2-4 3-5 4-5 6-7 5-8 7-8 Activity 1-2 1-6 2-3 2-4 3-5 4-5 6-7 5-8 7-8
te(Estimated time) 6 5 13 4 11 6 11 3 15 EST 0 0 6 6 19 10 5 30 16
St (Standard deviation) 2 1 4 1 2 2 4 1 4 LST 0 2 6 20 19 24 7 30 18
Vt (Variance) 4 1 16 1 4 4 16 1 16 Total slack = LST-EST 0 2 0 14 0 14 2 0 2
Production planning and control Length of the critical path or the total project duration = = Sum of the duration of each critical activity = 6 + 13 + 11 + 3= 33 days. Variance of the critical path = Sum of the variance of the each critical activity = 4 + 16 + 4 + 1 = 25
Standard deviation, S t = Variance of the critical path = 25 = 5
63
The probability that the project will meet the schedule or the due date = D = the due or schedule date(time) (Desired Time) = 38 days Total project duration = Te = 33 Substituting different values in the equation D - Te 38 - 33 Z= = =1 St 5 The corresponding value of probability can be read from the normal distribution table and is 0.841. 2. The data regarding the activities in a project are given below. SL.No 1 2 3 4 5 6 7 8 9 Activity 1-2 1-6 2-3 3-4 3-5 4-5 6-7 5-8 7-8 to 2 2 5 1 5 2 3 2 7 tm 5 5 11 4 11 5 9 9 13 tp 14 8 29 7 17 14 27 8 31
It is given that schedule date of completion of project is 38 days. a) Draw the PERT Network. b) Find the critical path. c) Find the probability that project can be completed at scheduled time. Solution : te =
to + ( t m 4) + t p
to 2 2 5 1 5 2 3 2 7 tm 5 5 11 4 11 5 9 9 13 tp 14 8 29 7 17 14 27 8 31 te (Estimated time) 6 5 13 4 11 6 11 8(7.66) 15
6 SL.No Activity 1 1-2 2 1-6 3 2-3 4 3-4 5 3-5 6 4-5 7 6-7 8 5-8 9 7-8 Critical path is 1-2-3-5-8.
64
Critical path is the one which consumes maximum time and it is 1-2-3-5-8. The total project duration, therefore is = 6 + 13 + 11 + 8 = 38 t p - to Standard deviation, St = 6
Variance Vt , =
tp - to 6
SL.No 1 2 3 4 5 6 7 8 9
Activity 1-2 1-6 2-3 3-4 3-5 4-5 6-7 5-8 7-8
te 6 5 13 4 11 6 11 8(7.66) 15
EST 0 0 6 19 19 23 5 30 16
EFT 6 5 19 23 30 29 16 38 31
LST 0 7 6 20 19 24 12 30 23
LFT 6 12 19 24 30 30 23 38 38
Float = LST-EST or Float = LFT- EFT 0 7 0 1 0 1 7 0 7
St 2 1 4 1 2 2 4 1 4
Vt 4 1 16 1 4 4 16 1 16
Variance of the critical path = Sum of the variance of the each critical activity = 4 + 16 + 4 + 1 = 25
Standard deviation, S t = Variance of the critical path = 25 = 5
The Probability that the project will meet the schedule or the due date = D = the due or schedule date(time) (desired time) = 38 days Te = Total project duration = 38
D - Te 38 - 38 = =0 St 5 The corresponding value of probability can be read from the normal distribution table and is 0.500.
Substituting different values in the equation Z =
Production planning and control Difference between P.E.R.T and C.P.M
65
PERT and CPM are some of the major tools used for attaining more efficient and faster completing of very complex projects. Both PERT and CPM models are used to minimize time, or cost or idle time of resources. Though there are no essential differences between PERT and CPM as both of them share in common the determination of a critical path and are based on the network representation of activities and their scheduling that determines the most critical activities to be controlled so as to meet the completion date of the project. SL.No P.E.R.T PERT is a probabilistic model. It uses three estimates of the activity time- optimistic, pessimistic and most likely with a view to take into account time uncertainty. PERT was developed in connection with an R and D work, therefore it had to cope with the uncertainties which are associated with R and D activities. Estimates of activity duration are uncertain. Uses three time estimate and so is a probabilistic tool. P.E.R.T terminology uses terms like network diagram, event and slack. PERT finds applications in project where resources (especially money) are always made available when required. It is an event-oriented network because in the analysis of network emphasis is given important stages of completion of task rather than the activities required to be performed to reach to a particular event or task. PERT is a technique that is used to predict project completions when there is a great deal of uncertainty in the estimated durations. Especially suitable in defense projects and Research and development where activity cannot be reliably predicted. PERT is normally used for projects involving activities of non-repetitive nature. C.P.M CPM is a deterministic model i.e. it dose not take into account the uncertainties involved in the estimation of time for execution of a job or an activity. It completely ignores the probabilistic element of the problem. C.P.M is used when the expected time for completion of each event is known. Estimates of activity duration are based on historical data. Uses one time estimate and so is a deterministic tool. C.P.M terminology uses terms like arrow diagram, nodes and float. C.PM. is employed to those projects where there is better utilization of resources.
1.
2. 3. 4. 5.
6.
CPM is activity oriented i.e., CPM network is built on the basis of activities. The critical path method is a method of managing a project by applying the management effort of the project manager and the efforts of the project team in the most effective way. Suitable for projects such as plant maintenance, civil construction projects etc. CPM is based on the assumption that there is some experience with the work. CPM is used for projects involving activities of repetitive nature.
8.
9.
Production planning and control Advantages of PERT and CPM 1. 2.
66
Detailed planning - The use of PERT and CPM forces management to plan in detail and to define what must be done to accomplish objectives on time. Efficient monitoring and control - The number of critical activities in a network is only a small portion of the total activities. Identification of the critical activities enables the use of an efficient monitoring system by concentrating only on the critical activities. Proper use of resources - Employing PERT or CPM enables management to use resources more wisely. Easily understood - CPM and PERT can be easily understood because they provide a method for visualizing an entire project. Adaptable to computers - PERT and CPM are easily adaptable to computer use. Tools for decision making - PERT and CPM allow management to check the effectiveness and efficiency of alternative ways of executing projects. Both PERT and CPM allow the user to manage and balance resources including money and time.
3. 4. 5. 6. 7.
Limitation of PERT and CPM 1. 2. 3. Project activities must be clearly defined, independent and stable in their relationships. Precedence relationships must be specified and networked together. There is an inherent danger in too much emphasis on critical paths.
Kanban In the word Kanban kan means "visual", and ban, means "card" or "board" is a concept related to (JIT) production. Kanban is a signaling system to trigger action. As its name suggests, kanban historically uses cards to signal the need for an item. Kanban, a Japanese system of Just-in-Time (JIT), is a slight modification of conventional JIT practice. In Kanban, a card or a marker is used to control the movement of in-process materials through the sequential process of manufacturing. It relies on an information system to communicate the material needs by a customer' unit to its 'supplier' unit by the card system. Two cards are used in the system; "p" card, meant for production signal, is used to authorize a workstation to produce one specified of a part, and "m" card, meant for movement signal, authorizes movement of the lot from the workstation to the customer Just like JIT, this technique can also be used for control of movement of materials between customers and vendors. To explain the Kanban concept, consider the case of an assembler who is drawing a particular component from a pallet which, when full, contains 100 pieces. As the last piece is drawn, the assembler takes an identifying card from the empty pallet and sends it back down the line to the earlier work centre where that part (among others) is made. On receiving the Kanban card, the work centre responsible for supplying the component makes a new batch of 100 and sends it to the assembly post ( so that the assembler isnt kept waiting, there will probably be an extra pallet in the system to maintain the supply while the new batch is being made).
67
1. 2. 3. 4. 5. 6. 7. 8.
What is the function of forecasting technique? What do you understand by the term PPC? Define BoM What is route sheet? What are the needs of PPC in an organization. What is meant by sales trend? List out the objectives of routing. Describe MPS
Production planning and control 9. 10. 11. 12. 13. 14. 15. 16. Define PPC. What are the three distinct stages in production system? Discuss the importance of sales forecasting for production scheduling. Why is capacity planning is strategically important? What is a product structure file? Draw a product structure for a clip board. Distinguish between production and production system State the factors of production. List the methods of sales forecasting What do you mean by the term correlation?
68
1. 2. 3. 4. 5. 6. 7. 8.
Explain the steps in detail to arrive the accurate demand forecasting for an industry and what are the factors that will influence the demand in the market? What are the information gathered during process planning and how they are generated. Describe the difference between the regeneration method and the net-change method for updating the MRP record. Discuss the long term forecasting techniques. Define production control. Explain the objectives and procedure for production control. What are the components of MRP system. List out the problems in implementing MRP system. Discuss the moving average model for forecasting and mention its drawbacks. What is meant by process planning? Discuss the steps in process planning.

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Production planning and control

Production planning and control

SYLLABUS......................................................................................... 3 MODULE-I ......................................................................................... 4

Production planning and control

Production planning and control

Production planning and control

Production planning and control 1.1.1 Objectives of PPC

Production planning and control 1.

Production planning and control 1.2 Factors affecting PPC

Production planning and control 1.3.1 Planning phase

Production planning and control 1.3.3 Control phase

Production planning and control

Production planning and control 1.5 Basic elements of PPC

Production planning and control 1.5.3 Scheduling

2. Exponential smoothing method 3. Least square method

Production planning and control Simple average technique

Dn+1 = Weighted n-period moving average Dn+1 = W1D1 + W2 D2 + ......+ Wn Dn Or Dn+1 =

A t = Actual demand for the t th period

Production planning and control Problems : 1.

Ft 500 495 496 498 497 494 500

At 450 505 516 488 467 554 510

F1 = 500 + F2 = 495 + F3 = 496 + F4 = 498 + F5 = 497 + F6 = 494 + F7 = 500 +

= 495 = 496 = 498 = 497 = 494 = 500 = 501

Ft 820 820 815.50 801.95 787.26 783.53 785.38 786.64 776.88

At 820 775 680 655 750 802 798 689 775

Production planning and control Least square method

Production planning and control Problems: 1.

To find the values of a and b

Production planning and control 2.

Population of the town (in lakhs) No of TV sets demanded (in thousands)

By putting the values we get

Multiplying equation (3) by 9 and putting it as equation (5), we get,

By deducting equation (5) from equation (4), we get 52 = 50b

b = 1.04 By putting the value of b in equation (3), we get 67 = 5 a + 45 1.04 a = 4.04

Production planning and control

y = 4.04 + 1.04 (20) = 4.04 + 20.80 = 24.84 thousands CTV sets.

Squares of time deviation X2 25 9 1 1 9 25

2002 2003 2004 2005 2006 2007 N=6

To find the values of a and b

720 = 120 6 280 =4 70

Sales forecast for the next years, i.e., 2008 to 2012

Production planning and control

Year 2001 2002 2003 2004 2005 2006 2007

Expenditure for research (x) 2 3 5 4 11 5 6

Annual Profit (y) 20 25 34 30 40 31 ?

(One unit corresponds to 1 Crore Rs.) Solution :

Year 2001 2002 2003 2004 2005 2006 Total

Expenditure for research (x) 2 3 5 4 11 5 30

Annual Profit 20 25 34 30 40 31 180

xy 40 75 170 120 440 155 1000

Production planning and control

1000 6 5 30 1000 900 = =2 200 6 5 5 200 50 y = a + bx

Ft 128.0 128.0 199.3 301.4 485.9 734.1

At 128.0 236.0 354.0 581.0 862.0 1055.0

Ft+1 = Ft + (A t - Ft ) '' =0.66 '' =0.4 '' =0.33

128.0 221.3 333.0 543.0 810.9 1011.4

128.0 206.6 311.8 504.8 759.5 967.5

Least square method Year 1996 X 3 Y 128 X2 9 XY 384

Forecast for 2002 is = 536 + 152 4 = 536 + 608 = 1144

Production planning and control 2.1 Production planning

Production planning and control 2.2 Process planning

Production planning and control 2.3 Capacity planning

Production planning and control