Introduction

Production Planning is a managerial function which is mainly concerned with the following important issues:

What production facilities are required?

How these production facilities should be laid down in the space available for production? and

How they should be used to produce the desired products at the desired rate of production?

Broadly speaking, production planning is concerned with two main aspects: (i) routing or planning work tasks (ii)
layout or spatial relationship between the resources. Production planning is dynamic in nature and always remains in
fluid state as plans may have to be changed according to the changes in circumstances.
Production control is a mechanism to monitor the execution of the plans. It has several important functions:

Making sure that production operations are started at planned places and planned times.

Observing progress of the operations and recording it properly.

Analyzing the recorded data with the plans and measuring the deviations.

Taking immediate corrective actions to minimize the negative impact of deviations from the plans.

Feeding back the recorded information to the planning section in order to improve future plans.

A block diagram depicting the architecture of a control system is shown in Figure1. Important functions covered by
production planning and control (PPC) function in any manufacturing system are shown in Table1along with the
issues to be covered.
Types of Production Systems
A production system can be defined as a transformation system in which a saleable product or service is created by
working upon a set of inputs. Inputs are usually in the form of men, machine, money, materials etc. Production
systems are usually classified on the basis of the following:

Type of product,

Type of production line,

Rate of production,

Equipments used etc.

They are broadly classified into three categories:

Job shop production

Batch production

Mass production

Job Production
In this system products are made to satisfy a specific order. However that order may be produced

only once

or at irregular time intervals as and when new order arrives

or at regular time intervals to satisfy a continuous demand

The following are the important characteristics of job shop type production system:

Machines and methods employed should be general purpose as product changes are quite frequent.

Planning and control system should be flexible enough to deal with the frequent changes in product
requirements.

Man power should be skilled enough to deal with changing work conditions.

Schedules are actually non -existent in this system as no definite data is available on the product.

In process inventory will usually be high as accurate plans and schedules do not exist.

Product cost is normally high because of high material and labor costs.

Grouping of machines is done on functional basis (i.e. as lathe section, milling section etc.)

This system is very flexible as management has to manufacture varying product types.

Material handling systems are also flexible to meet changing product requirements.

Batch Production
Batch production is the manufacture of a number of identical articles either to meet a specific order or to meet a
continuous demand. Batch can be manufactured either

only once

or repeatedly at irregular time intervals as and when demand arise

or repeatedly at regular time intervals to satisfy a continuous demand

The following are the important characteristics of batch type production system:

As final product is somewhat standard and manufactured in batches, economy of scale can be availed to
some extent.

Machines are grouped on functional basis similar to the job shop manufacturing.

Semi automatic, special purpose automatic machines are generally used to take advantage of the similarity
among the products.

Labor should be skilled enough to work upon different product batches.

In process inventory is usually high owing to the type of layout and material handling policies adopted.

Semi automatic material handling systems are most appropriate in conjunction with the semi automatic
machines.

Normally production planning and control is difficult due to the odd size and non repetitive nature of order.

Mass Production
In mass production, same type of product is manufactured to meet the continuous demand of the product. Usually
demand of the product is very high and market is going to sustain same demand for sufficiently long time.
The following are the important characteristics of mass production system:

As same product is manufactured for sufficiently long time, machines can be laid down in order of
processing sequence. Product type layout is most appropriate for mass production system.

Standard methods and machines are used during part manufacture.

Most of the equipments are semi automatic or automatic in nature.

Material handling is also automatic (such as conveyors).

Semi skilled workers are normally employed as most of the facilities are automatic.

As product flows along a pre defined line, planning and control of the system is much easier.

Cost of production is low owing to the high rate of production.

In process inventories are low as production scheduling is simple and can be implemented with ease.

Forecasting
Introduction
The growing competition, frequent changes in customer's demand and the trend towards automation demand that
decisions in business should not be based purely on guesses rather on a careful analysis of data concerning the
future course of events. More time and attention should be given to the future than to the past, and the question 'what
is likely to happen?' should take precedence over 'what has happened?' though no attempt to answer the first can be
made without the facts and figures being available to answer the second. When estimates of future conditions are
made on a systematic basis, the process is called forecasting and the figure or statement thus obtained is defined as
forecast.

In a world where future is not known with certainty, virtually every business and economic decision rests upon a
forecast of future conditions. Forecasting aims at reducing the area of uncertainty that surrounds management
decision-making with respect to costs, profit, sales, production, pricing, capital investment, and so forth. If the future
were known with certainty, forecasting would be unnecessary. But uncertainty does exist, future outcomes are rarely
assured and, therefore, organized system of forecasting is necessary. The following are the main functions of
forecasting:

The creation of plans of action.

The general use of forecasting is to be found in monitoring the continuing progress of plans based on
forecasts.

The forecast provides a warning system of the critical factors to be monitored regularly because they might
drastically affect the performance of the plan.

It is important to note that the objective of business forecasting is not to determine a curve or series of figures that will
tell exactly what will happen, say, a year in advance, but it is to make analysis based on definite statistical data, which
will enable an executive to take advantage of future conditions to a greater extent than he could do without them. In
forecasting one should note that it is impossible to forecast the future precisely and there always must be some range
of error allowed for in the forecast.
Dependent versus Independent Demand
Demand of an item is termed as independent when it remains unaffected by the demand for any other item. On the
other hand, when the demand of one item is linked to the demand for another item, demand is termed as dependent.
It is important to mention that only independent demand needs forecasting. Dependent demand can be derived from
the demand of independent item to which it is linked.
Business Time Series
The first step in making a forecast consists of gathering information from the past. One should collect statistical data
recorded at successive intervals of time. Such a data is usually referred to as time series. Analysts plot demand data
on a time scale, study the plot and look for consistent shapes and patterns. A time series of demand may have
constant, trend, or seasonal pattern ( Figure 1 ) or some combination of these patterns. The forecaster tries to
understand the reasons for such changes, such as,

Changes that have occurred as a result of general tendency of the data to increase or decrease, known as
secular movements.

Changes that have taken place during a period of 12 months as a result in changes in climate, weather
conditions, festivals etc. are called as seasonal changes.

Changes that have taken place as a result of booms and depressions are called as cyclical variations.

Changes that have taken place as a result of such forces that could not be predicted (like flood, earthquake
etc.) are called as irregular or erratic variations.

Quantitative Approaches of Forecasting

Most of the quantitative techniques calculate demand forecast as an average from the past demand. The following
are the important demand forecasting techniques.

Simple average method: A simple average of demands occurring in all previous time periods is taken as the
demand forecast for the next time period in this method. ( Example 1 )
Simple Average :

A XYZ television supplier found a demand of 200 sets in July, 225 sets in August & 245 sets in September.
Find the demand forecast for the month of october using simple average method.
The average demand for the month of October is

Simple moving average method: In this method, the average of the demands from several of the most
recent periods is taken as the demand forecast for the next time period. The number of past periods to be
used in calculations is selected in the beginning and is kept constant (such as 3-period moving average).
Example 2

Simple Moving Average :

A XYZ refrigerator supplier has experienced the following demand for refrigerator during past five months.
Month
February
March
April
May
June

Demand
20
30
40
60
45

Find out the demand forecast for the month of July using five-period moving average & three-period moving
average using simple moving average method.

Weighted moving average method: In this method, unequal weights are assigned to the past demand data
while calculating simple moving average as the demand forecast for next time period. Usually most recent
data is assigned the highest weight factor. (Example 3 )

Weighted Moving Average Method :

The manager of a restaurant wants to make decision on inventory and overall cost. He wants to forecast
demand for some of the items based on weighted moving average method. For the past three months he
exprienced a demand for pizzas as follows:
Month
October
November
December

Demand
400
480
550

Find the demand for the month of January by assuming suitable weights to demand data.

Exponential smoothing method: In this method, weights are assigned in exponential order. The weights
decrease exponentially from most recent demand data to older demand data. (Example 4 )

Exponential Smoothing :

One of the two wheeler manufacturing company exprienced irregular but usually increasing demand for
three products. The demand was found to be 420 bikes for June and 440 bikes for July. They use a
forecasting method which takes average of past year to forecast future demand. Using the simple average
method demand forecast for June is found as 320 bikes (Use a smoothing coefficient 0.7 to weight the
recent demand most heavily) and find the demand forecast for August.

Regression analysis method: In this method, past demand data is used to establish a functional relationship
between two variables. One variable is known or assumed to be known; and used to forecast the value of
other unknown variable (i.e. demand). (Example 5

Regression Analysis :
Farewell Corporation manufactures Integrated Circuit boards(I.C board) for electronics devices. The
planning department knows that the sales of their client goods depends on how much they spend on
advertising, on account of which they receive in advance of expenditure. The planning department wish to
find out the relationship between their clients advertising and sales, so as to find demand for I.C board.
The money spend by the client on advertising and sales (in dollar) is given for different periods in following
table :

Period(t
)

1
2
3
4
5
6
7

Advertisin
g (Xt)

Sales (Dt)

$(1,000.000
$(1,00,000)
)
20
25
15
18
22
25
27

6
8
7
7
8
9
10

Dt2

Xt 2

XtDt

36
64
49
49
64
81
100

400
625
225
324
484
625
729

120
200
105
126
176
225
270

8
9
10

23
16
20

7
6
8

49
36
64

529
256
400

161
96
120

211

76

592

4597

1599

Error in Forecasting
Error in forecasting is nothing but the numeric difference in the forecasted demand and actual demand. MAD (Mean
Absolute Deviation) and Bias are two measures that are used to assess the accuracy of the forecasted demand. It
may be noted that MAD expresses the magnitude but not the direction of the error.
Facility location
Location can be defined as a place to put something. Facility location means a place to put the facility. Facility
location decisions are strategic, long term, and non-repetitive in nature. Without sound location planning in the
beginning, the new facility may pose continuous operating disadvantages for the future operations. Location
decisions are affected by many factors, both internal and external, to the organization's operations. Internal factors
include the technology used, the capacity, the financial position, and the work force required. External factors include
the economic, political, and social conditions in the various localities. Thus, for long term benefits of the facility, a
sound and careful location planning is required.
Location planning deals with determining the optimal location for one or more new facilities to serve a set of
customers. This type of problem arises in many areas, such as location of manufacturing facility, storage facility, etc.
Location planning may involve finding the best site for the plant, which is termed as plant location. Location planning
may also involve deciding the location of each specific piece of machinery and equipment in a particular area of a
facility ( Tompkins, J. A., et al., Facility Planning, Second Edition, John Wiley & Sons, NY, 1996 ).
When does a facility location (plant location) decision arise?

It may arise when a new facility is to be located

In some cases, a poor site restricts the facility or plant operations and subsequent expansions, thereby
necessitating setting up the facility at a new site.

The growing volume of a business makes it advisable to establish additional facilities in new territories.

New economic, social, legal or political factors could suggest a change of the location of the existing plant.

Factors affecting the facility location study

Location studies are normally made in two phases,
(1) The general territory selection phase and
(2) The exact site selection phase
The important factors to be considered for the selection of territory and subsequent selection of a particular site are:
Market: It is a very important factor with respect to both phases of location studies. If product is fragile and
susceptible to spoilage, proximity of the facility to the market is critical. If the product is relatively cheap and
transportation cost is high, a location close to the markets is desirable.
Raw material and supplies: The facility in general should be near to the vendors / suppliers. This will further reduce
the transportation cost of incoming materials and the lead-time of the inventory replenishment.
Transportation facilities: Transportation facilities must be available.
Climate: Climate is another important factor to be considered for the facility location especially in industries where
special constraints are needed, for example the textile industry requires a high humidity zone.
Site size: The plot of land must be large enough to hold the facilities required by the proposed facility. Sometimes a
good site may not have the required area.
Community attitude: Community attitude is difficult to evaluate. Normally communities provide the overwhelming
support to new industries, because this generates significant employment opportunities to the local people. Moreover,
infrastructure development of the city or town progresses very rapidly. In some cases, when there is a fear of
generation of pollution, community attitude goes in the reverse.
Other factors that may also affect the facility location decisions are manpower availability, land cost, waste disposal,
and pollution.
Requirements governing the choice of a plant in a city location
The requirements that govern the choice of a plant or a facility to be located in a city location include availability of
adequate supply of labor force, high proportion of skilled employees, small plant site or multi-floor operations, good
communication facilities, good banking and health care delivery system, and rapid contact with customers and
suppliers.
Requirements governing the choice of a plant in a country location
The requirements that govern the choice of a plant or a facility to be located in a country location include large plant
site, lesser effort required for anti-pollution measures, lower taxes, unskilled labor force requirement, and low wages.
Analytical Methods of Location Planning

The various analytical methods of location planning are affected by the way the distances are measured and the
objective function is used.
Distance measure
The distance measure involved in a facility location problem is an important element in formulating an analytical
model. There are two ways to measure the distance between two facilities.
1.

Rectilinear Distance

2.

Euclidean Distance

Rectilinear distance
When distance between two facilities is measured along path that is orthogonal to each other, then that distance is
termed as rectilinear distance. Suppose two facilities are located at points represented by ( X 1 , Y 1 ) and at
( X 2 , Y 2 ) (figure 1), then the rectilinear distance between the facilities will be :
|X1-X2|+|Y1-Y2|

Figure 1: Rectilinear Distance

Euclidean distance
When distance is measured along straight-line path between the two facilities, then that distance is termed as
Euclidean distance. Suppose two facilities are located at points represented by ( X 1 , Y 1 ) and at ( X 2 , Y 2 ) (figure
2), then the Euclidean distance between the facilities will be
{(X1-X2)2+(Y1-Y2)2}1/2

Figure 2: Euclidean Distance

The whole family of distance measure ( D K ) for the distance between two points ( X 1 , Y 1 ) and ( X 2 , Y 2 ) is
defined by the following formula:
D K = { ( | X 1 - X 2 | ) K + ( |Y 1 - Y 2 |) K } 1 / K
when K =1 the above equation takes the form as:

D 1 = { ( | X 1 - X 2 | ) + ( |Y 1 - Y 2 | ) }
This equation gives the measure of rectilinear distance.
when K =2 the above equation takes the form as:
D 2 = { ( | X 1 - X 2 | ) 2 + ( |Y 1 - Y 2 |) 2 } 1 / 2
This gives the measure of Euclidean distance.
Techniques of conducting a facility location study
The following techniques may be used for deciding the best location of a facility.

Factor rating method

Transportation method

Factor rating method

The factor rating method is explained below by an example of deciding the best site out of the three proposed sites.

To evaluate these alternative sites we identify five factors such as raw material, market, land cost,
community attitude, and transportation facility.

Provide the weights to each factor. Suppose we allocate 10 points to market and raw material, 8 points to
land cost, 7 points to community attitude, and 6 points to transportation facilities.

Rate each alternative for each factor on a scale of 10. Suppose, for factor raw material the A alternative gets
9 points, Balternative gets 10 points and C alternative gets 8 points.

Tabulate all the above information as given in Table 1.

Repeat the same procedure (step 3 and 4) for other factors.

Multiply the weights of each factor with the rating of each alternative and record on the lower half of the
rectangle under each alternative.

Add the score of each alternative and record in front of Total.

The best alternative is that alternative which has the maximum score. If two or more alternatives have the
maximum score, then those alternatives should be selected and a separate evaluation should be made for
those alternatives only.
Table 1: Factor Rating Chart

Factors

Raw material

Weights Location A Location B

10

10

Location C

90

Market

10

100

8
80

Land cost

10

347

64

10
63

7
48

Total

90

64

70

Transportation
facilities

9
80

56

Community
attitude

80

70

10
42

349

60

364*

* Best Alternative is Location C

Transportation method:
The transportation problem is concerned with the distribution of goods or services from various sources to various
destinations. The transportation problem can be formulated as a linear programming problem. The total transportation
cost at various locations can be calculated and the location with the least total transportation cost can be chosen
(Turner, W.C, et al., Introduction to Industrial and System Engineering, Second Edition, Prentice Hall, Inc. New
Jersey 1987).
Facilities Layout Design and Facilities Location
Facilities layout design refers to the arrangement of all equipment, machinery, and furnishings within a building
envelope after considering the various objectives of the facility. The layout consists of production areas, support
areas, and the personnel areas in the building (( Tompkins, J. A., et al., Facility Planning, Second Edition , John Wiley
& Sons, NY,1996 ).
Need of Facilities Layout Design

The need for facilities layout design arises both in the process of designing a new layout and in redesigning an
existing layout. The need in the former case is obvious but in the latter case it is because of many developments as
well as many problems with in the facility such as change in the product design, obsolescence of existing facilities,
change in demand, frequent accidents, more scrap and rework, market shift, introduction of a new product etc.
Objectives of Facilities Layout Design
Primary objectives of a typical facility layout include
(1) Overall integration and effective use of man, machine, material, and supporting services,
(2) Minimization of material handling cost by suitably placing the facilities in the best possible way,
(3) Better supervision and control,
(4) Employee's convenience, safety, improved morale and better working environment,
(5) Higher flexibility and adaptability to changing conditions and
(6) Waste minimization and higher productivity.
Types of Layout
The basic types of layouts are:

Product layout

Process layout

Fixed position layout

Cellular layout

Product layout
This type of layout is generally used in systems where a product has to be manufactured or assembled in large
quantities. In product layout the machinery and auxiliary services are located according to the processing sequence
of the product without any buffer storage within the line itself. A pictorial representation of a product type of layout is
given in Figure 1. The advantages and disadvantages are given in Table 1.

Figure 1: A Pictorial Representation of Product Type of Layout

Table 1: Advantages And Disadvantages of Product Type of Layout

ADVANTAGES

Low material handling cost per unit

Less work in process

Total production time per unit is short

Low unit cost due to high volume

Less skill is required for personnel

Smooth, simple, logical, and direct

flow

Inspection can be reduced

Delays are reduced

Effective supervision and control

DISADVANTAGES

Machine stoppage stops the line

Product design change or process

change causes the layout to become
obsolete

Slowest station paces the line

Higher equipment investment usually

results

Less machine utilization

Less flexible

Process layout
In a process layout, (also referred to as a job shop layout) similar machines and services are located together.
Therefore, in a process type of layout all drills are located in one area of the layout and all milling machines are

located in another area. A manufacturing example of a process layout is a machine shop. Process layouts are also
quite common in non-manufacturing environments. Examples include hospitals, colleges, banks, auto repair shops,
and public libraries ( Muther, R, Systematic Layout Planning, Second Edition , CBI Publishing Company, Inc. Boston,
1973 ).
A pictorial representation of a process type of layout is given in Figure 2. The advantages and disadvantages are
given in Table 2.

Figure 2: A Pictorial Representation of Process Type of Layout

Table 2: Advantages And Disadvantages of Process Type of Layout

ADVANTAGES

Better machine utilization

Highly flexible in allocating personnel

and equipment because general
purpose machines are used.

Diversity of tasks for personnel

Greater incentives to individual

worker

Change in Product design and

process design can be incorporated
easily

More continuity of production in

unforeseen conditions like
breakdown, shortages, absenteeism

Fixed location layout

DISADVANTAGES

Increased material handling

Increased work in process

Longer production lines

Critical delays can occur if the part

obtained from previous operation is
faulty

Routing and scheduling pose

continual challenges

In this type of layout, the product is kept at a fixed position and all other material; components, tools, machines,
workers, etc. are brought and arranged around it. Then assembly or fabrication is carried out. The layout of the fixed
material location department involves the sequencing and placement of workstations around the material or product.
It is used in aircraft assembly, shipbuilding, and most construction projects. A pictorial representation of a fixed
location type of layout is given in Figure 3. The advantages and disadvantages are detailed in Table 3.

Figure 3: A Pictorial Representation of Fixed Location Type of Layout

Table 3: Advantages And Disadvantages of Fixed Location Type of Layout

ADVANTAGES

DISADVANTAGES

Material movement is reduced

Promotes pride and quality because

an individual can complete the whole
job

Requires greater skill for personnel

Highly flexible; can accommodate

changes in product design, product
mix, and production volume

Personnel and equipment movement

isincreased

Requires close control and

coordination in production and
personnel scheduling

May result in increase space and

greater work in process

Cellular type layout

This type of layout is based on the grouping of parts to form product / part families. Similar parts may be grouped into
families based on common processing sequences, shapes, tooling requirements, and so on. The processing
equipment required for a particular product family are grouped together and placed in a manufacturing cell. The cells
become, in effect, miniature versions of product layouts. The cells may have movements of parts between machines
via conveyors or have a flow line connected by a conveyor. This type of layout is used when various products have to
be produced in medium to large quantities. A pictorial representation of a cellular type of layout is given in Figure 4.
The advantages and disadvantages are given in Table 4.

Figure 4: A Pictorial Representation Of Cellular Type Of Layout

Table 4: Advantages And Disadvantages Of Cellular Type Of Layout

Advantages

Higher machine utilization

Smoother flow lines and shorter
travel distances are expected than
for process layout

Offers some benefits of both product

and process type of layout because it
is a compromise between the two

Encourages consideration of general

purpose equipment

Disadvantages

Greater labor skills required

Flow balance required in each cell

Has some of the disadvantages of

product and process type of layout; it
is a compromise between the two

Layout Selection
The basis of selection of a layout is the volume-variety analysis. Volume-variety analysis is based on the Pareto's
principle, which focuses on the fact that a majority of the resources are consumed by a small fraction of the
population. For example 85% of the wealth of the world is held by 15% of the people. This rule also applies to
facilities design i.e. 85% of the production volume is attributed to 15% of the product line. To decide a layout, a partpopulation analysis must first be completed. A bar chart between the type of products and the quantity to be produced

is developed. This chart is also called product-quantity chart (Figure 5) and, based on this chart, decision regarding
the type of layout to be used is taken. For the products lying in the area X (Figure 5) -a product type of layout is
recommended and for the products lying in the area Y , a process type of layout is recommended. In the middle (area
between X and Y ), a combination of product and process type layouts, is recommended (( Muther, R, Systematic
Layout Planning,Second Edition , CBI Publishing Company, Inc. Boston, 1973 ).

Figure 5: Product Quantity (P-Q) Chart

Types of Flow Patterns
In the facilities layout problem, the decision regarding placement of the machines is typically made. Depending on the
application and availability of space, the machines are placed in one of the following pattern ( (( Tompkins, J. A., et
al., Facility Planning, Second Edition , John Wiley & Sons, NY,1996)

Straight line pattern,

U-shaped pattern,

S-shaped pattern and

W- shaped pattern

A pictorial representation of flow patterns is given in Figure 6.

Figure 6: Flow Patterns

Straight line pattern
The straight-line pattern is normally used when products are produced in large quantities and the number of steps
required for their production is few. Moreover, the shipping and receiving sections are on the opposite sides.
U-shaped pattern
U-shaped patterns are often used when it is necessary to keep the beginning (receiving) and end (shipping) of the
line at the same side and same end of the plant . U-shaped patterns are also preferred in just-in-time layouts.
Workers are generally placed in the center of the U. From there they can monitor more than one machine at a time.
S-shaped pattern
S-shaped patterns are used for long assembly processes that have to fit in the same area as well as when it is
necessary to keep the receiving and shipping ends on the opposite sides.
W-shaped pattern
W-shaped pattern, like the S-shaped pattern is also used for long assembly processes, which have to fit in the same
area. When it is also necessary to keep the receiving and shipping ends on the same side, the W-shaped pattern is
preferred.
Layout Design Procedure
The major steps that needed to be followed in the layout design are :

Statement of the problem in terms of its objective, scope and factors to be considered.

Collection of basic data on sales forecast, production volume, production schedules, part lists, operations to
be performed etc.

Calculation of production rate and equipment requirements

Data analysis and its presentation in the form of various charts .

Calculations of space requirements and allocation of activity areas

Development of block plan, plot plan, and detailed layout.

Evaluation , selection , and installation of layout.