Production Planning & Control

I
Arvind Navadikar

Excellence Learning Center

www.excellencelearningcenter.com

Excellence Learning Center 1

 AGENDA
– Role and importance of manufacturing
– Conflicts in traditional systems
– Role, objectives, and responsibilities of
materials management
– Differences among manufacturing processes
– Importance of planning
– Planning and control system
– Planning hierarchy
– Lean V/s Mass Production
Excellence Learning Center 2
 A Typical Manufacturing
Organization
C.E.O.

Human Information
Mktg & Sales Engineering Finance Manufacturing Quality
Resources Systems

Research
& Dev Ind.Engg. Mat.Mgmt. Production Manuf.Engg.

Prod.Design
 Importance of Materials
Management
INDUSTRY COST OF MATERIALS %
WOOLEN TEXTILES 71.00
SUGAR 68.50
JUTE 66.00
PHARMACEUTICALS 60.00
COTTON TEXTILES 59.20
GENERAL ENGINEERING 51.10
PAPER 52.80
CHEMICALS 50.40
STEEL 40.20
CEMENT 38.90
Excellence Learning Center 4
Traditional “Silo” Organizations

M P
E A F
R
N R S I
O
G K A N Q
D
I E L A U
U
N T E N A
C
E I S C L
T
E N E I
I
R G T
O
I Y
N
N
G

Excellence Learning Center 5

Evolution of Materials Management
FUNCTIONAL MATERIALS MANAGEMENT

M.D.

MAT.
PURCHASE PLANNING STORES LOGISTICS
HANDLING

INTEGRATED MATERIALS
M.D.
MANAGERMENT

MATERIALS
MANAGER.

MAT.
PURCHASE PLANNING STORES
Excellence Learning Center LOGISTICS
6
HANDLING
SCOR Reference Model
www.supply-chain.org

Plan

Source Make Deliver

Return Return
Excellence Learning Center 7
Enable
 Each Basic Supply Chain is a Chain of
Source, Make , Deliver Execution Processes
Plan Plan
ConfigurabilityPlan Plan

Deliver Source Make Deliver Source

Customer & Supplier Customer & Supplier Customer & Supplier

Supplier Customer

Scrap Steel Mill Crank Shaft Engine Mfg Car Mfg

Suppliers Mfg Company Company Company
Excellence Learning Center 8
 SCOR Reference Model
Demand / Supply Planning
Management.
• Balance Resources with Requirements ,
establish / Communicate Plans for the
whole Supply Chain including
Return.Execution Processes of Source,
Make Deliver.
Plan • Management of Business Rules , Supply
Chain Performance,Data Collection ,
Inventory , Capital Assets ,
Transportation,Planning Configuration,
Regulatory Requirements and
Compliance.
• Align the Supply Chain Unit Plan with the
Financial Plan.
Excellence Learning Center 9
 SCOR Reference Model
Sourcing Stocked , Make-to-Order,
and Engineer-to Order Products.
• Schedule Deliveries,Receive,Verify,and
Transfer Product , Authorize Supplier
payments.
• Identify and Select supply sources
when not predetermined.
Source • Manage Business Rules , assess
supplier performance , and maintain
data.
• Manage Inventory , capital assets,
incoming product,supplier network,
import/export requirements and supplier
agreements
Excellence Learning Center 10
 SCOR Reference Model
Make –to-Stock,Make-to-Order,
Engineer-to-Order Production
Execution.
• Schedule Production Activities,issue
product,produce and
test,package,stage product and release
Make product to deliver.
• Finalize Engineering for Engineer-to-
Order product.
• Manage Rules,Performance data,in-
process product(WIP),equipment and
facilities, transportation , production
network,and regulatory compliance for
production.
Excellence Learning Center 11
 SCOR Reference Model
• Order,Warehouse, Transportation and
Installation management for
Stocked,Make-to-Order,Engineer-to-
Order and Retail Product.
• All Order management steps from
processing customer enquiries , quotes to
routing shipments and selecting carriers.
• Warehouse management from receiving
Deliver and picking product to load and ship
product.
• Receive and verify products at customer
site and install , if necessary.
• Invoice Customer.
• Manage Deliver Business Rules,
performance,Information, finished products
inventories,import/export
Excellence Learning Center
requirements. 12
 SCOR Reference Model
Return of Goods to Suppliers and
Return of Finished Goods from
Customer including Defective Products
MRO items,and Excess Products
• All return defective product steps.
Scheduling Product return, receiving,
verifying and disposition of defective
products,return replacement or credit.
Return • Return of MRO items steps.
• Return of Excess Product steps.
• Manage Return Business
Rules,performance, data collection,
Return Inventory. Transportation , network
configuration,and return regulatory
requirements and compliance.
Excellence Learning Center 13
What is the Goal of a Company?
• Better Customer Service?
• Larger Market Share?
• Lower Cost?
• High Quality?
• Survival?
• Make MONEY in the present as well as
in the future
• Win the Race
Excellence Learning Center 14
 The Goal: To Make Money
Bottom Line Measurements

NET PROFIT RETURN ON INVESTMENT CASH FLOW

(Absolute) (Relative) (Survival)

WHAT IS THE BRIDGE

ACTIONS
Excellence Learning Center 15
GOBAL OPERATIONAL MEASURES
• THROUGHPUT-
– The rate at which the system generates
money through sales
• INVENTORY-
– All the money the system invests in
purchasing things the system intends to
sell
• OPERATING EXPENSE-
– All the money the system spends in
turning inventory into throughput
Excellence Learning Center 16
 DIRECT IMPACT:
Operational Measurements & The Bottom Line

NET PROFIT RETURN ON CASH FLOW

INVESTMENT

THROUGHPUT INVENTORY OPERATING

EXPENSE

PRODUCTION PLANNING & CONTROL

Excellence HAS GREAT ROLE TO PLAY
Learning Center 17
 Customer Expectations
•Characteristics that provide value to the
customer
– Price
– Quality
– Delivery
– Pre- and post-sale service
– Flexibility (product and volume)

Excellence Learning Center 18

 Customer Expectations
– Order qualifiers
Competitive characteristics needed to be a
viable competitor

– Order winners
Competitive characteristics that cause
customers to choose firm’s products and
services

Excellence Learning Center 19

 Customer Expectations
•Meeting customer expectations requires
good communications
– Understanding customer needs
– Two-way communication
– Working with customers to solve design and
production problems
– Freeness and openness

Excellence Learning Center 20

 Business Strategy
– To meet customer expectations, a company
must be market oriented.
– All functions in a business must support this
concept.
– Operations must be tuned to meet the needs of
the marketplace.

Excellence Learning Center 21

 Lead Time
•“A span of time required to perform a process”
•—APICS Dictionary
•Delivery lead time
– “The time from the receipt of a customer order to the delivery of the
product”
•—APICS Dictionary
•Cumulative lead time
– “The longest planned length of time to accomplish the activity in
question”
•—APICS Dictionary

Excellence Learning Center 22

 Manufacturing Strategies
Delivery Lead Time

Engineer-
Design Purchase Manufacture Assemble Ship
to-Order

Delivery Lead Time

Make-to-
Inventory Manufacture Assemble Ship Order

Delivery Lead Time

Assemble-
Manufacture Inventory Assemble Ship to-Order

Delivery Lead Time

Make-to-
Manufacture Assemble Inventory Ship
Stock

Excellence Learning Center 23

 Physical Supply/Distribution
•Movement of goods from suppliers to the beginning of the
production process and from the end of the production
process to consumers

•Activities
– Transportation
– Distribution inventory
– Warehousing
– Packaging
– Materials handling
– Order entry

Excellence Learning Center 24

 Manufacturing Planning and
Control
Involves
– Production planning
– Implementation and control
– Inventory management

Excellence Learning Center 25

 Manufacturing Processes

Manufacturing Processes

Product Layout Process Layout Project Layout

Continuous Repetitive Intermittent Production

Production Production (Job Shop)

Excellence Learning Center 26

 Product Layout

– Workstations in sequence needed to make product

– Work flows at a nearly constant rate
– Little work-in-process inventory

Excellence Learning Center 27

 Characteristics of Product
Layout
– Limited range of similar products
– Dedicated workstations
– Sufficient demand
– Capital intensive

Excellence Learning Center 28

Advantages of Product Layout
– Little work-in-process inventory
– Short throughput time and manufacturing lead
times
– Lower unit cost

Excellence Learning Center 29

Process Layout

Excellence Learning Center 30

Characteristics of Process Layout
– Intermittent lot production
– Many different parts processed at workstations
– General-purpose machinery
– Similar types of skills and equipment in each
department
– Work moves only to required stations
– Relatively easy to change product or volume
– Complex and expensive production and
inventory control
– High work-in-process inventory levels
– Longer lead timesExcellence Learning Center 31
 Characteristics of Project
Layout
– Used for large, complex projects
– Project remains in one location for assembly
– Avoids cost of moving the product

Excellence Learning Center 32

 Why Plan?
•To satisfy customer demand and ensure
the availability of resources
– Material
– Capacity

Demand Resources

Excellence Learning Center 33

A Good Planning and Control
System

What must
we get
and
when?

These are questions of priority and capacity.

Excellence Learning Center 34
 Planning and Control Hierarchy
Priority Management Capacity Management
Techniques Techniques

Resource
Production Planning
Plan (RP) •At each level, there are
three questions:
Master Rough-Cut
Production Capacity – What are the
Schedule Planning (RCCP)
priorities?
– What capacity is
Material Capacity available?
Requirements Requirements
Planning (MRP) Planning (CRP) – How can differences
be resolved?
Input/Output
Production Control
Activity Control
(PAC) Operation
Sequencing

Excellence Learning Center 35

 Effects of Good PPC
• Timely Deliveries
• Quick Feedback on Job Status
• Lower Capital Investment
• Better Availability
• Better Co-Ordination between Production, Sales
& Stores
• Effective Supervision
• Better Job Satisfaction
• Cost Reduction & Cost Control
• Effective Utilization of factors of production
• Good Return on Investment
Excellence Learning Center 36
 Involvement of PPC
• Sales Enquiry
• Technical Feasibility
• Routing & Tentative Delivery Period
• Cost Estimates
• Quotation
• The follow-Up on Quotation
• Receipt of Purchase Orders
• Engineering Drawings
• Materials Control
• Routing
• Tools Control
• Scheduling
• Dispatching
• Progressing
Excellence Learning Center 37
• Expediting or Follow-Up
 Functions of PPC
Common Functions Optional Functions
• Materials Control • Sub-Contract
• Process Planning • Work Measurement
• Tools Control • Cost Estimation
• Scheduling • Capacity Planning
• Dispatching
• Progressing
• Expediting

Excellence Learning Center 38

 Planning & Control
Planning Control
(Planning the Work) (Working the Plan)
• Collection & Maintenance • Dissemination of data,
of Data Reports
• Working our • Seeing that Requirements
Requirements are fulfilled
• Preparation of various • Overseeing that Jobs are
Plans & Charts started & finished as per
• Preparation of necessary Plans
forms & Paperwork • Actual Issue of Forms &
• Designing suitable Paperwork
Feedback system • Tracking Production
• Forward thinking on Closely
remedial actions on • Suggesting Remedial
backlogs Excellence Learning Actions
Center in case of Backlogs
39
 Factors Influencing PPC
• Type of Production
– Project and Jobbing Production
– Batch Production
– Mass and Flow Production
– Continuous or Process Production
• Distribution of Work
• Degree of Centralization

Excellence Learning Center 40

 Inputs for PPC
• Marketing Forecast
• Installed Capacity
• Production Process
• Bill of Material
• Supplier Lead Times
• Production Lead Times
• Production Layouts

Excellence Learning Center 41

 Fall of Mass Production
• Pre 90 Era
• Demand more than Supply
• License Raj
• Mass Production was necessary to be
Cost Efficient
• All Costs could be passed to Customers
• Customer has No Choice
• Price = Cost + Profit
Excellence Learning Center 42
 Rise of Lean Production
• Post 90 Era
• Competitive Market Forces
• Supply more than Demand
• Customer has Choice
• Buyer’s Market
• Smaller Batch Qty’s
• Single Piece Flow
• Cost Reduction got Importance
• Profit= Price- Cost

Excellence Learning Center 43

 What is Lean?
• Lean production focuses on eliminating
waste in processes (i.e. the waste of work
in progress and finished good inventories)
• Lean production is not about eliminating
people
• Lean production is about expanding
capacity by reducing costs and shortening
cycle times between order and ship date
• Lean is about understanding what is
important to the customer
Excellence Learning Center 44
 What is Lean Production?
• The principles of Lean Production include
– Teamwork
– Communication
– Efficient Use of Resources
– Elimination of Waste
– Continuous Improvement

• Ref. ’The Machine That Changed The World’

By- James P. Womack, Daniel T. Jones, and Daniel Roos

Excellence Learning Center 45

Lean Production vs Mass Production
• Lean Production vs Mass Production requires
– Half the Human Efforts in the factory
– Half the Manufacturing Space
– Half the Investment Tools
– Half the Engineering Hours
– Half the time to develop new products

• Ref. ’The Machine That Changed The World’

By- James P. Womack, Daniel T. Jones, and Daniel Roos

Excellence Learning Center 46

 Benefits of Lean Manufacturing
• Manufacturing Lead Time Reduction of 25-90%
• Productivity Increases of 5-50%
• Inventory Reduction 15-90%
• Floor Space Reduction 5-40%
• First Pass Yield/Workmanship Quality
Improvement 10-50%
• Flexibility to Produce Any Model Any Day
• Higher Customer Satisfaction
• Increased Market Share and EPS

Excellence Learning Center 47

 Waste
• The essence of lean manufacturing is identifying
and eliminating waste.

• All processes either add value or waste.

• Through waste elimination, opportunities

to create competitive advantages.

Value
= what the customer is prepared to pay for

Waste
= what the customerExcellence
is notLearning Center
prepared to pay for 48
 The ‘Seven Wastes’ in
Manufacturing
• 1. Overproduction
• 2. Waiting
• 3. Transportation
• 4. Processing
• 5. Motion
• 6. Defects
• 7. Inventory

• 8. Underutilized People

(After Womack Jones Roos “The Machine That

Changed The World: The Story of Lean Production”,
1990; Womack Jones “Lean
Excellence LearningThinking”,
Center 2003) 49
 Individual processes can also be analyzed to
reduce lead time through Value Analysis
Lead Time Reduction Process
The Lead Time Reduction Graphic Tool
1. Identify he Product/Service you provide
· Make 1 box for each step
2. List all steps required to complete · Make box height proportional to time required for
product from start to finish each process step
· Put value added boxes on left of vertical
3. Identify time currently required to
· Put non-value added boxes on right
complete each step · Put boxes in correct order
4. Identify steps that Add Value to the · Label boxes (name of step & time required)
product
VA NVA
5. Graph the process VA and NVA steps
1 VA NVA
per the Graphic Tool shown on this
slide 2 1
3 VA NVA
6. Analyze & eliminate time for non-value 2
added steps 4 3 1
7. Analyze & reduce time for value added 5 4 3
steps 6 6 4
8. Re-graph the improved process 7 7 6

9. Identify the Ideal Process (Minimum 8 8 8

time for VA steps and no NVA steps)
10. Graph the ideal process & work Excellence
to Learning Center 50
achieve it Current Improved Ideal
Thank You

Excellence Learning Center 51