Production Planning and Control (ME-802 (D)) - Unit 2 Short Notes

UNIT 2: PRODUCTION PLANNING AND CONTROL

I. FUNDAMENTALS OF PRODUCTION SYSTEMS & PLANNING

Job Production vs. Batch Production

[!TIP] Exam Focus: Be ready to cite examples and justify which system suits a given industrial scenario (e.g., "building a bridge" vs. "manufacturing 1000 bearings").

Role of Production Planning and Control (PPC) in National Economy (Indian Context)

• Definition: PPC is the process of planning, routing, scheduling, dispatching, and controlling production activities to ensure efficient use of resources (men, material, machines) to meet customer demands economically.

• Justification for a Developing Economy like India:

  1. Resource Optimization: Maximizes utilization of scarce capital and human resources.

  2. Reduces Wastage: Minimizes material scrap, idle time, and inventory holding costs.

  3. Improves Delivery: Ensures timely supply of goods, boosting industrial credibility and exports.

  4. Economic Growth: Increases productivity, lowers production costs, enhances competitiveness in global markets.

  5. Employment: Efficient planning creates stable, predictable work environments.

Sales Forecasting

• Definition: The process of estimating future sales (revenue/quantity) over a specific period based on past data, market analysis, and economic trends.

• Purpose & Importance: Foundation for all planning. Drives production quantity, inventory policies, budgeting, workforce levels, and cash flow projections.

• Fields of Application: Production planning, inventory control, financial budgeting, manpower planning, sales quota setting.

• Common Forecasting Techniques:

  • Qualitative (Subjective): Delphi method, market research, executive opinion. Used for new products/long-term.

  • Quantitative (Objective):

    • Time Series: Moving Average, Exponential Smoothing, Trend Projection.

    • Causal: Regression Analysis (relates sales to factors like price, advertisement).

II. METHOD STUDY & WORK MEASUREMENT

Method Study vs. Work Measurement

Procedure of Method Study (The 6-Step Approach)

1. SELECT: Identify the job/process with high potential for improvement (high cost, frequent problems).

2. RECORD: Document the existing method using appropriate charts (e.g., Operation Process Chart, Flow Diagram).

3. EXAMINE: Critically question each step ("Why? Where? When? Who? What for?"). Use Principles of Motion Economy to identify inefficiencies.

4. DEVELOP: Design, evaluate, and select the best new method. Simulate if possible.

5. INSTALL: Implement the new method. Train personnel, change layouts, update documents.

6. MAINTAIN: Ensure the new method is adhered to through regular audits and feedback.

Principles of Motion Economy & Relation to Workplace Layout

These principles aim to reduce fatigue and time by designing efficient motions.

• Principles:

  1. Both hands should start and finish motions simultaneously.

  2. Use the lowest possible classification of motion (e.g., finger vs. arm).

  3. Use continuous, curved motions rather than straight-line, abrupt motions.

  4. Minimize the number of motions.

  5. Arrange workplace and tools to permit the best sequence of motions (e.g., fixed location, gravity feed).

  6. Provide adequate illumination, proper chair height, and tool design to reduce strain.

• Relation to Layout: Principles 5 directly dictates workplace layout:

  • Tools/materials in fixed, definite locations (preferably within the "normal working area").

  • Use gravity feed for materials.

  • Arrange tools in the sequence of use.

  • Provide adequate space for each hand to operate without interference.

III. PREDETERMINED MOTION TIME SYSTEMS (PMTS)

Analysis of PMTS for Man-Machine Systems (MTM & MOST)

[!TIP] Exam Key: When asked to "analyse critically," always structure as: Applicability (where it shines) → Limitations (especially for non-repetitive, cognitive, or machine-dependent tasks).

IV. PRODUCTION PLANNING

Information Requirements for Effective Production Planning

Effective planning requires a single, integrated source of truth. Key data includes:

1. Demand Forecast: Accurate, time-phased forecast of finished product demand.

2. Inventory Status: Current on-hand inventory of raw materials, WIP, and finished goods.

3. Capacity: Available capacity (machine hours, labor hours) at all work centers, including constraints.

4. Lead Times: Supplier lead times (procurement) and internal manufacturing lead times.

5. Bill of Materials (BOM): Accurate, multi-level structure of components/sub-assemblies needed for each product.

6. Workforce Skills & Availability: Labor skills matrix, shift patterns, absenteeism rates.

7. Material Availability & Supplier Reliability: Status of critical raw materials, vendor performance history.

8. Master Production Schedule (MPS): The specific plan for what to produce and when.

9. Financial Constraints: Budgets for production, inventory, and procurement.

V. PRODUCTION SCHEDULING

Types of Scheduling Situations & Methodologies

• Classification by Environment:

  • Flow Shop: Same sequence of machines for all jobs (e.g., assembly line). Scheduling focuses on sequencing.

  • Job Shop: Different routing for different jobs (functional layout). Complex scheduling problem.

• Common Methodologies:

  • Gantt Charts: Visual bar chart for loading and progress tracking. Simple, good for monitoring.

  • PERT/CPM: Network-based for project scheduling (one-time, complex projects). Identifies critical path.

  • Priority Rules (for Job Shop): Shortest Processing Time (SPT), Earliest Due Date (EDD), First-Come-First-Served (FCFS), Least Slack.

  • Johnson's Rule: For 2-machine flow shops to minimize makespan. Simple sequencing algorithm.

Detailed Explanation: PERT/CPM for Project Scheduling

• Objective: Plan, schedule, and control projects with interdependent activities (e.g., product launch, plant setup).

• Key Steps:

  1. Define Activities & Dependencies: List all tasks and their sequence (precedence diagram).

  2. Estimate Time: Use three-time estimates for PERT (Optimistic O, Most Likely M, Pessimistic P).

     • Expected Time: $$\displaystyle T_e = \frac{O + 4M + P}{6} $$

     • Variance: $$\displaystyle \sigma^2 = \left(\frac{P - O}{6}\right)^2 $$

  3. Construct Network Diagram: Arrow or Precedence (Activity-on-Node).

  4. Forward Pass: Calculate Earliest Start Time (EST) and Earliest Finish Time (EFT) for each activity.

  5. Backward Pass: Calculate Latest Start Time (LST) and Latest Finish Time (LFT).

  6. Determine Float/Slack:

     • Total Float (TF): $$\displaystyle TF = LST - EST = LFT - EFT $$

     • Critical Path: Path with ZERO total float. Longest path through the network. Determines project duration.

  7. Probability Analysis (PERT): Calculate project completion time probability using critical path's mean and standard deviation ($$\displaystyle Z = \frac{T_s - T_e}{\sigma_{cp}} $$).

[!TIP] Exam Distinction: CPM uses deterministic (single) time estimates, often for construction/engineering. PERT uses probabilistic (three) estimates for R&D/projects with high uncertainty.

VI. TRANSPORTATION PROBLEM (LOGISTICS OPTIMIZATION)

Formulation and Solution

• Model Structure:

  • $m$ Sources (Plants) with supply $$\displaystyle S_i $$.

  • $n$ Destinations (Warehouses) with demand $$\displaystyle D_j $$.

  • $$\displaystyle c_{ij} $$ = Unit transportation cost from source $i$ to destination $j$.

  • Objective: Minimize total cost $$\displaystyle \sum_{i=1}^{m} \sum_{j=1}^{n} x_{ij} c_{ij} $$.

  • Constraints:

    • $$\displaystyle \sum_{j=1}^{n} x_{ij} = S_i $$ (Supply constraint for each source $i$)

    • $$\displaystyle \sum_{i=1}^{m} x_{ij} = D_j $$ (Demand constraint for each destination $j$)

    • $$\displaystyle x_{ij} \ge 0 $$ (Non-negativity)

    • Balance Condition: $$\displaystyle \sum S_i = \sum D_j $$ (If unbalanced, add dummy row/column with zero cost).

• Solution Methods:

  1. Initial Feasible Solution:

     • Northwest Corner Rule (NWCR): Allocate from top-left cell, move right/down. Simple but often not cost-effective.

     • Least Cost Method (LCM): Allocate to cell with minimum $$\displaystyle c_{ij} $$ first. Better than NWCR.

     • Vogel's Approximation Method (VAM): Calculate penalty cost (difference between two smallest costs in each row/column). Allocate to cell with highest penalty. Most efficient for finding good initial solution.

  2. Optimality Test & Iteration (MODI Method / u-v Method):

     • Step 1: For current solution, calculate dual variables $$\displaystyle u_i $$ (for rows) and $$\displaystyle v_j $$ (for columns) such that $$\displaystyle u_i + v_j = c_{ij} $$ for all allocated cells ($$\displaystyle x_{ij} > 0 $$). Set $$\displaystyle u_1 = 0 $$ arbitrarily.

     • Step 2: Calculate unallocated cell costs $$\displaystyle \Delta_{ij} = c_{ij} - (u_i + v_j) $$.

     • Step 3: Optimality Check: If all $$\displaystyle \Delta_{ij} \ge 0 $$, current solution is OPTIMAL. If any $$\displaystyle \Delta_{ij} < 0 $$, solution is not optimal.

     • Step 4 (Improvement): Select cell with most negative $$\displaystyle \Delta_{ij} $$. Form a closed loop of allocated cells. Reallocate units along this loop (alternating + and -) to improve cost. Go to Step 1.

[!TIP] Exam Problem Solving: Always check for degeneracy (number of +ve allocations = m+n-1). If degenerate, artificially allocate a tiny epsilon (ε) to a zero-cell to form a loop. For VAM, show penalty calculations clearly.

VII. INVENTORY MANAGEMENT

Economic Order Quantity (EOQ) Model

• Assumptions: Constant, known demand ($D$); instantaneous replenishment; no stockouts; fixed ordering cost ($S$); fixed holding/carrying cost ($H$ per unit per year); single item.

• Derivation: Total Annual Cost (TAC) = Purchase Cost + Ordering Cost + Holding Cost.

$$TAC = PD + \frac{D}{Q}S + \frac{Q}{2}H$$

Where $P$ = unit price, $Q$ = order quantity.

• Minimization: Differentiate TAC w.r.t $Q$ and set to zero.

$$\frac{d(TAC)}{dQ} = -\frac{DS}{Q^2} + \frac{H}{2} = 0$$

\boxed{EOQ = Q^* = \sqrt{\frac{2DS}{H}}}

• Total Minimum Cost (TMC): Substitute $$\displaystyle Q^* $$ into TAC (excluding constant PD).

$$TMC_{ordering+holding} = \sqrt{2DSH}$$

Quantity Discount Analysis

• Procedure: Calculate Total Annual Cost (TAC) at EOQ and at each discount break quantity.

  1. Compute $$\displaystyle Q^* $$ using $$\displaystyle H = i \times P $$ (where $i$ = carrying cost %).

  2. If $$\displaystyle Q^* $$ is feasible for a discount price, compute TAC at $$\displaystyle Q^* $$.

  3. For each discount price break $$\displaystyle Q_d $$, if $$\displaystyle Q_d > Q^* $$, compute TAC at $$\displaystyle Q_d $$ (since ordering at $$\displaystyle Q_d $$ gets lower price but higher holding cost).

  4. Select the quantity with the LOWEST TAC.

• Key: Compare TAC across all feasible price breaks, not just EOQ.

Inventory Parameters under Uncertainty

• Demand during Lead Time (DLT): $d \times L$ (where $d$ = avg. daily demand, $L$ = lead time in days).

• Safety Stock (SS): Buffer stock to cover variability in demand or lead time.

  • Determination: Based on desired service level (e.g., 95%). Uses statistical models (if demand normal): $$\displaystyle SS = Z \times \sigma_{DLT} $$, where $Z$ = standard normal deviate, $$\displaystyle \sigma_{DLT} $$ = std. dev. of DLT.

• Reorder Point (ROP): Inventory level that triggers a new order.

  \boxed{ROP = \text{Average Demand during Lead Time} + \text{Safety Stock} = (d \times L) + SS}

• Inventory Levels (for Fixed-Order Quantity System):

  • Maximum Inventory Level: $Q + SS$ (just after order receipt).

  • Minimum Inventory Level: $SS$ (just before order receipt).

  • Average Inventory Level: $$\displaystyle \frac{Q}{2} + SS $$

VIII. ADVANCED PLANNING SYSTEMS (MRP & ERP)

Manufacturing Resources Planning (MRP II)

• Definition: An evolution of MRP that integrates all manufacturing resources (material, labor, machines, money) into a single, closed-loop system for planning and control.

• Key Modules:

  1. Master Production Schedule (MPS): "What to make and when?"

  2. Material Requirements Planning (MRP): "What materials/components are needed and when?" (Explodes BOM).

  3. Capacity Requirements Planning (CRP): Checks if MPS/MRP is feasible with available capacity.

  4. Shop Floor Control (SFC): Executes and monitors the planned orders.

  5. Financial Interface: Links to costing and accounting.

• Surrounding Failures/Challenges:

  1. Poor Data Integrity: Inaccurate BOM, inventory records, or lead times ("garbage in, garbage out").

  2. Lack of Top Management Support & Vision: Treated as an IT project, not a business process re-engineering.

  3. Unrealistic Expectations: Expecting immediate, dramatic results without process changes.

  4. Inadequate Training & Resistance to Change: Users don't understand or trust the system.

  5. Inflexible System Design: Cannot handle real-world exceptions (rush orders, scrap, breakdowns).

Enterprise Resource Planning (ERP)

• Definition: A cross-functional, integrated software suite that automates and manages core business processes (finance, HR, manufacturing, supply chain, services, procurement) across an entire enterprise using a centralized database.

• Advantages:

  • Integration: Single source of truth, eliminates data silos.

  • Real-time Information: Up-to-date data for decision-making.

  • Improved Coordination: Between departments (e.g., sales → production → procurement).

  • Standardization: Enforces best business processes.

  • Scalability & Reporting: Consolidated reporting, easier compliance.

• Disadvantages:

  • High Cost: Licensing, implementation, customization, training.

  • Complexity & Rigidity: Difficult to customize; may force business to adapt to software.

  • Long Implementation Time: Often 1-3 years.

  • Change Management Overhead: Major organizational disruption.

• Implementation Process (Phased Approach):

  1. Project Preparation & Selection: Define scope, select vendor/package.

  2. Business Blueprint: Document "to-be" processes, gap analysis.

  3. Implementation/Customization: Configure system, develop extensions if needed.

  4. Testing: Unit, integration, user acceptance testing (UAT).

  5. Training: End-user and super-user training.

  6. Go-Live & Support: Cutover to new system, hypercare support.

  7. Post-Implementation Review: Evaluate benefits, optimize.

IX. ASSEMBLY LINE & WORK BALANCING

Line Balancing using Heuristic Methods

• Objective: Assign tasks to workstations so that idle time is minimized and cycle time is met, respecting precedence relationships.

• Key Terms:

  • Cycle Time (C): Maximum time allowed per workstation. $$\displaystyle C = \frac{\text{Available Time per Day}}{\text{Required Output per Day}} $$.

  • Task Time ($$\displaystyle t_i $$): Standard time for each elemental task.

  • Total Task Time ($$\displaystyle \sum t_i $$): Sum of all task times.

  • Theoretical Minimum Workstations: $$\displaystyle N_{min} = \left\lceil \frac{\sum t_i}{C} \right\rceil $$.

• Heuristic Methods (Rules for Sequencing Tasks):

  1. Largest Candidate Rule (LCR): At each step, assign the longest unscheduled task that fits the remaining time in the current station and whose predecessors are assigned.

  2. Ranked Positional Weight (RPW) Method:

     • Calculate Positional Weight (PW) for each task: $$\displaystyle PW_i = t_i + \sum (\text{times of all immediate successors}) $$.

     • Rank tasks by descending PW.

     • Assign tasks in rank order to the first station where they fit (respecting precedence).

  3. Kilbridge & Wilson Method: Based on "number of followers" (tasks that depend on it). Tasks with most followers get priority.

• General Procedure:

  1. Draw Precedence Diagram.

  2. Calculate Cycle Time (C).

  3. Select a heuristic rule.

  4. Sequentially assign tasks to workstations, ensuring:

     • Predecessors are assigned.

     • Sum of task times in station $\le C$.

  5. Calculate Efficiency = $$\displaystyle \frac{\sum t_i}{(\text{Actual \# of stations} \times C)} \times 100\% $$.

  6. Compute Idle Time per station = $$\displaystyle C - \sum (\text{task times in station}) $$.

[!TIP] Exam Problem: You will be given a precedence diagram and task times. Apply one heuristic (usually RPW) step-by-step to fill a table showing station loading. Calculate final efficiency.

X. PRODUCTIVITY MANAGEMENT

Role of Factory Executives and Workers in Raising Productivity

• Factory Executives / Management:

  • Planning: Set clear goals, define standards, plan resources.

  • Organizing: Design efficient workflows, layouts, and systems.

  • Staffing: Select, train, and develop skilled workforce.

  • Directing & Leading: Motivate employees, communicate effectively, provide leadership.

  • Controlling: Monitor performance against standards, take corrective actions.

  • Providing Resources: Ensure adequate tools, equipment, and materials.

  • Improving Methods: Implement Method Study, Work Measurement, technology upgrades.

  • Creating Climate: Foster participative culture, suggestion schemes, reward systems.

• Workers:

  • Skill Development: Acquire and upgrade skills through training.

  • Adherence to Standards: Follow prescribed methods and time standards.

  • Cooperative Attitude: Support management initiatives, reduce resistance to change.

  • Active Participation: Contribute ideas in suggestion schemes, quality circles, Kaizen events.

  • Maintenance: Care for tools/equipment, report problems.

  • Teamwork: Collaborate to improve group output and quality.

  • Attendance & Punctuality: Maximize productive time.

[!TIP] Exam Answer: Structure as two clear sub-headings. Emphasize that productivity is a shared responsibility—management provides the system and environment, workers execute and contribute ideas.

XI. SPECIALIZED TOPICS (SHORT NOTES)

Market Analysis in Production Planning

• Role: Provides the external reality check for internal plans.

• How it Informs Planning:

  • Demand Assessment: Validates/ adjusts sales forecasts by analyzing market size, growth, customer segments.

  • Competition: Identifies competitor strengths/weaknesses, influencing production priorities and quality targets.

  • Trends: Technological shifts, regulatory changes, material availability affect product design and process selection.

  • Realistic Planning: Prevents over/under-production by aligning plans with market opportunities and threats.

  • New Product Introduction: Feasibility study for launching new products based on market potential.

Synthesis from Standard Data

• Concept: Building the standard time for a new, complex task by combining predetermined times for its constituent basic motions (from a PMTS like MTM) or elemental times (from historical data).

• Process:

  1. Break down the new task into basic, repeatable elements (e.g., "reach for tool," "turn nut 90°," "inspect").

  2. For each element, look up its standard time from a standard data catalog (built from previous time studies or PMTS).

  3. Sum the elemental times.

  4. Add allowances (personal, fatigue, delay) to get final standard time.

• Application Areas: Estimating for new jobs, setting piece rates, capacity planning for new products, quoting costs. Faster and more consistent than full time study.

Master Production Schedule (MPS)

• Definition: The primary link between the forecast (what the market wants) and the detailed manufacturing plan (what the shop floor will build). It specifies what finished items are to be produced, in what quantities, and when.

• Contents: Item number, description, quantity to be produced, time periods (usually weekly), planned order releases, available-to-promise (ATP) quantities.

• Role in MRP/ERP:

  • Input to MRP: Drives the explosion of component requirements.

  • Stabilizes Production: Provides a fixed, finite schedule for the master scheduler to manage.

  • ATP Calculation: Determines if new customer orders can be promised from scheduled production or future forecasts.

  • Capacity Check: Feeds into CRP to verify feasibility.

Inventory Classification (ABC, VED, XYZ Analysis)

• Purpose: Selective Control. Apply different management policies to different inventory classes to optimize efforts.

• ABC Analysis (Based on Annual Consumption Value):

  • A-items: ~10-20% items, ~70-80% of total value. Tight control, frequent review, accurate records.

  • B-items: ~20-30% items, ~15-20% of value. Normal control, periodic review.

  • C-items: ~50-60% items, ~5-10% of value. Simple control, large orders, minimal records.

• VED Analysis (For Spare Parts - Based on Criticality):

  • V (Vital): No stock = production stoppage. Highest priority, always in stock.

  • E (Essential): Important, but some delay tolerable. High priority, careful stocking.

  • D (Desirable): Low impact on downtime. Low priority, can be stocked minimally or procured as needed.

• XYZ Analysis (Based on Demand Variability):

  • X-items: Very stable, predictable demand (low σ). Easy forecasting, lean inventory.

  • Y-items: Moderate, some fluctuation. Moderate safety stock.

  • Z-items: Highly erratic, unpredictable demand (high σ). High safety stock or alternative sourcing.

• Integrated Use: Often combined (e.g., ABC-VED matrix) for comprehensive policy (e.g., A-V items = absolute priority).