Unit 4: Production Planning and Control – Short Notes

Based on ME-802(D) May 2024 past paper analysis.

I. Production Systems & Strategic Role of PPC

Job Production vs. Batch Production

[!TIP] Exam Focus: Be ready to compare them in a table format. Job = "one-off, high variety"; Batch = "groups, moderate variety".

Need for PPC in Developing Economies (India Context)

• Role in Economic Development:

  • Resource Optimization: Efficient use of scarce capital, labor, and materials.

  • Productivity Enhancement: Reduces waste (motion, waiting, defects) through method study & standard times.

  • Competitiveness: Lowers costs, improves delivery reliability and quality, making industries globally competitive.

  • Capacity Utilization: Helps match production with volatile demand, preventing under/over-utilization.

• Challenges in Indian Industry:

  • Demand Variability: Unpredictable market, seasonal fluctuations.

  • Infrastructure Issues: Power shortages, logistics inefficiencies.

  • Skill Levels: Variable workforce skill affecting standard time adherence.

  • Supplier Reliability: Unreliable raw material supply impacting schedules.

• Impact: Systematic PPC leads to cost reduction, quality improvement, and on-time delivery—key for "Make in India" success.

II. Sales Forecasting

Definition and Purpose

• Definition: Estimating future sales (demand) for a product/service over a specific period.

• Purpose in PPC Hierarchy: Provides the primary input for Aggregate Planning and Master Production Schedule (MPS). Drives capacity, inventory, and financial decisions.

Forecasting Methods

Fields of Application

1. Aggregate Planning: Setting overall production rates.

2. Capacity Planning: Determining facility needs.

3. Inventory Management: Setting stock levels (EOQ, ROP).

4. Financial Budgeting: Revenue & cash flow projections.

5. Demand Planning: Input for MPS and MRP systems.

[!TIP] Common Pitfall: Don't confuse forecasting (estimating demand) with planning (deciding how to meet it). Forecasting feeds planning.

III. Method Study & Work Measurement

Method Study vs. Work Measurement

Procedure of Method Study (SREDIM)

1. Select: Identify the process/problem with high potential gain.

2. Record: Document current method using flow process charts, operation charts, string diagrams.

3. Examine: Critically question each step (purpose? place? sequence?).

4. Develop: Design a better method, apply principles of motion economy.

5. Install: Implement new method (train workers, change layout).

6. Maintain: Ensure new method is followed and standard times are updated.

Principles of Motion Economy & Workplace Layout

• Principles: Use both hands simultaneously, minimize motion, use lowest possible motion classification, arrange tools in fixed locations, use gravity, combine tasks, ensure proper height/clearance.

• Relation to Layout: These principles directly dictate workplace design—tools/materials within easy reach (primary/secondary zones), sequence of motions logical, minimize reaching, walking, and bending. A good layout reduces fatigue and time.

Predetermined Motion Time Systems (PMTS) – Critical Analysis

[!TIP] Exam Key: For "critically analyse two systems," structure as: 1) Define PMTS. 2) For each system: State what it is → Applicability (where it's best) → Limitations (where it fails). 3) Compare them briefly.

IV. Production Planning – Information Required

Effective production planning requires a comprehensive data set:

1. Market & Demand: Sales forecasts, customer orders (firm & planned).

2. Capacity: Available machine hours, labor shifts, bottleneck identification.

3. Inventory: Current stock of RM, WIP, FG; lead times; safety stock levels.

4. Supply Chain: Supplier reliability, lead times, material availability.

5. Process: Routing sheets, standard operation times, setup times.

6. Resources: Labor skills, maintenance schedules, tool availability.

7. Financial: Budget constraints, cost of production, storage.

8. Policies: Production strategies (make-to-stock, assemble-to-order), service levels.

[!TIP] Think of it as: "What do I need to know to answer: What to make? How much? When? With what?"

V. Scheduling

Types of Scheduling Situations & Methodologies

Detailed Explanation: Johnson’s Rule for Two-Machine Flow Shop

• Objective: Minimize total makespan (total time to complete all jobs).

• Assumptions: All jobs available at time zero; no preemption; same sequence on both machines.

• Procedure:

  1. List all jobs with their times on Machine 1 (M1) and Machine 2 (M2).

  2. Find the smallest time among all M1 and M2 times.

  3. If smallest time is on M1: Schedule that job first. Remove job from list.

  4. If smallest time is on M2: Schedule that job last. Remove job from list.

  5. Repeat steps 2-4 with remaining jobs until all are scheduled.

• Result: An optimal sequence that minimizes idle time on M2.

[!TIP] Mnemonic: "Smallest on M1 → FRONT; Smallest on M2 → BACK."

Transportation Problem

• Definition: Minimizing total transportation/distribution cost from multiple sources (plants) to multiple destinations (warehouses) with supply/demand constraints.

• Formulation:

  • Origins (i): Plants with supply capacity \(S_i\).

  • Destinations (j): Warehouses with demand \(D_j\).

  • Cost Matrix: \(C_{ij}\) = cost to ship one unit from origin i to dest j.

  • Constraint: \(\sum_j x_{ij} = S_i\) (supply), \(\sum_i x_{ij} = D_j\) (demand), \(x_{ij} \geq 0\).

• Steps to Optimal Solution:

  1. Initial Feasible Solution: Use Northwest Corner Rule or Least Cost Method.

  2. Optimality Test: Calculate u_i, v_j potentials and opportunity costs (\(\Delta_{ij} = C_{ij} - (u_i + v_j)\)).

  3. Improve Solution: If any \(\Delta_{ij} < 0\), select most negative, form loop, adjust allocations (rotate -/+), recalc costs.

  4. Repeat until all \(\Delta_{ij} \geq 0\).

• Interpretation: \(x_{ij}\) values in final matrix give the optimum shipment plan minimizing total cost \(\sum \sum C_{ij}x_{ij}\).

VI. Inventory Management

Economic Order Quantity (EOQ) Model

• Objective: Find order quantity \(Q\) that minimizes Total Annual Inventory Cost (TC).

• Assumptions: Constant demand \(D\), instantaneous replenishment, fixed ordering cost \(C_o\), fixed holding cost \(C_h\) per unit/year, no stockouts.

• Derivation & Formula:

$$TC = \text{Purchase Cost} + \text{Ordering Cost} + \text{Holding Cost}$$

$$TC = PD + C_o\left(\frac{D}{Q}\right) + C_h\left(\frac{Q}{2}\right)$$

Differentiate w.r.t \(Q\), set \(d(TC)/dQ = 0\):

$$\boxed{EOQ = Q^* = \sqrt{\frac{2DC_o}{C_h}}}$$

Minimum Total Cost:

$$TC_{min} = PD + \sqrt{2DC_oC_h}$$

• Extensions:

  • Quantity Discounts: Calculate EOQ at each price break, check feasibility, choose \(Q\) with lowest total cost including material price.

  • Finite Production Rate (EPQ): For gradual replenishment. Formula:

$$Q^* = \sqrt{\frac{2DC_o}{C_h \left(1 - \frac{d}{p}\right)}}$$

    where \(d\) = demand rate, \(p\) = production rate.

Inventory Control Parameters

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

$$ROP = \text{(Lead Time Demand)} + \text{Safety Stock}$$

$$ROP = (d \times L) + SS$$

where \(d\) = avg daily usage, \(L\) = lead time in days.

• Safety Stock (SS): Buffer against demand/lead time variability.

$$SS = z \times \sigma_{LT}$$

where \(z\) = standard normal deviate for desired **service level**, \(\sigma_{LT}\) = std dev of demand during lead time.

• Inventory Levels (for constant usage):

  • Maximum Inventory = \(Q + SS\)

  • Minimum Inventory = \(SS\) (just before order arrives)

  • Average Inventory = \(\frac{Q}{2} + SS\)

Inventory Classification

• ABC Analysis (Pareto):

  • Criteria: Annual Usage Value = Annual Consumption (units) × Unit Cost.

  • Classification:

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

    • B-items: ~20% of total value, ~20-30% of items. Normal control.

    • C-items: ~10% of total value, ~50-60% of items. Simple control, large stocks.

• VED Analysis (for spares):

  • V (Vital): No stock = production stops. Highest priority.

  • E (Essential): Important, but some waiting tolerable.

  • D (Desirable): Can be stocked minimally or procured as needed.

• Other Methods:

  • FSN (Fast, Slow, Non-moving): Based on issue frequency.

  • HML (High, Medium, Low value): Similar to ABC but only on unit cost.

[!TIP] Numerical Alert: EOQ problems often ask for: 1) EOQ, 2) Number of orders/year, 3) Total cost (include material cost!), 4) ROP with safety stock, 5) Compare with discount offer.

VII. Material Requirements Planning (MRP) & ERP Systems

Manufacturing Resources Planning (MRP II)

• Definition: Evolution of MRP. A closed-loop, integrated system for planning all manufacturing resources (machine, labor, money, materials).

• Key Components:

  1. Master Production Schedule (MPS): What to produce, when.

  2. Bill of Materials (BOM): Product structure (parent-child).

  3. Inventory Records: On-hand, allocated, lead times.

  4. Capacity Planning (CRP): Checks if MPS is feasible with available capacity.

  5. Shop Floor Control: Execution & tracking.

• Surrounding Failures/Inadequacies:

  • "Garbage In, Garbage Out": Highly dependent on accurate, timely data (BOM, inventory, lead times).

  • Inflexibility: Difficulty handling frequent schedule changes.

  • Implementation Complexity: Expensive, time-consuming, requires cultural change.

  • Lack of Integration: Early versions poor at linking with finance, sales, procurement.

Enterprise Resource Planning (ERP) Systems

• Definition: Integrated software suite managing all core business processes (finance, HR, supply chain, manufacturing, CRM) in a single, unified database.

• Advantages:

  • Real-time data visibility across departments.

  • Improved coordination & reduced data redundancy.

  • Reduced inventory (better planning), better decision-making.

  • Standardized processes, scalability.

• Disadvantages:

  • Very high cost (licensing, implementation, customization).

  • Long implementation time (1-3 years), high failure risk.

  • Resistance to change from employees.

  • Customization issues: Can be complex, costly, and hinder upgrades.

• Implementation Process (Key Stages):

  1. Feasibility Study & Selection: Choose ERP (SAP, Oracle, etc.).

  2. Project Planning: Define scope, team, timeline, budget.

  3. Business Process Reengineering (BPR): Adapt business to ERP "best practices" or vice-versa.

  4. Customization/Configuration: Tailor modules to needs.

  5. Data Migration: Clean, map, transfer legacy data.

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

  7. Training: End-users, IT support.

  8. Go-Live & Post-Implementation Support: Cutover, hypercare period, review.

VIII. Line Balancing

Heuristic Methods for Line Balancing

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

• Steps:

  1. List tasks with times (t_i) and precedence diagram.

  2. Determine desired Cycle Time (CT) = Available Time / Desired Output.

  3. Calculate theoretical minimum number of workstations \(N_{min} = \frac{\sum t_i}{CT}\).

  4. Apply a heuristic rule to assign tasks to stations (forward/backward pass).

  5. Calculate Line Efficiency = \(\frac{\sum t_i}{(\text{Actual Stations} \times CT)} \times 100\%\).

• Common Heuristic Rules:

  • Largest Candidate Rule (LCR): At each step, assign the largest task time that fits remaining station time and whose predecessors are assigned.

  • Ranked Positional Weight (RPW): Calculate positional weight = task time + sum of times of all successor tasks. Assign tasks in descending RPW.

  • Kilbridge's Method: Based on "criticality" (number of successors). Assign most critical tasks first.

• Types & Rules:

  • Forward Pass: Start from first station, assign tasks as they become available (predecessors done).

  • Backward Pass: Start from last station, assign tasks that are successors of already placed tasks.

  • Priority: Based on task time (largest first) or positional weight (highest first).

IX. Productivity Management

Role of Factory Executives and Workers

[!TIP] Key Phrase: "Productivity = Output / Input". Both sides must improve: Management improves system efficiency; Workers improve individual efficiency.

X. Special Topics in Production Planning (Short Notes)

Market Analysis

• Definition: Systematic study of market size, growth, trends, competition, and customer needs.

• Components: Market size (volume/value), growth rate, segmentation, SWOT analysis, competitor strategies, buyer behavior.

• Role in PPC: Provides foundation for sales forecasting and strategic capacity planning. Determines product mix and long-term investment.

Synthesis from Standard Data

• Definition: Deriving standard time for a new operation by referencing and modifying existing standard data from similar, known operations.

• Process:

  1. Break down new operation into basic elements.

  2. Find a similar historical operation with established standard times (from PMTS database).

  3. Apply adjustment factors for differences (e.g., material, tool, location, working conditions).

  4. Sum adjusted times to get new standard.

• Application: Speeds up method study & work measurement for routine operations, avoids full-time study.

Master Production Schedule (MPS)

• Definition: "What" and "When" to produce. The link between forecast (plan) and MRP (execution).

• Inputs: Forecast, Customer Orders, Inventory Status, Plant Capacity.

• Outputs: Planned Order Releases (quantities & timing for end-items), Available-to-Promise (ATP) quantities.

• Significance: Drives the entire MRP explosion. Must be realistic (capacity-feasible) to be effective.

Inventory Classification (Recap & Emphasis)

• ABC Analysis: Value-based (Annual Usage Value). Focus on A-items for tight control.

• VED Analysis: Criticality-based (Vital, Essential, Desirable). Crucial for spare parts management.

• FSN Analysis: Movement-based (Fast, Slow, Non-moving). Helps in physical storage and review periods.

• HML Analysis: Value-based like ABC but simpler (High, Medium, Low unit cost).

• Significance: Enables selective control, optimizes managerial effort and inventory investment.