APEEJAY INSTITUTE OF TECHNOLOGY

SCHOOL OF MANAGEMENT

ASSIGNMENT

ON

MANUFACTURING PLANNING AND CONTROL

Submitted To Submitted By
Mr. B.C.Sinha Pushpendra Kumar Atri
Roll No.- M200966
PGDM-(G)
Sec- B
MANUFACTURING PLANNING AND CONTROL (MPC)
Manufacturing planning and control entails the acquisition and allocation of limited
resources to production activities so as to satisfy customer demand over a specified time
horizon. As such, planning and control problems are inherently optimization problems,
where the objective is to develop a plan that meets demand at minimum cost or that fills
the demand that maximizes profit. The underlying optimization problem will vary due to
differences in the manufacturing and market context.

An Overview of MPC system:

• MPC systems concerns planning and controlling all aspects of manufacturing,
including managing materials, scheduling machines and people, and coordinating
suppliers and key customers
• Both the MPC system and manufacturing process are designed to meet the dictates of
the marketplace and to support overall company strategy
• An effective MPC system can provide substantial competitive advantage for a
company in its marketplace
• Basically the MPC system provides information to effectively manage the flow of
material, effectively utilize people and equipment, and coordinate supply chains
• It provides to managers with information to make intelligent decisions
• MPC system need to continuously adapt and respond to changes in the company
environment, strategy, customer requirements, particular problems, and new supply
chain opportunities
• Firms to be an effective competitor must have MPC systems with the ability to
determine, transmit, revise, and coordinate requirements throughout a global supply
chain system

Typical MPC Support Tasks

• Plan capacity requirements and availability to meet marketplace needs
• Plan for material to arrive on time in the right quantities needed for product
production
• Ensure utilization of capital equipments and other facilities is appropriate
• Maintain appropriate inventories of raw materials, work in process, and finished
goods – in correct locations
• Schedule production activities so people and equipments are working on the correct
things
• Track material, people, customers’ orders, equipment, and other resources in the
factory
• Communicate with customers and suppliers on specific issues and long-term
relationships
• Meet customer requirements in a dynamic environment that may be difficult to
anticipate
• Respond when things go wrong and unexpected problems arise
• Provide information to other functions on the physical and financial implications of
the manufacturing activities
MPC System Payoffs
Symptoms of poor MPC system are:
Poor customer service, excessive inventories, inappropriate equipment or worker
utilization, high rate of part obsolescence, lack of responsiveness to changes in the
business environment, and large number of expeditors dedicated to ‘fire fighting’.

Push/Pull Systems
Based on the timing of the production operation relative to customer demand the
manufacturing system can be classified as push or pull systems
Push System
Materials are processed in batches according to a schedule for each workstation,
then moved (pushed) downstream to the next workstation where they processed
according to anther schedule
The materials must usually wait until the workstation completes earlier jobs,
changes over, and is ready to process them
In a factory that produces many kinds of product with different routing sequences
and demand rates, the wait can be unpredictable
As a result, the schedules are substantially padded to offset the waiting time
uncertainty and to account for material shortages, machine breakdowns, and so on
This uncertainty and consequential padding of schedules leads to long lead times,
high variability in lead times, and large in process inventories
In push process execution is initiated in anticipation of customer orders
At execution demand is not known and must be forecasted
It is a speculative process
Pull System
Consumer withdraws whatever material is needed from stock, and when the
amount in stock reaches some minimum level, that signals the producer at the
upstream location to replenish it
The producer then makes or procures the material in some prespecified quantity
and puts it into stock
In pull production, detailed production schedules for every operations are
eliminated
Immediate decisions about quantities and timing of work are made by workers
using a simple signal system that connects operations throughout the process
The charm of the system is that with relatively little inventory and only minimal
information requirements, the system keeps material flowing to meet demand
In pull process execution is initiated in response to a customer order
At execution demand is known
It is a reactive process
It is suitable for repetitive production environment
Sometimes called stockless production
Also called Just-in-time production because it seeks to have every stage in process
produce and deliver materials downstream in the exact quantities and at the exact
times requested
Desirable Characteristics of Production Systems
Flexibility – is the ability of the system to respond effectively to change
Responsiveness – Rapid response to customer request
Product variety
Product quality
Mass customisation – implies flexibility to produce a variety of products to meet
increasing customer demands and flexibility of process to meet whatever volume
responsiveness is required
Affordable cost – product cost and transaction cost
Better service
Lower inventories
Concerns associated with manufacturing stages are: -
Management problems
Techniques and systems
The data base

Preparing Production Plan

What is a production plan?

A production plan is that portion of your intermediate-range business plan that your
manufacturing / operations department is responsible for developing. The plan states in general
terms the total amount of output that the manufacturing department is responsible to produce for
each period in the planning horizon.

The output is usually expressed in terms of pesos or other units of measurement (e.g. tons, liters,
kgs.) or units of the aggregate product (this refers to the weighted average of all the products in
your company). The production plan is the authorization of your manufacturing department to
produce the items at a rate consistent with your company's overall corporate plan.

This production plan needs to be translated into a master production schedule so as to schedule
the items for completion promptly, according to promised delivery dates; to avoid the
overloading or under loading of the production facility; and so that production capacity is
efficiently utilized and low production costs result.

Why is it important to have a carefully developed production plan?

Production planning is one of the planning functions that a firm needs to perform to meet the
needs of its customers. It is a medium-range planning activity that follows long-range planning
in P/OM such as process planning and strategic capacity planning. Firms need to have an
aggregate planning or production planning strategy to ensure that there is sufficient capacity to
meet the demand forecast and to determine the best plan to meet this demand.
A carefully developed production plan will allow your company to meet the following
objectives:

• Minimize costs / maximize profits

• Maximize customer service

• Minimize inventory investment

• Minimize changes in production rates

• Minimize changes in work-force levels

• Maximize the utilization of plant and equipment

How is a production plan prepared?

Activity 1 Determination of Requirements

The 1 st activity in Production Planning is the determination of the requirements for the planning
horizon. Demand forecasting plays an important role in the conduct of these three tasks.
Managers thus need to be aware of the various factors that would affect the accuracy of the
demand and sales forecast.

Activity 1 involves the conduct of the following tasks:

ACTIVITY 1

Tasks Description
1 Draw up the sales forecast for each product or service over the
appropriate planning period
2 Combine the individual product / service demands into one
aggregate demand
3 Transform the aggregate demand for each time period into staff,
process, and other elements of productive capacity

There are company factors that could influence the level of demand for the firm's products.
These internal factors include the company's marketing effort; the product design itself; the
strategies to improve customer service; and the quality and price of the product.

There are also external factors or marketplace factors that significantly affect demand such as
the level of competition or possible reaction by competitors to a firm's business strategy; the
perception of consumers about the products and the consumer behavior as affected by their
socio-demographic profile. Lastly, there are random factors that could affect the accuracy of
demand forecasts such as the overall condition of the economy and the occurrence of business
cycle.

Activity 2 How to Meet the Requirements

The next major activity involves the identification of the alternatives that the firm may employ to
meet production forecasts as well as the constraints and costs involved. Specifically, this activity
involves the following tasks:

ACTIVITY 2

Tasks Description
1 Develop alternative resource schemes to meet the cumulative
capacity requirements
2 Identify the most appropriate plan that meets aggregate demand
at the lowest operating cost

Once the most appropriate plan has been selected, then the firm evaluates the plan and later on
finalizes it for implementation. For more efficient and effective planning process, the formation
of a production planning team composed of managers from manufacturing, marketing,
purchasing and finance, is recommended.

What are the inputs to the production planning process?

To be able to perform the aggregate planning process, the following information should be
available to this production planning team. These data include the following:

• Materials / purchasing Information

• Operations / manufacturing Information

• Engineering / process Designs

• Sales, marketing and distribution Information

• Financial and accounting information

• Human resources information

Strategies to address the demand fluctuations

There are three basic production planning strategies that the company can choose from to address
demand fluctuations. These are the (1) Chase Demand strategy, (2) Level Production strategy,
and the (3) Mixed Strategy.

Strategy Description
Demand Chase Matches the production rate to the order or demand rate
Strategy through the hiring and firing of employees as the order rate
varies
Level Production Maintains a stable workforce working at a constant production
Strategy rate with the shortages and surpluses being absorbed by any of
the following: • Changing the inventory levels • Allow order
backlogs (commit to the customer that you will deliver the
product (s) at a much later date) • Employ marketing strategies
(e.g. promotional activities)
Mixed Strategy The strategies here could include combination of any of the
following: • Having a stable workforce but employ variable
work hours (e.g., increase no. of shifts, flexible work schedules
or overtime) • Subcontracting / outsourcing

• Changing inventory levels

Source: Dilworth, James B. Production and Operations Management: Manufacturing and

Services . Fifth Edition. McGraw-Hill, Inc. 1993

What are the important considerations in selecting the production planning strategy?

Demand Chase Strategy

Specific Methods Costs Remarks

Hire additional workers as Employment costs for Skilled workers may not be
demand increases advertising, travel, available when needed
interviewing, training, and
others

Shift premium costs if

additional shift is added
Layoff workers as demand Cost of severance pay & The company must have
decreases increases in adequate capital investment
unemployment insurance in equipment for the peak
costs work force level
Level Production Strategy

Specific Methods Costs Remarks

Produce in earlier period and Cost of holding inventory Service operations cannot
hold until product is needed hold service inventory
Offer to deliver the product Delay in receipt of Manufacturing companies
or service later, when revenue, at minimum; with perishable products
capacity is available company may lose often use this method
customers
Exert special marketing Advertising costs, Exemplifies the inter-
efforts to shift the demand to discounts, other relationship
slack period promotional programs
among functions within an
organization

Mixed Strategy

Specific Methods Costs Remarks

Work additional work hours Overtime premium pay The time available for
without changing the maintenance work without
workforce size interrupting production is
reduced
Staff for high production Excess personnel wages Work force may be used for
levels so that overtime is not during period of slack deferred maintenance during
necessary demand periods of low demand
Subcontract work to outside Continuing company The capacity of other firms
firms overhead; subcontractor's can be utilized, but there is
overhead and profits less control of schedules and
quality levels
Revise make-or-buy Waste of company skills, These methods require
decisions to purchase items tooling and equipment capital investments
when capacity is fully loaded unutilized in slack periods sufficient for the peak
production rate, that will be
underutilized in slack
periods
Monitoring effectiveness of production plans?

The important considerations in monitoring the effectiveness of your production plan are shown
below:

Systems and Procedures

Consideration Present? Remarks

(if any)
Yes No
• Is there a current documentation of production planning and
control systems and procedures? Has this been communicated to
all concerned?
• Does production planning and control have a formal
monitoring system to maintain and update master scheduling
records?
• Is there a system of coordination between sales forecasts to be
prepared in sufficient detail so that these maybe readily
translated to specific production plans?

Production Planning

Consideration Present? Remarks

(if any)
Yes No
• Does production planning and control prepare a master
production schedule with all the production assignments
and time allocation?
• Do the production schedules permit adequate planning
of purchases and inventory levels?
• Are there signs of significant lost time or low rate of
worker productivity? Are the numbers of such orders
appear to be significant?
Production Control

Consideration Present? Remarks

(if any)
Yes No
• Can the status of any order or work in progress be
readily determined?
• Do actual production levels deviate significantly in
comparison with planned schedules?
• Do actual shipments of orders almost always occur
according to schedule?
• Are essential production control records and reports
maintained to cover current and future production loads?
 Heijunka: Leveling the Load

“The slower but consistent tortoise causes less waste and is much more desirable than the
speedy hare that races ahead and then stops occasionally to doze. The Toyota Production
System can be realized only when all the workers become tortoises. - Ohno, 1988 -

Many companies today are working towards the ultimate Lean goal of continuous or one-piece
flow. They want to be able to make just what the customer wants when they want it. Instead,
what we often see is a “hurry up, then slow down” build-to-order approach. Customers’ orders
vary from month to month, creating uneven production scheduling. Build-to-order companies
will be building huge quantities, paying overtime, and stressing their people and equipment one
week, but then sending them home the next due to light orders. This environment can also create
large amounts of inventory, hidden problems, and poorer quality. What many organizations fail
to do is the difficult process of creating a true balanced lean workflow. This is the Toyota
concept of heijunka, leveling out the work schedule.

Heijunka is the leveling of production by both volume and product mix. This system does not
build products according to the actual flow of customer orders. Heijunka takes the total volume
of orders in a period and levels them out so the same amount and mix are being made each day.
In a true build-to-order system you build products A and B in the production sequence of
customer orders (e.g., A, A, B, A, B, B, B, A …). This causes you to build product irregularly. If
your orders are twice as much on Monday compared to Tuesday, you end up paying overtime on
Monday and sending employees home on Tuesday. The answer is to build a level schedule
everyday by taking the actual customer demand, determine the pattern of volume and mix, and
building your level schedule. If you know you are making five A’s and five B’s, you create a
level schedule of ABABABAB. This is called leveled, mixed-model production.

Figure 1 gives an example of traditional unleveled production, for Company X that

manufactures tractors. The line makes small, medium, and large tractors. The medium are the
big sellers and are made early in the week, Monday through part of Wednesday. There is a
changeover and the small tractors are made Wednesday through Friday morning. After another
changeover the largest tractors, which are in smallest demand, are made Friday afternoon. This
typical unleveled method creates four problems:

§ Customers usually do not buy products predictably. If the customer decides to buy the
large tractors early in the week the plant is in trouble.

§ The risk of unsold goods that must be kept in inventory.

§ The use of resources is unbalanced.

§ There is an uneven demand on upstream processes.

Figure 2 represents an example of mixed model leveled production. By reducing the changeover
time and employing other Lean methods, the plant is able to build the tractors in any order they
want to on their mixed model assembly line. The four benefits of leveling the schedule is:

§ Flexibility to make what the customer wants when they want it.

§ Reduced risk of unsold goods.

§ Balanced use of labor and machines.

§ Smoothed demand on the upstream processes and suppliers.

Monday Production

Tuesday Production

Wednesday Production

Changeover

Thursday Production

Friday Production
Figure 1. Traditional Production
 Monday Production

Tuesday Production

Wednesday Production

Thursday Production

Friday Production

Figure 2. Leveled Production

To achieve the benefits of continuous flow, companies must level out the workload. Heijunka
will eliminate waste by leveling your product volume and mix, but most importantly, will
level out the demand on your people, equipment, and suppliers. Without leveling, waste will
increase as people are driven to work like mad and then stop and wait, just like the hare.