Production Planning and control

Introduction The efficiency of production system is stated in terms of its ability to produce the products with required quantity and specified quality at predetermined cost and predetermined time PPC aims at achieving efficient utilisation of resources (material, men and facility) in manufacturing organisation through planning, coordinating and control of production activities.

Introduction PPC issues directives to production department such as - What to produce ? - How many to produce ? - When to produce ? - What resources are required for production ? - How to coordinate different resources ? - How to control the deviation from the set plan ?

Production Planning and control PPC defined as direction and coordination of a firms’ material and physical facilities towards the attainment of pre-specified production of goods, with highest production efficiency. It deals with logistics problems encountered in manufacturing. Logistics problem deals with what and how many products to produce.

Production planning Defined as the determination, acquistion and arrangement of all facilities necessary for future production of products. It is concerned with: - Deciding which products to make, how many of each and when they should be completed - Scheduling the production and delivey of the parts and products - Planning the manpower and equipment resources for accomplising the production plan

Activities of Production planning Aggregate Production Planning Master production planning Materials requirements planning Capacity planning

Production Control Production control is concerned with determining whether the necessary resources to implement the production plan have been provided or not. Production control takes corrective action to match expected and actual production It reviews the progress of the work and takes corrective steps inorder to ensure programmed production takes place.

Activities of Production control Shop floor control Inventory control Manufacturing resource planning (MRP II) Just-in-time production systems RELATIONSHIP BETWEEN PRODUCTION PLANNING AND PRODUCTION CONTROL

Aggregate Planning Concerned with determining quantity and timing of production for the intermediate future ( often 3 – 8 months) ahead, setting employment, inventory and subcontracting. It is coordinated among various functions in the firm including product design, production, marketing and sales Provides data to plan the variable resources, which include full and temporary employment levels, total labour hours per period and number of subcontractors

Aggregate Production Planning Guidelines for Aggregate Planning Determine demand for each period Consider company policies that may have impact Determine capacities for each period Regular time, overtime, subcontracting, etc. Identify backorder or inventory amount Determine costs of operation Continue through time horizon to calculate total cost Develop alternate plans and compute cost for each Select the plan that meets objectives 11/27/2018

Aggregate Production Planning Assumptions in Aggregate Planning The regular output capacity is the same in all periods. Cost is a linear function composed of unit cost and number of units. Plans are feasible : sufficient inventory capacity exists to accommodate a plan, subcontractors with appropriate quality and capacity are standing by, and changes in output can be made as needed. Contd… 11/27/2018

Aggregate Production Planning Assumptions in Aggregate Planning All costs associated with a decision option can be represented by a lump sum or by unit cost that are independent of the quantity involved Cost figures can be reasonably estimated and are constant for the planning horizon Inventories are built up and drawn down at a uniform rate and output occurs at a uniform rate throughout each period 11/27/2018

Aggregate Production Planning Output of Aggregate Planning Production quantity from regular time, overtime and subcontracted time Inventory held for determination of how much warehouse space and working capital is needed Backlog or stock-out quantity for determining the customer service levels

Strategies in Aggregate Planning Level plans Use a constant workforce & produce similar quantities each time period Use inventories and backorders to absorb demand peaks & valleys Chase plans Minimize finished good inventories by trying to keep pace with demand fluctuations

Strategies in Aggregate Planning Level plans Production Demand Units Time

Strategies in Aggregate Planning Chase plans Production Demand Units Time

Strategies in Aggregate Planning Hybrid or Mixed Strategies Build-up inventory ahead of rising demand and use backorders to level extreme peaks Layoff or furlough workers during lulls Subcontract production or hire temporary workers to cover short-term peaks Reassign workers to preventive maintenance during lulls Influencing Demand

Master Production Planning Aggregate production plan is converted into master production schedule (MPS) MPS is a listing of the products to be manufactured, when they are to be delivered and in what quantities Lists the production quantities of major product lines, whereas MPS provides a very specific schedule of individual products MPS developed from customer orders and forecasts of future demands.

Master Production Schedule Provides basis for: Making good use of manufacturing resources Making customer delivery promises Resolving tradeoffs between sales and manufacturing Attaining strategic objectives in the sales and operations plan

Aggregate production and Master Production plan

Master Production schedule Master schedule should be based on accurate estimate of demand and a realistic assessment of the company’s production Products included in MPS are divided into 3 categories (1) Firm customer orders (2) Forecasted demands (3) Spare parts Customer orders for specific priducts, the company is usually obligated to deliver the item by particular date

Master Production Scheduling In the second category, the production output quantity are based on statistical forecasting techniques applied to previous demand patterns. For many companies the largest portion of the master schedule is constituted by forecast demand. In the third category, it consists of repair parts that either will be stocked in the company’s service department or sent directly to customer.

Master Production Schedule Consists of medium range plan, since it must take into account of lead time to order raw materials and components, produce parts and then assemble end products MPS are usually considered to be fixed in the near term. Changes are not allowed for six week horizon. Aggregate Production schedule is not only the input to master production schedule. Other inputs such as new customer orders and changes in the sales forecast, makes difference from aggregate production plan.

Master Production Schedule (MPS) Master schedule states quantity and delivery time of specific products. It says we need 75 push lawnmowers in January. But it does not say how we get it - from production, or from inventory. Master Production Schedule (MPS) is developed based on Master Schedule. MPS: Quantity and timing of planned production. MPS determines the Promised Inventory, and the Production Requirements available to promise inventory for each period.

Master Scheduling Process Inputs Outputs Beginning inventory Projected inventory Master production schedule Uncommitted inventory (Available to Promise) Master scheduling Forecast Customer orders The key idea is: we have a forecast, but it turns into and actual order when we receive a customer order. MPS starts with a preliminary calculation of projected inventory. This reveals when we need production to get additional inventory.

Link between SOP and MPS Month: January February March Output: 200 300 400 SOP January (weeks) 1 2 3 4 Push Mowers 25 25 25 25 Self-propelled 35 40 Riding 12 13 MPS

MRP and Related Concepts TLA (Three Letter Acronym) Definitions ATP: Available to Promise BOM: Bill of Materials DRP: Distribution Requirements Planning MPS: Master Production Schedule MRP: Materials Requirements Planning PAC: Production Activity Control SOP: Sales and Operations Planning

Where Does MRP Fit?

Assume that we’ve scheduled 500 chairs to be ready five weeks from now. what?

Material Needed for a Chair Back supports (3) Side rails (2) Front legs (2) Cross bars (2) Seat

Chair Structure Tree (aka “Bill of Materials”) Leg Assembly Seat Back Assembly Legs (2) Cross bar Side rails (2) Back Supports (3)

Graphic Lead-Time Week 1 Week 2 Week 3 Week 4 Week 5 Back Support (2 weeks) Side Rails (2 weeks) Back Assembly Cross Bar (2 weeks) (1 week) Chair Assembly Seats (2 weeks) (1 week) Leg Assembly Legs (2 weeks) Cross Bar (2 weeks) (1 week)

Lead-Time Key Points To have finished chairs at the beginning of Week 5, we must begin production and order materials in Week 1. “Exploding” the bill of materials tells us when to order things. Not much we can do to adjust output of chairs for the next 4 weeks. Why?

Material Requirements Planning (MRP) We need the following inputs: Bill-of-Materials (BOM) Inventory records Master production schedule We’ll get the following outputs: What items should be ordered When each item should be ordered How much of each should be ordered

The MRP Process Starts with the MPS End items are also known as “Level 0” items

The “Parent / Child” Relationship Refer back to bill of materials on slide 20, or insert duplicate after this slide for ready reference Where do the gross requirements come from? Do you understand the MRP logic? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Going Deeper… 25 25 25

Moving from “Level 1” items to “Level 2” items . . . 25 25 25 Where do the gross requirements for LEGS come from?

Combining Requirements: “Cross Bars” 25 25 25 Note effect of differences in lead times and order sizes on the gross requirements for each component

Objectives of MRP 1.Ensure the availability of materials, components, and products for planned production and for customer delivery, 2. Maintain the lowest possible level of inventory, 3. Plan manufacturing activities, delivery schedules, and purchasing activities.

Inputs of MRP Master Production Schedule Product structure records Inventory status records.

Shortcomings of MRP Capacity - MRP expects the lead time to be constant regardless of how much work has been released into the production system, so it is implicitly assuming infinite capacity. This can create problems when production levels are at or near capacity. - Rough-cut capacity planning (RCCP) attempts to do this by checking the capacity of a few critical resources.

Shortcomings of MRP Long Lead Times There are many pressures to increase planned lead times in an MRP system - To compensate, planners typically choose pessimistic estimates. Long lead times lead to large work-in-process (WIP) inventories.

Shortcomings of MRP Nervousness MRP is typically applied in a rolling horizon basis. - As customer orders firm up, and forecasts become better, a new MPS is fed to MRP which produces updated planned order releases that may be very different form the original. - Even small changes in the MPS can result in large changes in planned order releases.

Capacity planning Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products  Effective capacity is the maximum amount of work that an organization is capable of completing in a given period due to constraints such as quality problems, delays, material handling, etc.

Capacity planning Capacity planning is concerned with planning of production resources needed to meet the master schedule. Capacity planning is used to identify the limitations of production resources so that unrealistic master schedule is not planned.