PRODUCTION

PLANNING & CONTROL

Production planning & control aims at
optimum utilization of input resources
(men, machines, materials) to produce
goods or services and at the same time
economically meet the customer and
market demand (in terms of quantity,
quality, time and price).

 Production is the process of transforming

the raw materials and semi finished
products into finished products of desired
shape, size, and quality by performing a
series of manufacturing operations in a
predetermined sequence.
Planning is the scheme prepared in
advance, before the actual production is
started. Production planning, is therefore,
the scheme of future objective of producing
a product of desired attributes to give the
desired performance.

 Control means the supervision of all

relevant operations with the help of
control mechanism that feeds back the
progress of the work. It involves the
comparison of actual performance with
the present standards (plans) and
deviations are analysed.

Planning Levels
Long-range plans
(over one year)

Research and Development

New product plans
Capital investments
Facility location/expansion

Top
executiv
es
Operatio
ns
manager
s

Operation
s
managers
,
superviso
rs,
Responsibility
foremen

Intermediate-range plans
(3 to 18 months)

Sales planning
Production planning and budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans

Short-range
plans
(up to 3 months)
Job assignments
Ordering
Job scheduling
Dispatching
Overtime
Part-time help

Planning tasks and horizon

Planning Levels w.r.t Time

Horizons
Responsibl
e:
Operations
managers

Short-range plans
Job assignments
Ordering
Job scheduling
Intermediate-range plans
Dispatching
Sales planning
Responsible:
Top
Production planning and
executives
budgeting
Setting employment, inventory,Long-range plans
Responsibl
subcontracting levels
e:
R&D
Operations
Analyzing operating plans
New product plans
managers,
supervisors
, foremen

Today

3 Months

Capital expenses
Facility location, expansio

1 year

Planning Horizon

5 years

Aggregate Planning
Provides the quantity and timing of
production for intermediate future
Usually 3 to 18 months into future

Combines (aggregates) production

Often expressed in common units
Example: Hours, dollars, equivalents

Involves capacity and demand

variables

 Combines appropriate resources into

general terms
Part of a larger production planning
system
Disaggregation breaks the plan down into
greater detail
Disaggregation results in a master
production schedule
Within the specified time range, the
physical facilities are assumed to be fixed.
Fluctuations in demand must be met by
varying labour and inventory levels.

Goals of Aggregate
Planning

Meet demand
Use capacity efficiently
Meet inventory policy
Minimize cost
Labor
Inventory
Plant & equipment
Subcontract

Aggregate Planning Options/

Strategies
Options

Advantages

Disadvantages

Changing
inventory
levels

Changes in
human
resources are
gradual or
none; no
abrupt
production
changes.

Inventory
holding cost
may increase.
Shortages may
result in lost
sales.

Varying
workforce
size by
hiring or
layoffs

Avoids the costs Hiring, layoff,

of other
and training
alternatives.
costs may be
significant.

Some Comments

Applies mainly
to production,
not service,
operations.

Used where size

of labor pool is
large.
Table 13.1

Aggregate Planning Options/

Strategies
Some
Options

Advantages

Disadvantages

Comments

Varying
Matches
production seasonal
rates
fluctuations
through
without hiring/
overtime or training costs.
idle time

Overtime
premiums; tired
workers; may
not meet
demand.

Allows
flexibility within
the aggregate
plan.

SubPermits
contracting flexibility and
smoothing of
Or
the firms
Outsourcing output.

Loss of quality
Applies mainly
control;
in production
reduced profits; settings.
loss of future
business.
Table 13.1

Aggregate Planning Options/

Strategies
Options

Advantages

Disadvantages

Some Comments

High turnover/
training costs;
quality suffers;
scheduling
difficult.

Good for
unskilled jobs in
areas with large
temporary labor
pools.

Using parttime
workers

Is less costly
and more
flexible than
full-time
workers.

Influencing
demand

Tries to use
Uncertainty in
excess
demand. Hard
capacity.
to match
Discounts draw demand to
new
supply exactly.
customers.

Creates
marketing
ideas.
Overbooking
used in some
businesses.
Table 13.1

Aggregate Planning Options/

Strategies
Option

Advantages

Disadvantages

Some Comments

Back
ordering
during highdemand
periods

May avoid
Customer must
overtime.
be willing to
Keeps capacity wait, but
constant.
goodwill is lost.

Many companies
back order.

Counterseasonal
product and
service
mixing

Fully utilizes
resources;
allows stable
workforce.

Risky finding
products or
services with
opposite
demand
patterns.

May require
skills or
equipment
outside the
firms areas of
expertise.

Table 13.1

Meeting Uneven demands

The two most important and basic
aggregate planning strategies for
meeting uneven demands are:
Level Capacity Strategy:
This strategy strives to maintain a
constant output rate, production
rate, or workforce level over the
planning horizon; i.e. the daily
production level is uniform from
period to period.

 Firms that keep production at uniform

levels may:
1. Let the finished goods inventory go up
or down to buffer the difference
between demand and production.
2. Find alternative work for employees.
Level scheduling works well when the
demand is reasonably stable.
Stable & experienced workforce leads
to better quality product, less turnover
& absenteeism easy scheduling &
supervision, few startups & shutdowns.

..Meeting Uneven
demands

Chase Demand Strategy: This strategy

strives to match capacity to demand; the
planned output for any period would be
equal to the expected demand for that
period.
This can be achieved by a variety of
options:
Vary workforce levels by hiring/firing
Vary production by means of overtime, idle
time, part-time employees, subcontracting.
Does
not
require
the
inventory
management of extra units.

..Meeting Uneven
demands

Chase Demand Strategy: This strategy

strives to match capacity to demand; the
planned output for any period would be
equal to the expected demand for that
period.
This can be achieved by a variety of
options:
Vary workforce levels by hiring/firing
Vary production by means of overtime, idle
time, part-time employees, subcontracting.
Does
not
require
the
inventory
management of extra units.

MRP-Material
Requirements Planning
Materials Requirement Planning is a
technique
for
determining
the
quantity
and
timing
for
the
acquisition of dependent demand
items needed to satisfy master
production schedule requirements.

MRP-Material
Requirements Planning
Refers to the basic calculations used
to determine component
requirements from end item
requirements.
Also refers to the system that uses
the dependence relationship to plan
and control the manufacturing
operations.

Benefits of MRP
1. Better response to customer orders
2. Faster response to market changes
3. Improved utilization of facilities and
labor
4. Reduced inventory levels

Dependent Demand
Effective use of dependent demand
inventory models requires the following
1.
2.
3.
4.
5.

Master production schedule

Specifications or bill of material
Inventory availability
Purchase orders outstanding
Lead times

The Planning Process

Production
Capacity
Inventory

Marketing
Customer
demand

Procurement
Supplier
performance

Management
Return on
investment
Capital

Finance
Cash flow

Human resources
Manpower
planning

Aggregate
production
plan

Master production
schedule

Engineering
Design
completion

Change
production
plan?

Figure 14.1

The Planning
Process
Master production
schedule
Change
requirements?

Change
master
production
schedule?

Material
requirements plan

Change
capacity?

Capacity
requirements plan
No

Realistic?
Yes

Is capacity
plan being
met?

Is execution
meeting the
plan?

Execute capacity
plans
Execute
material plans

Figure 14.1

Master Production Schedule

(MPS)
Specifies what is to be made and when
Must be in accordance with the aggregate
production plan
Inputs from financial plans, customer demand,
engineering, supplier performance
As the process moves from planning to
execution, each step must be tested for
feasibility
The MPS is the result of the production
planning process

Master Production Schedule

(MPS)
MPS is established in terms of specific
products
Schedule must be followed for a reasonable
length of time
The MPS is quite often fixed or frozen in the
near term part of the plan
The MPS is a rolling schedule
The MPS is a statement of what is to be
produced, not a forecast of demand

Bills of Material
List of components, ingredients, and
materials needed to make product
Provides product structure
Items above given level are called
parents
Items below given level are called
children

JOB SCHEDULING
Short term decision
Derives its input from Master
Production Schedule.
Scheduling deals with the timing of
operations
The task is the allocation and
prioritization of demand

Strategic Importance of
Short-Term Scheduling
Effective and efficient scheduling can
be a competitive advantage
Faster movement of goods through a
facility means better use of assets and
lower costs
Additional capacity resulting from faster
throughput improves customer service
through faster delivery
Good schedules result in more
dependable deliveries

Scheduling Criteria
1. Minimize completion time
2. Maximize utilization of facilities
3. Minimize work-in-process (WIP)
inventory
4. Minimize customer waiting time
Optimize the use of resources so that
production objectives are met

Job Sequencing Methods

Specifies the order in which jobs should be
performed at work centers
Priority Rules
Critical Ratio
Johnsons Rule

1) Priority Rules
Priority rules are used to dispatch or
sequence jobs
FCFS: First come, first served
SPT: Shortest processing time
EDD: Earliest due date
LPT: Longest processing time

Comparison of
Sequencing Rules
No one sequencing rule excels on all criteria
SPT does well on minimizing flow time and
number of jobs in the system
But SPT moves long jobs to the end which
may result in dissatisfied customers
FCFS does not do especially well (or poorly)
on any
criteria but is perceived as fair by customers
EDD minimizes lateness, ensures on-time
delivery

2) Critical Ratio (CR)

An index number found by dividing the time
remaining until the due date by the work time
remaining on the job
Jobs with low critical ratios are scheduled
ahead of jobs with higher critical ratios
Performs well on average job lateness
criteria
CR =

Time remaining
Workdays remaining =

Due date - Todays date

Work (lead) time remaining

Critical Ratio Example

Currently Day 25
Job

Due
Date

Workdays
Remaining

Critical Ratio

Priority
Order

30

(30 - 25)/4 = 1.25

28

(28 - 25)/5 = .60

27

(27 - 25)/2 = 1.00

With CR < 1, Job B is late. Job C is just on schedule and Job A has some
slack time.

Sequencing N Jobs on Two

Machines: Johnsons Rule
(N/2 Method)
Works with two or more jobs that pass
through the same two machines or
work centers
Minimizes total production time and
idle time

Steps of Algorithm
1. List all jobs and times for each work center
2. Choose the job with the shortest activity time.
If that time is in the first work center,
schedule the job first. If it is in the second
work center, schedule the job last.
3. Once a job is scheduled, it is eliminated from
the list
4. Repeat steps 2 and 3 working toward the
center of the sequence

Johnsons Rule Example

Job

Work Center 1
(Drill Press)

Work Center 2
(Lathe)

10

12

Johnsons Rule Example

Job

Work Center 1
(Drill Press)

Work Center 2
(Lathe)

10

12

Johnsons Rule Example

Job

Work Center 1
(Drill Press)

Work Center 2
(Lathe)

10

12

Time

WC
1
WC
2

10

20

28

33

Johnsons Rule Example

B

Time

WC
1

10

WC
2
Time 0
35

20

B
1

28

7 9 10 11 12 13

C
E

D
17 19 21 22 2325

B
Job Sequence: B, E, D, C, A
Total Completion Time: 35 hours
Idle Time: 4 hours for work-centre 2

33

C
27

29 31 33

C A