PRODUCTION PLANNING

 Evaluation and determination of

production-inputs such as labour,
machinery and equipment, materials and
utilities to achieve the desired goals.
 Entails the acquisition and allocation of
limited resources to production activities
so as to satisfy customer demand over a
specified time horizon.
 Planning process
1. Defining objectives and setting priorities to
attain these
2. (a) Studying the environment external to
the system being planned
(b) studying the internal environment of
the system being planned
1. Determine realizable targets
2. Gearing the inputs to achieve these targets
Market Match the two optimally Production
demand capacities
 Engineering and
Maintenance planning
Marketing
Manpower planning
planning

Production Quality
planning planning

Financial and
investment planning
Distributions
Materials and planning
procurement planning
 Production schedule
 It is the schedule that amount of work which can
easily be handled by plant and equipment without
interference.
 It takes into account following factors.

(1) Physical plant facilities of the type required to

process the material being scheduled.
(2) Personnel who possess the desired skills and
experience to operate the equipment and perform
the type of work involved.
(3) Necessary materials and purchased parts.
 Production schedule
techniques
 Visual aids
 Johnson's rule
 Minimum critical ratio rule
 Line of balance technique
 AGGREGATE PLANNING

 Provides the quantity and timing of

production for intermediate future
 Aggregates production
 Involves capacity and demand
variables
 AGGREGATE PLANNING
 Estimate sale for each product or service over a
period
 Total all product or services into one demand in
an homogenous unit
 Convert the aggregate demand for each time
period into man, machine, material and money
 Evaluate alternative course of actions available
for meeting production capacity to support the
cumulative aggregate demand
 Select the plan which satisfies aggregates
demand at lowest total expenditure cost
 Master production
schedule

 MPS is a list of the products to be

manufactured, when they should be
completed and delivered, and in
what quantities
 It is derived from the aggregate plan
 MATERIAL REQUIREMENT
PLANNING
 MRP is a computational technique that
converts master production schedule for end
products into a detailed schedule for the raw
materials and components used in the end
products.
 MRP indicates when each item must be
ordered and delivered to meet the master
schedule for final products.
 MRP is the appropriate technique for
determining quantities o dependent demand
items
 Dependent Independent
demand: Demand demand:
for a product is Demand for a
unrelated to product is directly
demand for other related to the
items demand for some
Ex: Final products other item.
and spare products Ex: Raw materials
and component
parts
 Inputs to MRP system
 Master production schedule:
What are the end products
How many to be produced
when they are ready for shipment
 Bill of materials:
Compute the raw material and
component requirements for end products
listed in the master schedule
 Inventory record file:
Contains the details regarding the
inventory to be maintained
 Inventory management

Questions in inventory
management

 How much inventory to keep

 When to keep
 Costs related to
inventory
 Carrying costs
Cost of capital
Space cost
Material handling costs
Obsolescence costs
Insurance costs
Administration costs
 Ordering costs or procurement
costs
Economic order quantity
Average level of inventory = Q/2
where Q is quantity per order
Cost of carrying inventory = Cc * Q/2
where Cc is cost of carrying an inventory of one unit

Number of orders placed during the year = A/Q

where A is annual consumption
Cost of ordering during the year = Cp * A/Q
where Cp is cost of procurement ordering per order
 EOQ cont….
Total cost = Carrying cost + Ordering
cost
= Cc *Q/2 + Cp *A/Q
In order to minimize the total cost,
derivative with respect to Q and
equate to zero

EOQ = (2 Cp A/ Cc)1/2