Strictly as per Revised Syllabus of

Anna University
Semester - VIII (Mechanical Engineering) (Elective IV)

Production Planning & Control

Subhash L. Gadhave
Ph.D (Pursuing), M.E. Mech. (Mechatronics),
Asst. Prof. in Mechanical Engg. Dept.
Zeal College of Engg. & Research, Pune.

® TM
ISBN 978-93-332-1367-7

TECHNICAL
PUBLICATIONS
An Up-Thrust for Knowledge 9 789333 213677

(i)
Production Planning & Control
Semester - VIII (Mechanical Engineering) (Elective IV)

First Edition : January 2017

ã Copyright with Author

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®
by : TM
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PUBLICATIONS

ISBN 978-93-332-1367-7

9 7 8 9 3 3 3 2 1 3 6 7 7

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9789333213677 [1] (ii)

 Production planning
and control

Pre-planning Planning Control

 Machines and equipments  Dispatching
 Market demand
 Materials and methods  Inspecting
 Product design
and development  Process planning  Expediting
(routing)  Evaluation
 Forecasting demand
 Scheduling
 Estimating

Feedback
Input
Men Output
Material Company
Production objectives
Machines Goods and
system
Energy Services
Information

Production Comparison Production

control plan

Modify plan
Inputs Transformation Outputs
process
 Men  Goods
 Machines  Design  Services
 Materials  Planning
 Energy  Control
 Money  Maintenance
 Information

Comparison of
actual and
desired Feedback
 Types of production system

Intermittent production system Continuous production system

Project production flows Mass production flows

Jobbing production flows Process production flows

Batch production flows

Customer's order and
Intermittent production system
Customer's specific

No continuous flow
of same size GoldSmith Tailor

Features of intermittent production system

1. Flow of production is not continous.

2. Variety of products are produced.

3. Volume of production is small.

4. General purpose machines are used.

5. Sequence of operation changes as per design.

6. Production depends on customer's orders.

Demand forecast Continuous production system

Production is on a
Food industry Fuel industry
large scale
Features of continuous production system

1. Flow of production is continuous and not intermittent.

2. Products are standardized.

3. Products are produced as per quality standards.

4. Products are produced in anticipation of demand.

5. Standardized routing sheets and schedules are prepared.

Characteristics of process production flows

1. Highly mechanized system for handling materials.

2. Low-skilled labour and skilled technicians are required.

3. Very less work-in-progress, since material flow is continuous.

4. Production planning and scheduling can be pre-decided.

5. Full production system is designed to produce only one item.

 Form
design

Product Functional
development design
Product
design

Product Package
research design
 Creation

Product
Enhancement development Innovation

Improvement

Product development is a ...

Continuous
Innovation of improvement of

New product Enhancing

Creation of utility of
OR
Existing product
 5000

4500 a
re
Total revenue fit a
4000 Pro
BEP(sales)
Cost and revenue (In Rs.)

Variable expenses

3500 Break-even point

3000

2500

2000

1500
Fixed expenses

ea
1000 ar
s
Los
500

500 1,000 1,500 2,000 2,500 3,000 3,500

Production quantity (In no. of units)

 Fixed Cost Fixed Cost F
units
Contribution per unit Selling Price Variable Cost per unit S V

Fixed Cost Fixed Cost F

PV Ratio Sales Variable Cost
Sales

Fixed Cost
Contribution

Contribution
Sales

Fixed Cost
P / V Ratio
Fixed Cost Profit
Contribution
 Total fixed cost
Contribution Unit

40000
8

Fixed cost
P V ratio
s v 10 2
P V ratio
s 10
40000
0.8
Fixed costs profit 40000 30000
Contribution Unit 8

Fixed cost Profit 40000 30000

P v ratio 0.8

4000
1000
7000
1000
s v 7 4
s 7
Fixed cost
Selling price Variable per unit
F 1200
s v 7 4

Fixed cost 1200

Contribution margin ratio 0.4285
Fixed cost
P V ratio

s v
s

20 14
20
7,92,000
0.3

Fixed cost profit desired

contribution unit
 7,92,000 60,000 8,52,000
s v 6

Contribution Fixed cost Profit

100
Sales P v ratio P v ratio

80,000 60,000 20000

100
2,00,000 40 % 40 %
120
, ,000
100
2,40,000

60,000
50 %

60,000
50 %

60,000
100
180
, ,000
0
3333
. %
60,000
3333
. %

76,000 100
100
190
, ,000

60,000
40 %
16000
40 %
 33 13
F Rs.60,000
P 33 13 percent
Ratio
V
F 60,000
S–V 12 – 8

Profit 20000
contribution (per unit) 12 – 8

F + Desired profit 60000 + 40000

Unit contribution 4
F +Desired profit 100000
p 33 13 percent
ratio
v
Contribution 1,50,000
100 100
Sales 3,00,00
FC 90,000
Unit contribution 50 percent
 FC 90,000
P / V ratio 50 percent
Profit 60000
Unit constribution 30 – 15
Profit 60,000
P / V ratio 50 percent

FC 60,000
SP – VC 13 – 8

FC + PROFIT 60,000 +12,000

SP – VC 13 – 8

Fixed cost
Selling price per unit – Variable cost per unit

72,000
24 – 15
 Fixed cost + Profit
Selling price per unit – Variable cost per unit
72,000 + 90,000 1,62,000
24 – 15 9

2 9

Contribution
100
Sales

3
100
12

Fixed expenses
P V ratio

90,000 90,000 100

25 25
100
Fixed expenses + Desired profit
P V ratio

90,000 + 4,50,000 5,40,000

25% 25
100

5,40,000 100
25

Change in contribution
100
Change in sales

20,000
100
2,00,000

10
7,00,000
100
 Fixed cost
P V ratio

80,000 80,000 100

10 10
100

Break - even sales

Selling price per unit

8,00,000
100

Fixedcost + DesiredProfit
P V ratio

80,000 + 40,000
10%

1,20,000 100
10

Profit(P) + Fixed cost (FC)

Quantity sold (Q)
 P1 + FC
1 P1 1 Q1 FC
Q1

P2 + FC + S
2 P1 2 Q2 FC – S
Q2

P2 > P1
P2 – P1 0

2 Q 2 FC S) ( 1 Q1 FC)
( 2 Q2 1 Q1 S 0)

P
1- V
ratio for old design
P
- ratio for new design
V
Q1 S
1+ D
Q2 P1 FC

P1

Q1
 P V ratio for old design 1.00
P V ratio for new design 1.15

1,10,000
2

Q2 S
1+ D
Q1 P1 FC

55,000
1+ 0.8695
55,000 + 2,00,000

Q2 Q1
1st
P2 P1 10 % S
10
60,000 + 110
, ,000
100

P2

Q2 S + P2 FC
D
Q1 P1 FC

Q2 60,000 + 71,000 + 2,00,000

0.8695
Q1 60,000 + 2,00,000
Q2
Q1
2 nd
10
P2 P1 + S
100
10
60,000 + 60,000
100

P2

Q2 S + P2 FC
D
Q1 P1 FC

60,000 + 66,000 + 2,00,000

0.8695
60,000 + 2,00,000

Q2
Q1

Q2

Q2
 Select

Record

1 2 3
Process Path of movement Work place
 Outline process chart  Flow diagrams  Multiple activity in chart
 Flow process chart  String diagrams  Therbligs
 Two handed process charts  Form to chart  Simo charts
 Chronocyclagrophs
 Activity relation charts

Critical examination

Develop + Define

Install + Maintain
 Part No. : R.35 X X
Part Name : Rivetted plate Assembly.
Location : Assembly Shop
Method : Present
Charted by : A. K. Chavan
Approved by : L. M. Krishna

2 rivets Plate 2 : Cold worked steel Plate : 1 Cold worked steel strip
3  10 long strip 30 wide  4 thick 30 wide  4 thick

1 Cut 250 long.

4 Cut 350 long.

2 Drill 3 holes, 2 No.

5 Drill 3 holes, 2 No. 3 Cuntersunk

2 Unspent for burr. 1 Unspent for burr.

6 Locate plate
1 on top of 2

7 Insert rivets

8 Form rivet heads

1 Unspent
D
Left hand Both hands Right hand

Pick screwdriver from rack Insert screw in hole

Bring screwdriver to screw Hold screw in hole

Tighten screw

Turn assembly over

Check for marks

Working Idle
 Work
Key :
Idle
 From
1 2 3 4 5 6 7 8 9 10
1
2 1
3 1 1 1
4 3 1
To 5 1 2 3
6 5
7 2 2 2 1
8
9 1
10 2

Travel chart
 Flow diagram - Exiting method

Job : Raw material from stores machined

and finished components stoked in stores.

Diagram prepared by Date

Scale :

Drill Mill

Shaper Slotting

D
La the Inspection

R. M. stores Finis hed

stores
 String diagram
Job : Study of movement of a machinist
prepared by Date

Scale :

Machine Machine Machine

Inspection Toilet
Tool
room

Stores Supervisor
(a) Cycle graph (b) Chronocycle graph
 Time Study

Synthesis
Method

Work Work Sampling

Measurement

Analytical
Estimation

Predetermined
Motion Time
System [PMTS]
 B

0
9 1
30
25 5
20 10
8 15
2

7 3

6 4
5

Time study sheet

Product................................................. Time study observer...........................
Operation No.......................................... Date...........................
No. of cycles..........................................
Standard time found................................

Element Observed time Averaged Rating Normal Allow- Standard

description (stop watch reading) observed factor time ances time
time
1 2 3 4 5
 Holding
Stop watch
paper clip

Stop watch
holding device
 Normal time Observed time Rating factor

Standard time Normal time + Allowances

 SELECT
The job to be timed

DEFINE
The elements, break the job into elements convenient for timing

OBTAIN AND RECORD

Details regarding method, Operator, Job and working conditions

EXTEND
Observed time into normal time (Basic time)

MEASURE
Time duration for each element and assess the rating

COMPUTE
Standard time for the operation for defined job

DETERMINE
Relaxation and personal allowances
Standard time Normal time + Allowances
Observed performance
Normal performance
Observed time Performance rating
100
 110
8 8 1.10
100

Normal time 8.80 min.

Normal time 100 8.80 100

Performance rating 100

Observed time 8.80 min.

( 2 . 0 85 / 100) 1. 7
 Normal time 12.92 min.

10
Personal Allowance 12 .92
100

1 . 292 min.

4
Contingency allowances 12.92 0 .0516 min
100
Standard time / piece Normal time Personal allowance Contingency allowance
12 .92 1.292 0 .0516

Standard time 14.263 min

 01 / 5

1/ 8

Normal time Normal time frequency

Normal time / cycle Normal time frequency

1
0 .16
5

Normal time / cycle 0 .032

Normal time / cycle Normal time frequency

1
0 .24
8

Normal time / cycle 0 .03

10
2 .81 2 .81
100

Standard time 3 . 091 min

 Standard time Normal time Allowance
13
0 .12 0 .12
100

Standard time 0 .1356

1.0781
Total standard time with contingency allowance of 3 %
3
1.0781 0 .964 1.0781 0 .994
100

2 . 0721 min

1 / 100
 1 / 100

Total allowance Contingency allowance + Interference allowance

4% 3%

7%

Standard time Normal time Allowance

7
4 .3187 3 .8763
100

Standard time 4 . 59

(8 60) – 450
480 – 450
30 min
30
% Allowance 100
450

Allowance 6 . 67 % Normal time

Normal time per piece 4 min

Standard time per piece Normal time + Allowance
 6 .67
4 4
100

Standard time per piece 4 . 267

Quantity produced Total available time

per day Standard time per piece

480
4.267

Quantity produced per day 112 . 5 113 pieces

No.of pieces in a shift

Quantity to be produced per day
75
100
113

66 . 37 %
 20 + 01 +13 + 84 + 03
Average time 0 .242
5(100)

Standard time 0.5744(1 + 0.10)

Standard time 0.6318 min

Standard time Normal time + Allowances
1.3764 (0 .1 1.3764) (0 .15 1.3764)
1.3764 0 .1376 0 .2065

Standard time 1 . 72 min

 C 2 [1 – P]
N
A2 P

4[1 – P]
N
A2 P

N
R
m
 To
Duration of study in min
To
Number of pieces produced

Te

Te Overall time per piece production activity

Number of working observations
Overall time per piece (To )
TotalNumber of observations

Tn

Tn Effective time per piece (Te ) performance rating

Ts
Ts Normal time Allowance

P (1 – P)
AP 2
N

Number of observations
P Activity percentage
Total Number of observations
 To

Duration of study (min)

To
Number of pieces produced

Total time 02days Assume 8 hrs / day

02 08 60 960 min

960
To 9 .6 min
100
 Te
Te Overall time per piece ( To ) production activity
Number of observations
(To )
TotalNumber of observations
Number of observations
(To )
Number of observations +Number of idle observations
3100
9.6
3100 +90

Te 9 .33 min

Tn
Tn Effective time / piece performance rating
85
Te Peformance rating 9 .33
100

Tn 7 .93 min

Ts
10
Ts Normal time (Tn ) Allowance (Normal time) 7 .93 7 .93
100

Ts 8.72 min

P (1– P)
A.P. 2
N

P
Number of idle observations 90
TotalNumber of observations 3190

P (1– P)
A.P. 2
N
 (0.02) (1– 0 .02)
A(0.02)
3190
0 .0194
A(0.02)
3190
A(0.02) 2 . 46 10 –3

A 0.1234 or 12.34 %

3:1

To
Duration of study (min) 60 60
To 30 min
Number of parts produced 120

To 30 min

Te
Number of observations 2200
Te Overall time per piece 30
TotalNumber of observations 2800

Te 23 .57 24 min

Tm
1
Tm 24 6 min
4
Th
 3
Th 24 18 min
4
Tm [Th R] 6 [18 0. 90]

Th 22 .2 min

Ts Normal time [1 allowance] 22 .2 [1 0 .15]

Ts 25.53 min

To
Total time worked (min) 5 8 10 60
To
Number of units produced 5500

To 4 .36 min

Te
Number of observations
Te To
TotalNumber of observations
 (200 +185 +165 +160 +190) 900
4 .36 4 .36
(210 +220 +190 180 +220) 1020

Te 3 .85 min

Normal time Effective time rating 3 .85 1.2

Normal time 4 .62 min
Ts
Ts Normal time [1 allowance] 4 .62 [1 0 .1]

Ts 5.08 min
Process planning
Analyse
part requirements

Determine
operation sequence

Select
equipment

Calculate
processing times

Document
process plan

Communicate
mfg.engr. shop
 Production design and
Organizational development request
planning
system
Part list Connected data
CAD
Geometry
data
MRP
Parts master files
material resource
planning CAPP
capacity planning Process plans

Machine, Tool, Fixture

Production data bands NC Corrected
order Actual
data program data

CAM Production control

 Q

U W

–1 –1
tan p tan d V
O
Tp Tc Tp Time(T)

Tc

Tp
Tp

Tp d
Tc p
Q

U W

–1
tan p'
–1
tan d
O'
V'

–1
tan p
O
Tp V" T V Time(T)
T p

Tc
 Q0
Q0

Q0

Q0

Tc Tp Ts

Ts
Tp
Tp
:
Tc

Q0 d
Q p
 S
Q

1
Tc (Q Q 0 )
2
Tc
Q Q0
I Tc
2

Tc
1
2d

Tc
 BQ
d

S I BQ
C Q
Q 2d d
S Q BQ
C
Q 2d d

Annual cost Curve for total

cost of holding
and setup

Minimum
total cost
Holding cost
curve

Setup (or order)

cost curve
Optimal Order quantity
order
quantity

S
Q

I(1 ) 2
2d

dY
dQ
 –S
K
Q2

S 2ds
Qm
K I(1 + ) + 2B

Qm

S
KQ m
Qm

S
Xm C+ KQ m
Qm
S S
C+
Qm Qm
2S
Xm C+
Qm

I(1 + ) + 2B
Xm C + 2KQ m C+ Qm
2d

(Q m )

(Q m )
 Demand rate d
Production rate p
500 1
2500 5

13
per year
100
13 1
4 10 –4 per day
100 325

4 10 –4 355

2ds 2 500 5000

Q min
I(1 + ) + 2B 0.142 (1 + 0.2) + (2 0.015)

Q min

2S
Xm C+
Qm
2 5000
355 +
4995
Xm

Xm Qm

Qm
Tp

Qm
Demand rate d
Production rate p
50
130

13
per year
100
13 1
4.33 10 –4 per day
100 300
 10 4

Qm

2ds 2 50 3000
Qm
I(1 ) 2B 0.091 (1 0.38) 2 0.025

Qm
Tp
Qm 1307
Tp
P 130

2S 2 3000
Xm C 210
Qm 1307

Xm

Xm Qm
Machining time PC Batch size
Machine cost hour
60

Setup time Batch

Machine cost hour Tooling upcost
60

12 1000 60
45 45 400
60 60

4 1000 90
120 120 2000
60 60

12 1000 3 60
45 45 400
60 60

4 1000 3 90
120 120 2000
60 60
Order Weeks
Product Quantity
No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

42 L/14

42 M/163

42 A/16

42 M/60
43 L/16
43 L/15
43 M/111

44 L/13

44 L/25

Week no.1 starts on Production program

no. Time for design, delivery
Week no.20 ends on of materials and tools
Date of issue Production
Progress to be marked on By
Gantt charts End of inspection packing,
Checked and delivery
Job or part June July
number
27 28 29 30 1 5 6 7 8 11 12 13 14 15

Casting rod Maint.

Form wires

Fabricate end
caps

Heater element
assembly
Output (unit per hour)
Qth

t (min)

60
Q th units hour
t
 Components added at each station
Work carrier or
base part in Work Finished
flow assembly out
ASBY ASBY ASBY
MAN MAN MAN

Tej ne
 Twc

ne
Twc Tej
j=1

Tsi
n ne
Tsi Tej
i =1 j=1

(Tc )

Tc E / Rp

nTc – Twc
d
nTc
50 sec. 16 sec. 14 sec. 17 sec.

A B C F

17 sec.
13 sec. 14 sec.
17 sec.
55 sec. 20 sec. G
J K
H
D E
17 sec.

I
 (Production Time Per Day) (60 sec. 420 min.)
Cycle Time
(Output Per Day) ( 420 bicyles )
25,200
60 sec.
420

(Sum of Total Task Times) 250 sec's.

Number of Work Stations
(Cycle Time) 60 sec's

3 .97 4 (rounded)
 (Sum of All Task Times)
Efficiency
(ActualNo.of Work Stations) (Cycle Time)
(250)
(60)
(5)

0.83 or 83 %
 5 min.
7 min.
6 min. H 7 min.
G
6 min. L
C

2 min. K
12 min. 6 min. D 1 min.
A B 4 min.
2 min. I
J
E

12 min.

(Production Time Per Day)

Cycle Time 15 minutes
(Output Per Day)

(Sum of Total Task Times)

Number of Work Stations
(Cycle Time)
70 min's
15 min's

4.67 5 (rounded)
 (Sum of All Task Times)
Efficiency
(ActualNo.of Work Stations) (Cycle Time)
( 70)
(15)
(6)
0.778 or 77.78%
70 sec 10 sec 60 sec 25 sec
a d g j

40 sec 30 sec 50 sec 20 sec 25 sec

b e h k l

45 sec 20 sec 15 sec

c f i

(Production time per day)

(Output per day)
7.5 60 60
300

40

Idle time per cycle

100
Number of workstations cycle time
40
100
5 90
 2000

1750

1500

1250
Output of products y

1000 960 units

(units/ day)

750 Full capacity of

Stage - I
500
Production
250 below full capacity
1600 units
0
250 500 750 1000 1250 1500 1750 2000
Output of product x (units/ day)

2000

1750
Stage V
1500
Stage III
Output of product B

1250
St
ag

1000 Stag
(units/ day)

e
II

e
I
750 3

500 2
St
ag
250 e
IV
1
0
250 500 750 1000 1250 1500 1750 2000 x
Output of product x (units/ day)
xP xQ xR
60 80 25
xP xQ xR
75 50 25

Product Q
7 80
Process I
70
60
2 50

40

30
5 20 4

10 Process II
1 6
Product P
10

0 10 20 30 40 50 60 70 80
20
30

3
40
50

8
60
70
80

R
uct
od
Pr
 a 1x 1 a 2 x 2 a 3x 3 .......... a n x n P
b1x 1 b2 x 2 b3 x 3 .......... bn x n Q
c 1x 1 c 2 x 2 c3x 3 .......... c n x n R

x1
x2
x3
xn
 Forward
scheduling

Start by scheduling
raw material and work

Obtain raw Operation Final

Operation 2
material 1 assembly

Required
due date

1 2 3 4 5 6 7 8 9 10 11 12

Obtain raw Operation Final

Operation 2
material 1 assembly

Start by scheduling due date

Today's required and work
date Operation time Transit or queue time
Backward
scheduling
Authorized Prospective master
Are resources No
production production
plan available ?
schedule

Yes

Material Authorized master

requirements production
planning schedule
 Gantt chart

Load Schedule
chart chart

Day
Monday Tuesday Wednesday Thursday Friday
Work centre

Metal works Job 349 Job 350

Mechanical Job 349 Job 408

Electronics Job 408 Job 349

Painting Job 295 Job 480 Job 349

Processing

Center not available

(for example, maintenance time,
repairs, shortages)
 Day Day Day Day Day Day Day Day
Job
1 2 3 4 5 6 7 8

Now

Gantt schedule chart symbols :

Schedule activity time
Actual work progress
Non-production time
 Gantt load chart
Week-1 Week-2 Week-3 Week-4
Department
A
Department
B
Department
C
Time remaining before due date Remaining processing time
Number of remaining operations
(p i ) (d i ) (F i (F i – 1 ) p i ) (Li (F i – d i
Fi d i
(p i ) (d i ) (F i (F i – 1 ) p i ) (Li (F i – d i
Fi d i

(p i ) (d i ) (F i (F i – 1 ) p i ) (Li (F i – d i
Fi d i
(p i ) (d i ) (F i (F i – 1 ) p i ) (Li (F i – d i
Fi d i

(p i ) (d i ) (F i (F i – 1 ) p i ) (Li (F i – d i
Fi d i
M2
M1 M2
M1 M 2

M1

M2

M2 C

B C
 B A C

B A E C

B A E D C

M1 B A E D C Idle
Idle

B A E D C

4 8 12 16 20 24 28 32 36

M1
 a d e b c g f

8 18 38 62 92 110 132

Idle
MI a d e b c g f

Idle

Idle
MII a d e b Idle c g Idle f
6 22 35 38 62 82 92 112 118 132 134

20 40 60 80 100 120 140

Time (hours)
7 th
Gi Ai Bi Hi Bi Ci
 Machine

Job A B C D E
I 2 3 1 3 0
II 2 0 5 2 1
III 2 1 0 1 2
IV 5 0 2 1 1
V 0 3 1 0 2

Machine

Job A B C D E
I 1 3 0 2 0
II 1 0 4 1 1
III 2 2 0 1 3
IV 4 0 1 0 1
V 0 4 1 0 3

Machine

Job A B C D E
I 2 3 1 3 0
II 2 0 5 2 1
III 2 1 0 1 2
IV 5 0 2 1 1
V 0 3 1 0 2

Machine

Job A B C D E
I 1 3 0 2 0
II 1 0 4 1 1
III 2 2 0 1 3
IV 4 0 1 0 1
V 0 4 1 0 3
M1 M 2 Mm M1 M 2 M 3 Mm Tij
i th jth

min j ( T1j ) min j ( Tmj ) max j T2j T3j T4j T(m – 1) j

min j (T1j ) max j (Tij )

min j (Tmj ) max j (Tij )

TGj T1j T2j T(m –1) j THj T2j T3j Tmj

 Tij T2j T3j ... Tmj

M1 Mm M 1M m

Ai Ei
(B i , C i , D i )
Ei (B i , D i ) Ai Ci

Gi Ai Bi Ci Di Hi Bi Ci Di Ei
 2 Annual demand setup cost / batch
Inventory carrying cost per unit per year
 (Machine hours inventory +(Total Available
for all items) Machine hours)
Machine hours requirements forecasted for all the items
 (1) (2) (3) (4) (5)
Assemb. March March
Invent time forec. Invent. forec.
on-hand req'd. dem. on-hand dem.
Bicycle (Units) (Hr/Units) (Units) (Hours) (Hours)
Razer 100 .3 400 30 120
Splicer 600 .2 900 120 180
Tracker 500 .6 1,500 300 900
HiLander 200 .1 500 20 50
(1)×(2) (2)×(4) Total 470 1,250

(6) (7) (8) (9)

March's March's
desired desired Assembly
Ending Ending inv. Required time
inventory & Forec. production allocated
Bicycle (Units) (Units) (Units) (Hours)

Razer 70 470 370 111.0

Splicer 158 1,058 458 91.6
Tracker 264 1,764 1,264 758.4
HiLander 88 588 388 38.8
(3) x.176 (3)+(6) (7)–(1) (8)×(2) 999.8
 N
LE 100 %
S TS max

( S )(TS max ) N
BD 100 %
( S ) (TS max )
 3
C

5
1 E
A

4
D

2
B

Lead time in work days

30 25 20 15 10 5 0
 240

210

180

Cumulative  of units
150

120

90

60

30

MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB

240

210

180

150

120

90

60

30

1 2 3 4 5
 240
210
180
150
120 LOB
90
60
30

MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB 1 2 3 4 5

Actual progress measured in the

5 = 1 Sept. 5 2 field is shown by cross-hatched
3.4 = 15 Sept. 3.4 1 bars
2 = 30 Sept.
1 = 8 Oct.
 Master production schedule
(MPS)

Inventroy Material requirements planning Bill of

status (MRP) logic materials (BOM)
file file

1. Planned order release

2. Order rescheduling
3. Planned orders receipts
 M1 M2

M2
M3

A F D B C E,
 Inventory
consists of...

Raw-materials Work in progress Captive consumable Finished goods

required for (WIP). For example, goods,goods used which are
production process semi-finished goods by manufacturer available for sale
Total Inventory cost carrying cost ordering cost

Total cost
cost

Holding cost
Order cost

Order quantity Q
 C Purchase or manufacturing cost of an item.
C0 The ordering cost per order.
Ch Inventory holding cost of an item per unit per time unit
Cs Shortage cost per unit short per time.
D Demand rate of an item.
Q Order quantity (a decision variable)
T Cycle time (a decision variable)
ROL

L Lead – Time
N Number of orders per time unit
T Production time period
P Production rate at which quantity is produced.
PC Total purchase cost.
IHC Total inventory holding cost per time unit
SC Total shortage cost per time unit
OC Ordering cost per order
TC Total inventory cost per time unit
TVC Total variable inventory cost per time unit
 Ch

Inventory
level Maximum inventory level
Order
placed
Reorder level (or point)
ROL

Order
quantity, Q
0 LT LT Time (year)
Lead I = Q/D
Order points
time
Reorder cycle

Q D t

Total Variable Inventory Cost Annual carrying cost Annual ordering cost
{(Avg.Inventory level) (Carrying cost / Unit / Year)}
{Number of order placed per year
(Ordering Cost / Order)
 I max I min D Q D
TVC .C h .C C .C
2 Q 0 2 h Q 0

Cost

Total cost t
c os
TVC*
ing
rry
Ca

Ord
erin Purchase cost
gc
ost

0 Q* (EOQ) Order size, Q

D Q 2DC 0
C C or Q 2
Q 0 2 h Ch

2DC 0 2 Annualdemand Ordering cost

Q (EOQ)
Ch Carrying cost

Q * (EOQ)

t*
Q Annual demand Reorder cycle time = D.t

Q 1 2DC 0 2C 0
t*
D D Ch DC h

Annualdemand D 1 DC h
N* D
Optimalorder quantity Q 2DC 0 / C h 2C 0

TVC
D Q
TVC C0 C
Q 2 h
 1 Ch
D C0 + 2DC 0 / C h 2DC 0C h
2DC 0 / C h 2

TC D C TVC

D 3500 kg per year

C0 35 / order

Ch 30% of investment 12 30% 3.6 / kg / year

2DC 0
Q
Ch

2 3500 35
3.6

Q 260 . 87 kg / order

Q
r
D
260 . 87
t 0 . 0745 Year
3500

TVC 2DC 0C h 2 3500 35 3.6 158 . 87 / year

TC TVC DC
158 . 87 (3500 12)
 42158 . 87 / year

t 1 ,t 2 ,t 3 ......,t n D1 ,D 2 ,D 3 ......D n

T t 1 , t 2 , t 3 , ...... +, t n

Inventory
level Maximum inventory level

1 1 1
2 qt1 2 qt2 2 qtn

0 t1 t2 t2
Time

n D / q,

1 1 1
Carrying cost qt C q t 2C h ... q t n C h
2 1 h 2 2
1 1
q C h ( t1 t 2 ... t n ) q Ch T
2 2
D
Ordering cost C
q 0

1 D
TVC q Ch T + C0
2 q
1 D
qC T C
2 h q 0

q 2DC 0 / TC h , Economic order quantity

TVC 2C h C 0 (D / T), Optimal cost

D 10000 Units
Ch 2.5 0.09 = 0 . 225

Cc 0 . 09
2DC 0 2 10000 35
Q EOQ
Ch 0.225

Q 3111.11 Units

D 10000
N 5 .728
Q 3111.11

TC Ordering cost + Inventory carrying cost

2 ordering cost (at EOQ,order cost equals carrying cost)
10000
2 35
3111 . 11

TC 400
 D 3500 Units
Ch 1. 5 / unit / annum

C0 80 / order

2DC 0 2 80 3500
Q EOQ
Ch 1.5

Q 611.01 Units

D 3500
N 5 .728
Q 611.01

TVC 2DC 0C h

TVC 2 3500 80 1.5

TVC 916 . 51

1 1
t
N 5
t 0.2 Years
 2DC o 2 80 3600
Q
Ch 1.2

Q 692.82 693Units.

D 3600
5.196 6
Q 692.82

2DC oC h 2 3600 80 1.2

EOQ 693 12
t
D 3600

CS
 Max. inventory

Quantity
Q

Q–S

t1 t2
T Time

S Balance units after back orders are satisfied.

Cs Shortage cost per unit per period

t1 Time period during which inventory does exist

t2 Time for which shortage occurs
T Time between receipt of orders.

2DC 0 (C s C h )
Q
Ch Cs

2DC 0 Cs
S
C h (C s + C h )

Cs
Q S 1–
(C h + C s )

Cs
T 2DC 0C h
Cs + Ch
 D 9000 items
Ch 10 0.15 1.5

2DC 0 2 9000 30
Q
Ch 1.5

Q 600

D 9500 Units
Ch 20 % of

C0 125 /order

2DC 0 2 125 9500

Q EOQ
Ch 9

Q 513 Units
 D 9500
N 18 . 51 19 orders
Q 513

D C0 D
TC (C D) + C
Q 2 h
9500 125 513
TC (45 9500) + 9
513 2

TC 427500 + 2314 .81 2308 .5

TC 47373 . 31

D 12000 Units / annum

P 60 per day
C0 96 /order
12000
Consumption rate (d) 40 per day
300
Inventory charges / unit / anum Ch 8 0 .15

2C 0 DP 2 96 12000 60
Q EOQ 2400
C h (P – D) 1.2 (60 – 40)

Q 2400 Units
 Annaual consumption
Frequency of production run
EOQ
D 12000
N 5
Q 2400

N 5

Q 2400
Production time Tp
P 60

Tp

D 3600 units / year

Ordering cost (C 0 ) 80 / order

Inventory carrying cost (C C ) 1.20 / unit / year

2DC 0 2 80 3600
Q EOQ
Ch 1.20

Q 693 Units / order

D 3600
N 5 .194 5 orders
Q 513
 TVC 2DC 0C h

TVC 2 3600 80 1.2

TVC 813 . 38

D + 2DC 0C h 9000 + 831 . 38

9831 . 38 / year

Reorder points

EOQ

Inventory
level
693 Units/order

Time

D 10000
C0 50,

Ch 5 per unit

2DC 0 2 50 10000
Q EOQ
Ch 5

Q 447 . 21 Units / order

 D 10,00,000
C0 12.5

2C 0D 2 12 .5 10,00,000
Q EOQ 2581 . 98
Ch 3.75

Lead time consumption Lead time (months) Monthly consumption

15 10,00,000
41667 units
30 12
Lead time consumption 41667 units

Recorder level Safety stock + Lead time consumption

41667 41667
Maximum inventory +Minimum inventory
Average inventory
2
(41667 + 2581.9) + 41667
42957 . 99 bottles
2
 Q3
C3

2DC 0 2 2800 36
Q3
iC h 0.2 4.60

Q3 b1 Q1 c1

2 2800 36
Q1
0.2 5
Q1 b1 Tc (b1 ) Tc (b 2 )
Tc (b 3 )
D Q
Ch H D Ch
Q 2
2800 449
Tc (Q1 = 449) 36 (0.2 5) [2800 5]
449 2

Tc(Q1 = 449)

2800 500
Tc(b1 = 500) 36 (0.2 4.8) [2800 4.8]
500 2

Tc(b1 = 500)

2800 1250
Tc(b 2 = 1250) 36 (0.2 4.6) [2800 4.6]
1250 2

Tc(b 2 = 1250)

Tc(b 2 ) < Tc(b1 ) < T1(Q1 )

Q b2
 Empty Empty
bin bin
Plant Inventory Supplier
floor Full Full
bin bin
 100%
90%
80%
Percent of total usage value

70%
60%
50%
40%
30%
20%
10%
0%
20% 40% 60% 80% 100%
Percent of total items
36
68

80
88
96

97.4
98.4
99.36
99.36
100
Stampling Welding
 Business planning

Production planning

Master production
scheduling

Material requirements
planning

Capacity requirements
planning

Realistic?
No
Yes

Executing capacity plans

Executing material plans

 Company management

Go ahead

Pre-selection screening ERP vendors

Package evaluation

Project planning

Gap analysis Reengineering Configuration

Implementation
Testing End-user training
team training

Going alive

Post implementation
phase
Value of the material consumed
Value of average inventory