Production Planning and

Control
Module 02
 Introduction to Production Planning
• Production planning and control (PPC) is defined as a work process which seeks to
allocate human resources, raw materials, and equipment/machines in a way that
optimizes efficiency.
• PPC is a very critical decision which is necessarily required to ensure an efficient and
economical production.
• Planned production is an important feature of any manufacturing industry.
• PPC is a tool to coordinate and integrate the entire manufacturing activities in a
production system.
• This essentially comprises of planning production before actual production activities
start and then exercising control over those activities to ensure that the planned
production is realized in terms of quantity, quality, delivery schedule and cost of
production.
 Introduction to Production Planning
• Production planning also includes the plans of routing, scheduling, dispatching,
inspection, coordination, control of materials, methods machines, tools and
operating times.
• Its ultimate objective is the to plan and control the supply and movement of
materials and labour, machines utilization and related activities, in order to bring
about the desired manufacturing results in terms of quality, quantity, time and
place.
• This provides a physical system together with a set of operating guidelines for
efficient conversion of raw materials, human skills and other inputs to finished
product.
1. Routing
Routing determines the path from which the raw materials flow within the factory. Once the
sequence is followed, raw materials are transformed into finished goods.

2. Scheduling
Scheduling is the second step that emphasizes “When” the operation will be completed. It aims
to make the most of the time given for the completion of the operation.

3. Dispatching
The third step ensures that operations are done successfully and everything is loaded on the
software. Dispatching includes the release of orders, following the scheduled charts.

4. Follow-up
Also known as expediting, follow-up is the final step that finds faults or defects, bottlenecks,
and loopholes in the entire production process. In this step, the team measures the actual
performance from start till the end and then compares it with the expected performance.
 Objectives of Production Planning and Control (PPC)

• Ensure a cost-efficient production process

• Promote timely delivery of goods
• Minimize production time
• Improve customer satisfaction
• Coordinate with departments about production to ensure everyone is
on the same page
• Ensure the right person is assigned the right work
Procedure of Production Planning and Control
• The PPC is entirely based on the pre-design format.
• It attempts to execute and implement all activities/operations according to the set plan.
• All operations should be executed in a proper manner with a close vigil on all facts
ensuring that the time period and the stipulated costs should not go beyond the reach and
it should be done under the excepted/agreed policies.
• These costs are including the cost of assets, capital cost of the facility, and labour.
• Production planning is the core of any manufacturing unit. It includes material
forecasting, master production scheduling, long-term planning, demand management, and
more. The PPC process kicks off with demand forecasting of a product and then
designing the production plan according to the demand to move it forward.
• Production planning is a strategy to plan a chain of operations that supports manufacturers
to be at the right place, at the right time so they can achieve the maximum efficiency from
their resources.
Procedure of Production Planning and Control
a) Forecasting the demands of the customers for the products and services.
b) In advance preparing the production budget.
c) Design the facility layout.
d) Specify the types of machines and equipment.
e) Appropriate production requirements of the raw materials, labour, and machinery.
f) Drawing the apt schedule of the production.
g) Confirming the shortage or any excess of the end product.
h) Future plans are drawn for any sudden surge in the demand for the product.
i) The rate and scale of production is setup. Which needs to be broken into realistic time
periods and scheduling. The specified job needs to be done in the amount of time provided
so that the production can move to next step
• Utility of PPC Productions
• The implementation of PPC based production system yields various
advantages to any organization for various functional activities, which
include the following:
• a) Last hour rush is avoided:
• b) Problems areas of bottleneck get reduced:
• c) Cost reduction:
• d) Optimum utilization of resources:
• e) Better coordination of plants activities:
• f) Benefits to workers:
• g) Improved services to customers:
 Production Forecasting
• The process of analysing and understanding current and past information
to understand the future patterns through a scientific and systemic
approach is called forecasting. And the process of estimating the future
demand of product in terms of a unit or monetary value is referred to
as demand forecasting.

• The purpose of forecasting is to help the organization manage the present

as to prepare for the future by examining the most probable future demand
pattern. However, forecasting has its constraint for example we cannot
estimate a pattern for technologies and product where there are no existing
pattern or data.
 Business Forecasting Objective
• The very objective of business forecasting is to be accurate as possible, so that planning of resources can
be done in a very economical manner and therefore, propagate optimum utilization of resources.
Business forecasting helps in establishing relationship among many variables, which go into
manufacturing of the product. Each forecast situation must be analyzed independently along with
forecasting method.
• Classification of Business Forecasting
• Business forecasting has many dimensions and varieties depending upon the utility and application. The
three basic forms are as follows:
• Economic Forecasting: these forecasting are related to the broader macro-economic and micro-economic
factors prevailing in the current business environment. It includes forecasting of inflation rate, interest
rate, GDP, etc. at the macro level and working of particular industry at the micro level.
• Demand Forecast: organization conduct analysis on its pre-existing database or conduct market survey as
to understand and predict future demands. Operational planning is done based on demand forecasting.
• Technology Forecast: this type of forecast is used to forecast future technology up gradation.
Some important features or characteristics of forecasting are as follows

• Forecasting is strictly concerned with future events only

• It analysis the probability of a future event or transaction occurring or
happening
• It involves analysis of data from the past and the present
• Forecasting uses scientific techniques and methods to make such
forecasts
• But it also involves certain guesswork and observations
 Strategies for Aggregate Production Planning
• Aggregate planning is a marketing activity that does an aggregate plan for the production
process, in advance of 6 to 18 months, to give an idea to management as to what quantity
of materials and other resources are to be procured and when, so that the total cost of
operations of the organization is kept to the minimum over that period.

• Aggregate planning is a method for analyzing, developing and maintaining a

manufacturing plan with an emphasis on uninterrupted, consistent production. Aggregate
planning is most often focused on targeted sales forecasts, inventory management and
production levels in the mid-term (3-to-18-month) future.

• Note that production planning is not just goods, but services as well. Aggregate planning
defines the necessary production inputs for a good or service (including facilities,
workforce, raw materials and inventory levels) to maintain consistent delivery dates, all
while keeping costs down.
 Objectives of Aggregate Planning

•  Maximize customer service.

•  Minimize inventory investment.
•  Minimize changes in workforce levels.
•  Minimize changes in production rates.
•  Maximize utilization of plant and equipment.
 Benefits of Aggregate Planning

•  Determine demand for each period.

•  Determine capacities for each period.
•  Determine relevant company policies.
•  Determine unit cost based on all relevant sources.
•  Develop alternative plans and calculate the cost for each.
•  Choose the best overall plan based on company objectives and cost.
 3 Types of Aggregate Planning Strategies
• Level Strategy: The goal of an aggregate planning strategy is to keep the production rate and the
workforce level. This requires strong forecasting of demand to know if production levels must be
increased or decreased as customer demands grow and shrink. This aggregate production planning
strategy will keep your workforce steady, but can increase your inventory and backlog.

• Chase Strategy: As the name implies, you are chasing market demand. The production matches
demand, and excess inventory isn’t held over. This is part of a larger lean production
strategy, which saves money by waiting until an order is placed. However, productivity and
quality can be reduced, and it can negatively impact the morale of your workforce.

• Hybrid Strategy: There is a third alternative, which is a hybrid of the previous two strategies.
This keeps the balance between the production rate, workforce and inventory levels, while still
responding to demand as it changes. This alternative offers a bit of flexibility that can satisfy
demand while working to keep production costs low.
 Material Requirements Planning (MRP)
• Material requirements planning (MRP) is a production planning, scheduling, and
inventory control system used to manage manufacturing processes. Most MRP
systems are software-based.

• Material requirements planning (MRP) is an inventory management system that is

completely operated digitally through a wide variety of computer-based platforms.
MRP is exclusively designed to improve the inventory efficiency of a business by
estimating quantities of raw material and scheduling timely deliveries.

• In addition, the material requirements planning system (MRP) helps businesses

maintain low inventory levels by controlling manufacturing, purchasing, and delivery
activities.
The History of Material Requirements Planning
• The implementation and constant innovation surrounding the MRP inventory system created a long-lasting effect
that can still be seen today.
• Before computer-engineered systems became prevalent in the business world, inventory was recorded by hand.
• As time went on, users became aware of how inefficient hand-kept inventory was, creating demand in the
market for the most productive method.
• In the early 1950s, MRP was first computerized by aero-engine makers associated with General Electric and Rolls
Royce.
• Before MRP became commercialized, it was reinvented to use the Polaris program.
• In 1964, MRP was released to specific individual businesses, being used first by Black & Decker.
• By 1975, over 700 companies had implemented MRP as their inventory management system.
• Since 1975, the MRP system has been continuously updated to be made more efficient for businesses. Including
several different models.
• Today, MRP is one of the most common and widely used inventory management systems in the world.
Material Requirements Planning Objectives

• To ensure that raw materials are readily available for production and
products are readily available for delivery to consumers.
• To sustain the lowest raw materials and finished product levels in
store.
• To organize manufacturing, delivery schedules, and purchasing
activities.
 Advantages of MRP

• Maintains low inventory level

• Reduction of associated costs through material planning
• Ensure capacity utilization
• Extensively tracks every piece of inventory that comes in and goes out
• Reduces cost of warehousing product
• Increased organization throughout the business
• Scheduled shipment and delivery of the product
 Disadvantages of MRP

• Reliance on the precise input information

• There are scheduling delays, wrong order quantities, and inefficient
tracking if the information is inputted inaccurately within the system
• Requires extensive maintenance of robust databases
• In order to use the system, proper training is required
• The system is not cheap and requires a substantial capital investment
What Is Capacity Requirements Planning (CRP)?
• Capacity requirements planning (CRP) is the process of discerning a firm's
available production capacity and whether it can meet its production
goals. The CRP method first assesses the company's planned
manufacturing schedule. Then, capacity requirements planning weighs
this schedule against the company's actual production capabilities to see
if the current capacity can successfully meet the existing production
schedule.
• Capacity requirements planning (CRP) is the process of specifying the level
of resources (facilities, equipment and labor force size) that best supports
the enterprise’s competitive strategy for production.
• Capacity requirement planning forms part of the operational stage of the planning process
and works in conjunction with a manufacturing requirement planning (MRP) system. A
detailed capacity requirement plan provides an operational level overview for the
production cell and assists the operations manager with identifying all of the elements that
will be required to deliver the output.

• For the operations manager to accept the capacity plan they may need to take into
account, materials, machine production time, machine change over time and tooling,
maintenance and downtime, along with manpower availability and skill, so that shift work
can be assigned and resources can be used efficiently.

• The operational team will feedback their ability to meet the planning requirements to the
planning team, who will then look to ensure materials or components required for the
production process are made available in time and in full via the procurement team. The
planning team will then confirm the capacity plan and the materials requirement plan and
generate a works order which will then be passed to the production team.
Manufacturing Resource Planning (MRP II)

Manufacturing Resource Planning (MRP II) is an integrated information system used by

businesses. Manufacturing Resource Planning (MRP II) evolved from early 
Materials Requirement Planning (MRP) systems by including the integration of additional data,
such as employee and financial needs.

The system is designed to centralize, integrate, and process information for effective decision
making in scheduling, design engineering, inventory management, and cost control in
manufacturing.

Both MRP and MRP II are seen as predecessors to Enterprise resource planning (ERP), which is a
process whereby a company, often a manufacturer, manages and integrates the important parts of
its business.
What Is Enterprise Resource Planning (ERP)?

• Enterprise resource planning (ERP) is a process used by companies to

manage and integrate the important parts of their businesses. Many
ERP software applications are important to companies because they
help them implement resource planning by integrating all of the
processes needed to run their companies with a single system. An ERP
software system can also integrate planning, purchasing inventory,
sales, marketing, finance, human resources, and more.
 Enterprise Resource Planning
• Enterprise resource planning (ERP) refers to a type of software that organizations use to manage
day-to-day business activities such as accounting, procurement, project management, risk
management and compliance, and supply chain operations. A complete ERP suite also includes
enterprise performance management, software that helps plan, budget, predict, and report on an
organization’s financial results.

• ERP systems tie together a multitude of business processes and enable the flow of data between
them. By collecting an organization’s shared transactional data from multiple sources, ERP
systems eliminate data duplication and provide data integrity with a single source of truth.

• Today, ERP systems are critical for managing thousands of businesses of all sizes and in all
industries. To these companies, ERP is as indispensable as the electricity that keeps the lights on.
Manufacturing Planning and Control stage model -modified. Adapted from: Manufacturing (or production)
planning and control have evolved through five major stages due to forces driving the evolutionary process
between stages:
1) Reorder point (ROP) systems,
2) Materials Requirement Planning (MRP) systems; due to production integration,
3) Manufacturing Resource Planning (MRP-II) systems; due to quality improvement,
4) MRP-II with manufacturing execution systems (MES) ; due to time-based competition,
5) Enterprise Resource Planning systems (ERP) with MES; due to global competition. Two additional stages may
be added:
6) Extended ERP (ERP II) with MES – transition driving force: internet,
7) Extended ERP (ERP II) with autonomy and self-control through CPS intelligence (elimination of MES) –
transition driving force: internet of things and services.