Production Planning and Control

Overview

Production planning & control

Functions of production planning & control

Material Requirements Planning (MRP)

Benefits of MRP

Dependent Demand

Master Production Schedule (MPS)

The Planning Process


MRP Structure

Production planning & control

Any production activity requires input of resources in items of men, materials, capitals and machines. For maximum effectiveness, production should satisfy customer’s demand and at the same time should be carried out in an economic manner. The process of developing this kind of relationship between market demand and production capability is the function of production planning and control. The set of polices and procedures that are used to mange work flow, inventories, production rate is called a production planning and control system.

Functions of production planning & control

The highest efficiency in production is obtained by manufacturing the required quantity of product of the required quality at the required time by the best and cheapest method. 

     The main functions of production planning and control can be classified in ten categories:-

Material Requirements Planning (MRP)

Material Requirements Planning (MRP) is a computer-based production planning and inventory control system. MRP is concerned with both production scheduling and inventory control. It is a material control system that attempts to keep adequate inventory levels to assure that required materials are available when needed. 

MRP is applicable in situations of multiple items with complex bills of materials. 

MRP is not useful for job shops or for continuous processes that are tightly linked.

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

* The demand for one item is related to the demand for another item

* Given a quantity for the end item, the demand for all parts and components can be calculated

* In general, used whenever a schedule can be established for an item

* MRP is the common technique

Dependent Demand

Effective use of dependent demand inventory models requires the following

1. Master production schedule

2. Specifications or bill of material

3. Inventory availability

4. Purchase orders outstanding

5. Lead times

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

* 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

The Planning Process

Master Production Schedule (MPS)

Can be expressed in any of the following terms:

* A customer order in a job shop (make-to-order) company

* Modules in a repetitive (assemble-to-order or forecast) company

* An end item in a continuous (stock-to-forecast) company

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

Accurate Records

* Accurate inventory records are absolutely required for MRP (or any dependent demand system) to operate correctly

* Generally MRP systems require 99% accuracy

* Outstanding purchase orders must accurately reflect quantities and scheduled receipts 

Lead Times

* The time required to purchase, produce, or assemble an item

* For production – the sum of the order, wait, move, setup, store, and run times

* For purchased items – the time between the recognition of a need and the availability of the item for production

MRP Structure

Capacity Requirement Planning

Capacity Requirements Planning, also known as CRP, is the technique that allows business to plan ahead to determine how large their future inventory capacity needs to be in order to meet demand.

CRP also helps companies determine how much space they will need to hold these materials. It verifies that they have the sufficient capacity available to meet the capacity requirement for the MRP plans. It thus helps the planners to make the right decisions on scheduling before the problem develops.

Inputs for CRP Process

1. Planned orders and released orders from the MRP systems.

2. Loading information from work centre status file.

3. Routine information from the shop routing file.

4. Changes which modify capacity, give alternative routines or alter planned orders.

Outputs of CRP

Apart from information for modification of capacity or revision of MPS,
    The major outputs of CRP systems are:

1. Verification of planned orders for the MRP systems.

2. Load reports.

Inventory Control

Inventory-A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.

Inventory Control- It is a planned approach of determining what to order and how much to order and how much to stock so that costs associated with buying and storing are optimal without interrupting production and sales. Inventory control basically deals with two problems:

1. When should a order placed? (Order level)

2. How much should be ordered? (Order quantity) 

Types of Inventories

 A manufacturing firm generally carries the following types of inventories:

1. Raw materials

2. Bought out parts

3. Work-in-process inventories (WIP)

4. Finished goods inventories

5. Maintenance, repair and operating stores

6. Tool inventory

7. Miscellaneous inventories

Objectives of Inventory Control

* To ensure adequate supply to products to customer and avoid shortage as per as possible.

* To make sure that the financial investment in inventories is minimum.

* Efficient purchasing, storing, consumption and accounting for materials is an important objective.

* To maintain timely record of inventories of all items and stock.

* To ensure timely action for replenishment.

* To provide a reserve stock.

* To provide a scientific base for both short-term and long-term planning of materials.

Benefits of Inventory Control

*Improvement in customers relationship.

*Smooth and uninterrupted production.

*Efficient utilization of working capital.

*Helps in minimizing loss due to deterioration, obsolescence damage.

*Economy in purchasing.

*Eliminates the possibility of duplicate ordering.

Cost associated with Inventory

* Purchase (or production) cost

*  Capital cost

* Inventory carrying costs (holding costs)

* Shortage cost

* Ordering cost

There are two types of cost

- Fixed costs

- Variables costs

Inventory cost relationships/EOQ