UNIT 1

INTRODUCTION

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. Production planning and control (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.

According to Gorden and Carson, PPC usually involve the organization and planning
of manufacturing process. Principally, it includes entire organization. The various
activities involved in production planning are designing the product, determining the
equipment and capacity requirement, designing the layout of physical facilities and
material and material handling system, determining the sequence of operations and the
nature of the operations to be performed along with time requirements and specifying
certain production and quantity and quality levels.

Production planning also includes the plans of routing, scheduling, dispatching

inspection, and 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.

It may be defined as the direction and coordination of the organizations materials and
physical facilities towards the attainment of pre-specified goals in the most effective way.
It is aimed at achieving the efficient utilization of resources (material, men, facility, etc.)
in the manufacturing organization through planning, coordination and control of
production activities that transform the raw material into finished products in a most
optimal manner. PPC = production planning + production control

MANUFACTURING SYSTEM

The combination of people, equipment, processes, and procedures used to produce goods
for sale or use. It encompasses various elements that work together to transform raw
materials into finished products efficiently and effectively. Here are key components and
characteristics of a manufacturing system:

Components of a Manufacturing System:

People: Includes workers, supervisors, engineers, and managers who operate, monitor,
and manage the production processes.

Equipment: Machinery, tools, and technology used to perform manufacturing operations

such as cutting, shaping, assembling, and packaging.

Processes: Sequence of steps and operations involved in transforming raw materials into
finished products, which can include machining, casting, molding, welding, and assembly.

Materials: Raw materials, components, and supplies needed to manufacture products.

Facilities: Manufacturing plants, factories, and production sites where operations take
place.
Information Systems: Software, databases, and communication networks used for
planning, scheduling, monitoring, and controlling manufacturing activities.
Types of Manufacturing Systems:
Job Shop: Customized production of small batches or individual products, often in
response to specific customer orders. Flexible equipment and skilled labor are
characteristic.
Batch Production: Manufacturing in batches where groups of identical products are
produced together before switching to another set of products. Equipment setups are
changed between batches.
Mass Production: High-volume production of standardized products using assembly
lines or continuous flow methods. Designed for efficiency and low cost per unit.

Continuous Production: Non-stop production of very large quantities of standardized

products with minimal interruptions. Often used for commodities like chemicals, food,
and utilities.

Characteristics of a Manufacturing System:

Efficiency: Maximizing output with minimum input, including time, labor, and materials.
Quality: Ensuring products meet specified standards and customer expectations.
Flexibility: Ability to adjust production to changes in demand, product design, or process
requirements.
Reliability: Consistency and dependability in production processes and equipment
performance.
Cost-effectiveness: Optimizing costs while maintaining quality and meeting production
goals.
Safety: Ensuring a safe working environment for employees and compliance with health
and safety regulations.
Integration with Other Systems:
Supply Chain Management: Coordinating with suppliers for timely delivery of materials
and components.
Logistics: Managing transportation, warehousing, and distribution of finished products.
Quality Management: Implementing quality control measures to ensure product
reliability and customer satisfaction.
Information Technology: Using software and systems for production planning,
scheduling, inventory management, and real-time monitoring.
PPC essentially consists of three Stages:
1. Pre- planning phase
a. Product development and design
b. Process design
c. Work-station design
d. Sales forecasting
e. Estimation
f. Factory layout and location
g. Equipment policy
h. Pre-planning production
2. Planning phase: The choice from several alternatives of the be st utilizing the available
resources to achieve the desired objective
a. Materials
b. Methods
c. Facilities, machines and manpower
d. Routing
e. Estimating
f. Scheduling
3. Control phase: The monitoring of performance through a fee dback by comparing the
results achieved with planned targets so that performance can be im proved
a. Dispatching
b. Inspection
c. Expediting
d. Evaluation
Elements of Production Planning and Control
This is important to note that production plan is the first and the foremost element of PPC.
Planning refers to deciding in advance what is to be done in future. A separate
planning department is established in the organization which is responsible for the
preparation of policies and plans with regard to production to be undertaken in due
course.
The planning department prepares various charts, manuals production budgets
etc., on the basis of information received from management. These plans and charts or
production budgets are given practical shape by carrying various elements under
production control.
If production planning is defective, production control is bound to be
adversely affected. For achieving the production targets, production planning provides
sound basis for production control.
One needs to remember that production plans are prepared in advance at top level
whereas, production control is exercised at machine shop floor (bottom level) where
actual production is taking place.

Materials: planning for procurement of raw material, component and spare parts in the
right quantities and specifications at the right time from the right source at the right place.
Purchasing, storage, inventory control, standardization, variety reduction, value analysis
and inspection are the other activities associated with material.
Method: choosing the best method of processing form several alternatives. It also
includes determining the best sequence of operations (process plan) and planning for
tooling, jigs and fixtures etc. Machines and equipment: manufacturing methods are
related to production facilities available in production systems. It involves facilities
planning, capacity planning, allocations, and utilization of plant and equipment, machines
etc. Manpower: planning for manpower (labour and managerial levels) having
appropriate skills and expertise.
Routing; determining the flow of work material handling in the plant, and sequence of
operations or processing steps. This is related to consideration of appropriate shop layout
plant layout, temporary storage location for raw materials, component and semi-finished
goods, and of materials handling system.
Route Sheet: a route sheet is a document providing information and instructions for
converting the raw material in finished part or product. It defines each step of the
production operations and lay down the precise path or route through which the product
will flow during the conversion process. Route sheet contains following information:
The operation required at their desired sequence
b) Machines or equipment to be used for each operations
c) Estimated set-up time and operation time per piece
d) Tools, jigs, and fixtures required for operations
e) Detailed drawings of the part, sub-assemblies and final assemblies
f) Specification, dimensions, tolerances, surface finishes and quality standard to be
achieved
g) Specification of raw material to be used
h) Speed, feed etc. to be used in machines tools for operations to be carried on.
i) Inspection procedure and metrology tools required for inspection
j) Packing and handling instructions during movement of parts and subassemblies
through the operation stages.
Estimating: Establishing operation times leading to fixations of performance
standards both for worker and machines. Estimating involves deciding the quantity
of the product which needs to be produced and cost involved in it on the basis of
sale forecast.
Scheduling: scheduling ensure that parts and sub-assemblies and finished goods are
completed as per required delivery dates. It provides a timetable for manufacturing
activities. a) To prevent unbalance use of time among work and centers and department.
b) To utilize labour such a way that output is produced within established lead time or
cycle time so as to deliver the products on time and complete
production in minimum total cost.
Dispatching: This is concerned with the execution of the planning functions. It
gives necessary authority to start a particular work which has already planned under
routing and scheduling functions. Dispatching is release of orders and instructions for
starting of production in accordance with routing sheet and scheduling charts.
Inspection: This function is related to maintenance of quality in production and of
evaluating the efficiency of the processes, methods and labours so that improvement can
be made to achieve the quality standard set by product design.
Evaluating: The objective of evaluating is to improve performance. Performance of
machines, processes and labour is evaluated to improve the same.
Cost control: Manufacturing cost is controlled by wastage reduction, value analysis,
inventory control and efficient utilization of all resources.
In an organization, PPC system can be effective only if the following aspects are given
due considerations before implementation:
a) Appropriate organization structure with sufficient delegation of authority and
responsibility at various levels of manpower.
b) Right person should be deputed at right place for right job.
c) Maximum level of standardization of inventory, tooling, manpower, job, workmanship,
equipment, etc.
d) Appropriate management decision for production schedule, materials controls,
inventory and manpower turnover and product mix.
e) Flexible production system to adjust any changes in demand, any problem in
production or availability of materials maintenance requirements, etc
f) Estimation of accurate leads times for both manufacturing and purchase.
g) Management information system should be reliable, efficient and supporting.
h) Capacity to produce should be sufficient to meet the demand.
i) The facility should be responsive enough to produce new products change of products
mix and be able to change the production rates.
The above elements are very important and necessary to make the production planning
system effective and efficient
Utility of PPC Productions or advantages of ppc

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: Production is well planned and controlled as per the given
time schedules. Therefore, production control reduces the number of emergency order
and overtime works on plant and thus reduces the overheads.
b) Problems areas of bottleneck get reduced: The incomplete work or work-in-transit
does not get piled up because production control balances the line and flow of work.
c) Cost reduction: An appropriate production control increases the men-machines
utilization, which maintains in process inventories at a satisfactory level, leads to a better
control on raw material inventories, reduces costs of storage and materials handling,
helps in maintaining quality and limits rejections and thus ultimately reduces the unit cost
of production.
d) Optimum utilization of resources: It reduces the time loss of the workers waiting for
materials and makes most effectives use of equipment.
e) Better coordination of plants activities: PPC coordinates the activities of the plant that
leads to control concerted effort by workforce.
f) Benefits to workers: PPC results into better efficiency and productivity, which leads to
adequate wages stable employment, job security, improved working conditions increased
job satisfaction and ultimately high morale.
g) Improved services to customers: PPC leads to better services to the customers as it
ensures production in accordance with the time schedules and therefore, deliveries are
made as per the committed schedules.
Scope of Production Planning and Control
a) Nature of Inputs To manufacture a product, different types of inputs are used. The
quality of the product depends upon the nature of the inputs are used. Hence the
 planning is done to determine the nature of various types of inputs which is a
complicated process.
b) Quantity of Inputs
To achieve a level of production, determination of quantity of the inputs and their
composition is very important. A product can be prepared only when there is an estimate
of the required composition of inputs.
c) Proper Coordination
It ensures the proper coordination among the workforce, machines and equipment. This
leads to avoidance of wastages and smooth flow of production.
d) Better Control
Production planning is the method of control. For a better control, planning is a
precondition. Only then, one can compare the performance and calculate the deviations
which lead control of the production.
e) Ensure Uninterrupted Production
The planning of materials ensures the regular supply of raw materials and other
components. The regular flow of materials and supplies are helpful in the uninterrupted
production.
f) Capacity Utilization
There is a need to use the available resources effectively. It is helpful in bringing down
various costs of production.
g) Timely Delivered
If there is good production planning and control, there will be timely production and
the finished product will be rushed to the market in time. This also ensures the better
relationship with the customers
Factors affecting Production Planning and control

a) Use of Computers: Modern factories are using office automation equipment like PC,
punch cards etc. It helps accurate computation of required of men and machine.
b) Seasonal Variations: Demand of certain products is affected by seasons, for instance
umbrellas and raincoats during the monsoons and outputs. Production planning
andmcontrol must take such changes into consideration while planning and control
activities of inputs and outputs.
c) Test Marketing: In an aggressive marketing strategy new products are to be test
marketed in order to know the trends. This is a short- cycle operation, intermittent in
nature and often upsets regular production.
d) After Sales Service: This has become an important parameter for success. In after
sales services, many items are returned for repair. These are unscheduled Work and
also overload the production line.
e)Losses due to Unpredictable Factors: Losses occur due to accidents, fire and theft of
production inputs, mainly materials and Components. These are unpredictable.
Shortage of input due to such factors upset the planned production schedule in time
and quantity.
f) Losses due to Predictable Factors: There are losses of inputs, due to natural
engineering phenomena like production losses and changes in consumption of
materials and occurrence of defectives.

PPC relationship with other departments

Production planning and control (PPC) are closely interconnected with various
functional departments within an organization. Here’s how they relate to other key
departments:
Sales and Marketing:

Relation: Sales and marketing departments provide crucial input to production

planning by forecasting demand based on market trends, customer orders, and
promotional activities.

Impact: Accurate demand forecasts from sales and marketing help production
planners determine production schedules, inventory levels, and resource allocation.

Purchasing and Procurement:

Relation: Purchasing departments interact closely with production planning to ensure

timely availability of raw materials, components, and supplies needed for production.

Impact: Effective coordination between production planning and procurement helps

in minimizing lead times, managing inventory levels, and optimizing costs.

Finance and Accounting:

Relation: Finance departments are involved in budgeting and financial planning,

which impacts production planning decisions related to investment in equipment,
facilities, and resource allocation.

Impact: Production planning decisions influence cash flow, working capital

requirements, and financial performance, making alignment with financial goals
crucial.

Human Resources:

Relation: HR departments provide workforce availability and skills data, which are
critical for production planning to ensure adequate staffing levels and skill matching.

Impact: Proper alignment between production planning and HR ensures workforce

efficiency, safety compliance, training needs, and labor cost management.

Research and Development (R&D):

Relation: R&D departments provide input on new product development and process
innovations, influencing production planning decisions related to technology adoption
and production capabilities.

Impact: Integration with R&D ensures that production plans can accommodate new
product introductions, process improvements, and technological advancements.
 Quality Assurance and Control:

Relation: QA/QC departments collaborate with production control to monitor and

maintain product quality standards during production processes.

o Impact: Close coordination ensures that production plans account for quality
assurance protocols, inspections, and corrective actions to minimize defects and
ensure customer satisfaction.
2. Logistics and Supply Chain Management:
o Relation: Logistics departments manage transportation, warehousing, and
distribution, aligning closely with production planning to ensure efficient flow of
goods.
o Impact: Integration facilitates smooth material flow, inventory management, and
fulfillment of customer orders, optimizing supply chain efficiency and
responsiveness.

THE MAIN FUNCTIONS/ACTIVITIES OF PPC:

1. Material planning:

Raw materials, standard parts and semi-finished products and assemblies needed at

required time and place. It deals with fixation of material standards, batch quantities,

de livery dates, reduction of varieties, procurement of parts and raw materials.

2. Methods planning:

It identifies alternate methods of manufacturing, evaluates them and selects the best

method compatible with a given set of circumstances and facilities. It covers the

general study and selection of production process which in turn requires a series of

decision making encompassing the theoretical feasibility of manufacturing the parts.

3. Facilities planning:

Concerned with procurement of machines and equipment and specification of

standard tools, design, and manufacture of special tools.

4. Process planning (routing): It is the process of determining sequence of operations

to be performed in the production process. What work will be done on a product.

Where these operations will be performed In which sequence the job will move in
the plant. To fix the path of travel giving due consideration to layout. To break
down the operation into elements so as to define each operation in detail

To decide the setup time and process time for each operation.

5. Estimation:

The operation time for each operation. Extensive use of operational analysis in

conjunction with methods and routing as well as work measurement in order to set up

performance standards.

6. Scheduling:

It involves fixing priorities for each job and determining the starting time and

finishing time for each operation, the starting dates and finishing dates for each part,
sub-assembly and final assembly. It lays down a time table for production, indicating

the total time required for the manufacture of a product and also time required for

carrying out the operation for each part on each machine or equipment.

Scheduling devices = Gantt charts, CPM and PERT, the runout approach

7. Loading (fixing priorities):

It is the process of assigning specific jobs to machines, men or work centre’s based on

relative priorities and capacity utilization. It ensures maximum possible utilization of

productive facilities and avoids bottlenecks in production.

8. Dispatching (release of order) is the execution phase of planning:

Setting the production activities in motion through the release of orders and

instructions in accordance with the previous planned time schedules and ratings

it authorizes the start of the production operations by releasing materials, components

tools, fixtures and instruction sheets to the operator, and ensures that material

movement is carried out in accordance to the planned routing sheets and schedules

9. Expediting (follow up) is a control function that keeps track of the progress of

work in accordance with the planned schedule:

It maintains the production flow according to plan till job is completed. This followup
is to done at every stage in production cycle. Controlling variations or deviations

from planned performance levels. Following up and monitoring progress of work

through all stages of production. Modifying the production plans and preplan if

necessary.

10.Inspection and testing:

It ensures that the quality of the product meets the specifications as ordered or

decided in the product development and design stage. Limitations are analyzed with a
 view to improve production methods/facilities.

11. Evaluation:

It serves as a link between control and future planning. Valuable information

regarding all the problems faced in realizing the product starting from pre-planning to

shipping stages is gathered in this process. The information gathered can be used in

preplanning, planning and control stages in future manufacturing activities

MANUFACTURING METHODS

Continuous System Continuous production refers to the manufacturing of large

volume of a single or a very few varieties of products with a standard set of processes.
The mass production is carried on continuously for stock in anticipation of demand.
Features of the continuous production are given below:

1. The volume of output is generally large

2. . The product design and the operations stages are standardised
3. Special purpose automatic machines are used to perform standardised operations.
4. Product layout is designed according to a separate line for each product.

Merits of continuous production process

The following are the advantage of continuous production system:

1. The main advantage of continuous production system is that work-in-progress

inventory is minimal.
2. The quality of output is kept uniform because each stage develops skills of
employees through repetition of work.

3. Any delay at any stage is automatically detected.

4. Handling of materials is reduced due to the set pattern of production line

5. Control over materials, cost and output is simplified.

6. The work can be done by semi-skilled workers because of their specialization.

Demerits of continuous production system:

1. Strict maintenance is necessary to avoid production hold ups.

2. Huge capital investment is required.

3. Cannot make sudden changes in the production system.

Types of continuous production system:

Mass Production

In this method, a few types of products are manufactured in large quantities. The

volumes are high and products are standardized which allows resources to be
organized

around particular products. Mass Production is characterized by the following

features:

Standardized inputs and standardized operations are used for manufacturing. 3. Large
volume of products. 4. Shorter cycle time of production. 5. Less supervision is
required. 6. Perfectly balanced production lines. 7. Flow of materials, components
and parts are continuous 8. Production planning and control are easy.

Process Productions Production facilities are arranged as per the sequence of

production operations from the first operations to the finished product. It involves
continuous physical flow of material from one stage to another stage. The process
usually operates round the clock to maximise utilisation and to avoid expensive
shutdowns and start-ups.

Intermittent Production System

In this system, the goods are generally produced to fulfill customers‘ orders rather
than producing against stock. Intermittent situations are those where the facilities
must be flexible enough to handle a variety of products and sizes. The flow of
material is intermittent.

The production facilities are flexible enough to handle a wide variety of products and
sizes.In the industries following the intermittent production system, some components
may be made for inventory but they are combined differently for different customers.
The finished product is heterogeneous but within a range of standardized options
assembled by the producers. Since production is partly for stock and partly for
consumer demand, there are problems to be faced in scheduling, forecasting, control
and coordination.

Characteristics intermittent production

The Characteristics intermittent production is given below:

1. The flow of production is intermittent, not continuous.

2. The volume of production is generally small.

3. A wide variety of products are manufactured.

4. General purpose machines and equipment are used.

5. No single sequence of operations is used for a long period.

6. Process layout is most suited in a highly competitive environment.

7. Periodical adjustments are made to suit different jobs or batches.

Types of Intermittent Production

Basically there are two types of intermittent production system. They are as follows:

Job Production

In the case of Job production, the products are manufactured as per the specifications

of the customers within pre -determined time and cost. The main feature of this
method is low volume and high variety of products compared to mass production.
Under this method, each job demands unique production activities.

Features of job production

The following are the features of job production system:

1. More variety of products is manufactured as per customer‘srequirements.

2. Volume of production is low.

3. Highly skilled employees are required to do the work.

4. Detailed planning is essential for sequencing the requirements of each product.

5.Employees should be able to take each job as a challenge.

Advantages

Advantages of job production are as follows:

1. It tries to satisfy the unique requirements of customers.

2. Employees will become more skilled, as each job gives them learning opportunities
to develop.

3. Full potential of employees can be utilised.

4. Opportunity exists for employees to do creative

Batch Production

Under batch production method, items are processed in lots or batches and a new
batch is undertaken for production only when the production on all items of a bath is
complete. In fact, batch type of production system can be considered as an extension
of job type system.

Characteristics of batch production

Batch Production is characterised by

1. Shorter production runs.

2. Products are manufactured in small batches.

3. Plant and machinery set up is used for the production of item in a batch and change
of set

up is required for processing the next batch.

4. Manufacturing lead-time and cost are lower as compared to job order production.
Advantages

Following are the advantages of Batch Production:

In Production Planning and Control (PPC), management policies and work

distribution are crucial for efficient operations. Here are some management policies
and work distribution strategies in PPC:

Management Policies:

1. Centralization: Centralized planning and decision-making.

2. Decentralization: Decentralized planning and decision-making.

3. Hybrid: Combination of centralization and decentralization.

4. Functional Organization: Divide tasks among specialized departments.

5. Product Organization: Organize tasks around specific products or product lines.

Work Distribution Strategies:

1. Job Shop Production: Produce small batches or one-off products.

2. Flow Shop Production: Produce large quantities of a single product.

3. Line Production: Produce a continuous flow of products.

4. Cell Production: Produce small batches or families of products.

5. Lean Production: Minimize waste and maximize value-added activities.

6. Agile Production: Respond quickly to changing customer demands.

7. Total Productive Maintenance (TPM): Assign maintenance tasks to production

teams.

8. Total Quality Management (TQM): Assign quality responsibilities to all employees.

Effective work distribution and management policies in PPC can lead to:

- Improved productivity

- Increased efficiency

- Enhanced employee empowerment

- Better communication

- Faster response times

- Improved product quality

- Reduced waste and costs

By implementing these strategies, organizations can optimize their PPC processes and
achieve their goals.

In Production Planning and Control, management policies and meeting demand are
crucial to ensure efficient and effective operations. Here are some key policies and
strategies to consider:

1. Demand Forecasting: Accurately predict demand to plan production and inventory

levels.

2. Production Planning: Create schedules and plans to meet demand, considering lead
times, capacity, and resources.

3. Inventory Management: Manage inventory levels to avoid stockouts and

overstocking, using techniques like JIT (Just-In-Time) or MRP (Material
Requirements Planning).

4. Capacity Planning: Ensure sufficient capacity to meet demand, considering

machine and labor availability.

5. Scheduling: Create schedules to optimize production, considering factors like

priority, batch sizes, and setup times.

6. Quality Control: Implement quality checks to ensure products meet standards,

reducing rework and scrap.

7. Supply Chain Management: Manage relationships with suppliers to ensure timely

delivery of raw materials and components.

8. Flexibility and Agility: Build flexibility into production plans to respond to

changes in demand or unexpected disruptions.

9. Total Productive Maintenance (TPM): Implement maintenance programs to

minimize equipment downtime and optimize productivity.
10. Continuous Improvement: Regularly review and optimize production processes to
reduce waste, improve efficiency, and increase customer satisfaction.

By implementing these policies and strategies, you can effectively manage production
planning and control, meet demand, and drive business success.

Some popular production planning and control techniques include:

- MRP (Material Requirements Planning)

- ERP (Enterprise Resource Planning)

- JIT (Just-In-Time)

- Lean Manufacturing

- Six Sigma

- Theory of Constraints (TOC)

n Production Planning and Control, management policies and centralization are

crucial to ensure efficient and effective operations. Here are some key aspects to
consider:

Centralization:

- Centralized Production Planning: A single department or team is responsible for

planning and controlling production, ensuring a unified approach.

- Benefits:

- Improved coordination and control

- Enhanced visibility and decision-making

 - Reduced errors and miscommunication

- Increased efficiency and productivity

- Challenges:

- Potential for bottlenecks and delays

- Limited flexibility and adaptability

- Overreliance on a single team or department

Management Policies:

- Top-Down Approach: Senior management sets goals and objectives, which are then
cascaded down to lower levels.

- Bottom-Up Approach: Lower levels provide input and feedback, which is then used
to set goals and objectives.

- Decentralization: Decision-making authority is distributed to various levels and

departments, allowing for more autonomy and flexibility.

- Push vs. Pull Production: Push production focuses on producing to meet forecasted
demand, while pull production focuses on producing to meet actual demand.

Balancing Centralization and Decentralization:

- Hybrid Approach: Combine centralized planning with decentralized execution,

allowing for both control and flexibility.

- Empowerment: Give teams and departments the autonomy to make decisions and
take ownership of their work.

- Clear Communication: Ensure that goals, objectives, and policies are clearly
communicated across all levels and departments.

By striking a balance between centralization and decentralization, and implementing

effective management policies, organizations can achieve efficient production
planning and control, while also fostering a culture of empowerment and continuous
improvement.
PERFORMANCE STANDARDS LABOUR SYSTEMS

Performance standards in labor are specific, measurable criteria used to evaluate employee
performance within an organization. They provide a benchmark against which actual
performance is assessed, facilitating objective feedback, goal-setting, and performance
management.

Measurement and Evaluation: Performance standards serve as a yardstick to measure how well
employees are performing their job duties. They provide a quantitative or qualitative measure of
performance against predetermined criteria.

Feedback and Improvement: Standards enable managers to provide timely feedback to

employees regarding their performance. This feedback loop helps employees understand where
they stand, what improvements are needed, and how they can develop professionally.

Goal Alignment: By setting clear expectations, performance standards align individual efforts
with organizational goals and priorities. This alignment ensures that employees are focused on
tasks and outcomes that contribute directly to the organization’s success.

Decision Making: Standards support decision-making processes related to promotions,

compensation, training needs, and disciplinary actions. They provide a fair and consistent basis
for making these important HR decisions.
Characteristics of Effective Performance Standards

Clear and Specific: Standards should be clearly defined in terms of what is expected from
employees. They should specify the desired outcomes, behaviors, or targets in a way that leaves
no room for ambiguity.

Measurable: Performance standards must be measurable so that progress and achievement can be
objectively assessed. This often involves quantifiable metrics such as sales numbers, error rates,
customer satisfaction scores, etc.

Achievable yet Challenging: Standards should be realistic and achievable within the given work
environment and resources. At the same time, they should be challenging enough to encourage
employees to strive for continuous improvement.

Time-bound: Setting a timeframe or deadline for achieving performance standards provides

clarity and urgency. This helps in prioritizing tasks and ensuring that goals are met within a
reasonable period.

Types of Performance Standards

Quantity Standards: Measure the volume of work completed within a specific time frame (e.g.,
number of units produced, calls handled, tasks completed).

Quality Standards: Focus on the accuracy, precision, and effectiveness of work outputs (e.g.,
error rates, compliance with quality standards, customer feedback ratings).

Timeliness Standards: Evaluate how promptly tasks are completed or responses are delivered
(e.g., meeting deadlines, response times to customer inquiries).

Cost Standards. Assess the efficiency in terms of resource utilization or cost-effectiveness (e.g.,
cost per unit produced, budget adherence).

Behavioral Standards: Address interpersonal skills, teamwork, adherence to organizational

policies, and ethical conduct (e.g., communication effectiveness, teamwork evaluations).

Implementing Performance Standards

Communication: Clearly communicate performance standards to employees, ensuring they
understand what is expected of them and how their performance will be evaluated.

Training and Support: Provide necessary training and resources to help employees meet
performance standards. Supportive coaching and development opportunities can also enhance
performance.

Monitoring and Feedback: Regularly monitor performance against standards and provide
constructive feedback to employees. This helps in identifying strengths, areas for improvement,
and developmental needs.

Adjustment and Flexibility: Performance standards should be periodically reviewed and adjusted
to reflect changes in job requirements, organizational goals, or external factors affecting
performance.

Challenges and Considerations:

Subjectivity: Ensuring objectivity in evaluating performance can be challenging, especially with

qualitative standards like teamwork or communication.

Employee Engagement: Involving employees in setting performance standards and goal-setting

processes can improve buy-in and motivation to achieve them.

Legal and Ethical Issues: Standards must comply with legal requirements and ethical standards,
ensuring fairness and non-discrimination in evaluation processes.

PERFORMANCE STANDARDS OPERATING SYSTEMS

performance standards for operating systems (OS) define the criteria used to assess the efficiency,
effectiveness, and overall performance of an operating system environment. These standards are
essential for ensuring optimal system operation, resource management, and user satisfaction.
Here’s an explanation of performance standards for operating systems:

 Throughput: This metric measures the rate at which the OS can process tasks and handle
data. Higher throughput indicates better performance in terms of processing speed and
efficiency.
  Response Time: Response time refers to the delay between a user request and the
system's response. A low response time indicates that the OS is performing well in terms
of responsiveness to user interactions.

 Resource Utilization: This metric assesses how effectively the OS manages and utilizes
system resources such as CPU, memory (RAM), disk I/O, and network bandwidth.
Efficient resource utilization ensures that resources are allocated optimally to maximize
system performance.

 Reliability and Availability: These standards evaluate the OS's ability to maintain stable
operation without crashes or downtime (availability) and to recover quickly from failures
(reliability).

 Security: OS performance standards include measures related to the system's ability to

protect against unauthorized access, malware, and other security threats. This involves
evaluating the effectiveness of security features, patch management, and incident
response capabilities.

Factors Influencing Performance Standards:

 Hardware Configuration: The performance of an OS depends significantly on the

underlying hardware infrastructure, including CPU processing power, amount of RAM,
disk type and capacity, and network capabilities.

 Workload Characteristics: Different workloads (e.g., web servers, database servers,

multimedia applications) place varying demands on the operating system. Performance
standards should account for workload diversity and scalability requirements.

 System Configuration and Tuning: Configuring OS parameters, optimizing system

settings, and applying performance tuning techniques can significantly impact OS
performance and adherence to performance standards.

Benchmarking and Measurement:

 Benchmarking: OS performance standards often involve benchmarking against industry

standards or comparing performance metrics with similar systems or versions of the OS.
 Benchmarking helps identify areas for improvement and gauge performance relative to
peers.

 Monitoring Tools: Monitoring tools and performance metrics such as CPU utilization,
memory usage, disk I/O rates, and network traffic are used to measure and analyze OS
performance in real-time or over specified periods.

Importance of Performance Standards:

 User Experience: Well-defined performance standards contribute to a positive user

experience by ensuring that the OS responds quickly, reliably, and efficiently to user
requests.

 Operational Efficiency: Meeting performance standards enhances operational efficiency

by reducing system downtime, improving resource utilization, and minimizing
performance bottlenecks.

 Cost Optimization: Efficient OS performance can lead to cost savings by maximizing

hardware utilization, extending hardware lifespan, and reducing energy consumption.
 performance standards planning
Work order preparation
A work order is a document that provides all the information about a maintenance task and
outlines a process for completing that task. Work orders can include details on who authorized
the job, the scope, who it's assigned to, and what is expected. Work orders are the engine of your
maintenance operation.
Identify the Work

Request or Requirement: Determine what work needs to be done. This could come from a
customer request, a maintenance schedule, an internal need, or a project plan.

scope of Work: Clearly define the scope of work to be performed, including specific tasks,
objectives, and expected outcomes.

Gather Information

Details of the Request: Collect detailed information about the request, including the requester’s
name, contact information, location of the job, and any relevant background information.

Specifications: Note any specific requirements, such as materials, tools, equipment, and special
instructions.

Task Breakdown

Task List: Break down the work into specific tasks or steps. Each task should be clearly
defined and measurable.

Sequence of Tasks: Determine the order in which tasks need to be completed to ensure
efficiency and effectiveness.
Resource Allocation

Labor: Identify the personnel required for the job, including their skills, qualifications, and
availability.

Materials and Equipment: List all necessary materials, tools, and equipment. Ensure that
everything is available and in good condition.

Budget: Estimate the cost of labor, materials, and other expenses. Ensure that the work order
stays within budget.

Scheduling

Timeline: Establish a start date and an estimated completion date. Break down the timeline for
individual tasks if necessary.

Deadlines: Identify any critical deadlines or milestones that need to be met.

Risk Assessment and Safety

Hazards: Identify potential hazards associated with the work.

Safety Measures: Implement safety measures and provide instructions to mitigate risks. Ensure
compliance with safety regulations.

Approval and Authorization

Review: Have the work order reviewed by relevant stakeholders, such as supervisors, managers,
or clients.

Approval: Obtain necessary approvals and authorizations to proceed with the work.

Documentation and Communication

Work Order Document: Create the work order document, including all the gathered
information, task details, resource allocations, and schedule.

Distribution: Distribute the work order to all relevant parties, ensuring everyone involved has a
clear understanding of their responsibilities and the overall plan.

Execution and Monitoring

 Implementation: Execute the tasks as per the work order. Ensure that all steps are followed
correctly and efficiently.

Monitoring: Monitor progress regularly to ensure the work is on track. Address any issues or
deviations promptly.

Completion and Review

Completion: Verify that all tasks have been completed as per the work order.

inspection: Conduct a final inspection to ensure the quality of work.

Feedback Gather feedback from stakeholders to identify any areas for improvement.

-Documentation: Record any changes, outcomes, or lessons learned for future reference.

Example Work Order

A typical work order might include the following sections:

Work Order Number: A unique identifier for tracking.

Date: The date the work order is created.

Requestor: Information about who requested the work.

Description of Work: Detailed description of the tasks to be performed.

Location: Where the work will take place.

Tasks: List of specific tasks with associated details.

Resources. Details about labor, materials, and equipment required.

Schedule: Start date, completion date, and any important deadlines.

Approval: Signatures of authorized personnel.

Comments/Notes: Additional information or instructions.

Effective work order preparation ensures that work is performed efficiently, safely, and within
budget, leading to successful project completion and high customer satisfaction.
production order or shop orders

A production order is an order specifying what is to be sent into production, regardless if it is an

in-house or outsourced production. The production order is created within an order management
system (which can be a part of an ERP system) and dictates the production process.A production
order is a document or instruction issued to the production department detailing the quantity of a
product to be manufactured, the materials to be used, and the timeline for completion. It helps in
tracking the progress of production and ensures that all necessary resources are allocated
efficiently.

Production Order Cycle

Key Components of a Production Order:

Order Number: A unique identifier for tracking the order.

Product Details: Description and specifications of the product to be manufactured.

Quantity: The number of units to be produced.

Materials List (Bill of Materials - BOM): A detailed list of raw materials, components, and
sub-assemblies required for production.

Routing Information: The sequence of operations or steps involved in manufacturing the

product.

Work Centers: Specific machines or workstations where the production activities will take
place.

Labor Requirements: The skills and number of personnel required.

Start and End Dates: The timeline for starting and completing the production.

Quality Control Measures: Standards and procedures to ensure the product meets quality
specifications.

Instructions and Notes: Any additional instructions or special requirements for the production
process.

Shop Orders

Shop orders are similar to production orders but are often used in a more specific context
within the manufacturing process. They are instructions issued to the shop floor or
individual work centers detailing the operations to be performed on specific workpieces
or sub-assemblies. Shop orders ensure that each step of the manufacturing process is
executed correctly and efficiently.
 Key Components of a Shop Order:

Shop Order Number: A unique identifier for tracking.

Work piece or Sub-Assembly Details: Description and specifications of the item to be

processed.

Operation Details: Specific tasks or operations to be performed.

Tools and Equipment: The tools and machinery required for each operation.

Labor Requirements: The skills and personnel needed for each operation.

Start and End Dates: The timeline for each operation.

Work Center Information: The specific workstation or area where the operations will take
place.

Quality Control Checks: Procedures for inspecting and ensuring quality at each step.

Instructions and Notes: Additional instructions or special requirements for each operation.

Process Flow of Production/Shop Orders:

Order Creation: Production or shop orders are created based on customer demand, inventory
levels, or production schedules.

Material Allocation: Raw materials and components are allocated to the order.

Scheduling: The order is scheduled, and the necessary resources (labor, machines, etc.) are
assigned.

Execution: The production process begins, following the instructions detailed in the order.

Monitoring: Progress is monitored, and any deviations from the plan are addressed promptly.
Quality Control: Inspections and quality checks are performed at various stages to ensure
compliance with standards.

Completion: The production or shop order is completed, and the finished product is inspected
and moved to inventory or shipped to the customer.

Documentation: Records are updated, and the order is closed in the system.

Benefits of Production and Shop Orders:

 Efficient Resource Allocation: Ensures optimal use of materials, labor, and equipment.
 Improved Planning and Scheduling: Helps in planning production activities and
meeting deadlines.
 Enhanced Quality Control: Standardizes procedures and ensures product quality.
 Better Tracking and Accountability: Facilitates tracking of production progress and
accountability at each step.
 Reduced Waste: Minimizes waste by providing clear instructions and resource
requirements.

Example Production Order Template:

Production Order Number: PO-12345

Product Name: Widget A

Quantity: 500 units

BOM: List of raw materials and components

Routing: Sequence of operations (e.g., cutting, assembly, finishing)

Work Centers: Workstation 1, Assembly Line 2

Labor: 2 skilled operators, 3 assistants

Start Date: 2024-07-05

End Date: 2024-07-10

Quality Checks: Inspection at each stage, final inspection before packaging

Notes: Special instructions for handling delicate components

Inspection orders

Order Inspections comprises of inspection orders that are used to structure the inspection
of products that are purchased, produced, transferred, or sold. For products in inventory, a
storage inspection order instead of a standard inspection order is used. Inspection orders
are critical components in Production Planning and Control (PPC) systems, ensuring that
products meet specified quality standards at various stages of the production process.
They help maintain product quality, compliance with standards, and customer satisfaction.
Here’s an overview of inspection orders within the PPC framework:

Purpose of Inspection Orders

Quality Assurance: Ensure that products meet the defined quality standards and
specifications.

Process Control: Monitor and control the manufacturing process to identify and rectify
defects early.

Compliance: Ensure compliance with industry standards, regulations, and customer

requirements.

Customer Satisfaction: Deliver products that meet or exceed customer expectations.

Key Components of an Inspection Order

Inspection Order Number: A unique identifier for tracking the inspection order.
Product or Batch Details: Information about the product or batch to be inspected,
including specifications.

Inspection Type: The type of inspection to be conducted (e.g., incoming inspection, in-
process inspection, final inspection).

Inspection Criteria: Detailed criteria and standards against which the product will be
evaluated.

Inspection Points: Specific points or stages in the production process where inspections
will be carried out.

Sampling Plan: The method and size of samples to be taken for inspection.

Inspection Tools and Equipment: Tools and equipment required to conduct the
inspections.

Inspector Details: Information about the personnel conducting the inspection, including
qualifications.

Inspection Procedures: Step-by-step procedures for conducting the inspection.

Documentation: Forms and documents to be used for recording inspection results.

Acceptance Criteria: Standards and thresholds for accepting or rejecting the product.

Corrective Actions: Procedures to follow if the product fails the inspection.

Types of Inspection Orders

Incoming Inspection: Conducted on raw materials, components, and sub-assemblies

received from suppliers to ensure they meet quality standards before they enter the
production process.
In-Process Inspection: Carried out at various stages of the production process to monitor
quality and detect defects early, preventing defective products from progressing further.

Final Inspection: Conducted on finished products before they are shipped to customers
to ensure they meet all quality standards and specifications.

Special Inspections: Ad-hoc inspections triggered by specific events, such as customer

complaints, production issues, or changes in production processes.

Process Flow of Inspection Orders

Order Creation: An inspection order is created based on the production plan, quality
control plan, or specific triggers (e.g., receipt of raw materials, completion of a
production stage).

Inspection Planning: Detailed planning of the inspection, including criteria, sampling

plan, and assignment of inspectors.

Execution: The inspection is carried out according to the planned procedures, and results
are recorded.

Analysis: Inspection results are analyzed to determine if the product meets the
acceptance criteria.

Decision: Based on the analysis, the product is either accepted, rejected, or subjected to
rework.

Corrective Actions: If the product fails inspection, corrective actions are initiated to
address the defects and prevent recurrence.

Documentation: All inspection results, analyses, and corrective actions are documented
for traceability and future reference.

Feedback: Feedback from the inspection process is used to improve production

processes and quality control measures.
Example of an Inspection Order

Inspection Order Number: IO-78910

Product/Batch ID: Batch-2024-07-03-01

Inspection Type: Final Inspection

Inspection Criteria:

o Dimensions: Tolerances specified in product design

o Surface Finish: Free of scratches and blemishes
o Functional Tests: Electrical and mechanical tests

Inspection Points:

o After assembly
o Before packaging

Sampling Plan: Random sampling of 10% of the batch

Inspection Tools and Equipment: Calipers, surface gauge, test rigs

Inspector: John Doe, Quality Control Inspector

Inspection Procedures:

o Measure dimensions using calipers

o Inspect surface finish visually and with a gauge
o Conduct functional tests using specified test rigs

Documentation:

o Inspection report form IR-1234

o Quality checklist QC-5678
 Acceptance Criteria:

o Dimensions within ±0.1mm tolerance

o Surface finish free of defects
o Functional tests passed without issues

Corrective Actions:

o Rework defective units

o Adjust production process to eliminate identified issues

Benefits of Inspection Orders

 Improved Quality Control: Ensures consistent quality and compliance with standards.
 Early Detection of Defects: Identifies issues early, reducing rework and waste.
 Enhanced Customer Satisfaction: Delivers high-quality products, increasing customer
trust and satisfaction.
 Process Improvement: Provides data and feedback for continuous improvement of
production processes.

Store issue orders

Store issue orders are documents used within a warehouse or storeroom environment to
authorize the withdrawal or release of materials, goods, or inventory items for various
purposes such as production, maintenance, or consumption. Here’s an explanation of
what store issue orders involve and how they function: Material Issue. Material issue, or
stock checkout, manages the process of pulling and releasing stock items from a
storeroom. Material issue processing occurs as follows: The person from the issuing
storeroom can verify availability within the system then release (issue) the items.
 Purpose of Store Issue Orders

Material Distribution: Authorize the release of materials from the warehouse or store to
different departments or production units.

Inventory Management: Record and track the movement of inventory items to maintain
accurate stock levels and ensure availability.

Cost Control: Manage and control the costs associated with materials and inventory usage
by tracking withdrawals and consumption.

Accountability: Establish a formal process to ensure that materials are issued only for
authorized purposes and that withdrawals are properly documented.

Key Components of Store Issue Orders

Order Number: A unique identifier for tracking and reference purposes.

Issue Date: The date on which the materials are authorized to be issued.

Issuing Authority: The name or department responsible for authorizing the issuance.

Recipient: The department or individual receiving the materials.

 Material Details: Description of the materials or inventory items being issued, including
quantities and specifications.

Purpose: The reason for issuing the materials (e.g., production order, maintenance,
consumption).

Location: The location within the warehouse or storeroom from which the materials are
being withdrawn.

Authorized Personnel: The name of the person authorized to withdraw or release the
materials.

Signature: Signatures of both the issuing authority and the recipient to acknowledge
receipt and authorization.

Store issue order cycle

QUESTIONS
1.Explain the concept of a purchase order with a detailed example.

2.What is store issue order? Give a detailed analysis of store issue order cycle.

3. Explain in detail about production order with a neat example

4.write short notes on performance standards of labour system.

5. write short notes on performance standards of operating system.

6.List out the work order preparation for various manufacturing methods

7. Elaborate process flow order with a neat example.

8.Compare the performance standards of labour and operating system

Inventory Control & Inventory control parameters

Inventory:

• It is stock of an item or idle resource held for future use.

• It is a stock of physical assets having some economic value, which can be used at a
later time to meet expected/unexpected demand.

• The amount of material, a company has in stock at a specific time is known as

inventory or in terms of money it can be defined as the total capital investment over
all the materials stocked in the company at any specific time
• Items waiting to be purchased or sold are considered to be in inventory.
• The primary factor in the reduction of inventory costs is deciding when to order, how
much to order, and if back-ordering is permissible
Types of inventory:

• raw material inventory

• work in process inventory
• finished goods inventory
• spare parts inventory
• office stationary
Need of Inventories:

To safe guard against the uncertainties in price fluctuations, supply conditions,

demand conditions, lead times, transport contingencies etc.
To reduce machine idle times by providing enough in-process inventories at
appropriate locations.
To take advantages of quantity discounts, economy of scale in transportation etc.
To decouple operations i.e. to make one operation's supply independent of another's
supply. This helps in minimizing the impact of break downs, shortages etc. on the
performance of the downstream operations. Moreover operations can be scheduled
independent of each other if operations are decoupled.
To reduce the material handling cost of semi-finished products by moving them in
large quantities between operations.
To reduce clerical cost associated with order preparation, order procurement etc.
Functions of Inventories:
The basic purpose of inventories is to balance supply and demand.
 Inventory serves as a link between:
1. Supply and demand
2. Customer demand and finished goods
3. Finished goods and component availability.
4. Requirements for an operation and the output from the preceding operation.
5. Parts and materials to begin production and the suppliers of materials.

Inventory Control

It may be defined as the scientific method of determining what to order, when to order
and how much to order and how much to stock so that costs associated with buying
and storing are optimal without interruption production and sales.
Inventory control involves decisions by management as to the source from which the
inventory is to be procured and as to the quantity to be procured at the time
 According to the Merriam-Webster dictionary, inventory control can be defined as
the “coordination and supervision of the supply, storage, distribution, and recording of
materials to maintain quantities adequate for current customer needs without
excessive supply or loss.”
 When it comes to wholesalers and distributors of durable goods, inventory control can
be further defined as the process employed to maximize a company’s use of
inventory. The goal of inventory control is to generate the maximum profit from the
least amount of inventory investment without hindering customer satisfaction levels
or order fill rates.
Objectives of inventory control:

To ensure continuous supply of materials so that production should not suffer at any
time.
To maintain the overall investment in inventory at the lowest level, consistent with
operating requirement
To minimize the holding, replacement and shortage cost of inventories and maximize
the efficiency in production and distribution.
To keep inactive waste surplus scrap and obsolete items at the minimum level.
To supply the product raw material to its users as per the requirements at right time
and at right price.
To ensure timely action for replenishment
To maintain timely record of inventories of all the items and to maintain the stock
 within the desired limits
To avoid both over-stocking and under-stocking of inventory.
Definitions of Terms:

 Procurement quantity
Is the order quantity, which in effect determines the frequency of ordering and
is related directly to the maximum inventory level
 Inventory (I):
o Stock held for the purpose of meeting a demand either internal or external to
the organization.
 Lead time (L):
o The time required to replenish an item of inventory by either purchasing from
a vendor or manufacturing the item in-house.
 Demand (D):
o The number of units of an inventory item required per unit of time.
 Reorder point (r):
o The point at which an order must be placed for the procured quantity to arrive at
the proper time or, for the manufacturing case, the finished product to begin
flowing into inventory at the proper time.
 Reorder quantity (Q):
o The quantity for which an order is placed when the reorder point is reached.
 Demand during lead time (DL):
o This quantity is the product of lead time and demand. It represents the number
of units that will be required to fulfill demand during the time that it takes to
receive an order that has been placed with a vendor.
 Replenishment rate (P):
o This quantity is the rate at which replenishment occurs when an order has been
placed. For a purchase situation it is infinite (when an order arrives, in an
instant the stock level rises from 0 to Q). For the manufacturing situation it is
finite.
 Shortage:
o The units of unsatisfied demand that occur when there is an out-of-stock
situation.
Inventory Costs

In order to control inventories appropriately, one has to consider all cost elements that are
associated with the inventories. There are four such cost elements, which do affect
cost of inventory.

1. Unit cost:
It is usually the purchase price of the item under consideration. If unit cost is
related with the purchase quantity, it is called as discount price.

2. Procurement costs:
This includes the cost of order preparation, tender placement, cost of postages,
telephone costs, receiving costs, set up cost etc.

3. Stock out costs:(Shortage cost):

Is the penalty incurred for being unable to meet a demand when it occurs? This
cost does not depend on the source chosen to replenish the stock but is a function
of the number of units short and the time duration involved

This represents the cost of loss of demand due to shortage in supplies. This
includes cost of loss of profit, loss of customer, loss of goodwill, penalty etc.

4. Holding costs (Carrying costs):

Are incurred as a function of the quantity on hand and the time duration involved.
Included in these costs are the real out-of-pocket costs, such as insurance, taxes,
obsolescence, and warehouse rental and other space charges, and operating costs,
such as light, heat, maintenance, and security. In addition, capital investment in
inventories is unavailable for investment elsewhere.

This represents the cost of maintaining inventories in the plant. It includes the cost
of insurance, security, warehouse rent, taxes, interest on capital engaged, spoilage,
breakage etc.

5. Ordering cost
Is the cost incurred when an order is placed. It is composed of the cost of time,
materials, and any expense of communication in placing an order.
 6. Setup cost:
Is the cost incurred when a machine’s tooling or jigs and fixtures must be changed
to accommodate the production of a different part or product.

Total annual inventory cost = Cost of items + Annual procurement cost + Annual
carrying cost + Stock out cost

Variables in Inventory Models

D = Total annual demand (in units) Q = Quantity ordered (in units)
Q* = Optimal order quantity (in units) R = Reorder point (in units)
R* = Optimal reorder point (in units) L = Lead time
S = Procurement cost (per order)
C = Cost of the individual item (cost per unit)
I = Carrying cost per unit carried (as a percentage of unit cost C) K = Stock out cost
per unit out of stock
P = Production rate or delivery rate
dl = Demand per unit time during lead time
Dl = Total demand during lead time
TC = Total annual inventory costs
TC* = Minimum total annual inventory costs
Number of orders per year = =Annual Demand/Order Quantity=D/Q
Total procurement cost per year = S.D / Q
Total carrying cost per year = Carrying cost per unit * unit cost * average inventory
per cycle
Cost of items per year = Annual demand * unit cost = D.C
Total annual inventory cost (TC) = D.C+ S.D/Q+I.C. Q/2

• The objective of inventory management team is to minimize the total annual

inventory cost.
• A simplified graphical presentation in which cost of items, procurement cost and
carrying cost are depicted is shown in Figure.
 • It can be seen that large values of order quantity Q result in large carrying cost.
• Similarly, when order quantity Q is large, fewer orders will be placed and
procurement cost will decrease accordingly.
• The total cost curve indicates that the minimum cost point lies at the intersection of
carrying cost and procurement cost curves.

Fig.3.6: Economic Order Quantity

Inventory Operating Doctrine:

When managing inventories, operations manager has to make two important decisions

• When to reorder the stock (i.e. time to reorder or reorder point)

• How much stock to reorder (i. e. order quantity)
Reorder point is usually a predetermined inventory level, which signals the operations
manager to start the procurement process for the next order. Order quantity is the order
size.

Types of Inventory Models

Deterministic models:

• It assumes that quantities used in the determination of relationships for the model are
all known.
• These quantities are such things as demand per unit of time, lead time for product
arrival, and costs associated with such occurrences as a product shortage, the cost of
holding the product in inventory, and that cost associated with placing an order for
product.
Constant demand: Is one case that can be analyzed within the category of deterministic
models. It represents very effectively the case for some components or parts in an
inventory which are used in multiple parents, these multiple parent components
having a composite demand which is fairly constant over time.

Lumpy demand: Is varying demand that occurs at irregular points in time.

• This type of demand is normally a dependent demand that is driven by an irregular

production schedule affected by customer requirements.
• Although the same assumptions are made regarding the knowledge of r elated
quantities, as in the constant demand case, this type of situation is analyzed separately
under the topic of materials requirements planning (MRP). This separation of
methodology is due to the different inputs to the modeling process in that the
knowledge about demand is approached by different methods in the two cases.
Probabilistic models:

• Consider the same quantities as do the deterministic models but treat the quantities
that are not cost related as random variables.
• The demand and lead time have their associated probability distributions. The added
complexity of the probabilistic values requires that these models be analyzed by
radically different methods.
Inventory Modeling:

This is a quantitative approach for deriving the minimum cost model for the inventory
problem in hand.

• This model is applied when objective is to minimize the total annual cost of inventory
in the organization.
• Economic order quantity is that size of the order which helps in attaining the above
set objective.
• EOQ model is applicable under the following conditions.
o Demand per year is deterministic in nature
o Planning period is one year

o Lead time is zero or constant and deterministic in nature

o Replenishment of items is instantaneous

 o Demand/consumption rate is uniform and known in advance

o No stock out condition exist in the organization

The total annual cost of the inventory (TC) is given by the following equation in EOQ model

Inventory Models

Example: ABC manufacturers produces 1,25,000 oil seals each year to satisfy the
requirement of their client. They order the metal for the bushing in lot of 30,000 units. It cost
them $40 to place the order. The unit cost of bushing is $0.12 and the estimated carrying cost
is 25% unit cost. Find out the economic order quantity? What percentage of increases or
decrease in order quantity is required so that the ordered quantity is Economic order quantity?
Techniques of Inventory Control
There are a number of different techniques employed by wholesale distributors to ensure their
inventory control is maximizing efficiency and profitability. Below are six key techniques of
inventory control for wholesalers and distributors of durable goods:
1) Establishing Annual Stocking Policies
Management must decide the maximum and minimum level of stocks and supplies that need
to be kept in the warehouse or across the network of warehouse locations. Management must
also set optimized re-order levels, safety stock levels (below which supply must not be
allowed to fall) and an average inventory level to ensure costs are contained.
2) Preparation of Inventory Budgets
Many organizations have an annual inventory budget and they are usually prepared well in
advance before inventory is procured. Budgets should include the total cost of ownership to
keep inventory on hand during that year’s account period. This includes materials cost, fixed
operational costs, carrying costs, logistics costs, redistribution costs and additional
miscellaneous costs that contribute to the total costs of ownership.
3) Maintaining A Perpetual Inventory System
Also known as “the automatic inventory system”, this method is designed to keep a constant
track of the quantity and value of each stocked item. Many wholesale distributors leverage a
combination of an Enterprise Resource Planning (ERP) or Warehouse Management
System (WMS) in conjunction with an Inventory Optimization solution, such as EazyStock,
to optimize inventory balances. Most ERP and WMS technologies struggle to keep costs low
and service rates high, which is why optimization software can be so valuable to operations
processes.
4) Inventory Turnover Ratio
This is a calculation used to determine how quickly inventory is used up or “turned over” in a
given time period. The higher the ratio the shorter the shelf life of the inventory and typically
leads to higher sales volume and profitability for companies with lower profit margins.
Inventory turnover should be closely watched for every item in the warehouse. Over the
course of the product’s life cycle, demand will fluctuate and cause variability in the supply
chain. Tracking demand patterns are one way to ensure product replenishment
calculations are accurate and optimized.
5) Establishment of Optimized Purchasing Procedures
In order to ensure that inventory is under adequate control, management must adopt
purchasing procedures that align with actual sales history and demand pattern data. All
inventory items that have not had an inventory turnover or have not been sold within an
accounting period, typically 12 months, should be classified as obsolete stock and should be
liquidated from inventory to eliminate unnecessary carrying costs. Any item with a declining
customer demand should be flagged in the system and its safety stock level thresholds and re-
order point counts should be downwardly adjusted to mitigate risk of obsolescence and cost.
6) ABC Analysis and ABC Classification
The fastest moving products in your inventory should be located closest to the shipping,
staging, and receiving area in the lower-right of the diagram below. As the demand for each
product decreases over time, products should be migrated backwards to free up space for
items with higher inventory turnover or for new product introductions that have high demand.
Since the majority of your picking activity is performed in a rather small area, your
warehouse layout should be optimized to reduce time spent looking for product in the back of
the warehouse.

Fig.3.8: Inventory model classification

 They experience stock outs of other products, resulting in backorders, lost sales, and
dissatisfied customers.
 They have too much of some products which leads to excess inventory which ties up
working capital and profitability.
 They have lost track of what is actually in inventory because their legacy
applications cannot effectively keep up with growing demand and the speed of
business.
They can’t find material in their warehouse, but they know the material is in the
warehouse but warehouse management systems says they have product on hand.
With these common challenges come a few industry best practices that can eliminate, or at
the very least, reduce the recurrence of these issues. Distributors that have committed to
putting into place some of the following best practices on average report 30% reduction in
costs associated with managing inventory.
Optimization
Here are 5 inventory optimization best practices to consider that will lead to a more
optimized supply chain:
1) Categorize Your Inventory
This is similar to the ABC analysis practice where management categorizes its inventory
according to its value and speed of turnover. Sales numbers and profitability margins are
some of the ways stocks are valued. Inventory optimization software, such as EazyStock, can
help inventory managers track an item’s demand and lifecycle across 9 different demand
patterns, from new to growing to decline, to ensure replenishment practices and customer
demand are never out of step with each other.
2) Automate Demand Forecasting
The company’s performance is often dependent on external conditions such as seasonal
demand, market trends, economic conditions and other business trends that can cause
unpredictable demand variability. Automated demand forecasting can be used to take the
guesswork out of how much inventory should be carried for a given period. Automation
dynamically calculates an inventory item’s based demand according to historical sales data to
ensure minimum and maximum order quantities are optimal.
3) Replenishment Automation
A centralized inventory management system coupled with inventory optimization software
will enable a company to better track inventory levels and prepare for unexpected events.
They can also avoid over stocking and under stocking situations as demand patterns can
automatically override the replenishment parameters based on predetermined stocking
policies and service level targets.
4) Continuous Process Improvement
Unless companies continuously monitor and analyze operational challenges, they may keep
getting the same results, which include high operational costs, poor customer service levels
and inefficient operations.
5) Invest into Inventory Optimization Technology
Most wholesalers and distributors rely on antiquated technology platforms such as ERP and
WMS to drive their planning, forecasting and replenishment processes. Unfortunately, these
types of systems were not designed to optimize inventory levels. Companies looking to gain a
step on the competition need to evaluate add-on systems that can support more lean
operations and more efficient operations to save costs and increase service levels.

Selective control systems:

Selective inventory control refers to the variation in method of control from item to
item on some selective basis.

The principle of selective inventory control recognizes that it is impossible to manage

and control every item in inventory holdings, in the same way and still meet the
objectives of
o Bringing down the level of investment inn inventory
o Avoid stock-out of critical items

In this system the items are clustered into a few groups depending upon the selected
criteria such as value, usage and frequency of consumptions

Fig.3.9: Selective Inventory control technique

 Table.3.1: Selective Inventory control models

ABC Analysis:

Inventory is a necessary evil in any organization engaged in production, sale or trading of

products. Inventory is held in various forms including Raw Materials, Semi FinishedGoods,
Finished Goods and Spares. Every unit of inventory has an economic value and is
considered an asset of the organization irrespective of where the inventory is located or in
which form it is available. Even scrap has residual economic value attached to it.
Depending upon the nature of business, the inventory holding patterns may vary. While in
some cases the inventory may be very high in value, in some other cases inventory may be
very high in volumes and number of SKU. Inventory may be help physically at the
manufacturing locations or in a third party warehouse location.
Inventory Controllers are engaged in managing Inventory. Inventory management involves
several critical areas. Primary focus of inventory controllers is to maintain optimum
inventory levels and determine order/replenishment schedules and quantities. They try to
 balance inventory all the time and maintain optimum levels to avoid excess inventory or
lower inventory, which can cause damage to the business.

ABC Classification:
Inventory in any organization can run in thousands of part numbers or classifications and
millions of part numbers in quantity. Therefore, inventory is required to be classified with
some logic to be able to manage the same.
In most of the organizations inventory is categorized according to ABC Classification
Method, which is based on pare to principle. Here the inventory is classified based on the
value of the units. The principle applied here is based on 80/20 principles.
Accordingly, the classification can be as under:
 A Category Items Comprise 20% of SKU & Contribute to 80% of money spend. B
Category Items Comprise 30% of SKU & Contribute to 15% of money spend. C
Category Items Comprise 50% of SKU & Contribute to 5% of money spend.
It is a widely used method of categorizing inventories to quantity and value.

It is based on the Pareto principle that a few high usage value items constitute a major
part of the capital invested in inventories whereas bulk of inventory item having low
usage value constitute insignificant part of the capital.

Procedure for ABC analysis: The following steps may be used to make ABC analysis

• Step 1: Identify all items being used, list them and estimate their
• Step 2: Collect cost date of individual items
• Step 3: Find out annual usage – consumption in rupees for each item.
• Step 4: Start from highest annual usage value, arrange the items in descending order
of annual consumption in value
• Step 5: calculate cumulative annual usage and express it in percentage of total annual
usage. Also express number of items into cumulative item percentages
• Step 6: plot cumulative usage percentage against cumulative item percentage and
segregate into A,B and C category. It will be seen that for certain length the curve has
a steep rise after that it flattens off. The two tangential lines where the curve changes
its direction will determine the range of A B and C category of items.
 • Helps the material manager to exercise selective control and
focus his attention onlyon a few items when he is confronted with
many store items
• Implementing ABC analysis results in reduced clerical costs,
saves time and effort,resultsin better planning and control, and
increased inventory turnover.
Advantages of ABC Classification:

one manage the

entire volume and assign relative priority to the right category.
For Example A Class items are the high value items. Hence
one is able to monitor the inventory of this category closely
to ensure the inventory level is maintained at optimum levels
for any excess inventory can have huge adverse impact in terms
of overall value.

A Category Items: Helps one identify these stocks as high value

items and ensure tightcontrol in terms of process control,
physical security as well as audit frequency.

management’s attention to the issue on hand to facilitate instant decision-

making.

B Category Items: These can be given second priority with

lesser frequency of reviewand less tightly controls with
adequate documentation, audit controls in place.

C Category Items: Can be managed with basic and

simple records. Inventoryquantities can be larger with
very few periodic reviews.
Fig.3.10: ABC Analysis
• VED Analysis:

• VED stands for vital, essential and desirable. his analysis relates to the classification
of maintenance spare parts and denotes the essentiality of stocking spares.

• The spares are split into three categories in order of importance. From the view-points
of functional utility, the effects of non-availability at the time of requirement or the operation,
process, production, plant or equipment and the urgency of replacement in case of breakdown.

• Some spares are so important that their non-availability renders the equipment or a
number of equipment in a process line completely inoperative, or even causes extreme
damage to plant, equipment or human life.

• On the other hand some spares are non-functional, serving relatively unimportant
purposes and their replacement can be postponed or alternative methods of repair found. All
these factors will have direct effects on the stocks of spares to be maintained.

• V: Vital

• Vital items which render the equipment or the whole line operation in a process
totally and immediately inoperative or unsafe; and if these items go out of stock or are not
readily available, there is loss of production for the whole period.

• E: Essential

• Essential items which reduce the equipment’s performance but do not render it
inoperative or unsafe; non-availability of these items may result in temporary loss of
production or dislocation of production work; replacement can be delayed without affecting
the equipment’s performance seriously; temporary repairs are sometimes possible.

• D: Desirable

• Desirable items which are mostly non-functional and do not affect the performance of
the equipment.

• As the common saying goes “Vital Few — trivial many”, the number of vital spares
in a plant or a particular equipment will only be a few while most of the spares will fall in
‘the desirable and essential’ category.

• However, the decision regarding the stock of spares to be maintained will depend not
only on how critical the spares are from the functional point of view (VED analysis) but also
on the annual consumption (user) cost of spares (ABC — analysis) and, therefore, for control
of spare parts both VED and ABC analyses
Enterprise Resource Planning (ERP)

ERP- DEFINITION An Enterprise resource planning system is a fully integrated business

management system covering functional areas of an enterprise like Logistics, Production,
Finance, Accounting and Human Resources. It organizes and integrates operation processes
and information flows to make optimum use of resources such as men, material, money and
machine. Enterprise resource planning promises

 one database,
 one application,
 one user interface

for the entire enterprise, where once disparate systems ruled manufacturing, distribution,
finance and sales.
 Fig.3.5: Enterprises Resource Planning

Evolution of ERP:

In the ever-growing business environment, the following demands are placed on the industry:

 Aggressive cost control initiatives

 Need to analyse costs/revenues on a product or customer basis
 Flexibility to respond to changing business requirements
 More informed management decision making
 Changes in ways of doing business.

One or more applications and planning systems have been introduced into the business
world for crossing Some of hurdles and achieving growth. They are:

 Management Information Systems (MIS)

 Integrated Information Systems (IIS)
 Executive Information Systems (EIS)
 Corporate Information Systems (CIS)
 Enterprise Wide Systems (EWS)
 Material Resource Planning (MRP)
  Manufacturing Resource Planning (MRP II)
 Money Resource Planning (MRP III)

ERP has evolved from the system known as MRPII (Manufacturing Requirement planning)
system with the integration of information between Vendor, Customer and Manufacturer
using networks such as LAN, WAN and INTERNET etc.

MRPII system again evolved from MRP (Material Requirement Planning) system. MRP is a
technique that explodes the end product demands obtained from Master Production Schedule
(MPS) for the given product structure which is taken from Bill of Material (BOM) into a
schedule of planned orders considering the inventory in hand.

MRPII has a number of drawbacks.

 The main problem is that it has not been able to effectively integrate the different
functional areas to share the resources effectively.
 The traditional application systems, which the organizations generally employ, treat
each transaction separately
 They are built around the strong boundaries of specific functions that a specific
application is meant to cater.

For an ERP, it stops treating these transactions separately as stand-alone activities and
considers them to be the part of the inter-linked processes that make up the business.

Enabling Technologies :

 It is not possible to think of an ERP system without sophisticated information

technology infrastructure.
 It is said that, the earlier ERP systems were built only to work with huge mainframe
computers.
 The new era of PC, advent of client server technology and scalable Relational
Database Management Systems (RDBMS)
 Most of the ERP systems exploit the power of Three Tier Client Server Architecture.
 The other important enabling technologies for ERP systems are Workflow, Work
group, Group Ware, Electronic Data Interchange (EDI), Internet, Intranet, Data
warehousing, etc.
ERP Characteristics: Any system has to possess few key characteristics to
qualify for a true ERP solution. These features are:

1. Flexibility : An ERP system should be flexible to respond to the changing

needs of an enterprise. The client server technology enables ERP to run across
various database back ends through Open Database Connectivity (ODBC).

2. Modular & Open : ERP system has to have open system architecture. This
means that any module can be interfaced or detached whenever required
without affecting the other modules. It should support multiple hardware
platforms for the companies having heterogeneous collection of systems. It
must support some third party addons also.

3. Comprehensive : It should be able to support variety of organizational

functions and must be suitable for a wide range of business organizations.

4. Beyond The Company : It should not be confined to the organizational

boundaries, rather support the on-line connectivity to the other business
entities of the organization.

5. Best Business Practices : It must have a collection of the best business

processes applicable worldwide. An ERP package imposes its own logic on a
company’s strategy, culture and organization.

Features of ERP : Some of the major features of ERP and what ERP can do
for the business system are :

 ERP provides multi-platform, multi-facility, multi-mode

manufacturing, multi-currency, multi-lingual facilities.
 It supports strategic and business planning activities, operational
planning andexecution activities, creation of Materials and Resources..
 ERP covering all functional areas like manufacturing, selling and
distribution,payables, receivables, inventory, accounts, human
resources, purchases etc.
 ERP performs core activities and increases customer service, thereby
augmenting thecorporate image. ERP bridges the information gap
across organisations.
 ERP provides complete integration of systems not only across
departments but alsoacross companies under the same management.
• ERP is the solution for better project management.
  ERP allows automatic introduction of the latest technologies like
Electronic Fund Transfer (EFT), Electronic Data Interchange (EDI),
Internet, Intranet, Videoconferencing, E-Commerce etc.
 ERP eliminates most business problems like material shortages,
productivity enhancements, customer service, cash management,
inventory problems, quality problems, prompt delivery etc.
 ERP provides intelligent business tools like decision support system,
Executive information system, Data mining and easy working systems to
enable better decisions.

Why Companies Undertake ERP

integrate financial information : As the CEO tries to understand the company’s overall
performance, he may find many different versions of the truth. ERP creates a single version
of the truth that cannot be questioned because everyone is using the same system.

integrate customer order information : ERP systems can become the place where the customer
order lives from the time a customer service representative receives it until the loading dock
ships the merchandise and finance sends an invoice. By having this information in one
software system companies can keep track of orders more easily, and coordinate manufacturing,
inventory and shipping among many different locations simultaneously.

standardise and speed up manufacturing processes : Manufacturing companies -especially

those with an appetite for mergers and acquisitions—often find that multiple business units
across the company make the same transaction / recording / report using different methods and
computer systems. ERP systems come with standard methods for automating some of thesteps
of a manufacturing process.

Reduce inventory : ERP helps the manufacturing process flow more smoothly, and it improves
visibility of the order fulfilment process inside the company. That can lead to reduced
inventories of the materials used to make products (work-in-progress inventory), andit can help
users better plan deliveries to customers, reducing the finished good inventory at the
warehouses and shipping docks.

Standardize HR information : Especially in companies with multiple business units, HR may

not have a unified, simple method for tracking employees’ time and communicating withthem
about benefits and services. ERP can fix that.
benefits of ERP : Following are some of the benefits they achieved by implementing the ERP
packages :

Gives Accounts Payable personnel increased control of invoicing and payment processing
and thereby boosting their productivity and eliminating their reliance on computer personnel
for these operations.

Reduce paper documents by providing on-line formats for quickly entering and retrieving
information.

Improves timeliness of information by permitting posting daily instead of monthly.

Greater accuracy of information with detailed content, better presentation, satisfactory for the
auditors.Improved cost control.Faster response and follow-.up on customers.

More efficient cash collection, say, material reduction in delay in payments by customers.

Better monitoring and quicker resolution of queries.

Enables quick response to change in business operations and market conditions.

Helps to achieve competitive advantage by improving its business process.

Improves supply-demand linkage with remote locations and branches in different countries.

Provides a unified customer database usable by all applications.

Improves International operations by supporting a variety of tax structures, invoicing

schemes, multiple currencies, multiple period accounting and languages.

Improves information access and management throughout the enterprise.

Provides solution for problems like Y2K and Single Monetary Unit (SMU) or Euro Currency.

Material Requirements Planning (MRP) is a crucial aspect of production planning and control
that focuses on ensuring the availability of materials and components required for
manufacturing. It helps in planning inventory, scheduling production activities, and managing
procurement processes. Here’s a detailed overview of MRP, its components, benefits, and
implementation:
Key Components of Material Requirements Planning (MRP)

Master Production Schedule (MPS)

1. Definition: A detailed plan that outlines what products need to be produced, in what quantities, and
when.
2. Purpose: To ensure that production meets demand while optimizing resource use.
3. Input: Customer orders, sales forecasts, and inventory levels.
 Bill of Materials (BOM)

1. Definition: A comprehensive list of raw materials, components, and assemblies required to produce a
product.
2. Structure: Hierarchical, showing the relationship between finished goods and their constituent parts.
3. Purpose: To provide detailed information on what is needed to manufacture each product.

Inventory Status Records

1. Definition: Detailed information on the current inventory levels, including on-hand quantities, on-
order quantities, and lead times.
2. Purpose: To track inventory and ensure materials are available when needed.

Lead Time

1. Definition: The time required to procure or produce an item.

2. Types: Procurement lead time, production lead time, and delivery lead time.
3. Purpose: To plan when orders need to be placed to ensure timely availability of materials.

How MRP Works

Demand Forecasting

1. Based on the MPS, MRP systems calculate the demand for materials and components needed to meet
production schedules.

Explosion of BOM

1. The BOM is used to break down the finished products into their individual components and raw
materials.

Net Requirements Calculation

1. MRP systems calculate the net requirements for each material by considering current inventory levels,
scheduled receipts, and safety stock.
2. Formula: Net Requirements=Gross Requirements−Available Inventory−Scheduled Receipts\text{Net
Requirements} = \text{Gross Requirements} - \text{Available Inventory} - \text{Scheduled
Receipts}Net Requirements=Gross Requirements−Available Inventory−Scheduled Receipts

Planned Orders

1. MRP generates planned orders for materials that need to be procured or produced.
2. Timing: Orders are scheduled based on lead times to ensure materials are available when needed.

Benefits of MRP

Improved Inventory Management

1. Reduces excess inventory and minimizes stockouts by ensuring materials are available just when
needed.
Enhanced Production Efficiency

1. Ensures smooth production processes by aligning material availability with production schedules.

Cost Savings

1. Optimizes inventory levels, reducing carrying costs and minimizing waste.

Better Supplier Management

1. Improves communication and planning with suppliers, ensuring timely delivery of materials.

Increased Customer Satisfaction

1. Ensures timely delivery of finished products by aligning production with demand.

Accurate Production Planning

1. Provides a detailed and accurate production plan, helping to meet production targets and deadlines.

Implementation Steps for MRP

Data Collection and Preparation

1. Gather accurate data on inventory levels, BOM, lead times, and demand forecasts.

System Selection

1. Choose an MRP software that suits the company’s size, complexity, and specific requirements.

Integration

1. Ensure the MRP system integrates seamlessly with existing ERP systems and other relevant software.

Training

1. Train employees on how to use the MRP system effectively, including data entry, interpretation of
results, and action planning.

Testing

1. Conduct thorough testing to ensure the system functions correctly and meets all requirements.

Implementation

1. Roll out the MRP system in phases, starting with a pilot project to identify and address any issues
before full implementation.

Monitoring and Optimization

1. continuously monitor the performance of the MRP system and make necessary adjustments to
optimize efficiency and effectiveness.
 Challenges of MRP

Data Accuracy

1. MRP relies heavily on accurate data; any errors in inventory levels, BOM, or lead times can lead to
incorrect planning.

Complexity

1. Implementing and managing an MRP system can be complex and may require significant resources
and expertise.

Change Management

1. Shifting to an MRP system often requires a cultural change within the organization, which can be met
with resistance.

Integration Issues

1. Ensuring seamless integration with existing systems and processes can be challenging.

Forecasting Errors

1. Inaccurate demand forecasts can lead to either excess inventory or stockouts, negating the benefits of
MRP.

Conclusion

Material Requirements Planning is a powerful tool in production planning and control that helps companies
optimize inventory levels, improve production efficiency, and ensure timely delivery of products. By
carefully implementing and managing an MRP system, businesses can achieve significant improvements in
their manufacturing operations, reduce costs, and enhance customer satisfaction. However, successful
implementation requires accurate data, effective training, and continuous monitoring and optimization.

Just-In-Time (JIT) is a production and inventory management strategy that aims to increase efficiency and
reduce waste by receiving goods only as they are needed in the production process. This approach helps to
minimize inventory costs and reduce lead times. Here's an overview of JIT in the context of production
planning and control:

Key Principles of JIT

1.

Elimination of Waste: JIT focuses on reducing waste in various forms, such as excess inventory,
overproduction, waiting times, and defects.

2.
3.

Continuous Improvement (Kaizen): The JIT philosophy encourages constant improvement in all
areas, aiming for incremental changes to improve processes, reduce waste, and increase quality.

4.
 5.

Pull System: In a JIT system, production is based on customer demand rather than forecasted
demand. This is often referred to as a "pull" system, as products are only made and moved when
there is an actual demand.

6.
7.

Quality Control: High-quality production processes are essential in JIT systems because there is
little room for error. Any defects can disrupt the production flow and cause delays.

8.
9.

Supplier Integration: JIT requires close coordination with suppliers to ensure timely delivery of
materials and components. Suppliers may need to make frequent deliveries and be located close to
the production facility.

10.

JIT in Production Planning and Control

1.

Production Scheduling: JIT requires precise production scheduling to ensure that materials and
components arrive just in time for production. This minimizes inventory levels and reduces carrying
costs.

2.
3.

Inventory Management: Traditional inventory systems often maintain large buffer stocks to
account for variability in demand and supply. In contrast, JIT minimizes inventory levels by
synchronizing production with demand, requiring accurate forecasting and reliable suppliers.

4.
5.

Lead Time Reduction: JIT aims to reduce lead times in the production process. This involves
streamlining production steps, reducing setup times, and improving workflow.

6.
7.

Flexibility and Responsiveness: JIT systems need to be flexible to respond quickly to changes in
customer demand. This may involve cross-training employees, using multi-purpose machinery, and
maintaining a flexible production schedule.

8.
9.

Collaboration and Communication: Effective communication and collaboration among all

stakeholders, including suppliers, production teams, and customers, are crucial for JIT. Information
sharing helps to align production with demand and ensures smooth operations.
 10.

Benefits of JIT

 Reduced Inventory Costs: By minimizing inventory levels, JIT reduces the costs associated with storing and
managing inventory.
 Improved Cash Flow: Less money is tied up in inventory, freeing up cash for other uses.
 Higher Quality: With a focus on quality control, JIT often leads to higher-quality products and fewer defects.
 Increased Efficiency: JIT encourages streamlined processes and efficient use of resources, leading to
improved productivity.
 Greater Customer Satisfaction: By aligning production closely with customer demand, JIT can lead to faster
response times and better customer service.

Challenges of JIT

 Dependency on Suppliers: JIT requires reliable suppliers who can deliver materials on time. Any disruptions
in the supply chain can cause production delays.
 Limited Buffer Stock: With minimal inventory, there is little room for error in the production process. Any
issues can quickly disrupt operations.
 High Initial Setup Costs: Implementing a JIT system may require significant investment in technology,
training, and infrastructure.
 Demand Variability: JIT systems can struggle to cope with sudden changes in demand, leading to potential
stockouts or production delays.

Overall, JIT is a powerful strategy for improving efficiency and reducing waste in production planning and
control. However, it requires careful planning, strong supplier relationships, and a commitment to
continuous improvement.

Example: Toyota's JIT System

Toyota, a Japanese automobile manufacturer, is one of the most famous examples of a company that has
successfully implemented JIT.

Context and Problem

In the 1950s, Toyota faced several challenges, including limited resources and space for inventory storage.
To address these issues, they developed the Toyota Production System (TPS), which includes JIT as a core
component.

Implementation of JIT

1.

Pull System: Toyota shifted from a "push" production system, where products are made based on
forecasts, to a "pull" system, where production is driven by actual customer demand. Each stage of
the production process pulls what it needs from the previous stage, ensuring that only the necessary
parts are produced at each step.

2.
3.

Kanban System: Toyota introduced the Kanban system, a signaling system that uses cards or digital
signals to indicate when parts are needed at different stages of production. For example, when a
worker on the assembly line uses the last part from a bin, they send a Kanban card to the upstream
station to request more parts.
 4.
5.

Supplier Integration: Toyota worked closely with suppliers to ensure timely delivery of high-
quality parts. They developed strong relationships with a smaller number of suppliers and
encouraged them to adopt JIT practices as well.

6.
7.

Quality Control and Continuous Improvement (Kaizen): Toyota emphasized quality at every
stage of the production process. Workers were trained to identify and address defects immediately,
preventing defective parts from moving through the production line. The company also fostered a
culture of continuous improvement, where employees regularly suggested ways to improve processes.

8.

Results and Benefits

 Reduced Inventory Costs: By producing cars only when there was demand and receiving parts just in time,
Toyota significantly reduced its inventory costs.
 Improved Quality: The focus on quality control led to a reduction in defects and higher-quality vehicles.
 Increased Efficiency: The streamlined production process minimized waste, reduced lead times, and
improved overall efficiency.
 Flexibility: Toyota was able to respond more quickly to changes in customer demand because it did not have
large amounts of finished goods inventory.

Challenges

 Supplier Reliability: JIT requires reliable suppliers who can deliver parts exactly when needed. Any delays
can disrupt the entire production process.
 Demand Fluctuations: If customer demand changes suddenly, it can be challenging to adjust production
quickly without excess inventory or stockouts.
 Initial Setup and Training: Implementing JIT requires significant changes to production processes and
training for employees.

Conclusion

Toyota's implementation of JIT is a prime example of how the strategy can lead to significant improvements
in production planning and control. By minimizing waste, improving quality, and increasing efficiency, JIT
has allowed Toyota to maintain a competitive edge in the automotive industry.

4o
Extra illustrations
2.Re-order quantity of material ‘X’ is 5,000 kg. ; Maximum level 8,000 kg. ; Minimum usage 50 kg. Per
hour; minimum re-order period 4 days; daily working hours in the factory is 8 hours. You are required to
calculate the re-order level of material ‘X’.

Re- order Level = Maximum Level – [Re- order quantity – (Minimum usage per day ×
Minimum Reorder period)
= 8000 kg. - [5000 kg. – (400 kg,* × 4)
= 8000 kg. – 3400 kg. = 4600 kg.
Hence, Re-order level is 4600 K.
*Minimum usage per day = 50 kg. × 8 = 400 kg.
3 Computation of ABC ANALYSIS
 UNIT-4
Process planning

Introduction

When the design engineers have designed the product, the assembly drawings and
working

drawings of individual components are made. Now the process planners have to see
how the

product can best be made to meet the drawing specifications.

Process Planning:

Process planning can also be defined as the systematic determination of the methods
by which a

product is to be manufactured economically and competitively. It consists of devising,

selecting

and specifying processes, machine tools and other equipment to convert raw material
into

finished and assembled products.

Purpose of process planning:

The purpose of process planning is to determine and describe the best process for each
job so

that:

1. Specific requirements are established for which machines, tools, and other
equipment can

be designed or purchased.

2. The effort of all engaged in manufacturing are coordinated.

3. A guide is furnished to show the best way to use the existing or proposed facilities.

Process planning is intermediate stage between design and manufacturing as shown in

fig.1

Procedure of process planning:

To achieve the aim of economic manufacture of the product, process planning is done
as follows:

1. The finished product is broken into sub-assemblies and individual components from

manufacturing point of view.

2. Prepare a bill of materials for all components of the product which forms a basis for

purchase of raw materials.

3. Decide which parts are to be manufactured in the plant and which parts are to be

purchased from the market depending upon the facilities available in the plant.

4. Choose the appropriate blank size and select the most economical process to be
followed to manufacture components of the product. This is done by comparing the
various possible methods of obtaining the final product.

5. Decide the sequence of operations to be performed on each component in the

process sheet.
6. Depending upon the accuracies called for by the drawings, determine the machine
tools to do the operations.

7. Determine the need for any special equipment like jigs, fixtures, tools etc.

8. Determine the inspection stages and the instruments required and the need for
designing

any inspection devices.

9. Estimate the standard time for performing the job.

10. Determine the type of labour (skilled, semi-skilled or unskilled) required to do the
job.

Process Sheet:

The whole information determined by the process planning is recorded in a tabular form
in a

sheet called process planning sheet. The character of this sheet will vary for different

organization depending upon the production conditions and degree of details required.
However,

in general the following data is listed for each component the product:

1. Quantity of work to be done along with product specifications.

2. Quality of work to be completed.

3. Availability of equipment, tools and personnel.

4. Sequence in which operations will be performed on the raw material.

5. Names of equipments on which the operations will be performed.

6. Standard time for each operation.

7. When the operations will be performed?

8. Cutting speed

9. Feed
10. Material specification.

11. Job rating of labours.

Computer Aided Process Planning

Computer Aided Process Planning (CAPP) has been investigated for more than 20
years; it can be

categorized in two major areas; variant planning, where library retrieval procedures are
applied to find

standard plans for similar components, and generative process planning, where plans
are generated

automatically for new components without reference to existing plans. The latter system
is most desirable but also the most difficult way of performing CAPP.

The process planning function bridges the gap between engineering design and
manufacturing and is thus a critical element in integrating activities within manufacturing
organizations. Current CAPP systems

range from simple editors for manual planning to fully-automated systems for planning a
range of

products. Some of the specific benefits of CAPP are:

1. Improved productivity
More efficient use of machines, tooling, material and labour. “Best practice” (in the form
of optimized

process plans) is documented for consistent application throughout the organization

rather than captured mentally by the process planner.

2. Lower production cost

Cost reduction are realized through productive improvements. Also, the skill level
required to produce

process plans is less than that required for manual methods.

3. Consistency

Computerized methodologies assure consistent application of planning criteria. Also the

number of errors generated during process planning is reduced.

4. Time savings

Time savings can range from days to minutes. Lead times are reduced and flexibility is
increased due to

the ability to react quickly to new or changing requirements. The amount of paper work
and clerical effort involved with design changes is also reduced.

Selection of manufacturing process:

Manufacturing processes are the steps through which raw materials are transformed
into a product. The manufacturing processes can be broadly classified into three
categories viz. shaping, joining and finishing processes as shown schematically

The selection of a particular process from a wide range of choices for a given
application requires a hierarchical classification of the processes. For example,

Diagram depicts how the shaping family can be expanded in different classes such as
casting, deformation, moulding, composite and powder processing, and prototyping.
Next, moulding as a class can be enlarged into a number of member
processes such as compression, rotational, transfer, injection moulding, etc. Lastly,
each member process can be identified with a number of attributes, which would
facilitate the selection of a member process for a given material, dimension, level of
requisite tolerances and so on. Similarly, Fig.4 depicts how the joining and machining
family can be expanded in different classes and actual processes.
Shaping Processes The shaping processes are referred to those that use a certain raw
material and shape it to a final part. Casting, moulding, powder material processing,
primary and secondary material forming, machining are typical example of shaping
processes. Casting Processes Most of the manufactured parts start its journey with
casting process. In a typical casting process, metal is first heated in a furnace until it
melts and then the molten metal is poured into a mold so that the liquid metal takes the
shape of the mold cavity, which is the final shape of the part. Once the liquid metal in
the mold cavity solidifies, the mold is broken or opened to take the final part out of the
mold cavity.

Machining

Machining is a form of subtractive manufacturing in which a sharp cutting tool is used to

physically remove material to achieve a desired geometry. Most of the engineering

components

such as gears, bolts, screws, nuts need dimensional and form accuracy for serving their
purpose,

which cannot be obtained through casting or deformation process like forging, rolling,
etc.
 A wide variety of machining processes are available today that can broadly
be classified in three main categories – conventional machining processes that are used
for all kinds of bulk material

removal operations, grinding processes that are primarily employed to obtain a desired
surface

finish, non-conventional or advanced machining processes that are used for special
kind of

material removal operations. As per the name suggests, non-conventional machining

processes

do not follow the principle of relative hardness as conventional machining, where the
tool

material must be harder than the work material for proper removal of material. The
processes

that remove material by melting, evaporation, chemical and / or electrochemical action

etc. are

generally referred to as non-conventional machining processes. Electrodischarge

machining,

electrochemical machining, laser and electron beam machining are some of the
common

examples of non-conventional machining processes.

In Production Planning and Control (PPC), process planning documents play a crucial
role in ensuring that manufacturing runs smoothly, efficiently, and according to design
specifications. These documents provide detailed instructions and guidelines for
transforming raw materials into finished products.

1. Process Sheets (Operation Sheets)

: Provide step-by-step instructions for each operation in the manufacturing process.

Description of the operation (e.g., cutting, welding, machining).

Tools, machines, and equipment required.

Specific setup instructions for machines or workstations.

Process parameters like speed, feed rates, temperature, pressure, etc.

Estimated time to complete each operation.

Safety guidelines and quality control checks.

2. Routing Sheets

: Define the sequence of operations or steps that a product must undergo from raw
material to finished product.

List of operations in the exact sequence they need to be performed.

Machines, tools, and workstations assigned to each operation.

Estimated time for each operation.

Movement of materials between work centers or departments.

The route through the factory or shop floor.

3. Bill of Materials (BOM)

: A detailed list of all raw materials, components, sub-assemblies, and parts required to
manufacture the product.

Description and quantity of each material or component.

Part numbers and material specifications.

Information about suppliers and lead times for materials.

Cost breakdown for each item.

Material availability and inventory levels.

4. Work Instructions

: Provide detailed, task-specific guidelines for workers on how to perform specific tasks
within a process.

Step-by-step instructions for tasks (e.g., assembling, inspecting).

Safety measures to be taken during the task.

Tooling requirements and setup procedures.

Visual aids such as diagrams or photos for clarity.

Key inspection points for quality assurance.

5. Capacity Planning Documents

Ensure that production capacity is aligned with demand and that resources (machines,
labor, materials) are properly allocated.

Machine utilization plans and schedules.

Labor requirements and shift schedules.

Availability of resources (e.g., machines, materials).

Forecast of production capacity needs over time.

Contingency plans for handling bottlenecks or capacity constraints.

6. Machine Setup Instructions

: Provide instructions for setting up machines and equipment for specific production
runs.

Machine settings such as speed, temperature, and tool alignment.

Required jigs, fixtures, and tooling for the setup.

Setup time and calibration instructions.

Safety protocols during setup.

Instructions for validating machine setup through test runs or samples.

7. Quality Control Plans (Inspection Plans)

: Ensure that products meet quality standards at each stage of the process.

Specific quality checks and inspections required at each operation.

Tolerances and measurement standards to be met.

Testing methods, inspection tools, and frequency of inspections.

Defect criteria and rejection protocols.

Documentation of test results and corrective actions for non-conformance.

8. Tool and Fixture Lists

: Provide a detailed list of tools, fixtures, and jigs required for the manufacturing
process.

List of tools and fixtures for each operation.

Specifications and part numbers for tools.

Storage location and tool availability.

Maintenance requirements for tools and fixtures.

9. Job Cards (Work Orders)

Communicate the production requirements for specific jobs or orders to the shop floor.

Job number, customer details, and product specifications.

List of operations to be performed, with start and end times.

Required materials, machines, and tooling.

Priority level and delivery deadlines.

Any special instructions or notes for operators.

10. Production Schedule

Outline when each operation or batch of products should be completed to meet

demand.

Timelines for production runs, including start and finish dates.

Deadlines for delivering products or components to customers or the next stage of

production.

Allocation of resources (machines, labor) for each batch or order.

Gantt charts or other visual aids to monitor progress.

11. Cost Estimation Documents

: Provide an estimate of the cost to produce a product, including material, labor, and
overhead costs.

Detailed breakdown of material costs (based on BOM).

Labor costs (hours required and rates).

Machine and equipment costs (e.g., depreciation, maintenance).

Overhead costs (utilities, factory overhead).

Final cost analysis for each unit or batch.

12. Material Requirements Planning (MRP) Reports

Coordinate the ordering and availability of materials to match the production schedule.

Material demand forecasts based on production schedules.

Lead times for materials and components.

Stock levels and reorder points for materials.

Purchase orders and supplier information.

Inventory tracking and material usage.

13. Change Orders

Document any changes to the process plan, such as design revisions or changes in
materials.

Details of the change (e.g., part revision, new material, updated specs).

Reason for the change (e.g., cost savings, quality improvements).

Impact on the process sequence, routing, or materials.

Approval from relevant departments (e.g., engineering, quality control).

Process planning information refers to the detailed and structured data required to plan,
control, and execute the manufacturing process effectively. This information covers all
aspects of transforming raw materials into finished products, ensuring that production is
efficient, cost-effective, and meets quality standards.

Key Types of Process Planning Information:

Product Information

Product Specifications: Detailed description of the product’s design, materials,

dimensions, tolerances, and quality requirements.
Bill of Materials (BOM): A list of raw materials, components, and subassemblies needed
for production, including quantities, material specifications, and suppliers.

Engineering Drawings: Technical drawings, CAD models, and blueprints showing

product dimensions, shapes, and other design details.

Manufacturing Process Information

Operation Sequence: The specific sequence of steps or operations to be followed in

manufacturing the product (e.g., cutting, machining, assembling).

Process Parameters: The settings and conditions for each operation, such as
temperature, pressure, speed, feed rates, and tolerances.

Tooling and Equipment Requirements: Information on the machines, tools, fixtures, jigs,
and other equipment required for each manufacturing step.

Work Instructions: Detailed step-by-step instructions for operators, including machine

setup, operation procedures, safety measures, and quality control points.

Routing Information

Routing Sheet: A document that lists the sequence of operations and the workstations
or machines where each operation is performed.

Work Centers: Identification of workstations or production areas where specific

processes are carried out.

Movement of Materials: Information on how materials flow from one operation to the
next, including material handling methods and transportation between work centers.

Resource Information

Machines and Equipment: Information on the machines and tools required for
production, their capabilities, and availability.

Labor Requirements: Details about the number and skills of workers needed for each
operation, along with shift schedules and labor costs.

Capacity Planning: Data on machine capacities, labor availability, and resource

utilization to ensure production volumes meet demand.

Time and Cost Information

Cycle Time: The time required to complete each operation, including machine
processing time and setup time.
Lead Time: The total time it takes to produce a product from start to finish, including
production and non-production time (e.g., material handling, inspection).

Cost Estimates: Information on the cost of materials, labor, machine time, and overhead
for producing the product.

Efficiency Targets: Expected performance benchmarks, such as productivity rates,

machine utilization, and labor efficiency.

Quality Control Information

Quality Standards: The required quality levels and tolerances for the product, including
dimensional checks, material properties, and surface finishes.

Inspection and Testing Plans: Specific checkpoints and tests to be conducted during
and after production to ensure quality compliance.

Defect Criteria: Definition of acceptable and unacceptable deviations, with clear

guidelines for handling defects or rework.

Documentation: Records of quality checks, test results, and inspection reports for
traceability.

Inventory and Material Management Information

Material Availability: Data on the current stock levels of raw materials, components, and
subassemblies.

Material Requirements Planning (MRP): Information on the quantity and timing of

materials required for production, considering lead times and inventory levels.

Supplier Information: Details of suppliers for raw materials and components, including
lead times, quality certifications, and pricing agreements.

Waste and Scrap Rates: Information on expected material waste and scrap generated
during production and methods for minimizing it.

Workstation and Layout Information

Factory Layout: Information on the physical arrangement of workstations, machines,

and material flow within the production facility.

Ergonomics: Data on how to set up workstations to ensure operator safety, efficiency,

and comfort.
Material Handling: Information on the tools, equipment, and methods used to move
materials between workstations (e.g., conveyors, forklifts).

Process Optimization and Improvement Information

Continuous Improvement Data: Historical data on production efficiency, downtime,

waste, and quality issues that can be analyzed for process optimization.

Lean Manufacturing: Information on lean practices such as eliminating waste, reducing

inventory, and improving flow in the manufacturing process.

Six Sigma Data: Quality data used for defect reduction and process variation control to
improve production outcomes.

Feedback Loops: Information from operators, maintenance teams, and quality control
teams on areas for process improvement.

Regulatory and Compliance Information

Safety Regulations: Information on safety protocols and standards that need to be

followed during manufacturing, including machine guarding and operator training.

Environmental Compliance: Data on environmental regulations related to material

disposal, emissions, and energy usage during production.

Industry Standards: Compliance with relevant industry standards (ISO, ASTM) for
product quality, testing, and production processes.

Process planning problems in production planning and control refer to challenges that
arise when determining the most efficient and effective way to manufacture a product.
These problems can negatively affect production efficiency, lead to increased costs,
cause delays, and compromise product quality. Below are common process planning
problems and their potential impacts:

1. Inaccurate or Incomplete Product Data

: Missing or inaccurate product specifications, drawings, or BOM can lead to improper

planning.

Incorrect selection of processes or materials.

Product defects due to unmet specifications.

Delays as designs are corrected or data is re-collected.

Ensure accurate, up-to-date product data and verify designs before process planning.
2. Poor Selection of Manufacturing Processes

Choosing inappropriate manufacturing processes that do not align with product design
requirements, material properties, or production volume.

Increased scrap and waste due to poor quality.

Inefficient use of machinery and resources.

Inability to meet production schedules due to longer processing times.

Thoroughly analyze product requirements and material properties to select the most
suitable manufacturing processes.

3. Inaccurate Time and Cost Estimation

: Overestimating or underestimating the time and cost required for production can
disrupt production schedules and financial planning.

Delays in meeting delivery deadlines due to underestimated production times.

Increased production costs due to inefficient resource allocation.

Profit margins are affected by inaccurate cost estimates.

: Use historical data and standardized costing methods to improve the accuracy of time
and cost estimates.

4. Resource Constraints

: Insufficient availability of machines, tools, labor, or materials due to poor resource

planning.

Production bottlenecks, causing delays.

Suboptimal utilization of resources (machines sit idle or workers are underutilized).

Increased lead times for orders.

Implement proper capacity planning and material requirements planning (MRP) systems
to align resources with production demands.

5. Inefficient Operation Sequencing

: An improper sequence of operations can lead to unnecessary handling, delays, and

wasted resources.

Increased lead times as materials wait for processing.

Higher production costs due to extra handling and movement.

Quality issues arising from poorly coordinated processes.

: Optimize the sequence of operations to minimize movement and handling, and ensure
smooth material flow between workstations.

6. Inflexibility in Handling Design Changes

: Failure to quickly adapt the process plan to accommodate design changes or

engineering revisions.

Production of defective or outdated products.

Wasted materials, time, and labor.

Delays in meeting customer demands.

Implement a robust change management system to handle design revisions quickly and
effectively.

7. Overcomplicated Process Plans

Overly detailed or complex process plans that are difficult for operators to follow,
leading to confusion and errors.

Increased operator errors, resulting in defective products.

Longer setup times and increased training needs.

Inefficiencies in production as workers struggle to understand procedures.

Simplify process plans, focusing on essential details, and provide clear, concise
instructions.

8. Inadequate Process Parameter Control

: Failure to set or control critical process parameters such as temperature, pressure,

speed, or feed rate.

Production of low-quality products due to improper settings.

Increased rework and scrap, leading to wasted time and materials.

Equipment damage or increased maintenance needs due to incorrect settings.

9. Underutilization of Automation and Technology

Problem: Failure to use automation or advanced manufacturing technologies when

available.

Impact:

Slower production rates compared to competitors using automated solutions.

Higher labor costs due to reliance on manual processes.

Inconsistent product quality due to human error.

Solution: Invest in automation technologies where appropriate and train workers to use
advanced tools and systems.

10. Bottlenecks in Production Flow

Bottlenecks occur when one part of the process slows down or stops production,
creating delays in the overall workflow.

Forecast: A prediction, projection, or estimate of some future activity, event, or

occurrence.

Managerial uses of demand forecasting:

In the short run:

Demand forecasts for short periods are made on the assumption that the company has
a given

production capacity and the period is too short to change the existing production
capacity.

Generally it would be one year period.

Production planning: It helps in determining the level of output at various periods and

avoiding under or over production.

Helps to formulate right purchase policy: It helps in better material management, of

buying inputs and control its inventory level which cuts down cost of operation.
 Helps to frame realistic pricing policy: A rational pricing policy can be formulated to

suit short run and seasonal variations in demand.

Sales forecasting: It helps the company to set realistic sales targets for each
individual

salesman and for the company as a whole.

Helps in estimating short run financial requirements: It helps the company to plan the

finances required for achieving the production and sales targets. The company will be

able to raise the required finance well in advance at reasonable rates of interest.

Reduce the dependence on chances: The firm would be able to plan its production

properly and face the challenges of competition efficiently.

Helps to evolve a suitable labour policy: A proper sales and production policies help
to

determine the exact number of labourers to be employed in the short run.

In the long run:

Long run forecasting of probable demand for a product of a company is generally for a

period of 3 to 5 or 10 years.

1.Business planning

It helps to plan expansion of the existing unit or a new production unit. Capital budgeting
of a

firm is based on long run demand forecasting.

2.Financial planning:

It helps to plan long run financial requirements and investment programs by floating
shares and

debentures in the open market.

3.Manpower planning :

It helps in preparing long term planning for imparting training to the existing staff and
recruit
skilled and efficient labour force for its long run growth.

4.Business control :Effective control over total costs and revenues of a company helps
to determine the value and

volume of business. This in its turn helps to estimate the total profits of the firm. Thus it
is

possible to regulate business effectively to meet the challenges of the market.

5.Determination of the growth rate of the firm :

A steady and well conceived demand forecasting determine the speed at which the
company can

grow.

6.Establishment of stability in the working of the firm :

Fluctuations in production cause ups and downs in business which retards smooth
functioning of

the firm. Demand forecasting reduces production uncertainties and help in stabilizing
the

activities of the firm.

7.Indicates interdependence of different industries :

Demand forecasts of particular products become the basis for demand forecasts of
other related

industries, e.g., demand forecast for cotton textile industry supply information to the
most likely

demand for textile machinery, colour, dye-stuff industry etc.,

8.More useful in case of developed nations:

It is of great use in industrially advanced countries where demand conditions fluctuate

much

more than supply conditions.

The above analysis clearly indicates the significance of demand forecasting in the
modern
business set up.

Levels Of Demand Forecasting

Demand forecasting may be undertaken at three different levels, viz., micro level or firm
level,

industry level and macro level.

Micro level or firm level

This refers to the demand forecasting by the firm for its product. The management of a
firm is

really interested in such forecasting. Generally speaking, demand forecasting refers to

the

forecasting of demand of a firm.

Industry level

Demand forecasting for the product of an industry as a whole is generally undertaken by

the

trade associations and the results are made available to the members. A member firm
by using

such data and information may determine its market share. Macro-level

Estimating industry demand for the economy as a whole will be based on macro-
economic

variables like national income, national expenditure, consumption function, index of

industrial

production, aggregate demand, aggregate supply etc, Generally, it is undertaken by

national

institutes, govt. agencies etc. Such forecasts are helpful to the Government in
determining the

volume of exports and imports, control of prices etc.

The managerial economist has to take into consideration the estimates of aggregate
demand and
also industry demand while making the demand forecast for the product of a particular
firm.

Criteria For Good Demand Forecasting

Apart from being technically efficient and economically ideal a good method of demand

forecasting should satisfy a few broad economic criteria. They are as follows:

Accuracy: Accuracy is the most important criterion of a demand forecast, even though

cent percent accuracy about the future demand cannot be assured. It is generally

measured in terms of the past forecasts on the present sales and by the number of
times it

is correct.

Plausibility: The techniques used and the assumptions made should be intelligible to
the

management. It is essential for a correct interpretation of the results.

Simplicity: It should be simple, reasonable and consistent with the existing knowledge.

A simple method is always more comprehensive than the complicated one

Durability: Durability of demand forecast depends on the relationships of the variables

considered and the stability underlying such relationships, as for instance, the relation

between price and demand, between advertisement and sales, between the level of

income and the volume of sales, and so on.

Flexibility: There should be scope for adjustments to meet the changing conditions.
This imparts durability to the technique.

Availability of data: Immediate availability of required data is of vital importance to

business. It should be made available on an up-to-date basis. There should be scope

for making changes in the demand relationships as they occur.

Economy: It should involve lesser costs as far as possible. Its costs must be
compared against the benefits of forecasts

Quickness: It should be capable of yielding quick and useful results. This helps the
management to take quick and effective decisions.

Thus, an ideal forecasting method should be accurate, plausible, durable, flexible, make
the data

available readily, economical and quick in yielding results.

Survey Methods

Survey methods help us in obtaining information about the future purchase plans of
potential
buyers through collecting the opinions of experts or by interviewing the consumers.
These

methods are extensively used in short run and estimating the demand for new products.
There are

different approaches under survey methods. They are

A. Consumers interview Method:

Under this method, efforts are made to collect the relevant information directly from the

consumers with regard to their future purchase plans. In order to gather information
from

consumers, a number of alternative techniques are developed from time to time. Among
them,

the following are some of the important ones.

1. Survey of buyer’s intentions or preferences: It is one of the oldest methods of

demand forecasting. It is also called as “Opinion surveys”.

Under this method, consumer-buyers are requested to indicate their preferences and

willingness about particular products. They are asked to reveal their ‘future purchase

plans with respect to specific items. They are expected to give answers to questions like
what items they intend to buy, in what quantity, why, where, when, what quality they
expect, how much money they are planning to spend etc. Generally, the field survey is
conducted by the marketing research department of the company or hiring the services
of outside research organizations consisting of learned and highly qualified
professionals.

B. Direct Interview Method

Experience has shown that many customers do not respond to questionnaire addressed
to them even if it is simple due to varied reasons. Hence, an alternative method is
developed. Under this method, customers are directly contacted and interviewed. Direct
and simple questions are asked to them. They are requested to answer specifically
about their budget, expenditure plans, particular items to be selected, the quality and
quantity of products, relative price preferences etc. for a particular period of time. There
are two different methods of direct personal interviews.

They are as follows:

i. Complete enumeration method

Under this method, all potential customers are interviewed in a particular city or a
region.

The answers elicited are consolidated and carefully studied to obtain the most probable
demand for a product. The management can safely project the future demand for its
products. This method is free from all types of prejudices. The result mainly depends on
the nature of questions asked and answers received from the customers.

However, this method cannot be used successfully by all sellers in all cases. This
method can be employed to only those products whose customers are concentrated in
a small region or locality. In case consumers are widely dispersed, this method may not
be physically adopted or prove costly both in terms of time and money. Hence, this
method is highly cumbersome in nature.

ii. Sample survey method or the consumer panel method Experience of the experts‟
show that it is impossible to approach all customers; as such careful sampling of
representative customers is essential. Hence, another variant of complete enumeration
method has been developed, which is popularly known as sample survey method.
Under this method, different cross sections of customers that make up the bulk of the
market are carefully chosen. Only such consumers selected from the relevant market
through some sampling method are interviewed or surveyed.

C. Collective opinion method or opinion survey method This is a variant of the survey
method. This method is also known as “Sales – force polling” or “Opinion poll method”.
Under this method, sales representatives, professional experts and the market
consultants and others are asked to express their considered opinions about the volume
of sales expected in the future.

D. Delphi Method or Experts Opinion Method This method was originally developed at
Rand Corporation in the late 1940‟s by Olaf Helmer, Dalkey and Gordon. This method
was used to predict future technological changes. It has proved more useful and
popular in forecasting non– economic rather than economical variables. It is a variant of
opinion poll and survey method of demand forecasting. Under this method, outside
experts are appointed. They are supplied with all kinds of information and statistical
data. The management requests the experts to express their considered opinions and
views about the expected future sales of the company.

E. End Use or Input – Output Method Under this method, the sale of the product under
consideration is projected on the basis of demand surveys of the industries using the
given product as an intermediate product. The demand for the final product is the end –
use demand of the intermediate product used in the production of the final product
Statistical Method It is the second most popular method of demand forecasting. It is the
best available technique and most commonly used method in recent years. Under this
method, statistical, mathematical models, equations etc are extensively used in order to
estimate future demand of a particular product. They are used for estimating long term
demand. They are highly complex and complicated in nature. Some of them require
considerable mathematical back – ground and competence.

Trend Projection Method An old firm operating in the market for a long period will have
the accumulated previous data on either production or sales pertaining to different
years. If we arrange them in chronological order, we get what is called as „time series‟.

Economic Indicators Economic indicators as a method of demand forecasting are

developed recently. Under this method, a few economic indicators become the basis for
forecasting the sales of a company. An economic indicator indicates change in the
magnitude of an economic variable. It gives the signal about the direction of change in
an economic variable.

Advantages of forecasting

1. Optimal Inventory Management Inventory management is critical for any

business that wants to maximize its profits and minimize its waste. The accuracy
of demand forecasting helps in successful stock optimization as it helps
accurately determine the amount of materials required to fulfill the customers’
expectations. This lowers the risk of lost sales due to stockouts or wastage of
resources due to excess stock. Planners can use different forecasting methods,
such as survey, barometric, statistical, and trend projection methods, to forecast
consumer orders. These methods can help identify patterns in buying behaviors,
which can then be used to generate more accurate analysis and achieve optimal
inventory management.
2. Better Production PlanningBusinesses with accurate data analysis can make
informed decisions about production schedules by analyzing past sales data,
upcoming trends in the market, and other relevant factors. By forecasting the
demand accurately, organizations can schedule production cycles and allocate
resources accordingly, reducing the risk of stockouts or excess manufacturing.
This ensures that the business can meet the orders promptly and efficiently.
3. Improved Resource AllocationDemand forecasting can help planners allocate
resources more effectively, including personnel, equipment, and raw materials.
 This way, businesses can ensure they have the necessary resources to meet
orders without overspending. This not only helps in increasing efficiency but also
prevents the wastage of resources.
4. Enhanced SustainabilityOne of the prominent benefits of demand forecasting is
enhanced economic as well as environmental sustainability. As the planners have
accurate predictions for future orders, it will help them keep their stocks and
inventory at the optimum level, further leading to effective utilization of
resources while preventing any wastage of material or resources. This results in
the better economic and environmental sustainability of the business’s operation.
5. Improved Sales and RevenueForecasting demand can have a big impact on sales
and revenue. Businesses may make educated decisions on production, inventory
management, pricing, and marketing tactics by accurately anticipating how much
customers want their products or services. This, in turn, can result in increased
revenue. Executives can schedule production accordingly, ensuring that they have
enough inventory to fulfill client expectations if they know which products will
likely be in high demand. They can find new market opportunities by analyzing
data and establishing more effective sales and marketing strategies. This might
assist firms in increasing their consumer base and revenue.
6. Better Pricing StrategiesDemand forecasting is important in pricing strategy since
it gives critical information about consumer buying behavior, market trends, and
sales potential. Companies can use analytics tools to adjust their pricing strategy
in order to maximize earnings while limiting risks. By examining historical data
and market trends, it helps them determine the best pricing points to enhance
revenue and profitability. If a product's orders are higher at particular times of the
year, businesses may adjust their price strategy to capitalize on the increased
demand.
7. Increased Supply Chain EfficiencyAccurate demand prediction helps planners
plan every operation of the supply chains while focusing on the possible
customer orders. This way can help the planners optimize their operations,
such as inventory management, production planning, and raw material
procurement, make more efficient while maintaining the lower cost.
8. Risk ManagementDemand forecasting is an important risk management
strategy because it enables firms to predict and plan for variations in consumer
requests. Effective allows businesses to modify production levels, manage
inventory, and allocate resources to meet future demand. It considers different
 factors, including economic indicators, market trends, customer behavior, and
seasonality, allowing planners to foresee possible disruptions in the entire supply
chain network and change their plans accordingly.
9. Competitive AdvantageAccurate prediction of demand enables businesses to
ensure that they have enough stocks to fulfill those orders and never have to face
stockouts. This helps them in enhancing the level of customer satisfaction. This
creates trust and gives them added leverage over their competitors, allowing
them to outperform their competition.
10. Improved Customer SatisfactionWhen businesses can give their customers the
best quality products in the right quantity at the right time and place, it can help
increase buyer loyalty and retention and attract new consumers through positive
word-of-mouth recommendations.
In summary, demand forecasting can provide businesses with a competitive advantage
by improving supply chain management, enhancing the customer experience, increasing
efficiency, and informing strategic decision-making. By anticipating changes in market
trends, organizations can position themselves for success in an increasingly competitive
marketplace. With 3SC’s demand forecasting solutions, you can accurately anticipate
consumer behavior and ready your supply chain to meet consumer orders and ensure
better consumer satisfaction.
UNIT-5
Production scheduling involves organizing resources and workflows to meet production goals
efficiently. Several factors influence production scheduling, ensuring that the production process
is optimized, meets demand, and utilizes resources effectively.

Key Factors in Production Scheduling:

1. Demand Forecasting:

 Customer Orders: The volume and timing of customer orders determine how production
should be scheduled.
 Seasonality and Trends: Anticipating seasonal changes or trends in demand allows for
better planning and ensures product availability during peak times.

2. Production Capacity:

 Machinery and Equipment Availability: The availability of machines, their operating

speeds, and downtime for maintenance or repairs significantly affect scheduling.
 Labor Availability: The number of workers available and their skill levels influence how
tasks are assigned and how quickly jobs are completed.
 Plant or Facility Capacity: The physical limitations of the production facility, including
workspace and storage, impact how much can be produced at one time.

3. Lead Time and Production Time:

 Setup and Changeover Times: Time required to set up machinery or switch from one
product to another can impact scheduling, especially in mixed-product environments.
 Processing Time per Job: Different products or tasks require different amounts of time
to complete. Efficient scheduling ensures that faster jobs aren’t delayed by longer tasks.

4. Inventory Levels:

 Raw Materials Inventory: Availability of raw materials and components plays a crucial
role in scheduling. Shortages or delays in the supply chain can lead to production halts.
 Finished Goods Inventory: Current stock levels of finished goods determine whether
production needs to increase or decrease to meet demand without overproducing.

5. Order Prioritization:

 Due Dates and Delivery Schedules: Orders with urgent deadlines may need to be
prioritized over others to meet customer requirements.
 Order Size: Larger orders may take more time, so they need to be balanced against
smaller, faster jobs to optimize production.

6. Bottlenecks and Constraints:

  Critical Resources: Identifying bottlenecks, such as limited machine capacity or a
shortage of skilled labor, helps avoid delays in the production process.
 Dependency of Tasks: Some tasks cannot begin until others are completed (e.g., a part
must be machined before it can be assembled). This sequencing needs to be factored into
scheduling.

7. Supply Chain Reliability:

 Vendor and Supplier Lead Times: The reliability and delivery times of suppliers for
raw materials and components can affect production schedules.
 Transportation and Logistics: Delays in the transport of materials to the plant or
delivery of finished products to customers can require adjustments to the schedule.

8. Production Flexibility:

 Product Mix: If the company produces multiple products, the ability to switch between
product lines without significant downtime is crucial for effective scheduling.
 Customization and Variability: Highly customizable products can introduce variability
into the schedule, making it harder to standardize timelines and processes.

9. Quality Control Requirements:

 Inspection and Testing Times: Quality checks may take time and need to be scheduled
into the production plan, especially if issues require rework.
 Defect Rates: High defect rates may lead to reworking, which can cause delays in the
production process.

10. External Factors:

 Market Conditions: Changes in the broader market, including economic downturns or

upturns, can impact scheduling needs and production volume.
 Government Regulations: Compliance with safety, environmental, and labor laws may
introduce additional steps into the scheduling process.
 Unexpected Disruptions: Natural disasters, strikes, or pandemics can disrupt supply
chains, labor availability, or even facility operations.

These factors interact in complex ways, and successful production scheduling must carefully
balance all of them to ensure efficient, timely, and cost-effective manufacturing. Advanced
software and production management systems are often used to track and optimize these factors.

You said:

production scheduling techniques

ChatGPT said:
Production scheduling techniques help manage workflows, optimize resource use, and ensure
timely delivery of products. Below are some widely used production scheduling techniques:

1. Forward Scheduling

 Definition: Planning production from the start date and working forward through each
task until the completion date is determined.
 Best For: Situations where the start date is fixed, and you want to see when a project will
be finished.
 Advantages: Helps utilize resources as soon as they become available.
 Challenges: May lead to finished products sitting in inventory for longer if customer
demand isn't immediate.

2. Backward Scheduling

 Definition: Starting with the desired completion date and working backward to determine
when each task must begin.
 Best For: Situations where delivery deadlines are strict.
 Advantages: Helps ensure that products are completed just in time, minimizing inventory
holding costs.
 Challenges: Less flexibility if unexpected delays occur.

3. Just-in-Time (JIT) Scheduling

 Definition: Aims to minimize inventory and production costs by producing goods only as
they are needed, based on customer demand.
 Best For: Reducing waste and inventory holding costs in environments with stable
demand.
 Advantages: Minimizes waste, lowers storage costs, and improves cash flow.
 Challenges: Highly dependent on reliable suppliers and streamlined processes.

4. Master Production Schedule (MPS)

 Definition: A detailed plan that outlines what needs to be produced, in what quantity, and
when it will be produced.
 Best For: Complex manufacturing environments that produce a variety of goods.
 Advantages: Provides a long-term view of production, ensuring alignment between
production capacity and demand.
 Challenges: Requires accurate demand forecasting and flexible resource allocation.


Key Factors in Production Scheduling:

1. Demand Forecasting:
  Customer Orders: The volume and timing of customer orders determine how production
should be scheduled.
 Seasonality and Trends: Anticipating seasonal changes or trends in demand allows for
better planning and ensures product availability during peak times.

2. Production Capacity:

 Machinery and Equipment Availability: The availability of machines, their operating

speeds, and downtime for maintenance or repairs significantly affect scheduling.
 Labor Availability: The number of workers available and their skill levels influence how
tasks are assigned and how quickly jobs are completed.
 Plant or Facility Capacity: The physical limitations of the production facility, including
workspace and storage, impact how much can be produced at one time.

3. Lead Time and Production Time:

 Setup and Changeover Times: Time required to set up machinery or switch from one
product to another can impact scheduling, especially in mixed-product environments.
 Processing Time per Job: Different products or tasks require different amounts of time
to complete. Efficient scheduling ensures that faster jobs aren’t delayed by longer tasks.

4. Inventory Levels:

 Raw Materials Inventory: Availability of raw materials and components plays a crucial
role in scheduling. Shortages or delays in the supply chain can lead to production halts.
 Finished Goods Inventory: Current stock levels of finished goods determine whether
production needs to increase or decrease to meet demand without overproducing.

5. Order Prioritization:

 Due Dates and Delivery Schedules: Orders with urgent deadlines may need to be
prioritized over others to meet customer requirements.
 Order Size: Larger orders may take more time, so they need to be balanced against
smaller, faster jobs to optimize production.

6. Bottlenecks and Constraints:

 Critical Resources: Identifying bottlenecks, such as limited machine capacity or a

shortage of skilled labor, helps avoid delays in the production process.
 Dependency of Tasks: Some tasks cannot begin until others are completed (e.g., a part
must be machined before it can be assembled). This sequencing needs to be factored into
scheduling.

7. Supply Chain Reliability:

  Vendor and Supplier Lead Times: The reliability and delivery times of suppliers for
raw materials and components can affect production schedules.
 Transportation and Logistics: Delays in the transport of materials to the plant or
delivery of finished products to customers can require adjustments to the schedule.

8. Production Flexibility:

 Product Mix: If the company produces multiple products, the ability to switch between
product lines without significant downtime is crucial for effective scheduling.
 Customization and Variability: Highly customizable products can introduce variability
into the schedule, making it harder to standardize timelines and processes.

9. Quality Control Requirements:

 Inspection and Testing Times: Quality checks may take time and need to be scheduled
into the production plan, especially if issues require rework.
 Defect Rates: High defect rates may lead to reworking, which can cause delays in the
production process.

10. External Factors:

 Market Conditions: Changes in the broader market, including economic downturns or

upturns, can impact scheduling needs and production volume.
 Government Regulations: Compliance with safety, environmental, and labor laws may
introduce additional steps into the scheduling process.
 Unexpected Disruptions: Natural disasters, strikes, or pandemics can disrupt supply
chains, labor availability, or even facility operations.

These factors interact in complex ways, and successful production scheduling must carefully
balance all of them to ensure efficient, timely, and cost-effective manufacturing. Advanced
software and production management systems are often used to track and optimize these factors.

Production scheduling techniques help manage workflows, optimize resource use, and ensure
timely delivery of products. Below are some widely used production scheduling techniques:

1. Forward Scheduling

 Definition: Planning production from the start date and working forward through each
task until the completion date is determined.
 Best For: Situations where the start date is fixed, and you want to see when a project will
be finished.
 Advantages: Helps utilize resources as soon as they become available.
 Challenges: May lead to finished products sitting in inventory for longer if customer
demand isn't immediate.

2. Backward Scheduling
  Definition: Starting with the desired completion date and working backward to determine
when each task must begin.
 Best For: Situations where delivery deadlines are strict.
 Advantages: Helps ensure that products are completed just in time, minimizing inventory
holding costs.
 Challenges: Less flexibility if unexpected delays occur.

3. Just-in-Time (JIT) Scheduling

 Definition: Aims to minimize inventory and production costs by producing goods only as
they are needed, based on customer demand.
 Best For: Reducing waste and inventory holding costs in environments with stable
demand.
 Advantages: Minimizes waste, lowers storage costs, and improves cash flow.
 Challenges: Highly dependent on reliable suppliers and streamlined processes.

4. Master Production Schedule (MPS)

 Definition: A detailed plan that outlines what needs to be produced, in what quantity, and
when it will be produced.
 Best For: Complex manufacturing environments that produce a variety of goods.
 Advantages: Provides a long-term view of production, ensuring alignment between
production capacity and demand.
 Challenges: Requires accurate demand forecasting and flexible resource allocation.

 A gantt chart is a horizontal bar chart used in project management to visually represent a
project over time. Gantt charts typically show you the timeline and status—as well as
who’s responsible—for each task in the project.
 In project management, gantt charts are used to schedule, track, and communicate
deliverables, deadlines, dependencies, and resource assignments. They’re particularly
helpful in managing complex projects with interdependencies that a simple to-do list or
Kanban board can’t handle.
 A gantt chart allows you to simplify complex projects into an easy-to-follow plan that
includes:
 How a project breaks down into tasks
 When each task will begin and end
 How long each task will take
 Who’s assigned to each task
 How tasks relate to and depend on each other
 When important meetings, approvals, or deadlines need to happen
 How work is progressing in a project
 The full project schedule from start to finish
 Key components of a gantt chart
 Let’s break down the basic parts of a gantt chart even further so you understand how each
element functions in a project plan.
 Task list: Runs vertically down the left of the gantt chart to describe project work and
may be organized into groups and subgroups
 Timeline: Runs horizontally across the top of the gantt chart and shows months, weeks,
days, and years
 Dateline: A vertical line that highlights the current date on the gantt chart
 Bars: Horizontal markers on the right side of the gantt chart that represent tasks and
show progress, duration, and start and end dates
 Milestones: Yellow diamonds that call out major events, dates, decisions, and
deliverables
 Dependencies: Light gray lines that connect tasks that need to happen in a certain order
 Progress: Shows how far along work is and may be indicated by percent complete and/or
bar shading
 Resource assigned: Indicates the person or team responsible for completing a task

 How does a gantt chart work?

 Gantt charts may seem complicated at first. But once you learn how to read them, you’ll
be able to tell exactly where your projects are and what needs to happen to guide them to
success.
 In a gantt chart, all project activities run vertically down the y-axis of the chart, with a
timeline running horizontally across the x-axis. Each task listed down the left is
represented by a horizontal bar on the right side of the chart.
 In a gantt chart diagram, these taskbars span from start date to end date to show the
overall duration of a task.
 As work gets done, each taskbar fills up to indicate the amount of progress completed.
 If one task relies on another one to start or finish, a line will be drawn between the two
taskbars to mark a dependency.
 Since project milestones have a 0-day duration, they’re typically represented by a yellow
or gold diamond on the gantt chart.

 Resource assignments are typically listed down the left beside the task name, but may
also appear within or next to taskbars on the right side of a gantt chart.
 Here’s a sample project that uses a gantt chart diagram to lay out the project plan:
Gantt charts are widely used in production scheduling to visually represent tasks, their
durations, and dependencies. They help in planning, coordinating, and tracking the progress of
production activities. Here’s a breakdown of how Gantt charts are used in production scheduling:

1. Visual Timeline of Tasks

 What It Shows: Gantt charts display tasks or activities along a timeline, usually with
bars representing the start and end dates.
 Benefit: Provides a clear, at-a-glance understanding of what tasks are happening when,
making it easier to monitor production schedules and deadlines.

2. Task Dependencies

 What It Shows: Gantt charts can show dependencies between tasks (e.g., Task B cannot
start until Task A is complete).
 Benefit: Ensures that tasks are sequenced correctly, preventing bottlenecks by managing
interdependencies and making sure critical tasks are completed first.

3. Resource Allocation

 What It Shows: The chart can be used to show how resources (machinery, labor, etc.)
are allocated to different tasks over time.
 Benefit: Helps ensure that no resource is over or under-utilized, balancing workloads and
avoiding over-scheduling or downtime.

4. Progress Tracking

 What It Shows: As tasks are completed, progress can be tracked directly on the Gantt
chart by shading the portion of each task's bar.
  Benefit: Provides real-time insights into how closely the actual production process aligns
with the schedule, allowing for adjustments if delays occur.

5. Critical Path Identification

 What It Shows: The Gantt chart can highlight the critical path, which is the sequence of
tasks that directly impact the project’s overall duration.
 Benefit: Identifying the critical path ensures that tasks critical to the production timeline
are prioritized to prevent delays in delivery.

6. Adjusting and Re-scheduling

 What It Shows: Gantt charts are flexible tools that allow for easy adjustments to task
durations and start/end dates.
 Benefit: In the case of unexpected delays, equipment breakdowns, or supply issues, Gantt
charts can be quickly adjusted to re-plan the schedule, reducing downtime.

7. Communication Tool

 What It Shows: Gantt charts provide a visual summary of the production schedule that
can be easily shared with teams, managers, or stakeholders.
 Benefit: Enhances communication by giving all team members a clear picture of
deadlines, tasks, and their responsibilities in the production process.

Example Use Case:

A manufacturer producing multiple products may use a Gantt chart to:

 Plan the sequencing of machine usage for each product.

 Visualize the setup time needed between product changeovers.
 Track when raw materials will be available, when production will start, and when the
final product will be ready for shipping.

Tools:

Gantt charts are typically created using project management software like:

 Microsoft Project
 Trello
 Smartsheet
 Asana

By offering a detailed yet flexible approach to scheduling, Gantt charts help manufacturers stay
on track, manage resources efficiently, and meet production deadlines.
Production scheduling is a critical component in manufacturing and operations management, but
several challenges can arise that disrupt the flow of production and impact efficiency. Below are
common production scheduling problems and potential solutions:

1. Unpredictable Demand

 Problem: Inaccurate demand forecasting can lead to either excess inventory

(overproduction) or stockouts (underproduction). Fluctuations in customer demand make
it difficult to plan production schedules efficiently.
 Solution:
o Demand Forecasting Tools: Use advanced forecasting software and historical
data to better predict demand trends.
o Just-in-Time (JIT) Production: Produce goods based on actual demand rather
than forecasts to reduce waste.

2. Machine Breakdowns and Maintenance

 Problem: Unexpected machine failures or required maintenance can cause production

delays and bottlenecks.
 Solution:
o Preventive Maintenance: Schedule regular maintenance to avoid unplanned
breakdowns.
o Backup Equipment: Have spare machinery or outsourcing options available to
minimize downtime.

3. Bottlenecks in Production

 Problem: A single stage in the production process may limit overall throughput, leading
to inefficiencies and delays in the entire system.
 Solution:
o Identify and Address Bottlenecks: Use tools like the Theory of Constraints
(TOC) to focus on optimizing the slowest part of the process.
o Balancing Workloads: Redistribute tasks and resources to minimize the impact
of bottlenecks.

4. Resource Constraints

 Problem: Limited availability of raw materials, labor, or machinery can cause delays or
force the rescheduling of production tasks.
 Solution:
o Resource Planning: Implement a robust resource planning system to track
inventory and resource availability.
o Cross-Training Employees: Ensure workers can handle multiple tasks or roles to
reduce dependency on specific employees.

5. Inefficient Sequencing of Jobs

  Problem: Poor job sequencing can lead to inefficient use of resources, long setup times,
and production delays.

Product sequencing refers to the process of determining the most efficient order in which
products or tasks should be produced or processed in a manufacturing or production
environment. It involves arranging production activities in a sequence that optimizes resources,
minimizes delays, and ensures timely delivery of goods.

Key Aspects of Product Sequencing:

1. Task Order: The specific order in which different products or processes should be
handled, often based on priority rules or resource availability.
2. Dependency Management: Ensuring that certain tasks are completed before others can
start (e.g., assembling parts before packaging).
3. Minimizing Setup Time: Grouping similar products or tasks together to reduce the time
needed for machine setups, changeovers, or adjustments.
4. Efficiency Optimization: Sequencing is often designed to balance workloads, minimize
idle time, and avoid bottlenecks in production.

Example:

In a factory producing multiple products (e.g., smartphones and tablets), the production
sequencing might prioritize high-demand products first or group tasks that use the same
machines together to minimize machine reconfiguration time.

Common Sequencing Rules:

 First-In, First-Out (FIFO): Tasks are completed in the order they arrive.
 Shortest Processing Time (SPT): Jobs with the shortest processing time are prioritized
to improve throughput.
 Critical Ratio (CR): Jobs are ranked based on the ratio of the time remaining until their
due date to their processing time, prioritizing tasks closer to deadlines.

Efficient product sequencing helps optimize production, minimize delays, and ensure timely
fulfillment of customer orders.

Dispatching progress is crucial for efficient logistics and delivery systems. Here are some
effective techniques to enhance dispatching progress:

1. Real-Time Tracking:
o Implement GPS tracking systems to monitor vehicle locations and optimize
routes.
o Use mobile apps to provide updates to both dispatchers and customers.
2. Route Optimization:
o Utilize route optimization software to find the most efficient paths for delivery.
o Consider factors like traffic patterns, road conditions, and delivery windows.
 3. Automated Dispatch Systems:
o Use software that automates the dispatch process, reducing manual errors and
speeding up decision-making.
o Implement features like automatic load assignment based on capacity and
distance.
4. Data Analysis:
o Analyze historical dispatch data to identify trends and improve future routing and
scheduling.
o Use predictive analytics to anticipate delays and adjust dispatching strategies
accordingly.
5. Effective Communication:
o Ensure open lines of communication between dispatchers, drivers, and customers.
o Use messaging apps or platforms to quickly relay information about changes or
delays.
6. Performance Metrics:
o Establish key performance indicators (KPIs) to assess dispatch efficiency, such as
delivery times, fuel costs, and driver performance.
o Regularly review these metrics to identify areas for improvement.
7. Training and Development:
o Provide ongoing training for dispatch staff to improve their skills and knowledge.
o Encourage drivers to familiarize themselves with the dispatch system and routing
software.
8. Use of Technology:
o Implement Electronic Logging Devices (ELDs) for monitoring driving hours and
improving compliance.
o Consider adopting telematics systems for real-time vehicle diagnostics and
performance monitoring.
9. Flexible Dispatching:
o Allow for adjustments in real-time based on unforeseen circumstances, such as
traffic or weather changes.
o Maintain a backup plan for emergencies to ensure continuity.
10. Customer Feedback:
o Collect and analyze customer feedback regarding delivery experiences.
o Use this information to improve service quality and dispatch processes.

Reducing lead time is crucial for improving efficiency and customer satisfaction in supply chain
management. Here are some effective techniques to optimize lead time:

1. Demand Forecasting:
o Use statistical models and historical data to predict demand accurately.
o Implement software solutions that analyze trends and adjust forecasts in real-time.
2. Inventory Management:
o Adopt just-in-time (JIT) inventory practices to reduce holding costs and minimize
lead times.
o Implement inventory optimization tools to maintain optimal stock levels and
prevent stockouts.
3. Supplier Relationships:
o Build strong relationships with suppliers to ensure reliability and quicker response
times.
o Negotiate favorable terms for lead times and prioritize suppliers that can meet
tighter schedules.
4. Process Mapping:
o Analyze and document each step in the production or fulfillment process to
identify bottlenecks.
o Streamline processes by eliminating unnecessary steps or automating repetitive
tasks.
5. Lean Manufacturing:
o Implement lean principles to eliminate waste and improve efficiency in
production processes.
o Use techniques like value stream mapping to visualize and optimize workflows.
6. Technology Integration:
o Use ERP (Enterprise Resource Planning) systems to integrate various business
processes and enhance visibility.
o Leverage automation tools for order processing and fulfillment to reduce manual
errors and speed up operations.
7. Cross-Functional Collaboration:
o Encourage collaboration between departments (e.g., sales, production, and
logistics) to align efforts and share information.
o Hold regular meetings to discuss lead time goals and progress.
8. Flexible Production Scheduling:
o Implement production scheduling software that allows for flexibility and rapid
adjustments based on changing demand.
o Consider adopting agile manufacturing techniques to respond quickly to market
changes.
9. Continuous Improvement:
o Establish a culture of continuous improvement where employees are encouraged
to identify and propose lead time reduction initiatives.
o Conduct regular reviews of lead time performance and implement corrective
actions as necessary.
10. Customer Communication:
o Keep customers informed about order status and expected delivery dates to
manage expectations.
o Use feedback from customers to improve processes and reduce lead times.

1. Continuous Improvement:
o Establish a culture of continuous improvement where employees are encouraged
to identify and propose lead time reduction initiatives.
o Conduct regular reviews of lead time performance and implement corrective
actions as necessary.
2. Customer Communication:
o Keep customers informed about order status and expected delivery dates to
manage expectations.
 o Use feedback from customers to improve processes and reduce lead times.

Project management involves planning, executing, and closing projects effectively and
efficiently. Here are some key concepts in project management:

1. Project Lifecycle:
o The project lifecycle consists of phases that a project goes through from initiation
to closure:
 Initiation: Define the project, its objectives, and feasibility.
 Planning: Develop a detailed project plan, including scope, schedule, and
resources.
 Execution: Carry out the project plan and manage resources.
 Monitoring and Controlling: Track progress, make adjustments, and
ensure the project stays on course.
 Closure: Finalize all activities, obtain acceptance, and close the project.
2. Project Scope:
o The project scope outlines what is included and excluded from the project.
o Effective scope management involves defining, controlling, and validating the
scope to prevent scope creep (uncontrolled changes).
3. Project Schedule:
o A project schedule is a timeline that outlines when tasks and activities will be
completed.
o Techniques for developing schedules include Gantt charts, Critical Path Method
(CPM), and Program Evaluation Review Technique (PERT).
4. Resource Management:
o Resource management involves planning, allocating, and managing project
resources (human, financial, and physical).
o Ensuring the right resources are available at the right time is critical for project
success.
5. Risk Management:
o Risk management identifies, assesses, and mitigates potential risks that could
impact the project.
o Techniques include risk assessments, risk registers, and developing contingency
plans.
6. Stakeholder Management:
o Stakeholders are individuals or groups affected by the project. Identifying and
engaging stakeholders is crucial.
o Effective communication and stakeholder management help ensure support and
buy-in for the project.
7. Communication Management:
o Communication is vital for project success. Establishing a communication plan
helps ensure information flows effectively among stakeholders.
o Regular updates and reports keep everyone informed about project progress and
issues.
8. Quality Management:
 o Quality management ensures that project deliverables meet the required standards
and stakeholder expectations.
o Techniques include quality planning, quality assurance, and quality control.
9. Agile Methodology:
o Agile is a flexible project management approach that emphasizes iterative
development and responsiveness to change.
o Common frameworks include Scrum and Kanban, focusing on collaboration,
customer feedback, and continuous improvement.
10. Project Documentation:
o Maintaining proper documentation is essential for tracking project progress,
decisions, and changes.
o Common documents include the project charter, project plan, status reports, and
lessons learned.
11. Earned Value Management (EVM):
o EVM is a project performance measurement technique that integrates scope,
schedule, and cost to assess project performance.
o Key metrics include Planned Value (PV), Earned Value (EV), and Actual Cost
(AC).
12. Change Management:
o Change management processes handle modifications to the project scope,
schedule, or resources.
o A formal change control process helps assess the impact of changes and secure
necessary approvals.

By understanding and applying these project management concepts, project managers can
improve the chances of successful project delivery, meeting time, budget, and quality
requirements.