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1. Tractor Industry

1.1 Global Tractor Industry

The global spotlight on Tractor manufacture certainly in terms of unit volume seems to be

swinging away from the USA, UK and Western and Eastern Europe towards India and China

where growth in the number of producers and the total volume in recent years have been

impressive.

Country Volume %

India 2,40,000 31

USA 1,90,000 25

China 95,000 12

Sri Lanka 5,000 2

Australia 10,000 1

Europe 1,75,000 23

Pakistan 45,000 6

Table 1. Production Volume around world

1.2 Indian Tractor Industry

Escort Pvt Ltd,AMG Page 1


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The tractor industry, in India, has completed, more than, 25 years During this period, there

has been a large growth, in it's production capacities and capabilities A wide choice of

competitive models, ranging from 12 to 75 HP, is now available, to the farmer. The tractor

industry, represented by the successful units, has now attained a maturity, as judged by it's,

capacity and capability, to expand production, as and when, needed, to meet any sudden

surge in demand The successful units have, also, developed, expertise and capability, for

effecting horizontal transfer of technology, to other developing countries.

Tractor density

India 11 per 1000 hectares

US 27 per 1000 hectares

Global average 19 per 1000 hectaresAverage HP per hectare

India 0.4

Developing Countries 0.9

Developed Countries 2.6

World 1.4

Table 2. Tractor Density and Average HP per hectare

Agriculture still accounts for 25% of countrys GDP and engages 60% of the population in

employment. Average CAGR of tractor industry has been 8% over the last 3 decades. Tractor

population is concentrated in just 10% of our villages. Even today 70% of villages do not

have a tractor. There is large untapped potential it is a growth industry for at least next 15

years.

Players in Indian tractor industry are Balwan Tractors, Force Motors Ltd, Captain Tractors

Pvt. Ltd, Crossword Agro Industries, Eicher, Escorts (Escort, Powertrac and Farmtrac), Ford

Tractors, HMT Tractors, Indo Farm, John Deere, Mahindra Gujarat Tractor Limited,Mahindra & Mahindra, MARS Farm Equipments Ltd, New Holland, Preet Tractors, Punjab

Tractors Ltd (Swaraj Tractors),Same Deutz-Fahr Ltd, Sonalika (International Tractors Ltd.),

Standard, TAFE, VST Tillers.

Year Number

1999 2000 2,57,998

2002 03 1,71,657

2003 04 1,90,348

2004 05 2,47,531

2005 06 2,92,9082006 07 3,12,450



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2007 08 3,30,758

Table 3. Size of Indian Tractor Industry

2. Company Profile

The genesis of Escorts goes back to 1944 when two brothers, Mr. H. P. Nanda and Mr. Yudi

Nanda, launched a small agency house, Escorts Agents Ltd. in Lahore. Over the years,

Escorts has surged ahead and evolved into one of India's largest conglomerates. In this

journey of six decades, Escorts has had the privilege of being associated with some of the


UP

16%

MP

9%

Rajasthan

10%

Punjab

5%

AP

8%

Bihar

4%

Haryana

6%

Gujarat

9%

Karnataka

9%

Maharashtra

7%

Tamil Nadu

7%

Orissa

3%

Others

7%

Fig 2. Tractor Sales in India by States


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world leaders in the engineering manufacturing space like Minneapolis Moline, Massey

Ferguson, Goetze, Mahle, URSUS, CEKOP, Ford Motor Company, J C Bamford Excavators,

Yamaha, Claas, Carraro, Lucky Goldstar, First Pacific Company, Hughes Communications,

Jeumont Schneider, Dynapac . These valued relationships be it technological or marketing,

are highly cherished experiences treasures, which have helped escorts inculcate best in class

manufacturing practices and to emerge as a technologically independent world class

engineering organization.

1944 - Launch of Escorts (Agents) Ltd.

1948 - Pioneered farm mechanization in the country by launching Escorts Agricultural

Machines Limited, with a franchise from the U.S. based Minneapolis Moline, for marketing

tractors, implements, engines & other farm equipment. Launch of Escorts (Agriculture and

Machines) Ltd.

1951 - Escorts established Indias first private Institute of Farm Mechanisation at Delhi.

1953 -Escorts (Agents) Ltd. and Escorts (Agriculture and Machines) Ltd. merged to form

Escorts Agents Pvt Ltd.

1958 - Started importing Massey Ferguson tractors from Yugoslavia for marketing the same

in India.

1960- Set up of Escorts Limited.

1961- Setting up of manufacturing base at Faridabad for manufacture of tractors in

collaboration with URSUS of Poland and 50% indigenous components. Launch of Escort

brand of tractors.

1969 - Escorts Tractors Limited was born. A technical and financial joint venture with the

global giant Ford Motor Company, USA, to manufacture Ford tractors in India. The years

ahead saw Escorts grow as the largest tractor manufacturer in India.

1971 - 1st February, the first tractor FORD 3000 rolled out of the factory.

1974 - Crossing national boundaries, Escorts exports for the first time. After winning a global

tender, 400 tractors were exported to Afghanistan, which was perhaps the world's largest everairlift of tractors.



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1976 - FORD 3600, an advancement in Farm Mechanisation launched. Trial production of in-

plant manufacturing of engine parts (Block & Head).

1977 - Escorts enters the world of self-developed technology by setting up its first

independent R&D Center. Escorts Scientific Research Centre marked its beginning at

Faridabad by developing its own Engines for E-27 and E-37. Due to constant technology

absorption, indigenisation level touched 72% for FORD tractors. 2nd plant at Bangalore for

manufacturing piston assemblies was set up.

1983 - Escorts Tractors Limited (ETL) established a state-of-the-art research and

development centre to spearhead newer breakthroughs in Farm Mechanisation and to

maintain industry leadership. Line concept introduced for engine block machining. 11,000

ton floating dry-dock Escorts I launched.

1985 - Escorts Tractors Limited (ETL) offered its first Bonus Issue (1:1).

1990-91 - First Public Issue in February 1991, over-subscribed four times. Shares listed on

Delhi and Bombay Stock Exchanges.

1993 - FORD 3620 tractor launched.

1996 - Launch of FARMTRAC Tractor.

1998 - POWERTRAC series of tractors launched.

2004 - TS16949 certification for Agri Machinery Group.

2.1 Agri Machinery Business:

Domestic Tractor Industry during the period October-September, 2008 grew by 3%. The

Company continued to maintain its market share at 14%. Exports Tractor Industry grew by

12% mainly due to the outsourcing of tractors by the MNCs who have set up its base in India

for outsourcing. Tracking the depreciating dollar value and recession in US, your Company

made a conscious and proactive decision to deliberately pull back its exports in the US. This



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resulted in a sharp decline in the export of your Company from 5468 tractors to 1401tractors.

The surge in the capital infl ow contributed to a sharp appreciation of Indian Rupee

particularly against the US Dollar resulting in very thin margins and lower demand due to

recession in the US/European markets.

2.2 Escorts Agri Machinery Group Supply Chain

The following diagram gives a high level Supply Chain Structure of Escorts Ltd.

PL2

+

PL3

CHD

SUPPLIER1

SUPPLIER2

SUPPLIER3

SUPPLIER4

DEALER6

DEALER4

DEALER3

DEPOT1 +STOCKIST1

DEPOT2 +STOCKIST2

DEPOT3 +

STOCKIST3

DEALER1

DISTRIBUTOR

SUBCONTRACTOR

DEALER2

PL1

DEALER5

Fig 4. Supply Chain Structure of Escorts Ltd

2.3 Products

The Agri Machinery Group (AMG) of Escorts has three tractor brands, which are on distinct

and separate technology platforms.

1. Farmtrac: Single reduction and epicyclic reduction transmissions from 34 to 75 HP. This

brand is also exported.



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2. Powertrac: Utility tractors, offering straight-axle and hub-reduction tractors from 34 to

55 HP.

3. Escort: Economy tractors having hub-reduction transmission and twin-cylinder engines

from 27 to 35 HP

Each of the Brands has about 5-6 models and total of about 200 variants. The variants for one

model essentially have similar key features but are differentiated in terms of peripheral

features (PTO, Clutch Type, Steering type etc), Aesthetics and country specifications

In addition Escorts also manufactures the engines for gensets & spares for the tractors.

2.4 Sales & Marketing

Sales at Escorts is divided into 3 entities viz: Domestic Business, Exports Business & New

Business Lines (NBL)

2.4.1 Domestic Business

As seen from the Supply Chain diagram, the Escorts tractor business operates in a Build To

Stock mode. The tractor stock is held in the channel by Dealers & Depots. All Depots are

linked to the stockists who are mainly providing financing for holding the tractor inventory.

Escorts still controls the release of the stock held by the stockist to dealers or distributors.

The tractors are distributed to the dealers based on their requirements either directly or

through distributors. Only a specified set of dealers can obtain stock both from the Depots &

Distributors. Other dealers have to necessarily source tractors from the Escorts Depots. All

over India Escorts has about 1000 dealers.

Out of the 1000 dealers some dealers are big and can hold substantial stock themselves but

many dealers are small and do not have the financial strength to hold stock levels required to

service customers effectively. For these dealers a distributor is set up so that he can hold the

stock for the dealers and supply as and when needed by the dealer to service a customer

order.

Escorts Sales infrastructure consists of 33 Area Offices which support the sales & logistics

from the depot to dealers & distributors. However the billing happens only at the head office.

The logistics team sits at the head office and controls the distribution of the tractors from the

Plant to the Depots.



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Fig 5. Distribution Terminologies

2.4.2 Exports Business

Escorts export business works through 4 types of demand channels viz: Distributors for each

country, Institutional Sales for one off government orders, Direct Buyer who can in future get

transformed to a distributor & Escorts Subsidiary in Poland. For all these demand channels

except for the EL subsidiary the production can be done only after receiving either advance

payment or LC for the sale.

The main differences between domestic & exports tractors are in terms of Power Steering,

Dual Clutches, Bigger Tires and Rotary Pumps

2.4.3 New Business Lines

The AMG New Business Lines currently focuses on the sales of engines for many

applications. But 99% of the business is for the engines used in Gensets. Other sale comes for

the engines used in applications like pump-sets & concrete mixers. There are plans to

increase the sale of engines for other industrial applications. The main difference in the

engines used in tractors and NBL are that these are fixed RPM engines hence components

like flywheel, flywheel housing, radiators and fuel injection pumps are different.

The capacity for NBL engines will be ramped up to 1000 per month. The target sale of the

engines including the gensets is 8700 for the coming year. Currently, there are about 20

running accounts of dealers / OEMs and 2 corporate accounts (Lumbardini and FG Wilson)

for the sale of genset engines.



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3. Manufacturing Facilities

The manufacturing operations for all Brands of tractors are spread across four plants viz:

Plant1, Plant2, Plant3 & CHD. The operations for the Farmtrac & Powertrac brands have

some differences and each is described below.

3.1 Farmtrac

Fig 6. Farmtrac Component Flowchart

All of the Farmtrac manufacturing operations happen at Plant2

This is divided into 4 Production Units (PU) viz: Engine PU, Rear Axle PU, Transmissions

PU and Tractor Assembly PU.

3.1.1 Engine PU:



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The Engine PU comprises of Engine assembly, Cylinder Block Machining Line, Cylinder

head Machining Line & Connecting Rod Machining Line. The Engine PU assembles engines

for use in the Tractor PU. Major bought out parts (BOPs) include Fuel Injection Pump,

Camshaft, Clutch Assembly and Intake Manifold. These BOPs generally vary depending on

the engine model.

For Cylinder Block, 4 types are machined on the same line and for Cylinder Heads, 2 types

are machined on the same line. One type of cylinder block is machined in Plant 1. Only one

type of Connecting Rod is machined in this PU.

The crankshaft is one of the critical components for engine assembly. There are three types of

crankshafts used out of which one is machined in CHD while for others subcontracting is

used to machine the crankshaft.

Engine Assembly is straightforward and no issues until the material for assembly are

available.

Operation Operation

Lead Time

Setup

Time

Cool-down

Time

Batch

Sizes

Thru-

Put

Engine

Assembly

2.5 - - - 84

Engine Testing 1.15 - - - 84 77



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Engine Dress-Up 0.5 - - - 84

Cylinder Block

Machining

5.5 6 - 300-

350

52 41

Cylinder Head

Machining

4.5 5.5 - 200-

250

49 45

Connecting Rod

Machining

2.5 - - - 60 58

Crankshaft

Table 4. Operation Chart of Engine PU

3.1.2 Rear Axle PU:

The Rear Axle PU comprises of Rear Axle assembly, Center Housing Line, Trumpet Housing

Line & Rear Axle Shaft Line. The Rear Axle PU assembles rear axle assembly for use in the

Tractor PU. Major bought out parts (BOPs) include Brake, Crown Wheel & Pinion. There is

little variation in the factory made parts (FMPs) across models.

2 Lines are available for LH & RH Trumpet Housing. The 3rd line is used for 65 EPI tractors.

Center Housing has no constraints. The Spline Milling Machine is a big bottleneck and need

to run for 3 shifts.

Assembly of transmission has no constraints except timely availability of Material.

Operation Operation

Lead Time

Setup

Time

Cool-down

Time

Batch

Sizes

Thru-Put

Rear Axle

assembly

- - - 84

Center Housing

Line

6 - - - 62



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Trumpet Housing

Line

5 - - - 62

Rear Axle Shaft

Line

6 - - - 56

Table 5. Operation Chart of Rear Axle PU

3.1.3 Transmissions PU:

The TransmissionsPU comprises of Transmissionsassembly, Case Transmission Line, Small

Castings Line, Spindle Line, 4 Gear & Shaft Machining Lines & Heat Treatment. The

TransmissionsPU assembles the transmissionsfor use in the Tractor PU. Major bought out

parts (BOPs) include Special Purpose Gears, Hubs and Cover & Lever Assembly.

The Case Transmission and the Spindle lines are largely dedicated lines with same

components running on the machines most of the time.

The gears and shafts lines make more than 40 types of components. There are 4 Lines for

gear manufacture & 1 line for Spindles. These lines are characterized by batch production

since the set-up times are sizeable. Most Gears undergo heat treatment which is a batch

process and has sub activities of heating, cool down & shot blasting. There are 2 types of

furnaces 2 of each type. The production capacity is set in terms of number of tractors and

hence the 65 EPI models which have higher number of gears constrain the production.

Operation Operation

Lead Time

Setup

Time

Cool-down

Time

Batch

Sizes

Thru-Put

Transmissions

Assembly

- - - 84

5 65 EPI

Case Transmission

Line

6 - - - 56

Small Castings

Line

6 - - - 90

Spindle Line Varying - - - 57 Tractors



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Gear & Shaft

Machining Lines

Varying 2 - 100 -

500

57 Tractors

Heat Treatment 10 - 2 80 100 80 100

Table 6. Operation Chart of Transmission PU

3.1.4 Tractor PU:

The Tractor assembly line has 4 major parts viz: Buckle-Up, Before Paint, Paint & After

Paint. Buckle-Up is the Backend Assembly. Before Paint is assembly of Engines, Backend &

Other BOP sheet metals. Major BOPs are Crankshafts, Radiators, Tyres, Fender and Sheet

Metals.The Tractor PU assembles the tractors after which the tractors are tested, reworked if

necessary and dispatched.There are some constraints that higher end models like 70 DT & 80

DT can be max 10 per shift.

Table 7. Operation Chart of Tractor PU


Operation Operation

Lead Time

Setup

Time

Cool-down

Time

Batch

Sizes

Thru-Put

On Line 10.5 - - - 80

Off Line 2 - - - 80


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3.2 Powertrac

Fig 7. Powertrac Component Flowchart

The manufacture of the Powertrac brand is distributed across three plants viz: Plant1, Plant3and Crankshafts & Hydraulics division (CHD) and multiple PUs in each plant viz: Plant1

Castings PU, Plant1 Transmission Components PU, CHD Crankshafts PU, CHD

Hydraulics PU, Plant3 Backend PU, Plant3 Engine PU and Plant3 Tractor Assembly

PU

3.2.1 Plant3 Engine Assembly:

This PU controls the assemblies of the engines. The major FMP in this PU is the cylinder

block which comes from Plant 1 and the major BOPs for this PU include Cylinder heads,

Connecting Rods, Fuel Injection Pump, Camshaft, Clutch Assembly and Intake Manifold.

Operation Operation Setup Cool- Batch Thru-



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Lead Time Time down

Time

Sizes Put

Engine

Assembly

2.5 - - - 84

Engine Testing 1.15 - - - 84 77

Table 8. Operation Chart of Plant3- Engine Assembly

3.2.2 Plant3 Backend Assembly:

This PU controls the assemblies of the backend which includes the assembly of transmission,

hydraulics & rear axle. The major FMP for this PU are the Gears & Shafts, Center Housing,

Case Transmission and Hydraulics. The major BOPs in the PU are Trumpet Housing, Rear

Axle Shafts, Special Purpose Gears, Hubs and Cover & Lever assembly

Operation Operation

Lead Time

Setup

Time

Cool-

down

Time

Batch

Sizes

Thru-

Put

Backend

Assembly

- - - 94

Table 9. Operation Chart of Plant3- Backend Assembly

3.2.3 Plant3 Tractor Assembly:

The Tractor assembly line has 3 major parts viz: Before Paint, Paint & after Paint. Before

Paint is assembly of Engines, Backend & Other BOP parts. Major BOPs are Radiators, Tyres,

Fender and Sheet Metals.

The Tractor PU assembles the tractors after which the tractors are tested, reworked if

necessary and dispatched. .

Operation Operation

Lead Time

Setup

Time

Cool-

down

Time

Batch

Sizes

Thru-

Put

On Line 6.5 - - - 90

Off Line 4 - - - 90



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Table 10. Operation Chart of Plant3- Tractor Assembly

3.2.4 Plant1 - Castings PU:

This comprises of Machining of engine blocks, differential housing and gearbox housing.After machining, these components are sent to Plant 3 for assembly.

There are 2 machining lines for engine blocks. One line is dedicated to production of

differential housing. There are two parallel lines with machines on both sides of the conveyer

line for production of the gearbox housing.

3.2.5 Plant1 Transmission Components PU:

There are 12 production lines at Plant1. The heat treatment furnace is being treated as a

separate line. These production lines have been assigned to 34 groups of items being

manufactured.

This PU has High lead times the manufacturing lead time under the existing working

arrangement is in the range of 30 hours to 50 hours, High batch quantities batch sizes of

300 and 500 are being used at various resources. Many resources are shared due to capacity

constraints and have Variable run times even on same resource the run times would vary

depending on the item that is being processed on that resource.

The production lines have been so configured so that each line is dedicated for a given

category of parts. Sharing of resources, though technically possible, is however restricted.

3.2.6 CHD Crankshafts:

This unit is engaged in the production of crankshafts which are supplied to the engine PU.

Different types are required for 2, 3 & 4 cylinder engines.

There is a single manufacturing line at this unit for production of crankshafts

The crankshafts are transported regularly to Plant3 in multiples of 66 pieces. Shipments can

be made daily depending on the plant3 requirements as the two units are locatedapproximately 10 kms from each other.



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4. Planning And Scheduling

Planning and Scheduling are one of the most underutilized areas of opportunity for

manufacturing competitiveness. Planners make decisions which have a major impact on the

companys performance on a day-to-day basis. They make these decisions without proper

tools to provide them with correct information on the shop floor, or to provide visibility of

the effect of their decisions on factory performance.

Factory Planner, is a set of tools for Master Production Planning, Master Production

Scheduling, Material Requirements Planning, Capacity Requirements Planning, and Dynamic

Finite Scheduling. These tools are made available through a graphical user interface (GUI),

consisting of pull down menus which access each function of Factory Planner. Factory

Planner enables rapid what-if analysis and not only does it identify problems but solves them

as well. It also allows you to interactively solve problems. An important aspect of Factory

Planner is the efficiency of its algorithms for heuristic optimizations. It acts as a cementing

agent for formalizing synchronous flow production.

Factory Planner simultaneously considers material and capacity constraints, when developing

the finite capacity master production schedule, by using a technique called Constraint

Anchored Optimization (CAO), a technology which focuses on constraint anchored

optimization. A constraint is anything which limits the performance of a system. A constraint

can be a resource such as, a work center with limited capacity as well as material such as, a

part which prevents the completion of an order. Constraints are dynamic and interdependent.

They may change based on the demand pattern or product mix. CAO optimizes overall

performance of the system by considering the trade-offs among conflicting objectives.

Factory Planner is an intelligent planning and scheduling system with the

following properties:

Decisions are based on the latest shop floor information.

Incremental adjustments may be made without complete rescheduling.

High quality decisions are made in limited time using domain knowledge.

Domain knowledge is used to focus the search in areas with a high possibility of

yielding good solutions. Important decisions are separated from unimportant decisions

(few scheduling systems have this capability).



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Decisions are made at the appropriate temporal level. Planning is performed for a

longer horizon and scheduling for a shorter horizon. If detailed scheduling decisions

are made too early, fluctuations or dynamics of the shop floor will render those

decisions invalid. The scheduling horizon depends on the benefits of predictivescheduling and the stability of the environment.

Hard constraints are not violated. Soft constraints are relaxed in a manner which best

achieves system goals.

The system and the planning / scheduling procedures are flexible and accommodate

new goals, constraints and operating conditions.

Factory Planner works to: Increase profitability by:

o reducing manufacturing lead time

o increasing on-time performance

o reducing work in process

Increase the service level offered to customers by having the capability to react

quickly to changes.

Synchronize production plans and schedules with the real-time changes in customer

demands, resource status and material availability.

Manage capacity and inventory buffers through its planning and scheduling

algorithms.

Core Functionality

Factory Planner has at its core, several basic functions, they are:

Material Planning

Inventory Allocation

Infinite Capacity Planning

Procurement Planning

Finite Capacity Planning Using CAO

Dynamic Finite Capacity Scheduling



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Dynamic Due Date Quoting

5. Supply Chain Management

5.1 Supply Chain :

5he supply chain encompasses all activities associated with the flow and transformation of

goods from the raw materials stage (extraction), through to end users, as well as the

associated information flows. Material and information flows both up and down the supply

chain. The supply chain includes new product development, systems management, operations

and assembly, purchasing, production scheduling, order processing, inventory management,

transportation, warehousing, and customer service. Supply chains are essentially a series of

linked suppliers and customers; every customer is in turn a supplier to the next downstream

organization until a finished product reaches the ultimate end user.

5.2 What is SCM ?

5.2.1 Supply Chain Management (SCM):

SCM is the integration of all the activities in the supply chain to achieve a sustainablecompetitive advantage. Supply Chain can be broadly classified of comprising of three

networks Supplier, Firm and Distribution. The supplier network consists of all

organizations that provide inputs, either directly or indirectly, to the focal firm (i.e., the

purchaser). Focal firms network is involved in the conversion of input material to the output

material. The distributive network consists of all downstream organizations from the focal

firm that ensure that the right quantity of goods is delivered to the appropriate customer

location in a timely manner.

5.2.2 Elements of Supply Chain

Following are the key elements in Supply Chain Management:

Customers

Producers (includes Retailer, Distributor, Manufacturer)

Suppliers

Customers, Producers and Suppliers can be interconnected in the Supply chain as

follows:



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Fig 8. Supply chain Elements

5.2.3 Interrelationship of the elements

A number of companies can be linked in the supply chain network.

A supplier to one manufacturing facility can be a customer to another manufacturing

facility and so on.. hence a number of supplier / customer relationships exist in the supply

chain network.

A number of intermediaries (distributors, wholesalers, retailers etc.,) form part of the

supply chain network.

In defining the supply chain network and the integrations between the elements, the

following decisions must be made

Identifying the key supply chain elements in the network to link the processes.

Identifying the processes that are to be linked with the key elements.

Identifying the level of integration and management control to be applied for each

of the processes.

5.3 Manufacturing Resource Planning (MRP II)

5.3.1 Objectives

The base block of any company is the strategic business plan. The strategic business plan

incorporates the plans of marketing, finance, and production. Marketing must agree that its

plans are realistic and achievable. Finance must agree that the marketing plan is financially

viable, and production must agree that it can meet the desired demand. The manufacturing

planning and control system is a master game plan for all functions of the company. This

fully integrated planning and control system is called manufacturing resource planning-

II orMRP-II. II to differentiate it from MRP i.e. Materials requirement planning. TheMRP-II activities in the below diagram can be roughly broken up in to three parts.



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The front end : These activities consist of production planning and Master production

schedule. These are basically the plans on which your whole system will be based.

The engine : These consist of Materials requirement planning (MRP), Detailed capacity

planning (CRP), and its result detailed material and capacity plans.

The Back End : It consists of the shop floor control system and the vendor plans. This is

where the action takes place, and all the detailed planned is brought into fruition.Monitoring

is very important and any deviation has to report up to keep priorities current.



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Fig 9. MRP II Flowchart



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5.3.2 Principles and Characteristics

Integrated Planning Structure

Fully integrated: The MRP-II system is intended to be a fully integrated system that works

from top down and has feedback from bottom up. Taken up with simulations it is a top

management-planning tool. MRP-II requires all functions to interact through this system, any

change in plan in any of the functions requires validation through MRP-II.

Cross-functional Integration

Coordinate between functions: MRP-II is fully integrated and cross functional in nature.

MRP-II provides coordination between marketing and production. All the functions viz.

Marketing, Finance and Production agree on a workable plan, which is the production plan.

Marketing and production must work together on a daily or weekly basis to adjust the plan as

changes occur. Generally this kind of changes is made through MPS, however care must be

taken to respect the time fences when any changes are made to meet the customer demand.

The nature of changes could be from changing the batch size to order cancellation or delivery

dates.

Closed Loop Feedback

Feed back loop: As seen from the diagram MRP-II provides feedback from within its

various parts, making it closed loop. At every stage resource availability, through modules

like, rough cut capacity planning (RCCP), Capacity resource planning (CRP) is checked. Any

deficit or inability to make the priority true calls for a change in plan or some alternate means

to meet the demand.

What if Simulation

Simulations: Another ability of MRP-II system is a what-if analysis. This tool can be used

early in the planning stage to find out what resources are required beforehand. Forewarned

being forearmed. This can be done by simulating the desired conditions and getting to know

the effect of pre-supposed conditions down the line on say a critical resource like material, or

a work center or for that matter on capacity.



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6. Project Scope

The scope of Factory Planner at Escorts AMG is as follows

Synchronized Production & Procurement Planning

Planning to respect Production & Procurement Constraints

FP Planning Cycle Time Reduction

Simulation / Re-Planning Capability

The factory planning processes will help in achieving the following objectives of the

organization

Improvement of overall factory performance so that delivery reliability and customer

service level is improved

Improvement in procurement planning processes

Improvement in Finished goods Inventory turns

Reduction of work in process inventory levels

Improve Asset Utilization

Reduce the planning cycle time

FPs deployment is designed to enhance the overall production and procurement planning

processes to ensure increased reliability of procurement schedules and have better delivery

commitments to the sales team once the field inventory levels are under control

6.1 Factory Planner Terminologies

6.1.1 Planning Horizon

The planning horizon represents the interval of time over which plans are created for the

factory. It will be 3 months for factory planning at Escorts. The buckets will be daily in the

first month and weekly in the next two months.

6.1.2 Demand Orders Categorization

FP will be considering the following types of demands for upstream and downstream

planning



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Build-To-Stock (BTS) Demand This demand will be available from the Dispatch Plan

developed in DM. Such demand will be available at Depot-Variant-Week level. This

demand will be further split into BTS forecast demand and BTS safety stock fulfillment

demand. BTS forecast demand will be prioritized over BTS safety stock demand.

Locate-To-Order (LTO) Forecast Demand This demand will also be available from the

Dispatch Plan developed in DM. Such demand will be available at Plant-Variant-Week

level.

Build-To-Order (BTO) Forecast Demand This demand will also be available from the

Dispatch Plan developed in DM. Such demand will be available at Plant-Variant-Week

level. Such demand will be used only for procurement planning and not production

planning.

Build-To-Order (BTO) Order Demand This demand will be available from Oracle ERP.

Such demand should be available at Depot-Variant-Date level. This demand will be used for

procurement planning as well as for production planning.

In case of Exports and New Business Line (NBL), release plan from DM will be considered

and planned.



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Fig 10. Demand Incident on Factory and Depots

Demand will be differentiated in FP on the basis of variants, i.e., every variant will have to be

classified as BTO, LTO or BTS. This classification will be done on the basis of the tractor

volumes. This information will have to be maintained by the planner either in ABPP or inOracle.

Apart from this, the transportation times from Plant to various Depots will have to be

maintained in ABPP by the planner. It is recommended that such times are at least quarterly

reviewed.

6.1.3 Demand Prioritization

In order to reach the targeted customer service levels, the material planning process should

ensure that the limited supply of components, is allocated to orders such that the overall

amount of lateness is minimized throughout the factory and highest priority orders are

fulfilled first.

Hence, demands from various sources will also have to be prioritized based on the following

considerations

Region-wise Priority - There will be region-wise priorities defined by the sales team. Such

priorities will have to be respected in FP, in case of capacity and material shortages.

Demand Category Priority - Priorities will be also be defined on the basis of nature of

demand like BTO orders. By default, BTO orders will be prioritized over BTO forecasts,

LTO and BTS demand. Apart from BTO orders, rest of the demand segments like BTO

forecasts, LTO and BTS forecasts will be of similar priority unless some region-wise

priority is specified.

Safety Stock Priority - BTS demand will be split into BTS forecast demand and BTS safety

stock fulfillment demand. BTS forecast demand will be prioritized over BTS safety stock

demand.

Due-Date Priority FP internally prioritizes demand with an earlier due date over the

demand with a later due date.

Demand Prioritization will be specified in Demand_Order_Record native file as defined

above in priority.



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6.1.4 Forecast Netting

Forecast for BTO and LTO variant and actual orders received in the Oracle system will have

to be netted against each other based on Customer-Variant-Month combination. This will

have to be done so that inflated demand is not sent to FP for planning; else this could inflate

the procurements.

To understand this better, lets consider an example

In the absence of Forecast Netting, FP will be planning against the inflated demand, as shown

below

Hence, procurement would be generated for a total demand of 42 tractors, whereas the actual

demand is only for 30 tractors.

Now, if Forecast Netting is used, then FP will be planning the following demand as shown

below

The total demand input in this case, is still 30 with 12 actual orders and 18 forecasts.

Netting level will be for the complete planning horizon, variant and customer.



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6.1.5 Factory Model

Factory Planner has the capability to build factory model which is a representation of the

actual factory. Following data entities will be required to build a realistic factory model

which also takes into the production and procurement constraints.

6.1.5.1 Items

This data specifies the various parts modeled in the factory model Bought Out Parts,

Factory Manufactured Parts (FMP), Factory manufactured Assemblies (FMA), Out Side

Processing (OSP) Items and Finished Tractor variants.

There are 3 different plants of Escorts namely EP1, EP2 and EP3. The same part is used in all

the plants, and its procurement is to be handled separately for each and every plant due to

some excise benefits and other commercial issues. So, to differentiate these parts, a

combination of Part and Plant will be modeled as an individual part in FP. The following

table describes the part number defined in Oracle versus the part number considered in FP.

Apart from this, there will be 2 parts modeled for every BTO tractor variant. This will be

done by attaching F to the variant incase the demand is a BTO forecast demand, and O to

the variant in case the demand is a BTO order.

6.1.5.2 Bill of Materials (BOM)

Bills of Materials in FP provide the means of modeling the following requirements


Item Code in

Oracle

Organization

Code

Item Code in FP

D10077380 85 D10077380_85

D10035190 84 D10035190_84

D10005130 174 D10005130_174


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TRACTO

ENGINE BACKEND ASSEMBLY BO

CONROD CYLINDER BLOCBOP

Multiple level Bill of Material (BOM) Using this functionality, multiple level of BOM

can be modeled in FP. In the below example, a tractor is made of engine, backend assembly

and various other BOP. Now, an engine is made of conrod, cylinder block and other BOPs.

Fig 11. BOM structure

BOMs will be read directly from Oracle. The parent name and the component name will be

read in to FP as a combination of the parent or component name with the organization code.

Also, since the material is machined in Plant 1 and then transferred to Plant 2 or Plant 3 for

the final sub-assembly or tractor assembly, there will be cases where the bom can appear

broken in FP (not in Oracle Apps). Hence, such broken boms will be joined in ABPP by

inserting one more record to join the broken bom.

The example below will clarify the situation

A sub-assembly D10093950 is manufactured in EP1 using D10147530 and is then

transported to EP3 to be used in a sub-assembly D10104750 in EP3.

The BOM in Oracle is as follows -

Parent Code Parent Code

Organization

Component

Code

Component Organization

Code

D10104750 EP3 D10093950 EP3

D10093950 EP1 D10147530 EP1

As Item definition in FP is a combination of Item Code and its organization, following BOMs

will be created in FP



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ENGINE

CONROD CYLINDER BLOCKBOP

ENGINE

CONROD CYLINDER BBOP_1

BOM Code Parent Code Component Code

BOM_1 D10104750_EP3 D10093950_EP3

BOM_2 D10093950_EP1 D10147530_EP1

BOM_1 requires a component D10093950_EP3 and BOM_2 manufactures

D10093950_EP1. Practically both the BOMs use the same part D10093950 but for FP

there are 2 separate items namely, D10093950_EP3 and D10093950_EP1. Hence, the

BOM appears to be broken in FP since there is no link between BOM_1 and BOM_2.

To avoid such a situation, a dummy BOM will be created in FP which will link both these

BOMs. The dummy BOM in this case will have the parent item as D10093950_EP3 and the

component name as D10093950_EP1. The final BOM in FP will now be as follows

BOM Code Parent Code Component Code

BOM_1 D10104750_EP3 D10093950_EP3

BOM_3 D10093950_EP3 D10093950_EP1

BOM_2 D10093950_EP1 D10147530_EP1

BOM_1 and BOM_2 are now linked via a dummy BOM, BOM_3.

A dummy routing will also be attached to this BOM with the operation time as the

transportation time from source plant to the destination plant. Since, this will be a fixed

transportation time irrespective of the number of the items transported; this time will be

modeled as the cool down time.

Date Effectivity Using this functionality, a date effective BOM requirement can be

modeled in FP. For example, in the figure below, engine is made using conrod, cylinder

block and a BOP between 1-Jan-2009 and 1-Mar-2009. Post 1-Mar-2009 BOP will be

replaced with BOP_1 in the same BOM. Hence, any new schedules should not be generated

for part BOP after 1-Mar-2009. After 1-Mar-2009, schedules should be generated only for

part BOP_1.



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Fig 12. BOM with Date Effectivity

The data in Oracle can have multiple ECAs with different start dates and disable dates. In

such a situation, the ECA falling in the FP plan horizon will be considered and ECAs in the

past will not be considered. Thus, BOM ECA will have to be closely monitored and regularly

maintained in Oracle.

In order to have a better plan stability, it is recommended to reduce the number of BOM EC

changes on a frequent basis. BOM EC changes will have to be monitored as a separate KPI

on a regular basis and root causes will have to be identified and then reduced on an on-going

basis to avoid frequent re-scheduling of BOMs.

6.1.5.3 Routings and Operations

Routings include detailed information of manufacturing of a particular item. The information

includes such items as operations to be performed, sequence of operations, setup and run

times.

It is proposed to model routing at an aggregate level. However, the operations and hence

resources definition in Factory Planner is going to be determined by the tracking points on

the shop floor. These routings will be maintained in ABPP. The aggregate level of the items

will be arrived through the Commodity codes maintained in Oracle. Routings for these

commodity codes will be maintained in ABPP.

The following data will have to be maintained in Oracle -

Item Code Commodity Code



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Apart from the routings maintained in Oracle Apps, there will be certain dummy routings

which will be generated in ABPP for the following cases

There are certain FMPs that are manufactured in Plant 1, but also directly procured in Plant3

or Plant 2 based on a percentage. Such items will be modeled as Alternate Routings with

proportions. The Alternate Routing of such parts will be generated in ABPP before every FP

run.

There are certain parts that are both OSP items as well as BOP items. The split of the item as

an OSP or BOP item is based on proportions. Such cases will be modeled as Alternate

Routings with proportions. The Alternate Routing of such parts will be generated in ABPP

before every FP run.

In case of BTO forecast demands, dummy routings will be created and assigned to the

corresponding tractor variant. Also, a compressed BOM would be defined which will be used

for generating the procurement schedules.

It is proposed that the commodity codes of various items should be correctly maintained in

Oracle. Also, the routings for these commodity codes should be properly maintained in ABPP

and reviewed every quarterly.

6.1.5.4 Cycle Times

In performing forward and backward propagation, Factory Planner utilizes Operation

Precedence Constraints whenever operations must be run in sequence. Factory Planner breaks

down the time constraining (separating) operations into the following components:

Pre-op time (setup time)

Runtime

Post-op time (Cool-down or wait time)

Transportation time

The setup times of the machining operations will be defined for critical operations.

Runtimes will be modelled for all the operations of the routings. There are cases where run

time of the operations varies with the item which is being processed at the operations. Thiscan also be specified as Production Rate for that item.



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Among the above cycle time components, Cool-down time will be considered for heat

treatment operation for gears. Post heat treatment operation, gears have to be cooled for a

certain period of time before being used at the next operation.

As stated earlier, there are 3 plants under Escorts AMG. Machining of engine blocks,

differential housing and gearbox housing is done in the Castings PU of Plant1. After

machining, these components are sent to Plant 3 for assembly. This transportation time will

be modeled in FP via a dummy routing with move operations. The transportation time

between various PUs in the same plant will not be modeled in FP.

Since the routings will be maintained at an aggregate level via commodity codes, the

operation run times will also be maintained at that level.

Data for the various operation times will have to be provided in the format defined below

Commodity Code Operation Name Unit Run Time Setup Time Cool-down Time

Transportation times between the various plants will have to be provided in the format below-

Source Plant Destination Plant Transportation

Time

6.1.5.5 Resources



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The simplest Factory Planner model of a work centre defines the capacity of the work centre

based on its Resource Calendar. The work centre is assumed to be available 24 hours a day, 7

days a week unless specified differently in the Resource Calendar.

At Escorts, resources are mainly of two types, machines and manpower. Resources will be

modelled at an aggregate level and attached to the various operations. This data will be

maintained in ABPP. It is proposed to model only the critical resources in the factory. This

will help in focussed planning and also not constrain the plan output much due to capacity

constraints.

Following information will have to be maintained in ABPP, so that proper resources are

generated and attached to the correct routing and operation

Produced Item

Code

Commodity Code Capacity

Constraints

6.1.5.5.1 Simultaneous Resources

Simultaneous resources are used to model situations in which more than one resource is

required to complete an operation. The operation cannot be completed unless all resources

are available. This is modelled using the AUX1 component of simultaneous resources

functionality.

The assembly of certain Heavy-Duty tractor models is to be restricted to 10 tractors per day.

To model this functionality, simultaneous resource will be modelled on the final tractor

assembly process. The capacity of this resource will be constrained through the

corresponding resource calendar to restrict the assembly output to 10 tractors per day.

The capacity of the resources will be defined as per Escorts LTS (Long-Term-Settlement).

Apart from this, normal working shift hours will also have to be specified and regularly

maintained as Resource availability in Resource Calendars mentioned in next segment.

6.1.5.6 Resource Calendars



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Any down time, plant shut downs and holidays of resources over the planning period can be

specified using resource calendars. More than one set of resources can be associated with a

given Calendar if all of them have the same calendar requirements. ABPP UIs will be

provided to maintain the resource calendars.

6.1.5.7 Manufacturing Lot Sizes and Consolidation Horizon

In case FP is unable to satisfy the demand from inventory (on-hand, wip, in-transit and

pending schedules), then a manufacturing and procurement suggestion is made by FP.

There are certain machining items like cylinder block and cylinder head machining which

require an optimum batch size for production. The batch sizes vary from 100 to even 300 in

case of few cylinder blocks. To model such requirements, manufacturing lot sizes and

consolidation horizon can be used.

Lot sizes can be defined in FP using Minimum Quantity. It is the minimum size of the

manufacturing order that can be produced. But keeping a lot size restriction can result in

generation of earlier procurement schedules (even if there is no demand) and would increase

the inventory handling cost of the Bought Out Parts.

A better approach to handle lot size is through Consolidation Manufacturing Orders (CMO)

in FP. In CMO, a consolidated manufacturing order would be generated based on the

consolidation horizon specified for the part. Demands for the part falling in the same

consolidation horizon would be clubbed together and a single manufacturing order would be

created with the expected due date as the due date of the earliest demand.

CMO is better than lot size, as in CMO procurements would be generated based on actual

demand, whereas in lot size, procurement might be generated without any demand in the near

future. The final decision on selection of the approach would be taken after a detailed data

analysis for such parts.

6.1.5.8 Vendor and Vendor Lead Times

In order to release an accurate procurement schedule in sync with the production plan, the

material availability from the vendor will have to be accurately defined. To enable this,

vendor lead times apart from the vendor capacities will have to be defined. This lead time

will be the transportation lead time between the vendor location and Escorts Plant in



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Faridabad. For a few cases, where the vendor is importing the raw material and then

manufacturing the item required by Escorts, vendors manufacturing lead time as well as the

procurement lead time will have to be added to the transportation time and maintained as the

vendor lead time in ABPP.

6.1.5.9 Procurement MOQ and FLM

Procurement lot sizes need to be modeled in FP to accurately capture the procurement

process between Escorts and its vendors. For this the minimum order quantity (MOQ) of the

vendor and his fixed lot multiples (FLM) will be modeled in FP for procurement planning.

MOQ is the quantity below which the vendor will not be able to supply. FLM is the multiple

quantity which the vendor is able to supply.

An illustration of the concept is explained below

D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11

Procurements 0 0 20 60 0 45 0 100 45 0 80

MOQ 40

FLM 25

Lot Sized

Procurements0 0 40 40 0 50 0 100 40 0 100

Lot sized procurements on day D3 will be 40 based on MOQ. Now, the excess procurements

of (40-20=20) will be considered next day D4. So, demand for D4 will now be 60-20=40.



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Hence, lot sized procurement on D4 will be also be 40. D6 procurement need is 45 which is

greater than MOQ, hence it will be in multiples of FLM which is 50.

By default, the demand will be clubbed for 1 week by FP for applying the lot sizes. This

might result in excess procurements in case of demand fluctuations. Hence, the procurement

time will be specified as 1 Day in supplier_part_record for all the parts to minimize the

overall procurement.

A differentiated strategy will have to be adopted for stranger and runner models and

parts.MOQ and FLM will be defined only for regular and runner parts.

6.1.5.10 Vendor Share of Business

Escorts has an agreed Share of Business with its vendors. This functionality can be modeled

using FPs Vendor Fair-Share functionality where the suggested procurements from the

various vendors will be as per the percentages defined in SOB. SOB values will be fetched

directly from Oracle Apps in every run.

Lets take an illustration of the concept

There is an Item D1001010, supplied by Vendor-1 and Vendor-2. The total demand forD1001010 is 200 in Week1. The suggested procurements from FP in week 1 will be as

follows -

Vendor

SOB

(in

percentages)

Suggested

Procurement

Vendor-1 30 60

Vendor-2 70 140

A report of SOB adherence to the planned SOB will be provided to the planners that will aid

them in re-defining and negotiating the future SOB based on actual vendor deliveries.

The SOB percentages will be specified in supplier_part_record native file.



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6.1.5.11 Procurement Consolidation Horizon

In case of stranger parts, it is recommended to have a procurement consolidation policy

defined based on a consolidation interval. FP consolidates the procurements into a single

procurement as long as the PO release dates are in the same consolidation interval.

D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11

Procurements 0 0 20 60 0 45 0 100 45 0 80

Consolidation

Interval4

Consolidated

Procurements0 0 125 0 0 0 0 225 0 0 0

6.1.5.12 Just-In-Time Procurements

Since large inventories can reduce the margins and block the working capital, it is necessary

absolutely critical that the demand is met with just-in-time procurements as far as possible.

FP suggests the material procurements based on a server flag jit_part_reservations which

helps in just-in-time procurements.

6.1.5.13 Safety Stock Profiles

A safety stock of BOP (purchased parts) and few sub-assemblies will be maintained on-hand

to deal with unexpected variations in demand and supply. Safety stock maintenance should be

based on the following parameters

Part cost and criticality

Demand volatility

Vendors ability to respond to demand volatility

Past history

FP has the ability to define both time-based and quantity-based safety stock. It is



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recommended to have a differentiated strategy for stranger, runner and repeater parts. Time-

based safety stock (defined as Days of Cover) will be defined for runner parts; whereas

quantity based safety stock will be used for stranger parts.

If the Safety Stock is specified in Days of Cover, then FP internally calculates the safety

stock demand based on the actual demand. This safety stock demand is then planned as a

normal demand order. Such orders can be easily differentiated from normal orders as such

order ids carry a prefix of FP-Safety-Stock in their order ids.

The following example explains the concept of Safety stock maintained as Days of Cover.

A safety stock calendar needs to be linked to each purchased or manufactured part for which

a safety stock is to be maintained. The intervals of this calendar represent the safety stock

intervals with the safety stock quantity being specified as a value applicable for each interval.

The safety stock calendar applicable for the part is specified in ItemGroupCalendar while the

calendar details are specified in CalendarDetail, CalendarBasedAttributes and

CalendarPatternDetail. Pattern names EVERYDAY will be used in the specification of

safety stock periods. All these entities map to the Named_Calendar_Record in native FP. The

field level mapping is described in the FP Integration document.

6.1.6 Supply Picture

The supply picture information will be fetched directly from Oracle Apps. Hence, to generate

a feasible material and capacity plan supply picture has to be accurately maintained in Oracle

Apps, and Back-flushing is carried out as soon as the part is produced on the assembly line or

machining line.

6.1.6.1 On-Hand Inventory

On hand inventory is inventory of finished goods, raw material or sub-assemblies (if any) that

is available as supply. Any inventory that is quarantined or rejected or not available for

production will not be included in FP.



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Following types of materials will be considered for On Hand inventory

Finished Tractor Inventory This inventory will include finished tractor OK inventory in

the Plant (EP3 and EP2, if any). Tractor inventory in Quality operation will also be

considered as Tractor inventory.

Raw Material Inventory Raw material inventory inside all the plants (EP1, EP2, EP3, ES3

and CHD) will be considered to generate a feasible material and capacity plan. Any rejected

or scrap raw material inventory will not be considered for planning. Such inventory should be

moved to RTV site in Oracle which will not be read into FP.

6.1.6.2 Work In Process (WIP)

Work in process is typically associated with manufacturing job orders. This is represented in

FP as work in process. This information is available from the job orders in Oracle Apps. WIP

will be read in FP in unassigned_wip_record and read at the last operation of the routing.

6.1.6.3 Pending Schedules

Pending schedules are material that have been ordered from the suppliers and have a

proposed date of arrival (need-by date) in the plant. Open schedules with the arrival time in

the past (earlier than the plan start date) will not be considered in FP for planning. Such

schedules will be assumed to be closed in Oracle Apps. Only schedules with the need-by date

in future from the plan start date will be considered for planning in FP.

6.1.6.4 In-transit Plant Material

Following types of in-transit inventory will be considered in FP for planning -

In-transit tractor FG inventory already dispatched from plant to a particular depot will be

considered in FP for planning. The demand that can be fulfilled using this demand will be

satisfied first from this in-transit inventory. Such inventory will be read in with the dispatch

date from the plant and the transportation time to the desired depot will be added to this to

arrive at the tentative arrival date at the depot.

In-transit material from EP1, EP2, EP3, CHD and SP3 will be considered with the dispatch

date from source location and the respective transportation time will be added to this date to



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arrive at the tentative arrival date at the plant.

6.1.6.5 In-transit Vendor Material

The in-transit vendor material will also be considered for planning in FP. This in-transit raw

material inventory will be netted off from the pending schedules and the remaining pending

schedules along with the in-transit material will be considered for planning by FP. This

material will be netted off against the demand and then fresh procurements will be suggested.

A UI will be developed in ABPP for the suppliers to capture the following

Item

Shipped Date

Shipped Quantity

Once the data is captured, following workflow will be executed

Based on the shipped date and the expected supplier transit lead time, an expected arrival date

for the shipment will be calculated.

In case there is a pending schedule against this shipment, then this shipment will not be

considered to avoid duplicity of the schedules.

In case the schedule for this shipment has expired, then a schedule will be created in FP and

Oracle based on the expected arrival date.

Apart from this, no fresh communication will be sent to Suppliers for this schedule. This

development will have to done in Oracle Apps as supplier communication for the schedules ishandled in Oracle Apps.

This is a temporary solution which is being proposed so that accurate procurement schedules

are generated. Once the process of supplier collaboration is developed in Oracle, this

workflow should be terminated and a new workflow will have to be developed to capture in-

transit inventory from Oracle.



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6.1.7 Critical Business Requirements

6.1.7.1 Sub-Contracted Parts (OSP)

There are certain parts where the child parts/ components are procured from certain vendors

and then these items are sent to other vendors (termed as Out Side Processors) for finishing.

Once the finished material is ready, it is sent by the supplier and received inside the plant.

Such items are termed as OSP items in Escorts. For such items, procurements should be

generated for the component parts as well as an indication should be sent to Out Side

Processors regarding the availability of the finished part in the plant.

In FP, such items will be modeled as Sub-contracted parts. These items will be modeled in

part_number_record by setting subcontracted_p as 1. FP generates procurements for both the

finished part as well as for the component items.

6.1.7.2 Same Part as OSP and BOP

There are certain parts which can be directly procured from certain suppliers or can be sub-

contracted (OSP) to a supplier with the basic OSP components. Procurement schedules

should be generated for the Bought-Out Part and OSP component items based on a Share of

Business (SOB) pre-defined percentage.

This requirement will be modeled using alternate routings. A dummy routing and a dummy

item will be created for all such items and attached as an alternate routing for the item.

Routing usage percentages will be defined based on the SOB.

The information about the same part being defined as an OSP and BOP, will have to be

maintained by planners in an ABPP table MST_UDSOB_ITEMS through a separate UI.

The SOB percentages will also be maintained in ABPP.

To illustrate this design, lets consider an item D10006690_85 which is an OSP item as well

as a Bought-Out Part (BOP). This item will be maintained in the table

MST_UDSOB_ITEMS with the fields BOP and OSP set as Y

The SOB for the item will also be maintained in the same table. The SOB for the item as



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BOP is 30% and as an OSP is 70% in this case.

Once this data is maintained in the table, then following will be done automatically

A dummy part D10006690_85#BOP will be created in Item master table.

An additional routing will be created for the part D10006690_85 in Item Bom

Routing table with the routing and bom name as D10006690_85#BOP.

A new bom will be created in bom components table with the component as

D10006690_85#BOP.

SOB percentages will be defined as Routing usage percentage in Item bom routing

table.

Approved Supplier item table will be updated with the new item

D10006690_85#BOP where the original item was D10006690_85.

6.1.7.3 Same Part as FMP and BOP

There are certain parts which are manufactured in the plant as FMP and also directly

procured from the supplier. This process will also follow the same path as described above.

In place of OSP field to be maintained in the table MST_UDSOB_ITEMS, FMP and BOP

fields will be maintained. The SOB percentages will be defined in SOB_BOP and SOB_FMP

fields. Rest of the process remains same as defined in 5.1.7.1

6.1.7.4 Same Part as FMP and OSP

There are certain parts which are manufactured in the plant as FMP and also sub-contracted

to outside suppliers. FMP and OSP fields will be maintained in the table

MST_UDSOB_ITEMS. The SOB percentages will be defined in SOB_OSP and SOB_FMP

fields.

This requirement will be modeled using alternate routings. A dummy routing and a dummy

item will be created for all such items and attached as an alternate routing for the item.

Routing usage percentages will be defined based on the SOB.



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To illustrate this design, lets consider an item D10006690_85 which is an OSP item as well

as a FMP. The BOM for this item is made of 2 parts D10006691_85 and D10006692_85.

Once this data is maintained in the table, then following will be done automatically

Dummy parts D10006691_85#OSP and D10006692_85#OSP will be created in

Itemmaster table.

An additional routing will be created for the part D10006690_85 in

ItemBomRouting table with the routing and bom name as D10006690_85#OSP.

A new bom will be created in bomcomponents table with the components as

D10006691_85#OSP and D10006692_85#OSP.

SOB percentages will be defined as Routing usage percentage in Itembomrouting

table.

Approved Supplier item table will be inserted with the new items

D10006691_85#OSP with the same information as original item was

D10006691_85. Same will be done for the other component D10006692_85#OSP.

6.1.7.5 Phantom Parts

Phantoms parts are defined in the BOM to make it more modular. There are no procurements

for these parts and there is no inventory maintained against such parts.

FP also has the ability to define phantom parts do not have any procurements or any

manufacturing orders against them.

This functionality is modeled by defining consumed parts as phantom in

bom_components_record. The server flag define_phantoms_in_bom will have to be set to

TRUE for this functionality to work.

6.2 Detailed Solution Design Planning Process

The following section defines the factory planning process as done by the Factory Planner.

Factory Planner internally prioritizes the demand orders, then assigns the available inventory



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in the plant and balances the critical resources to arrive at the most feasible procurement and

production plan for the next 3 months.

6.2.1 Prioritize Demands

FP internally sorts all the demand orders as per the priority assigned to the demand and its

due date. Demand with an earlier due date is internally prioritized by FP over demand with a

later due date. The demand priority will be specified as mentioned in Demand Prioritization

Policy section above. If there is a competition among some demand orders, FP automatically

allocates the capacity to the demand with an earlier due date. In case of demand orders with

same due date, order priority (if specified) will act as a tie-breaker.

Also, demands with large quantities will be broken down into various small quantity

demands. This will be done as FP internally tries to satisfy a complete demand order quantity

and in case of capacity or material constraints, small quantity demand orders would be

preferred over large quantity demand order. This is done so that overall demand satisfaction

is higher.

Consider the following demand orders

Demand Order Due Date Demand Quantity Priority

Demand_1 01-Mar 15 0


Demand_3 27-Feb 5 0

http://opt/scribd/Users/Mustafa/AppData/Roaming/Microsoft/Word/Escorts%20FP%20Solution%20Architecture%20Specification%20v1.0.doc#Demand%20Prioritization%20Policyhttp://opt/scribd/Users/Mustafa/AppData/Roaming/Microsoft/Word/Escorts%20FP%20Solution%20Architecture%20Specification%20v1.0.doc#Demand%20Prioritization%20Policyhttp://opt/scribd/Users/Mustafa/AppData/Roaming/Microsoft/Word/Escorts%20FP%20Solution%20Architecture%20Specification%20v1.0.doc#Demand%20Prioritization%20Policyhttp://opt/scribd/Users/Mustafa/AppData/Roaming/Microsoft/Word/Escorts%20FP%20Solution%20Architecture%20Specification%20v1.0.doc#Demand%20Prioritization%20Policy


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Demands will be sorted by FP for material allocation in this fashion

Demand Order Due Date Demand Quantity Priority

Demand_3 27-Feb 5 0




Hence, the demand orders are prioritized by FP as per the due date, then priority and then

quantity. This sorting priority can be controlled through a server flag:

Part_assignment_algorithm.

6.2.2 Net off Depot Transportation Time

The demand due dates will be the dates when the tractor will be assumed to be arrived at the

Depot. For example, if the due date of a particular demand from Ahmedabad depot is 25th

Mar 2009, then the tractor will have to reach Ahmedabad depot latest by 25th Mar 2009.

In order to arrive at the production plan for this tractor, the transportation time from

Faridabad plant to Ahmedabad depot will be netted off from the due date of the demand. The

netting off the depot transportation time will be done by FP.

6.2.3 Inventory Assignment

Once the demand orders are sorted as per the priority logic, all parts are sorted beginning

with FG, assemblies, sub-assemblies and ending with raw material inventory.

For each part, FP identifies demands and the available supplies. All the supplies defined in

section 5.3.6 will be used for supply search.

In case of insufficient inventory or wip, the component parts are identified (through BOM

explosion) and if needed, new supply sources (manufacturing orders and procurement orders)



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are created. Then this supply is assigned to insufficient demands based on production due

date (actual due date minus depot transportation time).

A re-assignment of supplies to demands is done at the end to

Eliminate or reduce the late or short orders.

Remove cross-feeds, if any . Cross-feed is a situation where a demand with a later due

date is fed with an earlier supply and vice-versa. Reducing cross-feeds will help in

pegging a demand to the latest available supply.

Removing cross-feeds is also controllable through a server flag : ia_post_processing

6.2.4 Capacity Balancing

Once the inventory assignment phase is completed, FP balances all the over-loaded resources

to arrive at the most balanced production and procurement plan. To achieve capacity

requirements planning, FP uses a pull-push based approach to obtain a feasible capacity plan.

This approach balances resource workload in every time bucket by either pulling or pushing

tasks at that resource to match the workload in a time bucket to the capacity available in that

time bucket.

During the capacity balancing phase, due dates and priorities of the demand orders are

respected. If a demand with an earlier due date cannot be produced at a resource which is

already overloaded with other tasks in that time bucket, such demand order is pulled in earlier

time buckets of that resource. In case the earlier time buckets are also fully utilized, the

demand is then pushed to a later time bucket where the resource capacity is available.

In case the demand is either pulled or pushed depending on the capacity availability at that

resource, the suggested procurement schedules are also pulled or pushed to align the

procurements with the production requirements.

The following example shows how the demand will be pulled and pushed to respect the

capacity constraint. The green arrows represent the pulling in of demand while red arrows

represent delaying of demand.



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FIRM TENTATIVE

W1 W2 WW7W6W5W4W3

W0

W3

FIRM TENTATIVE

FIRM TENTATIVE

FROZEN

FROZEN

FROZEN

OZEN

Till M+

Model D1 D2 D3 D4 D5 D6 D7No Of Shifts 1 1 1 2 1 1 1Per Shift Thru Put 90 90 90 90 90 90 90Capacity 90 90 90 180 90 90 90Heavy Duty Thruput 10 10 10 10 10 10 10Heavy Duty Capacity 10 10 10 20 10 10 10

FT-45 30 70 0 10 30 60 10

FT-60 30 50 40 0 80 30 50

FT-70 0 10 0 40 0 25 0

FT-45 50 30 20 10 30 60 10

FT-60 30 50 40 40 50 20 50

FT-70 10 10 10 20 10 10 5

Demand

Fulfillment

The capacity balancing horizon will be set to 30 days. Only overloaded resources and their

tasks falling in this period will be considered for balancing.

6.2.5 Schedule Release

Following is the time phased output that will be given to the suppliers of the procurement

schedule. The red FIRM INPUT is decided for a period of 5 days for which there would be

no new procurement requests generated and old procurements will be taken back as firm

supply. The green area denotes the time

period for which new procurements can be generated and these will be output as firm

schedules to the suppliers. The grey area is the tentative plan.The plan generated after the

capacity balancing phase will be then used to send procurement schedules to the respective

vendors. Every schedule will have the following details

Item Code Item to be procured.

Item Version - At the time of schedule releases in Oracle Apps, the current active

version of the procured item will be fetched and sent along with the schedule details.

Vendor vendor code who will be supplying this material.


Fig 13. Schedule Release


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Quantity quantity required at the shop floor based on the demand

Need-by Date The date when this material in the desired quantity needs to be made

available in the plant for production.

Schedule Release Date This is the date when the schedule is to be released in Oracle

Apps, so that the required material in the desired quantity is available in the plant.

This date is calculated as Need-by date minus the vendor lead time. Following table

explains this date calculation with examples

Schedule ID Item Code Vendor Code Need-by DateVendor

Lead Time

Schedule

Release Date

SCHD-1 D1001010 Vendor 1 15-Mar 10 05-Mar




Disable Date The date after which this material cannot be received in the plant. This

date is not calculated by FP. This date will be calculated in the interface between FP

and Oracle Apps based on item tolerance maintained in item master in Oracle Apps.

Once the FP plan is finalized, all the schedules with the Schedule Release Dates falling in

the next 2 weeks will be released as firm schedules in Oracle Apps automatically with the

Need-by date as recommended by FP. In the above example, if FP has run on 01-Mar (i.e,

Plan start date is 01-Mar), then following schedules will be released in Oracle Apps SCHD-

1, SCHD-2 and SCHD-3. Since the Schedule release date of SCHD-4 is not within 2 weeks

from FP plan start date, this schedule will not be released in Oracle. However, this schedule

SCHD-4 will be sent to the vendors as a tentative schedule.

6.2.6 Buffer Quantities for C Class Items

In case of C-class items and hardware items, a buffer quantity of around 1% percent will have

to be added to take care of rejections and damages. This addition of quantity will be done in

integration between FP and Oracle Apps. For this functionality, item classification will have



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to be correctly defined and maintained in either Oracle item master or in ABPP

7. Findings

Sr

No

Description Customer Of

Report

Purpose

A Validation Reports

PlannerFor proactive correction of data

errors to reduce FP run time

Items revision Report

Items with No ASL/Broken

BOM

SOB not equal to 100%

Std PO/ No PO



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B Plan reports

Procurement Plan Buyer To see schedule item wise

Production Plan Planner To get day wise Production Plan

Daily Buyer Report Buyer Buyer wise Date wise Schedules

Production Plan Commitments Planner To update Production Plan

Detail Safety Report Planner To get Safety stock data

C KPI reports

Schedule Adherence ReportSupply Heads

Schedule Adherence-Supply

level-item level

Detail Inventory Reports Supply Heads

and Planning

Heads

Inventory status and analysis

8. Bibliography

1. Factory Planner Features and Terminologies From i2 Team.

2. Agriculture Equipment Market and Analysis by Indian Brand Equity Foundation

3. www.escortsgroup.org

4. www.indiaitaly.com

5. www.zinnov.com

6. www.ibef.org

7. www.google.com

8. www.krchoksey.com

http://www.escortsgroup.org/http://www.indiaitaly.com/http://www.zinnov.com/http://www.ibef.org/http://www.google.com/http://www.krchoksey.com/http://www.escortsgroup.org/http://www.indiaitaly.com/http://www.zinnov.com/http://www.ibef.org/http://www.google.com/http://www.krchoksey.com/


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