MB0017

Master of Business Administration - Semester 4

OM0017 - Advanced Production Planning and Control (Book ID: B1342)

Assignment: Set- 1

Note: Each Question carries 10 marks. Answer all the questions. 1. Explain briefly the main tasks of dispatching, inspecting, expediting, evaluating and controlling inventory and so on by production controls department.

Functions/Tasks and Control Activities in Production In each of the production processes, activities can be segregated and grouped into three main distinct stages, namely:

· Pre-Planning.

· Planning.

· Production Control.

Figure 3.2 explains the distinctive stages of production control activity.

Figure 3.2: Three Distinctive Stages of Production Control activity

The figure 3.2 indicates the total activities of these three distinctive stages and also how each function interacts with the others for smooth functioning.

Functions/Tasks at pre-planning stage

Pre-Planning covers the analysis of data and outlines the basic planning policy based on sales reports, market research and product development and design. Pre-planning is a PPC responsibility in which the collection of data on materials, machines, manpower availability, scope of work, capacity and so on are to be created.

Functions/Tasks at planning stage

In the Planning stage, the function concentrates on:

· Materials to be used for the product being produced as planned.

· Methods to be adopted to produce that particular product.

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· Machine/ equipment to be allocated and its capacity to produce.

· Routing, estimating, loading and scheduling activities.

Machine loading as per the capacity and their capability assessment of performance is done in conjunction with routing for smooth workflow.

· Materials: It is the responsibility of the planners to ensure that the required raw materials/components/semi-finished items are available before release of work orders and start of production. Here the duties include tightening up specification of materials, its availability to the quantity required/delivery date of expected incoming materials, standardisation and reduction in variety, procurement processes and coordination with inspection.

· Methods: Here the planners have to analyse and define the best method that is compatible with facilities available and select the processes for manufacture of parts, assembly and testing.

2. Explain briefly the functions of planning in “Facility Planning” for production activities?

Facility planning refers to determining how much of long range production capacity is needed, when it is needed, where production facilities be located& layout characteristics.

Plant planning serves the following:

a) Aim is to provide highest efficiency in manufacturing at lowest cost

b) An effective integration of all factors affecting the layout

c) Efficient utilization of machines, labour and space

d) Logical work flow and the smooth sequence of operations

e) To minimize movement of materials and labour for processing

f) Satisfaction, safety and conveniences of all employees

g) Provision of facilities for future expansion

h) System flexibility to changes in product design & output volume

The scope of plant planning may include the following:

1) Selection of production system and plant design

2) Design of plant buildings

3) Manufacturing process design

4) Selection of equipment and machinery.

5) Design of plant layout and shop layout.

6) Plant utilities and services

7) Selection of materials handling system and equipments


3. What are the merits and demerits of batch production? Briefly explain the salient features of PPC for Job production.

Merits and demerits:

Merits of mass production

· Smooth flow of material from one work station to the other.

· Output of one work station becomes the input for the next, so there are inbuilt inventories at each work station.

· In assembly line productions the production time is shorter.

· Since work stations are spaced closely together, the material is more efficiently handled.

· Training cost is less, as there is no special expertise required for the staff.

· Production planning and control is simpler.

Demerits of mass production

· Maintenance is a challenge since proper functioning of all the machines is required in an assembly line production.

· Any change in the design layout proves difficult because assembly lines are rigid inflexible setups.

· The slowest machine determines the pace at which production will continue.

· Assembly line setups require installation of specific types of machines and are therefore capital intensive.

The intent of assembly line balancing is to minimise the idle time of machines. It means the number of operators required to perform a task is reduced.

PPC for batch production Batch production is the technique of manufacturing a particular group of components at a work centre before moving the group to the next step in the production process. This production technique is common seen in paint and ink industries, bakeries, in the manufacture of pharmaceutical ingredients, processing of leather and so on.

In batch production, there is a continuous demand and hence flow of materials is complex. Batch production is suitable for a variety of products. Here the volumes are not so large to demand highly automated and productive machines. Batch production is distinct from job production.

Batch production employs a process layout and machines are grouped to facilitate smooth flow to produce products in batches. As different jobs follow their route, enough flexibility is built into the system.

Economic lot size or batch size: The main factor to opt for batch production is to keep the cost of maintaining inventory and the cost of production low. There are two reasons to maintain a specific batch size. One is to maintain an optimum batch size to facilitate production first and then sale of goods. Second is the simultaneous production and sale of goods.


4. How do you classify forecasts? Explain Time Series Methods.

Classification of Forecasting Methods A large number of forecasting methods are available. Forecasting methods can be broadly divided into two categories namely:

a) Opinion and judgemental methods.

b) Time series methods.

a) Opinion and judgemental (Predictive) methods The qualitative or judgment method is a method that translates the opinions of managers, experts in the field, consumer surveys, and sales force estimates into quantitative estimates. These methods range from a scientifically conducted opinion survey to the nominal group technique. These are commonly used techniques in business and industries, where they rely heavily on the past experiences and skills of people. There are four methods adopted under this category, namely:

· Opinion Survey Method.

· Market Trial methods.

· Delphi Technique.

· Nominal Group Technique.

Opinion survey method: This is a simple and practical method used for FC for new products, where the opinions are collected from prospective buyers regarding why they buy and what they expect out of those products.

Market research/trial method: When a product is new to the customer or market, it is difficult to anticipate its acceptability. In such a case, a trial run of the new product in the market as a controlled experiment in a carefully selected place is practised. Market research is a systematic approach used to determine the consumer interest in a product and decisions taken based on the testing hypotheses. (This type is recommended in consumer goods like cosmetics, software, and other fast selling consumer goods).

Delphi technique: Delphi technique is an interactive learning process through the group of experts in the field responding to a set of questionnaire and hence is a subjective method of relying on the opinion of a few experts. As many experts are involved in the consensus developing process, it minimises the bias and error of judgement compared to other opinion methods.

Nominal group technique: Here, the panel of experts work together to arrive at a consensus through discussions. Success of the nominal group process lies in identifying questions, allowing creativity, encouraging discussions and ultimately arriving at a consensus.

b) Time series methods or quantitative methods In this method, it is assumed that the past data is a good indicator of the future, and hence a lot of assumptions are made here while making a quantitative forecast. With the experience of the operation managers, they can master the prediction from the historic data of the product. For this, the operations managers use the time series model to forecast the demand for their goods or services. Time series method addresses the horizontal trend and seasonal patterns of demand.


5. Explain inventory Management and Control. List the benefits of inventory control.

Inventory Management

ERP is a computer system that maintains information database which can be accessed through out the organisation. i.e. the system is centralised.

Systems that deploy ERP inventory management allows information sharing across various departments of the organisation and also across geographical locations. It allows employees to view information in reliable and consistent fashion. The systems that deploy ERP procedures maintain only one software system and are dependent on networks.

Consider for illustration how the order execution process is managed by SAP. Figure 8.1 shows the execution of a process.

Figure 8.1: Order Execution Process

From the figure 8.1 you can make out that, whenever a customer makes an enquiry about the inventory (1). A quote is prepared by SAP along with the finance information and date of delivery (2). The quote takes into report what it already knows about the consumer (3). A check is performed to determine the amount of stock or inventory that is available for maintenance (4), and thus resulting in an instant and automatic update of information in the database. Once the quote is prepared by the supplier, it is presented to the customer. If the customer accepts the quote, SAP issues a sales order (5) by quoting their prices for each item. The order is then processed as per the requirements by sending the necessary information to various departments of the organisation and delivery is automatically scheduled (6). The cost issues of customer billing are also automatically processed (7). Thus the SAP tool manages the entire ERP cycle.

ERP Inventory module is a simple yet dominant inventory tracking module that facilitates the process of tracking and controlling the inventory and also provides the flexibility of customisation. Earlier, paper based systems were used to process information from various departments of an organisation and it consumed time.

ERP inventory management system reduces time lag and makes the entire process efficient, by maintaining the appropriate level of stock in the warehouse. It helps in maintaining the suitable level of stock in the warehouse. The activities of inventory control involve:


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6. Define deterministic model of inventory control. Explain how economic order quantity can be calculated by model 1. Deterministic Models in Inventory Control Inventory managers face contradicting issues, as they need to maintain inventories at a low level to avoid excess holding costs and at the same time need to maintain it high enough to reduce frequency of orders. Thus, inventory control aims at finding the right order size, which is economical with respect to operations.

The quantity of raw materials procured in a single order is known as order quantity or lot size. This is the quantity ordered every time the stock exhausts. Inventory related costs are kept to a minimum by this quantity and is known as economic order quantity. The total inventory holding costs and ordering costs are kept to a minimum by economic order quantity.

This EOQ will be optimal when the following assumptions are satisfied:

· The rate of demand rate is constant.

· The lot size is not constrained.

· Inventory holding cost and fixed ordering cost are highly important.

· Order decisions for items are independent.

· The lead time is fixed.

If the system parameters are known accurately, then a deterministic situation exists. This system is based on certainty of events. The inventory reserves estimation is based on recognised engineering, geological, and economic information for the deterministic model. The optimal inventory of a single item with obscure demand is determined by the deterministic model. The inventory is built at a constant rate to meet a determined demand.


Master of Business Administration - Semester 4

OM0017 - Advanced Production Planning and Control (Book ID: B1342)

Assignment: Set - 2

Note: Each Question carries 10 marks. Answer all the questions. 1. Write a note on:

a) Lean Manufacturing and

Lean manufacturing is an emerging technique that improves performance considerably in terms of delivery, cost, quality and flexibility.

Even though small and medium enterprises (SMEs) play a very important function in the global manufacturing supply network, it is not known about the extent to which lean manufacturing is present in these enterprises.

Normally, lean manufacturing methods are not implemented as a formal management initiative in SMEs. This is because there are constraints, which are applied by the way they operate. You need to address these issues and devise strategy to incorporate lean manufacturing procedures. Information and communication technologies like pervasive computing play an important role in implementing this successfully. No organisation can risk ignoring this aspect in the present business environment.

SMEs can reap maximum benefits if they implement this formally into their system. This brings in advantages in the area of logistics (that is, supply, distribution and manufacturing phases).

b) Agile Manufacturing

An agile manufacturer delivers the products to the market quickly, operates with minimum total cost, and has the ability to satisfy the customers.

FMS is the way for achieving high agility in manufacturing. A set of work stations/machine tools that require the least time to change over jobs or least set-up time performs operations like drilling, milling, tapping, reaming, turning, grooving, and boring all at one work station.

A material handling system is automated and flexible to move the jobs between machines and follows job routing. The supervisory computer in the network performs the following tasks:

· Directs the routing of jobs through the system.

· Tracks the status of all jobs in progress and the next station to go.

· Assists the processing of each operation to each station and ensures that the right tools are available for the job.

· Monitors the correct performance of operations and indicates problems if any, in order to take immediate action.

· Stores material either at work stations, and/or at a central location.


2. Differentiate between forward and backward scheduling. Explain automation and the drawbacks associated with automation

Forward scheduling Forward scheduling can be associated with the scheduler selecting a planned order release date and schedules all activities from this point forward in time. This is the approach in which customer orders are processed immediately, even if the order dates are far away. For example, if a part is required to be delivered in two weeks and if it needs a total of nine days to process it, the first nine days are used to make it. Forward scheduling can be associated with taking up jobs with a number of tasks and assigning resources as early as possible. The task should utilise the resource as soon as it is allotted. Forward scheduling also has its own advantages and disadvantages. Jobs can be completed ahead of their due date by forward scheduling.

Backward scheduling In backward scheduling, the scheduler begins with the delivery date, and plans backward to calculate the date for order release. The start date is determined by counting the number of days required for processing in backwards. Backward scheduling can be associated with taking up jobs with a number of tasks and assigning resources in reverse order. This system requires a delivery date from the customer, since scheduling is done backwards from the date of delivery.

Backward scheduling is the method, which uses the same lead time offset logic as MRP. Here the customer orders for a job as late as possible but expects it to be delivered in time or on due date. The components are delivered when they are required rather than as soon as possible.

It is important to know that even scheduling has some constraints. Scheduling production can be a slow and cumbersome process when done manually. Scheduling can be improved by using computer-based tools and software. Following are some of the scheduling constraints.

· Precise information needed for proper scheduling is often not available.

· Random changes in the plans and schedules.

· The necessity for human input in scheduling.

· Schedule preparation can be affected by system problems.

· Efficient scheduling is disturbed by organisational problems.

3. Explain in brief about Priority Rules for Scheduling?

Priority rules for scheduling The priority rule is a systematic procedure for assigning priorities for awaiting jobs. The common problem faced in most of the companies is assigning priority with respect to the job on hand for production. When there is a set of orders to be executed, the question of prioritising arises. Priority rules give the solution to the priority problems faced by companies.

Dispatching procedures determine the job to be processed with the help of priority sequencing rules.

Following are the major criteria for selecting priority rules:

1. Set up costs. 2. Idle time of machine and labour. 3. In-process inventory. 4. Percentage of jobs those are late. 5. Average number of jobs waiting in the queue.


6. Average time to complete a job. 7. Standard deviation of time to complete a job. 8. The priority rules can be classified as: 9. Single criteria rules. 10. Combined criteria rules. 11. Critical ratio scheduling. 12. Index method of scheduling. 13. Critical path method.

Now, we will define the major criteria rules:

· First Come First Served (FCFS): In this method the job that comes first is served by scheduling first.

· Shortest Processing Time (SPT): In this method, the job that requires the least of shortest time is processed first.

· Longest Processing Time (LPT): In this method, the job that requires the longest time is processed first.

· Least slack: In this method, the top priority is given to the waiting job whose slack time is the least. Slack time is calculated as the difference of the length of time remaining until the job is due and the length of its operation time. For example, if the job requires 6 days and the time left is 8 days, then the slack for that job is only 2 days.

· Random Selection (RS): This is a rule that selects jobs randomly. There is no basis and it is done with pure chance.

· Next Queue (NQ): Next queue is based on machine utilisation. The idea is to consider queues at each of the succeeding work centres at which the job goes. The worker then selects the job that is going to the smallest queue, measured either in hours or jobs.

· Mathematical Programming Methods: It is applied to situations where there are ‘n’ number of supply sources and ‘n’ number of demand uses (Example: five jobs on five machines) and the objective is to minimise or maximise the effectiveness.

· Least Stup (LSU): This rule maximises utilisation. The process calls for scheduling the job first that minimises the changeover time on a given machine.

4. Bring out the differences between productivity and flexibility. And is productivity compromised by introducing flexibility in the manufacturing process? Comment

Productivity vs. Flexibility

In order to know the concept of flexibility versus productivity, we need to address questions like, what is the nature of relationship between the two? And does it mean that greater flexibility implies lesser or higher productivity?

A general proposition is flexibility hampers productivity by reduced output and requirement of more input. As flexibility facilitates more options, it would be hampering productivity. This is due to the freedom of choice and change mechanisms. Flexibility raises the need for more inputs for more options and reduced output. This opinion can be observed from two viewpoints: one from the input and the other from the output point of view.


Let us match the output of a mass manufacturing system and a flexible manufacturing system. Less flexibility may cause productivity of undesired output, whereas more flexibility will result in more real productivity of the desired output.

In order to bring out the difference between productivity and flexibility, let us consider two manufacturing systems such as

· A mass manufacturing dedicated assembly line.

· A flexible system able to handle many products.

Now, which manufacturing system is expected to have a higher rate of products manufactured per day? You may tell that a dedicated system would have higher output rate as there are no changeover time in-between. However, in reality, a manufacturer requires to produce many models as per customer requirements. If a dedicated assembly line is used, then you would incur loss of setup time as every new model requires a new setup to be created. Whereas, in case of an FMS many models can be handled simultaneously, and in that way, you will have more satisfactory output and thus more productivity in real sense. Thus, with less flexibility, the productivity seems to be high, but with more of undesired output– whereas more flexibility enables more real productivity of desired output.

A common assumption is that a dedicated system requires less input and is more efficient. However, a flexible system manages uncertainty of demand effectively, leading to less input per unit of output.

Let us examine the condition of input required in a less flexible and more flexible system for the same issue being discussed above.

Normally, it is assumed that a dedicated mass manufacturing system would be more efficient and would require less input of manpower and machines per unit product. A dedicated system requires balanced production stages and well skilled workers. On the contrary a flexible manufacturing system, producing different products at a time will require higher inputs of technology and multi-skilled workers.

It is observed that a less flexible system has higher productivity level on account of lower inputs. However, this is not true always as a dedicated system may be idle, when there is no demand for that product resulting in higher input costs per unit of output produced.

Whereas, in such a case, a flexible system will be able to better cope with uncertainty of demand as it deals with a variety of products. Thus, having higher capacity utilisation in real terms leads to higher productivity by way of less input per unit of output.

Thus, from the above discussion, we can conclude that though the productivity of a less flexible system may appear to be higher than that of a more flexible system in a stable environment, in real terms, the situation would be reverse in an uncertain and dynamic environment.

Flexibility built into FMS and its productivity with respect to machining technology is shown in the following figure. Here, lesser the volume of production, lot more is the flexibility.

5. Explain in brief the Goldratt’s “Theory of constraint” and the five focused steps of TOC recommended for solving the constraints/ problems.

Goldratt’s Theory of Constraints (TOC) Any element or factor that prevents a system from reaching a higher level of performance with respect to its goal is termed as a constraint. Constraints may be physical, such as equipment, or lack of material, which can be managed with certain pre-planning.


Constraint Management is the practice of managing the resources and the organisation in accordance with TOC principles. The theory of Constraints can be defined as “A management philosophy” developed by Dr. Eliyahu M. Goldratt and has to be viewed under three separate disciplines.

· Logistics: It includes Drum Buffer Rope (DBR) scheduling, buffer management, and VAT analysis.

· Performance measurement: It includes throughput, inventory, and operating expense and the five focusing steps.

· Logical thinking: Delving on process tools for identifying the root problem, and to find optimum solutions and develop implementation plans.

The TOC fundamentals are based on the cost accounting system, as it focuses too much on reduction of direct labour. The result is a highly non-synchronised flow of products through the plant that affects the company’s ability to compete.

11.18 Steps of TOC to Solve Problems/Constraints

Goldratt has recommended the following “Five Focussed steps of TOC” for alleviating constraints related to production, distribution, project management, and so on.

1. Identify the system constraints.

2. Determine how to exploit system constraints, that is making constraints effective.

3. Synchronise every part of the system to support ‘constraints’, even if it lowers efficiency of non constraint resources.

4. Improve the system constraints. If still the output is inadequate, procure more of this resource so it is no longer a constraint.

5. If, in the previous steps, the constraints have been simplified, go back to step one, but ensure that inactivity does not become the system constraint. This is a continuous process of improvement of identifying the constraints, simplifying them, and then identifying the new ones that occur.

Based on the above said work of Goldratt is the notion of SM. It refers to the entire production process working in harmony to achieve the set goal of the company. The emphasis of TOC is on total system performance, not on localised measures such as labour or machine.

6. Explain make or buy decisions and when it is appropriate to consider each respectively.

Strategic level – following are the activities that are managed at the strategic level of supply chain management: · Planned network, including the location, number, distribution centres, facilities, and size of warehousing.

· Suppliers, distributors and customers share strategic partnership for creating communication channels for critical information.

· The supply chain is integrated with the product life cycle management,

· Where-to-make and make-buy decisions.

· Organisational strategy and supply strategy needs to be aligned.


· Resource commitment is required as it is for long term.

Tactical level – the following activities are grouped under the tactical level: · Purchasing decisions and sourcing contracts.

· Contracting, scheduling, and planning process definition included in production decisions.

· Decisions pertaining to inventory location and quality.

· Strategy involved in transportation such as frequency, routes and contracting.

· Best practices are implemented throughout the enterprise after benchmarking of all operations against competitors. Customer demand is the prime focus.

Operational level – the following activities can be considered at the operational level: · Day to day planning of production and distribution.

· The minute by minute production scheduling for every manufacturing service in the supply chain.

· Sharing of the demand forecast with suppliers, and coordination of demand planning and forecast.

· Collaboration with all suppliers for source planning, current inventory and forecast demand.

· Transportation of materials from suppliers.

· The consumption of raw materials and the flow of finished goods within the organisation included in production operations.

· Transportation of goods to customers and warehousing.


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