057532: Production

Planning & Inventory

Control

Production Planning
& Inventory Control

Forecasting
Aggregate Planning
Inventory Management
Scheduling
Production Planning & Master Production
Scheduling (MPS)
Material Requirements Planning (MRP)
Capacity Planning
Just-in-Time (JIT) & Lean Manufacturing
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Introduction to
Production Planning &
Inventory Control

Production System
Input (4Ms):
Money
Man
Materials
Machine

Transformation

Output:
Product or Service

Productivity = Output / Input

= Quantity of Output / Quantity of Input
= Value of Output / Cost of Input
= Profit / Cost

Production System

Other Resources

Suppliers

Raw
Material
Inv.

Transformation
Work-In-Process
(WIP)

Finished
Goods
Inv.

Customers

Production & Inventory

Management (PIM)

PIM: The design, operation & control

of the systems for the manufacturing
& distribution of products.
Organizations may chooses to
maintain different types of inventory.
Types of inventory:
Raw Materials
Work-in-Process (WIP)
Finished Goods

Objectives of PIM:

Quality: Equal or better than

competitors.
Cost: Lower than competitors.
Time: Deliver to customers on time,
every time

PIM Functions

Planning: Selecting measurable

objectives and deciding how to
achieve them
Execution: Carrying out of plans
Control:
Comparing actual results (or simulated
results) with desired results
Deciding whether to revise objectives or
methods of execution

Production Planning
Decisions

Strategic Planning
Top Management
Long-Range Planning Horizon:
>18 months 10 years
Long-Range Planning Activities:

Business Forecasting
Product & Sales Planning
Production Planning
Resource Requirements Planning
Financial Planning

Production Planning
Decisions (Contd)

Tactical Planning
Middle Management
Medium-Range Planning Horizon: 1-18
months
Medium-Range Planning Activities:

Distribution Requirements Planning (DRP)

Demand Management
Master Production Scheduling (MPS)
Rough Cut Capacity Planning (RCCP)
Material Requirements Planning (MRP)
Capacity Requirements Planning (CRP)

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Production Planning
Decisions

Operational Planning

Short-Range Planning Horizon: 1 day 1 month

Involve priorities (i.e., determining and meeting
due dates) and capacities
Short-Range Planning Activities:
Input/Output Planning & Control
Production Activity Control
Purchase Planning & Control
Project Management
Total Quality Control (TQC) and Preventive
Maintenance

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Production Systems
Dimensions

Levels

Physical Organization

Product vs. Process

Key Resources

Labor Intensive vs. Capital

Intensive

Product Flow Control

Discrete Batches vs. Continuous

Flow

Order Initiation

Make-to-Order vs. Make-to-Stock

Product Authorization

Push vs. Pull

Product Variety

Single vs. Multiple Products

Product Volume

Custom Jobs vs. Repetitive Mass

Production

Fabrication / Assembly
Structure

Single Stage vs. Multiple Stages

Time Horizon

Single Period (Static)

vs. Multiple Periods12
(Dynamic)

Physical Organization:
4 basic layout types
(1) Process Layout:
Used when many different products
are produced & there is a need for
skilled expertise at production
processes.
A greatest flexibility to produce a
variety of items
Low equipment use
Long throughput times
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Physical Organization
(2) Product Layout:
Used for repetitive manufacturing where
demand is large enough to economically justify
the dedication of equipment to a single product.
Production processes are laid out in a
sequential manner so that product visits each
area, one right after the other.
Equipment is designed to have similar
production rates at each stage.
In a high volume environment, product layouts
are very efficient and typically have small
throughput times.

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Physical Organization
(3) Cellular Layout:
Attempt to partition large facilities into
smaller cells designed to produce a
family of related parts or products.
Similarity of machines/tooling or usage
in the same finish products.
Each cell is a simpler mini-factory, with
short materials moves and easier
coordination.
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Physical Organization
(4) Fixed Position Layout:
Large projects such as constructing
a building.

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Physical Organization

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Physical Organization
Characterist Produ Proce Cellular Fixed
ic
ct
ss
Skill Level
Low
High Mixed
High
Unit
Low
High Low
High
Production
Cost
Equipment
Utilization

High

Low

Moderat
e
High

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Low
Moder
ate

Key Resources

Capital Intensive:

High-cost machines/equipments
Run multiple shifts & employ adequate labor
to keep the process running.
Increasing capacity takes a long time and is
very expensive.
Often the majority of cost is fixed and thus it
is expensive to have the equipment idle.
Capacity of all resources is maintained at a
higher level to ensure optimal use of the
bottleneck.

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Key Resources

Labor Intensive:

Equipment tends to be small and

inexpensive.
Capacity can be modified in a
relatively short time by hiring and
training workers or through layoffs.
Overtime and extra shifts can be
added when extra capacity is needed.
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Product Flow Control

Batch Flow Process:

Automobile
Furniture
Consumer electronics
Textiles

Continuous Flow Process:

Foods
Chemicals
Pharmaceuticals
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Order Initiation: Make-toStock

Strategy:
Emphasizes immediate delivery of good quality,
reasonable priced, off-the-shelf, standard items.
Sets target levels for the number of units of each
product to keep on hand at all times.
Makes sense when delivery response time is a key
competitive factor.
Stocking allows us to schedule production in
advance and to coordinate the delivery of R/Ms with
the production schedule.
Large inventories of F/Gs (due to the need to provide
a variety of size, colors & features)
Require investment capital & storage space
Run the risk of damage & obsolescence

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Order Initiation: Make-toOrder

Strategy:
To provide the technical ability to produce specialty
products
Inventories of F/Gs are not maintained
Items are only produced after they have been ordered.
Some components are custom designed for the
customer.
Materials are often purchased after the order is placed.
Long Lead Time
Make-to-Order is appropriate when
The system can respond quickly to customer requests
Products have a high degree of customization
Shelf life of products is short because of changing
customer tastes or product spoilage.

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Order Initiation: Assembleto-Order

Assemble / Pack / Finish

Strategy:
To supply a large variety of high quality, competitivelypriced final products from standard components &
subassemblies within a short assembly lead time.
Many variations of final product exist, all base on a
few subassembly platforms.
Components and subassemblies are produced/
purchased to stock.
Final assembly can be performed quickly providing a
rapid delivery cycle time of seemingly customized
products.
We need not incur the high cost of storing a wide
variety of finished goods that may never be ordered.

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Production Authorization

Refers to the tactical decision of

when a worker or machine is
allowed to start a task that is part
of an open shop order.
Push & Pull Systems

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Production Authorization
Push System:

A high-level planning model will keep

track of all orders and their status and
send authorizations to workers/machines
when they are to begin a job.
We use the word push because these
orders, along with the required R/Ms,
are pushed into the work areas input
buffer by this upper-level controller.
The appearance of this material
constitutes an authorization to work.

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Production Authorization
Pull System:

Workers are informed that it is time to

perform a task when someone comes
with an authorization to remove the F/G
from the output buffer.
The station is supposed to maintain a
fixed number of each part type in
inventory.
When parts are pulled out of the stations
output buffer by a subsequent station,
the station is automatically authorized to
replace these parts.

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Product Volume & Variety

The combination of product volume &

variety strongly impacts the choice of layout
type, the planning unit & decision hierarchy.
If products use resources in a similar
proportion, we can frequently aggregate
these into a single product for planning
purposes.
If multiple products with different resource
profiles are produced, then the products
and all potential bottleneck processes must
be explicitly considered in decision models.

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Product Volume & Variety

As product volume increases & variety

decreases, dedicated process layouts &
continuous flow manufacturing become
more economical.
Dedicated
The production facility produces
only one product, including product
variations (e.g. colors) that require no
setup delay in the process.
High-Volume products can justify
specialized tooling and equipment.
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Product Volume & Variety

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Product Structure

Single Stage vs. Multiple Stage

Fabrication & Assembly:

Many of the manufactured (fabricated)

components may first be assembled into
subassemblies.
Then subassemblies combine into products.
The production plan must account for the timephased assignment of operations to workstations
for each component & subassembly to be used in
final assembly.
We must plan to have each component &
subassembly arrive at the final assemble point at
the right time and in the right sequence.

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Time Horizon
(Static vs. Dynamic
Environments)

Static: Constant through the time

Static models assume the same plan
will be acceptable in each period, at
least for the foreseeable future.
Dynamic models explicitly consider
changes in demand & resource
availability to determine what should
be done through time over a planning
horizon period.
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Production Process
Design
Flow Shop

A product always follows the same sequential

steps of production.
Typical Layout: Line (Product Emphasis)
Make-to-Stock or Assemble-to-Order

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Flow Shop

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Flow Shop (Contd)

1.

Continuous Flow

2.

Items: Low Cost / Standardized /

Automated Process / Specific Purpose
Machinery
Make-to-Stock

Dedicated Repetitive Flow

Items: Competitive Cost / Low Variety /

Some Automation Process / Specific
Purpose Machinery
Make-to-Stock

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Flow Shop (Contd)

3. Batch Flow

Long setup time, thus manufacturing runs

for each product typically last several hours
or days.
Items: High Quality / Some Variety / Medium
Cost Process / General Purpose Machinery
Make-to-Stock / Assemble-to-Order
Example: Bottle filling plant
Long Setup time:
Line cleaning, Adjustment for bottle
height changes, etc.

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Production Process
Design (Contd)
Job Shop

The process is characterized by the

organization of similar equipment by function.
Typical Layout: Functional (Process Emphasis)
Customized Product
Items: Low Volume/ High Quality / High
Variety / High Cost Process / Skilled Labor
Different Work Center Loads / High WIP / Long
Waiting Time
General Purpose Machinery
Make-to-Order

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Job Shop

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Job Shop

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