Production Planning: its Meaning and Objectives!

Production is the most important activity of an

enterprise. It occupies significant place in an
organisation because other functional areas of
management viz., financing, marketing, personnel
revolve around it.
Production is concerned with transforming raw
material into finished product with the help of energy,
capital, manpower and machinery and is a very
complex and tedious process.
Production is carried on by following various production
policies initiated by production department of an
organisation. The aim of a good production policy is to

Production Planning: its Meaning and Objectives!

According to Elwood S. Buffa , In a broader sense,

production management is concerned with
coordination of materials, men, methods, machines
and money in manufacturing goods.
In a narrow sense it means planning, scheduling and
controlling the flow of materials through a plant.
In simple words, it can be concluded that production
management is concerned with decision making
relating to processes for producing goods and
services in accordance with the pre-determined
specifications and standards by incurring minimum
costs.

PRODUCTION PLANNING - Meaning:

Production planning involves the means by which a manufacturing
plan is determined, information issued for its execution, data
collected and recorded, which will enable the plant to be controlled
through all its stages.
A few definitions are given here in order to have clear understanding
of the term Production Planning.
The planning of industrial operations involves four considerations,
namely, what work shall be done, how the work shall be done and
lastly, when the work shall be done.
Kim bait
and Kimball Jr.
The technique of forecasting or picturing ahead every step in a long
series of separate operations, each step to be taken in the right place
of the right degree and at the right time and each operation to be
done at maximum efficiency.
Alford and Beatty

PRODUCTION PLANNING Meaning:

Production planning is a series of related and

co-ordinated activities performed by not one but
a number of different departmental groups, each
activity being to systematise in advance the
manufacturing efforts in its area.
Bethel, At water. Smith others
By studying the above mentioned definitions it
can be said that production planning is
concerned with thinking in advance what is to
be produced, how it is to be produced and by

Objectives of Production Planning:

1. To achieve coordination among various

departments relating to production.
2. To make adequate arrangement of men,
money, materials, machines tools, implements
and equipment relating to production.
3. To decide about the production targets to be
achieved by keeping in view the sales forecast.
4. To keep production operation continuous.
5. To achieve desired share of the market.

Objectives of Production Planning:

7. To achieve the desired level of profit.
8. To make all arrangements to remove possible obstacles in the
way of smooth production.
9. To achieve economy in production cost and time.
10. To initiate production on modern lines.
11. To operate the plant at planned level of efficiency.
12. To develop alternative plans in order to meet any emergency or
contingency.
H.A. Harding has nicely summed up objectives of production
planning. In his words, the objective of production planning is to
make sure that customers will be supplied their orders, on their
delivery dates and also at the minimum overall cost by planning the
sequence of activities.

Important functions of production

planning and control :

1.Materials Function:
Raw materials, finished parts and bought out
components should be made available in required
quantities and at required time to ensure the
correct start and end for each operation resulting
in uninterrupted production. The function includes
the specification of materials (quality & quantity)
delivery dates, variety reduction (standardisation)
procurement and make or buy decisions.

Important functions of production planning and control :

2.Machines and Equipment:

This function is related with the detailed analysis of available
production facilities, equipment down time, maintenance policy
procedure and schedules. Concerned with economy of jigs and
fixtures, equipment availability. Thus the duties include the
analysis of facilities and making their availability with minimum
down time because of breakdowns.
3.Methods:
This function is concerned with the analysis of alternatives and
selection of the best method with due consideration to
constraints imposed. Developing specifications for processes is
an important aspect of PPC and determination of sequence of
Operations.

Important functions of production planning and control :

4.Process Planning (Routing):

It is concerned with selection of path or route which the raw should
follow to get transformed in to finished product.
The duties include:
(a) Fixation of path of travel giving due consideration to layout.
(b) Breaking of operations to define each operation in detail.
(c) Deciding the set up time and process time for each operation.
5.Estimating:
Once the overall method and sequence of operations is fixed and
process sheet for each operation is available, then the operations times
are estimated. This function is carried out using extensive analysis of
operations along with methods and routing and standard times for
operation are established using work measurement techniques.

Important functions of production planning and control :

6.Loading and Scheduling:

Scheduling is concerned with preparation of machine loads
and fixation of Starting and completion dates for each of the
operations. Machines have to be loaded according to their
capability of performing the given task and according to their
capacity.
Thus, the duties include:
(a) Loading the machines as per their capability and capacity.
(b) Determining the start and completion times for each
operation.
(c) To Co-ordinate with sales department regarding delivery
schedules.

Important functions of production planning and control :

7.Dispatching:
This is the execution phase of planning. It is the process of setting
production activities in motion through release of orders and instructions.
It authorises the start of Production activities by releasing materials,
components, tools, fixtures and instruction sheets to the operator.
The activities involved are:
(a) To assign definite work to definite machines, work centres and men.
(b) To issue required materials from stores.
(c) To issue jigs, fixtures and make them available at correct point of use.
(d) Release necessary work orders, time tickets etc. to authorise timely
start of operations.
(e) To record start and finish time of each job on each machine or by each
man.

Important functions of production planning and control :

8.Expediting:
This is the control tool that keeps a close observation on the progress of the work. It is a
logical step after dispatching which is called follow-up or Progress. It co-ordinates
extensively to execute the production plan. Progressing function can be divided in to
three parts, i.e. follow up of materials, follow up of work in process and follow up of
assembly.
The duties include:
1. Identification of bottlenecks and delays and interruptions because of which the
production schedule may be disrupted.
2. To devise action plans (remedies) for correct the errors.
3 To see that production rate is in line with schedule.
9.Inspection:
It is a measure control tool. Though the aspects of quality control are the separate
function, this is of very much important to PPC both for the execution of the current
plans and in scope for future planning. This forms the basis for knowing the limitations
with respects to methods, processes etc. which is very much useful for evaluation
phase.

Important functions of production planning and control :

10.Evaluation:
This stage though neglected is a crucial to the improvement of
productive efficiency. A thorough analysis of all the factors
influencing the production planning and control helps to
identify the weak spots and the corrective action with respect
to preplanning and planning will be effected by a feed back.
The success of this step depends on the communication, Data
and information gathering and analysis.

Intermittent production system

Intermittent means something that starts (initiates) and

stops (halts) at irregular (unfixed) intervals (time gaps).
In the intermittent production system, goods are
produced based on customer's orders. These goods are
produced on a small scale. The flow of production is
intermittent (irregular). In other words, the flow of
production is not continuous. In this system, large
varieties of products are produced. These products are
of different sizes. The design of these products goes on
changing. It keeps changing according to the design
and size of the product. Therefore, this system is very
flexible.

Intermittent production system

Following are examples on the intermittent production system. Please

refer above chart while reading examples given below.
1. The work of a goldsmith is purely based on the frequency of his
customer's orders. The goldsmith makes goods (ornaments) on a smallscale basis as per his customer's requirements. Here, ornaments are not
done on a continuous basis.
2. Similarly, the work of a tailor is also based on the number of orders he
gets from his customers. The clothes are stitched for every customer
independently by the tailor as per one's measurement and size. Goods
(stitched clothes) are made on a limited scale and is proportional to the
number of orders received from customers. Here, stitching is not done on
a continuous basis.

Continuous production system

Continuous means something that operates constantly

without any irregularities or frequent halts.
In the continuous production system, goods are produced
constantly as per demand forecast. Goods are produced on a
large scale for stocking and selling. They are not produced on
customer's orders. Here, the inputs and outputs are
standardized along with the production process and sequence.

Continuous production
system
Following are examples on the continuous production

system. Please refer above chart while reading

examples given below.
1. The production system of a food industry is purely
based on the demand forecast. Here, a large-scale
production of food takes place. It is also a continuous
production.
2. Similarly, the production and processing system of
a fuel industry is also purely based on, demand
forecast. Crude oil and other raw sources are processed
continuously on a large scale to yield usable form of
fuel and compensate global energy demand.

DIFFERENCE BETWEEN INTERMITTENT AND CONTINUOUS

PRODUCTION SYSTEM

1. Nature of product :

a. In intermittent production system, goods are produced based on customer

orders and not for stocking.
b. In continuous production system, goods are produced based on demand
forecast and for stocking.
2. Flexibility of process :
a. In intermittent production system, production process is flexible. The product
design goes on changing.
b. In continuous production system, production process is not flexible. It is
standardized. The same product is manufactured continuously.
3. Scale of production :
a. In intermittent production system, goods are produced on a small scale, so
there is no economies of scale.
b. In continuous Production System, goods are produced on a large scale, so
there are economies of large-scale production.

DIFFERENCE BETWEEN INTERMITTENT AND CONTINUOUS PRODUCTION SYSTEM

4. Per unit cost :

a. In intermittent production system, cost per unit may be higher because
production is done on a small-scale.
b. In continuous production system, cost per unit may be lower because
production is done on large-scale.
5. Range of products :
a. In intermittent production system, wide ranges of products are manufactured.
b. In continuous production system, normally one particular type of product is
manufactured.
6. Instructions :
a. In an intermittent production system, many detailed instructions must be
provided depending upon the customer's specification.
b. In continuous production system, single set of instructions is sufficient for
operation. Here, there is no need to repeat the instructions.

DIFFERENCE BETWEEN INTERMITTENT AND CONTINUOUS PRODUCTION SYSTEM

7. Staff :
a. Intermittent production system requires staff with high technical skills and abilities.
b. Continuous production system requires more managerial skills and less technical
skills.
8. Storage of final products :
a. In an intermittent production system, there is no need to store and stock the final
products, because items are produced as per customer's orders.
b. In a continuous production system, there is a need to store and stock the final
products until they are demanded in the market.
9. Location change :
a. In an intermittent production system, change in location is easy.
b. In a continuous production system, change in location is difficult.
10. Capital invested :
a. In an Intermittent production system, capital invested is small.
b. In a continuous production system, capital invested is very huge.

Definition of Production Control:

In the opinion of Mary Gushing Niles, Control is maintaining a

balance in activities towards a goal or set of goals evolved
during production planning. Planning only outlines some
course of action whereas control is an execution process
involving standardisation, evaluation and corrective functions.
According to Fayol, Control consists in verifying whether
everything occurs in conformity with the adopted plan and
established principles. The objective of control is to point out
weaknesses and shortcomings, if any, in order to rectify them
and prevent recurrence. It operates on everything viz. material,
equipment, men, operations etc. For control to be effective, it
must be applied within reasonable time and be followed-up
sanctions.

Definition of Production
Thus production control is some
Control:
scientific procedure to regulate an orderly
flow of material and co-ordinate various production operations to

accomplish the objective of producing desired item. In right quantity of

desired quality at the required time by the best and the cheapest method
i.e., to attain highest efficiency in production.
Alternately, production control is the function of management which plans,
directs and controls the material supply and processing activities of an
enterprise; so that specified products are produced by specified methods to
meet an approved sales programme. It ensures that the activities are
carried in such a way that the available labour and capital are used in the
best possible way.

Necessity of Production Control:

Production process of an enterprise is a system consisting of material,
labour and equipment combined together by some dependence imposed by
operations. Input factors in the process are always uncontrollable. The
controller of a production process tries to control the output so that it is in
conformity with the target set by the marketing department.

Definition of Production Control:

Production control tries to channelize the manufacturing
process in such a manner that goods and services are produced
according to the requirements of the consumer, i.e., of right
quality, shape and quantity at the desired time.
In the present era of cut-throat competition, production control
is a boon for an enterprise. It tries to take corrective measures
whenever thoro is some deviation from the planned strategy.
Goetz has rightly said that Management planning seeks
consistent, integrated and articulated programmes. Production
control aims to fulfil these needs.
In the report on the elimination of waste in industry. President
Novar's committee states that Production control is the
hallmark of production efficiency., it is a necessity and not a
luxury; a profitable investment and not an expense.

Objectives of Production Control:

The success of an enterprise greatly depends on the performance of its production

control department.
The production control department generally has to perform the following
functions:
(i) Provision of raw material, equipment, machines and labour.
(ii) To organise production schedule in conformity with the demand forecast.
(iii) The resources are used in the best possible manner in such a way that the cost
of production is minimised and delivery date is maintained.
(iv) Determination of economic production runs with a view to reduce setup costs.
(v) Proper co-ordination of the operations of various sections/departments
responsible for production.
(vi) To ensure regular and timely supply of raw material at the desired place and of
prescribed quality and quantity to avoid delays in production.
(vii) To perform inspection of semi-finished and finished goods and use quality
control techniques to ascertain that the produced items are of required
specifications.
(viii) It is also responsible for product design and development.

Objectives of Production Control:

Thus, the fundamental objective of production control is to regulate

and control the various operations of production process in such a
way that orderly flow of material is ensured at different stages of
the production and the items are produced of right quality in right
quantity at the right time with minimum efforts and cost.
Levels of Production Control:
Production Control starts with some particular goal and formulation
of some general strategy for the accomplishment of desired
objectives. There are three levels of production control namely
programming, ordering and dispatching. Programming plans the
output of products for the factory as a whole.
Ordering plans the output of components from the suppliers and
processing departments. Dispatching considers each processing
department in turn and plans the output from the machine, tools
and other work centres so as to complete the orders by due date.

What Is a Break-Even Analysis?

The break-even analysis lets you determine what
you need to sell, monthly or annually, to cover your
costs of doing businessyour break-even point.

PURPOSE OF BREAK EVEN ANALYSIS

To help in deciding profitable level of output , below which
losses will occur
To compute costs and revenues for all possible volumes of
output to fix budgeted sales
To take decision regarding make or buy
To decide the product mix and promotion mix
To take plant expansion decisions
To take equipment replacement decisions
To indicate margin of safety
To fix the price of an article to give the desired profit
To compare a number of business enterprises
To compare a number of facility locations

TERMS USED IN BREAK EVEN

ANALYSIS

FIXED COST : The cost which does not change

with the volume of Production is called fixed
cost. e.g administrative overhead
VARIABLE COST: The cost which varies with the
volume of production is referred as variable
cost. E.g raw material
TOTAL COST LINE : The line which comes with
the addition of fixed cost and variable cost is
called total cost line.
BREAK EVEN POINT : The break even point may
be defined as the level of sales at which total

BREAK EVEN CHART

It is a graphical representation of the relationship between costs and
revenue at a given time
It is a graphic device to determine the break even point and amount of
loss and profit under varying conditions of output and costs.
Costs and revenues is represented on vertical axis while output in
quantity is represented is represented in horizontal axis.
The fixed costs line is horizontal and parallel to the X axis . It indicates
that fixed costs remain unchanged for any volume.
The variable cost line is superimposed on the fixed cost line to show
total costs.
The total sales revenue line indicates sales income at various levels of
output.
The point at which the total revenue line intersects the total cost line
is the break even point.

BREAK EVEN CHART

The method to plot break even chart is as under :
The cost and revenue in rupees are plotted on Y- axis.
The volume of production ( in units) is plotted on X-axis.
Fixed cost plotted by a straight line parallel to horizontal axis.
The variable cost is superimposed on the fixed cost line. This
represents total cost line.
The sales line passes through origin.
The point of intersection of total cost line and sales line is
Break Even Point.
The left shaded part to BEP is loss and to right shaded part
is profit.

TERMS USED

MARGIN OF SAFETY : It is the difference between the existing

level of output and the level of output at BEP. Margin of safety =

Sales Sales at BEP Sales/Sales
Greater the value of margin of safety means higher profits to the
firm

ANGLE OF INCIDENCE : This is the angle at which sales

revenue line cuts the total costs line. A larger angle of incidence
indicates a high profit rate.
PROFIT VOLUME RATIO (PV RATIO) : It is the ratio of contribution
to sales. It is measure to compare profitability at different
products.
PV RATIO = Contribution/ Sales *100
= Increase in profit /increase in sales* 100

EFFECTS ON BEP DUE TO VARYING INPUT/ OUTPUT

EFFECT OF INCREASE IN FIXED COST :
Increase in fixed cost shifts BEP towards the right hand side . It
shows that increase in fixed cost reduces the margin of profit.
EFFECT OF INCREASING THE VARIABLE COST :
It will increase the total cost and shift BEP towards right hand .
So decrease in profit takes place.
EFFECT OF INCREASE IN SALE PRICE:
If the price of article rises, a new sales revenue will be drawn
with a greater slope. This shifts the BEP towards the left hand
side. Thus increases the company profit for the volume of
output.

LIMITATIONS OF BREAK EVEN

ANALYSIS
Break even analysis is a static picture as it assumes constant
relationship of output to costs and revenue.
Selling Price and Variable cost per unit are not constant
practically
It is based on accounting data which may suffer from several
limitations like neglect of input costs, depreciation estimates,
inappropriate allocation of overheads etc.
It is a tool of short run analysis. It can not be used for long term
analysis.

What is a Gantt chart?

It was developed by Henry L Gantt, an American Engineer and

social scientist
A Gantt chart, commonly used in project management, is one of the
most popular and useful ways of showing activities (tasks or events)
displayed against time. On the left of the chart is a list of the
activities and along the top is a suitable time scale. Each activity is
represented by a bar; the position and length of the bar reflects the
start date, duration and end date of the activity. This allows you to
see at a glance:
What the various activities are
When each activity begins and ends
How long each activity is scheduled to last
Where activities overlap with other activities, and by how much
The start and end date of the whole project

Gantt chart

GANTT CHART - CONSTRUCTION

A Gantt Chart is constructed with horizontal axis
representing the total time span of the project broken
down in days, weeks or months .
Vertical axis representing the tasks that make up the
project.
To construct a Gantt chart firstly listening all the things
that you can think of that need to be done in a Project.
Then those tasks are grouped under specific headings.
Gantt Chart is to be used for people to look at regularly
so that they can get an idea of what is happening in a
Project

ADVANTAGES OF GANTT CHART

It gives an easy and visual idea about the

status of the project is it on time or not.
It tells us whos working on what.
It shows the dependencies of the task.
It can easily adopt to changes in the Project.
It demonstrates that you know what you are
doing.
It helps to set realistic time frames.
It is the best tool for planning and scheduling
projects.

DISADVANTAGES OF GANTT CHART

Gantt charts becomes extraordinary

complex.
The size of the bar does not indicate the
amount of work completed.
Need to be constantly updated
Dependencies can easily become a mess,
especially for larger projects.
Difficult to see on one sheet of Paper.

COMPARISON OF JOB , MASS, BATCH PRODUCTION

SR.
NO.

2
3

PARAMETE
RS

JOB PRODUCTION

Nature of Product is
Producti fabricated in a
on
fixed position
and machines,
raw materials,
man etc. are
brought to a
particular place
Quantity One or very few
Produced
Machines General purpose
and
machines are
equipme used
nt used

BATCH
PRODUCTION

Production is
done in small
batches. One
operation is done
on whole the
batches then the
next operation is
done.
Limited batch
size
Special purpose
machines are
used

MASS PRODUCTION

Identical parts are

produced in a
continuous
manner.

Very large
Mostly single
purpose machines
are used.

COMPARISON OF JOB , MASS, BATCH PRODUCTION

SR.
NO.

PARAMETE
RS

JOB PRODUCTION

BATCH
PRODUCTION

MASS PRODUCTION

Unit Cost Very high

High

Less

Producti
on
Planning

Production
Planning is done
for each Product

Production
Planning is done
for each batch

Scheduli
ng

It is done for
each job

It is done for
each batch

Production Planning
is done before
starting the
production
Scheduling is fixed

Example
s

Tailoring, ship
building etc.

Furnitures,
Printing Mills etc.

Automobile Parts
gears etc.

OBJECTIVE TYPE QUESTIONS

1. In process production system, the

sequence of operation is

2. Plants employing process production

systems are known as
plants.
3. Break even point is the point at
whichare same.
4. Routing indicates the .of

OBJECTIVE TYPE QUESTIONS

1. In process production system, the

sequence of operation is
FIXED
2. Plants employing process production
systems are known as
FUNCTIONALplants.
3. Break even point is the point at which
REVENUES AND TOTAL COSTSare same.
4. Routing indicates the PATH.of

MULTIPLE TYPE QUESTIONS

1. In Intermittent production following

system is used :
a) Mass Production b) Process Production
c) Assembly lines d) None of these
2. Production Planning function is
a) Loading b) despatching c) inspection d)
progressing
3. Routing prescribes the

MULTIPLE TYPE QUESTIONS

4. Which system is used for mass production

of identical parts ?
a) Process Production b) Mass Production c)
Assembly lines d) Job Production
5. Schedule showing the planned utilization
of men and machines is .
b) Route chart b) move ticket c) loading
chart d) time card
6. Work order form is used in .

MULTIPLE TYPE QUESTIONS

7. Progress control can be done with the help

of
a) Work order b) inspection ticket c) job
card d) Gantt Chart
8. Process balancing is must for
b) Mass production b) job order production
c) batch production d) none of these
ANSWERS : 1. d 2. a 3. d 4. b 5. c 6. b