Manufacturing Planning And Control

National Institute of Technology Calicut

Department of Mechanical Engineering

MANUFACTURING PLANNING AND CONTROL (MPC) An Overview of MPC system: • MPC systems concerns planning and controlling all aspects of manufacturing, including managing materials, scheduling machines and people, and coordinating suppliers and key customers • Both the MPC system and manufacturing process are designed to meet the dictates of the marketplace and to support overall company strategy • An effective MPC system can provide substantial competitive advantage for a company in its marketplace • Basically the MPC system provides information to effectively manage the flow of material, effectively utilize people and equipment, and coordinate supply chains • It provides to managers with information to make intelligent decisions • MPC system need to continuously adapt and respond to changes in the company environment, strategy, customer requirements, particular problems, and new supply chain opportunities • Firms to be an effective competitor must have MPC systems with the ability to determine, transmit, revise, and coordinate requirements throughout a global supply chain system Typical MPC Support Tasks • Plan capacity requirements and availability to meet marketplace needs • Plan for material to arrive on time in the right quantities needed for product production • Ensure utilization of capital equipments and other facilities is appropriate • Maintain appropriate inventories of raw materials, work in process, and finished goods – in correct locations • Schedule production activities so people and equipments are working on the correct things • Track material, people, customers’ orders, equipment, and other resources in the factory • Communicate with customers and suppliers on specific issues and long-term relationships • Meet customer requirements in a dynamic environment that may be difficult to anticipate • Respond when things go wrong and unexpected problems arise • Provide information to other functions on the physical and financial implications of the manufacturing activities

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

MPC System Payoffs Symptoms of poor MPC system are: Poor customer service, excessive inventories, inappropriate equipment or worker utilization, high rate of part obsolescence, lack of responsiveness to changes in the business environment, and large number of expeditors dedicated to ‘fire fighting’.

Managing the Manufacturing Process Ø What are the manufacturing process stages? Ø What are the management concerns with each stage? Manufacturing process: ♦ Physical flow is quite universal ♦ Specific differences between firms must be taken into account Differences: § Production process – vast differences among different types of production processes § Four broad classes are job shop, batch production, mass production, and continuous flow process

Product Variety

Job Shop Production

Batch Production

Mass Production

Continuous Flow Process Production Volume Fig. 1 Types of Plant Configurations

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National Institute of Technology Calicut

Department of Mechanical Engineering

Job shop § Wide range products are manufactured (quantity usually small) § Parts are routed to work centres depending on the production steps required § Manufacture customised product § Job shops are typically inefficient and have long lead times, large work-in-process inventory, and high costs § Major performance criterion is utilisation of equipments § Eg:- Special purpose machine tools, Commercial printer, Boilers, etc Batch production § Involves the manufacture of medium-size lots of the same item or product § The lots may be produced only once or they may be produced at regular intervals § Lot sizes and the frequency of production of a single item are tied up with the inventory control policies adopted by marketing § Product demand characteristics may lead to different kind of production management especially production control Ø Usually the products produced in a batch production have somewhat-continuous demand Ø But the production rate is usually higher than the demand rate and hence batch production method is traditionally adopted Ø The items that goes into the final products generally standardised Ø Such production of standardised items on a continuous basis is called repetitive production Ø For repetitive production, demand does not have to be large, just stable enough so that final assembly schedule can be smoothed (ie, have relatively level daily production output) Ø To achieve stability and enable levelled production scheduling, some organisation combine production of different version of products that were formerly produced separately Ø Combining production of different products is feasible as long as product differences are add-on features or options and not differences in fundamental design, major components or production processes Ø Grouping different items usually resulted in a particular way of configuring the system for achieving the better operational efficiency and control Ø Such configuration is called cellular manufacturing or group layout Mass production § Continuous specialised manufacture of identical products § High-volume production lines are characterised by very high production rates and narrow scope

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

§

One or a few products travel through a set of fabrication activities specially arranged for the particular products (The entire plant is designed and operated for manufacture of a single product type) § The equipment is dedicated to the manufacture of a single product type such as automobile, light bulbs, appliances § A very high fixed investment is required for one-of-a-kind specialisation of production facilities, such as fixed transfer lines, dedicated conveyors, buffers, etc § Each piece of equipment is optimised in terms of cost and time for the operation it performs and material movement is automated Continuous flow process § Continuous dedicated production of large amounts of bulk product § Product types are few and volumes are high § Continuous flow material through a serious of sequential operations § Eg:- chemical plants, oil refineries, plastics, iron and steel, and textile industries A system configuration suitable for the competitive environment where low to mid volume production is called Flexible Manufacturing Systems (FMS) Flexible Manufacturing Systems (FMS) § Automated transfer lines were installed in automobile and other industries for mass production. § Such systems, although economical, lack flexibility § They would be choice configuration for steady markets § The small-batch production and custom-made products that accounts for 75 % of total number of work pieces are essentially manufactured in job shops § These shops are inefficient in machine utilisation and have large manufacturing lead times § FMS have evolved as a solution to efficient mid-volume production of a variety of part types with low set-up time, low work-in-process inventory, short manufacturing lead time, high machine utilisation, and high quality § Capability to maintain competitive production of a variety of part types in low-to mid-volume ranges, in the face of design, demand, and part mix changes, and machine and tool failures Another kind of difference § Distinguished as make to order, assemble to order and make to stock § Make to order - Manufacture each customer order on a unique basis § Assemble to order – assemble a wide variety of finished goods from a smaller set of standardised options - Needs careful integration of actual customer orders with option planning and final assembly

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

§

Make to stock – produces goods to replenish inventory - Finished goods inventories are used to separate the assembly process from customer orders Still another difference § Complexity of component part fabrication and assembly § Some firms do little internal fabrication, purchasing most of their component parts prior to assembly Ø This is true especially in the current outsourcing scenario Ø Outsourcing is the term used to describe when a firm purchases material, assemblies, and other services that were initially done within company, from sources outside the company Ø Outsourcing allows a firm to focus on activities that represent its core competencies Ø Thus the company can create a competitive advantage while reducing cost Ø The coordination of outsourcing activities is typically carried out by materials/logistic management Ø Materials/logistic management refers to the grouping of management functions that support the complete cycle of material flow, from the purchase and internal control of production materials; to the planning and control of work-in-process; to the shipping, and distribution of finished goods § Others with extensive machining and other conversion processes, have significantly more complex component part fabrication activities § Some firms makes relatively few products with dozens of components parts; assemble hundreds of end items made from thousands of component parts Yet another difference Push/Pull Systems § Based on the timing of the production operation relative to customer demand the manufacturing system can be classified as push or pull systems Push System § Materials are processed in batches according to a schedule for each workstation, then moved (pushed) downstream to the next workstation where they processed according to anther schedule § The materials must usually wait until the workstation completes earlier jobs, changes over, and is ready to process them § In a factory that produces many kinds of product with different routing sequences and demand rates, the wait can be unpredictable § As a result, the schedules are substantially padded to offset the waiting time uncertainty and to account for material shortages, machine breakdowns, and so on § This uncertainty and consequential padding of schedules leads to long lead times, high variability in lead times, and large in process inventories § In push process execution is initiated in anticipation of customer orders MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

§ At execution demand is not known and must be forecasted § It is a speculative process Pull System § Consumer withdraws whatever material is needed from stock, and when the amount in stock reaches some minimum level, that signals the producer at the upstream location to replenish it § The producer then makes or procures the material in some prespecified quantity and puts it into stock § In pull production, detailed production schedules for every operations are eliminated § Immediate decisions about quantities and timing of work are made by workers using a simple signal system that connects operations throughout the process § The charm of the system is that with relatively little inventory and only minimal information requirements, the system keeps material flowing to meet demand § In pull process execution is initiated in response to a customer order § At execution demand is known § It is a reactive process § It is suitable for repetitive production environment § Sometimes called stockless production § Also called Just-in-time production because it seeks to have every stage in process produce and deliver materials downstream in the exact quantities and at the exact times requested Desirable Characteristics of Production Systems § Flexibility – is the ability of the system to respond effectively to change § Responsiveness – Rapid response to customer request § Product variety § Product quality § Mass customisation – implies flexibility to produce a variety of products to meet increasing customer demands and flexibility of process to meet whatever volume responsiveness is required § Affordable cost – product cost and transaction cost § Better service § Lower inventories Concerns associated with manufacturing stages are: v Management problems v Techniques and systems v The data base

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National Institute of Technology Calicut

Department of Mechanical Engineering

Material Flows, Management Problems, Decision-making Techniques, and Supporting Database Stage A B C How to schedule Example How to maintain How to monitor management accurate raw material component item vendor performance production Problems records Techniques and Vendor scheduling Cycle counting Shop-floor control systems procedures techniques systems Database Purchase orders Inventory records Part routings elements

Vendors Purchasing

MPC Introduction

Raw material inventories

D E How to determine How to schedule final component item assembly requirements Material requirements Master production planning(MRP) systems scheduling(MPS) systems

Fabrication

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Bill of material

Component-part inventories

Open customer orders

Assembly

National Institute of Technology Calicut

F How to estimate enditem demand for each product

Assembly

Department of Mechanical Engineering

G

H

I

J

How to move material to distribution centers

How much and when to order

How to choose transportation modes

How to meet customer needs

Exponential smoothing forecasting procedures

Vehicle loading procedures

Independent demand based inventory procedures

Sales order history

Shipping costs

Planned shipments

Finished-goods Inventories

Inventory/tran-sportation Distribution requirement trade-off techniques planning (DRP) systems Transportation costs

Field warehouses

Distribution centers Transport

Customer ordering patterns

Transport

Fig. 2 Material Flows, Management Problems, Decision-making Techniques, and Supporting Database

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Customers

National Institute of Technology Calicut

Department of Mechanical Engineering

Techniques and systems: Nature of management problems Ø Infrequent eg. Determining distribution centres Ø Frequent (routine) eg. Majority of production and inventory decisions – component part planning, establishing priorities for unfinished work, etc.

Tightly defined and consistent Manual or Automated Routine decisions

Policies

Procedures Predictable Fig. 3 How routine decision made predictable

The managerial issue are how to ♦ Design the system ♦ Provide the data ♦ Set the decision rules ♦ Implement the system ♦ Monitor system and ♦ Make improvement- it comes from better Techniques Integration of material flow Data (accurate and pertinent) The data base: Ø Techniques or systems rely on basic information eg. A large job shop machine scheduling system Ø The complexity of MPC problems are mainly due to the enormity of underlying database required to properly support routine decision making system eg. A firm requires 5 million individual pieces of data to be accurately maintained and accessed to support a component part planning system. Ø A well-formulated system must be driven by data that are appropriate, consistent and accurate. Ø The data must be managed like any other resource and this might necessitate major changes in thinking, habits and procedures. Ø The data base integrity must be maintained with common definitions of terms, procedure for processing detailed transactions, clear assignment of organisational responsibility for each data base subsection and company wide commitment to maintain the integrity of each data base element.

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National Institute of Technology Calicut

Department of Mechanical Engineering

AN MPC SYSTEM FRAMEWORK v MPC system encompasses 3 distinctive aspects or phases § Creating the overall manufacturing plan for the manufacturing part of the company § Detailed planning of material flows and the capacity to support the overall plan § Execution of these plans in terms of detailed shop scheduling and purchasing actions v This is in line with the decision-making framework that recognises the natural hierarchy of production decisions A Framework for Production Decision Making v Decision framework • Managerial decision making – a broader perspective; identifies a hierarchy of interconnected decisions • Operational level decision – coordination for smooth flow of materials between stages in a multistage process v Hierarchy of Managerial Decision Strategic planning, tactical planning, and operational control v The hierarchy of decisions applied to production function is given the table below Category of Activity

Strategic

Tactical

Operational

General types of Plans for acquisition of decisions resources

Plans for utilisation Detailed execution of resources of schedules

Managerial levels Top

Middle

Low

Time horizon

Long (2+years)

6 to 24 months

Short range

Level of detail

Very aggregated

Aggregated

Very detailed

Degree of uncertainty

High

Medium

Low

Examples of variables under control of management

Products to sell; which Operation hours of dimensions to compete; size plants; work force and location of facilities; sizes; inventory nature of equipment (e.g. levels; general purpose vs subcontracting specialised); long-term raw levels; output rates; material and energy contracts; transportation labour skills needed; nature of modes used production planning and inventory management decision systems

What to produce (procure), when, on what machine (from which vendor), in what quantity, and in what order; order processing and follow-up; material control

Fig. 4 Hierarchy of managerial decisions applied to production function

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

Integration at the Operational Level v It is necessary to ensure at the operational level the proper coordination of input streams of the various raw materials, components, subassemblies, and so forth v There should be a coordination of action back through all the stages of distribution from the ultimate customer to the interface with production A single general framework for planning and scheduling within a production environment is shown in the figure below Demand Planning

Production planning Master Production Schedule

Detailed Capacity Planning

Front End

Material Requirement Planning

(MRP) Material and Capacity Plans

Shop-floor Control Systems

Purchasing Systems

Engine

Back End

Fig. 5 General framework manufacturing planning and control system v It embraces the hierarchy of decisions as well as integration at the operational level v The framework is suitable for Closed Loop Material Requirement Planning. A more complete system is known as Manufacturing Resource Planning (MRP II) v It is also consistent with the Enterprise Resource Planning (ERP) framework v MRP is a material planning and scheduling system for components, parts, subassemblies and raw materials v Closed loop MRP can creates better plans compared to MRP as the system considers feed back information in creating realistic plans and dynamic priority setting rule in scheduling v MRP II converts a number of the outputs of production planning and control into financial terms – e.g.- Inventories in rupees, labour budget, shipping budget, standard hours of output in rupees, vendor rupee commitment, etc. v ERP system can be considered a direct extension of MRP

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National Institute of Technology Calicut

Department of Mechanical Engineering

v MRP logic is used in the production module of ERP v Under ERP the entire firm operates from the same data v ERP system allows for integrated planning across the functional areas in a firm

Enterprise Resource Planning (ERP) Evolution Towards ERP • •

The focus of manufacturing system in the 1960’s was on inventory control Techniques of the day focused on the most efficient way to manage large volumes of inventory

•

Software packages were designed to handle inventory based on traditional inventory concepts

•

In the 1970’s, it became increasingly clear that companies could no longer afford to the luxury of maintaining large quantities of inventory – led to introduction of Material Requirement Planning (MRP) systems For the first time, using a Master Production Schedule (MPS), supported by bill of material files that identified the specific material needed to produce each finished item, a computer could be used to calculate gross requirements Using accurate inventory record files, the available quantity on hand and scheduled receipts of material determined net material requirements This then prompted an activity such as placing an order, cancelling an existing order or modifying the timing of existing orders For the first time in manufacturing, there was a formal mechanism for keeping priorities valid in a changing manufacturing environment

• • • • •

The ability of the planning system to systematically and efficiently schedule all parts was a tremendous step forward for productivity and quality

•

These are a part of the manufacturing problem; capacity planning represents an equal challenge

•

Techniques for capacity planning were added to the basic MRP system capabilities

•

Tools were developed to support the planning of aggregate sales and production levels, the development of build schedule, forecasting, sales planning and customer order promising and high level resource analysis Scheduling techniques for the factory floor and supplier scheduling were incorporated into the MRP systems

• • • • •

When this occurred, users began to consider their systems as company-wide systems The resultant system is known as closed-loop MRP In the 1980’s, companies began to take advantage of the increased power and affordability of available technology and were able to couple the movement of inventory with the financial activity This led to the development of a more integrated system which incorporated the financial accounting system and the financial management system along with the manufacturing and materials management systems

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

•

The resultant system is known as Manufacturing Resource Planning (MRP II) systems

•

This system derived the material and capacity requirements associated with a desired operations plan, translated all this to a financial statement, and suggested a course of action to address those items that were not in balance with the desired plan

•

By early 1990’s, continuing improvements in technology allowed MRP II to be expanded to incorporate all resources planning for the entire enterprise • Areas such as product design, information warehousing, materials planning, capacity planning, communication systems, human resources, finance, and project management could now be included in the new system • The term, ERP was coined for such systems • ERP can be used not only in manufacturing firms, but in any company that wants to enhance competitiveness by most effectively using all its assets, including information Why ERP • Companies today face the challenge of increasing competition, expanding markets, and rising customer expectations •

•

This increases the pressure on companies to lower total costs in the entire supply chain, shorten throughput times, drastically reduce inventories, expand product choice, provide more reliable delivery dates, and efficiently coordinate global demand, supply, and production As the business world moves ever closer to a completely collaborative model and competitors upgrade their capabilities, to remain competitive organisations must improve their own business practices and procedures

•

Companies must also increasingly share with their suppliers, distributors, and customers the critical in-house information they once aggressively protected

•

Functions within the company must upgrade their capability to generate and communicate timely and accurate information To accomplish these objectives, companies are increasingly turning to ERP ERP provides two major benefits that do not exist in non-integrated departmental systems: (i) a unified enterprise view of the business that encompasses all functions and departments; and (ii) an enterprise database where all business transactions are entered, recorded, processed, monitored, and reported

• •

ERP Defined •

An important feature of ERP is that it is the first approach that integrally combines business management and IT concepts

•

Its strength stems from its ability to provide a comprehensive business functionality in an integrated way using a state-of-the-art IT infrastructure ERP systems typically are very efficient at handling the many transactions that document the activities of a company

•

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

•

One significant feature of ERP software is that Ø Core corporate activities, such as manufacturing, human resources, finance, and supply chain management are automated and Ø Improved considerably by incorporating best practices, Ø So as to facilitate greater managerial control, speedy decision making and huge reduction of business operational cost

•

ERP provides seamless integration of process across functional areas with improved workflow, standardisation of various business practices, improved order management, accurate accounting of inventory and better supply chain management

•

Earlier concepts such as MRP and MRP II, were designed to assist planners by logistically linking various forms of process information in specific business contexts such as manufacturing

•

ERP system should not be looked as simply as tools that have a fixed and measurable output, but rather as a technological infrastructure designed to support the capability of all other tools and processes used by a firm ERP systems represent corporate infrastructure, much the same way that physical high way systems do ERP systems are designed to integrate business functions so that real-time resource accountability across all business units and facilities of a corporation could be maintained The objectives of the ERP could include elimination of conflicting information, the reduction in data redundancy, standardisation of business unit interfaces, global access and security

• • • • • •

ERP implementation results in significant benefits produced from the integrated nature of the system as well as from reengineering business process and the change in business culture ERP supports coordinated planning and execution across functional areas Companies’ motivation for ERP implementation could be classified into two groups – Technological and Operational

Technological Drivers •

Replacement of disparate systems, Improvement of quality and visibility of information, Improvement of business process and systems, Simplification of integration of business acquisitions into the existing technology infrastructure, Replacement of older and obsolete systems, and Acquirement of system that can support business growth

Operational Drivers •

Improving inadequate business performance, Reducing high-cost structures, Improving responsiveness to customers, Simplifying ineffective and complex business processes, Supporting new business strategies, Expanding business globally, and Standardising business process throughout the enterprise

MPC Introduction

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National Institute of Technology Calicut

Department of Mechanical Engineering

View point on ERP by Managers, and Information Technology Community Managers • • • •

ERP represents a comprehensive software approach to support decisions concurrent with planning and controlling the business Focus is more on the potential impact of ERP on the performance of various business functions ERP, with the emphasis on planning, is designed to allow much tighter integration, thus eliminating the problem of local optimisation Manufacturing industry experts describe ERP as: Ø An enterprise-wide set of management tools that helps balance demand and supply Ø Containing the ability to link customers and suppliers into a complete supply chain Ø Employing proven business process for decision making Ø Providing high degree of cross functional integration among sales, marketing, manufacturing, operations, logistics, purchasing, finance, new product development, and human resource Ø Enabling people to run their business with high level of customer service, responsiveness and productivity, and simultaneously lower costs and inventories, and providing the foundation for effective e-commerce

Information Technology Community •

ERP is a term to describe a software system that integrates application programs in finance, manufacturing, logistics, sales and marketing, human resources, and other functions in a firm • Focus is on the intricacies of package and process design to meet conceptual objectives ERP benefits can be classified into five groups Operational • Relating to cost reduction, cycle time reduction, productivity improvement, quality improvement, and customer service improvement Managerial • Relating to better resource management, improved decision making and planning, and performance improvement Strategic • Concerning business growth, supporting business alliance, building business innovations, building cost leadership, generating product differentiation, and building external linkages IT Infrastructure • Involving building business flexibility, IT cost reduction, and increased IT infrastructure capability Organisational

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National Institute of Technology Calicut

•

Department of Mechanical Engineering

Relating to supporting organisational changes, facilitating business learning, empowering, and building common visions

Software Imperatives Multifunctional in scope: - Ability to track financial results in monetary terms, procurement activity in unit of material, sales in terms of product units and services, and manufacturing or conversion process in units of resource or people Excellent ERP software produces results closely related to the need of people for their day-to-day work Integration:- When transaction or piece of data representing an activity of the business is entered by one of the functions, data regarding the other related function is changed as well This eliminates the need for reposting data to the system Modular in Structure:- The software can be combined into a single expansive system, narrowly focused on a single function, or connected with software from another source/application Facilitate classic manufacturing planning and control activities:- Forecasting, production planning, inventory control Routine Decision Making VS Transaction Processing Transaction Processing • Transaction processing relates to the posting and tracking of the activities that document the business Example • When an item is purchased from a vendor a specific sequence of activities occurs • Solicitation of the offer, acceptance of the offer, delivery of goods, storage in inventory, and payment for the purchase are all activities that occur as a result of the purchase •

The efficient handling of the transactions as goods move through each step of the production process is the primary goal of an ERP system Decision Support System • Relate to how well the system helps the user make intelligent judgement about how to run the business Example • With respect to the manufacturing planning and control, decision concerning the amount to purchase, the selection of vendor and how it should be delivered need to determined • An ERP system with decision logic based parameters set in the system can assist the managers to take appropriate decision •

For items stored in inventory, the specific reorder points, order quantities, vendors, transportation vendors, and storage locations can be established when items are initially entered in the system

References: 1. Vollmann, T.E., Berry, W.L., Whybark, D.C., and Jacobs, F.R., (2005) Manufacturing Planning and Control Systems, Fifth Edition, Tata McGraw-Hill.

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National Institute of Technology Calicut

Department of Mechanical Engineering

2. Nicholas, J., (2001) Competitive Manufacturing Management - Continuous Improvement, Lean Production, and Customer-Focused Qualities, Tata McGrawHill Editions. 3. Viswanadham, N., and Narahari, Y., (1992) Performance modeling of automated manufacturing systems, Prentice-Hall of India, New Delhi. 4. Umble, E.J., Haft, R.R., and Umble, M.M. (2003) Enterprise resource planning: Implementing procedures and critical success factors, European Journal of Operational Research, 146, 241-257. 5. Jacobs, F.R. and Bendoly, E., (2003) Enterprise resource planning: Developments and directions for operations management research, European Journal of Operational Research, 146, 233-240. 6. Al-Mashari, M., Al-Mudimigh, A. and Zairi, M., (2003) Enterprise resource planning: A taxonomy of critical factors, European Journal of Operational Research, 146, 352-364.

Useful link What is ERP? http://erp.ittoolbox.com/documents/popular-q-and-a/what-is-erp-1630 Academic articles on ERP http://erp.ittoolbox.com/documents/academic-articles Industry articles on ERP http://erp.ittoolbox.com/documents/industry-articles ERP in India solution directory http://www.wits.firm.in/erpindia/sol_dir/erp_india_solutions_directory.htm#M To get an idea about the following concepts used in ERP software click the link below Product structure Material Requirement Planning (MRP) Shop Floor Control Link: http://www.sourcepro.co.in/engg_details.html Significance of ERP implementation http://www.erpwire.com/erp-articles/criteria-for-erp-implementation.htm Hitting the moving target of operational excellence identifying and obtaining the information needed for continued success – White paper http://www.sap.com/asia/pdf/Operational_Excellence_IDC.pdf

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