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A Beginners Guide to Production Planning

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This presentation is aimed at helping small and medium businesses in their production planning processes. …

This presentation is aimed at helping small and medium businesses in their production planning processes.

Production Planning is explained in a detailed manner with step-by-step examples for better understanding.

Please visit www.businessense.in to download this document.

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  • 1. PRODUCTIONPLANNINGMODULEAn initiative of Hash Management Services LLPA Business Sense PublicationFor more free resources visit www.businessense.in
  • 2. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Overview ‘The Essentials’ series from Business Sense is an initiative to empower the professionals and students in performing moreefficiently and effectively in the organization This publication is aimed at bridging the gap between the institutions and the industry by providing the fundamentals ofmanufacturing management which are not offered by any of our institutions/curriculum This course would immensely benefit professionals and students who are joining manufacturing organizations At Business Sense, we help medium scale manufacturing units improve their operational efficiency through consultingengagements focusing on improving their Operations through Lean Manufacturing Implementation covering 5S, SMED,Kaizen and other tools We promise to double the productivity in less than 33 days of our effort In addition, our web application would help the senior management in monitoring the important business updates every dayand provide them analytics and enable them better decision making. Useful if your organization do not have an ERP For more details, please visit www.businessense.in You can subscribe to our bi-weekly newsletter here. Follow us:
  • 3. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Contents Section 1 – Introduction to Planning Processes Section 2 – Terminology Section 3 – Step-by-Step ExampleProperty of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.
  • 4. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Introduction Production Planning function is responsible for preparing the Plan for theproduction Normally the planning is done through Manufacturing RequirementsPlanning (MRP) or Manufacturing Resource Planning (MRP2) Enterprise Resource Planning (ERP) is the automated & integrated versionof MRP2 – Nowadays a lot of ERP packages are in use widely, acrossindustries For our easy understanding, the focus would remain on the MRP systems
  • 5. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Materials Requirement Planning (MRP) Material requirements planning (MRP) is a production planning andinventory control system used to manage manufacturing processes. Evolved in1960’s An MRP system is intended to simultaneously meet threeobjectives: Ensure materials are available for production and products are availablefor delivery to customers Maintain the lowest possible material and product levels in store Plan manufacturing activities, delivery schedules and purchasing activities
  • 6. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Manufacturing Resource Planning (MRP2) MRP2 had evolved from MRP in the 80’s It encompasses the same methodology but includesintegrated materials planning, finance and human relations. It has a simulation capability to answer "what-if" questions Usage of Software is ideal for MRP2
  • 7. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Enterprise Resource Planning (ERP) Integrated functions aids in better planning andexecution Both MRP and MRPII are still widely used,independently and as modules of morecomprehensive ERP systems Automatically calculates the materials purchasing,production planning and delivery schedulesMRP1960’sMRP 21980’sERPnow
  • 8. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Contents Section 1 – Introduction to Planning Processes Section 2 – Terminology Section 3 – Step-by-Step Example
  • 9. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Terminology The following are the various factors that should be considerd while planning forthe production using an MRP systemBill ofMaterialsMachine / LaborProductivityDemand SideSupply Side Company
  • 10. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Demand Side - Customer Order A confirmed order from the Customer specifying thefollowing: Order No Product Required Quantity Delivery schedule Price Sample approval / Design / Technical drawings – depending on theindustry
  • 11. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Demand Side - Forecasted Demand For items which are manufactured based on the salesforecast, the following items are required for planning: Product Required Quantity Region-wise / other break-up ( depending on the company) Shipment date
  • 12. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Company Side - Bill of Materials Bill of Materials (BoM) is the list ofall items required to manufacture aproduct It includes all raw materials,consumables, packing materials withclear consumption details tomanufacture 1 product This must be created for each andevery finished product the companyis delivering to the customers An example for a BoM isdemonstrated hereBill of Materials (BoM) for X1. Copper rod – 5 m2. Steel rod – 10 m3. Plastic Case – type A – 2 nos4. Plastic Case – type B – 1 no5. Welding rod – 2 no6. ‘OK’ Sticker – 1no7. Barcode label – 1no8. Packing box – 1 no9. Carton box – 1/6 no ( 6 items in 1 box)
  • 13. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Company Side – Machine / LaborProductivity What is the time taken for manufacturing – manufacturinglead time Lead time of all manufacturing processes Machine run time + idle time + transportation + documentation etc(refer 7 wastes – explained in the production module)
  • 14. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Supply Side – Stock in Hand This is the stock for the items present in hand Finished goods Raw materials For e.g. For a customer order of 500 items of ‘X’ product, ifwe have 100 nos of ‘X’ in stores, we can plan only for theremaining 400 nos
  • 15. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Supply Side – Lead time, Safety stock &Minimum Order Quantity (MOQ) This has been clearly explained in the Purchase and Stores modules Lead time – is the time an item takes to reach the factory gate from the time of raising a PO Safety Stock – is the stock quantity/no of days of stock that should be planned tocompensate for any uncertainty in the delivery Minimum Order Quantity – There is a minimum order size and batch size for most of theitems. for. E.g. the supplier of welding rods might accept the order only a minimum of 500rods are ordered and the multiples will be in 100 Minimum order is 500 nos After that multiples of 100 ( an order of 575 nos will not be accepted; either 600 nos or500 nos is fine)
  • 16. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Supply Side – Pending Order Status This refers to the pending Purchase Orders that are yet to befulfilled by the suppliers/ vendors One has to take this also in to account while planning for thematerials
  • 17. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Contents Section 1 – Introduction to Planning Processes Section 2 – Terminology Section 3 – Step-by-Step Example
  • 18. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Step-by-Step Example Imagine the company produces a product called ‘X’ It is made using the following materials: Note that items like ‘OK’ sticker, carton boxes etc are not included the list.Normally, the small items are omitted from the list which creates a lot ofconfusion while planning the materials. This is why we would create adetailed/mistake proof BoMItems required for manufacturing - X1. Copper rod2. Steel rod3. Plastic Case – type A4. Plastic Case – type B
  • 19. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Customer Demand Let us assume that the customer has placed an order with thefolowing details:Order No C10075Product Required XQuantity 1000 nos - 2 batchesDelivery Schedule 500 nos on1st April 2012, next 500 nos on 17 April 2012Price Rs. 5000 / unitSample Approved
  • 20. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Company Side - Bill of Materials A detailed Bill of Materials wouldbe created and used subsequentlyfor the product ‘X’ Please refer to the table on theright for the BoM There is nothing required forproducing and packing the product‘X’ that is missing in the BoM –Everything is covered in the BoMBill of Materials (BoM) for X1. Copper rod – 5 m2. Steel rod – 10 m3. Plastic Case – type A – 2 nos4. Plastic Case – type B – 1 no5. Welding rod – 2 no6. ‘OK’ Sticker – 1no7. Barcode label – 1no8. Packing box – 1 no9. Carton box – 1/6 no ( 6 items in 1 box)
  • 21. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Machine / Labor Productivity Let us assume the production consists of 3 activities:Welding 30 minsAssembling 20 minsInspection and Sticker Pasting 5 minsPasting 5 minsTotal manufacturing time = 60 mins = 1 hour 1 hourThere are 5 assembly lines 5So total production per shift = 8x1x5 40 nosAssume that the factory works for 2 shifts per day = 16hours: Total Production per day = 80 nos
  • 22. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Supply Side – Stock in Hand This is the stock for the items present in hand Finished goods Raw materials For e.g. For a customer order of 500 items of ‘X’ product, ifwe have 100 nos of ‘X’ in stores, we can plan only for theremaining 400 nos
  • 23. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Lead time, Safety Stock and MOQBoMPerdayConsumption Lead time (days) Safety stock - days Safety Stock - qty MOQ MultiplesCopper Rod 5 400 7 3 240 200 50Steel Rod 10 800 5 2 160 200 50Plastic case - Type A 2 160 3 2 160 200 50Plastic case - Type B 1 80 3 2 160 200 50Welding Rod 2 160 3 2 160 200 50OK Sticker 1 80 3 2 160 200 50Barcode Lable 1 80 3 2 160 200 50Packing Box 1 80 2 1 80 200 50Carton box 0.17 13.33 2 1 80 50 10Determined by thesupplierMultiply Safetystock days and Perday consumption
  • 24. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Supply Side – Pending Order StatusOrder Quantity 500 For I despatchFinished Goods in Stores 100Net Requirement 400Net Requirement X BoM qty Stock in Hand Pending Order Qty Quantity to be orderedCopper Rod 2000 200 100 1700Steel Rod 4000 300 200 3500Plastic case - Type A 800 50 100 650Plastic case - Type B 400 60 100 240Welding Rod 800 200 400 200OK Sticker 400 50 150 200Barcode Lable 400 25 200 175Packing Box 400 200 50 150Carton box 66.67 20 25 22
  • 25. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Production PlanMfg. Leadtime 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar 21-Mar 22-MarWelding (hours) 0.5 10 15 15 15 15 15 15 15Assembling (hours) 0.41 8.33 12.50 12.50 12.50 12.50 12.50 12.50 12.50Inspection& stickering (hours) 0.083 1.67 2.50 2.50 2.50 2.50 2.50 2.50 2.50Packing (hours) 0.083 1.67 2.50 2.50 2.50 2.50 2.50 2.50 2.50Finished Goods (nos) 20 30 30 30 30 30 30 30Delivery23-Mar 24-Mar 25-Mar 26-Mar 27-Mar 28-Mar 29-Mar 30-Mar 31-Mar 1-AprWelding (hours) 15 15 15 15 15 15 15 15 15Assembling (hours) 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50Inspection& stickering (hours) 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50Packing (hours) 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50Finished Goods (nos) 30 30 30 30 30 30 30 30 30Delivery 500Let us assume todays date is 10th March. We have 21 days for delivery. We can use one assembly line and meet the target. Wecan start the production on 15th March.
  • 26. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Daily Stock Consumption PatternRaw Materials BoM 15-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar 21-Mar 22-MarCopper Rod 5 100 150 150 150 150 150 150 150Steel Rod 10 200 300 300 300 300 300 300 300Plastic case - Type A 2 40 60 60 60 60 60 60 60Plastic case - Type B 1 20 30 30 30 30 30 30 30Welding Rod 2 40 60 60 60 60 60 60 60OK Sticker 1 20 30 30 30 30 30 30 30Barcode Lable 1 20 30 30 30 30 30 30 30Packing Box 1 20 30 30 30 30 30 30 30Carton box 0.17 3.33 5 5 5 5 5 5 5Raw Materials 23-Mar 24-Mar 25-Mar 26-Mar 27-Mar 28-Mar 29-Mar 30-Mar 31-MarCopper Rod 150 150 150 150 150 150 150 150 150Steel Rod 300 300 300 300 300 300 300 300 300Plastic case - Type A 60 60 60 60 60 60 60 60 60Plastic case - Type B 30 30 30 30 30 30 30 30 30Welding Rod 60 60 60 60 60 60 60 60 60OK Sticker 30 30 30 30 30 30 30 30 30Barcode Lable 30 30 30 30 30 30 30 30 30Packing Box 30 30 30 30 30 30 30 30 30Carton box 5 5 5 5 5 5 5 5 5Red cells indicate that the stock in stores will get over by that date and should be refilled before that date, to avoid stock-out situation
  • 27. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Purchase PlanPurchase Schedule I Order DateI OrderQuantityCopper Rod 10-Mar 1000Steel Rod 12-Mar 2000Plastic case - Type A 14-Mar 300Plastic case - Type B 16-Mar 200Welding Rod 21-Mar 200OK Sticker 18-Mar 200Barcode Lable 18-Mar 100Packing Box 20-Mar 100Carton box 21-Mar 50The list below gives the date for ordering theraw materials ( based on the lead time andSafety stock).Quantity is approximately (or more) than halfof the net requirement quantity for ease ofunderstanding.In reality, Re-order status has to be consideredwhile OrderingTo avoid the stock-situation ( refer previous slide), we need to order the materials as mentioned below:
  • 28. Property of Hash Management Services LLP. Unauthorized copying, circulating, modifying and using it without the knowledge / approval of Hash Management Services LLP is prohibited.Conclusion Thus the Production planning function plans for the Delivery – based on the customer order Manufacturing – based on the manufacturing lead times Purchase – Based on the stock position, Re-order level & lead time ofthe materials
  • 29. PRODUCTIONPLANNINGMODULEAn initiative of Hash Management Services LLPA Business Sense PublicationFor more free resources visit www.businessense.inFor any queries / suggestions / requestsCall us: +91 91766 13965orEmail us: support@businessense.in

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