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  2. 2. B.TECH. DEGREE COURSE SCHEME AND SYLLABI (2002-03 ADMISSION ONWARDS) MAHATMA GANDHI UNIVERSITY KOTTAYAM KERALA PRODUCTION PLANNING AND CONTROL M 803 2+1+0 Module 1 Introduction to PPC: need for PPC, effect, advantages, functions and problems of PPC. Forecasting: methods of sales forecasting-forecasting for new products- forecasting for established products-time series analysis for sale forecasting – long term forecasting – methods of estimating Sales trend- problems- correlation analysis. Module 2 Production planning: objectives-characteristics-process planning. Capacity planning- factors affecting-Master production scheduling-material requirement planning – BOM and product structure. Production control: objectives- production control systems- principle and procedure of production Control. Routing: objectives- procedure – route sheets. Module 3 Sequencing assumptions: solution of sequencing problems-processing n jobs through two machines Processing n jobs through three machines – processing n jobs through m machines – processing two Jobs through m machines-problems Module 4 Materials management: Components of integrated material management Purchasing management- stores management. Supply chain management – ERP- Role of I.T.
  3. 3. Module 5 Loading and scheduling: aim- reasons for scheduling- master scheduling or aggregate scheduling Estimating shop loads- short term scheduling – mathematical loading and scheduling- problems- Scheduling through PERT / CPM problems. Despatching- duties- procedure- rules. Follow up and reporting- types-report preparation and presentation. References 1. Modern Production Management - E.S.Buffa 2. Principles of Production Management - J.Apple 3. Production management principles - Mcycss 4. Production Planning and Control - K.C.jani& L.N.Aggarwal 5. Manufacturing Planning &Control - Volfman, Berry, Whybark systems 6. Production and operations management - R.Paneerselvam 7. Modeling the supply chain - Jeremy F Shapiro
  4. 4. MODULE – 1 PPC Defined: Any manufacturing activity requires resource input in terms of men, materials, capital and machines. In any business that produces goods and services, production activity must be related to market demands as indicated by the continuous stream of customers orders. For maximum effectiveness, this must be done keeping the customer satisfied and at the same time production activities are carried on in an economic manner. Introduction to Production, Planning and Control 2.1 PPC DEFINED Any manufacturing activity requires resource input in terms of men, materials, capital and machines. In any business that products a product or service, production activity must be related to market demands as indicated by the continuous stream of customer's orders. For maximum effectiveness, this must be done in such a way that customer demands are satisfied, but at the same time production activities are carried on in an economic manner. The process of developing this kind of relationship between market demands and production capability is the function of production planning and control or sometimes referred to as production control. Production planning and control can be effected principally through the management of work flow, inventories and backlogs and changing levels of operation. The set of policies and procedures that are used to manage work flow, inventories backlogs and changes in the level of production rate comprise, what is called a production planning and control system. SHORT HISTORY OF PRODUCTION PLANNING AND CONTROL 2.2 EARLY INDUSTRIAL MANAGEMENT No one can say when man first studied production. Even in the ancient times, attention was given to management methods, in the conduct of Government,
  5. 5. Organisation, for construction and other work where co-operative endeavour was required. In industry methods of organising, planning, supervising and controlling the flow of production were developed at least as early as the days of Adam Smith writing in 1776, he described the process of making ordinary brass pins. He makes a distinction between the production line worker, the person who designs the machine and handles other engineering problems, and the manager who plan, organise, supervise, observe, and control the operation. These distinctions are basic to much of modem management. Beginning of Work Measurement. Studies in work measurement were made from time to time in both the USA and UK. Some of these studies included the use of stopwatch. An interesting study of this nature was made by Thomas Jefferson in 1769 as he began to dig the foundation of new home near Charlottesville, Virginia. He estimated the amount of dirt that one person could dig and haul away in a day of 12 hours. Standards of this kind constituted the essential feature of the Taylor system of management which was developed later. Standardisation of Product. Another early development was the production of parts according to specifications in such manner that the parts were interchangeable. Eli Whitney is credited with having developed the principle of interchangeable parts in the manufacture of muskets. Development of Manufacturing Methods. In the beginning of about 1775 a number of machines were developed for the manufacture of cloth, which was one of the most important industries. The changes in methods of production soon extended to other industries with the invention of the steam engine, the cotton gin, the steam boat, the reaper and other machines. These inventions not only revolutionised methods of production on farms and in factories that used the machine but also gave rise to new industries for the manufacture of machines and machine parts used in their production. With the introduction of new machines larger factories were built to employ larger number of people. The work of production was further sub-divided into smaller
  6. 6. tasks to provide for greater specialisation among the workers. Attention was directed to such problems as plant location, plant layout, methods of moving materials and the design of factory buildings, machines were gradually improved and new machines were invented from time to time. Development of Management Methods. During the first half of the ninete~nt.1 century attention began to be directed towards such management problems as personnel relations, hours of work, fatigue and market relationships. Scientific Management: Scientific management is the name given to a new movement which began in a small way in the later part of the nineteenth century and received national prominence in the first two decades of the present century. The new system was characterised by a spirit of inquiry, the questioning of all conventional management, methods and technique and an attempt to promulgate basic management principles. Probably the best known of these persons associated with the new movement were F.W. Taylor, H.L. Gantt, Frank B.L.M. Gilbreth. Taylor's work was in tune with the vaunted reputation of contemporary scientific investigations and, therefore, he lodged his concepts under the title of scientific management. His theories received both acclaim and abuse. Critics forecasted that his mechanistic views enforced by efficiency experts would completely de-humanise industry but others saw them as logic applied to a promising new area. Whether people agreed with him or not, his beliefs and the fervor with which he expounded them, strongly stimulated industrial management. An associate of Taylor, Henry L. Gantt, developed methods of sequencing production activities which are still in use today. Operations-oriented thinking took new substance from the literal as well as figurative marriage of engineering and psychology in the husband -wife team of Frank and Lillon Gilbreth, the mechanistic attitudes of engineer Frank were mitigated by the humanistic attitudes of psychologist Lillain. Together they showed that basic human motion patterns are common to many different work situations. Their analysis of
  7. 7. micromotions to improve manual operations initiated time and motion studies and the use of motion pictures in work design. In the 1920's and 1930's things become more complicated as it was realised that people did not always behave as intuitively expected and that the complicities of emerging production processes required more controls. As demonstrated by the famous Hawthrone studies, the carrot of better wages or working conditions did not always lead to proportional increase in output, psychological factors such as morale and attention were influential. An interdisciplinary approach to system studies appeared in the war years of 1940's first in the form of British operational research teams. The 1940's also saw the birth of the electronic computer. Today its influence is apparent throughout industry. Equivalently, The capabilities of computers must be utilised if we expect to relate and evaluate the many variables in complex production systems. 2.3 NEEDFOR PPC India's developing economy needs PPC : The importance of PPC cannot be over emphasised, particularly under the present circumstances of India. We are undergoing an era of planning. The . main intension behind industrial planning is to accelerate the productivity so that our goods may find a suitable market abroad. But the need for greater, better and cheaper goods is out of question without proper planning and adequate control. A successful production control programme minimises the idleness of the men and machines optimizes the number of setups required, keeps in process inventories at a satisfactory level, reduces material handling and storage costs and conse- quently permits quantity and quality at low unit costs. PPC is factory's nervous system. The functions of PPC in a factory can easily be compared with the nervous system in human organism. It serves to co-ordinate the activities of a plant just as the nervous system regulates muscular movements. When simple repetitive operations are performed, production control or accomplished more is
  8. 8. less subconsciously in the same manner that the nervous system automatically regulates one's breathing. When less repetitive activity is involved, more conscious direction is necessary; both in the plant and in the human system. Customer demands are likely to differ in quantities and delivery schedules and this will lead to large fluctuations in the production levels. So to meet any demand, it is desirable to have planning for production in future time periods for inventories of finished goods and meet part of market demands from such finished goods inventories. Furthermore, the lead times involved in procurement of manufacturing imputs warrant planning for production in advance. This is particularly so, in the Indian context, with specific reference to industrial raw materials. Also, requirements of skilled manpower necessitate such planning where time factor involved in training· personnel is rather large. Also the socio-political structure in India makes it quite difficult for an organisation to have varying manpower levels. This, again, necessitates production planning in order to smooth out the needs for manpower. Another reason why PPC is necessary, is the need to meet changes in demands due to trend, cyclical and reasonal factors. Long-run changes in demand are taken care of by change in overall capacity by expansion and or new facilities. However, in short run, these will have to be taken care of by such factors as sub-contracting, using overtime and building up inventories. Needless to say, in planning production for these purposes, one should take into consideration the changes in production levels over future periods in order to economise the cost of production. This is an important factor which necessitates planning for production and exercising control. Moreover, production operations are subject to variety of uncertainties ~uch as emergency order, breakdown, material shortages and various other contingencies. PPC provides a way to take these factors into considerations. 2.4 EFFECTS PF PPC The effects of PPC can be grouped in two captions: (a) Material factors.
  9. 9. (b) Human factors. (a) Material factors. Under this following categories are included: (i) Quality of the output. An improvement in volume of output within quality and safety limits laid down by management is most common objective of PPC. (ii) Plant utilisation. With ever increasing capital investment per producer in industry, making fuller use of plant is of growing importance. Experience and research has shown that in many types of plant the capital saving due to improved load factors are proving the most substantial of all. These improvements are also being achieved through better labour effectiveness. (iit) Use of services. Again economic in the use of steam, water, air and electricity may be paramount factors. (iv) Quality of product. It may be sometimes desirable for economic or other reasons, to improve the quality of product new or more consistent standard. (v) Process efficiency. An operator can have a far more significant effect on process efficiency than was previously envisaged. (vi) Standard of safety. In dealing with many products quite apart from the normal good standards a particularly high level of safety may be important, which is being achieved by it. (vii) Works cleanliness. It is another objective of management. (b) Human factors. Under this heading following may be included: (i) Effectiveness of work. The work should be such that it meets the ego and emotion of the worker and he feels the pride over it. In other words, the objective of management is to choose right man for right job at right place at right time on right wages and salaries. (ii) Interest in work. The worker should take interest in work and he will put the heart and hand in performing the task is another prime aim of good management. .
  10. 10. (iii) Waiting time. The waiting time should remain minimum for the want of material tools, equipment, supervision, inspection, delivery, etc. It can only be achieved when the worker on the work will help fully and take interest in it. (iv) Need for supervision. To make the worker expert and self-dependent in normal day to day work is the other aim of the management. The supervisory time should be reduced. The supervisors should be left to perform the task of planning, coordination, motivation, control and feedback informations only. (v) Ideas for new methods. Workers, working on the machine are said to be the best man for new idea and suggestions, as he knows the various aspect of work fully. To give encouragement to the worker for new ideas and new method the PPC is brought in picture. (vi) Team spirit. To develop the team spirit and feeling of brotherhoodness among workers is another aim. The workers should do the work as a team, and should do the work as a team, and should recognise their value and status in company as a group not individuals. (vii) Absenteeism. To minimise and regulate the absenteeism, PPC may be introduced. (viii) Labour turnover. It helps the turnover to its minimum. 2.5 ADVANTAGES OF PRQDUCTION PLANNING CONTROL The advantages of PPC can be viewed from company point of view, share holders point of view, employees' point of view and society point of view. A brief outline of advantage is listed below from all the angles. From Company’s point of view. The main advantages is cost of product per piece reduces, and the company enjoys better and more earnings. The administration and management task go ahead smoothly and efficiently. How this is achieved is briefly outlined under following captions : 1. Production Management aspect. This is one of the most essential field which helps in reducing cost per unit of production. This caption is further sub-divided as
  11. 11. follows: (i) Production control. (a) It facilitates in receipts, shipment and delivery. (b) It paces production. (c) It reduces conflict among workers. (d) It helps in production time predictable. (e) It helps in scheduling and dispatching automatically. (f) If helps in setting up production centres. (g) It reduces the number of parts and their cost and helps in mismatched part. (h) Reduces the numbers of stock chasers. (i) Reduces the production control expenses. (ii) Quality Control and Waste Reduction. PPC helps in : (a) Maintaining the rigid quality control. (b) Minimising the wastes, scrap and rework. (c) Minimising the rectification hours. (d) Cost of inspection is reduced. (e) Reduction of variations in manufactured goods. (iii) Advantages in the manufacturing Costs. These can be briefed as follows: (a) Decreased maintenance cost. (b) Decreased tool replacement. (c) Effects a saving in power load. (d) Decrease in spoilage and scrap. (e) Reduced raw material wastage.
  12. 12. (f) Better cost control. (g) Reduced handling helps in saving time and quality. (iv) Advantages to Labour Cost. These are as follows: (a) Increased output per man hour. (b) It helps in reducing set up time. (c) Reduced number of operation. (d) Reduced number of handling. (e) Reduced length of handling. (f) Reduced labour waiting time. (v) Advantage to Management and Organisation. (a) It helps in adopting better, efficient and effective planning. (b) Better feed back and effective control system can be installed in different spheres of activities. (c) It helps on coordination and synchronising, the employee's efforts towards the same goal as of the management. (d) Reduced conflicts with trade unions and hence reduced and eliminated strikes and lock-out. (e) Reduced absenteeism, tum over and accidents. (f) The management can efficiently and effectively install and develop the new techniques of production and automation, if any (g) Improved and better human relations. (h) Higher morale among workers which leads to better cooperation, helping attitude and up attitude of team spirit. (i) The management can mould, efficiently, effectively to meet new environments and circumstances.
  13. 13. (j) Degree of flexibility, reliability and accessibility in functions of management viz. planning, coordination, staffing, organisation, motivation, direction and control enlarges. (k) It helps in easing of the burden of the supervisor. (l) Reduced cost of supervision. (m) Coordial relation between supervisor and subordinates. (vi) Advantages to Capital Investment. (a) It helps in management of fixed or block capital, working capital earning, and dividends. The capital can be raised very easily and quickly. The finance functions can be carried out effectively and efficiently. (b) It helps in reduced investment in machines and equipment by : (i) Increasing production per machine. (ii) Utilising idle hours of machine. (iii) Reduced inventory of waste, in progress and of finished products. (iv) Standardisation and simplification. (v) Advantages to Marketing Management. This includes: (a) Better and fine image of the company and thus creating higher watering capital such as goodwill, repute and fame by: (i) Maintaining excellent quality of product. (ii) Quality of all products but cheaper in competition. (iii) Satisfaction of the consumer in psychological field and actual operational field. (b) It helps in introducing now product in market.
  14. 14. (c) Company can stand in competition as cost of production per unit of production is less. (d) Marketing staff can be procured at lower initial investment, moreover this staff will be of better quality, and of higher excellence in all fields. (e) Risk carrying cost decreases. (f) Cost of advertising reduces. (g) Market research cost declines. From Worker's point of view. Under this caption, we include the following: (a) Reduced efforts of the worker. (b) Reduced number of handling. (c) Reduced fatigue and boredom. (d) Acquires process of specialization. (e) It permits working at maximum efficiency. (f) Higher morale and team spirit. (g) Job satisfaction and job pride. (h) Reduced number of accidents. (i) High earnings which helps him : 1. To raise standard of living. 2. To satisfy all his physiological demands more effectively and efficiently. 3. Can maintain his family up-to-date, e.g. better education of children, better housing, better food and clothes etc.
  15. 15. From Shareholder's point of view (a) Higher dividends; regularly and certainly in the future. (b) Psychological satisfaction. (c) Reduced speculation in the shares. From Consumer's point of view (a) Reduced cost per piece. (b) Better and excellent quality. (c) Psychological satisfaction. From Society point of view (a) Quicker and faster capital formation which leads to higher national income and income per capita, which decides the standard of living of the country's people. (b) It helps in unemployment problems. (c) Better and efficient application of welfare economics as government raises more revenue from the company on account of their higher earnings. (d) National repute and self-dependence and self-reliance spirit is boost up (e) The nation progresses towards prosperity. (f) Stability and security of the nation is achieved. 2.6 FUNCTIONS OF PRODUCTION PLANNING AND CONTROL The highest efficiency in production is obtained by manufacturing the required quantity of product, of the required quality, at the required time by the best and cheapest method. To attend this objective management employs production planning and control, the tool that co-ordinates all manufacturing activities. The main functions of PPC can be classified in ten categories: (i) Materials: Raw materials, as well as standard finished parts and semi-finished-products
  16. 16. must be available when required to ensure that each production of operation will start on time. Duties include the specification of materials (both with respect to dimensions and quality) quantities and availability; delivery dates, standardization and reduction of variety, procurement and inspection. This function also covers the procurement of semi- finished products from subcontractors. (ii) Methods. (a) The purpose of this function is to analyse possible methods of manufacture and to try to define the best method compatible with a given set of circumstances and facilities. This analysis covers both the general study and selection of production processes (for the manufacture of components or assemblies) and the detailed development and specifications of methods of application. (b) such a study results in determining the sequence of operations and the division of the product in to assemblies and sub-assemblies, modified by the limitations of existing layout and work flow. (iii) Machines and equipments : Methods of manufacture have to be related to available production, facilities, coupled a detailed study of equipment replacement policy. Maintenance policy, procedure and schedules are also functions connected with managerial responsibility for equipment, since the whole problem of break. downs and reserves can be seriously reflected in halts in production tool management, as well as problems both design and economy of jigs and fixtures, constitutes some of the major duties of production planning and control. (iv) Routing: Once the overall methods and sequence of operations have been laid down, each stage in production is broken down to define each operation in detail; after which the issue of production orders can be planned. Routing prescribes the flow of work in the plant and is related to considerations of layout of temporary storage locations for raw materials and components and of material handling systems. Routing is fundamental
  17. 17. production function on which all subsequent planning is based. (v) Estimating: When production orders and detailed operation sheets available with specifica- tions feeds, speeds, and use of auxiliary attachments and methods, the operation times can be worked out. This function involves the extensive use of operation analysis in conjunction with methods and routing as well as work measurement in order to set up performance standards. The human element figures prominently in work measurement because it is sensitive to systems of work rating and wage incentive schemes. Hence it may consequently result in a wide scatter of operation times and in unduly large fluctuations and perhaps instabilities in time schedules. (vi) Loading and Scheduling: Machines have to be loaded according to their capability performing the given task and according to their capacity. Machine loading is carried out in conjunction with routing to ensure smooth work flow; and with estimating, to ensure that the prescribed methods feeds and speeds are best utilised. Scheduling is perhaps the toughest job facing' a production manager because it determines the utilisation of equipment and manpower and hence the efficiency of the plant. Scheduling must ensure that operations are properly dovetailed that semi-finished components arrive at their next station in time, that assembly work is not delayed; and that on the other hand the plan is not unnecessarily loaded with physically and financially with work in process, i.e. with semi-finished components waiting for their next operation. This calls for a careful analysis of process capacities, so that flow rates along the various production lines can be suitably co-ordinated. In machine loading, appropriate, allowances for set up of machines, process adjustments, and maintenance down-time have be made, and these allowances form a vital part of the data constantly used by the scheduling function. (vii) Dispatching: This function is concerned with the executive of the planning function. Dispatching is 'the routine of setting productive activities in motion, through release of
  18. 18. orders and instruction and in accordance with previously planned times and sequences as embodied in route sheets and loading schedules'. Despatching authorizes the start of the production operations by releasing materials, components, tools, fixtures and instruction sheets to the operator, and ensures that material movement is carried out according to the planned routing sheets and schedules. (viii) Expediting: This control tool is t:1)~ executive arm that keeps a close watch on the progress of the work expediting or 'follow up' or 'progress' as it is some times called, is logical step after despatching. Despatching maintains them and sees them through to their successful completion. This function has to keep close liaison with scheduling, in order to provide efficient feed-back and prompt review of targets and schedules. (ix) Inspection: Another major control function is that of inspection. Although the control of quality is often detached from the production planning and control department, its findings and criticisms are of supreme importance both in the execution of current plans and in the planning stage of future undertakings. When the limitations of processes, methods and manpower are kn0wn, then these limitations can form a base for future investigations in evaluating, with the view to improving production methods, or indicating the cost implications of quality at the design stage. (x) Evaluating: Perhaps the most neglected function, but on an essential link between control and future planning, is that of evaluating. The executive tasks of despatching and expediting are concerned with the immediate issues of production and with measures that will as certain the fulfilment of set targets. Valuable information is gathered in this process, but the feedback mechanism is rather limited in nature and unless provision is made so that all this accumulated information can be properly digested and analysed, valuable data may be irretrievably lost. Thus l1ere the evaluating function comes in, to provide a feed- back mechanism on a longer term basis so that past experience can be evaluated with the view to improving utilisation of methods and facilities. Many firms consider this
  19. 19. function important enough to divorce part of it from production, planning and control land to establish it as a separate department in its own right, in which wider aspects of production management can be studied, using modern tools of operations research. Whatever the scope of evaluating in the production planning and control department, this process is an integral part of the function. The ten functions were listed above in the order of their operation. As shown in Fig. 2.1, they are related to three stages, preplanning, planning and control. . Preplanning: This covers an analysis of data and outline of basic planning policy based on sales, reports, market research and product development and design on the broad aspects of planning, this stage is connected with problems of equipment policy and replacement, new processes and materials, layout and work flow. Preplanning production as a production planning and control responsibility is also preoccupied with collection data on the '4M's, i.e. on materials, methods, machines and manpower, mainly with respect to availability, scope and capacity. Planning. When the task has been specified a thorough analysis of the" 4 M's" is first under taken to select the appropriate materials, methods and facilities by means of which; the work can be accomplished, as already mentioned. This analysis is followed by outing, estimating and scheduling. The more detailed, realistic and precise the planning, the great conformity to schedules achieved during production and subsequently the greater the efficiency of the plant. There are two aspects of planning, a short term one, connected with immediate production programmes, and a long term phase, where plans for the more distant future are considered and shaped~ Prominent planning functions are these dealing with standardisation and simplification of products, materials and methods. Control: This stage is effected by means of despatching, inspection and expediting. Control of inventories, control of scraps, analysis of work in process, and control of transportation are essentially links of this stage. Finally, evaluation takes place to
  20. 20. complete the production planning and control cycle. The control functions have a very important rate in providing the main sources of feed-back. information to ensure necessary corrective actions. Effective communication systems are prerequisites to efficient control and are, therefore, of great concern to production planning and control. The ten functions of production plan, and control were related in what might be regarded as a chronological order in the production procedure. It is important to stress, however, that there is a very strong connection and interdependence between, production planning and control, and other industrial engineering functions, some of which are briefly described below. Plant lay-out. Layout not only affects the allocation of machines to perform given task but it may also becomes an important factor at the design stage in selection of production processes. A rigid layout may hamper the integration of additional equipment in a specific production centre either through lack of space of limited mobility of the equipment. This may lead to long lines of transportation which increases the total production costs and the amount of work in process. On the other hand, sequences of operations changes in plant layout must often be undertaken in the light of production planning and control requirements, in order to achieve a satisfactory work flow. Thus, the production planning and control is affected by the restrictions imp<;>se~ on the system by the layout, and at the same time it may greatly contribute through evaluation to modifications in layouts. Specification and Standardisation: Production of different components, models or products lead to a demand for different types of materials and methods of fabrication. At the various stages of manufacture, variety may, therefore, occur in materials, bought out parts, manufacture components, minor and major assemblies for finished products as well as in processes methods of manufacture, tools, jigs and fixtures, machines, etc. Simplification and standardisation are functions which aim at finding a limited variety of different types so that the basic requirements are satisfied and the efficiency of the plant is increased. Most aspects of simplification and standardisation are the joint
  21. 21. responsibility of several department, e.g. the question of limiting the variety of finished products would involve the sales department, production department and the design office, while questions relating to simplification of materials would also include inventory control considerations and perhaps involve the research and development department. Some aspects of simplification and standardisation are major responsibilities of the production planning and control department, such as problems relating to machines and methods. Time and Motion study: This field is closely allied to efficient utilisation of manpower and scheduling problems. Time and motion study consists of two fields of activity, operation analysis and work measurement. (a) Operation analysis or method study. Which as the name suggests, consists of a evaluation, selection and development of an efficient method to perform a given task. Operation analysis is concerned both with problems of limited scope (such as operator's work place layout, an activity study of a gang of operators or correlation of machine, operator activities) and overall studies of the process, in which all aspects of routing, plant, layout and scheduling may play an important role. (b) Work measurement. Which is concerned with stabilising standard times for the vari9us operations in the process for the estimating function in production planning. As already mentioned no scheduling can ever be attempted before some data on performance times becomes available. From the foregoing remarks it should be appreciated that time and motion study is employed both at the planning and control stages. Development of methods and information regarding the measurement of processing times can be obtained in two ways. (a) By synthesis based on past experience of similar circumstances, where the same processes are employed. Synthesis is an important tool at the planning stage. (b) By analysis of an existing production method and measurement of operation times when the process is already in action. This obviously belongs to the control stage,
  22. 22. and information gathered . in this way provides a basis for replanning and readjusting of production schedules, when these are proved to be unrealistic and for data required for future synthesis. Although these two distinct functions of time and motion study are employed at different stages of production planning and control and for different processes; they share the same philosophy, the same approach, the same techniques, and even if they can be divorced in time they are essentially integral parts of the same field. The importance of materials availability at the various stages of production necessitates a mechanism of inventory control and stores organisation. Inventories are a financial burden on the plant and management of stores may be very costly. Inventory control is sometimes a very complex function as its policies are not dictated by internal needs and considerations along out by external" factors governing the purchasing of materials, such as vendor's offers and terms, market availability. Factor may influence both quantity and delivery dates of materials and components and have to be taken into account by any inventory control mechanism. 2.7 PROBLEMS OF PRODUCTION PLANNING AND CONTROL Production planning operational and control problems require two major typ~s of decisions one that relates to the design of the system and the other that relates to the operation and control of the system (that is both long run and short run decisions) the relative balance of the emphasis on such factors as cost, services, ~~liability of both functional and time performance depends on the basic purposes of the enterprise or institution and on the general nature of goods or service being produced. In general economic enterprises will probably emphasize cost, consistent with quality and delivery commitments. A classification of problems is as follows: (A) Long rim decision related to the design of production and operation's system: (a) Selection of equipment and process.
  23. 23. (b) Production design of items processed. (c) Job design. (d) Location of the system. (e) Facility layout. (B) Decisions related to the design of operation and control systems: (a) Inventory and production control. (b) Maintenance and reliability of the system. (c) Quality control. (d) Labour control. (e) Cost control and improvement. The relative importance of these problems in operation's management varies considerably depending on the nature of individual production system. Nevertheless, every system has these problems in some degree. For example, replacement policy may occupy a dominant position in production systems where the capital investment per worker is very large in the steel industry, on the other hand, replacement policy may occupy a minor role in a production system that is represented by a large labour component or a large material cost component. Part of the area of ~e operation management involves the sensing of the relative importance of these various components in a given situation. 2.8 THE NEED OF PPC FROM A SYSTEM POINT OF VIEW Many of the problems of production interact with each other. For example, job design may interact with the material handling system used, the design of the things being processed, the equipment or process being used, and the overall facility layout. An optimal inventory policy to . follow is partially dependent on the means by which production levels are controlled. The best process (in instances where alternatives exist) may depend on whether idle labour or equipment is available. If we were to study inventory problems in isolation, ignoring the effects of changes in production level, we would develop a sub-optimal solution to the problem, because the solution
  24. 24. Forecasting Sale forecasting A sale forecast is defined as an estimate of the amount of sales for a specified future period under a proposed marketing plan or programme. Forecasting plays a crutial role in the development of plans for the future. It is essential for the organisation to know for what level of activities one is planning before investments in inputs ie, men, machines & materials are made. In modern production activity, the activities are more complex technologically and the basic inputs are becoming expensive and therefore these are lot of restrictions. Thus planning is very essential for any production activity and is a fundamental activity of management. Forecasting forms the basis of planning and enables the organisation to respond more quickly and accurately to market changes. Prediction Forecasting (1) is an estimate of future event through subjective considerations other than just the past data. (1) is an estimate of future based on historical data (2) good subjective estimation is based on managers skill experience and judgment (2) requires statistical and management science techniques. (3) Influence of one’s own perception and bias. So it is less accurate & low reliability (3) achieved by systematically combining and casting foreward in a pre determined way data about the past. Need for Demand Forecasting:- 1. Majority of activities of the industries depend upon future sales. 2 To assist decision making w.r.t the investment.
  25. 25. 3. To schedule production activity to optimise the utilisation of plant’s capacity. 4. To prepare material planning to make materials available at right quantity and right time. 5. gives a future trend which is essential for product design and development. Thus in the changing and uncertain techno-economic and marketing scenario, forecasting helps to predict the future with accuracy. Long Term Forecasting Forecasts which cover the period over one year (5 year or 10 years) future are termed as long term forecasts. (In some text the period more than 5 years.) Eg:-Capacity planning and investment planning. Short Term Forecasting Forecasts which cover the periods less than one year is termed as short term forecasting (In some text b/w 1-5year) Eg:-purpose of materials control, scheduling, loading. Methods of sales forecasting Sales Forecasting Methods Forecasting for new Products Forecasting for established products 1. Direct survey method 1. Projection method 2. Indirect survey method 2. Related information method 3. Comparing with established 3. Market research 4. Limited market trial 5. Sales force composite method
  26. 26. Direct survey method Prospective customers are approached and are asked what they intend to buy. Sampling technique is adopted for survey purposes. From this sample survey with some degree of certainity, it is possible to predict, how the population will respond. Indirect survey method The attitude and behaviour of the consumers is predicated through salesman, intermediate selling agent, wholesalers, retailers etc. Comparing with Established Products Product is compared with an existing product, so sales figures can be compared.. If the new product is a substitute for a competitor’s product its acceptance loyality to the present product. Limited Market Trial To predict the acceptance of the product by potential customers, some ties, limited selling technique is also adopted.
  27. 27. Established products Projection Method Based on historical data, future can be predicted to some extent. A line drawn though the known information is projects into a forecast area to predict. Projection of future can be done either by time series analysis or correlation, regression analysis technique Projection methods Time series analysis correlation analysis 1. Graphic methods a) Simple graphs long term short term b) Scatter diagrams 2. Mathematica methods 1. Method of inspection a) Pearsonian method 2. Method of average Regular variation Irregular variation a) Selected point trend b) Concurrent deviation method b) Semi average trend c) Ranking method c) Moving average trend d) Regression equation or least 3.Method of least squares squares method a) Arithmetic straight line trend e) Difference method b) Logarithmic straight line trend c) Parabolic trend Related information Method In this, a prediction various directly with the sales volume is formed
  28. 28. Examples:- Actual birth rate might be used to predict the sales of baby foods. Market Research Through critical analysis of marketing forces, changing patterns of socio-economic pressures, political changes etc, we can predict the future demands of the products. Jury of Executive Opinion Method Opinions of experts are invited about the future sales. It is simple and fast. No scientific. Sales force composite method Views of salesmen, traders, middlemen are grouped and estimates are made accordingly. Not scientific. Time Series Analysis for Sales Forecasting Long Term Forecasting (1) Method of Inspection Describes a sales trend by drawing free hand curve keeping as far as possible the troughs and peaks of the original graph at equal distance. The method is easy and simple and may be superior to other methods when performed by a person who possesses mature judgment and thorough knowledge of firms operations and of general business conditions. This may be used for preliminary analysis. Limitations (1) Different persons may draw different trend lines from same data (2) Affected by personal prejudice or bias of the person (3) Being a subjective method it requires the exercise of a high level of judgment and statistics. P1 Straw products Ltd, is a pvt. company with a paid up capital of Rs.41,400 lakhs. It is engaged in the production f straw boards, paper boards, writing papers etc. The balance sheet reveals the following sales pattern during 1995 to 1999. It is desired
  29. 29. by the chairman to flash the sales forecast for the year 2000. Year Sales (in lakhs) 1995 890.50 1996 941.87 1997 1260.60 1998 2354.19 1999 2355.84 (2) Method of averages (a) Selected point method The common practice is to select the values of the years which are considered to be most representative or normal. Then straight line is drawn. This is not correct method of approximation as selection of point is open to objection and difference of opinion. (b) Semi average method Is sometimes employed when a line appears to be an inadequate explanation of the trend. In this method the original data is divided into two equal parts and the values of each part are then summed up and averaged. The average of each part is centred in the period of the time of the part from which it has been calculated and
  30. 30. then plotted on the graph. A straight line then be drawn to pass through the plotted points. This line is the semi average trend line. When the number of years are added, the middle year is not considered while dividing the data into two equal parts and obtaining an average. Advantages: (1) The method is simple (2) No possibility of personal prejudice and bias Limitations: (1) It assumes a straight line relationship b/w the plotted points. (2) It is associated with the defects of arithmetic averages. P2. The sales turnover of fertilizer corporation of India ltd. for the period 1991-92 to 97-98 is given below, compute the estimated sales for the year 1998-99. Also plot the actual sales values on the graph to have a comparison. Year Sales (in Rs. crores) 1991-92 39.2 1992-93 48.8 1993-94 65.8 1994-95 78.0 1995-96 95.0 1996-97 91.7 1997-98 112.5
  31. 31. (c) Moving Average Method Is obtained by summing the data point over a desired number of past periods (years, months, weeks). This number usually encompasses 3 years, 5 years or 8 years. Advantages: (1) The method is simpler compared with the method of least squares. (2) It is a flexible method. If a few years are added the entire calculations are not changed. (3) Not affected by personal prejudice and bias. (4) This gives a very good picture of the general long term movement in data, if the data contains uniform cycles and if the trend is the data, if any is linear or approximately. Disadvantages: (1) Cannot be applied if same observations are missing (2) It does not result in a mathematical equation which may be used for forecasting. (3) The selection of the period of moving average requires a great deal of care for, if a wrong period is selected a corrected picture of a trend cannot be obtained. 3. The sales pattern of N. Abdulah & Sons, a firm manufacturing different types of castings used in industrial motors, traction motors etc is as follows compute the 3 yearly moving trend and find out the sales forecast for 2001. Year Sales (in lakhs) 1994 6.00 1995 7.00 1996 8.00 1997 7.50 1998 6.50 1999 7.00
  32. 32. 2000 9.00 Year Sales (in lakhs) 3 yearly moving total 3 yearly moving avg 1994 6.00 1995 7.00 21.00 7.00 1996 8.00 22.50 7.50 1997 7.50 22.00 7.33 1998 6.50 21.00 7.00 1999 7.00 22.50 7.50 2000 9.00 4. The balance sheets of R.N. brothers dealer in M.S. scrap revealed the following sales pattern. Compute the 4 yearly moving average trend to the firm. Year Sales (in lakhs) Year Sales (in lakhs) 1984 200 1991 220 1985 190 1992 208 1986 210 1993 224 1987 180 1994 200 1988 188 1995 240 1989 204 1996 184 1993 216 Year Sales (in lakhs) Total of 4 years Total in pairs of 4 yr. Moving Avg. 1984 200 1985 190 780 1986 210 768 1548 193.50 1987 180 782 1550 193.75 1988 188 788 1570 196.25 1989 204 828 1616 202.00 1990 216 848 1676 209.50 1991 220 868 1716 214.50 1992 208 852 1720 215.00 1993 224 872 1724 215.50
  33. 33. 1994 200 848 1720 215.00 1995 240 1996 184 (3) Method of Least Squares The method of least squares is a mathematical device which places a line through a series of plotted points is such a way that the sum of the squares of the deviations of the actual points above and below the trend line is at the minimum. This method gives us what is known as line of best fit. If we sum up the positive and negative deviation on either side of the line of best fit the sum is zero. Advantages:- 1) Free from bias and personal prejudice. 2) Trend values can be obtained for all the years 3) This method gives the most satisfactory results Disadvantages: It lacks flexibility of trend fitting. If one more year is added the entire calculations have to be done again. A straight line will be of the general form Y = bx + a where y is the dependent variable, such as in rupees, sales in volume etc, a and b are two unknown constants whose values are determined by solving two normal equations and x is the unit of time. To determine the values of a and b the following two normal equations have to be solved. Σ y = Na + bΣ x Σ xy = aΣ x + bΣ x2 where N is the total number of observations
  34. 34. But where deviations are taken from the middle year, x will be equal to zero and the values of a and b can be determined as under. a = Σ y/N; b = Σ xy/Σ x2 5. Exports of Indian Rare earth. Ltd., during 1993-94 to 1997-98 is given below. (a) Compute the exports during 2002-03 (b) If the analysis of business conditions and pertinent economic factors indicate that exports in 2002-03 will be about 15% below trend or normal, then what will be export forecast in 2002-03. Year Exports (in Rs. crores) 1993-94 1.49 1994-95 1.24 1995-96 1.69 1996-97 1.69 1997-98 3.11 (a) Year Exports in Rs. crores y Deviation from middle year x xy x2 1993-94 1.49 –2 –2.98 4 1.106 1994–95 1.24 –1 –1.24 1 1.476 1995–96 1.69 0 0 0 1.846 1996–97 1.70 +1 1.70 1 2.216 1997–98 3.11 +2 6.22 4 2.586 N=5 Σ y = 9.23 Σ x=0 Σ xy=3.7 Σ x2=10 Since the deviations are taken from the middle year.
  35. 35. Equation of trend of export will be: y = a + bx y = 1.846 + 0.370 x Y 93–94 = 1.846 + 0.370 × (–2) = 1.106 Y 94–95 = 1.846 + 0.370 × (–1) = 1.476 Y 95– 96= 1.846 + 0.370 × (0) = 1.846 Y 96–97 = 1.846 + 0.370 (1) = 2.216 Y 97–98 = 1.846 + 0.370 (2) = 2.586 Y 2002–03=1.846 + 0.370 (7)= 4.436 (b) Forecasted sales = Trend ± cyclic variation = 4.436–(0.15 × 4.436) = 3.77 crores Note (i) If the time series consists of odd number of years to make Σ x=0, the middle value of the time series is taken as the origin. (ii) If the time series consists of even number of years, the midway period between two middle period is taken as the origin to make Σ x = 0. 6. The sales for the domestic water pumps manufactured by Ajit Mfg. company is given. Forecast the demand for the pumps for the next three years using least square method. Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Sales (x103 ) 30 33 37 39 42 46 48 50 55 58 (Trend: Y = 43.8 + 3.04x for 1998 = 66,600 1997 = 63,560 1996 = 60,520
  36. 36. (4) Logarithmic straight line or Exponential method of sales trend: Sometimes a smooth curve provides a better fit for the data than does a straight line. A smooth curve implies a uniform percentage growth or decay instead of the constant increment or decrement exemplified by a straight line. The equation for a curve may take the exponential form y = abx , which indicates that y changes at the constant rate b, each period. We can convert the exponential equation to its logarithmic form: log y = log a + x log b Two normal equations: Σ log y = N log a + Σ x log b – (1) Σ × log y = Σ x log a + Σ x2 log b – (2) Alpha smith & Co. a private firm has the following sales pattern during 1995 to 1999. Compute the sales forecast for 2000. Year 1995 1996 1997 1998 1999 Sales 106 118 111 123 129 Year Sales (Rs.lakhs) Deviation from middle year x x2 log y x log y 1995 106 –2 4 2.0253 –4.0506 1996 118 –1 1 2.0719 –2.0719 1997 111 0 0 2.0453 0 1998 123 +1 1 2.0899 2.0899 1999 129 +2 4 2.1105 4.2210
  37. 37. N=5 Σ x= 0 Σ x2 =10 Σ log y = 10.3429 Σ xlogy = 0.1884 Σ log y = N log a + Σ x log b ⇒10.3429 = 51ga + 0 Σ xlog y = Σ log a + Σ x2 log b ⇒ 0.1884 = 0 + 10 log b a = 117.106 & b = 1.044 Forecasting equation is log y = 2,0686 + 0.0187 x Forecast for 2000 is 133.26 lakhs 5. Parabolic Trend – Sometimes a straight line fails to fit in the data. A second degree curve describes them. The equation of such a curve is Y = a + bx + cx2 The normal equations of this second degree parabola are:- Σ Y = Na + bΣ x + c Σ x2 (1) xy = a Σ x+bΣ x2 + cΣ x3 (2) Σ x2 y = aΣ x2 + bΣ x3 + cΣ x4 (3) 8. R. Bham & Co. is engaged is the manufacturing of compressor, pumps etc given below are the sales of the company during 1993 to 1999. Compute the expected sales during 2000. Year 1993 1944 1995 1996 1997 1998 1999 Sales (Rs.lakhs) 6 10 15 39 25 20 15 Year Sales (Rs.) Deviation Long term trend of
  38. 38. (y) (x) xy x2 x3 x4 x2 y sales 1993 6 –3 –18 9 –27 81 54 1994 10 –2 –20 4 – 16 40 1995 15 – – 1 – 1 15 1996 39 0 0 0 0 0 0 1997 25 1 25 1 1 1 25 1998 20 2 40 4 8 16 80 1999 15 3 45 9 27 81 135 Σ y = 130 Σ x=0 Σ xy= 57 Σ x2 = 28 Σ x3 =0 Σ x4 =19 6 Σ x2 y=34 9 Normal equations : 130 = 7a + b.o + 28c (1) 57 = a.0 + 28b + c.o (2) 349= 28a + b.o + 196 c (3) Solving, b = 2.0357 a = 26.714 and c = –2.0357 Equating the parabola, y = 26.714 + 2.0357x – 2.0357x2 Forecast for 2000 ⇒y = 26.714 + 2.0357 (4) –2.0357 (4)2 = 2.286lakhs Experimental smoothing: Suppose that a new observation has just been made, and that we already have an old forecast, based on any method we like. There will almost certainly be a difference between the forecast and the actual observation. Therefore let us construct one forecast of the next observation from are old one by allowing for the error we have just made. This method can then be written as: Newfprecast = old forecast + α (Later obsrv.-old for cast) where α = smoothing constant and is a fraction between 0 and 1. It has been found appropriate to have α between 0.1 and 0.5 in many systems.
  39. 39. Correlation Analysis Is an additional technique which may be employed to sales forecast. Since all forecast methods are subject to error, a firm is wise to employ more than one method. A forecast based on time series analysis trends to be substantiated if a similar forecast is obtained by correlation analysis. A statistical tool used for expressing the relationships between two or more variables in one single figure is known as correlation. Correlation is simply an averaging process by which an average relationship between two or more variatles is established. Types of Correlation Analysis of the relationship between two sets of data is referred as simple correlation. Multiple correlation analysis is designed to measure the influence of several series of data upon a particular series such as sales. For example, sales of point might be forecast for specific states or regions by analysis of (1) number of residential structures with paintable surfaces (2) number of owner occupied residences. (3) median value of owner occupied residences. Partial correlation analysis is a technique by which the influence of one series upon another is measured while other held constant. Pattern of Correlation: If the amount of change in one series tends to bear a constant ratio to the amount of change in the other series then the correlation is said to be linear. The relationship is manlinear or curvilinear if the amount of change in one series does not remain in constant ratio to the amount of change in other series. Degree of Correlation: When changes in two related variables are exactly proportional, correlation is perfect. If they are not proportional the degree of correlation is limited. Thus we may have four degrees of relationships. (a) Perfect positive - Equal proportional change in same direction (b) Perfect negative - Equal proportional change in opposite direction (c) Limited positive - Unequal change in same direction (d) Limited negative - Unequal change in opposite direction
  40. 40. Measurement of correlation: Correlation can be known by: (i) Graphical methods (a) Simple graph (b) Scatter diagrams or scatter grams (ii) Mathematical methods (a) Pearsonian method (b) Concurrent or concomitant deviation method (c) Ranking method (d) Regression equation or least squares method (e) Difference method. (i) a) Simple graph The two series may be plotted on a graph paper and their direction and loseness observed. This is a visual method of finding out correlation. If the series are running parallel, this is an evidence of position correlation, if they are running in opposite direction, inverse correlation exists between them. Graphical correlation methods cannot indicate the exact degree of correlation.
  41. 41. b) Scatter diagrams Is the simplest method of studying relationship between two series of data. Under this method, x variable is measured on the horizontal axis and y variable on the vertical axis and for each pair of x and y, points are plotted. If the points so plotted show some trend either upward or downward, the two variables are correlated. On the other hand if the plotted points do not show any trend, there is no correlation between the variables. The greatest limitation of the method is that it fails to give any idea about the degree of corelation. (ii) (a) Pearsonian method To render comparison possible a coefficient of correlation is calculated. Karl pearson devised a coefficient of correlation (γ ) which varies within ± 1. 1 represents perfect correlation. Zero indicates absence of any correlation or independence of variables. Positive correlation is given by + sign and negative correlation by – sign. Karl pearson’s coefficient of correlation is given by the formula: (d) Regression Analysis After having established the fact of correlation between two variables, it will be one’s curiosity to know the extent to which one variable varies in response to a given variation in other variable. Thus the primary use of the regression equation is to describe the nature of the relationship between the two variable and to show the rates of change in one factor in terms of another. If we are given x and y values we can fit a regression equation of the type y = a 9 bx regression equation of y on x. Here y is the dependent variable, a and b are two unknown constants and x is the independent variable. In order to find out the values of a and b we have to solve two normal equations. Σ y = Na + bΣ x (1)
  42. 42. Σ XY = Na Σ x + b Σ x2 (2) Month Nail driver sales (104 ) Constructive volume 108 x2 y2 xy 11 10.00 2.50 100.00 6.25 25.00 12 11.00 3.00 121.00 9.00 33.00 13 9.00 2.50 81.00 6.25 22.50 14 9.00 2.00 81.00 4.00 18.00 15 12.50 3.50 156.25 12.25 43.75 16 11.50 3.00 132.25 9.00 34.50 17 11.50 3.00 132.25 9.00 34.50 18 10.50 3.00 110.25 9.00 32.50 19 11.00 3.00 121.00 9.00 33.00 20 9.00 2.00 81.00 4.00 44.00 Σ y=207 Σ x=54.50 Σ y2 =2169.5 0 Σ x2 =152.75 Σ xy=598.7 5 To find the most likely sales estimate when construction volume is Rs.300000000, we can have two normal equations. Σ y = Na + bΣ x Σ xy = aΣ x + bΣ x2 Substituting the values, 207 × 104 = 20a + 54.5 × 108 b 598.75 ×1012 = 54.5×108 a + 152.75×108 b
  43. 43. 207 × 104 × 54.5 × 108 = 20 × 54.5 ×108a + 54.5 ×108 × 54.5 × 108 b 598.75 × 1012 ×20 = 20 × 54.5 × 108 a + 152.75×108 × 20 × b Solving a = 109.86 × 103 b = –23.35 × 10–6 when y = 300000000, y = Rs. 102857.8 Another method of obtaining regression equation is as follows: Regression equation of x and y will take the following form: where = Arithmetic mean of x and y series r = coefficient of correlation σ x, σ y = standard deviation of x and y series. The quantity is called regression coefficient of y on x. 9. Rama and sons is a pvt. organisation engaged in the manufacture of nail drivers. The management of the firm think that the sales of nail drivers logically be related to the amount spent on construction. If a relationship does not exist, published government and construction industry forecasts of anticipated building levels can be used as an additional sales predictor. First a check is made to confirm that the building levels forecasts are relatively accurate. Next the national figures are broken down to conform to the firm’s marketing areas. Then the records of monthly building volume and nail driver sales for corresponding months are collected and tabulated the construction volume is in Rs. 100 million units and product sales in 10,000 units. Find out: (a) Is it worthy to consider the correlation between sales of nails and construction volume? (b) Is projected construction volume for the next month is Rs. 300,000,000. What would be sales volumes of the nails in rupees.
  44. 44. Month Nail driver sales 104 Construc tion volume 108 y2 x2 xy 1 7.5 2.00 56.25 4.00 15.00 2 10.00 2.50 100.00 6.25 25.00 3 9.00 2.00 81.00 4.00 18.00 4 10.50 3.00 110.25 9.00 31.50 5 11.50 3.50 132.25 12.25 40.25 6 11.00 3.00 121.00 9.00 33.00 7 10.50 3.00 110.25 9.00 31.50 8 10.00 2.50 100.00 6.25 25.00 9 11.50 3.00 132.25 9.00 34.50 10 10.50 2.50 110.25 6.25 26.25 ie, y –67 = 1.12 (x–65) y = 1.12x – 72.8 + 67 ie, y = 1.12x – 5.8 If x = 70, y = 1.12 × 70 – 5.8 y = 72.6 Selection of a forecasting method A single organisation may use several different forecasting methods to anticipate the future of its various activities. The selection may depend on any or all the factors listed below: (1) Availability and accuracy of historical data (2) Degree of accuracy expected from the production
  45. 45. (3) Cost of developing the forecast (4) Length of the prediction period (5) Time available to make the analysis (6) Complexity of factors affecting future operation Requirements of a good forecasting method (1) The method should be easy to understand and should be simple to use. (2) The method selected should give minimum forecast errors at optional cost. (3) The cost to make the forecast should be small (4) The method selected should be stable in the sense that the changes should be minimum. The Internal reports system, the marketing intelligence system, the marketing research system and the analytical marketing system. The internal reports system gives access to current data on sales, costs, inventories, cash flows and accounts receivable and payable. Internal reports systems based on computers may provide speedier and more comprehensive information. The marketing intelligence system supplies marketing executives with every day information about developments in the external marketing environment. Marketing research involves collecting information that is relevant to a specific problem facing the business. The analytical marketing system consists of advanced statistical procedures and models to develop more rigorous findings from information collected by the above three systems. The various steps involved in designing and developing MIS are: (1) Identifying the broad information needs of the orgnisation (2) Categorising the information needs as follows:
  46. 46. – Information on Strategic planning level – Information at sales operational level – Information at sales operational level (3) Evaluating the cost of collecting and processing the information. (4) Comparing the costs Vs. the benefits. (5) Deciding the frequency and timing of collection of information. (6) Identifying the sources of information. (7) Designing the mechanisms/Procedures for gathering, processing, storing and retrieval of information. (8) Analysing and interpreting the information and disseminating it to the right person at the right time and in the right manner. (9) Monitoring, maintaining, reviewing and improving the system. Questions (1) Define ‘Marketing Research’. Explain the present day importance of marketing research. (2) Describe in brief the classification of marketing research problems. (3) “Marketing research is vital for evolution of sound marketing strategy”. Critically examine this statement. (4) “Marketing research is the key tool used by the management in its problem solving and decision-marking in the field of marketing”. Justify. (5) Briefly explain the steps in the marketing research process. (6) Name and describe briefly the various sources of collecting marketing research data. (7) Describe the objectives/benefits of marketing research.
  47. 47. (8) What is market survey? What are the steps involved in carrying out market survey? (9) Name and describe the various market survey techniques. (10) Describe briefly: (i) Personal interview survey. (ii) The mail survey (iii) Questionnaire development. 11. Describe in brief (i) Panel research (ii) Market research agencies in India 12. What is sampling? (in connection with market survey). What are the requirements of a good marketing sample? 13. State the importance, merits and demerits of sampling as a data collection process in market survey. 14. Define Marketing Information System (MIS). Describe its components in brief. 15. State the various steps involved in designing and developing MIS. Sales Forecasting 34.1. INTRODUCTION Business action taken today must be based on yesterday’s plan and tomorrow’s expectation. The plans for future cannot be made without forecasting events and their relationships. Every firm is keen to know the expected demand for its products, how much of a given product it could sell in a given time, whether the sales would increase or decrease from the current levels and by how much and what would be the share of the market it can secure during the specified period. This knowledge is required by the firm
  48. 48. for its survival and growth. Without this knowledge it cannot plan any of its production and other activities. It forms the basis for the requirements of raw material, equipment, labour, capital etc. All the these decisions are basically related to the size of production which in turn can be determined from potential demand for the product. Thus the starting point of all decisions related to production strategy is the sales forecast for a specified period. 34.2 Definition In literary sense forecasting means prediction. Forecasting may be defined as a technique of translating past experience into prediction of things to come. It tries to evaluate the magnitude and significance of forces that will affect future operating conditions in an enterprise. Sales forecast is the task of projecting the future sales of the firm. It indicates how much of a product is likely to be sold during a specified period in a specified market, at specified prices. Sales forecast is an estimate based on some past information, the prevailing situation and prospects of future. It is based on an effective system and is valid only for some specific period. Due to dynamic nature of market phenomenon sales forecasting has become a continuous process and requires regular monitoring of situation. Sales forecasting has been defined by the American Marketing Association as, “Sales forecast is an estimate of sales in dollars or physical units for a specified future period under a proposed marketing plan or programme and under an assured set of economic and other forces outside the unit for which the forecast is made”. In the words of Philip Kolter, “The company sales forecast is the expected of company sales based on chosen marketing plan and assumed marketing environment.” 34.3 Types of Forecasting There are two types of forecasting: 1) Short-term forecasting
  49. 49. 2) Short-term forecasting 1. Short term forecasting The forecasting which covers a period of three months, six months or one year is generally called as short term forecasting. The period for which forecasting is done depends upon the nature of business. Forecasting is done only for a short period when the demand fluctuates from one month to another. 2. Long term forecasting This type of forecasting usually covers a period of 5 to 10 years, and in some cases even 20 years. However, beyond 10 years, the future is assumed to be uncertain. But in many industries like ship building, petroleum refinery, generation of electricity etc., a long term forecasting is needed as the total initial investment cost of equipment is quite high. 34.4.Objective of Forecasting (a) Objectives of short term forecasting: (i) Formulation of suitable production policy. Forecast helps to formulate a suitable production or over production may not arise. (ii) Regulate supply of raw material: It is possible to evaluate the requirements of raw materials in future so as to ensure regular and continuous supply of materials on the basis of estimated sales and also to control the size of inventory at economic level. (iii) Best utilization of machines: The operations can be so planned that the machines are utilized to its maximum capacity. (iv) Regular availability of labour: One of the objectives of sales forecasting is also to arrange for trained personnel and non-technical workers so that they might not experience any shortage of personnel and at the same time they don’t remain idle when the production is curtailed.
  50. 50. (v) Price policy formulation: Sales forecasts enable the management to formulate some appropriate pricing mechanism. So that the level of prices does not fluctuate too much in the periods of depression or inflation. (vi) Forecasting of short term financial requirements: On the basis of sales forecast it is possible to determine the financial requirements of the enterprise for the production of desired output and arrange it accordingly much in advance. (vii) Setting the sales target: Sales forecasts are calculated for different market segments and then the sales targets for various territories are fixed accordingly. This later on becomes the basis to evaluate and control sales performance. (b) Long term objectives of forecasting: (i) Deciding Plant Capacity: The long run objective of sales forecasting is to plan capacity in accordance with the demand. The size of the plant can be determined such that the output conforms with sales requirements. Too small or too large size of the plant may not be in the economic interest of the enterprise. By studying the demand pattern for the product and the forecasts for future the enterprise can plan for a plant with output of desired capacity. (ii) Manpower Planning: Reliable and accurate forecast can help the management to assess the appropriate manpower requirements. This can ensure best manpower facility to carry out the production in the long run without any hindrances. (iii) Estimating Cash Inflows: Cash inflows from sales can well be estimated through sales forecasting by determining the cash and credit sale ratio. It can also help to plan for credit policy of the firm. (iv) Determining Dividend Policy: The profits can also be forecast on the basis of gross profit ratio on sale and divided policy can be determined. (v) Planning of Long-run Production: Long-run production planning also depends upon sales forecasting. In the long run product has to be adjusted to the market demand and other conditions.
  51. 51. (vi) Long-run Financial Requirements: Sales forecasting also helps to determine the long-run financial requirements of the organisation for working capital as for capital expenditure. (vii) Budgetary Control Over Expenditure: In forecasting the sales, all the activities are to be forecast and for this purpose budget is to be prepared for the income and expenditure of the orgnaisation. The budgeting figures for income and expenditure may then be compared with the actual performance and any variation is removed. Thus budgetary control over expenditure becomes possible. 34.5. Importance of Sales Forecasting Manufacturing organisations plan their production on the expectation of future demand. It is on the basis of correct forecast that the producer is able to adjust his production to the market demand and adjust the productive capacity of the plant. Forecast tries to maintain a balance between production and distribution policies of the enterprise. For the success and achievement of the overall objectives of the organisation it is essential to review the sales forecast periodically. According to John D.Luth “A good sales forecast is undoubtedly the most important single planning tool”. Sales forecasting helps in business planning by providing a realistic estimate of market trends and sales possibilities. It helps the to decide which products are to be dropped. Which ones are to be added in line and which ones need modification. It enables the firm to identify its precise position in the market; which facilitates optimum utilization of resources, optimum penetration of markets and optimum penetration of markets and optimum gains from the marketing opportunities. Sales forecasting also forms the backbone of customer-oriented marketing. It not only provides excepted sales in the number of products but also vital clues regarding customer’s tastes, preferences and needs .
  52. 52. The firm can carry out its marketing planning and strategy formulation and develop its marketing objectives in a specific manner. The sales forecast is vital for determining sales targets and for decisions on physical distribution, transportation, promotion, sales force and pricing. In short the entire marketing mix, i.e. product, price, promotion and distribution revolves around the sales forecast. 34.5 Process of Sales Forecasting/Steps in sales forecasting The steps involved in forecasting may very from company to company because the nature of the business and of the product are not similar for each enterprise. Market conditions also very from company to company and from product to product. However, the following steps are generally followed by most of the industries in ordinary circumstances. The following are the main steps in demand forecasting: 1. Determining the objective of forecast: Certain points in this respect should be very clear before taking up the forecasting test such as period of forecasting (short term, long term): area of sales forecasting. unit of sales forecasting (i.e in quantities or values) the time, labour and money to be employed on forecasting. All these points are determined taking into account the objectives of sales forecasting. 2. Sub-divide the task of forecasting: Sub-divide the forecasting programme into homogeneous groups according to product, area, activities or customers. The total sales forecast of the company will be the sum total of all the groups. 3. Determine the relative importance of factors: So that due weight age may be given to different factors affecting forecast. 4. Select the method to be used for forecasting: The method is to be selected by the appropriate authority taking into account all the relevant situations, purpose of forecasting and the degree of accuracy required. 5. Collect and analyse the data: By applying method, the necessary data for forecast
  53. 53. are collected, tabulated and cross-checked. The data, are interpreted by using statistical techniques. It may be called as the preliminary sales forecast which forms the basis for final sales forecast. 6. Study the correlation between sales forecast and sales promoting plans: Marketing the forecast reliable, the sales promotion plans such as advertising policy, personal selling and other policies should be reviewed with reference to the preliminary sales forecast. 7. Study of competitors activities : Volume of sales of a company is largely affected by the activities of competitions and, therefore, it is essential to study the competitor’s activities, policies, programmes and strategies and also their effects on the market and adjust the forecasting accordingly. 8. Prepare final sales forecasts: The preliminary sales forecast results are converted into final sales forecast relating to the products and territories involved. The aggregate of sales forecasts of different products, or territories or customers or activities may form the sales forecasts of the enterprise. 9. Evaluation and adjustments: The actual sales performance in the coming period should be reviewed and evaluated from time to time. The evaluation may be made monthly , quarterly, half yearly or yearly. The forecast figures may be revised in the light of difficulties experienced during the course of actual operations. On the expiry of forecasts period the actual sales and forecast sales and forecast sales should be compared and causes of variation found out which may help to improve the next period sales forecasts. 34.7 Advantages and Limitations of sales forecasting Advantages: (i) Helps in Effective planning. Forecasting helps in effective planning by providing a scientific and reliable basis for anticipating future operations such as sales, production, inventory, supply of capital etc. (ii) Helps in removing the weaknesses of orgnaistion structure. Since it leads to
  54. 54. rationalisation of various procedures for the achievement of organisational objectives. (iii) Helps in Better Co-ordination. It helps in better co-ordination of various resources which leads to better utilization of resources and reduction in waste and inefficiennces. (iv) Achieves Co-operation in the Enterprises. Various executives at different levels participate in the process of forecasting. This creates a sense of a sense of belongingness among them. (v) Provides a Basis for Effective Control. Forecasting provides a basis for effective control by providing information where higher degree of control is to be exercised. The managers car predict the weaknesses of their departments through forecasting. (vi) Important at the national level. Economic forecasts of various factors at the national level help in planning for economic development. Limitations of Forecasting: Forecasts are only estimates of future condition. They can never be actual position. They can only give a best estimate of future courses of events, but they can never be hundred percent accurate and reliable. The following are some of the limitations of sales forecast: (i) Forecasting is based on postulations and assumptions and assumptions and hence it is subject to some guess work and possibility of error. (ii) Forecasting is usually based on past data but future may not be a copy of the past. (iii) Changes in consumer’s need, taste fashion, style etc. may causes inaccuracy in forecast. (iv) There may be lack of history in case of a new product. (v) Forecasts are not full proof and condition proof and if there are changes in the general economy of the country; they may not materialise.
  55. 55. (vi) Development of new products, mateirals methods may introduce error in the sales forecast of a particular product. (vii) There may be lack of efficient and experienced sales force. (viii)Lack of sales history in case of a new product makes the forecast difficult. (ix) Short term forecasting is more accurate than long term forecasting and hence its usefulness is limited to short-term purposes. 34.8 FACTORS AFFECTIGN FORCASTING (i) General Business Conditions (ii) Conditions Within the Industry (iii) Conditions Within the Company (iv) Factors Affecting Export Trade (v) Political Stability (vi) Govt. Restrictions (vii) Fiscal and Monetary Policy (viii) Price Level and Trend (ix) Technological Research and Development (i) General Business Conditions. While making sales forecast the marketer should take into consideration the general conditions of the economy, growth of population, distribution of wealth and income, general cons toms, fashion and seasonal fluctuations etc., during the future period. (ii) Conditions within the Industry. While making sales forecast the changes going on all the time in the total demand of the product, technological developments should be taken into consideration. The number of other units engaged in the industry and their sales, research, potentials and product development, etc., have to be carefully considered.
  56. 56. (iii) Conditions within the Company. Internal changes within the company in the coming future also affect future sales. Such changes may be in price structure, distribution channel, sales promotion measures, product or other marketing policies of the company, future expansion plans, plans for product development etc. It is therefore essential to anticipate the extent to which such measures may affect the future sales. There are the internal factors which are well within the control of the company. (iv) Factors Affecting Export Trade. If the company is engaged in the export trade, the marketing manager must also consider the various factors in forecasting the export sales. Such factors include export and import controls impressed by the government, export conditions, export import policy, export finance, new agreements etc. (v) Political Stability. If the nation is practically stable, the business flourishes. Things outside the business remain static and stable. Generalisations come true and so the forecasts. (vi) Government Restrictions. Today Govts. all over the world are interfering more and more in business activities through various restrictions and control. If these are announced on a long term basis forecasting becomes easy and if they are for a short period forecasting is rendered difficult. (vii) Fiscal and Monetary Policy. The frequency of changes in the fiscal and monetary policy do affect the forecasting. From forecasting point of view a flexible but less frequency changing fiscal and monetary policy is regarded as good. (viii) Price Level and Trend. Frequent and wild changes in price levels do adversely affect the forecasting. On the contrary stable price trends helps in achieving the objectives of forecasting. (ix) Technological research and development. 34.9 MARKET POTENTIAL
  57. 57. Market potential is the total possible sales by all the firms selling the product in a given market. It gives an indication of the ultimate potential for that product and industry as a whole, assuming that the ideal marketing effort is made. Company potential refers a part of the market potential, which an individual firm can achieve at the maximum in a given market, under ideal conditions and on the assumption that the ideal marketing effort is made. The term Market demand and company demand refers to those portions of market, market potential and company potential that are achievable under existing conditions. Market forecast and company forecast refer to what the industry and the firm respectively will sell in actual practice during the period of the forecast. Thus company potential is a part of market potential, company demand is a part of market demand and company forecast is just a part of market forecast. 34.10 METHODS OF SALES FORECASTING The important methods of sales forecasting are: (1) Jury Method/Executive Opinion Method (a) Top Jury Method (b) Percolated Jury method (2) Survey of Experts Opinion Method (3) Sales Force Composite Method (4) Survey of Buyers Intention Method (5) Market Share Method (6) Analytical and Statistical Methods (a) Single Projection Method (b) Extrapolation Method (c) Moving Average Method
  58. 58. Production Planning and Control 28.1. INTRODUCTION Production. Production is the process by which goods or services are created. Production can also be defined as a means of converting the raw materials into finished products by performing a set of manufacturing operations in a pre-determined sequence that transforms material from a given to a desired form. The transformation may be done in one or in a combination of the following ways: I. Transformation by disintegration, having essentially one ingredient as input and producing several outputs. The transformation is generally accompanied by changes in the physical shape of the input, such as changes in the physical state or in the geometrical form. Examples: making components from standardized materials on machine tools, rolling steel bars from cast ingots, making components by smithy and forging operations etc. 2. Transformation by integration or assembly, using several components as inputs and obtaining essentially one product as output. Examples : producing machines, household appliances, automobiles, radio and television sets etc. 3. Transformation by service, where virtually no change in the object under consideration is perceptible but where certain operations may be performed to change one of the parameters which define the object. Ell:amples : sizing and coining in press work, servicing and light repairs of automobiles, loading and unloading of trucks, transportation from one place to another which gives place utility etc. Planning Planning means preparing the scheme in advance before the actual work is started. It may also be defined as the pre-determination of future achievement to meet the desired objectives. Planning begins with an analysis of the given data, on the basis of which a scheme for the utilization of the firm's resources can be outlined so that the desired target may be most efficiently attained. Planning in fact sets up the standards
  59. 59. performance. Before starting the production, it is necessary to decide in advance what to produce, how much to produce, where to produce and where to sell. Therefore production planning is the pre-determination of future achievements in type of product, volume of production, quality, time, price in manufacture and the resources required. It analyses all the problems likely to arise in manufacture and decides in advance how these difficulties can be overcome. Control Control means the supervision of all the relevant operations with the help of control mechanism that feeds back the progress of the work. Controlling is made by comparing the actual performance with the present standards (plan) and deviations are analysed. The control mechanism is also responsible for subsequently adjusting, modifying, and redefining plans and targets, in order to ensure attainment of prespecified production foals, in the most efficient and effective manner. 28.2. DEFINITIONS OF PPC Some of the important definitions of production planning and control are given below: Production planning and control may be defined as the direction and co- ordination of the firm's material and physical facilities towards the attainment of pre- specified production goals, in the most efficient and economical manner. According to Samuel Elion : "The highest efficiency in production is obtained by manufacturing the required quantity of the product, of the required quality, at the required time, by the best and cheapest method." To attain this target, management employes production planning and control, the tool that co-ordinates all manufacturing activities. The four factors mentioned above- namely: quantity, quality, time and priceencompass the production system, of which production planning and control is the brain.
  60. 60. According to Charles A. Koepke: "Production planning and control may be defined as the coordination of the series of functions according to a plan which will economically utilize the plant facilities and regulate the orderly movement of goods during the entire manufacturing cycle, from the procurement of all materials to the shipping of finished goods at a predetermined rate." Production planning and control comprise the planning, routing, scheduling, dispatching and follow-up functions in the productive process, so organised that the movement of material, performance of machines and operations of labour, however subdivided, are directed and coordinated as to quantity, quality, time and place. It is based on the principle 'plan your work and work your plan'. -Alford and Beatty In simple words, production planning and control means: (a) a complete plan. (b) a follow up procedure for determining how closely the plans are being followed. (c) a means to regulate the mechanism to meet the requirements of proposed plan. (d) a procedure to employ right quantity and right type of personnel at the right place. 28.3. OBJECTIVES OF PPC There are three M's of production viz, men, materials and machines without which production cannot be carried out. The production planning and control (P.P.C.) system integrates and coordinates the use of manpower, machines and materials for the efficient production to meet the sales requirements. In recent years it is increasingly becoming apparent that planning and control systems are the basic activities that determine the effectiveness of an enterprise. In fact it is the nerve centre of an organisation whose effort is mostly to maximize the output and profit subject to shop capacity and marketing constraints.
  61. 61. To run, an industrial plant whether in public sector or in private sector. to stay in business and provide for its dynamic growth efficient production planning and control system is necessary. The major objectives of PPC can be stated as : (I) To design a system and plan, by which production may be carried out with a view to meet promised delivery date consistent with minimum cost and quality standard. (2) To ensure efficient utilization of production facilities. (3) To coordinate the production activities of different departments, (4) To maintain adequate but not excessive stock of raw materials, work in process and of finished goods to meet production requirements and delivery schedules at the most economical level. (5) To ensure production of right product in right quality at the right time. (6) To maintain flexibility in manufacturing operations, to accomodate rush jobs or to meet contingencies, (7) To co-ordinate labour. machines and equipment in the most effective and economic manner, (8) Ensuring smooth flow of materials by eliminating bottlenecks if any. in production. (9) Establishing targets and checking it against performance. (10) To provide alternative production strategies in case of emergencies. (11) To determine the nature and magnitude of various input factors to manufacture the desired output. (12) The PPC department guides production by preparing and issuing manufacturing orders which direct the use of facilities and material and allocate labour to the output of the required quantity of products of the required quality. In short PPC regulates and controls "how", "where" and "when" work is to be done.
  62. 62. 28.4. FUNCTIONS OF PRODUCTION PLANNING AND CONTBOL The various functions of production planning and control can be classified into three main categories or phases as follows: (I) Planning phase (2) Action phase (3) Follow up or control phase. These three phases as mentioned above make up the main body of functions of PPC. There are other secondary functions which are essential contributors to the efficient performance of production, planning and control. In addition there are other functions which are supported by these three phases which are not generally considered to be direct functions of production planning and control. These include quality control- cost control and so on. Relations between Production Planning and Control There exists a very close inter-relationship among the phases and functions of the production planning and control and they are mutually supporting. For instance, realistic planning is quite dependent upon the data which is compiled during the function phase. Action. in turn, is dependent upon continuous planning of the work to be performed by the activity. Follow-up is the comparison of the work that was originally planned against the work actually done. It must be understood, that if the plans are lacking, or not slated properly or are recorded Inadequately in terms of objectives, starting and completion dates and utilisation of resources, there will not be a basis for a comprehensive follow up phase. Relation between production planning and production control The planning and control is an integral part of the system and it is very difficult to isolate one from the other. They are so Inter-related that one is always identified with the other. This can be better explained by control cycle as shown in Fig. 28.2. Planning concerns with the formulation of production strategies and targets for the enterprise whereas control is vested with actual implementation and execution of planned
  63. 63. objectives. Production planning determines the operations required to manufacture the production and control regulates and supervises these operations. Through production control information the organisation can locate shortcomings in the planning process and the necessary modifications can be done at the time of planning In future. Similarly, production control operations can be improved to adjust with the planning requirements. Prior Planning: Prior planning implies that a course of action is established in advance. The whole activity must be planned and exists on paper before the ver:' first action takes place. (1) Fore-casting (Estimation of future work) : Fore-casting is defined as the estimation of future activities i.e. the estimation of type, quantity and quality of future work. These estimates provide the basis for establishing the future requirement for men, materials, machines. time and money. (2) Order writing (Preparation of work authorisation): If the work is to be controlled. it must begin with a specified documents authorising it. So it means giving the authority to one or more persons to do a particular job. (3) Product design (preparation of specifications) : After the work authorisation has been prepared the next step is to collect the information necessary to describe the work in details. This includes blue prints or drawings, a list of specification, a bill of material and so on. Action Planning: In any type of work activity the following steps are necessary for planning details of the work to be done: (1) Process planning: The determination of most economical method of performing an activity, all factors being considered. Routing. The arrangement of work stations is determined by the route.
  64. 64. (2) Material control: Determination of material requirements and control of material (inventory control). (3) Tool control: Tool control may be subdivided into two categories: (a) Design and procurement of new tools. (b) Control storage and maintenance of tools after procurement. (4) Loading: Determination and control of equipment and manpower requirements. Loading may be defined as the assignment of work to the facility. The facility may be equipment, manpower or both. (5) Scheduling: Determination when the work is to be done. Scheduling consists of time phasing of loading (workload) i.e. setting both, starting and ending time for the work to be done. The common practice dictates that routing, loading and scheduling be performed simultaneously. Action Phase: The work is started in the action phase. There is only one production planning activity in action phase i,e. dispatching. Dispatching is the transition form the planning phase to action phase. It consists of actual release of detailed work authorisation to the work centres. Follow up or Control Phase : Once the work is started in an activity it is necessary to evaluate continuously the progress in terms of plan so that deviations can be detected and corrected as quickly as possible. The control phase accordingly consists of two parts: (1) Progress reporting: (Data collection). The first step in progress reporting is to collect data for what is actually happening in the activity (Progress of work).
  65. 65. /opt/scribd/conversion/tmp/scratch6294/85708748.doc (2) Data interpretation. After the data has been collected. then it is nece. Ito interpret it by comparing the actual performance against the plan. Corrective Action: (1) Expediting. If the data collected from the production unit indicates that there is significant deviation from the plan and the plan cannot be changed. then some action must be taken to get back on plan. (2) Replanning. It should be emphasised that the plan is not to be changed but to be followed. however, if after expediting to correct deviation it is found that, it is impossible to perform according to plan. It would be necessary to replan the whole affair. It may also be found that there were errors made while developing the original plan. In all such cases replanning is necessary. 28.5. ORGANISATION OF PPC DEPARTMENT The PPC department must be carefully organized to carry out the activities and procedures established in the planning system. Fig. 28.3 illustrates the organisation structure for a medium sized firm engaged in job order or semi- diversified manufacture. Function Phase Formal Technology (1) Estimate of future work (forecasting)estimation of material, time and money (1) Prior planning (1) Fore-casting (2) Preparation of work authorisation (2) Order writing (3) Preparation of specification (Blue prints drawings, list of specification Bill of material) (3) Product design (4) Preparation of detailed work plan (2) Action planning (4) Process planning (Routing) sequence of operation (5) Determination of requirements and control of materials (5) Material controlling (to maintain optimum inventory levels) (6) Determination of requirements and control of tools (6) Tool control (a) Design and procurement 65
  66. 66. /opt/scribd/conversion/tmp/scratch6294/85708748.doc of new tools (b) Control storage and maintenance of tools after procurement (7) Determination of the requirements and control of equipment and manpower (7) Loading Assignment of work to facilities machinery, manpower or both without time factor (at top management level) (8) Determination when work will be done (8) Scheduling, time phasing of loading at lower level of PPC (9) Starting of the work (3) Action phase (9) Dispatching (work assignment to various shops) (10) Collecting data (4) Follow up phase (10) Data collection (11) Interpreting the data (a) Progress reporting (11) Data Interpretation (12) Correcting the work plan (b) Corrective action (12) Expediting (13) If the planning is to be redesigned (13) Replanning MODULE-2 28.6. ROUTING Routing may be defil1ed as the selection of the path which each part of the product will follow, while being transferred from raw material to finished products. Path of the product will also give sequence of operations to be adopted while manufacturing. In other words, routing means determination of most advantageous path to be followed from department to department and machine, till the raw material gets its final shape. Routing is related to considerations of layout, temporary storage of in process inventory and material handling. According to Alford and Beatty routing is defined as, "the specification of the flow or sequence of operations and the processes to be followed in producing a particular manufacturing lot". Routing is an important function of the production planning and control 66